Total System Services Inc. is probably losing another important customer.
The Columbus, Ga., processor warned Tuesday that Bank of America Corp. is reevaluating its relationship with TSYS. The Charlotte banking giant announced Monday that it had created a merchant processing joint venture — Banc of America Merchant Services — with TSYS' rival First Data Corp.
TSYS said its contract with B of A expires in April 2010 and it will operate under that contract until it hears otherwise from the company.
"Bank of America has indicated to TSYS that it is in the process of formulating its plans with respect to changes in its merchant processing relationship with TSYS but has not yet communicated … the timing or extent of the deconversion," TSYS said.
TSYS said the B of A merchant processing business accounted for about 4% of the processor's $1.9 billion of 2008 revenue and about 4.6% of its $408.9 million of first-quarter 2009 revenue. The "potential loss of Bank of America as a merchant processing client is not expected to have a material adverse effect," it said.
Glenn Greene, an analyst at Oppenheimer & Co. Inc., wrote in a research note that TSYS had already this year lost the processing contract for Washington Mutual Inc.'s consumer card portfolio; JPMorgan Chase & Co. bought its banking operations last year and moved the processing work in-house.
"We are concerned by TSYS' recent spate of lost customers," he wrote. Dramatic "risks within the banking industry, slowing consumer spending, reduced card solicitations and elongated sales cycles will likely inhibit TSYS' ability to quickly replace lost business."
David Fish, an analyst at Mercator Advisory Group Inc., said that losing B of A's merchant processing business would mean that most of TSYS' acquiring relationships would be with independent sales organizations and small banks. One countermove, Fish said, could be for TSYS to use recent technology acquisitions to develop "next generation" payment products.