TSS Inks Deal with BancorpSouth

Last week, Total System Services Inc. (TSS - Analyst Report) announced a strategic long-term deal with the U.S.-based retail banker BancorpSouth to offer card payment solutions. However, other terms of the deal were not divulged.

Accordingly, Total System will now process the debit and credit card portfolios of BancorpSouth. The company will begin the card payment solutions early this year. The bank already provides retail banking services that include issuance of credit cards along with services related to insurance, mortgage, trust and fiduciary.

While BancorpSouth believes that Total System’s card solutions complement well with its retail banking, the deal also blends well with the Total System’s client growth strategies.

Total System has been growing its contract portfolio, which has got quite a fillip with the latest processing contract attainment from Bank Standard, Kenya’s Imperial Bank, Advanzia Bank, Bank of Ireland, Bank of Montreal, Swisscard, Cynergy Data, President’s Choice and Wal-Mart in Canada, while Bank of America extended its long-term contract for merchant and other card processing services through a new joint venture in 2010.

Last year, even Capital One Financial Corp. has extended its contract until 2017. Besides, with over 22 years of business relationship, the U.S. Bank’s recent agreement has been helping Total System to reach out the European markets. Furthermore, other alliances with Clearent and Caledon coupled with technological advancements through the TSYS PRIME card management solutions and Mobile App are further expected to drive growth going forward.

Overall, these high profile long-term contracts are crucial for Total Systems to boost its business portfolio and top-line growth. This coupled with the complete acquisition of TMS and expansion into merchant acquiring services is expected to drive growth.

Going ahead, we believe that the overall market stability and healthy impact of the regulations in the card industry will help recover the number of client accounts and long-term contracts in the long run. These efforts will also help the company mitigate risks related to currency and interest rates fluctuations along with stiff competition from dominant players such as Global Payments Inc. (GPN - Snapshot Report) and Alliance Data Systems Corp. (ADS - Snapshot Report).

Total System carries a Zacks Rank #3, which translates into a short-term Hold rating and a long-term Neutral stance.

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