Visa delays plan to cut ties with CardSystems

Credit card company postpones plans by three months, as CyberSource gets set to buy the beleaguered payment processor.

Reuters

Oct. 29, 2005 5:00 a.m. PT

2 min read

Visa said Thursday that it is delaying by three months its plan to cut ties with CardSystems Solutions, a payment processor hit by a large security breach earlier this year.

Electronic payments company CyberSource on Sept. 23 said it intends to buy most of the assets of CardSystems.

But CardSystems faces uncertainty after major customers Visa and American Express said they planned to cut their ties with CardSystems following a breach there that exposed some 40 million credit cards to identity theft.

"Visa USA is granting an extension of the CardSystems Solutions Inc. disconnection from the Visa payments system from the scheduled date of October 31, 2005, until January 31, 2006," Visa said in a statement.

Visa said the extension was for "the sole purpose" of helping to facilitate CyberSource's planned acquisition of CardSystems' assets.

The extension is contingent upon several security requirements, Visa said, including compliance with Visa's data security requirements by both CyberSource and CardSystems.

If Visa's security requirements are not met or the transaction fails to close, Visa said it reserves the right to "eliminate some or all of the extension period" for disconnecting CardSystems.

American Express was not immediately available for comment.

A CyberSource spokesman on Sept. 23 said the company was in talks with Visa and American Express about continuing to process transactions on CardSystems' assets once the deal is closed.

He did not comment on whether the deal's completion was premised on Visa and American Express staying with the company.

CyberSource also said it had signed a letter of intent to acquire the assets of privately held CardSystems for an undisclosed amount. The letter gives CyberSource exclusivity in its talks to buy CardSystems, and it sees any deal closing in the fourth quarter.

The online payments processor said it intends to acquire substantially all of the assets of Atlanta-based CardSystems.

These include its payment processing platform with direct connections to major credit card association networks and banks, as well as contracts to process credit card transactions on behalf of more than 120,000 merchants representing over $18 billion in annual processing volume.