NEW YORK–Large U.S. banks have held preliminary discussions about acquiring a debit-card payments network in a move that could exempt them from federal limits on debit-card interchange fees, according to a new report.
JPMorgan Chase, Bank of America, Wells Fargo and PNC Financial Services have engaged in tentative discussions in recent months about acquiring a payments network owned by Fiserv.
According to the Journal, no agreement is imminent, and several of the banks have already concluded they are unlikely to pursue such a transaction. People familiar with the discussions told the newspaper that some institutions are concerned an acquisition could trigger opposition from lawmakers, regulators and merchant groups.
Were such a deal to come to fruition, of course, it would mean many credit union transaction would ride on rails owned by the nation’s biggest banks.
Earlier Deals
The interest follows Capital One Financial’s $50.6 billion acquisition of Discover Financial Services, which gave Capital One ownership of a card payments network. The Wall Street Journal reported that owning a network allows banks to process transactions more directly with merchants while potentially qualifying for an exemption from federal caps on certain debit-card interchange fees.
The exemption stems from the Dodd-Frank Wall Street Reform and Consumer Protection Act, specifically the Durbin amendment. The provision authorizes the Federal Reserve to cap interchange fees that banks with more than $10 billion in assets may collect on debit-card transactions routed through outside payment networks. According to the Journal, banks that own the payment network used to process the transaction are exempt from those caps.
The FI Argument
Banks and credit unions have both argued that the Durbin amendment reduced revenue that had helped support free checking accounts, debit-card rewards and other consumer services. Following implementation of the rule, some banks reduced rewards programs, and Bank of America briefly considered imposing a monthly fee on debit cards, according to the Journal.
As the CU Daily has been reported, merchants and supporters of the law have countered that lower interchange fees have reduced costs for retailers and helped keep consumer prices lower.
Fiserv owns the STAR and Accel debit payments networks, which process electronic debit-card transactions. As the Journal noted, the company’s shares have declined roughly 70% over the past year amid broader challenges facing the business.
