Thank you, everyone. We're going to get started here on our next session. Very pleased to have Frank Bisignano, CEO of Fiserv, here with us today. Frank needs no introduction. Frank, we're very excited to have you, and thank you for joining us.
Thank you. I'd like an introduction, anyway, you know, I didn't even get one of those, right? It was Matt Harris for the past 10 minutes up there.
So maybe I'll start with getting a few macro-related questions out of the way before.
Any updates from a consumer spending standpoint versus the trends you shared for January?
No, I think we saw, you know, it, it's not unusual to see weather effects, kinda for this period of time. I think you see a little slowing in maybe restaurants also, somewhat correlated. But, you know, spending, spending seems to still be occurring. You know, we have this board in our office that, you know, I have pattern recognition from because we've had it there, you know, for since we built eight years ago, which shows how many transactions per second and where they're happening. So, you know, I mean, it looks the consumer's out, the consumer's out and spending. Obviously, we have some large non-discretionary categories in our portfolio, which kind of brings stability to our spending patterns.
That's helpful color. And then I guess on the banking industry, it seems the industry is facing a bit of a crisis with rising real estate losses. I know you have a big client, NYCB, which is one of the names that's been in the headlines. How should we think about any potential ramifications? Is there a fear of a broader contagion? You know, what are you hearing from your bank clients?
Well, you know, if you went back almost a year ago, you know, we were inundated with this concept of a crisis going on. And yes, you know, we had three names. I like to think of them as it was a bicoastal problem with just a very small handful who deviated. You know, we have a portfolio of banks that are very, very well run. I talk to CEO of banks all the time, multiple times a day. And, you know, I think, I think they feel good about their balance sheet, their portfolio, their positions. You know, historically, you're always gonna have a little something going on every year. You know, NYCB is a good client of ours. SVB was a good client of ours.
Signature was a good client of ours. And, you know, and then fundamentally, their successors became good clients of ours. I don't mean to take the other side of this, but I don't really see a banking crisis going on.
That's helpful color. So let's dive into the business, maybe starting with Clover. Clover has been a tremendous growth story for Fiserv, and in fact, you're expecting an acceleration in revenues there based on the trends you shared at your Investor Day. I think you're calling for basically 30% compounded annual growth rate going forward the next three years, versus maybe it's been running in the high 20s. Can you talk about the drivers for that few points of acceleration we'll get from here, and what's giving you sort of the confidence in the sustainability of these really strong growth rates?
Yeah, I mean, look at... You know, I think it's important to go back, go back to where we created Clover, how we created Clover, because we talk about it in a manner of its maturation. But, you know, the reality is, you know, we didn't get the first Clover into market probably till 2015, really. So if you think about the maturation of it, it's super early innings. And, you know, I love to, I love to remind us that, you know, we had bought Clover, and it was a few engineers and a few patents, and today, you know, we have thousands of engineers driving outcomes across the globe. And so I think we're continuing to innovate. You know, we figured out early on, we thought it was gonna be an iPhone for small business, and I was mistaken in that.
You know, we recognized that we needed to canisterize the product. We needed to have value-added services, not only that we had, but that clients wanted. We needed to think about verticals. We needed to think about, in fact, how different client sets would use and buy the product. And, you know, that's the journey we're on. So we're in the young, young stages of verticalization. We're still in the young, young stages of VaaS. You continue to watch our penetration rate increase. And, you know, we've approached it in a manner that we have more channels to attack, we have more geographies to attack, and, you know, our job is to grow more merchants and bring more product to them and allow them...
You know, we're a purpose-driven company that want to help our clients grow their business, and the best way we could do it is bring in more software to their stack and have them consume it, run their business more efficiently, and be able to, you know, grow. As our clients grow, it's a tremendous benefit for us to grow more merchants in more geographies, more vertical expertise, more distribution and direct distribution.
...And I know the back book penetration is another growth driver that you've talked about. What's the plan of attack on that, and how aggressively are you planning to pursue it?
