The three-year-old Chase Paymentech Solutions joint venture between JPMorgan Chase and First Data will end at year’s end, since both organizations plan to bring their merchant services business in-house and operate them independently, both companies announced Tuesday.
The Chase Paymentech venture, which had $719 billion in annual bank-card and debit volume and had also made strong in-roads into accepting alternative payments in the online channel, will now be split up. The deal leaves JPM retaining 51 percent of the assets and most of the employees; First Data will assume control of the ISO and agent-bank unit of Chase Paymentech.
"With emerging opportunities in the global payments business, it makes good sense to bring our stake in Chase Paymentech business fully in-house,” says Gordon Smith, CEO of JPMorgan Chase's card services group, in a statement. “Merchants are moving beyond traditional payment vehicles and we expect to be at the forefront of the industry, developing and investing in new forms of payments and related transactions that bring value to merchants.”
Brian Mooney, president of First Data's Merchant Services group, says First Data will retain business ties in other unspecified areas. “"We remain committed to the bank alliance model and value the successful relationships we have with our financial institution partners.”
According to Aite Group senior analyst Adil Moussa, both firms will face some additional challenges by ending the relationship. “Chase will rely on its banking arm to leverage other types of banking relationships that retailers are looking for (i.e. Treasury Services). Chase will also challenge First Data on some of the big accounts that come up for renegotiation,” said Moussa, in a statement. “First Data can offer some of these services but it will be through their alliance banks (Wells Fargo, Citi or SunTrust), or even PNC. First Data’s retention of the ISOs and agent bank relationships marks a clear indication as to where First Data is looking to grow, and it clearly sees ISOs as a factor in its success. Therefore, Chase will quite conceivably grow faster than First Data in large merchant acquisition.”
