When First Data Corp. owns 47.5% of your company, it might not be politic to refer to that superpower of the card processing business as "the factory."

But Michael P. Duffy, who on April 1 became president and chief executive officer of Paymentech, does not seem worried about corporate niceties. He says he is more concerned about distinguishing the strengths of his own company, a Dallas merchant acquirer and card processor that is majority-owned by Bank One Corp.

Technically, Paymentech is one of nine "merchant-bank alliances" that First Data maintains with large banking companies, including Wells Fargo & Co. and Chase Manhattan Corp. The idea is that the banking company maintains merchant relationships and First Data handles the processing.

Mr. Duffy, 41, said his company -- which started life as an independent processor -- is nothing like the eight other First Data alliances. First Data, parent of the merchant processing giant First Data Merchant Services, bought Paymentech's outstanding public shares last July.

"Other alliances have to buy all their technology from what we call 'the factory,' -- from First Data," Mr. Duffy said. "We have our own technology in a very differentiated manner."

Indeed, Paymentech, which handles credit card transactions for the restaurant, hotel, oil, and retail industries, uses its own networks for much of its business. The company, known for aggressively acquiring competitors with enviable data systems, is regarded as the industry's foremost specialist in Internet and telephone/mail-order transactions.

The relationships among Paymentech, Bank One, and First Data have taken many twists in recently. In February, for instance, Pamela Patsley -- who headed Paymentech for 10 years and was a founding officer of Paymentech's former parent, First USA Inc. -- resigned, only to emerge a week or two later as president of First Data Merchant Services.

In February 1999, Paymentech announced that First Data Merchant Services would take over the back-end settlement functions of about 300,000 merchant sites that had previously relied on Electronic Data Systems of Plano, Tex. Paymentech is still in the process of making that transfer.

In that instance, First Data is doing "really what they do best, the funding and clearing of that retail transaction," said Mr. Duffy. He took the helm of Paymentech after three years as chief operating officer and a total of five with the company.

Paymentech -- which tends to have accounts with larger merchants such as Lands End, Crate & Barrel, and Mailboxes Etc. -- became majority-owned by Bank One through the latter's 1997 purchase of First USA. It continued to compete with Banc One Payment Services -- a First Data merchant ally -- until the First Data buyout last July.

Paymentech then merged with Banc One Payment Services -- which brought 154,000 merchant sites, $21.8 billion of annual sales volume, and 270 employees to the table -- and discarded the latter's name. Paymentech ended 1999 with 490,000 merchant sites and 1,400 employees. The company processed $93.3 billion of sales last year.

Mr. Duffy, whose agenda includes penetrating the smaller Internet merchant market and taking advantage of Bank One's corporate banking relationships, said Paymentech can customize its technology and devote special attention to merchants in a way that other First Data allies do not. For instance, First Data's product for gaining access to transaction data on the Web is more of a "canned product," he said, which suits smaller merchants but not more complex merchant relationships.

Other differences, Mr. Duffy said, include Paymentech's separate corporate identity. "The employees in those other alliances are half First Data, half bank partner."

Mr. Duffy said last year's First Data purchase left merchants concerned that they would be handed off to a more bureaucratic alliance. "A lot of the business we've gotten was because we competed against FDC somewhere along the line," he said, giving Amazon.com and the Steak and Ale restaurant chain as examples. "We were able to get those businesses because we differentiated ourselves. … I guess what we want known is that we don't see that changing at all."

Paymentech, preoccupied with the restructuring, has not been outspoken about its autonomy until now. "There's still confusion in the marketplace," Mr. Duffy said. "I think had Pam been here she would be saying the same thing."

Perhaps. Ms. Patsley said in an interview that Paymentech competes against all the other alliances. "Mike Duffy understandably takes a competitor's view in comparing Paymentech to those alliances," she said.

Ms. Patsley dismissed notions that the alliances are a shrink-wrapped solution.

"Our view at First Data is that the success and strength of our alliance strategy is evident in their strong performance and growth," she said. "We attribute this success to the breadth of payment solutions offered by the alliances and the value their individual brands and distribution channels provide.

"Because of First Data's scale, we are able to provide the best quality service and solutions in a flexible format -- enabling the alliances to customize and rebrand their products and services to meet the needs of a diverse set of merchants."

Paul Martaus, president of Martaus & Associates, a merchant-acquirer consulting firm in Mountain Home, Ark., said Paymentech is indeed eager not to be "smeared" by the "bureaucracy that has grown up around FDC."

"It doesn't mean that [First Data] are bad guys, and it doesn't mean that they're not working their absolute hardest," Mr. Martaus said, but "when you have two out of three merchants on the planet in your portfolio, somewhere you're going to make somebody mad." Paymentech "has a responsive management team -- you can get Mike Duffy on the phone," he added.

Mr. Martaus predicts Bank One will not stay in the processing business long, however. He suggests that the company will divest itself of Paymentech's stock within the next couple of years -- as soon as divestiture is allowed. "FDC will buy them out," he said, "I don't think there's a question."

Paymentech and Bank One declined to comment on the possibility.

Paymentech processes for large electronic retailers, including amazon.com and kbtoys.com. The company handles subscriptions for most of the top 25 Internet service providers, including America Online. Aiming to grab more small Internet merchants, Paymentech is working on what Mr. Duffy calls "e-commerce in a box." The company is working on "partnerships," he said. "We're not going to host Web sites; we're not going to build Web sites." Plans to revamp the company's Web site are in the works. Soon merchants will be able to set up card processing accounts entirely online at Paymentech's Web site.

Now that Banc One Payment Services is not a competitor, Mr. Duffy said, Paymentech has more opportunities than ever to milk the banking company's retail and lending relationships. "It's the one-stop shop of the payment world, coupled with the one-stop shop of the corporate banking world," he said.

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