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Bank One Takes Things In-House, Evicts First Data

As part of an effort to consolidate operations, Bank One Corp. announced that it will move its credit card processing business in-house, ending its contract with First Data Corp. First Data will continue to process for Bank One until the current contract expires in June 2004. Bank One also announced that during the completion of the transition to its own in-house system, which might take at least three years, TSYS will process the business formerly handled by First Data. This partnership is expected to last until at least 2006.

Pricing issues and Bank One's overall shift toward bringing its outsourced business under one roof seem to be the reasons behind the decision.

Bank One has been the largest single customer of First Data's card processing subsidiary for four years. Bank One has 50 million cardholders; First Data has 325 million card accounts on file with 1,400 card-issuing clients worldwide. TSYS processes 245 million accounts.

First Data's Chairman and CEO, Charlie Fote, expressed disappointment in Bank One's decision but said his company's obligations are to staff and stockholders. He said his company could not meet Bank One's terms and that it would not sign up unprofitable business.

"We have an obligation to our investors and employees ... to ensure that our client relationships are compensatory to First Data," he said in a statement.

Fote stressed that Bank One's decision was not based on First Data's technological capabilities: "We highly value our client relationships and have built an unparalleled portfolio of services to serve them well." First Data will work with Bank One over the next 15 months to ensure a smooth transition, he said.

Bank One and First Data will remain partners in Paymentech, with Bank One holding 52.5% and First Data holding 47.5%. Paymentech is the nation's second-largest merchant acquirer, based on transactions.

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