This acquisition marks a significant shift in the payments processing landscape, strengthening Fiserv’s position in debit processing, ATM services, and surcharge-free network capabilities. By acquiring Elan Financial Services’ third-party ATM and debit servicing business, Fiserv expands its client base while enhancing the breadth of services it can offer financial institutions.
The transaction also clarifies U.S. Bank’s long-term strategy. While it is exiting the third-party debit processing and ATM servicing business, the bank is retaining its core payments businesses—including card issuing, merchant services, and corporate payments—allowing it to focus on strategic growth areas while placing the acquired business with a payments technology leader.
This week has seen over $50 B in announced merger and acquisition activity and its only Tuesday. One deal in the financial services industry was the announced acquisition of Elan Financial Services by Fiserv. Ever since U.S. Bank announced that it was considering selling its debit card processing, ATM outsourcing and surcharge free network businesses that operate under the Elan brand, Fiserv has been mentioned as a likely buyer. Here are the details of the deal as they are known now, with greater information to be provided during third quarter earnings announcements:
U.S. Bancorp announced today that it has agreed to sell its third-party ATM and Debit Servicing business, which is part of the company’s Elan Financial Services unit, to Fiserv, Inc., for approximately $690 million. The sale includes business assets and a debit card processing network previously acquired by the Company. U.S. Bancorp made the decision to sell this portion of the business, which also operated as Elan ATM and Debit Processing, following a strategic review of the business unit.
“We believe this sale is the right thing to do for the bank and our customers,” said Tim Welsh, vice chairman, Consumer Banking Sales and Support, U.S. Bank. “Our customers will benefit from the commitment that Fiserv has for this business, and U.S. Bank will benefit as we continue to reinvest in our core businesses.”
From the outside looking in, this deal seems to make a lot of sense. Fiserv picks up a lot of new debit clients and Elan debit customers will have a broader array of services offered through Fiserv. Additionally, Fiserv picks up ATM management capabilities and the surcharge free network MoneyPass which they can in turn sell to their existing base of Fiserv customers.
When U.S. Bank first announced their intentions to sell Elan, there was confusion if this also included its merchant services business Elavon, its prepaid business and their corporate payments businesses. As announcements today clarified, they are not a part of the deal:
U.S. Bancorp remains committed to its card issuing, corporate payments and merchant services payments businesses, which include Elan Issuing and Elan Corporate Payments. There is no change to those businesses and they are not part of the transaction.
The planned sale is expected to close in the fourth quarter and is subject to customary closing conditions, including U.S. antitrust approval. This transaction is not material to U.S. Bancorp’s 2018 financial results. The company will provide additional information during its third quarter 2018 earnings call.
The acquisition appears to be a strategic win for both organizations. Fiserv gains valuable processing capabilities, the MoneyPass surcharge-free ATM network, and a larger portfolio of financial institution clients, while U.S. Bank sharpens its focus on businesses that remain central to its long-term payments strategy.
As the payments industry continues to consolidate, transactions like this highlight the importance of scale, integrated technology platforms, and diversified payment services. The deal reinforces Fiserv’s position as a leading payments infrastructure provider while demonstrating how financial institutions are reshaping their portfolios to focus on core competencies.
Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group
