Good morning, everyone, and welcome to day two of Citi's thirteenth annual FinTech conference. I'm Ashwin Shirvaikar. I'm Citi's Global Head of FinTech Research, and it's my pleasure to welcome Frank Bisignano, who is the Chairman, President, and CEO of Fiserv. You know, folks you've known I was just joking with with Frank earlier that, you know, 'cause he asked me who's, who's following me, and I kinda said, "Frank, it's all, all the people that used to work for you, who are now, now leading various other companies." So, Frank's been in the industry for an incredibly long time. It's been my pleasure to know him since he used to be at Citi years and years ago. You know, I mean, can't think of a better manager, better leader.
So, Frank, what do you say we just get into it here?
Thanks for having me.
Yeah, absolutely. Thanks. Thanks for being here, being part of our conference, kicking off day two. I'm gonna start, maybe with a macro question-
Mm-hmm
... because, you know, when I look at your merchant business, that's, you know, meaningful share of the overall market. You guys have a view of what the consumer behavior is like. What does your data tell you about the health of the consumer? And that I know is primarily a U.S. question, but obviously, you are in major markets in other places, too, so a broader answer.
Yeah, I mean, you know, we created the FSBI-
Mm
... and, long time in the making. That's not necessarily a, direct indicator of our business, but a good indicator of what's happening in small business. And we've seen that tick up. You know, as everyone knows, you know, January can have weather effects, and we definitely saw that in January. We see a rebound of a bit that occurred in February. But you can, you know, consistent with what economists have put out for the macro, you could see that spending is strong, but, you know, maybe a hair dampened from what we've seen in the past.
Okay, okay. When you kind of maybe extend that out to small businesses and small business health, that's the other question we do get on macro, and you guys obviously look at that data. What is that?
Well, it's trending, it's trending positive.
Yeah.
You know, you're gonna always have a seasonal adjustment for December, because December will always outperform by the nature of it, even though the season has extended over the past few years in a different manner. But I think SMBs are, you know, they're in there competing well, and, you know, year-over-year data shows a slight increase.
Okay, okay. And if I can extend that to, say, the company itself, right? The adaptability that you guys have. If numbers aren't, say, in line with your economic assumptions, right, how quickly can you adapt, positive or negative investment or sort of retrenchment of sorts?
Yeah. So, you know, I think it's important to go back to any way you look at this company, it's an 85% recurring revenue business across the whole-
Yeah
... enterprise. Let's start there. Two, you know, it's hard not to point to the resilient business model. You saw it perform, you know, at the height of the pandemic in 2020. You know, you got 38 years of double-digit EPS growth. So, we really, really believe our business model can sustain the toughest of times, as it's seen before. Obviously, you know, you've watched us deploy a lot of capital into tech and into investing in our business, and we continue that, whether it's building out more data elements, whether it's investing in AI. So we feel like we have a fair amount of capability to deliver in good times and bad. I mean, you know, we're now fundamentally one-sixth through the year. We see demand strong.
Yeah.
But I've always felt that we're a very capable organization of delivering in very, very difficult times.
Okay, okay. That's good to hear. When we talk about Merchant Solutions, right, and you guys have the outlook out there, $10 billion in 2025 to $12 billion in 2026, could you walk us through sort of the growth algorithm that gets us to those numbers?
Yeah. I mean, I think you've gotta kind of look at the current business-
Mm-hmm
... right? Take a look at what the business is performing. You know, I hate to simplify life, but I like to make things as simple as possible. You know, we live to do two things: grow merchants and bring in more product.
Mm.
You know, and obviously, with that and bringing value allows us also to have some degree of flexibility in pricing. But I think Clover has a ton of runway, both in bringing more VAS into it and in more distribution capability. And I would say, there's no corner that we look at that we don't believe, whether it's ISV, whether it's bank, whether it's geography, whether it's any of our channels, and we do have the best distribution in the industry, that we don't think we can continue to expand the growth algo on it. We will continue to deploy capital into the product.
Yeah.
I don't think the product three years from now will be the same product we have.
Yeah.
You know, and I do think that the adoption rates continue to be very, very strong on front book, and as you know, you know, we have not put in the calculus until really in 2026, anything for back book.
