A Shift in the Bank Vendor Landscape for Card Processing

The card processing landscape experienced significant changes in 2017, and this shift in players will impact financial institutions well into the future.

What follows is a Card Processing Solutions (CPS) vendor list Cornerstone sees in 85% of our card selection projects.

PSCU and Jack Henry Card Processing Solutions (JHA CPS)

JHA had been searching for a card processing partner for over a year because its platform was lacking in product innovation. Even though the company had made a significant ($20 million+) investment in its fraud suite, the total package just wasn’t enough to compete.

With over 1,100 banks and credit unions utilizing the Card Processing Services product, JHA needed a partner that would be the workhorse in the background while JHA focused on front-end customer service. JHA found this partner in PSCU (backed by First Data). The conversion from CPS to the PSCU back-end is slated to begin in late 2017.

While this is great news for both banks and credit unions, the implications of the deal on merchant services are different for each.

For banks, the deal means another extremely viable solution for credit card processing. Banks looking to re-enter the credit card processor environment and leave their agent programs behind have been finding their options limited. Now, they’ll have the option of utilizing Jack Henry for credit card processing even if they are not a Jack Henry core client.

For PSCU credit unions that are processing debit cards on FDR Wilmington and credit cards on FDR Omaha, the option now exists for both the debit card and credit card payment processing to be done on one platform – FDR Omaha. Although PSCU has had FDR Omaha debit available for some time, very few customers are using the platform. It is our understanding that all JHA CPS customers will migrate to FDR Omaha for debit and credit payment processing solutions. This scale of customers now boarded to the solution should mean enhanced development of the FDR Omaha platform.

JHA CPS clients will not be member-owners of PSCU. However, with this added revenue stream, PSCU should come to market even faster with increased innovation for its platform.

This exciting addition to the vendor landscape will bring additional, much needed competition to the marketplace for credit card processing, which will only lead to continued innovation within the bank industry.

Fiserv Offers Credit Card Processing Services

Fiserv offers many terrific options even for institutions that are not utilizing one of its core processing systems. “Big Orange” has invested heavily in its credit card processing platform in the last 12-24 months and it is a real contender in the market today.

I don’t love Fiserv’s decision to only offer a companion app with its Card Valet product for non-Fiserv mobile providers. It feels a bit like Fiserv is talking out of both sides its mouth when it shows a slick and integrated solution to Mobiliti or Architect clients but clients that are using a different provider are told that the companion app is the best way to go and is better than an integrated solution via API.

CO-OP and TMG Acquisition Allow for Delivery of Debit Card Processing

The acquisition of TMG by CO-OP Financial Services may have come as a shock to many, but for those of us that have been involved in system selections over the past 18 months, it wasn’t a surprise. There had been a lack of innovation on the CO-OP platform as well as a significant fraud event on the IVR. The combination of these factors plus the retirement in May 2016 of CEO Stan Hollen led to a need for change.

It will be interesting to see how CO-OP marries the FIS and FDR Omaha debit platforms to deliver a cohesive solution for their combined cardholder base. I hope it isn’t just smoke and mirrors with a back-office tool but actual integration that brings together things like fraud management and call center support to offer their combined members a best in class solution.

I don’t like that the credit union space has lost an option in the vendor landscape, but I remain optimistic for CO-OP’s future.

Vantiv Credit card Processing Company (coming soon World Pay)

Vantiv seems to be having an identity crisis as it builds its merchant/acquiring empire. However, it does have a viable product for issuers, and it has spent a considerable amount investing in its credit card processing infrastructure in the last year. Institutions in the market may be pleasantly surprised by Vantiv’s features/functionality.

FIS & Card Services for Credit Unions (CSCU) Partner for Fraud Solutions

A flurry of fraud related products rolled out in 2017. Unfortunately, many of them come with a hefty price tag. Some might say you can’t put a price on fraud protection, but I can – and in some cases, it feels like financial institutions are overpaying the fee to possibly reduce fraud by only 1 basis point.

I encourage banks and credit unions to do the math and make sure they aren’t paying for a Tesla when they only need an Accord. The base systems are getting so sophisticated (as are the fraud specialists running them) that an institution may not need the additional bolt-on widgets.

Visa Debit Processing Services

While Visa DPS still only offers debit processing services with an option for pass-through credit processing, it is beginning to offer additional options to clients that utilize a different vendor for full-service credit card processing. Imagine a world where you can do a chargeback for two card providers with one system and can even have an integrated mobile app with the Visa Digital Commerce App. Or, how about combined analytics using the Visa Data Manager product?

This product pricing model is not inexpensive, but it really is a terrific product, and only having to buy one product for both card products is nice. Maybe in the future we will finally see Visa partner with someone to offer full-service credit card processing. Until then, these added benefits under the current pricing model are better than nothing.

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Whether these dramatic changes lead to strong, healthy relationships devoid of conditioned responses or just create a bunch of unnecessary noise will depend equally on the banking vendors and their bank and credit union clients.

This article is an excerpt from Cornerstone Advisors’ free white paper,

“Breaking the Conditioned-Response Habit in Your Vendor Relationships.”

Learn how you can get the most out of your supplier relationships.