Despite taking a short-term earnings hit, Fiserv Inc. may fare better than expected from its bill payment deal with Bank of America Corp., according to Tien-Tsin Huang, an analyst at JPMorgan Securities Inc.
In a note to clients this week, Mr. Huang wrote that Jeffery W. Yabuki, Fiserv's president and chief executive, is confident the pricing concession his Brookfield, Wis., vendor announced last month as part of the contract renewal with B of A would not spread to other large customers of its CheckFree.
"No other bank comes close to B of A in terms of bill pay revenues," the note said. "We estimate that B of A is at least five times larger than the next largest bank in terms of revenues."
Mr. Huang previously had estimated the discount Fiserv offered B of A on bill payment rates at 15% to 17%. In the note, he wrote that he now believes the discount was at the low end of that range or lower.
"We are encouraged that B of A did not take any elements of bill pay in-house, and we believe the incentive to take any material pieces in-house has been taken off the table for several years," according to Mr. Huang, who reiterated his "overweight" rating on Fiserv's stock.
Elements that the Charlotte company could take in-house, such as customer service, the payment warehouse, and the user interface, are less valuable than the elements that would be difficult to move in-house, such as the settlement network and e-bill distribution, he wrote.
