Visa gives CardSystems three-month reprieve
Plans are delayed to sever ties with the Atlanta payment processor by three months
Follow @infoworldVisa U.S.A. is giving CardSystems Solutions a little more time to get its act together. On Thursday, Visa announced that it has delayed plans to sever ties with the Atlanta payment processor by three months, in order to facilitate a planned sale of CardSystems to electronic payment vendor CyberSource Corp.
CardSystems processes credit card transactions totalling about $18 billion per year for approximately 120,000 merchants. Both Visa and American Express Co. had planned to cut ties with the Atlanta company at the end of October, after a CardSystems security breach exposed some 40 million credit card numbers to online thieves. CardSystems Chief Executive Officer John Perry later admitted that some of the stolen records had been improperly stored by his company.
Visa said it will now wait until Jan. 31, 2006, before requiring merchants to move to another credit card processor. "Visa is granting an extension... for the sole purpose of helping facilitate CyberSource's planned acquisition of (CardSystems) assets," the company said in a statement.
Last week, CyberSource signed a letter of intent to acquire CardSystems, but the company hinted that the acquisition would be contingent on Visa and American Express's continued business.
Now it appears that if the CyberSource acquisition goes through as planned, companies such as Visa and American Express may stay with the CardSystems network, provided that CyberSource can assure partners that the data will be secured.
"If this transaction moves forward, it is a win-win situation for all those associated with the deal, because those financial institutions who already use CardSystems will be able to transition more easily to CyberSource," said a source familiar with the negotiations, who asked not to be identified because of the sensitive nature of the deal. "There are less headaches there," the source said.
The CyberSource acquisition is expected to be completed by year's end.
As of Thursday, American Express had no plans to change the October cut-off date, but the CyberSource acquisition does change things, said Judy Tenzer, an American Express spokeswoman. "We had previously discussed terminating our relationship at the end of October, but in light of the new circumstances we are evaluating how to more forward," she said.
REFERENCES:
Troubled CardSystems to be sold, Sep. 23, 2005
