• United States



by Paul Kerstein

Visa Gives CardSystems Three-Month Reprieve

Sep 30, 20052 mins
CSO and CISOData and Information Security

Visa U.S.A. Inc. is giving CardSystems Solutions Inc. a little moretime to get its act together. On Thursday, Visa announced that it hasdelayed plans to sever ties with the Atlanta payment processor by threemonths, in order to facilitate a planned sale of CardSystems toelectronic payment vendor CyberSource Corp.

CardSystems processes credit card transactions totalling about US$18billion per year for approximately 120,000 merchants. Both Visa andAmerican Express Co. had planned to cut ties with the Atlanta companyat the end of October, after a CardSystems security breach exposed some40 million credit card numbers to online thieves. CardSystems ChiefExecutive Officer John Perry later admitted that some of the stolenrecords had been improperly stored by his company.

Visa said it will now wait until Jan. 31, 2006, before requiringmerchants to move to another credit card processor. “Visa is grantingan extension… for the sole purpose of helping facilitateCyberSource’s planned acquisition of (CardSystems) assets,” the companysaid in a statement.

Last week, CyberSource signed a letter of intent to acquireCardSystems, but the company hinted that the acquisition would becontingent on Visa and American Express’s continued business.

Now it appears that if the CyberSource acquisition goes through asplanned, companies such as Visa and American Express may stay with theCardSystems network, provided that CyberSource can assure partners thatthe data will be secured.

“If this transaction moves forward, it is a win-win situation for allthose associated with the deal, because those financial institutionswho already use CardSystems will be able to transition more easily toCyberSource,” said a source familiar with the negotiations, who askednot 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 Octobercut-off date, but the CyberSource acquisition does change things, saidJudy Tenzer, an American Express spokeswoman. “We had previouslydiscussed terminating our relationship at the end of October, but inlight of the new circumstances we are evaluating how to more forward,”she said.

By Robert McMillan – IDG News Service (San Francisco Bureau)