Okay. Yeah, yeah.
But I just wanna go geography-
Yeah
... distribution, more VAS, and continuing win share.
Okay, yeah. So those, those elements, and maybe next up, you know, probably the most popular topic that you know, Clover. Because that's where I have most of my questions, inbound even now. Even though I tried to talk about Carat, I tried to talk about Finxact and so on, but Clover is where people come back to. And so let's talk about Clover and the investments it needs to keep going, and obviously you mentioned the back book is later on. So product investments, geography investments, traction that you're seeing in new geographies and distribution mechanisms.
Well, I mean, I like to believe that we've always, always, deployed our capital wisely in our technology spend, which, you know, I come back to the fact the company's 13,000 engineers, software engineers, half the people in the company are technologists. And I do believe that we continue to get more productive in technology. And when I say that, what that really means is that we're delivering more product at a quicker rate than we used to. Productivity should not be confused with reducing expenses. In fact, that's-
Yeah
... a place we will always deploy. We've been fortunate, with our ability to continue to attract and retain, our engineering staff, which, you know, really showed up at probably, you know, the best levels we've ever seen in terms of retention, which is really mission-critical to the journey. I think you're just gonna continue to see us invest in verticalization of the software. You'll see us bring more horizontal capability. But we talk about Clover, probably in a manner today than we didn't talk about it five years ago. And, you know, I love reminding people, I got laughed out of stadiums, when I said we'd end up in a heavyweight bout with the other guy.
And then ultimately, we're in stadiums, you know, in a big way. A few Met fans come out there and watch. You know, but there's plenty of other places. You could love the Milwaukee Bucks also, by the way, we're rooting for a national championship there. You know, so I think the fact of the matter is, this is a very young product.
Yeah.
This is not you know, it's its thoughts are 10 years old. You know, we had you know, the truth of the matter is, we had 3 patents and 7 engineers in 2013. So I feel like we are so early in it. And you know, I mean you know, you look at the business we built in Clover, you look at the business we built in Brazil, and now we take Clover and Brazil and put them together in the second half of this year, and that'll matter a heck of a lot. You know, you look at what we built across the globe in places where we didn't have businesses, and we built them out.
Yeah.
So that's all capital deployment, but, you know, I don't think we have any problem deploying dollars to building out both... all of it, Clover, Carat, Finxact, all of it.
Yep.
Wow.
Yeah. No, makes sense. So you mentioned obviously building out vertical capabilities, building out, or I should say, building out more vertical capabilities and more horizontal capabilities. Those are things that very explicitly help your yield. Could you maybe talk about the process of how that works, you know, in a live example with a client? Is it sort of land and expand, or, you know, are you now showing up with full portfolio, here, take everything? And, you know, if someone does have the full portfolio, what's the yield look like in that situation?
Yeah, I mean, you know, look at we got a $8 billion business.
Yeah.
So what's that? We're excited of that. We're, you know, signing up merchants, you know, every day in an extraordinary fashion across the globe. We're in a client-centric business, and that would be true across our whole portfolio. And what I mean by that, and it's what I say to CEOs when I show up in their office, we need to fit within their strategy, right? And Clover's the same, right? You know, we're not going to change how a pizzeria runs their pizzeria. We're gonna bring them more capability that hopefully allows them to use product that helps them grow their business.
We don't get up in the morning and say, "maybe this is, you know, maybe this is a failure of mine." We don't get up in the morning and say, "How are we gonna get more yield today?" We get up in the morning and say, "How are we gonna deliver a better product for our clients? How are we gonna touch more clients? How are we gonna use our distribution networks? How are we gonna continue to build and engineer things that are next generation to help our small business owners grow?" The output of that-
Yep
... will be greater penetration rates, and in fact, you know, a better margin-
Yep
... with better growth. But I wanna be very clear, you know, like, I don't, I don't think I have one conversation in the past 10 years that said, "Hey, we need better yield.
Yep.
Right? It's just not a mindset. The mindset has to be: how do you deliver better capability that delights the client, that causes them to retain the product and take the next three attachments that should go naturally with it so they run a better business? The best thing that happens to us, and the best thing we have, is our client base, and our client base's ability to grow and thrive is of the utmost importance to us.
