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First Data and Chase: Big Players Get Even Bigger

Two giants in the card acquiring space, First Data Corp. and JPMorgan Chase & Co., are combining market muscle by merging the two acquiring organizations that they jointly operate, Paymentech LP and Chase Merchant Services.

Their goal is to create the newest name in card acquiring: Chase Paymentech Solutions LLC.

Chase will own 51% and First Data will own 49% of the joint venture.

Michael P. Duffy, a long-time veteran of the payments business and most recently Paymentech President and Chief Executive Officer, has been tapped to head the new company.

Many expect it to emerge as the leader of the card-acquiring pack. The new corporate entity will process 13.1 billion transactions a year worth more than $500 billion, according to a statement announcing the deal.

In The Green Sheet's most recent rankings of top bankcard acquirers (see "2004 Payments Grand Prix," GSQ Vol.7 No.4, December 2004 (5.6mb PDF) ), Chase Merchant Services came in second, processing an estimated 4.6 billion MasterCard- and Visa-branded credit and offline debit transactions in 2004, worth an estimated $322 billion. Only First Data Merchant Services (FDMS) had a larger processing workload last year.

Paymentech was ranked the third-largest acquirer of MasterCard and Visa card payments in that GSQ.

Bank One and First Data had jointly owned and operated Paymentech. When Chase acquired Bank One late last year, the Paymentech partnership transferred, too.

Chase Merchant Services was the largest of First Data's alliance partnerships; the two split ownership 50/50. Paymentech was also an alliance, with First Data controlling 47.5%. As part of the new deal, Chase Paymentech Solutions secured a five-year processing agreement with its long-time partner FDMS.

Brandt Sakakeeny, an analyst with Deutsche Bank said the deal is not much of a surprise.

He called it "a move that had been foreshadowed by executives from both sides in recent months." He added that the alliances are consistent with First Data's goals.

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