1200 Sixth Avenue
TSYS Vision: We set the standard in global transaction processing services.
Total System Services, Inc. (TSYS) is the second-largest credit card processor in the world, trailing only American Express's First Data Corp. subsidiary. Under the service mark, THE TOTAL SYSTEM, and the company's TS2 computer-based processing system, TSYS offers a full line of card support services, from credit approval to production and mailing of cards, to authorizing domestic and international purchases, preparation and mailing of billing statements, and customer service support, as well as merchant accounting and other merchant support services. In 1996, TSYS handled more than 63 million consumer accounts and more than 600,000 merchant accounts for some 115 banks and other card issuers. Major clients include AT&T, Bank of America, and NationsBank Corp. TSYS has also captured more than half of the young but quickly growing commercial card market, already serving more than two million VISA and MasterCard commercial accounts since that market was created in 1994. In 1996, TSYS and VISA U.S.A.'s Merchant Bank Services formed the for-profit Vital Processing Services LLC joint venture, combining both companies' merchant processing units, which together processed nearly three billion transactions in 1995.
TSYS has also expanded into new areas to combat the increasing maturation of the U.S. credit card industry. In 1995, TSYS, which has long serviced banks in Canada, Mexico, and Puerto Rico, took its first steps to transform itself into an international company. TSYS formed the joint venture Total System Services de Mexico, S.A. de C.V. with Controladora PROSA, an 11-bank partnership representing 75 percent of Mexico's card-issuing banks. The joint venture added four million accounts, giving TSYS de Mexico 40 percent of that country's credit card accounts. TSYS has also expanded beyond traditional credit card markets by winning the processing business of United States Medical Finance Corp.'s USMed Card, a medical credit card. An alliance with Fair, Isaac and Company subsidiary DynaMark, Inc., formed in 1995, has enabled TSYS to extend its services to its clients with dynamic database marketing capabilities.
TSYS generates revenues through the volume, rather than the amount, of transactions made on the credit cards it services. In 1995, TSYS revenues neared $250 million, producing a net income of $27.7 million. TSYS is led by Chairman and CEO Richard Ussery, Vice-chairman Kenneth Evans, and President Philip Tomlinson, all three long-time employees of parent company Synovus Financial Corp. That company, formerly known as Columbus Bank & Trust, owns 81 percent of TSYS's stock; TSYS management controls an additional ten percent of the company's shares, with the remainder trading on the New York Stock Exchange.
Started in a Basement in the 1950s
In the 1950s, it was barely possible to speak of a credit card "industry." When tiny Columbus Bank & Trust (CB&T) issued a credit card to its local depositors in 1959, it was only the second bank in Georgia, and among the very first in the country, to do so. A credit processing operation was set up in the bank's basement; processing was done manually, as computers were still rare and software was even rarer. Through the first half of the 1960s, the bank's credit department grew from processing transactions from some 200 local merchants to 3,000. In 1966, CB&T built a separate operations building, and, after attempting to form a joint venture with W.C. Bradley Company to computerize processing, CB&T installed its own computer. Finding trained computer operators was difficult and expensive; instead, the bank trained some of its own personnel, establishing a computer department.
By 1969 the company was writing its own software to handle processing of its credit card accounts. Joining the team developing the bank's software programs was Richard Ussery, then in his fourth year with the bank (he joined CB&T as a teller in 1965). As more banks instituted credit cards and struggled to process accounts, they were attracted to CB&T's processing system. Ussery told Georgia Trend of a meeting with an executive from Landmark Union Trust, of Jacksonville, Florida, who complained of the difficulty and expense his firm was having processing its credit transactions. Ussery replied, "We can do that for you here in Columbus at half what it's costing you."
By 1973, CB&T had completed an accounting and bank card data processing software system, dubbed THE TOTAL SYSTEM, the first system in the country offering online access to credit card and bank account information. The following year, CB&T began providing processing services for other banks, starting with Landmark Union Trust. Shortly after, CB&T agreed to handle processing for two more banks, in Seattle and Kentucky. By then, the credit card industry was undergoing its first boom. CB&T's processing business took off, especially after 1976. Prior to that year, credit card issuers had been restricted to offering either one or the other of the predecessors to Visa and MasterCard, then called BankAmericard and MasterCharge. But when the card systems allowed banks to issue both cards, CB&T became the first in the country to take on processing both card systems.
