Wells Fargo, the fourth-largest US banking
group by assets and recent acquirer of beleaguered institution
Wachovia, has announced it is to move the newly-acquired bank’s
credit card portfolio over to global payment and processing
specialist First Data.
The move will mean that all Wachovia credit
card accounts, as well as Wells Fargo private-label and personal
credit management lines of credit accounts, are to be taken over by
the processor. Wells Fargo completed its purchase of Wachovia in
December last year.
First Data already manages Wells Fargo’s seven
million-plus cardholder accounts within its consumer credit and
small business portfolios as well as providing data processing
services, statement, letter production and mailing, plastic card
personalisation and fraud services.
Wells Fargo has been a client of First Data
since 1971, and has around 28 million credit and debit cards in
issue, including the Wachovia portfolio, and around 10,400 branches
and 12,000 ATMs in its US territories.
“Expanding our long-standing partnership with
Wells Fargo clearly demonstrates that First Data’s single platform
solution, economies of scale and continuous investment in
technology enables our clients to grow and build stronger
relationships with their customers,” said Matt Kardell, senior
vice-president of sales and strategic account relationships for
Transformation of US banking
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The transfer comes only weeks after
JPMorgan Chase decided to move more than half of its $59 billion
Washington Mutual (WaMu) debit portfolio from MasterCard to rival
network Visa, giving Visa an increasingly large share of the US
debit market, in which it already has a 73 percent market
The merger between Wells Fargo and Wachovia
was a controversial one. Wachovia was initially to be bought by
Citi in a deal arranged with the Federal Deposit Insurance
However, two days before the deal was due to
go through, Wells Fargo torpedoed negotiations with a bid of $15.1
billion for the bank, taking control of its $448 billion deposits,
while writing off at least $71.4 billion of its $482 billion loan
portfolio, including $36 billion of adjustable rate mortgages and
$9.6 billion of commercial real estate.
The deal itself more than doubled the size of
Wells Fargo, creating the fourth-largest US bank by assets. Wells
Fargo also has the nation’s largest branch network, with more than
6,600 offices in 39 states and Washington, DC, and one of the
largest retail brokerages in the country.
Despite the most recent movement of the credit
portfolio, Wachovia and First Data actually already have a long
history together; in 2001 the bank signed a deal whereby First Data
provided a variety of payment services to Wachovia, including
official cheque and money order processing, credit card transaction
processing and loan payment services.
Expansion of deal
This was expanded in 2004 when the bank signed
a deal with Remitco, a First Data subsidiary, to provide remittance
processing for Wachovia’s national retail lockbox network.
The US credit card processing industry is
made up of less than 500 companies with combined annual revenue of
just under $10 billion and is heavily weighted, with the top four
companies accounting for around 40 percent of industry
The largest players in the industry include
First Data, TSYS, Global Payments and
BA Merchant Services, a unit of Bank of America.
First Data processes around 20 billion
merchant transactions annually, while TSYS processes around 10
First Data has 95 merchant servicing centres,
10 card issuing centres and around 400 million accounts from 1,400
credit card issuers last year, as well as accounts with 4 million
The news comes after Wells Fargo was recently
accused of targeting the black community in Baltimore for subprime
A lawsuit accuses Wells Fargo of using a range
of deceptive practices to push high-interest, subprime loans onto
African-Americans in Baltimore and the Maryland suburbs, with
subsequently hundreds of applicants going into foreclosure.
The claims come largely from two former Wells
Fargo loan officers, who submitted signed affidavits.