Yep.
Out of that, you know, I always say, we're not in business... you know, we don't get up in the morning thinking about collecting fees. We get up thinking in the morning, how we do a better job for our client, and the outcome is the growth that you see inside the company over the past three years.
Yep, yep, absolutely. So from your clients' perspective, as they kind of reach out and, you know, have that conversation with the Fiserv salesperson, are they looking for specific additional capabilities today? What are-
Sometimes clients... I mean, look, it, it's important that we deliver, and that's why things like the dashboard is so important, because it's also a messaging capability. It's a place where we can communicate back and forth. We can put offers and opportunities out there. You know, we do have an advisory role for our clients. It's not just a sell and escape and collect. It's how are we gonna help them run their business better.
Yep.
So we touch our clients every day, both virtually and through AI, and also in a manner when they need help in understanding how to use more capability, but that's our job, you know?
Yep.
It's not, you know, bring a Clover device in, give them a stack, and leave. It's how do we every day communicate with them, both virtually, and, you know, how do we build the right knowledge base through artificial intelligence that we've delivered to them?
Yep. Okay, okay. Let's maybe switch gears to talk about Carat, enterprise solution.
You wanna talk about that?
Enterprise Solution, maybe you could kinda, you know, in terms of the outlook for Carat, right? As you sort of think about who that client base is, is that client base now beginning to, you know, spend better than they were last year and the year before, they sort of come out of a shell of sorts? You know, what's happening with that sales process, implementation process, and so on and so forth?
Yeah, so, you know, I think, remember, you know, we've tried to communicate our business in the manner it operates. SMBs-
Yeah
... enterprise and processing.
Yep.
Right, which, you know, is the third leg of it. Not necessarily a growth engine, but definitely a very stable utility, processing.
Yeah.
Now, Carat sits within-
Yeah
... enterprise.
Yep.
I think what's important is that, Carat, and maybe remember, if you go back in time, we were always a large e-com processor. Because of the nature of the construct of the company, which is no longer the nature of the construct of the company, we weren't an e-com acquirer. We had a partner that was the e-com acquirer, and although many people were concerned about the outcome of that, it was actually something that we, we really, really wanted because it allowed us to be able to build our own acquiring capability for e-com. And it, you know, I'd take it one step further. It wasn't about building it for e-com, it was building it for omni-commerce, where I believe, we're the unparalleled industry leader.
Now, the ability to bring Carat and Commerce Hub, bring VAS in, at a level that allows us to continue to not only provide processing, acquiring, but other value-added services that continue to improve the margin opportunity and the growth opportunity. So I think, you know, we have a very good hand here. It's another, all of these, whether it's Clover or whether it's Carat, are long-term technical builds that'll never end.
Yeah.
The minute we stop highly investing in more capability is the minute we go backwards.
Yeah.
So you should expect us to continue to listen to our client in their office. These are large institutions that all have different needs. You know, Home Depot will not want what Walmart wants. It's just a way of life. I think we know how to play well in the institutional space. We're faced off of it with the right product people, the right salespeople, and the right tech people that are completely lined up, and we will continue watching them onboard, you know, the wins that we've booked and continue to invest. It's a. Look, this investment cycle is so darn important in all of our products that we will continue to make engineering the number one job in the company. It's a software engineering shop.
Yeah. Yeah. So given this is more of a, you know, bespoke solution, so to speak, because, you know, as you mentioned, Home Depot, different needs than, say, a Walmart, than maybe a Kohl's. You know, is there a need for more of a, you know, consulting advisory, like a separate organization, or is this fulfilled by your, you know, regular sales?
Well, I mean, you know, companies of this size and scale will always have, you know, large wrappers up top-
Yep
... and specific capabilities when facing off to the client. So of course, these are advisory and consultatory sales. You know, we have all types of things we do, which is bring payment leaders across large institutions together, you know, in venues like this to listen and talk and make sure that our next gen builds meet what they need, while they'll also have specifics. So yeah, I think it's a solution sale, is what we call it, where it's gotta be a solution sale because every one of these will take all the capabilities we have, and they need some customization for how they run their business. The key is that the customization and the solution set caters to 5%, not 95%. So 95% of the solution will be exactly the same, and then, and five, maybe two or one even.
