Banc One Corp. has become the third financial institution to join First Data Corp.'s merchant bank alliance program.

As in previous deals with U.S. Bancorp and Norwest Corp., First Data is flexing its muscle in merchant processing with a service designed to keep banks in a business that many of them shunned in recent years.

First Data said its program offers Banc One the economies of scale and technological prowess of a large third-party processor, as well as a portion of the merchant base First Data acquired through Card Establishment Services.

Banc One will contribute its merchant contracts in exchange for a 50% ownership stake in a new venture, Banc One Payment Services LLC.

The Columbus, Ohio-based bank said it processed $750 billion in Visa and MasterCard sales volume in 1994. The company ranked 10th among processors of bank card transactions for merchants, according to The Nilson Report, an industry newsletter.

First Data's proposed merger with First Financial Management Corp., owner of No. 1 processor, Nabanco, could magnify the advantages available to joint venture partners.

Roger Peirce, president of First Data's Electronic Funds Services unit, said the plan is to combine Card Establishment Services with First Financial's Nabanco unit, the largest merchant processor, to be a single source of technology and client support.

He said the merchant bank alliances would benefit from "a bigger book of business."

David L. Strider, president of Banc One POS Services Corp., said it is moving to consolidate the processing for 85,000 merchant customers, currently scattered across several systems, to a single platform. About a quarter of them are served through First Data's Omaha, Neb., facility.

The bank official said the partnership brings together First Data's significant investments in technology with Banc One's extensive branch network.

"With economies of scale and skill, the new company will be very competitive with product capability, performance, and price," said Mr. Strider.

Both partners will devote sales and marketing staffs to recruiting new business.

Mr. Peirce said First Data expects to have 12 to 15 merchant bank alliances by the end of 1996. They give banks a way to maintain relationships with retailing customers at a time when the processing business has become heavily concentrated among nonbanks. He said the top 10 merchant processors have increased their total market share to 70% from 50% three years ago.

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