Magazine article American Banker

Signet Buys Equity Stake in Credit Card Processor

Magazine article American Banker

Signet Buys Equity Stake in Credit Card Processor

Article excerpt

Signet Buys Equity Stake In Credit Card Processor

Seeking savings while retaining control of a profitable business, Signet Banking Corp. has bought an equity position in a St. Louis-based credit card processing firm.

Richmond, Va.-based Signet, estimated to be the 21st-largest U.S. credit card issuer, will become the largest shareholder of Credit Systems Inc., currently owned by several midwestern banks.

Signet officials declined to reveal how much the bank will invest in Credit Systems, whic now processes 2 million credit card accounts.

Shunning Nonbank Processors

Signet, which processes its credit card transactions in-house, chose to buy into Credit Systems rather than sign up with a large nonbank processing firm such as First Data Resources, Omaha, Neb., or National Data Corp., Atlanta, because it wanted more control over the processing operation.

Some credit card industry observers have warned in recent years that financial institutions were giving up too much control to nonbank processing companies, and the Signet-Credit Systems deal is the latest example of a big card-issuing bank's making a financial commitment to this technology-intensive business.

Last May, MBNA America Bank, Newark, Del. - the third-largest U.S. card issuer - announced it would become sole owner of Southwestern States Bankcard Association, a large processing firm where the bank already held a majority stake.

Credit System's transaction volume will increase by 75% with the Signet deal. …

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