Fiserv aims to broaden its scope in handling processing tasks for merchants in the fiercely competitive payments market of a cost-conscious economy. The bank technology provider has sought a merchant acquirer limited purpose bank charter in Georgia. This move would allow Fiserv to oversee the entire payment process, encompassing the authorization, settlement, and clearing of debit and credit card transactions. Typically, Fiserv collaborates with bank partners as part of its payment processing operations.

This strategic move is a response to recent shifts in the market landscape. With third-party financial institutions, which traditionally acted as sponsor banks providing access to card networks, increasingly redirecting their focus to other aspects of their business, Fiserv is adapting its approach. It’s essential to note that Fiserv intends to transform into something other than a conventional financial institution or regional bank. Instead, it plans to maintain partnerships with financial institutions looking for continued market involvement as acquiring sponsors.

Key Takeaways

• Strategic Shift in Merchant Acquiring: Fiserv’s application for a Merchant Acquirer Limited Purpose Bank Charter in Georgia indicates a strategic shift in its approach to payment processing. By seeking direct access to card networks, Fiserv aims to broaden its capacity and gain greater control over the entire payment process, including authorization, settlement, and clearing of transactions.
• Response to Market Dynamics: Fiserv’s move is a response to recent shifts in the market where third-party financial institutions, traditionally acting as sponsor banks, are redirecting their focus. The evolving landscape has prompted Fiserv to adapt its approach, emphasizing a move towards maintaining partnerships with financial institutions while seeking direct access for merchant acquirers.
• Potential Industry Trend: Fiserv’s application signals a possible trend in the payments industry, advocating for increased direct access to payment card networks for merchant acquirers. If successful, it could pave the way for other companies, such as Priority Technology and Global Payments, and competitors like Square and Stripe, to follow suit and explore the particular purpose bank charter option in Georgia.
• Fiserv’s Vertical Integration Strategy: Under the leadership of CEO Frank Bisignano, Fiserv is considering a comprehensive vertical integration strategy. The acquisition of First Data in 2019 aligns with this strategy aimed at enhancing efficiency and gaining control. However, finding suitable bank partners may pose a challenge as financial institutions are cautious about engaging in non-core activities amid thin margins in the merchant sector.

Fiserv’s Application For Bank Charter Signals Potential Shift In Direct Access for Merchant Acquirers

In Georgia, the Merchant Acquirer Limited Purpose Bank Charter (MALPB) is a distinctive charter enabling companies to provide merchant payment processing services independently without relying on a partner bank. Despite its existence for 12 years, companies have faced challenges in utilizing it, primarily because card networks have yet to permit direct participation. However, this scenario might shift soon, particularly with Fiserv recently applying for a bank charter.

Fiserv seeks to broaden its capacity for handling processing tasks on behalf of merchants in a competitive payments market within a cost-conscious economy. On 12th January this year, Fiserv made a significant announcement, revealing its application filing with the state of Georgia for a MALPB charter. This application marks a noteworthy development and serves as a positive indicator for those advocating increased direct access to payment card networks for merchant acquirers in the US.

The potential MALPB charter promises to enable a company to provide merchant payment processing services without the need for a sponsoring partner bank. This includes things like joining card networks, authorizing and approving retailers to accept network-branded cards, assisting with transaction clearing and settlement via a card network, and providing access to and funding participation in card networks for clients of the MALPB, affiliates, or clients of affiliates.

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Fiserv has sought a merchant acquirer limited-purpose bank charter in Georgia to manage merchant authorization, settlement, and clearing independently without a partner bank. This is a strategic action driven by the growing emphasis that third-party financial institutions place on other areas of their operations, following in the footsteps of sponsor banks that have long provided access to card networks.

Under CEO Frank Bisignano’s leadership, Fiserv is considering a more extensive vertical integration strategy. Analysts suggest that Fiserv focuses on enhancing efficiency and gaining control where it is feasible. In 2019, Fiserv acquired First Data, previously in a joint venture with Bank of America, which was terminated a few months post-acquisition. The challenge for Fiserv might be finding suitable bank partners, as the offering may bring little benefit to financial institutions.

Banks may hesitate to engage in non-core activities in the current economic climate, where controlling expenses is crucial. The merchant sector faces thin and diminishing margins, making scale a critical factor for competitiveness. The larger the scale a company attains and the more costs it can streamline, the greater its likelihood of staying competitive.

A spokesperson from Fiserv stressed that the recent action doesn’t imply Fiserv’s intention to transform into a complete bank. Fiserv has yet to make plans to evolve into a conventional financial institution or a regional bank. Additionally, Fiserv will persist in collaborating with financial institutions that prefer to stay engaged in the market as acquiring sponsors.

