hat do you get when you put a front-end specialist together with a back- end expert? You get Vital Processing Inc., an outstanding merchant processing joint venture of Visa USA and Total System Services Inc. (TSYS) that burst upon the marketplace in 1996.

Historically, Visa has focused on banks, members and Visa issuers developing Visa-branded payment vehicles. TSYS, on the other hand, is a major player on the cardholder issuer-processing field.

Neither had end-to-end full-service merchant solutions. Together, they made a good fit with a marketplace-oriented agenda of merchant-centric services.

As for its fitting name, Vital was chosen for the power and competitive strength the new company brought to the marketplace, representing the heritage and brand strengths of VIsa and ToTAL.

In a world of many merchant processors, the lines can get blurred. Vital Processing enjoys a unique position, a singular focus. Delivering only through its acquiring clients, Vital Processing is neither clouded nor conflicted within its channel space.

Its mission is to provide a full range of services for merchant acquirers, meeting the needs of merchants across all retail industries.

Opening its doors with a large, established network and market share of the business, Vital based its business model on sound, reliable solutions. That business model hasn't changed since.

"Business doesn't change, only the world does," says Jonathan Palmer, President and CEO of Vital Processing. "Our real strength - product and services as well as quality of service - are scale. This goes to the kernel of our business."

That core is "offer, capture, clear, settle" while remaining price sensitive, almost commoditized. However, Vital doesn't stagnate in its model. Rather, it's committed to growth and leverage of scale.

"We're always improving, whether it's more product or better service while lowering price," says Palmer. "The winners in this business are those who help merchants create as well as process their transactions."

What has Vital improved and how has it helped? At present, Vital has four lines of business:

+ Terminal management services.

+ POS services - authorize, capture, process, either physical or virtual.

+ Back-end services.

+ Information services - value adds, risk management, loyalty.

These four avenues do focus on creating more value for the merchant. Which one really heats up the merchant community? "All of our services work together," says Palmer. "Our clients tell us what our hottest product is."

And not one of those clients is exclusive to Vital, which recognizes this is a broad market with hundreds of players in the merchant acquiring space. Vital continually explores the space, partnering often and certifying software developers on its systems.

"We are not their only provider, but our acquiring clients' lives are made easier," Palmer says. "They don't have to deal with as many vendors."

Vital also recognizes the importance of its client base and intelligently has set its sights on the target.

"The top 10 acquirers in North America own more than 85% of merchant volume," says Palmer. "If you are going to be a provider, you need to meet the needs of the top 10."

Vital provides merchant processing solutions for more than 300 financial institutions, including the top 25 acquirers in the industry - e.g., US Bank, Bank of America, Heartland Payment Systems and Citibank.

Vital has more than 400 clients, and the largest pursue different strategies and therefore have different needs.

Vital meets those needs with physical and virtual pre-purchase, purchase and post-purchase merchant services on behalf of acquirers and merchant service providers. Vital considers itself the only pure third-party merchant processor in the industry.

In 2000, this pure third-party merchant processor authorized more than 5 billion electronic payment transactions at the point-of-sale and settled 2 billion transactions. More than 1 million merchants benefit from Vital's processing solutions.

Those solutions include merchant POS services such as authorization and capture of credit, debit, EBT, check payments and smart Visa credit-debit chip cards. All POS services are provided via dial, leased line, wireless or Internet access with 24/7 year-round merchant support.

Another solution is acquirer services - systems and solutions that assist the management of merchant portfolios.

Association clearing and settlement, merchant settlement, merchant accounting, billing and statements as well as risk reporting, profitability reporting and fraud monitoring are all part of Vital's acquirer-focused services.

Then there are terminal-management services exclusively provided by Vital's latest subsidiary, Vital Merchant Services. Incorporating full life-cycle sales, service and support of merchant POS payment devices and supplies, Vital Merchant Services offers same-day service on terminal deployment, replacement and repair. It provides for inventory management as well as supply replenishment.

