Total System Services Inc. (TSS - Analyst Report) announced a strategic alliance with US-based bank-related financial company – KeyCorp’s (KEY - Analyst Report) KeyBank NA, in order to process the consumer credit cards for the bank.
KeyBank offers services related to deposits, lending, cash management and investments in about 14 states across the US. These services are offered to individuals as well as small and medium-sized businesses.
Last year, KeyBank acquired a credit card portfolio worth $725 million from Elan Financial Services, which highlights the role of Total System to process this card portfolio through its TS2 platform and issue new credit cards in the future, overall strengthening the payment processing network.
The partnership also complements KeyBank’s strategy to bolster its relationship with customers as it plans to offer risk management, fraud avoidance and other support services on these cards. On the other hand, the new contract should enhance Total System’s payment volumes and a number of processed transactions, thereby supporting the financials.
However, this is not the first time that both parties have joined forces. Last year, KeyBank had appointed Total System to manage the conversion of a small acquisition portfolio. The authenticity of TSYS Program Solutions and its ability to meet the needs with precision and speedscored well with KeyBank and ultimately resulted in attaining a bigger contract from the bank.
Total System has been strengthening its clientele by offering customized and flexible processing solutions to all its partners, primarily in the merchant acquiring space. Additionally, the company is making efforts to tap opportunities in the recovering markets through high-grade technology.
Overall, Total System is challenged with strong competition, currency and interest rate fluctuations along with stringent regulatory reforms that have disturbed the pricing, credit allocation and business model of the company. Hence, we believe that Total System will require consistent top-line growth along with strong expense management in order to maintain the stability in its margins and cash flow.
While Total System carries a Zacks Rank #4 (Sell), other strong performers in the financial sector include Vantiv Inc. (VNTV - Snapshot Report) and Fleetcor Tech Inc. (FLT - Snapshot Report). All these stocks carry a Zacks Rank #1 (Strong Buy).