U.S. Bancorp to Buy FSV Payment Systems

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U.S. Bancorp (USB) is beefing up its prepaid card business.

The $352 billion-asset company's U.S. Bank subsidiary said Tuesday it would buy FSV Payment Systems, a prepaid card program manager and processor based in Jacksonville, Fla.

Financial terms of the deal, which is expected to close in December, were not disclosed.

FSV, which manages and processes payroll, gift and other card programs on behalf of companies in varied industries, would become part of U.S. Bank's Elan Financial Services unit. In September, McDonald's USA selected FSV to provide payroll card services for the chain's company-owned restaurants in the U.S.

Elan provides prepaid, ATM and credit card programs on behalf of roughly 3,000 companies, according to U.S. Bank.
 
"Their strong suit is in the payroll card, which we have, but this greatly expands our payroll product," Teri Charest, a U.S. Bank spokeswoman, told American Banker.  "This would basically double our prepaid program."

U.S. Bank introduced its first prepaid card roughly a dozen years ago. Since then, the Minneapolis-based bank has expanded its prepaid business to include a reloadable Visa debit card, a Visa gift card and a prepaid card for teens. The bank also offers a Visa- and MasterCard-branded payroll card, as well as prepaid cards for government and corporate rewards programs.

The deal comes amid rapid growth in the prepaid market, which some analysts expected to double in size by 2016. There were six billion prepaid card transactions in 2009, according to a study published in August by the Federal Reserve Bank of Philadelphia.

Most of the nation's biggest banks are now marketing prepaid cards. JPMorgan Chase (JPM) said Monday it plans to offer instantly issued debit cards in 2,000 branches primarily in New York, Chicago and Los Angeles by the end of the year.

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Comments (6)
Payday and US Bank seem to go hand-in-hand. Hopefully they will not mess this one up like they have with their foray into "payday lending". They will need to grow via acquisition because their reputation may limit their organic growth as their customer base realizes the terrible financial solutions that they present to their customers. Customers in need only have to pay a minimum of 208% (yes - minimum 208% -you read that right)for that short term advance (35 day payday loan). And they think Dodd-Frank is too restrictive and should be relaxed more! Makes you proud to be a banker!
Posted by frankarauscher | Tuesday, November 27 2012 at 2:37PM ET
I've read this article twice and the original press release and can't find any mention of payday. What's up with frankrauscher?? Did he mis-read prepaid??
Posted by jim_wells | Tuesday, November 27 2012 at 5:59PM ET
Perhaps you missed this part of the release "McDonald's USA selected FSV to provide payroll card services for the chain's company-owned restaurants in the U.S." With this info, US Bank has an opportunity to know exactly when the McDonald's payday is, it is the functional equivalent of a direct deposit, it is only a very short step to offer a "payday loan" to a McDonalds employee which will be repaid via a deduction from their next "pre-paid payroll card". McDonald's low paid employees are a target rich environment for providing an asset returning over 1000% ROE. Now do you see the relationship?
Posted by frankarauscher | Wednesday, November 28 2012 at 8:13AM ET
Additionally, if I were a small financial services center that provides check cashing, money transfer, and short-term payday loans, I would be concerned that US Bank will be able to scrape off the "cream" of that business because they can offer lower payday loan rates and yet make more money than a payday lender. How? Multiple ways - because they have a taxpayer financed safety net that allows them to leverage their capital by 10:1 while most payday lenders are way below half of that. And by using the Perverse Advantage of their exemption from state banking laws and usury caps they can get away with this even in states that have tried to drive out payday lenders. At the same time, they want relief from Dodd-Frank to make it even easier to abuse their customers.
Posted by frankarauscher | Wednesday, November 28 2012 at 9:13AM ET
Wow, that's quite a leap from US Bank acquires prepaid card processor.
Posted by jim_wells | Wednesday, November 28 2012 at 11:10AM ET
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