But everybody has their own ERP, everybody has their own way of running their business, everybody has a different P&L structure, and, you know, we'll have to modify it to what they need, but it's a solution sale.
Yeah.
You know, but, you know, I'd step back a second because, you know, I would worry if we didn't articulate this element. We have the best breadth and depth of product in the industry, right? Whether it's processing platforms, whether it's lowering the cost of acceptance, whether it's a debit network, whether it's a prepaid set of things, whether it's our data and analytics engines, whether it's our fraud engine, I think, you know, the reason we win is the full stack capability and the unparalleled breadth of product and expertise.
Got it. Got it. Great. So switching gears, one question I get a lot from investors also is Latin America. I know Latin America is not exclusively Argentina. I get the diversification, but could you walk through the diversification that you're doing? Part of the Latin America and Argentina debate is anticipation revenues, and investor concerns with regards to using of your balance sheet for that. So what would you say to that question to allay sort of investor fears with regards to that?
Yeah. I mean, let's step back, right? Because I think it's important. You know, the Latin American franchise competes in very good payment markets, right? Brazil is a very good payment market. Argentina is a very good payment market, and we've been innovative and creative in these markets. Anticipation has always existed, right? And if you get to our P&L, right, our income statement, you know, yes, we have this transitory organic growth rate that's outsized, and we basically say... I think we basically say 15%, 17% is the company's guide for organic. You should take 7 points out, and, you know, I think if you go look at that, that gets you to something like 8-10, and that's how you should think about the joint in totality. Now, let's drop back down to LatAm.
You know, we built the Brazil business. I think when you look at what we've done in Brazil, it's quite outstanding. And now we'll follow up with bringing Clover into Brazil. If you actually go and look close enough, you'd find out that Argentina was a dual acquiring market four years ago. And we were pretty instrumental in going there and working on how to change that. And we, you know, I give that credit to how we run our international business, which is really a global business. Global product, local leadership with tremendous expertise in the market. And we brought Clover in at the same time we went to be capable of being a Mastercard and Visa acquirer, right?
Both of these were highly strategic, highly thought through, resourced ahead of time, and yes, there's always been an anticipation market there. But when you get to LatAm right this moment, and you pull, you know, it all together, the cost of everything, you know, FX is, you know, definitely wreaks havoc on LatAm. And the numbers we produce are inclusive of all of that. You know, and it, it's not... It's an offset. I think you got to pull it all out, take a look at it. Anticipation is a good business. It's a strong business. Yes, it requires capital deployed, but when you comb through it all, I think the return is strong. I think we've built a tremendous client franchise, and LatAm expands there. We have a great business in Colombia.
We have a great business in Chile. We've definitely made very, very good inroads in Mexico. So yes, there has distortion in the growth rate, but when you get to the net income line, I think it all shows itself for what it is. You got anticipation, you got interest, you got FX headwinds on the other side of it. I mean, obviously, you know, during this year, that currency havoc won't be, you know, linear, and it'll roll into 2025 also. I think the purest real year you'll see for us is 2026.
Got it.
I don't know if that's helpful, Ashwin.
No, no, it's everything you say is helpful, Frank.
Who knows?
So, let's switch gears to financial solutions and just talk about what your bank spending clients are saying. And by the way, I have to say, yesterday, one of the sessions I hosted was with the CIO of Webster Bank and said good things about you guys. So, have to pass that on. So yeah, bank spending demand, what are people looking for?
Bank problem? Was that banks?
Yes.
Yeah.
Yeah.
Takes me a while. We only have 3,700 bank CIOs we're talking to.
I'm impressed, actually. I mean, you know, that's great. Yeah.
Yeah. Yeah. I think look at, you know, we love financial institutions, right? I mean, and, you know, I spent 20 years between Citi and JP Morgan, overseeing large parts of those companies. Before that, you know, a few years at First Fidelity Bank, which was one of the great regional bank turnarounds of all time, I believe, with Tony Terracciano. And, like, the idea of cutting IT spend, right, is always very interesting. But, you know, if I go to JP Morgan right now, and heaven knows, it's like one of the greatest institutions in the world, so I couldn't really. When I say this, it doesn't mean I'm right. People will be arguing to spend more money on tech. They will not be arguing to get their tech spend down. And that's just true everywhere. You know, it's true at Webster.
