First National Bank of Omaha, which for many years has kept a relatively low profile as one of the nation’s largest privately held credit card issuers, this year is churning with activity from an unprecedented growth streak.

During a year when many other issuers are pulling in their horns, the Omaha, Neb.-based bank is in the midst of rolling out several new cobranded programs and recently became one of only three U.S. banks with contracts to issue credit cards on all four major card networks.

Only GE Money and HSBC have similar deals, according to First National. In operation since 1953, the Omaha bank in October signed agreements enabling it next year to add Discover Financial Services and American Express Co. to the lineup of network brands it issues alongside MasterCard Worldwide and longtime partner Visa Inc.

The issuer’s card-network expansion comes as it begins to spread its wings in other key areas. First National this year began capitalizing on a joint merchant-acquiring deal inked with Total System Services Inc. that analysts say could help to fuel a series of cobranded card deals it is hatching with smaller and regional merchants.

And business also is booming in the institution’s sideline of issuing credit cards on behalf of other banks.

First National, which has 2.5 million of its own cards in circulation, this year will take on a record number of other banks’ credit card programs as an agent issuer, Stephen Eulie, president of First National Bank’s credit card division, tells PaymentsSource. The issuer’s parent, First National of Nebraska Inc., has $17 billion in assets, a spokesperson says.

The bank manages credit card programs for some 700 financial institutions, putting it “second or third” among firms handling other banks’ card programs on an agent basis, Eulie says.

“Last year was our biggest year so far in terms of signing up new agent-bank partners, and 2010 looks like it will be even bigger,” Eulie says, noting that in the next couple of months the company expects to sign “at least 10” additional deals to issue cards on behalf of other banks.

More-difficult times for smaller issuers, which have experienced significant setbacks this year from regulatory and economic shocks, have helped spur the increase in First National’s agent-bank partnerships, Eulie speculates.

“Banks see a need to increase fee income, and credit cards are a good source of that. And while some are getting out of directly issuing cards, we are willing to do that for banks on an agent basis and give them back a part of the revenues we earn,” Eulie says. “A lot of financial institutions whose cards we issue were also recently asking for more (network) products, especially relative to AmEx.”

Eulie also is betting that credit card spending will improve next year for the issuer’s core card-issuing business, and he believes in further growth opportunities in cobranded credit cards, which have reached wide saturation in recent years.

“It’s true that spending on credit cards has been down, and people are hesitant to put a lot of money on plastic,” Eulie says. “But we think that when unemployment rates improve, if we give the right value proposition to customers, they will begin using credit cards again, including cobranded cards.”

Eulie is particularly focused on smaller, regional and specialty merchants that are entering the cobranded credit card market for the first time. Such merchants often have strong in-store and online customer traffic that can provide rich, targeted marketing opportunities that are far more effective than general direct-mail credit card solicitations, he says.

 “The thing that really attracted us to Discover and AmEx was the strength of these two brands, their strong networks and existing merchant partnerships,” Eulie says. “Both Discover and AmEx can provide us access to merchants we’d like to partner with in cobrand deals.”

In both deals, First National will issue the cards, manage the customer relationships, and be responsible for all marketing, billing, charge authorizations and credit management. Discover and AmEx will process the transactions through their respective networks, similarly to other cobranded deals the bank has announced recently.

Adding the Discover and AmEx brands may help accelerate the bank’s cobranded credit card program growth, Eulie says, adding the bank plans to announce “a few large” cobranded card programs in upcoming months.

 “By offering both Discover and AmEx, First National of Omaha is leveraging the power of other brands in order to capture more market share, spending volume and total transactions,” Adil Moussa, an analyst with Aite Group, tells PaymentsSource.

Bolstering First National’s recent deals with Discover and AmEx was another strategic move it made earlier this year when it joined forces TSYS for its merchant-acquiring operations, analysts suggest.

The bank in March announced plans to sell a 51% stake in its merchant-acquiring arm, First National Merchant Solutions, to TSYS (see story).

 The $150.5 million deal catapulted Columbus, Ga.-based TSYS into a significant role in the acquiring industry while providing First National with the opportunity to develop products and services “that were unavailable prior to the joint venture,” according to First National statement.

First National’s acquiring partnership with TSYS is a “very interesting relationship” that enhances the bank’s overall card-marketing options. Brian Riley, senior research director at TowerGroup, tells PaymentsSource. “The TSYS connection makes it more natural for First National of Omaha to expand its merchant scope in various ways that can only enhance its cobranding opportunities,” he says.

The TSYS deal apart, First National has a robust cobranded card program it has expanded this year, and the company is hatching several more deals, Eulie says.

The issuer in September announced a cobranded MasterCard program with, a popular e-commerce site, that provides cardholders with free shipping for online purchases, 3% to 8% cash back on qualified purchases through the site, plus 1% back on purchases elsewhere (see story).

Murphy USA, a petroleum merchant with 1,000 outlets mostly in the south, in July announced the launch of the first Murphy Oil-branded Visa card, providing cardholders with 1% cash back on credit card purchases and 4 cents off per gallon at any Murphy USA or Murphy Express gasoline stations (see story). 

Some of First National’s other cobranded cards include partnerships with the National Rifle Association, Japan Airlines, All Nippon Airways, gasoline and convenience store retailers Sinclair Oil Corp. and Sheetz Inc., and the 23-store Midwest sporting-goods chain Scheels All Sports Inc.

Smaller merchants are a good fit for First National because of their ability to design cobranded card rewards programs around specific product offerings with incentives for customers to make frequent or higher-ticket purchases, Eulie says.

“The reason smaller and midsize merchants with solid brands are so interesting to us is that we have a lot in common in that we’re a large issuer, but we’re not one of the top five,” he  says. “That gives us a lot of flexibility, and we don’t have to book as many millions of accounts as the biggest issuers in order to show healthy growth.”

Moreover, Eulie believes many consumers are willing to carry more credit cards in their wallets if the rewards programs are compelling enough.

“We see consumers using credit cards in very specialized ways so that they may use one card to get a discount with a gasoline merchant and turn around to use another card to get a discount at their favorite sporting goods store,” he says. “The average consumer probably has four or five cards in their wallet, and they are happy to pull out different ones if they are getting a good deal there.”

Not all observers agree that consumers want to stuff their wallets with more cards to get more deals. Indeed, certain new “targeted” cobranded rewards card programs have some potential for success, notes Beth Robertson, director of payments research for Javelin Strategy and Research. But she is skeptical about whether many consumers want to carry several different cobranded cards to capture rewards from favored merchants.

“A top-of-wallet focus is more prevalent today,” Robertson says.

And while Robertson believes there is “a lot” of untapped merchant interest in launching cobranded credit card programs, she says “there is definitely specific focused opportunities that might leverage unique brand-value ties with either Discover or AmEx.”

First National of Omaha for decades may have been a relative sleeping giant among credit card issuers, but as the issuer expands its reach through broad credit card network relationships it is becoming a force to be reckoned through its partnerships with a growing number of merchants and its expanding card market-share.

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