All right, thanks. The clock is counting. Stephanie, we're gonna start without you.
No, it's okay. This is My name is Tien-Tsin Huang. I'm the Payments and IT Services Analyst at JP Morgan. It's been a great day. Get to great sessions with a lot of different companies. We have FIS here to close out the day with us. From FIS, we have Stephanie Ferris, CEO, and James Kehoe, CFO. Thank you both for being here. Nice to have you.
Thank you. Thank you for having us.
Yeah, for sure. you know, we're a little bit late. Forgive us. I thought I'd just kick it off, if that's okay? I know I asked it on the main earnings call, Stephanie, it's always important to hear what's happening from your clients.
Yeah.
You just visited a client conference. What were the two big takeaways, if you wanted to share? What did you learn? Where are you encouraged? Where could there be some room for?
Yeah.
For caution, that kind of thing?
Yeah. We did. We just had our Emerald Client Conference. We had over 3,000 client and prospects there. I would say the theme was immense positivity in the financial institution space. I haven't, Tien-Tsin Huang, seen this much positive momentum and tailwind in this space probably since before the great financial crisis. Banks feel really good about where they are if they're gonna grow organically. They feel really good about where they are if they wanna sell themselves. They feel really good about where they are in terms of if they wanna buy somebody. I think that, you know, the consumer is holding in there. Lending is holding in there. They have the opportunity to innovate in places where they haven't historically been able to participate in the financial services spectrum. Broadly, up and down the market, the sentiment is really strong.
I would say from a banking standpoint, when you combine that with the opportunity that the banks have around AI, for me it feels like a generational moment in financial services. In terms of where they're focused, so it tends to be in a couple of places, regardless of what size of bank you are. The first thing is they're really focused on funding their assets, so deposit generation. Deposit generation is taking a different construct, whether you're small, medium or large, whereby you are going out and you are talking to your commercial lending customers and talking about, hey, I really need you to put your deposits with me here at my bank because I provided you with your lending capabilities. In return, those customers then start talking to the bank about, happy to do, but I need two things from you.
I need really sophisticated or broadly sophisticated money movement capabilities. When you think about ACH, wire, real-time payments, digital currency, all of those capabilities, it can't just be one of them. I need pretty sophisticated digital capabilities. Whether you're a commercial banking customer and you have treasury management, needs, you need to be able to move money when you need to move it in whatever capability you need. Obviously there's quite a significant amount of fraud capabilities that come with that because money movement is fairly sophisticated. There's first the focus of deposit generation and what capabilities you need around that. When you think about FIS, so many conversations around where we are with money movement, our digital consortium that we launched as a part of that, where we're bringing together a set of regional banks to start with a tokenized deposit capability.
Again, leaning into digital capabilities within money movement. The other thing I would say is broadly around digital. If you think about how banks sell and service, all of us want to be able to continue to go onto our mobile app. When I talk about digital, I don't just mean they have a mobile app. Of course, they have a mobile app. However, we all wanna be able to, and they want us to, open up new accounts digitally. Let's just say, for example, I wanted to open up a credit card or a HELOC or Home Equity or however, I wanna be able to go onto my digital app and do that. Historically, banks have not enabled those capabilities because there is a significant amount of fraud. When they open those up online, they have historically gotten just completely lambasted with fraud.
When we talk to them about digital capabilities and wanting to be able to do that, we talk about account origination capabilities that go across their different cores, and we talk about a significant amount of fraud capabilities you have to have to enable those digital capabilities. Finally, the place that took a ton of activity was around data and AI. I'll take them separately, even though they build on each other. In terms of data, no matter what size of bank you are, if you are trying to do anything with AI, you need data and real-time data. We launched a data platform whereby you can access, if you're a customer of ours, your data in a real-time way across debit, credit, core, et cetera. You've historically always had those, but you had to come to us in every different system.