Yeah, I mean, we've been very clear that when we laid out our 25 target, it had contemplated no greater Back Book penetration. You know, and we've been very consistent from going back to 2020 that, you know, yes, there is some Back Book that naturally turns into our Clover portfolio, and that's about 10% versus 90% net new. There, you know, it's really about software. It's not about hardware, it's about software. And as we've built the new dashboards, we've built the new prompts, we've built the new intelligence for our client base, the ability to roll that out and then follow up with the greater software total stack is really the strategy we employ. And you wouldn't see that till, you know...
I don't, I don't see that as a big driver of anything we're talking about for 2024, 2025. I think about that more as a 2026. If there's some reason that should veer, you'll probably be the second person to know.
That's good.
You will be the second person to know.
That's great. I know you talked about new geographies, new channels, sort of any one that stand out as a bigger growth driver as we think about the next three years?
I mean, look, we have, you know, the best distribution in the industry. We are the partner of choice in multiple areas, and I would talk about banks, I would talk about ISVs, I would talk about agents. So, there's, and I think about that outside the U.S. So, I mean, I know everybody is always looking for the one driver. You know, that's not this company. This company has lots of channels, lots of distribution, tons of capability, and tons of geography. We built a business in Brazil out of nothing. You know, yeah, I think Caixa will probably be a good distribution partner for us, given the fact they're in 99% of the cities in Brazil. But that's not what's gonna drive the number.
It's Argentina, it's Poland, it's across the globe, it's the U.K., but it's also, you know, greater penetration in the U.S.
Right. Can we touch a little bit on the pricing environment? I mean, typically, the merchant acquiring industry, always very competitive, and pricing tends to be a headwind, but where we're sitting right now, it's actually been a tailwind for you guys. You've been able to take some pricing. So how do you see pricing as a growth lever from going forward from here? Any thoughts on that?
Well, I mean, I think what we've really done is add value, right? You know, we're in the business of delivering capability to our client and getting paid for it. So I think software has a tremendous benefit. That capability allows us to actually capture more TAM for our client and actually have pricing at points in time. But I don't think of it as anything other than getting paid for value that we create that allows our clients to stay with us and grow with us.
If the Fed goes through with the lowering of the debit interchange, which is kind of in the works at this point, is that—should we think about that as being a nice sort of tailwind to Clover?
I don't know if it's a tailwind to Clover. I wouldn't really think about it as a tailwind to Clover. The way I might think about it is, you know, look it, we have a very large merchant constituent, and anything that helps our merchants be able to have a strategic advantage in pricing and gaining more clients and selling more business is good for our merchant business. I wouldn't make it a Clover item, I'd make it a, you know, if it's lowering the cost of acceptance for our clients, then we wanna help them grow.
Got it. Switching to Carat, you've positioned that as sort of an omni-channel operating system for large enterprises, and it's a very competitive end market with, you know, the modern players like Adyen and Stripe of the world competing aggressively. So how does Fiserv win against these players in the market?
Well, I think, look at, you know, first of all, technology is the great enabler. Technology is the great equalizer. You know, we, we like to... The number one job in our company, the number one job, you know, there's 13,000 software engineers. So if you wanna think what we are, I think we're a company that builds software. Half the people in the company are technologists. So I think at the end of the day, you know, we went down this Carat and Commerce Hub path. We believe it brings tremendous capability. We bring it, believes- brings VaaS to it. We like playing in the, what we call, enterprise space. We like playing in the multinational space.
And I think, you know, ultimately, we're gonna continue to build product that our clients are asking us for and that new markets want us to accept. There are fabulous competitors in this business. I kind of love that, right? I mean, why not, you know? Let's challenge each other all day. Let's compete all day. There's plenty of TAM to expand in these markets, because ultimately, what we're doing is helping our clients gain more market share. So I think, you know, we're gonna continue to drive down that path.
