After a series of losses, First Data Corp. has won the contract to process the Sears, Roebuck and Co. merchant card portfolio, arguably the largest private-label portfolio in the United States, with 86 million customer accounts.
First Data, of Denver, said Friday that Citigroup Inc. had awarded it the job, taking it away from its rival Total Systems Services Inc. of Columbus, Ga.
Though First Data was already processing other private-label merchant cards for Citi, TSYS had been handling the Sears cards for several years before Citi’s 2003 acquisition of the Sears portfolio.
James L. Schoedinger, the president of First Data’s card issuing services division, said Friday that Citi went through a 15-month evaluation process. “It was the most comprehensive we’ve ever participated in,” Mr. Schoedinger said. “We won this deal with our technology and quality of service.” The conversion will begin immediately and should be completed by the second quarter of 2006.
Though Sears signed a 10-year deal with TSYS in 2000, the contract included an exit provision that came into effect after May 2004. TSYS had said during several conference calls that it was optimistic about retaining the job, which provided nearly 10% of TSYS’ consolidated revenue last year.
TSYS won previous head-to-head showdowns with First Data.
After buying FleetBoston Financial Corp. last year, Bank of America Corp. moved Fleet’s card business from First Data to TSYS.
JPMorgan Chase & Co.’s acquisition of Bank One Corp. last July was also good news for TSYS. The buyer said it would switch from First Data.
First Data has said that merchant cards are becoming a larger part of its portfolio and that servicing these cards is now a more important part of its strategy.
“It’s a huge win for First Data,” said Edward Neumann, the managing director of Javelin Strategy and Research in Pleasanton, Calif. “It shows that they seem to be on par with TSYS.”
Mr. Neumann also said TSYS told him Friday that it expects to retain the Citi and Sears commercial card accounts.
Tony Hayes, the managing director of Dove Consulting Inc. in Boston, said the processing market has become “extremely competitive.”
“Sometimes First Data wins, sometimes TSYS wins — but the bank always wins, because they always get better terms,” he said.
A spokesman for TSYS referred all questions to Citigroup, which declined to comment.
