Payment stocks decline following reports of bank discussions
Visa (NYSE:V) shares fell 2.3% in premarket trading on Tuesday, while Mastercard (NYSE:MA) declined 1.8% after reports that several major US banks have explored acquiring a debit payments network owned by Fiserv (NYSE:FI).
According to The Wall Street Journal, ownership of the network could allow banks to bypass federal restrictions on debit-card interchange fees.
Major lenders examine potential acquisition
The report said JPMorgan Chase (NYSE:JPM), Bank of America (NYSE:BAC), Wells Fargo (NYSE:WFC) and PNC Financial Services Group (NYSE:PNC) have participated in preliminary discussions.
The banks are reportedly assessing whether ownership of a debit payments network could exempt them from the fee limits imposed under the Durbin Amendment, which caps interchange fees on debit-card transactions.
Discover deal highlights strategic interest
The reported discussions follow Capital One Financial’s US$50.6 billion acquisition of Discover Financial, a transaction that provided the bank with its own payment network and reduced reliance on third-party processors for card transactions.
Large banks have long argued that government-imposed limits on debit-card fees reduce revenue that helps fund customer rewards programmes and other banking services. Collectively, debit-card interchange fees generate billions of dollars in annual revenue across the industry.
Regulatory concerns remain a hurdle
Despite the reported interest, there is no guarantee that a transaction involving Fiserv’s network will proceed.
According to people familiar with the matter, several banks that evaluated the opportunity have already concluded they are unlikely to pursue a deal.
Some institutions are reportedly concerned that acquiring the network could attract increased scrutiny from lawmakers, regulators and merchant groups.
The discussions remain at an early stage as banks continue to weigh the potential financial advantages against possible political and regulatory challenges.