... what are the sort of differentiations that Fiserv brings when you win a deal versus an Adyen or Stripe? What are those sort of few features or technology that enables you to do that?
Well, look, all of these are, you know, it's not... These are large institutional clients, right? Many times our advantage is our omnicommerce capability, right? I mean, that is a large strategic advantage. And I don't think it's that replicable in an hour, or even much longer, right? But on top of that, you know, we brought in new technology. Now, you know, I think it's quite forgotten that we were always a great e-com processor, right? We didn't compete in the front end of the business because we had JVs that actually were the front end, and we were the best processor in the industry. So when that changed, we then veered to our ability to build capability that we thought about for a long time.
How we're gonna have a single front door, how we're gonna have a Commerce Hub behind Carat, how we're gonna integrate VaaS in a manner that we have capability, whether it's our debit networks, whether it's our, our lower cost of acceptance products. And so, when you put that all together, I think we have the, the best hand in the industry. You know, now it depends on who the client is and what they're looking for.
When we think about the 2026 targets that you've laid out, can Carat sustain sort of the mid-teens type growth that you've been seeing? And are there any pockets where you expect to see most of that growth come from? Is it mostly, like you said, omnichannel is a big thing for, that you can bring to the table. Is it more selling omnichannel to maybe clients, enterprise clients that have historically not done omnicommerce, or are there other levers that you are seeing for growth?
Yeah. Yeah. Remember, we are going to report an enterprise number, right? So remember, that's like what we've talked about, you know, SMB enterprise processing. We've been very clear about that. And so when you think about this Carat conversation, it's a subset of the enterprise conversation. Now, that's a much bigger base, and that will not be a mid-teens grower sustainably. But yes, Carat will be. And, you know, I understand the desire to have this, like, give me the item, right? But, you know, we have a multi-billion dollar business that has a few items, right? Those items would be, yes, our ability to bring more VaaS and more capability as both inside the U.S. and outside the U.S. It's the capability, yes, it's...
I'm pretty darn proud of our Omnicommerce capability and ability to package it and deliver it to the client in a manner that allows them to easily settle in a manner that's good for them. And then I do think that, you know, our entry point through Commerce Hub and those value adds and an orchestration layer that we can use in any manner we want, will long-term differentiate. By the way, I think three years from now, we're gonna be having a conversation about a whole new set of software and technology, right? This is the here and now. We're building stuff for 2026 and 2027 and beyond, too.
Got it. Great. So maybe switching gears a little bit to the financial solutions business, can you talk a little bit about the Finxact acquisition and that-
Yeah.
-how that's helped modernize the experience for your bank customers? Because a lot of them were on legacy core systems. Maybe you can help us bring that to life with an example of how you've been able to use Finxact to give them a more modern experience.
Yeah, I think there's, there's, like, multiple examples. You know, we used one on Investor Day, Primus Bank, which I think was very strong. And remember, here we are coming in with a, you know, really a software stack that allows an institution to be able to decide, do I want a sidecar? Do I want it as a takeout? Is it going to serve a different set of clients? How do we bridge it as a sidecar? So our job was to create optionality for our client base and for attracting new clients.
I think another incredible example, in my opinion, is, you know, the fact that, you know, ONE is a JV sub, a part of a JV sub of Walmart, and we've proved the case, you know, in building that out and having millions of accounts on Finxact. And so what does that say? That says we could fight at any weight, you know? We could be in every heavyweight bout, and we can also bring it down to a small fintech that needs just capability to move. We can make it a sidecar for a bank. We can attract a new client into one of our world-class products, like DNA, but have them have a path to build a digital bank with Finxact, and we have all those things going on right now.
You've also talked about how Finxact can help you serve the larger end of the market than you have historically, maybe-
Well, I think that's the base case I make with Walmart. You know, I mean, we've demonstrated size and scale beyond anything we've ever seen before. So I think, you know, at the end of the day, we think it's a large market product. It's a ledger for many types of fintechs. It can be used in a multipurpose core capability. It is fourth generational, and I think it gives our clients tremendous optionality. Obviously, you know, you don't wake up in the morning and have, you know, we assign 1,000 merchants in a day. We're not gonna assign 1,000, you know, fintech clients in a day. I think they're two completely different things, but the demand is high. I think we're in battles we had never been in before.
