B of A, First Data to Team on Advanced Payments

By Wolfe, Daniel | American Banker, June 30, 2009 | Go to article overview

B of A, First Data to Team on Advanced Payments


Wolfe, Daniel, American Banker


Byline: Daniel Wolfe

Bank of America Corp. and the processor First Data Corp. are collaborating to deliver advanced payments capabilities, and especially mobile payments, to merchants.

The companies announced Monday that they had created Banc of America Merchant Services LLC, which incorporates Bank of America's acquiring unit and First Data's merchant clients that had been served previously by a joint venture with JPMorgan Chase & Co. that disbanded in November.

Thomas Bell, the new company's chief executive, said that First Data has a long history of teaming up with banking companies, and that this partnership will help deliver its payments technology to B of A's extensive roster of business customers.

"The bank alliance model is, we believe, the most powerful strategic model for us to go to market, and it's certainly something that we've been committed to for decades," he said during a conference call Monday. Bell is also First Data's chief strategy officer and the president of its financial services division.

Besides offering standard credit and debit card acceptance services, Bell said, First Data and B of A expect to promote a variety of other emerging services, including prepaid cards, new types of online transactions and, perhaps most important, mobile payments.

The ability to collaborate on new payment formats "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," he said.

A key goal is 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," he said. "Being partners with the bank allows us to be at the front line of bringing that innovation to the table."

Brian Riley, a research director in the bank cards practice at TowerGroup, the Needham, Mass., independent research firm owned by MasterCard Inc., said First Data's executives "are masters of joint ventures" with banks. "They go way back," Riley said.

One of its largest such ventures was Chase Paymentech Solutions LLC, which it co-owned with JPMorgan Chase.

The New York banking company decided to dissolve the joint venture after First Data's 2007 acquisition by Kohlberg Kravis Roberts & Co.; First Data owned 49% of that venture, and when it was formally broken up in November First Data ended up with a proportional number of the merchant acquirer's customers.

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