Rivals May Follow The Path!

Fiserv’s application for a particular purpose bank charter in Georgia has generated significant interest in this charter option, prompting expectations of more companies following suit in the coming months. If Fiserv successfully secures the charter and gains access to card networks, it might pave the way for other merchant acquirers eagerly observing the situation.

Potential candidates for the charter could be large merchant acquirers headquartered in the state, such as Priority Technology and Global Payments. Payment competitors like Square and Stripe are also anticipated to pursue the charter, potentially establishing a presence in Georgia to meet the necessary application requirements.

About Fiserv

Fiserv is a leading company providing cutting-edge payment and financial services technology solutions. Operating across three key segments—Financial Technology, Payments and Network, and Merchant Acceptance—the company offers diverse services. In the Merchant Acceptance segment, Fiserv provides POS merchant services, mobile payment solutions, digital commerce services, a cloud-based POS, fraud and security protection products,  and a business management platform, among other options.

The Financial Technology segment equips financial institutions with tools for processing customer deposit and loan accounts, managing general ledgers and central information files, and supporting various financial transactions, including digital banking and risk management. The Payments and Network segment delivers non-card digital payment software and services, encompassing bill payment, account-to-account transfers, person-to-person payments, electronic billing, and security and fraud protection products.

Fiserv is a global company with over 13,000 clientele and 21,000 associates worldwide. Fiserv is well-known for its fintech services and creative solutions, and it is dedicated to helping clients achieve best-in-class outcomes. Fiserv has won awards for excellence in data analytics, risk management, online and mobile banking, payments, and core account processing. Fiserv is a company that takes pleasure in pushing the envelope in the financial services industry. Utilizing its extensive knowledge base and innovative solutions helps financial institutions, companies, and consumers move and manage money more quickly and easily.

Conclusion

Fiserv’s strategic move to pursue a Merchant Acquirer Limited Purpose Bank Charter in Georgia reflects its proactive response to evolving market dynamics. The application signifies Fiserv’s intent to gain greater control and efficiency in payment processing tasks, aligning with the changing landscape where sponsor banks are redirecting their focus. Under CEO Frank Bisignano’s leadership, this move suggests a potential vertical integration strategy to enhance operational capabilities.

While challenges may arise in finding suitable bank partners, the initiative signals a broader trend in the industry. The ripple effect could see other major players, such as Priority Technology, Global Payments, Square, and Stripe, exploring similar paths. Fiserv’s diversified services across Financial Technology, Payments and Networks, and Merchant Acceptance underscore its commitment to delivering innovative solutions in a competitive market.

In keeping with their goal to transform the digital economy by implementing real-time payments (RTP) on the RTP network, Mastercard and TCH, or The Clearing House, have decided to prolong their multi-year relationship. With the help of this Mastercard TCH partnership, businesses, governments, and consumers will be able to navigate and prosper in the quickly changing digital landscape by utilizing cutting-edge instant payment use cases for various payment procedures.

Notably, Mastercard will continue to serve as TCH’s exclusive supplier of immediate payment software for its RTP network, allowing the integration of new instant payments for various uses across different entities. In 2017, both companies joined forces to introduce the RTP Network, marking the first new payments rail framed by Mastercard in four decades. Presently, the ongoing collaboration focuses on advancing real-time account-to-account technologies. These innovations facilitate the seamless transmission of data within the network, not only across the US but also on a global scale.

Key Takeaways

• Enhanced Digital Economy Commitment: The extended partnership between Mastercard and The Clearing House reaffirms their dedication to transforming the digital economy by implementing real-time payment systems. This collaboration aims to introduce innovative instant payment use cases, providing advanced capabilities for businesses, governments, and consumers in the fast-moving world of payments.
• Mastercard’s Exclusive Role: Mastercard continues to serve as the exclusive instant payments software provider for TCH’s RTP network, solidifying its position in advancing real-time account-to-account technologies. The collaboration focuses on integrating new instant payment not only within the US but also globally.
• Real-Time Payments Impact Across Sectors: The partnership highlights the critical role of instant payments in elevating the value and efficiency of financial transactions across diverse sectors. RTP ensures immediate access and confidence in payment receipt for consumers, streamlines process for businesses, and activates local economies for governments through efficient disbursement and settlement processes.
• Competition and Industry Recognition: The collaboration builds upon TCH’s efforts to expand its RTP network amidst competition from FedNow. The RTP network’s significant milestones, such as surpassing one million daily payments, reflect industry recognition of the advantages offered by real-time transactions. Financial institutions’ increasing usage of the RTP network demonstrates its effectiveness in addressing real-world challenges and innovation in payment processes.