We got use cases going on that we never did before, and we have use cases of tremendous size and scale. To me, the biggest item was demonstrating to ourselves in a market and our client base that this thing can be the industrial strength, heavyweight leader.
That's awesome. On the card issuing side, at the Investor Day, you highlighted a revenue pipeline of $125 million that you've signed over the past year. When you compete for these deals, are you seeing the modern card issuers like Marqeta and Galileo show up more in the RFP process?
I don't, you know, look, it, we go in to win, right? I don't really think about who else is in the fight. I think we're the industry leader at this. I think we've taken a boatload of market share here, and it's been built off of our technology platform. There are great competitors in all different aspects of the space, but if you look at the wins, right? Whether it's Target, whether it's Desjardins, whether it's before that, Bread, these are very large enterprises that want the full stack capability, and we've invested $hundreds of millions in our technology stack over the past five years to build it out, and we'll continue to do that. I think, you know, it's not about who's in the process, it's who comes out at the end of the process with the win.
I know you just mentioned Target. That was a win that you highlighted at the Investor Day. Was that a competitive takeaway? Maybe you could talk a little bit about the attributes that really sort of attracted Target to work with Fiserv.
I think, look it, Target was somewhere or another, you know, I mean, so, like, I don't really like that competitive takeaway. You know, I made a point about the industry, and my point about the industry is, you know, there's tons of good competitors. Everybody does a really good job. We deploy our capital in multiple ways, and we do it in a manner to help grow our business and to return it to our shareholders. I mean, you know, we win these deals because of our modern technology, because of our surrounds, because of our long-term capability, and the fact that we continue to invest in the next generation, you know, of the stack. You know, so this is a constant evolution of deployment, you know, of capital to get a great return for a long-term recurring revenue business.
I think you talked about investments that you're making in the issuing platform to deliver a more cloud-native platform. So where are we in that investment journey for Fiserv?
We're in that journey. We continue to move clients in a different manner. We continue to move up functionality. I think it's in the next couple of year journey, and that was after we built Optis, modernized Optis, and made it the industry-leading platform.
Great. So maybe I also wanted to talk about the Melio partnership that Fiserv signed recently, and that's sort of an expansion into almost a new domain for you with AP/AR. How significant is that opportunity?
Well, I think it's significant. I mean, you know, remember the size of this company, so if you say significant, you know, it's, it has opportunity to move things. I think the biggest issue here is our client base wants it. Like, it's always great to go... You know, like, I find that our strategy is we gotta fit within our client's strategy. And, we believe we have lots of opportunity to help our clients, bring more, that's our financial services clients, and also our corporate clients, in different distribution networks, but let's call it, our financial services clients, to be able to bring this AR, AP solution to, their client base.
You know, we think that it's gonna help them grow their business, and help us grow our business. I would say, you know, I sit in on an every other week review of this, with the business head leading it and the CEO, Emilio, and I mean, we're flat out on the demand side, and you know, our capability will be there, and you should expect this in market, you know, as we say, in the summer.
Great, I know you've already signed a couple of bank partners on that front, so maybe once you sign a bank partner, what's sort of the timeline as to how quickly we start to see some revenue generation? And then just on the revenue model, if you could help us with the revenue model for a product like this would look like.
Well, I'll leave Julie for modeling, okay? I'll deal with what it takes to get it done and how long it takes to get it done.
Fair enough. Fair, fair enough.
You know, but you know, if I'm talking about it, you should assume, you know, I'm not talking about it because it's a rounding error over time.
Right.
Maybe that'll help you with modeling.
Absolutely.
Right? But I think at the end of the day, you know, if we sign somebody up, I would expect to get them up and running in six months.
