Fiserv aims to broaden its scope in handling processing tasks for merchants in the fiercely competitive payments market of a cost-conscious economy. The bank technology provider has sought a merchant acquirer limited purpose bank charter in Georgia. This move would allow Fiserv to oversee the entire payment process, encompassing the authorization, settlement, and clearing of debit and credit card transactions. Typically, Fiserv collaborates with bank partners as part of its payment processing operations.
This strategic move is a response to recent shifts in the market landscape. With third-party financial institutions, which traditionally acted as sponsor banks providing access to card networks, increasingly redirecting their focus to other aspects of their business, Fiserv is adapting its approach. It’s essential to note that Fiserv intends to transform into something other than a conventional financial institution or regional bank. Instead, it plans to maintain partnerships with financial institutions looking for continued market involvement as acquiring sponsors.
Key Takeaways
- Strategic Shift in Merchant Acquiring: Fiserv’s application for a Merchant Acquirer Limited Purpose Bank Charter in Georgia indicates a strategic shift in its approach to payment processing. By seeking direct access to card networks, Fiserv aims to broaden its capacity and gain greater control over the entire payment process, including authorization, settlement, and clearing of transactions.
- Response to Market Dynamics: Fiserv’s move is a response to recent shifts in the market where third-party financial institutions, traditionally acting as sponsor banks, are redirecting their focus. The evolving landscape has prompted Fiserv to adapt its approach, emphasizing a move towards maintaining partnerships with financial institutions while seeking direct access for merchant acquirers.
- Potential Industry Trend: Fiserv’s application signals a possible trend in the payments industry, advocating for increased direct access to payment card networks for merchant acquirers. If successful, it could pave the way for other companies, such as Priority Technology and Global Payments, and competitors like Square and Stripe, to follow suit and explore the particular purpose bank charter option in Georgia.
- Fiserv’s Vertical Integration Strategy: Under the leadership of CEO Frank Bisignano, Fiserv is considering a comprehensive vertical integration strategy. The acquisition of First Data in 2019 aligns with this strategy aimed at enhancing efficiency and gaining control. However, finding suitable bank partners may pose a challenge as financial institutions are cautious about engaging in non-core activities amid thin margins in the merchant sector.
Fiserv’s Application For Bank Charter Signals Potential Shift In Direct Access for Merchant Acquirers
In Georgia, the Merchant Acquirer Limited Purpose Bank Charter (MALPB) is a distinctive charter enabling companies to provide merchant payment processing services independently without relying on a partner bank. Despite its existence for 12 years, companies have faced challenges in utilizing it, primarily because card networks have yet to permit direct participation. However, this scenario might shift soon, particularly with Fiserv recently applying for a bank charter.
Fiserv seeks to broaden its capacity for handling processing tasks on behalf of merchants in a competitive payments market within a cost-conscious economy. On 12th January this year, Fiserv made a significant announcement, revealing its application filing with the state of Georgia for a MALPB charter. This application marks a noteworthy development and serves as a positive indicator for those advocating increased direct access to payment card networks for merchant acquirers in the US.
The potential MALPB charter promises to enable a company to provide merchant payment processing services without the need for a sponsoring partner bank. This includes things like joining card networks, authorizing and approving retailers to accept network-branded cards, assisting with transaction clearing and settlement via a card network, and providing access to and funding participation in card networks for clients of the MALPB, affiliates, or clients of affiliates.
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Fiserv has sought a merchant acquirer limited-purpose bank charter in Georgia to manage merchant authorization, settlement, and clearing independently without a partner bank. This is a strategic action driven by the growing emphasis that third-party financial institutions place on other areas of their operations, following in the footsteps of sponsor banks that have long provided access to card networks.
Under CEO Frank Bisignano’s leadership, Fiserv is considering a more extensive vertical integration strategy. Analysts suggest that Fiserv focuses on enhancing efficiency and gaining control where it is feasible. In 2019, Fiserv acquired First Data, previously in a joint venture with Bank of America, which was terminated a few months post-acquisition. The challenge for Fiserv might be finding suitable bank partners, as the offering may bring little benefit to financial institutions.
Banks may hesitate to engage in non-core activities in the current economic climate, where controlling expenses is crucial. The merchant sector faces thin and diminishing margins, making scale a critical factor for competitiveness. The larger the scale a company attains and the more costs it can streamline, the greater its likelihood of staying competitive.
A spokesperson from Fiserv stressed that the recent action doesn’t imply Fiserv’s intention to transform into a complete bank. Fiserv has yet to make plans to evolve into a conventional financial institution or a regional bank. Additionally, Fiserv will persist in collaborating with financial institutions that prefer to stay engaged in the market as acquiring sponsors.
Rivals May Follow The Path!
Fiserv’s application for a particular purpose bank charter in Georgia has generated significant interest in this charter option, prompting expectations of more companies following suit in the coming months. If Fiserv successfully secures the charter and gains access to card networks, it might pave the way for other merchant acquirers eagerly observing the situation.
Potential candidates for the charter could be large merchant acquirers headquartered in the state, such as Priority Technology and Global Payments. Payment competitors like Square and Stripe are also anticipated to pursue the charter, potentially establishing a presence in Georgia to meet the necessary application requirements.
About Fiserv
Fiserv is a leading company providing cutting-edge payment and financial services technology solutions. Operating across three key segments—Financial Technology, Payments and Network, and Merchant Acceptance—the company offers diverse services. In the Merchant Acceptance segment, Fiserv provides POS merchant services, mobile payment solutions, digital commerce services, a cloud-based POS, fraud and security protection products, and a business management platform, among other options.
The Financial Technology segment equips financial institutions with tools for processing customer deposit and loan accounts, managing general ledgers and central information files, and supporting various financial transactions, including digital banking and risk management. The Payments and Network segment delivers non-card digital payment software and services, encompassing bill payment, account-to-account transfers, person-to-person payments, electronic billing, and security and fraud protection products.
Fiserv is a global company with over 13,000 clientele and 21,000 associates worldwide. Fiserv is well-known for its fintech services and creative solutions, and it is dedicated to helping clients achieve best-in-class outcomes. Fiserv has won awards for excellence in data analytics, risk management, online and mobile banking, payments, and core account processing. Fiserv is a company that takes pleasure in pushing the envelope in the financial services industry. Utilizing its extensive knowledge base and innovative solutions helps financial institutions, companies, and consumers move and manage money more quickly and easily.
Conclusion
Fiserv’s strategic move to pursue a Merchant Acquirer Limited Purpose Bank Charter in Georgia reflects its proactive response to evolving market dynamics. The application signifies Fiserv’s intent to gain greater control and efficiency in payment processing tasks, aligning with the changing landscape where sponsor banks are redirecting their focus. Under CEO Frank Bisignano’s leadership, this move suggests a potential vertical integration strategy to enhance operational capabilities.
While challenges may arise in finding suitable bank partners, the initiative signals a broader trend in the industry. The ripple effect could see other major players, such as Priority Technology, Global Payments, Square, and Stripe, exploring similar paths. Fiserv’s diversified services across Financial Technology, Payments and Networks, and Merchant Acceptance underscore its commitment to delivering innovative solutions in a competitive market.
