NationsBank Corp. has teamed up with Nabanco, one of the banking industry's most aggressive transaction processing competitors, to sell credit card support services to retail merchants.

The companies formed a joint venture, Unified Merchant Services, to serve merchants in NationsBank's territory - the Southeast and Texas.

They did not rule out the possibility of expanding into other markets.

The Atlanta-based venture, headed by former NationsBank executive O.B. Rawls, is the latest in a series of developments reshaping a business that banks had shunned until recently. While NationsBank and a few others kept their hands in merchant processing, specialists like Nabanco won the lion's share of the market away from those that exited and focused instead on card issuing and lending to consumers.

Over the past year, banks have revisited their merchant strategies. In a move along the lines of NationsBank-Nabanco, Wells Fargo & Co. announced a strategic alliance 18 months ago with Card Establishment Services, the onetime Citicorp unit that more recently was taken over by First Data Corp. of Hackensack, N.J.

First Data, a rival of Nabanco and its parent, First Financial Management Corp., used the Wells-CES deal as the model for "merchant-bank alliances" - a pooling of the companies' strengths similar to what NationsBank and Nabanco envision.

"We bring tremendous customer relations, and Nabanco brings tremendous processing capabilities," said Eileen M. Friars, president of NationsBank Card Services. "We think it is a very complementary alliance in which we will both gain scale and leverage our investments."

"I think we'll start to see more deals along these lines, especially now that two of the three largest (merchant-)acquirers have struck these deals," said Frederick A. White, a principal of First Annapolis Consulting Group in Maryland.

"Theoretically, a bank as big as Nations can do anything," Mr. White added. "But a company like Nabanco has such a depth of specialized expertise that a bank like Nations clearly can see advantages in allowing Nabanco to handle the processing." Then NationsBank can concentrate "on the customer side, with opportunities to cross-sell other banking services."

Unified Merchant Services will start with about $9 billion in annual merchant credit card sales, representing both partners' merchant portfolios in the markets in which Charlotte, N.C.-based NationsBank operates. The volume does not include Nabanco's large national accounts, which do not go into the new venture.

Any business that NationsBank adds when entering new states will become part of the joint venture, said Donald Y. Sharp, a First Financial Management spokesman in Atlanta.

The deal calls for the partners to work together on merchant credit card authorization, processing, and settlement. Nabanco, which is based in Fort Lauderdale, Fla., will exclusively provide processing services, and NationsBank will provide banking services.

"The merchant business - much more so than the card issuing side of the business - is a scale business," said Richard T. Robida, senior executive vice president of Speer & Associates, an Atlanta-based consulting firm. "With this joint venture, Nations and Nabanco can leverage this volume to become more effective competitors."

Nabanco had previously submitted the winning bid with the $170 billion- asset NationsBank for the U.S. Postal Service's potentially lucrative merchant processing contract. The companies said they expect to go after more government business, as well as other card-accepting merchants.

As president of Unified Merchant Services, Mr. Rawls will direct the sales force.

"I expect my job will become a lot more fun because as we consolidate the sales force and get the economies of scale, we'll be able to offer better products," said Mr. Rawls, who was NationsBank's senior vice president of merchant services.

Nabanco, No. 1 in merchant card volume, is also considered a leader in advanced technologies like electronic draft capture and signature capture. These capabilities will now be available to NationsBank merchants.

"Nabanco is well regarded and one of the lowest-cost providers," said Mr. Robida. "It invested a lot in technology and will be able to leverage that investment with this additional volume.

"Nations will be able to really concentrate on marketing opportunities," he added. "It's a dynamite alliance."

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