CB&T began intensifying its marketing of THE TOTAL SYSTEM. As Ussery, who was named senior vice-president of the company's Operations Division in 1981, told American Banker, "We realized, here was an opportunity to generate some miscellaneous income." The division's revenues reached $6 million in 1980 and neared $10 million by 1982. By the end of that year, CB&T, which itself was expanding rapidly with a series of acquisitions of other banks, spun off its account and data processing operation as a separate subsidiary, Total System Services. By then, TSYS was processing more than one million accounts for more than 60 banks in 28 states. Ussery was named president and CEO, joined by Philip Tomlinson, who began working for the bank in 1974, as executive vice-president. CB&T President James H. Blanchard was named TSYS chairman. Bolstering the new company's processing capacity was the acquisition of a banking software developer, Bank-R Systems Inc., also based in Columbus, in February of 1983. In August of that year, CB&T took TSYS public, retaining 82 percent of the new company's shares. The company's revenues had passed $15 million, providing a net income of nearly $2 million.
Growing Rapidly in the 1980s
By 1984, TSYS had captured second place among the country's leading credit card processors, serving some five million accounts for more than 80 financial institutions. The addition of Michigan National Bank's processing business, among the largest credit card issuers in the United States, added another one million accounts to TSYS, raising its total to 7.5 million credit card accounts and nearly doubling its annual revenues since its initial public offering, to $28 million, with net income of more than $4.3 million.
TSYS was riding high on a new wave of credit card growth in the 1980s. Increasing numbers of banks were introducing their own credit cards, with many banks expanding their credit card business nationwide. Private label cards also began to proliferate, with department stores, airlines, oil companies, and other retail chains offering their own credit cards. Intense competition in the credit card industry lowered profit margins as the cost of processing transactions grew. Whereas larger issuers were able to achieve the economies of scale to conduct their own processing operations, smaller issuers increasingly turned to TSYS (and to rival First Data) to handle their credit card business.
TSYS made steady gains in the second half of the 1980s. Revenues passed $46 million in 1987, with more than 12 million accounts, and jumped to $56 million one year later, as accounts neared 14 million. Net income grew even faster, reaching $9.5 million by 1988. By then, the company's accounts numbered 106 financial institutions and extended into Canada, Mexico, and Puerto Rico. As the end of the decade neared, TSYS made plans to step up expansion of its account base, expecting to pass more than 40 million accounts by the mid-1990s.
To fuel this growth, TSYS moved to split its operations, turning over its banking data processing operations to its parent. CB&T, renamed Synovus Financial Corp., had continued its own rapid expansion, now combining a network of more than 20 banks in Georgia, Florida, and Alabama, and preparing an aggressive push into other states in the Southeast region. The split enabled TSYS to concentrate on its core credit card processing business and to pave the way to winning its biggest client yet.
More Than a Credit Card Processor in the 1990s
In 1990, TSYS signed a five-year contract to process AT&T's new Universal Card. The deal was expected to provide TSYS with its largest client yet as AT&T prepared to launch its Visa and MasterCard, which combined calling card features, to its 70 million household customers and 40 million calling card holders. Analysts estimated that the Universal Card could reach 35 million accounts within five years. The Universal Cards caught on quickly, growing to represent 30 percent of TSYS's total accounts, which grew to 27 million by 1992. The company's merchant account list was also growing, to 310,000 accounts. Revenues climbed from $84 million in 1990 to $112 million in 1991. In early 1992, TSYS restructured its management, with Ussery elected as chairman of the board and CEO, and Tomlinson named president.
