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BofA to End Payments Joint Venture With First Data Next June

Lananh Nguyen and Jenny Surane

(Bloomberg) -- Bank of America Corp. said it will end a payments joint venture with First Data Corp. next June when a contract between the two companies expires.

The firms will continue to provide delivery of products and services for existing clients through at least June 2023, but will otherwise pursue independent merchant-services strategies next year, Charlotte, North Carolina-based Bank of America said in a statement. The bank said in a filing it expects to take a charge of about $1.7 billion to $2.1 billion in the third quarter related to the planned exit, which won’t affect its capital plan.

The separation could free up Bank of America to directly offer retailers the services that come with handling electronic payments, at a time when ventures from Silicon Valley and China are looking to muscle into an industry that collects $108 billion a year from merchants. The battle over payments is prompting longstanding players such as First Data to consolidate, and banks to ponder their own roles. Already, JPMorgan Chase & Co. has proven it’s possible to set out on its own.

“Payments are at the core of our business, and this announcement is another step forward in our global strategy to provide companies of all sizes an integrated payment offering,” Mark Monaco, head of enterprise payments at Bank of America, said in the statement.

The announcement of the separation comes on the day Fiserv Inc. completed its acquisition of First Data, and three days after shares of both of those companies surged on optimism that negotiations over the Bank of America joint venture would wrap up soon. Fiserv shares fell 1.6% in late trading at 6:43 p.m. in New York.

Bank of America is one of First Data’s largest bank partners, and the two companies processed 17.3 billion transactions in 2018, according to trade publication Nilson Report.

Jeff Yabuki, chief executive officer of Fiserv, said his company still expects to service a “meaningful proportion” of new merchants onboarded after June 2020, citing conversations with Bank of America. The two companies haven’t signed any agreements, he said.

(An earlier version of this story corrected the description of the number of transactions processed in sixth paragraph.)

(Adds comment from Fiserv CEO in last paragraph.)

To contact the reporters on this story: Lananh Nguyen in New York at lnguyen35@bloomberg.net;Jenny Surane in New York at jsurane4@bloomberg.net

To contact the editors responsible for this story: Michael J. Moore at mmoore55@bloomberg.net, David Scheer

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