We stood up that data capability, and we have a significant amount of demand coming from just providing those capabilities. We can work with you if you want our help in terms of building a model. For example, we did with one of our regional bank customers who was a TSYS customer and a core customer, where we built a model for them and with them on top of their data to say, this is where we think you should increase your credit card consumer lending lines. We can do that. We can just give you this data, and you can build on top of it. All of that had a huge amount of momentum. There's obviously the Anthropic announcement that we took. I'll pause there.
We'll probably have to talk about that.
We'll probably talk about that, yeah.
Maybe before we do that's such a good, great summary. We've had some of your IT services peers that are servicing banks and of course, in a different way.
Yeah.
Either consultancy or with point solutions. There's some complexity around spend, right? It's evolving. It's positive in the aggregate, but some things are getting left behind, some things are getting overfunded. How are you seeing the budget, you know, behave here? Is it predictable? Is it going in the places that are aligned well with FIS?
You mean in terms of where banks are spending on technology?
Just generally speaking.
Yeah.
In terms of their discretionary as well as their core spend?
Yeah. I think banks have been pretty consistent, as you know, over time, 7%- 8% growth. They've been in varying levels, and they go in and out of cyclicality in terms of where they allocate. It's been pretty consistent in total, but you need to make sure you're in the categories where they're spending money.
Sure.
Top of stack, just for perspective, they banks are spending and will continue to spend a lot on cyber. We do as well. We don't provide cyber products, but cyber does continue to be a big category of spend for them. When you start to go into the next pieces of spend, it really aligns with where I just talked about. They have to spend on digital because it's their sales and service engine. They have to spend on payments and money movement because they need it to fund deposits. They have to spend on data and AI because they know they need to get after some of the costs that are inside their bank. What I mean by that, I don't mean technical costs. I mean the actual regulatory costs and the people burden they have. Those are the place. Fraud.
Yeah.
Fraud is a very significant cost for the bank, and it continues to go up, not down. It's in things like check kiting. I mean, the amount of fraud that banks are spending on is very significant. When you look at where they're spending, that's where we see their spending and the demand is right in line with where our products serve. core itself has been pretty low on the totem pole. It's been low for a long time. Generally, banks don't wanna change their core unless we're not serving them well. I mean, that's been generally true. In order for a core to a bank to decide to change their core, we, the collective industry, just aren't doing a good job, or there's a capability they need that we're not delivering.
I would say that's not their ideal of where they would wanna spend money because they really wanna spend money on growing the bank, protecting the bank versus, like, a core conversion.
Yeah. Okay.
One other thing I would add is.
Please.
There's so much M&A. People are putting off potentially core decisions because they're buying other banks, or they're making a core decision because they're buying other banks. That also can tend to be, as you know, an up and down. We tend to accrue the benefit of that. I might add that, you know, from our standpoint, we're obviously on the larger side of the industry here. We've been seeing account growth historically, overall, accounts on file growth in the 4%-5% range. It has ticked up to the 6% range. We are seeing banks grow as they grow organically and through M&A.
Right. Better account growth is great. Look, because all this complexity going, and you answered it, right? Some things are getting pushed down.
Yeah.
In priority, and then some is getting pushed up. You know, from a core perspective, it sounds like this is still pretty steady.
Yeah.
Pretty surprising.
Yeah, for sure.
Let's do the Anthropic deal. I've been surprised by how much airtime that's gotten.
Really?
In terms of public airtime.
Yeah.
Beyond our little investment community world. I'm sure you've gotten questions about it, you know, since you have announced it. Can you maybe just hit the high points of maybe what's underappreciated? I think how it came together is really important, right?
Yeah.
They came to you.
Yeah.
The most common question I get is still, Steph, you know this, engineers, right? Are you feeding the beast, right?
Yeah.
Are you feeding a beast? Is this something that's gonna come back to maybe haunt you down the road?
Yeah.
You speak with a lot of confidence about that. Can you hit on that?
