Bank of America Merchant Services (BAMS) is considering bringing its payment processing completely in-house, potentially scrapping a joint venture with First Data Corp., the payments company.
According to a report in the Wall Street Journal, citing people familiar with the matter, BAMS wants to go it alone so it has more control, aiming to capitalize on the new ways money is moving between consumers and businesses.
First Data has benefited from the BAMS arrangement for the past 10 years. The bank inked the deal as it clawed its way back from the Great Recession, resulting in First Data walking away with the better terms, according to the report. First Data has the majority ownership stake in BAMS. The paper noted it accounts for between 10 percent and 12 percent of First Data’s revenue. If the joint venture is dissolved, BAMS can work with First Data but also with other payment providers.
People familiar with the matter told the news outlet that a final decision hasn’t been made. The joint venture is slated to expire in June of 2020, with both sides required to provide a year ‘s notice before terminating it.
Competition in the payments market has been heating up as digital payment methods gain popularity around the globe. Add the gig economy to the mix and the payments market is booming. BAMS isn’t the only traditional financial company looking to get a piece of the action. With other banks eyeing it, a battle between payment processors and banks for market share has broken out. It has also spurred a lot of consolidation in the payments market. First Data is one example, announced a $22 billion merger with Fiserv, the rival payments company, earlier this year. The combined company will be known as Fiserv.
Fiserv said, according to reports, that it is not affected by what could occur in terms of the BAMS/First Data joint venture. The company is “comfortable with [First Data’s] business in a variety of outcomes,” the firm said per reports.