JPMorgan, BofA weigh acquisition of payment networks to boost fee revenue

Major US banks are exploring acquisitions of card payment networks to boost fee revenue, though pushback from regulators, lawmakers and small businesses leaves the outcome uncertain.

The Wall Street Journal reported Monday, citing multiple sources, that JPMorgan Chase, Bank of America, Wells Fargo and PNC Financial had held months of preliminary discussions about acquiring the payment systems of financial technology firm Fiserv.

Fiserv operates STAR and Accel, two US debit card payment networks.

Under the Durbin Amendment to the 2010 Dodd-Frank Act, banks that use external debit card payment networks are subject to caps on the interchange fees they can charge merchants.

Banks have long argued that the regulation constrains their ability to expand customer rewards programs and other services. Owning a proprietary payment network, they believe, would allow them to sidestep those caps and grow fee income.

Industry observers say Capital One's $50.6 billion acquisition of Discover Financial Services last year — which gave it control of its own payment network — has prompted other large banks to consider similar moves.

Direct ownership of a payment network carries significant risks, however. It could draw scrutiny over market concentration and trigger opposition from Congress, regulators and merchant groups.

The Wall Street Journal said some banks have already withdrawn from the acquisition discussions for that reason.

Meanwhile, Fiserv has been struggling financially, with its share price down about 70 percent from a year ago.