Fiserv, the Milwaukee-based payments processor, has secured a major payment industry advantage: It has been granted a Merchant Acquirer Limited Purpose Bank (MALPB) charter in Georgia.
Patrick Cooley reported the financial-technology services provider’s market advantage in Payments Dive.
Fiserv’s Independent Processing
The charter—announced by the Georgia Department of Banking and Finance on October 4, 2024—allows Fiserv to process credit and debit card transactions independently, without relying on partner banks. Industry experts suggest this move will enable Fiserv to save on fees and potentially outcompete rivals such as Worldpay and Adyen on pricing.
“This gives them a competitive advantage [over other payment processing companies] from a pricing perspective,” said Tony DeSanctis, senior director of payments at Cornerstone Advisors. The charter’s financial benefits may allow Fiserv to lower transaction fees for large retailers like Walmart and Amazon, where even a marginal cost reduction can be pivotal.
New Flexibility
Historically, Fiserv partnered with banks for these transactions, incurring fees in the process. By “owning the entire transaction,” as DeSanctis put it, Fiserv gains new flexibility. The firm could either retain its savings or pass them on to customers through lower prices. This advantage is especially crucial in a competitive market where firms like Square and Stripe typically charge standardized rates, while larger players offer negotiable pricing.
Fiserv joins a short list of companies to obtain Georgia’s MALPB charter, a regulatory framework aimed at simplifying card transactions. James Stevens, co-leader of the financial services industry group at Troutman Pepper, noted that previous charter holders, like Finaro, faced roadblocks with major credit card networks. However, Fiserv’s application suggests that network reservations may have eased.
“Seeing that Fiserv has applied made me think they have been able to overcome reservations from the card networks,” said Michele Alt, a partner at Klaros Group.
Fiserv’s Strategic Vision for the Future of Payments
While Mastercard is still reviewing the charter’s implications, Visa, Discover, and American Express have yet to comment on Fiserv’s new status. In theory, this charter should allow Fiserv to eliminate one link in the transaction chain and lower prices, but Stevens cautions that the reality may be more complex. Banks often offer bundled services, adding value beyond just processing.
Fiserv’s CEO, Frank Bisignano, emphasized during a February earnings call that the company does not intend to use the charter to compete with large bank partners but to support smaller banks that lack sponsorship.
The move also dovetails with the wider-scope of Fiserv’s intended plans to bolster its digital capabilities through strategic integration.
For a full account of the possible competitive edge with Fiserv and MALPB, see the original article in Payments Dive.
