In a powerful combination of American payments giants, Bank of
America and First Data Corp announced the formation of a new
company that will deliver next-generation payments solutions to
merchants ranging from small business to commercial and corporate
clients worldwide.
Bank of America Merchant Services will provide clients with a
comprehensive suite of innovative payments solutions including
credit, debit and prepaid cards to merchant loyalty, cheque and
e-commerce payments, the companies said.
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Thomas Bell, chief strategy officer and president of First Data’s
financial services business, was named CEO of Bank of America
Merchant Services, and told EPI he was excited to combine the
technological expertise of First Data with the deep merchant reach
and customer referral network of Bank of America.
“This is an incredibly competitive business but we believe we have
created a real powerhouse,” Bell said. “We want to move beyond
being a straightforward transaction processor and work with clients
to provide innovative solutions to their payments business, but
also to their entire enterprise.”
Bell said that merchant clients will also benefit from new service
offerings including loyalty and prepaid programmes, along with
mobile commerce and check solutions that will drive return traffic
to their stores and provide their consumers with the security,
convenience and rewards they have come to expect.
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By GlobalDataBell said discussions with BofA began more than a year ago, in what
he described as the normal course of business.
“Go back about 16 months and for First Data, in our bank partner
strategy, we were very interested in BofA because of who they are
and how important they had become with the addition of Merrill
Lynch,” he said. “BofA had a merchant business, but they were
interested in a technological partner.”
First Data Corp owns approximately 48.5 percent of Bank of America
Merchant Services and Bank of America owns 46.5 percent; the rest
is owned by Rockmount Investments.
First Data brings its extensive payments technology to the
partnership, along with 140,000 merchant customers. BofA brings
240,000 clients and its ability to refer new customers.
Following a transition period, First Data will provide the merchant
processing and related services. The combined entity will process
over one billion transactions per month, Bell said.
The joint venture First Data had with JPMorgan Chase & Co,
called Chase Paymentech, which dissolved last year, had serviced
the 140,000 merchants First Data is putting into the new joint
venture. Chase continues to operate Chase Paymentech on its
own.
“For our clients, the most important transaction they have occurs
the moment their customer pays them for what they do. This alliance
provides stronger payments-acceptance capabilities as well as
enhanced business-reporting tools and a better experience for their
customers,” said Catherine P Bessant, president of BofA’s global
product solutions group, in a press release.
Bell said that for merchants seeking to expand their offerings in
the fast-growing virtual marketplace, Bank of America Merchant
Services will offer the scalability, integrated capabilities and
deep understanding of the transactional process to deliver industry
leading e-commerce solutions.
Innovative power
Bell said that the real payoff from the new Bank of America
Merchant Services partnership might come in popularising new
payment methods such as cellphones and electronic wallets through
Bank of America’s huge branch network.
“That is where this gets very powerful because obviously the bank
and obviously First Data have been working on next-generation
payment types and are investing in those, and this is an
opportunity to bring those together and do it collaboratively,”
Bell said.
Bell said that the new company will also find itself in possession
of millions upon millions of pieces of valuable consumer data –
transaction data that could be used by business clients to better
target return business through personalised promotional discounts
and other offers.
“We want to become a strategic partner, and not just a transaction
processor, so data is a huge opportunity,” he said.
“We have tremendous analytics that we can give merchants unique
insight into better planning for promotions, labor force schedules,
and other management practices that they are not even aware of.
People track eyeballs online, but online traffic has nothing on
actual payments data – what they did, and how they did it.”
Besides offering extended payment services to existing customers in
other lines of business, an initial goal of the new alliance will
be persuading merchants to embrace the idea that mobile phones can
become payments devices, he said.
“We all believe that eventually payments will move into the phone,
and pretty quickly,” Bell addd. “Being partners with the bank
allows us to be at the front line of bringing that innovation to
the table.”
The deal is a significant one for Bank of America, which has been
looking for business lines that hold the promise of keeping
connected to the shifting preferences of consumers, who have been
turning away from credit card use as the economic recession
deepened.
In April, losses at Bank of America’s Delaware-based card business
marred an otherwise upbeat quarterly report. The bank lost $1.8
billion in its Global Card Services unit after posting a profit of
$867 million a year ago. Net card revenue was down 5 percent to
$7.5 billion as fee income dropped. Of the bank’s $13.4 billion
provision for credit losses, $8.2 billion was in Card
Services.
As more consumers turn toward debit cards and similar forms of
payment, Bank of America hopes to capture more of the merchant fees
generated with those payments.
A report last year by the Gartner research firm found that mobile
payment services are on track to have 103.9 million users worldwide
in 2011, up from 32.9 million in 2008.