Mastercard TCH Partnership – Driving Next-Gen Instant Payment Capabilities

Mastercard has recently declared the extension of its partnership with TCH, emphasizing the enhancement of user capabilities. In a multi-year collaboration initiated by Mastercard and TCH, the two entities are working jointly to introduce improved features for businesses, governments, and consumers. The primary goal is to facilitate the adoption of the digital economy through the implementation of RTP on the RTP network. Additionally, this partnership solidifies Mastercard’s exclusive role as the provider of instant payment software for TCH’s RTP network, enabling both entities to integrate additional instant payment.

RTP guarantees customers instant access and assurance that their payments will always be received. It promotes timely wage disbursements, optimizes capital workflows, improves liquidity management, and streamlines payment operations for enterprises. Governments might also gain from stimulating local economies by ensuring that settlement and distribution procedures are effective. The expanded collaboration emphasizes how important real-time payments are to improving the effectiveness and value of financial transactions in a variety of industries.

The Federal Reserve’s immediate payments system, FedNow, introduced last year, is a competitor to TCH’s RTP network expansion efforts. This partnership with Mastercard strengthens TCH’s present efforts in this regard. The year 2017 saw TCH, which is owned by significant US banks, launch its instant payment network services, RTP. In the United States, financial institutions that hold around 90% of the demand deposit accounts have access to the RTP network.

Linda Kirkpatrick, who is the President, of North America at Mastercard, highlighted the key role of advanced technology in offering businesses and consumers increased flexibility in payment methods. The enduring collaboration with TCH contributes to expanding payment options by enabling contemporary and widely accessible real-time channels for bank transactions. Kirkpatrick expressed satisfaction in extending and reinforcing their commitment to TCH and its owner banks, emphasizing the shared objectives of ensuring the dependability, efficiency, and security of instant payments.

The RTP network, TCH’s instant payments system accessible to all insured depository financial institutions in the US, achieved a significant milestone last September by surpassing one million daily payments. This milestone reflects the growing recognition among the institutions and their customers of the advantages offered by real-time transactions, such as payment confirmation, enhanced control over payment schedules, and immediate fund availability.

With over 60 million transactions processed each quarter, the RTP network is experiencing increased usage as financial institutions leverage its real-time payment capabilities to address real-world challenges in innovative ways.

FedNow is a real-time payment system that competes with the growing RTP network. Interest in the RTP network appears to have increased with the release of FedNow. FedNow and RTP are competing with each other for the business of financial institutions. Regarding the Fed’s fast payments system, Mastercard has taken a cautious position. Previously, despite the FedNow system’s early acceptance by significant corporations like Fiserv and JPMorgan Chase, Mastercard CEO Michael Miebach noted that it lacks capabilities and a consumer platform.

Lee Alexander, Executive Vice President and CIO at TCH mentioned that TCH and Mastercard collaborated on the creation of the RTP network, recognized as the leading instant payment platform in the US. With a robust history of successful collaboration in delivering scalable, secure, and innovative products, the extended partnership aims to facilitate the development of the next generation of real-time payment capabilities for financial institutions and their customers.

All in all, the RTP network was designed to cater to institutions of various sizes, providing a stage for innovation that enables them to introduce new services and products to their customers. Financial institutions have the flexibility to connect to the RTP network directly, utilize third-party providers, and collaborate with corporate credit unions and bankers’ banks.

About MasterCard

Mastercard, Inc. is a technology company deeply involved in the payments industry, serving as a vital link connecting consumers, financial institutions, merchants, governments, and businesses. Established in November 1966 and headquartered in Purchase, NY, Mastercard provides innovative payment solutions encompassing credit, debit, prepaid, commercial, and payment programs.

The company acts as a crucial network, facilitating transactions between issuing banks and acquiring banks to ensure authentication and fund transfers. Its role extends to enabling payments for various purposes, including shopping, travel, business operations, financial management, and more. Mastercard specializes in global digital payments and commerce, offering cutting-edge mobile payment processing solutions.

In the fiscal year 2022, Mastercard achieved notable financial success, recording annual revenues of $22.23 billion and a net profit of $9.93 billion. As a technology-driven entity, Mastercard continues to play a significant role in shaping the face of modern payment solutions.

About The Clearing House

Founded in 1853, TCH stands as the oldest banking association and payments company in the United States. It is collectively owned by the world’s largest commercial banks, employing over two million individuals and holding more than half of all US deposits.

