Anticipating more than 40 million Visa check and MasterCard debit card transactions next year, Pulse EFT Association has turned to Midwest Payment Systems Inc. for processing.

The Houston-based Pulse network said MPS, a subsidiary of Fifth Third Bancorp of Cincinnati, has the experience and performance record to handle the association's off-line debit transactions, the youngest and fastest-growing part of its businesses.

A leading electronic funds transfer processor, MPS replaces Affiliated Computer Systems Inc. of Dallas.

The latter's three-year contract with Pulse had expired. MPS won in competitive bidding that included ACS.

"With the exploding deployment of signature-based debit cards, Pulse needed a very efficient, cost-effective service provider," said Pulse president and chief executive officer Stan Paur.

The network has been offering its members a Debit Support Service, Pulse DSS, since 1996. It serves MasterCard debit cards and Visa check, which are off-line transactions in the sense that they require credit-card-like authorizations at the point of sale, with settlement occurring in a few days.

Pulse does the sales and marketing and relies on an outsourcing company for processing. Forty-three of the network's roughly 2,050 financial institutions participate in DSS, with nearly 310,000 cardholders. Most are small or midsize institutions.

Pulse is now converting its participants to MPS.

Year-2000 conversion issues have put a damper on Pulse's ability to sign up financial institutions for DSS, but roughly a dozen are "in the queue" for next year, said Warren Coles, executive vice president and chief operating officer.

MPS, which is ranked as the top EFT processor in Faulkner & Gray's "1999 Card Industry Directory," processed 3 billion ATM and POS transactions in 1998.

Besides Pulse, the Cincinnati company processes for two regional electronic banking networks: Jeanie, which it owns, and Money Station. Other major customers are California Federal Bank of San Francisco and Hibernia Bank of New Orleans.

Pulse has members in Alabama, Arkansas, Colorado, Louisiana, Mississippi, New Mexico, Oklahoma, Tennessee, and Texas. The deal "significantly strengthens" MPS' position in these states, said Barry L. Boerstler, MPS executive vice president.

"They'll be one of our top 10 customers," he said of Pulse.

MPS, which also does credit card processing, was selected based on cost, experience, and technical merits, said Mr. Paur.

It offers back-office support capabilities, a fraud prevention system, and Internet access to reports.

Despite resistance from merchants who do not like the extra costs associated with accepting off-line debit cards -- the costs that banks pass on are higher than those on regional EFT network cards like Pulse -- the market is growing quickly.

In June, Pulse processed 1.9 million off-line transactions, 145% more than in the same month of 1998, said Cindy G. Ballard, a Pulse executive vice president.

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