Historically, Fiserv has used a bank partner to handle the end-of-day transaction settling for merchants. The special purpose charter would allow Fiserv to own the transaction end-to-end, eliminating third-party risk, said Tony DeSanctis, a senior director at Cornerstone Advisors. It’s also a more profitable endeavor for Fiserv, because the company doesn’t have to pay a bank to handle those transactions, he said.
Fiserv, led by CEO Frank Bisignano, is likely “looking to vertically integrate a little bit more,” DeSanctis said in an interview. “I think Frank and the folks at Fiserv are all about making things efficient, and controlling as much as possible where it makes sense.”
Additionally, it’s probably been challenging to find bank partners, because it doesn’t offer much benefit for financial institutions, he said. “It’s not a core business for anybody, and in a world where expenses are continuing to be challenged, [banks] don’t necessarily want to do that.”
First Data, which Fiserv acquired in 2019, previously was part of a joint venture with Bank of America, but that partnership was terminated months after the acquisition was announced.
In the merchant arena, “the margins are so thin and getting thinner,” DeSanctis said. “If you don’t have scale, you can’t compete.” The more scale a company has and the more cost they can “suck out of the process, the better chance you have to compete,” he said.
Fiserv was the largest non-bank merchant acquirer in 2022, beating rival Fidelity National Information Services’ Worldpay unit, according to a ranking last year by the Nilson Report. JPMorgan Chase, the largest U.S. bank, occupies the No. 1 spot in merchant acquiring.
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