News reports emerged that Bank of America is considering dissolving its payment processing joint venture called Bank of America Merchant Services. For well over a decade, Bank of America has outsourced merchant credit card payment processing to this joint venture. But following recent moves by Chase to bring its payment business in-house, Bank of America may be planning a “U-turn”. No final decision has been made and the successful joint venture could well survive and be renewed.
Banks with big card-issuing operations, particularly Chase and Bank of America, are now seeing the value of having the in-house ability to offer rewards and incentives to customers through tie-ins between the merchant payment processing and card issuing sides of the business. The data from a consumer’s card spending can be used to target offers for the merchants served by the merchant processing side of the business.
Bank of America has long been a leader in cash back rewards through its Bank Amerideals card-linked offer program. However, Bank of America has primarily relied on Cardlytics, its CLO technology provider, to deliver and originate offers from merchants. By bringing merchant payment processing in-house, Bank of America may believe that it will be better able to source offers from merchants and deliver better value to both consumers and merchants.
Chase, the largest bank in the US followed a similar strategy several years ago when it dissolved its merchant payment processing joint venture and brought that business in house. That move has played out well for Chase. Their payments business is now considered a crown jewel of their banking franchise.