The prominent credit card processor Total System Services Inc., energized by its rapid ascent in the retail card market, is casting its net even further from the banking industry.

Executives at the Columbus, Ga., unit of Synovus Financial Corp. say the company - well steeped in the bank card industry and a new giant in the retail card arena - is redefining "issuer" to include a number of new types of clients - including brokerage, insurance, telephone, gas, and utility companies.

"I think over the next several years you're going to see Total System change quite a bit in terms of the mix of services that we do," said Richard W. Ussery, Total System's chairman and chief executive officer, during an interview at the company's new $100 million riverfront complex. "We see a lot of opportunity in other markets that involve monthly billings, plastic cards, and sending out statements."

That is not to say the country's second-largest card processor is backing away from bank issuers. Total System's top brass says new industry segments will be good for banks, inspiring new services from which all clients can benefit and fostering cobranding and partnership possibilities.

"The bank card issuers - that's who got us here," said Philip W. Tomlinson, who, as Total's president, focuses on fostering client relationships. "We're very, very proud of those relationships and we're working as hard as we know how to expand [them]."

Total System is acutely aware of opportunities to move "horizontally," even when such chances come in strange packages. The company has turned the loss of one of its biggest credit card contracts into what it hopes will be a foothold in the phone card industry.

The contract, for 28 million AT&T Universal card accounts, is a casualty of Citigroup Inc.'s 1998 acquisition of AT&T Universal Card Services, which had been a client of Total System since the telephone company first started its card business in 1990. Knocking the wind out of Total System's sails, Citibank said in February 1999 that it would shift the consumer credit card accounts to its own in-house processing system. This month, Citibank took back those accounts.

Total System, which had been processing 1.7 million of AT&T's long-distance phone cards as part of its pre-Citibank agreement with AT&T, won a separate contract in May to continue that work.In an expanded relationship, Total System's telemarketing subsidiary, TSYS Total Solutions, will provide customer service, collection, and fraud management services.

Executives say they hope the new focus on phone cards will lead to deals with MCI Worldcom Inc., Sprint, BellSouth Corp. and other phone companies. "They're in the telephone business, they're not in the billing business," said Mr. Ussery, 53, one of Total System's first programmers. "Maybe we can help them with the skills that we have."

Total System plans to leverage its standing in the credit card industry as it aims for new industries. Executives tout its modern software platform, vast telecommunications network, and 45-Terabyte data center. Total System is also the largest first class mailer in the Southeast, a status that recently earned it a high award the Postal Service gives to big customers.

Moreover, the processor is financially strong. Revenues totaled $534 million last year, 34.8% more than in 1998, after rises of 10% in 1998 and 16% in 1997. Net income rose 25.1% last year, to $69 million, and cardholder accounts climbed 75%, to 206 million.

Buoyed by a robust fourth quarter, the company is now predicting a 20% increase in net income this year. Earlier it had predicted a 15% increase.

Total System "has performed exceptionally well over its history," said Jeffrey John, an analyst at Robinson-Humphrey Co. in Atlanta. It "makes a lot of sense" for the company to broaden its target market, he said, particularly with the success of its highly reputed TS2 processing software, a modern platform known for its flexibility.

By widening its focus, Mr. John said, the company leaves itself less dependent on big bank contracts like Citibank's. After that contract was lost, Mr. John forecast that Total System's revenue would grow just 6% this year before bouncing back in 2001.

Despite positive financial results, Total System, with 19.2% public ownership, cannot seem to shake stagnant stock prices. For most of last year, prices wallowed in the mid-to-high teens, a fact that perplexes Total System executives.

At the annual shareholder's meeting last month, Mr. Ussery said Wall Street's shift to the Internet and dot-com companies "defies logic and reason and fundamental business economics and principals." Bank stocks have largely been in a bear market, and Total System has been "pulled into that also," he said.

Mr. John is the only analyst covering Total System. Wall Street has little interest in the stock because Synovus is the major shareholder and trading volume is low, he said.

However, Total System and other processors are beginning to benefit from the pendulum swing of recent weeks, he said. The company's stock was trading at $19.25 at midafternoon Wednesday. "A lot of people are starting to look back again at some of these companies that have been out of favor for a while," Mr. John said.