Vital Merchant Services even offers merchant training and, of course, 24/7 merchant support with a single point of contact.

Don't forget Vital's reporting, risk and loyalty services - information- based solutions to support merchants' card-based customer acquisition and retention programs. These services incorporate customized reporting and data-analysis solutions to aid acquirers in managing and monitoring merchant risk

Even with this impressive array of acquirer product and services, Vital is not content.

"We spend a lot of money developing new services and solutions," says Palmer. "We also partner with companies that have integrity, someone who we can recommend confidently to our clients. We look for reliability, capability. We look for solutions that will resonate with our clients. We want value adds and time-to-market advantage. We may not always build it in- house, but we always want to be the only sticker on a merchant terminal."

Consider its latest partnership: Vital recently announced that it had signed a multiyear agreement with Certegy Check Services Inc., a subsidiary of Certegy Inc.

Certegy's agreement with Vital is for full POS equipment management and help-desk support for its merchant customers. Vital will provide the full range of POS equipment management and related services to Certegy Check Services, including terminal equipment procurement, programming and deployment; inventory management; replacement and repair services; and merchant supplies replenishment.

As part of its services, Vital will support all of Certegy's new and existing merchants on its 24/7 merchant help desk, which supports more than 800,000 Vital merchants.

It is quality and range of service that Vital values highly, the confidence all those clients have in Vital doing it right the first time. To support that confidence, Vital has implemented a balance scorecard system by which it manages its workings by its clients.

"We have established measures and standards for each client, and then we compare notes," says Palmer.

Twice a year, Vital surveys its client base with specific, granular questions and then appropriately responds to their observations and comments. The message to its clients is that Vital is listening.

Is anyone else out there listening as intently?

"Everyone and no one are our competitors," Palmer says. "Some of our largest clients have achieved market position and level of scale that would allow them to go in-house so every alternative is our competition."

Vital keeps the alternatives at bay every day because its clients trust Vital's continuous investment in products and services to provide quality, achieve economies of scale and supplement growth.

"I consider everybody a prospective competitor," says Palmer. "There is no telling where the competition will come from. Because of that, we continue to build on our record, continue to focus on providing strategic leadership."

According to Palmer, many of Vital's clients look to the company for advice on where the industry is going. Vital is active in trade associations and numerous other marketplace events and activities. It is interesting to hear that Vital's clients invite this solutions provider to participate in redefining strategies. Why? "We are non-threatening," says Palmer.

Does that non-threatening position translate to the ISO community? It would appear so.

"We don't look at them as a community. We look at ISOs one at a time," says Palmer. "Because we are very competitive and have achieved levels of scale, economies of scale in our core transactional and information processing, we make it that much more effective for ISOs to buy from us rather than do it themselves."

And what does it cost to do business with Vital? A figure wasn't quoted. Costs are variable, depending on ISO merchant volume and number of services provided. And those services can be customized. ISOs can take the whole pie or just the slices they need to satisfy their merchants' appetites.

"Long ago, we learned that the marketplace sets the price, we don't," Palmer says.

Vital does want to satisfy the appetite of the marketplace. Palmer believes the secret lies in five key ingredients - product, price, quality, leadership and capacity. "But there is also a sixth - people," says Palmer.

Vital continues to develop talent as well as technology. Headquartered in Tempe, Ariz., with facilities in Columbus, Ga., as well as Sacramento and San Diego, Vital boasts more than 850 employees, a number sure to increase in the future.

What else may the future hold for Vital? Palmer sees a three-part plan:

"First, we want to stay in front of the market and improve our core transaction processing. Secondly, information services will come into play as we continue to develop and deliver value-added services.

"Global is the third part of our future plan. As commerce becomes global for us, we'll devote more investment to multicurrency, multilanguage global services.'

Palmer says Vital also is looking to acquire more companies, both in acquisition as well as partnerships, to meet future plans.

"Neither is more important," he says. "It depends on where the market goes. Our future is more of the same and getting better every day."