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Related Party Transactions
6 Months Ended
Jun. 30, 2020
Related Party Transactions [Abstract]  
Related Party Transactions Related Party Transactions
Merchant Alliances
The Company maintains various ownership interests in merchant alliances and strategic investments in companies in related markets. At June 30, 2020, the Company had 16 affiliates, the most significant of which are related to the Company’s merchant bank alliance affiliates. A merchant alliance, as it pertains to investments accounted for under the equity method, is an agreement between the Company and a financial institution that combines the processing capabilities and management expertise of the Company with the visibility and distribution channel of the bank. A merchant alliance acquires credit and debit card transactions from merchants.
A significant portion of the Company’s business is conducted through merchant alliances between the Company and financial institutions. To the extent the Company maintains a controlling financial interest in an alliance, the alliance’s financial statements are consolidated with those of the Company and the related processing fees are treated as an intercompany transaction and eliminated in consolidation. To the extent the Company has significant influence but not control in an alliance, the Company uses the equity method of accounting to account for its investment in the alliance. As a result, the Company’s consolidated revenues include processing fees, administrative service fees, and other fees charged to merchant alliances accounted for under the equity method. Such fees totaled $41 million and $87 million for the three and six months ended June 30, 2020, respectively. No directors or officers of the Company have ownership interests in any of the alliances. The formation of each of these alliances generally involves the Company and the bank contributing contractual merchant relationships to the alliance and a cash payment from one owner to the other to achieve the desired ownership percentage for each. The Company and the bank enter into a long-term processing service agreement as part of the negotiation process. This agreement governs the Company’s provision of transaction processing services to the alliance. The Company had $37 million and $35 million of amounts due from unconsolidated merchant alliances included within trade accounts receivable, net in the Company’s consolidated balance sheets at June 30, 2020 and December 31, 2019, respectively.
In 2019, the Company and Bank of America announced the anticipated dissolution of the Banc of America Merchant Services joint venture (“BAMS”), which subsequently dissolved effective July 1, 2020. As of June 30, 2020, the Company owned 51% of BAMS and BAMS’ financial results were consolidated into the Company’s financial statements. Upon dissolution, the joint venture transferred a proportionate share of value, including the client contracts, to each party via an agreed upon contractual separation. The Company received a 51% share of the joint venture’s value and Bank of America received a 49% share of the value. The transfer of value to Bank of America will be accounted for as a distribution of nonmonetary assets at fair value and is not expected to result in the recognition of a material gain or loss. In addition, the Company will continue providing merchant processing and related services to former BAMS clients allocated to Bank of America, at BAMS pricing, through June 2023. The Company will provide processing and other support services to new Bank of America merchant clients pursuant to a five-year agreement which, after June 2023, will also apply to the former BAMS clients allocated to Bank of America.
Joint Venture Transition Services Agreements
Pursuant to certain transition services agreements, the Company provides, at fair value, various administration, business process outsourcing, and technical and data center related services for defined periods to the Lending Joint Ventures and Investment Services business (see Note 4). Amounts transacted through these agreements totaled $16 million and $9 million during the three months ended June 30, 2020 and 2019, respectively, and $27 million and $18 million for the six months ended June 30, 2020 and 2019, respectively, and were primarily recognized as processing and services revenue in the Company’s consolidated statements of income.