DALLAS — The recent abrupt withdrawal of Certegy Inc. from 7-Eleven's Vcom program could signal larger troubles.
According to an American Banker report, two analysts who cover Certegy said that it had pulled out of the project because Certegy had been losing money on it. The analysts also noted that 7-Eleven had halted its rollout of Vcoms.
7-Eleven confirmed that it stopped installing Vcoms in July. The company attributed Certegy's exit to the fact that the vendor is more accustomed to serving higher-volume markets.
Certegy signed an eight-year contract with 7-Eleven in 2001 but by July it will hand over the job to CashWorks, which General Electric Co.'s GE Consumer Finance division acquired this year. (See related stories CashWorks is 7-Eleven's newest Vcom partner and CashWorks hopes to leverage GE brand, experience)
Certegy said that the decision reflected its desire to focus on supermarket and casino clients rather than convenience stores.
It will continue to provide 7-Eleven's 2,000 company-owned stores with check warranty services at the point of sale, but only for personal checks, not the payroll checks it has been cashing at Vcoms, said Mary Waggoner, a Certegy spokeswoman.
"The fact that we signed this new agreement with 7-Eleven demonstrates that we have a good relationship with them," she said.
Neither Certegy nor 7-Eleven would say whether the Vcom program was meeting expectations, but two analysts cited by American Banker said it apparently was not.
Both Carla N. Cooper, an analyst with Robert W. Baird & Co., and Robert J. Dodd, an analyst for Regions Financial Corp.'s Morgan Keegan & Co., said that Vcom had not been generating enough return to warrant Certegy's continued participation in the program.
Cooper said that in the third quarter Certegy had talked about investing about $1 million in marketing for its partnership with 7-Eleven.
"It was clear from the tone of" comments made during a later conference call that "it was not exceeding expectations and perhaps dragging a little bit," Cooper said in the American Banker report. "The conclusion I'd come to is they didn't feel those dollars achieved the returns that they were looking for."
Carole Davidson, a 7-Eleven spokeswoman, would not discuss Vcom's financial performance, but she noted that 500,000 consumers have signed up for Vcom cards, which let them cash payroll checks at the terminals.
Davidson said that there are currently no plans to add to the 1,000 Vcoms that have been installed in 13 states. The rollout began in late 2002 and ended in mid-2003, she said. The company had earlier announced plans for up to 3,500 of the terminals.
