ollowing the just-completed merger of Bank One and Chase, the company now known as J.P. Morgan Chase & Co. announced on July 8, 2004 it selected Total Systems Services, Inc. (TSYS) to process its credit services business for 87 million cards.

The agreement will likely be finalized within the next few weeks.

This comes as a blow to First Data Corp, whose subsidiary, First Data Resources, has been processing credit transactions for Bank One.

By some accounts, the deal between TSYS and J.P. Morgan Chase is the largest in the industry this year. TSYS has been providing processing services for 51 million Bank One credit cards, the majority of which carry the Visa brand, since March 2003.

Now that the Bank One/Chase merger is complete, that processing business will also include 36 million cards issued by Chase, most of which are MasterCard-branded.

Despite its successful acquisition of Concord EFS and its STAR network in 2003, First Data has experienced a number of setbacks recently. The loss of the J.P. Morgan Chase processing business is not the first major chunk to go away this year.

According to ATMMarketplace.com, Bank of America, Wells Fargo and several other financial institutions said they will not renew their contracts with First Data when they expire later this year. They intend to leave the STAR network and will process point-of-sale and ATM transactions over Visa's network.

At least eight other large banks also have contracts with First Data that are set to expire at the end of 2004.

J.P. Morgan Chase could have brought its processing business in-house but instead decided to outsource to Columbus, Ga.-based TSYS. Even though TSYS has been processing for Bank One, it was not certain whether it would be able to hold on to the business once the Chase merger was completed.

Instead of losing Bank One's 51 million cards, though, TSYS also gained Chase's 36 million cards. This means that First Data, which until now has been the nation's largest processor of electronic payments, could be displaced to number two.