Summary
Capital One Financial Corporation (COF) announced on August 8, 2005, the entry into a material definitive agreement with Total System Services, Inc. (TSYS), effective August 5, 2005. This agreement involves Capital One transitioning the majority of its credit card account portfolios to TSYS's TS2 transaction and account processing platform, as well as its call center and rewards platforms. The company expects this move to enhance its processing capabilities, accelerate the introduction of new features, maintain service levels, and control operating expenses and capital costs. The conversion process is planned to be a phased approach over 18 to 24 months, with no significant expected change in current processing-related costs. The agreement has an initial term of five years post-conversion and includes provisions for Capital One to terminate the agreement under certain conditions, with a declining termination fee. Notably, Capital One retains the option to license the TS2 software and bring processing back in-house after three years.
Key Highlights
- 1Capital One enters a material processing services agreement with TSYS, effective August 5, 2005.
- 2The agreement includes the migration of the substantial majority of Capital One's credit card account portfolios to TSYS's TS2 platform.
- 3Capital One will also transition its call center and rewards platforms to TSYS.
- 4The company anticipates benefits including improved processing capabilities, faster time to market for new features, maintained service levels, and cost control.
- 5The conversion is expected to occur in a phased manner over approximately 18-24 months.
- 6Processing costs are not expected to change materially as a result of this transaction.
- 7The agreement has a five-year initial term post-conversion, with termination options for Capital One and rights to re-internalize processing after three years.