Several major U.S. banks have held preliminary discussions about buying a debit payments network owned by fintech firm Fiserv, according to people familiar with the matter. The conversations, which took place in recent months, focused on acquiring one of the debit networks that process transactions between merchants and financial institutions.
Participants named in the discussions included JPMorgan Chase & Co, Bank of America Corp, Wells Fargo & Company and PNC Financial Services Group Inc. The talks concentrated on Fiserv's STAR and Accel debit networks. Sources say the conversations remain tentative and that several banks have already concluded they are unlikely to pursue a purchase.
Ownership of a payments network could allow a bank to clear and process debit-card transactions on its own rails rather than routing them through third-party networks. Those who have been part of the discussions have argued that processing transactions via a bank-owned network could make those debit transactions ineligible for the interchange fee caps imposed by the Durbin Amendment, a provision of the 2010 Dodd-Frank Act.
Bank executives have long contended that the federal limits on interchange fees have reduced a stream of revenue that previously helped support consumer-facing services such as free checking accounts, fraud protection and debit-card rewards programs. In contrast, merchants and consumer advocacy groups have maintained that the caps lowered the cost of accepting card payments and helped restrain retail prices.
Those involved in the exploratory talks have voiced concern that attempting such a transaction could prompt heightened political and regulatory scrutiny, given the longstanding debate over interchange fees and competition within the U.S. payments sector. That potential for scrutiny has contributed to some banks deciding not to move forward.
The reported talks come after Capital One Financial finalized its acquisition of Discover Financial Services, a deal that gave Capital One control over its own payments network and has renewed interest among larger banks in vertical integration of payment processing capabilities.
Fiserv, which owns two of the largest debit-card networks in the United States, has seen its shares face pressure over the past year. Market commentary around the potential for bank ownership of payments infrastructure has emerged as industry participants weigh the implications for revenue models and the funding of consumer banking services.
Context and implications
- Acquiring a debit network could change how banks route debit transactions and impact interchange revenue flows that have been shaped by the Durbin Amendment.
- Some banks are deterred by the likelihood of political and regulatory attention should they pursue such deals.
- Recent activity in the sector, including a major acquisition by Capital One, has prompted renewed interest in vertical integration of payment processing among large lenders.