TCH Payments Company LLC plays a pivotal role by providing payment, clearing, and settlement services to its member banks and other financial institutions. Daily, it handles the clearing of almost $2 trillion, representing nearly half of the funds-transfer, ACH payments, and check-image payments made in the US.

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On the advocacy front, TCH Association LLC operates as a nonpartisan organization, championing the interests of its owner banks. This is accomplished through regulatory comment letters, amicus briefs, and white papers, addressing a spectrum of systemically important banking issues.

Conclusion

The extended collaboration between Mastercard and The Clearing House marks a significant stride towards enhancing digital economy capabilities. Their commitment to RTP underscores a shared objective to propel businesses, governments, and consumers into a dynamic digital era. Mastercard’s role as the exclusive instant payments software provider for TCH’s RTP network positions them at the forefront of advancing real-time A2A technologies.

This partnership not only ensures immediate access for consumers and streamlined processes for businesses but also holds promise for efficient disbursement and settlement processes for governments. Amidst growing competition in the real-time payments realm, the enduring collaboration between Mastercard and TCH exemplifies a commitment to reliability, efficiency, and security in the evolving world of financial transactions.

The IRS has repeatedly cautioned taxpayers about a rise in aggressive marketing related to questionable or fraudulent claims for the Employee Retention Credit (ERC). Initially, the IRS addressed ERC claims by including them in their Dirty Dozen list. Later, on September 14, 2023, the IRS took immediate action by placing a moratorium on processing new claims, which will continue at least until 2023.

The IRS is now providing a solution for taxpayers who have fallen prey to ERC scams and have yet to receive their refunds. On October 19, 2023, the IRS introduced an ERC withdrawal procedure. This initiative aims to assist businesses concerned about the eligibility of their claims.

The IRS instituted a “withdrawal process” for specific small businesses that submitted ERC claims during the Covid and now think they might not be qualified. Once presented as a relief plan, this procedure is intended for small firms that legitimately applied for financial aid but were later approached by the Internal Revenue Service to question the validity of their claims. These companies now have to deal with interest, fines, or payback. Company owners that submit ERC claims need to be fully aware of the qualifying requirements and the possible repercussions of making inaccurate, fraudulent, or inappropriate claims.

Key Takeaways:

• Introduction of a Targeted Solution: The IRS has responded to the surge in fraudulent Employee Retention Credit (ERC) claims by unveiling a withdrawal process on October 19, 2023. This targeted initiative is specifically designed to aid businesses that have fallen victim to ongoing scams and have concerns about the eligibility of their ERC claims.
• Shielding Businesses from Audits and Penalties: The withdrawal procedure protects businesses influenced by third parties or misled into filing ineligible ERC claims. Businesses can shield themselves from potential audits and penalties by retracting these claims. Withdrawn claims will be treated as if they were never submitted, offering a means of rectification.
• Eligibility Criteria for ERC Withdrawal: Businesses eligible for the ERC withdrawal process include those who have claimed the credit on specific employment tax return forms but have yet to receive a refund or have not cashed the refund. The withdrawal applies to businesses that filed adjusted returns solely for ERC claims without any other modifications.
• Irreversible Nature of ERC Withdrawal: While the ERC withdrawal process benefits eligible businesses, it comes with a crucial caveat – once requested, the withdrawal is irreversible. The IRS emphasizes the importance of businesses approaching reputable tax providers for guidance before initiating a withdrawal, highlighting the permanent nature of this decision.

The Necessity Of ERC Withdrawal Procedure

In light of the financial difficulties posed by COVID-19, the ERC was created to support qualified small enterprises in keeping their workforces on board. Unfortunately, several tax consultants have abused the credit by using aggressive marketing strategies. These advisors lured small companies into making illegal tax credit claims and amending payroll tax forms. The IRS decided to halt assessing new ERC applications until the end of 2023 as an outcome of this misuse, which led to an increase in invalid filings.

The purpose of the unique withdrawal procedure is to enable companies that other people have influenced to withdraw their ERC claims. This move aims to protect them against more audits and fines. Claims that are withdrawn will be handled as though they were never filed. It is crucial to remember that the law does not shield companies who intentionally submitted false ERC claims or colluded to do this from possible criminal inquiries and legal action.

The IRS press release states that certain employers who submitted an ERC claim but have not received a refund yet can withdraw their application thanks to this recently added withdrawal option. They can avoid penalties, interest, and future payback by doing this. To avoid the possibility of getting an ineligible reimbursement, employers have the option to withdraw an ERC claim while it is still being processed.

