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Total System Services Inc., known as TSYS, is going to have greater difficulty portraying itself as a top merchant acquirer as the Columbus, Ga.-based processor faces the loss of more business to rival First Data Corp., analysts say. First Data Monday announced a joint venture with Bank of America Corp. called Banc of America Merchant Services (CardLine, 6/29). BofA will move merchants off of the TSYS processing system under the new joint venture. TSYS says its contract with BofA expires in April, and it will operate under that contract until BofA notifies it of changes. BofA business accounted for approximately 4% of the TSYS's $1.9 billion in 2008 revenue and about 4.6% of the company's $408.9 million in first-quarter 2009 revenue, TSYS says. The "potential loss of Bank of America as a merchant-processing client is not expected to have a material adverse effect on TSYS's financial position, results of operations or cash flows," according to the company. While the deconversion appears to be financially sustainable for TSYS, analyst Glenn Greene of New York-based Oppenhiemer & Co. Inc. expresses concern in a research note because TSYS recently lost processing business when JPMorgan Chase & Co. bought the former Washington Mutual Inc. and moved the processing for WaMu cards in-house (CardLine, 12/3/08). "We are concerned by [TSYS's] recent spate of lost customers, especially in a challenging growth environment," Greene writes. "Dramatic changes and risks within the banking industry, slowing consumer spending, reduced card solicitations and elongated sales cycles will likely inhibit [TSYS's] ability to quickly replace lost business," Greene notes. Analyst Roger Smith of Chicago-based Fox-Pitt Kelton Cochran Caronia Waller (USA) LLC calls the business loss a "disappointment" for TSYS. "The company has been facing a bunch of challenges that haven't been going their way," Smith tells CardLine sister publication ISO&Agent Weekly. "The potential for losing another big client on the merchant-acquiring side is disappointing." Analyst David Fish of Mercator Advisory Group Inc., a Maynard, Mass.-based firm, says the move of BofA business to the First Data/BofA joint venture means the majority of TSYS's merchant-acquiring relationships will be with independent sales organizations and small banks. One way to counter is for TSYS to use recent technology acquisitions to develop "next-generation" payment products, Fish says. In early trading today, TSYS stock was trading at $13.74, up 2.6% from yesterday's close of $13.39.