What we provide is really, you know, not some ancillary service that you could decide whether you want it or not. So I've always been perplexed, since I've been in the job, of this idea of: Where is tech spending going? You know, is it... And then trying to figure out people in this space, what's gonna happen to them. We got a product that we're rolling out, CashFlow Central.
Yep.
There's nobody going around saying, "We don't want that." That's the other call-
That person is happy over their CashFlow Central.
Forget about him. Forget about him. You know, you know, so I think, you know, banks are committed to continue to digitize, to continue to win clients, to continue to grow their business, and they believe tech is the great enabler, which is 100% accurate. So I just had to say that because I'm always perplexed by the report that comes out. It's gonna be up 1%, it's gonna be down 1%, you know? It's just, oh, I've been around it too long, and, you know, I think the biggest gating factor for everybody is resource. It's not economics.
Yep. I get it. But in terms of where that spend is going, not sort of percent up, percent down, because, you know, we all do CIO surveys and stuff like that, but technology spend as a percent of revenue is going up. It used to be 2%, it's now 3%-3.5%. It will be 4%-4.5% of all revenues, and that's a big move in one direction. But I mean, part of the purpose of this-
But it's one of the great levers of all time.
Right.
I mean, it's a great enabler. It's a leverage factor, right? That really is designed to drive the top line.
Right. Right. So but the... I guess where the question was coming from was more, if banks have to spend more on, say, regulation, how, how, how good is your RegTech portfolio versus will they then spend a little bit less somewhere else, right? So maybe look at it from a prioritization-
Yeah, I mean, like, look at, we have a lot of banks that, where they're completely infrastructure.
Yeah.
We're gonna do whatever we have to do, and I think we did a very good job. I think at Bank of America, we did a very good job in March plus of last year, helping them deliver everything they needed to their regulatory constituents.
Yep.
You know, I mean, this is part of our base capability. It's not, you know, it's not an added feature. You know, we're highly focused on helping everyone meet their compliance and regulatory needs, relative to things that run on our systems.
Yep. Yep. Okay. If I can ask you with regards to, you know, obviously, you own a debit network. It's a good, solid, you know, strong debit network. We have a large deal on the table, and it's, you know, you know, Capital One, Discover.
Oh.
Um, um, and-
I was thinking maybe you had another one.
You looked at the industry, various large banks over time, you know, and know the industry more deeply than most people. What's your view of that, and maybe in the context of the debit network as well?
Well, you know, I mean, I just view the world as always evolving and changing. You know, there's always gonna be deals, there's always gonna be opportunities. I'm sure most people are sitting around thinking about, "Okay, with this, what?" Right? We think a debit network insight is very, very powerful.
Yeah.
So I think we're fortunate to have STAR and Accel and run them together for dual purposes. We've always believed we can do a good job as the number 3 network. We are, we are in that business for only one reason: our clients. Our clients. So, you know, what the outcome and all the iterations that ultimately happen over time here or what the world determines that deal will mean, will create opportunity for everybody. You know, opportunity to revisit, rethink, business model changes. So I think, I think we're always gonna have things that you weren't thinking about yesterday occur, and the idea is, for our company, you know, how do we help everybody in the equation?
'Cause we have a ton of assets that can be usually helpful to our current client base, to other clients, and for the combination of these things.
Got it. Okay. We're kind of winding up on time, and I didn't even get to ask you on margins or cash flow, but do you have any closing comments for the audience?
Oh, well, I mean, if I had a closing comment, it would be, we're early stage in a lot of things. We're early stage in Finxact, we're early stage in CashFlow Central, we're early stage in our restaurant aspirations, we're early stage, even outside the U.S. You know, and, and I think the company's coming into its own. You know, we did a merger and had a pandemic. I would say pandemics aren't good for anything. They're definitely not good for mergers. You know, because now the culture of all being sitting in a room, delivering, doing this, in these fashions come together. So I just think we're super early innings, and the construction of the property is very, very strong, and the ability to add capability and spread across the best dish-