The statement highlights that the IRS created the withdrawal option to support small company owners and other individuals who were duped or coerced into filing claims not eligible by ERC advertisers or promoters. Claims that are withdrawn will be regarded as never submitted, and the IRS won’t charge interest or penalties in these situations. It went on to say that it’s important to remember that anyone who intentionally made a bogus claim or who assisted or conspired to engage in such behavior should be informed that they could still face a criminal inquiry and prosecution if they decide to withdraw their fraudulent claim.

Who Is Eligible For The ERC Withdrawal Process?

Businesses are eligible to utilize the ERC withdrawal process under the following conditions:

• They filed a payroll return form for the employees (Form 941X, 943X, 944X, CT1X) claiming the ERC, but they have not received a refund, or if they have, they have not cashed the refund.
• With no other changes, they filed an updated return only to claim ERC.
• They plan to give up the ERC claim in its entirety.

Businesses can benefit from this unique ERC withdrawal method, but there’s a big catch and that is ERC removal is irreversible once requested.

IRS advises businesses who suspect the invalidity or inaccuracy of their claims to seek guidance from a trusted service provider with expertise in incentives and credits before initiating a withdrawal. This step ensures a thorough reassessment of refunds before making the irreversible decision to withdraw.

How To Initiate An ERC Withdrawal?

The IRS has specific instructions for withdrawing Employee Retention Credit (ERC) claims. The withdrawal method depends on the status of your ERC claim; for instance, for those who haven’t received a refund and haven’t been informed your claim/application is under an audit, here are some steps you can take:

• Create a duplicate of the adjusted return (e.g., 941X) containing the claim you intend to withdraw.
• On the first page, inscribe “Withdrawn” in the left margin.
• An authorized person should sign and date the right margin of the first page. Additionally, they should write their name and title next to their signature.
• Fax the duly signed return to the IRS’s ERC claim dedicated withdrawal fax line at 8557387609. For those without access to a fax, the adjusted return can be mailed to the address specified in the return instructions.

If you have yet to receive a refund and have been informed that your ERC application is under audit, the withdrawal steps remain the same as outlined for Status 1. However, there is a requirement to mail or fax the request to a different location. Here’s a detailed breakdown:

• Follow the same procedures as outlined for Status 1, which include copying the amended return containing the withdrawn claim, writing “Withdrawn” on the first page’s left margin, and having an authorized individual sign and date the right margin while putting their name and title next to the signature.
• If your case has been assigned to an examiner, ask them how to mail or fax your withdrawal request directly to them.
• If you would still like to be assigned an examiner, reply to the audit notice with your request to withdraw using the format specified.

In the scenario where you have received a rebate check but haven’t deposited or cashed it, follow these steps for the claim withdrawal:

• Prepare the claim withdrawal request by following the procedures listed in Status 1. But please do not fax the request.
• Mark “Void” in the endorsing section on the reverse of the return check.
• With the voided check, include a message that reads “ERC Withdrawal” and explains why you returned the refund check.
• Keep copies of all pertinent paperwork for your tax records, such as the signed and dated withdrawal request form, the explanation notes, and the front and reverse of the canceled check.
• The voided check should not be bent, paper-clipped, or stapled. Enclose it with your request to withdraw your claim and send the package to the IRS through certified mail.

After reviewing your request, the IRS will notify you by letter regarding the acceptance or rejection of your request. It’s important to note that an approved request is only effective once the IRS has officially notified you of its acceptance.

If you have accepted a rebate check and have already deposited or cashed it, the withdrawal option is currently unavailable for claims associated with deposited or cashed refund checks. However, the IRS has indicated the possibility of implementing a program to address this scenario shortly.

Conclusion

The IRS has introduced a targeted withdrawal process for businesses ensnared by fraudulent or questionable claims related to the Employee Retention Credit (ERC). Recognizing the surge in misuse of the ERC, particularly by unscrupulous tax consultants, the IRS implemented a moratorium on new ERC claims and has now unveiled this withdrawal initiative.

This unique withdrawal process allows eligible businesses to retract their ERC claims, shielding them from potential audits and penalties. Emphasizing the irreversible nature of the withdrawal, the IRS urges caution and certainty in decision-making. Eligible businesses facing interest, penalties, or repayment concerns can initiate withdrawal following specific instructions provided by the IRS.

As the IRS strives to protect businesses from ERC scams, it underscores the importance of seeking guidance from reputable tax providers before making irreversible decisions. This tailored withdrawal process is crucial for rectifying inadvertent or coerced ERC claims, ensuring a fair and just resolution for affected businesses.