Yeah. I think what you're seeing, whether it's Anthropic or the digital consortium or any new innovation. What you're seeing in financial services, which is, has historically been true, and I think if you listen to Dario, he would also say it's true for healthcare and life sciences. Because of the amount of regulatory and compliance complexity in this industry, it is always easier and almost the only way to get through is through the technology providers that live here. Because what we have, and this is why Anthropic came, they had been spending a lot of time with very large financial institutions trying to tackle some of these big problems. What they found out pretty quickly is, I ran into an FIS system every time I turned around, and that system has a lot of complexity inside of it that has regulatory rigor.
They could redesign a process flow, for example, but what they couldn't do at all was say, is it compliant with everything it needs to be compliant with? When they came and talked to us about, let's do something together inside the industry, and I might say we're not exclusive with each other. That's okay. They, you know, they obviously they're giving us some of their core deployed engineers, so we learn to build, and then we'll build on our own. The agents are ours to deploy and build. They can't go take all the learnings from us and go deploy to competing product.
When you think about the safe, the reason why a lot of these players, and you'll see we, you know, Anthropic won't be the only one, need to partner up with us is when you start to talk about financial crimes and you talk about needing 17 different reports, and in order to build that financial crimes agent, I have to pull someone from my fraud group, my SARs group, my compliance group, my regulatory privacy. All of that has to be brought in to test the agent and make the agent work. Anthropic can't do that. That's where they said, look, there's this huge amount of opportunity inside every financial institution. We can help you build the model.
We don't have the regulatory expertise to make this work. That's what's so unique, I think, in this industry and why there's less of a disruption risk. I think the other challenge for banks and why they're looking to their technology providers is when you buy something from FIS or any of my competitors, you know it can pass your cyber team, you know it can pass your regulatory team, you know it is SOC compliant, it has privacy around it. If you're gonna go build without that, you have to, you know, get all of your teams compliant with that. The cost of the token itself is expensive.
Sure.
When you're getting an agent out of FIS, you're getting the benefit of the negotiated token cost that I put together as a company versus you building individually. That's some of the construct around it. I think it's TAM expanding. We've never been able to, as an industry, get after these costs, to help banks get after these costs that they have around their regulatory burden. I might say one other thing I think is really important. You don't hear any bank say, we're planning to take down the cost and let the people go. What they want to do, what banks want to do is take down the cost and redeploy it on how to grow their bank. This isn't a cost exercise for banks in any way, shape, or form.
It is truly helping them allocate human capital from things that they don't view to be value add that they need to comply with over into growing their bank or serving their customers. I think that's really important because I'm not sure the AI narrative is getting out there correctly, and I can say on behalf of the banks that I speak with, that's what they're trying to do.
It's getting re-spent.
Yeah.
The savings is getting re-spent.
Yeah.
The financial crimes is the first wave. Should we expect, you know, I don't know how soon?
Yeah.
Months, quarters. Should we expect a lot more that will come behind this? Is that innovation burden on you? Do you share that?
Yeah.
How does that work?
It's a great question. Yes, you should. The innovation burden is on us.
Right.
Obviously, Anthropic provides the AI capability, but we build the agents. You should expect to see more in places where it makes sense for us, where we own the systems that already, the regulatory knowhow and expertise, and we can deploy it across our entire bank channel. There's lots of places inside a bank where, for example, card fraud disputes, chargebacks, where, that we have a lot of systems, and that's a lot of manual workflow that we think we could add a lot of value to. Deposit loan ops, item processing, things where there's a lot of people coming off our core systems and multiple core systems, we think we can provide agentic capabilities. The one interesting thing I would say, Tien-Tsin, is one of the things, we're gonna build the financial crimes agent and land it.
It's going to take us, you know, in the back half of the year. Part of the push on why does it take us so long is that agent has to be trained exactly right every time. Part of the timeframe of building the agent, and it will depend on the complexity of what we're building. There is no room for error in filing a Suspicious Activity Report.
Right.
Not one error. That has to be trained to an exact place. What Anthropic would tell you is they can't train it because it's our experts that have to tell them it's right or wrong. They can help us do the testing and the testing harness capabilities, the engineering piece. Teach us how to do that in a really good way. The training and the testing we're doing with our bank partners.