Right. I have a few more questions, but I do wanna ask and see if the audience has any. Come on, no one has a question for Frank? Don't be shy.
Bob?
Well, I'll keep going here then. So one of the interesting things, Fiserv applied for a bank charter in Georgia recently. What was the thought process behind that, and what benefits would it bring to, Fiserv?
Yeah, I think it's a very, very, very, very specific item. I think anybody who can research it will see it clearly. In Georgia, there's a single purpose license, and it's for sponsorship for merchant acquiring. As the landscape continues to change, we thought it was important that we also had the capability to sponsor ourselves with the networks. Today, we use all bank sponsors, and we have great relationships, but as we grow the business and the landscape evolves, we thought it was logical to have our own charter for that single purpose vehicle. It is designed to compete with not one of our banks in any manner, shape, or form, and in fact, help us, you know, continue to drive through our banking network a merchant acquiring business for them.
Does it have any impacts on the P&L, because now you have your own license, and in some situations might not have to-
I think it's, you know, this is nothing that's gonna affect, you know, the P&L. It's more ensuring that we have the opportunity to control our own destiny if we need to.
Does this become a unique advantage that you have as we think about embedded finance? Because that's definitely something that everyone wants to have. It's a hot topic, and does that give you a competitive differentiation as you go to win in those deals?
Well, I'd say it differently. I think we have a tremendous competitive differentiation in embedded finance. I would not have this as the item, but I would have the fact that, I think when we talk to companies and we're in very, very robust discussions about the capability that people want... Remember, we have the ability to bring the banks products that would be different than they would usually see, and a bunch of, to our, non-bank clients, you know, a plethora of everything from merchant acquiring, to Finxact, to, a value-added service products, everything from prepaid products to bring a debit network. And so when, you know, the phrase embedded finance, I don't know which year, somebody could Google it and tell me which year embedded finance became the hot phrase. We were working on these things way before it was called embedded finance.
We had distributed multi-products through a technical integration, delivering ledger capability, delivering card capability, and the ability to allow a retailer to be able to create more consumer finance capability. For us, you know, it was one of the things we highlighted on Investor Day because we think we have this unique position of our ability to distribute those in an integrated fashion to help our clients win in a different way.
Maybe moving to capital allocation, how are you thinking about potential for M&A? You know, I think you've been focused more on tuck-inside deals more lately, but is there appetite to do larger deals as well?
Well, I think we did the First Data Fiserv deal, so I think that would qualify as an appetite, maybe even a main course. I think it turned out pretty darn good. I think those things don't happen, you know, every kind of year and a half. You know, I think we're a good acquirer. I think we're a good integrator. I think we know how to distribute product in a manner that crosses, you know, our distribution networks. I mean, we try to work on everything humanly possible all the time, you know, and think through them. So, you know, can't really have a crystal ball about, are we gonna do something big, or are we gonna do something small, or are we gonna, you know?
There's got to be a motivated seller at the right price for us to be able to transact. We will always take these small investment bets, like you saw us on an Ondot, you know, or on a BentoBox, because we get to know it, we get to understand it, we sit in the boardroom, and then we acquire it. We feel really, really good about those type things. You know, historically, we did everything from acquisitions that got us our DNA product, that put us in the ISV business. So, I think, you know, we're active in thought.
As you think across your portfolio, are there any specific areas where you think M&A could really help add capabilities? Any sort of examples of here are the areas where we might be looking to do something?
I think, like, look, you know, I personally believe we have the fullest, best hand in the industry. It's our job to capitalize on that hand, it's our job to execute on that hand. We get up every morning maniacally focused on doing a better job for both our clients and our shareholders. I feel, you know, when you could have Clover, you could have an issuing business, you could have a debit network, you could have geographic dispersity that we have and the ability to distribute. You have a bank franchise that's unparalleled, both in what you would classically call deposit and loan systems, and then a front-end, probably the largest digital user base in the industry. I kind of feel like it's a pretty full hand.