The industry, once populated with dozens of issuing-side processors, has washed out to just a handful. First Data Corp. and Total System are the two biggest names, and Equifax of Atlanta and Electronic Data Systems of Plano, Tex., are also competitors. Mr. Ussery said that EDS and Equifax - which focused largely on processing for credit unions - do not pose much of a threat.

The 800-pound gorilla in the industry is First Data Resources, an Omaha subsidiary of Atlanta-based First Data, and the leading card processor. For years, Total System has lived in the shadow of FDR. Today, Total services about 181 million accounts, against First Data's 260 million.

Mr. Ussery is reluctant to seem too rivalrous, but signs of his company's staunch competition with First Data tend to slip out.

"I can remember when FDC was 50 times larger than we were, so we have substantially closed the gap in a reasonably short period of time," said Mr. Ussery, who started at Synovus at age 17, working as a teller for the company's lead bank, Columbus Bank and Trust Co. "It's still our plan to be the No. 1 processor in the U.S. and the world, period," he told shareholders.

"I'm always a believer that slow-and-steady wins the race," said James L. Accomando, president of Accomando Consulting Inc. in Fairfield, Conn. Total System has "methodically" focused on strategic initiatives, he said, and has been less oriented on acquisition-style growth than First Data.

"Total System is more of a boutique," Mr. Accomando said. The company's personal touch and "small-town approach" have brought them a reputation for better customer service, he said. By contrast, First Data - which also owns the largest merchant processor, Western Union, and other businesses - can take advantage of its size and breadth of services.

Total System claimed much of the early commercial card business and now services 86% of the U.S. Visa and MasterCard commercial card traffic.

Three years ago, Total System processed just 5.7 million retail cards. Today, the company boasts 90.3 million, 43% of its total accounts, and says it is the largest retail processor in the world. Clients include Sears, Roebuck and Co. - the largest card issuer among Total's customers - Nordstrom Inc., and Canadian Tire Acceptance Ltd., all of whom had previously processed in-house.Total System won the Sears contract in 1998, a coup in light of First Data's earlier failed negotiations with the department store chain. Total System completed the conversion of all 64 million accounts in 1999. Earlier this year, Sears gave the processor a vote of confidence by quickly extending its original contract another year, to 2010.

"That's a huge win, and really helps them replace the loss of this AT&T card," said Mr. John of Robinson-Humphrey. Yet historically low usage among private label cards could prove troublesome. "While it's a huge portfolio, I think both Sears and Total are really going to have to work together to get people to use that card," the analyst said.

First Data is processing a new Wal-Mart private label card on behalf of G.E. Capital and, according to First Data's annual report, has "contractually committed to a process with G.E. Capital in 1999 which could lead to significant increases in our retail card volume."

The latest evidence of Total System's eagerness to branch out is DotsConnect, a software subsidiary formed March 21 to focus exclusively on online payments.

"We're not going to make a pile of money overnight with that company," Mr. Ussery said. But e-payments are "something that we need to begin to cultivate and have full-time management worried about," he said. "In five years, hopefully it could be big or bigger than Total System today."

The spinoff - headed by Gaylon Jowers, former director for Total System's corporate strategy, marketing and sales - has taken charge of Total System's existing e-commerce services, introduced in 1998. DotsConnect inherited 19 issuing clients that use digital wallet technology and issuer-branded electronic bill presentment and payment services, among other services. Another eight clients have signed up since the subsidiary was formed.

The 54-employee company plans to expand autonomously, however, forging separate relationships with new customers, forming alliances with other software providers, and possibly making acquisitions, Mr. Jowers said. Even a relationship with First Data is a possibility, he said.

"Anybody that offers any type of payment device [or product] would be a long-term potential prospect for DotsConnect," Mr. Jowers said.

The spinoff's first alliance was with Atlanta-based S1 Corp., which will integrate DotsConnect's digital account management services into its consumer banking software by the third quarter. Under the agreement, S1's financial institution customers will have the option of offering their patrons advanced self-service options such as the ability to activate new cards or dispute transactions via the Internet.