Okay. Okay. Last point, TAM expanding.
Yeah.
These products that we can expect, these agents that are gonna come out, TAM expanding, or could it be a substitute for some of the products and the ancillary work that you've been doing to date?
No, these agents are TAM expanding.
Okay.
The reason why I say that is in early tests, and that's why it's gonna depend on how it ends up, but 90% of the process, the cost of the process goes away. There's always still a human in the loop. There's a lot of value being created for the bank. You know, in terms of the cost being taken down inside the bank. That's a TAM expanding opportunity.
Okay. Good. Let's bring it back to the business and thinking about ACV.
Yeah.
Right? I'm glad you're sharing that metric, by the way. I know we've talked about ACV for a bit.
George wouldn't let us do it.
Yeah, come on, George.
George finally got over it.
It wasn't then. I think the ACV piece, right, You know, I know bookings can be a little bit.
Yeah.
For us to focus on. You had some pretty big numbers on ACV, right? Up 24%. Capital markets was up even more than that. How does ACV layer into the growth algorithm for FIS? How should we use that metric?
Yeah. It's pretty critical because it shows the long-term demand for the products. Are the products hunting in the market? The 24% in Q1, that follows a 20% in Q4. How does the algorithm work? The sales ACV in Q4, some of that will start showing up in the income statement in the latter part of this year, and most of it next year. Some of the Q1, but not very much, will show up in Q4 of this year. There's always a timing lag on when you see it. What it is showing as well, it's validating the strategy on the growth vectors. It's coming from digital, it's coming from payments, and it's coming from lending. These were set up 24 months ago as strategic priorities. Banking remarkably consistent, 13% growth in both of the quarters.
That's great. It's the consistency that's even more important. We're seeing it across Money Movement Hub, new product. The linkage to innovation. We're actually seeing it across core. There's We're seeing good demand in general across core ACV. As an aside, we're seeing accounts under management, call it in our core systems, up mid-single digit. That's been pretty consistent over the last, I think, six quarters. This is the fundamental health of the business. Capital markets, you mentioned it, up 45%. That's following a 30%-something . Boosted by lending. Yes, we did call out some short-term lower volumes in our lending business, but it's not the product. The software we're selling is going into market. It's just the volume of take has been lower, that's entirely temporary.
What this bodes incredibly well for is. You will see an acceleration in recurring revenue in the capital markets business in the latter half of this year. We're not telling you, hey, wait two years and everything will get better. There's going to be an acceleration in Q2, a further acceleration in the second half, and definitely a strong acceleration when we get to 2027. That is the goal, which is reduce the dependence on large episodic licenses and focus much more on recurring. That has been incredibly successful in banking. 85% of our banking business is recurring.
Right.
Capital markets is more like a 72%, 73%. This is not gonna be overnight. This is a gradual build of recurring in capital markets. We're super excited by this. I'm especially excited because the margin profile of the products we're selling is far better. You're seeing it in the first quarter results. We're up 100 bps on or 87 bps in margin. It's equally coming from cost and favorable product mix. The composition of the products we're selling, especially within banking, is much more profitable.
Is it repeatable? Can you replenish the, you know, the ACV, given what you see in the pipeline and sales activity?
Yeah. Essentially, if you think about it, that's why we call out payments in most of the ACV numbers. Our payments business in general, if you take banking, payments products are more profitable.
Right.
Then within banking, all of the products are decently profitable. There's only like a commercial and processing business in there that's less profitable than the average of banking. We're pushing payments because it's a very profitable segment. Then within banking, digital and core are our focus areas because they're more profitable in general.
Right.
It's entirely sustainable, and it is our commercial strategy. Sell more recurring and sell more profitable recurring. We've been largely successful, especially over, I would say, the last nine to 12 months has been a huge success.
Okay, good. We'll keep asking you on the ACV metrics.
We have to.
We'll see if George is.
Yeah.