Having said that, you know, there's always new entrants, there's always more digital capability, and we're always looking at, is there opportunity to do something better, faster than we can? You know, given the fact that we can build product well, I believe, organically, that's always part of the decision-making sure there. But if we could, put things through our system, like we did Ondot, like we did Clover, like we do Bento, we think we have a strategic advantage in, in getting more VAS, more TAM, and, and better growth rates. I mean, everything's really about our growth rate and market expansion.
Just two high-level questions. Frank, when you guys did the Fiserv First Data deal, I think for a long time, the market didn't appreciate the distribution that the two assets brought together and the capabilities you have, and I think the market sort of realized that now and sort of appreciated what they missed. As you sit here today, do you think there are certain things about the asset that the market still underappreciates?
You know, I've never been the person who walks around and talks about what other people underappreciate, you know, because, like, I don't really know what that means, actually. You know, I mean, there's a big market out there, that everybody is making their own decisions about what to do. We have pretty good track record and performance. I think it's 38 years of double-digit EPS growth. I think it's 3 years of double-digit revenue growth. I think we took a company that used to grow 2 to 4% and a company that went from 0 to 5%. You know, we guided 7 to 9%, and we outperformed that. You know, we probably, you know, didn't get everything right. Nobody ever does.
I think we try to, you know, not have mistakes that are costly. We obviously, you know, deploy capital well, I believe. So I don't, I don't really wanna, you know, go, "Oh, nobody understands this about us." That's like whining, I don't whine.
Well-
I don't accept it, I don't listen to it, I don't believe in it.
Right. So then one last one for me. I think if we look back at the last 4.5 years since the deal was done, I think in my view, Clover is the one that's really surprised us to the upside, it surprised investors. As we look to the next 5, where do you think the surprise will come from? And it's also could be upside, so I know that.
Well, I'm trying not to surprise people that much. Kinda... I mean, I walked around in a Clover van and said, "You're gonna see Clover all over," but people just booed me out of stadiums. You know, so, you know, but I think now they're in stadiums. So, you know, it's not about the surprise, it's about the next level of operational excellence. It's about the utilization of AI and our capability, not to do anything other than help our clients grow their business. Our ability to bring intelligence to our banks and help them, because we are their infrastructure, understand their market, their end market better, our ability to bring down merchants more intelligence, you know?
The fact that you could walk past a screen and in only one of our businesses, we could be doing, you know, 4,500 transactions a second on a weak moment in the morning, W-E-A-K, a weak moment in the morning, is a testimony to what we can do. We, we lead the league in data, and if you lead the league in data, then you've got a better AI capability, and our ability to use that AI to run our business better and help our clients run their business better. And, you know, that's kind of my dream. My dream is to just delight our client base that, you know, we are the strategic partner of choice every time they make a decision.
Since you brought up AI, I have to ask the question on AI.
Sure.
Do you see that as more of a cost opportunity for Fiserv, or is that also a revenue opportunity? If you could help put a time frame around how quickly that'll start to move things.
Yeah, I think you gotta take it in the context I talked about it, right? I think our job is to help our clients grow their business. So we have way more information than our clients have, and we can tell them way more about how they use our systems, how their clients use their systems, and our ability to bring that together, synthesize it across the whole client base, and then help them run their business better, will ultimately be a top-line benefit for us. Of course, you know, I said this the other day somewhere, and, you know, I got a lot of pings from people about what I said, but it's really true. We were using AI before it was called AI, right?
I mean, that, you know, just like we had embedded finance before it was called embedded finance. You know, I'm way better at getting stuff done than naming it, right? You know, my point of view is, we will always use it to be more efficient, like we've always used technology to improve how we do our process. But I think the big thing is delivering value to our clients in a manner that we continue to help them grow, and that's an expanding TAM for us.
Great. So with that, we'll just end it right here. Thank you very much, Frank. This is very insightful.
Happy to be here.
Thank you for joining us.