U.S. Bank Acquires FSV Payment Systems

Navigator Edition: November 2012
By: Josh Gilbert and Andrew Gordon

On November 27th U.S. Bank announced the acquisition of FSV Payment Systems, a leading prepaid card program manager and processor, for an undisclosed amount.  Upon completion of the acquisition FSV will operate under U.S. Bank’s Elan Financial Services unit.  The acquisition will allow U.S. Bank to manage all aspects of prepaid card issuance in-house, and is the latest example of vertical integration in the maturing prepaid market.

Open loop prepaid, projected to reach $288 million in volume by 20141, has become an area of focus for retail banks seeking to diversify and grow revenue streams.  While banks only account for a fraction of current volume, several institutions are actively investing in consumer, commercial, and government-focused products.  U.S. Bank has been among the most active in this group and the FSV acquisition further demonstrates its commitment to the segment.  Bringing processing in-house allows U.S. Bank to control the development of its prepaid roadmap, while presumably allowing for future operating cost reductions.  With FSV, U.S. Bank has acquired a well-respected prepaid platform as well as a considerable portfolio of payroll card clients.

The FSV sale marks the latest announcement in the broader movement towards consolidation in the prepaid processing market.  Amid price compression and increased competition, prepaid specialists are increasingly under pressure from larger scale competitors.  As such, several notable players have announced transactions intended to expand capabilities, increase scale, or both.  We expect this trend to continue as aspiring prepaid market leaders attempt to secure capabilities and assets.

Figure 1:  Recent Prepaid Acquisitions

Source:  First Annapolis Consulting review of publicly available press releases.

This acquisition is also notable in that it represents the first major financial institution purchase of prepaid-related assets.  U.S. Bank has clearly sent a message to the market that it is bullish on prepaid and intends to compete aggressively in this burgeoning segment.  Viewed in concert with the Chase Liquid and American Express Bluebird product launches, reloadable prepaid cards appear to be “mainstream.”  This phenomenon suggests that retail banks should be actively evaluating prepaid market opportunities and defining their competitive strategies.

1 Includes incentive, employee benefits, payroll, government, and consumer reloadable segments

For more information, please contact Josh Gilbert, Principal specializing in Deposit Access,; or Andrew Gordon, Consultant specializing in Deposit Access,

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