TSYS next began to plan not only to expand the company, but also to diversify its operations, while clinging to its core processing business. In July 1992, the company acquired Mailtek, Inc., based in Atlanta, a full-service direct-mail provider of data processing and financial services beyond the financial community to health care companies, airlines, and the leisure industry. A second acquisition, of Lincoln Marketing, Inc., further enhanced the company's direct mail and marketing capacity. But the company also made a more fundamental move in September 1992, when it unveiled plans to develop an entirely new processing system, dubbed TS2. Designed to replace THE TOTAL SYSTEM, which had been expanded from a 25-million account capacity to 45-million accounts, TS2 would use the latest advances in computer technology, offering updated features, flexibility, and an account capacity of at least 250 million accounts. As Blanchard described it to the Atlanta Journal and Constitution, "It is the single biggest event in the history of this company. This is like a rocket ship to the moon in terms of the technology." TSYS initially budgeted $27 million for developing the software system.
TSYS received a fresh boost in 1993, when it reached a new agreement with AT&T to provide processing services through the end of the century, replacing the original agreement. By then, the AT&T card had grown to 16 million accounts, making it the industry's second largest. Earlier in that year, TSYS had also signed up the processing business of PROSA, an alliance of 14 card-issuing banks in Mexico, with 3.7 million accounts. The merger of longtime clients C&S/Sovran and North Carolina National Bank as Nationsbank in 1993 helped to firm TSYS's growing client list and attract other larger card issuers as well. By October, TSYS was negotiating to take over the card processing services for BankAmerica Corp. Citing TS2 as a primary reason for signing with TSYS, BankAmerica reached agreement to add its seven million consumer accounts to TSYS in March 1994, and then added its merchant accounts as well.
TSYS's consumer accounts topped 38 million. The company moved to increase its share of the merchant processing business, forming an alliance with Deluxe Data, of Milwaukee, Wisconsin to provide enhanced merchant services. TSYS also began to see progress on TS2, testing the program in 1993 and converting the first of its clients, First Omni Bank of Millsboro, Delaware, and its 750,000 accounts to the new system in 1994. TSYS was also quick to enter the newly created corporate credit card market, as issuers sought to expand business beyond the increasingly saturated consumer market, and in 1994 became the first company to be authorized to process both Visa and MasterCard corporate accounts. Within a year, TSYS's commercial services division had captured more than half of the processing business for the new type of card. TSYS closed that year with revenues of more than $187 million and a net income of $22.5 million.
During 1995, TSYS worked to convert its clients to TS2. The company also moved into new territory when it signed with Tallahassee, Florida-based United States Medical Finance Corp. to process that company's USMed medical credit card. But 1995 proved pivotal to TSYS's expansion in other ways. In July 1995, the company announced its agreement to form a joint venture with PROSA, opening an office in Mexico, which marked the company's first international expansion. This set the stage for future plans to become a worldwide company, as credit card use itself was becoming increasingly prevalent throughout the world. Two months later, TSYS and DynaMark, the database management and marketing subsidiary of Fair, Isaac announced an alliance to provide TSYS's clients with enhanced customer data analysis. Such analysis, normally too expensive for smaller card issuers to implement for themselves, was seen as a crucial value-added element in the competition to retain customers. At the same time, TSYS was also entering negotiations with Visa affiliate Merchant Bank Services to establish a joint venture company to capture a larger share of the merchant processing credit segment. That venture, Vital Processing Services, was launched in June 1996, with first year revenues projected at $100 million.
TSYS's $250 million in 1995 revenues continued the company's secure hold on the industry's number two position. But rival First Data's aggressive diversification efforts in the mid-1990s, boosting that company's revenues past $1 billion, was seen as an opening for TSYS to capture still more of the market. Whereas processing now accounted for only around half of First Data's revenues, TSYS remained committed to enhancing its core processing business. As the industry turned to compete for the expanding global market, TSYS was well positioned to build on its base as a processing powerhouse.
Principal Subsidiaries: Columbus Depot Equipment Co.; Columbus Productions, Inc.; Lincoln Marketing, Inc.; Mailtek, Inc.; Joint Ventures: Total System Services de Mexico de S.A. de C.V., Toluca, Mexico (with Controladora PROSA S.A. de C.V.); Vital Processing Services LLC, Tempe, Arizona (with Merchant Bank Services).
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