The growing popularity of Internet shopping, merchant loyalty programs, and commercial cards is adding new complexity to the merchant acquiring business, according to the head of Vital Processing Services.

Speaking at the annual meeting of the Electronic Transactions Association last week, Jonathan J. Palmer, president and chief executive officer of the merchant processing firm, said these factors create "so much opportunity in the acquiring business."

Mr. Palmer, a veteran banker who took the helm of Vital last month, said acquirers must be "reliable, responsive, efficient, and strong" to survive in changing circumstances.

Merchant acquirers are a mix of banks and independent sales organizations that facilitate point-of-sale transactions for merchants. As retailers have begun to accept debit cards, on-line payments, and other payment instruments, the companies that serve them have had to widen their scope.

Vital, of Tempe, Ariz., processes transactions for this community. "We want to be able to serve acquirers in order to help them grow faster than the industry," Mr. Palmer said.

Despite recent leadership changes, Vital is poised to capitalize on changes in the payments industry, he said. It is "business as usual" at the company, which will continue to design programs that help clients build volume "better, faster, and cheaper" than competing processors, he said.

Vital, a 50-50 venture of San Francisco-based Visa U.S.A. and Columbus, Ga.-based Total System Services Inc., was formed in 1996. Fred O. Gumbel, its first chief executive, resigned last year; Philip Tomlinson, president of Total and a Vital board member, served as Vital's interim leader until Mr. Palmer was hired.

The former chief technologist and head of retail banking at Barnett Banks Inc., Mr. Palmer spent the last four years as chairman, president, and chief executive officer of Wellspring Resources, a Jacksonville, Fla., human resources outsource firm.

On returning to the banking industry, Mr. Palmer, 55, said he found things are "not quite as simple as when I left."

Aiming to capture more Internet business, Vital is introducing a service that will help merchants process on-line transactions in real time, with what the company says will be minimal changes in the way they are handled.

The product, VirtualNet, offers direct connectivity between the Internet and the VisaNet POS Services network. It uses the communications infrastructure of WorldCom Advanced Networks (formerly Compuserve Network Services) and the Payment Gateway software of International Business Machines Corp.

At the Electronic Transactions Association conference, Vital announced its first VirtualNet customer, Go Software Inc. of Savannah, Ga. That company-which sells Windows-based programs that process credit, debit, and check transactions-already uses a similar product offered by Atlanta-based processor Nova Corp.

Vital is also aiming to take advantage of heightened merchant interest in customer loyalty programs. A new product, Momentum, handles electronic authorization and data capture for such programs.

It will be tested in Chicago with big-name retailers, including Avis, Spiegel, and Sharper Image. Vital will provide point-of-sale services, including electronic authorization and data capture.

"We are continuing to grow faster than the industry," Mr. Palmer said. "We will continue to invest in the technology, capability, and the capacity" needed for success, he said.

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