Won't be mad at me for asking. Let's bring it back to the stock, right? I think that the quarter was good. There was a negative reaction to the quarter. Now that you've digested it and you've been talking to investors, what do you think were the key sticking points? Has that changed how you wanna, you know, discuss the rest of the year, the visibility, the conviction, that kind of thing?
Yeah. I think the reaction was two-fold. One is the capital markets, guiding to the bottom end of the range. The volume from the lending activity. Our approach there was just to clear it in terms of be very transparent about it and not create, you know, volatility and no hope that it needs to come back, and if it does, great, but if it doesn't, fine. Given the strength of the banking business, which if you remember, Tien-Tsin people didn't believe that we could ever bring back, and I think it's proven that it's back. Feeling good about that overall, and that being more towards the upper end of the range, and then overall confidence in the margins. We just felt in an effort to be transparent that we needed to do that. It's obviously a pretty severe reaction to that, which was unfortunate.
We will continue to be very transparent and, you know, we'll continue to feel good about where the banking business and the capital markets business are, which is why we shared also a lot of the ACV information. I think the other thing that obviously, unfortunately the market took the wrong way for us was our Anthropic deal. We couldn't have been more excited about that. We announced that at our client conference. I can tell you it was a breathtaking moment for clients. I mean, they were extremely excited about it. For them, you know, the feedback even to us was like, this feels like a different company with the amount of products that you're announcing and capabilities you're bringing out to me.
Unfortunately, you know, AI continues to take an up and down scenario view within our industry and broadly, but that one was surprising to us in terms of that was played back negatively. I'm hopeful that after spending a lot of time on it, you know, people will believe in the opportunity there. I don't see. While I do think there could be some disruption over time, I just don't see where banks come into their core banking and the majority of the payment processing and digital capabilities and start bringing that in-house. I don't know how they could do that, given the level of complexity regulatory regime. Really where they're focused, like I said, is how do I get after the cost of doing business in banking is the cost of my regulatory, the people stacked against my regulatory.
That's really where they're spending a lot of time. Hopefully, you know, we'll keep talking about it. Those from my standpoint were the two things I think that potentially drove the negative reaction.
You know, we still have the same great visibility, which is, you know, you take the midpoint of the guide, the revenue is 5.5% growth. Two is 100 basis points on margin. Then it's the cash.
Yeah.
We would have expected a more favorable reaction thanks to the We doubled cash in the quarter, which, you know, we're targeting a 30% increase on the year, high quality earnings and conversion. You know, we're looking forward to another great Q2.
Okay.
I think it will substantially de-risk the entire full year, especially on the cash agenda. When on the earnings call, we did insinuate that we could do better on the full year on cash.
Yeah, we were really.
Managing really aggressively for one-time costs. One-time costs are coming in lower. The cash is really strong. I think there's a bunch of upside. We just got to be really focused and capture that between now and the end of the year.
Okay. Yeah, no, I think that way on the cash flow front that there was some room.
Yeah.
Some room there. Yeah. It's funny. I was thinking about, t hanks for going through all of that. I agree. I think as you put the proof points up, especially on the Anthropic stuff, that will solve itself.
Yeah.
I feel good about that. That's why we're recommending the stock. It was funny to me, I don't know if it's funny to you, but we went through the call. You spent a lot of time on Anthropic and of course the quarter.
Yeah.
Take a volume on capital markets. Didn't really talk about TSYS.
Yeah.
Which is a pretty important and large-
It is.
-transaction.
Yeah.
I guess that's a good thing, but I just wanna make sure I ask you and to check.
Yeah.
Because it's, you know, it's a big undertaking.
Yeah.
I'm curious at this point, now that you've owned it for a little bit, any surprises there? Have you rethought some of your platform decisions, for example? I know everyone's asking about synergies.
Yeah.
Strategically, is the TSYS still intact?
Yeah. It's a great point. You should expect to hear more from us over the next couple of quarters because it is a really important asset.
Yeah.
