Big Banks Eye Way Around Debit Fee Caps In Fiserv Deal
By CU Today Staff —
NEW YORK— Some of the nation's largest banks are exploring a deal to acquire a debit card payments network from Fiserv in a move that could allow them to sidestep federal limits on debit interchange fees, potentially reopening one of the payments industry's longest-running battles over swipe fees, according to reporting by Reuters and The Wall Street Journal.
Reuters reported that Fiserv has held talks with banks including JPMorgan Chase and Bank of America over the possible sale of its debit payments infrastructure business, which includes the STAR and Accel debit networks. The Wall Street Journal said Wells Fargo and PNC Financial Services have also participated in preliminary discussions, although some institutions have reportedly decided not to pursue a transaction because of potential political and regulatory backlash.
The interest stems from a provision in the 2010 Durbin Amendment that caps debit card interchange fees charged by banks with more than $10 billion in assets when transactions are routed over outside debit networks. According to Reuters and the Journal, banks that own a payment network are exempt from those fee caps, making ownership of a debit network potentially worth billions of dollars in additional annual revenue while allowing issuers greater flexibility to offer debit rewards and other services. The strategy follows Capital One's acquisition of Discover Financial Services, which gave it control of its own payments network.
Any deal would likely face intense scrutiny from merchants and regulators, who have long argued that interchange fee caps help keep payment acceptance costs in check. Analysts also told investors the transaction could prove difficult because it might damage Fiserv's relationships with community banks and credit unions that benefit from the current regulatory framework, while creating significant antitrust and political hurdles. Reuters reported the discussions remain preliminary, and there is no assurance a transaction will be completed.
Originally reported by CU Today.