U.S. Bancorp announced this week that it is buying FSV Payment Systems Inc., a prepaid processing company. The deal will help U.S. Bank gain volume in the payroll card business and gives it in-house processing capabilities.
From a Minneapolis Star-Tribune article:
The acquisition of privately held FSV Payment Systems Inc. doubles U.S. Bank’s prepaid card operations, giving the lender significant expertise as well as a valuable processing platform. U.S. Bank also immediately gains a competitive foothold in the area of payroll cards, which employers use instead of paper checks to pay workers.
There are two primary considerations this deal highlights. First, the payroll card business is complex, and while U.S. Bank certainly had the resources to build a business from the ground up, it found buying a seasoned processor with program management capabilities more attractive. Second, it shows that while volume is the first principle of prepaid profitability, owning the value chain is rapidly becoming an important consideration for managing costs in the industry.
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