We treat it as such. I would say generally the TSYS behind the acquisition still stands. It is a fantastic asset. It makes perfect sense within the FIS ecosystem. Having, now when you think about, AI being a capability inside banks, having debit credit core is really highly valuable. More valuable than we ever thought originally coming into the acquisition. I would say broadly, at its highest level, it's performing really well. You know, I think we shared that it's growing at the same level as overall banking. It continues to have a nice growth trajectory. The margins are really good. It helps support an ongoing strength in the banking recurring business. I would say teams-wise, which is, you know, the hardest part with acquisitions is actually culture.
Sure.
I think the culture is going really well. The teams within the total issuing business are melding really well within FIS. We all serve banks. We serve the same customers. That's going really well. The commercial momentum, the chief commercial officer is having a fantastic relationship with the total issuing president, and we're really seeing fruits come. As I said when we bought it, these are really large sales cycles and long sales cycles. We feel good about the revenue synergies, but consistent on they will take some time. We expect to see those show up in 2027 and 2028. Cost synergies for us, and that's part of why the margin, I think, continues, we feel good about it, come in more in the back half of the year.
For us it's not a huge amount of cost takeout, it's more facility consolidation because we really care about this asset and in terms of making sure that we continue its growth. For us, the cost synergies we feel really good about. They're baked in our forecast and largely they're done. You would expect to hear more from us around modernization and things like that over the next couple of quarters.
Yeah. I know there's TSYS Cloud and there's a lot of different platform decisions.
Yeah.
It doesn't sound like there's been any change in the platform side.
No change. No change for right now. Yeah.
Okay. Good. I had to ask you about this.
You have to ask me about Pismo.
What's that?
Yeah, you have to ask me about Pismo, right?
Yeah.
It's okay. You can do it.
Visa was here.
They were. Yeah.
We talked about it. They were excited about it.
Yeah.
They also acknowledged, right, it's.
It's a ledger.
It's the beginning. It's on the ledger side.
Yeah.
It is creating questions. They also bought Prisma and Nubank.
Yeah.
That's more Argentina, I know.
Yeah. Yeah.
It does feel like, you know, as you and I have talked over the years, Stephanie, right, swim lanes is always changing.
Yeah.
When Visa does something, we have to pay attention.
For sure.
Is this a big shift from a competitive landscape standpoint, in your mind?
Yeah.
Interpret this.
I think there's three different things, and so we can talk about it. I think first of all, I agree. Visa entering, credit processing, which is what I think they've really done. Visa's been in debit processing. Visa entering credit processing, I think is a meaningful move for them, and we all need to be really focused on it. When I mean all of us, I also mean not my competitors, but also brands.
Sure.
I think we take everything that they do seriously. I think let's talk about international. International, from a Pismo or a Prisma perspective, I think we feel really good with where our Prime product is. It's generally equally as competitive and is the product that's in market.
For international.
For international.
Yeah.
For us there, we feel really good. We compete really well. There's a huge market for us all to compete. It's not the two of us or anyone. I think internationally, very competitive. I think when you think about the U.S., I think about Pismo more of a debit credit story, a debit credit brand story. We're definitely seeing them show up. We're definitely seeing them show up in terms of trying to drive that consolidated story. I think there's very big competitors as well, us being one of them, that are fighting equally, we will see how they go. I think the Pismo Wells piece, I think you heard Ryan talk about that's a ledgering thing in a big bank.
I'm not sure that's really where their strategic positioning is. Wells' ledger isn't necessarily what I think the broad strategy is. you know, I think there's big competitors, and we will compete alongside our core and debit and credit capabilities as well.
Yeah. No, thanks for being candid about it.
Yeah.
You know, we can only track it. We'll see what the real.
Yeah.
Ambitions are and how it ties together with the branded visit. Yeah, there's always change.
Yeah. For sure.
Competitively. Sticking with networks then.
Yeah
Let me ask you about your debit network. You have the fourth largest.
Yeah
One, which, I think sometimes gets forgotten.
Very much gets forgotten.
In the mix of everything else.
Yeah.
You know, in the wake of Capital One Discover and PULSE and what happened there and the extraction of value, you know, from that, now you own, a much bigger piece of the market around card processing. Does that change the potential for synergies with the debit network, or is there potentially more value for that to be somewhere else? I mean, there's a lot of questions there.
