Meridian Bancorp has agreed to sell all its merchant processing contracts to National Data Corp.

The deal includes 9,000 merchant locations and a projected 14 million transactions in 1995. Federal regulatory approvals are required.

About 10 bank employees would transfer to Atlanta-based National Data's payrolls, and 25 to 30 employees of the bank's merchant group would be laid off.

Exact financial terms were not disclosed, but Meridian, based in Reading, Pa., would share in revenue from the contracts it would be selling, as well as from some future ones.

The two companies have had a business relationship for more than 15 years, with National Data performing signature capture, authorization, and processing for the bank's merchant portfolio.

National Data is the country's sixth-largest bank card acquirer in the United States, behind Card Establishment Services, according to The Nilson Report.

Jay Witmoyer, the Meridian executive vice president in charge of distribution and direct banking, said the bank consulted with all the major processors and some regionals but chose National Data because "it brought the greatest comfort level in approaching this as partnership" rather than a sale.

"We recognize our merchant program as very profitable, and it plays a significant role in our strategic retail plans," said Mr. Witmoyer, but "we couldn't afford to make the investments in technology to remain competitive in the long range."

Kevin C. Shea, National Data's general manager of integrated payment systems, said the alliance would reduce Meridian's operating costs while keeping the bank in the business of providing traditional banking services such as deposit accounts to merchant customers.

Throughout the year, First Data Corp. has announced similar alliances with other banks, using its acquisitions of Card Establishment Services and First Financial Management Corp. to keep them in the merchant processing business, a domain increasingly controlled by third-party processors.

Unlike First Data's merchant bank alliances, National Data would not contribute a portion of its existing merchant processing revenues to Meridian.

National Data has other banking relationships - with Chemical Banking Corp. and Signet Bank Corp., for example - although the deal with Meridian has more defined profit-sharing arrangements. The third-party processor said the industry should expect to see more of these arrangements in the future.

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