The company has ambitious plans for new offerings. In June, Synovus plans to open an Internet-only bank to be called pointpath bank; the venture will be the first customer of DotsConnect's Web hosting services. Marke Dickinson, who was a senior manager of Andersen Consulting, was just named manager of the new business-to-business unit of DotsConnect.

Mr. Jowers says DotsConnect is in talks with alliance partners eager to build a "payment backbone" for wireless transactions, something that could be "a particular point of disintermediation" if not pursued.

Perhaps most intriguing is DotsConnect's interest in alternative e-payments schemes. Mr. Jowers said the company is looking for partnerships involving "noninterchange, non-branded payment products" for conducting Internet commerce. Consumers and corporations will demand new payment types, and DotsConnect has to make sure it is not "missing" them, he said.

"We're positioning our company to take advantage of whatever electronic transaction vehicle comes up," said Richard Covington, director of sales, marketing and client services for DotsConnect. "That will include credit cards and debit cards, but will be some other new things, too."

Total System executives say none of the new initiatives will distract them from their core business of bank card processing. Anchoring its bank clients is Charlotte, N.C.-based Bank of America Corp., which brought in $86.9 million, or 16% of the company's total revenue in 1999. The bank holding company signed a new 10-year contract last year.

Fortunately for Total System, BankAmerica and NationsBank, which merged in 1998 to form Bank of America, had both been clients. The card processing company did not fare as well in the Citibank-AT&T deal. Last year, Total System took in $46 million in revenue from the Citibank/AT&T consumer card portfolio. This year, although the accounts have already been converted, Citibank has agreed to pay Total System until August, when the contract would have expired. Citibank will remain a commercial card processing customer.

"Obviously we're doing all we can to replace the revenue that was lost, but … our normal sales effort is aimed at any and all customers, especially the top 10," Mr. Ussery said. "So we're working on those all the time anyway." "We've made a lot of small announcements. When you tally it all up, we're pretty close to having replaced all that revenue," he said. Recently, Total System signed a multiyear agreement with Commerce Bancshares of St. Louis for one million credit and debit accounts, for instance.

Mr. Ussery added, "The real disappointment is to lose [Citibank] as a customer. We've gotten over the financial side, but just the idea of losing [it] kind of hurts our feelings."

In addition to new markets, Total System is eager to expand geographically. The company, an established force in Mexico - through its joint venture Total System Services de Mexico SA de CV - and in Canada, now wants to cross the pond. Total System opened an office near London last year and plans to open a European-based data center by yearend.

"There's been not only a lot of British banks that have welcomed our arrival … but we've got a lot of U.S. banks that are over there in that market that are also glad we're there and are asking us to make proposals," Mr. Ussery said.

In preparation for international expansion, Total System, also aiming to move into Japan, underwent precertification earlier this year to process American Express transactions through the Amex Global Network Services. Outside the U.S., banks can issue Amex as well as MasterCard and Visa, and Total System wants to be prepared to offer a full slate of services, Mr. Ussery said. First Data, too, is "on track" to become pre-certified in 2000, according to the company's annual report.

TS2, the showpiece of Total System, was designed "from day one with the idea that it would be an international piece of software," Mr. Ussery said. The platform, which processes about 65% of the company's accounts, including the Sears and AT&T business, is nimble and highly customizable, say executives. The system can accommodate credit lines of tens of millions of dollars, for example. Consumers can be billed at up to nine different addresses.

The company expected the effort to take three years and cost $30 million.Five years and $125 million later, it was finally done in late 1994. Total System executives say it was worth it, boasting that the project sets the company far apart from other processors.

First Data, for instance, says it is embarking on the next significant enhancement to its processing systems now that year-2000 conversion issues are behind it. According to the annual report, the company expects to invest an incremental 3% to 5% of card issuer revenues annually over the next several years.

"We've been the only processor that's been willing to step forward and completely rewrite our software from scratch," Mr. Ussery said. "It was a huge effort, but it is something now that is paying dividends because we were willing to do it. So now, we have literally a software platform that is out there that is one generation above the competition."

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