Bank facing test in bid to build credit card business
Bank of America Corp. can't take this weekend off.
By tomorrow the Charlotte, N.C., banking giant aims to integrate two credit-card systems, moving its legacy business of 50 million credit cards onto the older system that runs the 72 million credit cards that came when it bought MBNA Corp. for $35 billion last year.
The effort amounts to one of the largest bank integrations in history, and may be second only to steps by rival credit-card issuer JPMorgan Chase & Co. to move its roughly 90 million credit cards from one data processing company to another in 2004.
Slip-ups could raise the ire of customers and business partners and throw off a major part of Bank of America's overall strategy as it tries to grow beyond simple retail banking services.
On the other hand, a smooth transition would cement the wisdom of Bank of America's MBNA purchase, which more than doubled the bank's credit-card holdings and made it the country's largest issuer of plastic. On Thursday, the bank reported third-quarter profit of $5.4 billion, up 41 percent from the previous year, largely on the strength of the MBNA purchase.
Citigroup Inc. is in second place with 108 million credit cards in circulation and JPMorgan Chase is in third, according to figures from Nilson Report, a California newsletter that tracks the payment card industry.
Together the three banks account for nearly half the 700 million major credit cards circulating in the nation. Previously all three banks had used outside data processors to handle billions of credit-card transactions a year including authorizing sales at merchants, billing, and processing payments.
For customers, the transition will be most obvious to those who had MBNA-issued cards, which Bank of America has gradually been replacing with cards under its own brand. Starting Monday these customers will be directed from the former mbna.com site to the bank's red-and-blue bankofamerica.com site, where customers maintain their checking accounts and other financial relationships with the bank.
The site also will offer all customers new details about their credit-card bills such as temporary authorizations, links to request increases in credit limits, and on-screen icons such as shopping carts to show the type of transactions. The MBNA brand gradually will be phased out over the next year. Already, a minor sign of Bank of America's transition is that some current card balance information isn't available on the company's customer website.
The bank has high ambitions for the project. Integration overseer Mary Kanaga compares the project to souping up two race cars "while we're in the middle of running the race."
The origins of the effort date to last year when Bank of America ended a deal with processor Total System Services Inc. of Columbus, Ga., and said it would move the work in-house to the MBNA systems it had purchased.
The move will actually wind up costing Bank of America several hundreds of millions of dollars extra per year, compared with the money it could save if it had stayed with Total Systems as its processor, said Theodore Iacobuzio, managing director of TowerGroup, a Needham financial-services consultant.
But if everything works out this weekend, Bank of America will be left with much closer ties to its customers compared with other banks that still depend on processors for customer service.
David Robertson of Nilson Report said keeping current customers happy is ultimately a cheaper strategy than trying to lure newer, more fickle ones from other banks with expensive advertising or rewards programs.
Bank of America has lost perhaps 10 million MBNA customers during the transition, estimates TowerGroup. The bank expected to lose some business, since MBNA issued credit cards on behalf of some of the bank's major rivals. Bank of America calls the figure too high but won't be more precise. A spokeswoman said it expects its total card business to grow this year.
Ross Kerber can be reached at kerber@globe.com. 