Yeah.
I'm curious how you're thinking about the asset?
Well, I think owning a network is highly valuable.
Sure.
Whether it's a debit network or a credit network. As you said, we actually own a couple of networks. You can see now that banks owning networks, they can use them for different things.
Right.
I think from us, from our standpoint, a lot of the money movement, not a lot of it, but much of the money movement demand that has come, we hired as, you know, over the last couple of years, a different leader for our network business and have driven quite a bit of network business into FIS, which is a very high margin, high recurring business. I think we have a very competitive network, and we continue to compete there against all the existing players. I have no interest in selling my network, but I do think there's really interesting things to do with my network, and we've been talking to various banks about that. It really depends on what banks wanna do with their networks.
I think Capital One is an interesting, first play, and we'll see if some of the other banks wanna do something with networks TBD. From our standpoint, we really like our network, we value our network, but we also are very interested in doing strategic things if banks wanted to do that.
Okay. I asked Mike the same question.
What did he say?
To be, you know, to be fair. Something very similar. They There's a view on the on-us network and the synergies with merchant and everything else. Yeah, they see value in owning it and more potential for synergies and kind of a stay tuned.
Yeah.
I think is pretty similar. We have less than a minute. Time flies really quickly. I have like 10 more questions to ask. I thought the one I know James and I have talked about this with George. I don't know if it's a good question to end on, but I'll ask it anyway. Philosophy on pricing.
Yeah.
I know that's something, you know, that's important to investors. I know you've spent time on thinking around price and beefing up the team there. Switching costs are high for a lot.
Yeah.
Of your business, and it's always been hard to articulate to investors why pricing on renewals are what they are when switching costs are very high.
Yeah.
Is there an opportunity there to maybe be a little bit differentiated or thoughtful, maybe with the infusion of AI or something else to change the mindset around pricing at FIS?
It is a quagmire when you look at it just from the outside in because there's not that many providers in this space.
Right.
You would think there'd be a lot more pricing power than there is. You've heard us talk about putting pricing back in CPI and at price escalators back into our contracts. To be fair to us, because over the last 10 years when there was no price escalation, we had negotiated those out. Those are back in.
Good.
In most banks, that's a very fair ask, by the way. They see the price inflation, they understand it, and they can accept it. The other thing I would say about this industry is when we are contracting in this industry, it's a multi-year three, five, seven, 10-year contract. People aren't willing to operate and allow themselves to be completely open to a full variable price.
Yes.
It's different in that way. I think we have brought a lot of pricing discipline back into FIS, and we've seen, you know, some positive momentum there. I just don't see pricing being a mechanism where it'd be like a 2%-4% grower in our overall base. I think the way to think about the value of pricing is more around you for a net new piece of business. You, for example, bring in the core and then you sell all the surrounds, and that's how you think about gathering your price.
Yeah.
Ultimately, it's not about the core price at the end of the day. It's how many products you can serve around to that customer base, and they wanna buy those products. I think to be fair to the industry, that's maybe not very clear in terms of, you know the value of the core and the surrounds, but the pricing lever itself is really around building and delivering new product at a price that's market and not compressed. It's a tough one for this industry. I come at a merchant where you have a much easier mechanism to price because Visa and Mastercard change their price.
Right.
Every first quarter and third quarter. There's an opportunity to reprice. This part of the industry doesn't have that opportunity.
Right. Mixing into the right types of business where the value is high should drive the net positive pricing that you've been talking about.
You have to make sure that what you're selling is in products of high margin, that have high demand, that have organic growth, and that can be implemented in a short time period. That's why what you sell really matters. That's why that commercial excellence and that commercial momentum we've been focused on is so absolutely critical because not only does it reorientate the top line, it ensures you deliver the margin expansion you need.
Good. I know we're over time. Stephanie, James.
Okay.
George, thank you.
Thank you.
For being with us. Thank you.
Thank you.
Always enjoy it.