Monday, 21 January 2019 14:40
Debit implications of Fiserv/First Data deal
The planned merger of Fiserv and First Data in an all shares deal by Fiserv worth US$22 billion could have an especially large effect on the US debit card market, according to advisors.
First Data owns the Star electronic funds network, while Fiserv owns the rival Accel network. The planned merger would give Fiserv, as the successor company will be known, a commanding presence in the rapidly changing debit market.
Star, Accel, and their few remaining direct competitors originally served the ATM market and then expanded into providing PIN-based debit card acceptance at grocery stores and a few other merchant categories. But Mastercard and Visa Inc. also entered the PIN-debit market, and they effectively locked up the market for signature-based debit cards in the 1990s. In recent years, the surviving PIN-debit networks have been broadening their range of services, including by offering signature and PINless transactions, to enhance their appeal to merchants and debit card issuers.
One possibility is that federal antitrust regulators could intervene. Back in 2003, when First Data was trying to buy the big processor Concord EFS Inc., the U.S. Department of Justice filed suit to block the merger. At the time, First Data had a majority stake in the NYCE EFT network, while Concord owned Star as well as the MAC and Cash Station networks. First Data agreed to divest its NYCE stake to get the DoJ’s blessing for the Concord acquisition, and now NYCE is owned by Fiserv rival Fidelity National Information Services Inc. (FIS).
“One of the questions that deserves to be put on the table is what’s the regulatory perception of this,” says debit consultant Paul Tomasofsky, a partner at McGovern Smith Advisors.
Putting Star and Accel under one roof will raise different regulatory questions than the First Data/Concord deal did in light of the vast changes in the debit market since then, according to Tomasofsky. The DoJ, he notes, looked at the First Data/Concord marriage “fairly narrowly, looked at only PIN-debit.” But he wouldn’t predict what regulators might do, if anything, regarding Star and Accel.