JPMorgan Chase & Co. plans to develop its alternative payments capabilities and grow by acquisition in merchant processing now that it has sole control of Chase Paymentech Solutions LLC.
JPMorgan Chase and First Data Corp. completed the breakup of the merchant processing joint venture over the weekend, so the longtime partners have officially become rivals.
They divided up the customer base according to their shares of the venture, with 51% going to JPMorgan Chase and 49% to First Data. The plan had been to divide the venture's 600,000 merchant clients largely according to the processing systems they use, with merchants that use the proprietary Chase Paymentech platform staying with it and First Data retaining those that use its processing systems.
It is unlikely that either of the two will soon regain the scale that the joint venture enjoyed. Credit conditions have deteriorated considerably since the breakup was announced in May.
First Data said Monday that it will continue to provide processing services for a segment of the business allocated to JPMorgan Chase. The New York banking company said it wanted to provide a "payments-agnostic payment processing business."
Michael P. Duffy, the president of Chase Paymentech, rattled off a list of alternative payments, existing and emerging, that the Dallas company must be able to handle for its merchants both at the point of sale and online, including PayPal, BillMeLater, GreenDot, RevolutionMoney, and automated clearing house debits.
"You throw mobile in there and you've got a pot that is pretty well stirred," said Mr. Duffy, who became an employee of JPMorgan Chase after the breakup. "That becomes even more important as you move overseas."
Chase Paymentech plans to buy other merchant acquirers and independent sales organizations, Mr. Duffy said. "I don't think First Data wanted us buying anyone. They would have preferred to buy it for themselves."
The venture's contract ran through 2010, but JPMorgan Chase was able to arrange an early exit because of a change-of-control provision that took effect after First Data was bought by the private-equity firm Kohlberg Kravis Roberts & Co. in September 2007.
With the breakup, assets of the joint venture that JPMorgan Chase owned have been integrated into the banking company as a part of its card services division and will continue to operate under the name Chase Paymentech. The unit handles all of the banking company's merchant processing.
First Data said it plans to focus on keeping its clients competitive through cutting-edge technology, including online payments.
Brian Mooney, the president of First Data's Merchant Services group, said in a press release, "As the payments industry evolves, the value proposition to merchants becomes more about delivering new technologies that enhance the consumer experience."
Jody Soper, a First Data spokeswoman, said the transition went without a hitch. "Making it seamless to the merchant was the goal, and that was accomplished over the weekend," she said. "We'll take our processing in-house, and they'll take their processing in-house."
Aite Group analyst Adil Moussa said JPMorgan Chase would probably seek first to expand its relationships with the clients it already has.
"They can cross-sell a whole slew of other services, which as a bank you can do, but as a credit card processor you can't do," such as treasury services and lending, Mr. Moussa said.
Both companies are likely to benefit from their size, however, as the credit crunch slows consumer spending and raises costs for smaller rivals. "It doesn't mater if you have 2 billion transactions flowing through your system or 6 [billion]. The cost remains the same," he said.
