My name is John Davis. I'm the Payments and FinTech Analyst here at RayJay. We're excited to have Frank Bisignano, current Chairman and CEO of Fiserv and future head of Social Security Administration. So first off, Frank, big congrats. I'm sure everyone listening and everyone in the room couldn't think of a better person to run that. My kids and future generations, thank you for your service.
Thank you.
So Frank, just to kick off here, stock's up 50%. Numbers have been great all year. What's gone right in 2024, and what are you focused on heading to 2025, especially as you potentially move on?
I think, you know, I try to remind everybody, you know, the largest job class in a company is software engineer. So, you know, I was down in Brazil Tuesday and Wednesday, so go figure relative to stuff. We rolled out, we launched Clover. I think that's an example. You know, we did actually go see the administration there because they have a big initiative around SMBs, and you know, this fits perfectly with what they want to happen. I think, you know, we have tremendous receptivity. So what's gone right is our ability to continue to roll out product, continue to bring out software, continue to innovate. You back Clover up, and then you look at Cash Flow Central, which, you know, we continue to invest in, build out. But it's about how do you bring a product set that's a software integration to clients.
I think if you look at what's happened, we continue to drive top line and margin in OI growth through really a great client base. I mean, we have a fabulous client base. And I think, you know, when I think about the company, the construction of the company is unparalleled. Like, let's think about it. You got Clover on the front end. You got the third largest debit network. You have the largest bill pay business. You're the largest provider of Zelle. You have this global franchise. We went and acquired Finxact, and you watch Finxact coming into things like we did in embedded finance with DoorDash. You know, our bank partnerships are super large. Our ability to continue to serve banks and grow banks and partner with banks, both in merchant and in processing everything from their DDA systems to digital.
So I think it's the construction of the company. And, you know, I like to say, you know, the company's 40 years old. I had an unbelievable day yesterday. Not that anybody's going to really care about this, but we have a, I'm the fourth CEO, right? And so I have a little room that is a tribute to the first three CEOs, George Dalton, Les Muma, and Jeff Yabuki. And Muma was in New York, and I always, by the way, he's down, he's from your neighborhood. You know, he's from Belleair, you know where Belleair is? He lives in Belleair. And he came up, he wanted to come see me, you know, so I just had him up and walked in the room, and he got tears in his eyes.
So what we constructed, and he says it, you know. We show him on the wall all the transaction volumes, you know. Think about us with the FSBI, our ability. And I think when you think about the future of the company too, you think like we're a great data company that allows us to ultimately be an AI company for our client base. So I always say like for our small and medium-sized businesses, for our community banks, we're going to be their data engine and their AI engine. And, you know, when we think about how we forecast the future, none of that's thought about yet, but we've built all the foundation. So I say the construction of the company, you know. When you buy a house, you like to say, hey, this has good bones, right?
If you look at First Data, it has more than good bones. It has a great body. It's in good shape and knows how to play every day and hustle its butt off.
Yeah. So if I go back a little bit in history to the First Data merger back in 2019, obviously you saw a lot of strategic value at that point. But we'd just love to get your perspective five years later. What's gone better? What strategic value did you underestimate? Maybe what wasn't there? Clearly, it's been a very successful merger, but just curious to kind of get a postmortem five years in.
Well, you know, five years in, we're still getting synergistic value. You know, we cut off synergies at year three, but I didn't mean we cut off working on synergies. It was just for accounting and move forward. So, you know, I say first of all, you know, our ability to integrate was good. What really went bad, what really went bad was a pandemic. You know, building a culture during a pandemic is difficult. You know, and I think, you know, today we're in a different place than we were then. We've constructed facilities, we've moved people, we've got the company working, and we're going to continue to work. You know, we built a culture of in-office. That's the type of company we are. And I say that because all my clients have their employees in their office.
Their office may be Walmart, their office may be McDonald's, Dunkin' Donuts, you know. So, and sometimes people don't like me making that comparison, but you know, yeah, the number one job type is software engineer, but ultimately we deliver it. So I think, you know, it took a while during a pandemic to get a cadence, you know. You're not going to get a cadence on a new company without spending time together. But we got it right. We got it right. I think our ability to build product and distribute product, I think we have the best distribution system in the world. And I think, you know, Clover played very well. Our banking franchise is fabulous. I think it's never, you know, it's going to see the best growth it's ever seen over time here. I think it's a great business.
I think the combo of the assets made 100% sense, and so, you know, and I think we're allowed to continue to do stuff like we did, go down to Brazil and roll out Clover, we'll go to Mexico and roll out Clover, so our geography, our capability, I'd never encourage doing a merger and having a pandemic. It's not a growth engine. It's not a culture engine, you know, and it's good to be back in the office, you know, and being able to see clients every day. I mean, you know, really, clients are great.
I think before we get into the merchant business, I just want to touch a little bit on what you're seeing from a macro perspective. The health of the U.S. consumer, I think Bob said last week in Arizona that maybe November was a tick down from October, but still, you know, tracking to what you thought. I'm just curious, you know, what you're seeing real time.
You know, we're here in the middle of Manhattan. Our office is at the foot of Manhattan. And what I was seeing all the way up here was really crowded streets with a lot of people in it. So, you know, I like to say, you know, you have instinct, you have [eye stinct] too, you know. I could see it. But, you know, every day if you come up to our office, you can watch second by second the transactions, right? And I like to say, you know, through our veins goes 40% of the merchant. And what Bob said is correct. You know, October ticked better than November, but right this minute you see a strong, healthy season. And I said that to Julie before we took the journey up, which, you know, had some traffic. But more importantly, the foot traffic was off the charts.
And I go, I guess the board we have equals exactly what's going on in the streets of Manhattan right now. So I think the consumer's out and it's going to be a strong, has been a strong holiday season so far.
Yeah. Just curious what you're seeing from kind of a brick and mortar versus e-com. You know, if you go back, holiday sales are, I guess, the big five, what they call the, what used to be Black Friday.
Now we call it holiday season. You know, it went from, you know, Black Friday, Cyber Monday, and we really start, when we track for ourselves the season, we kind of talk about Wednesday through Tuesday. You know, that was a good uptick from last year. I, you know, I'm always guarded on this holiday spending because I feel like it goes all the way to the 24th. I've watched, as you're saying, I've watched over time it iterate. I remember when I first got the First Data, you know, it was the Friday after Thanksgiving. You know, most people, that's a day that most people stay home. I said, at home, why do I go to work? This is going to be the busiest day of the year for us.
Everybody in my house don't know what I'm talking about really, but you know, except they're buying stuff too, but you know, they struggle to coordinate what their dad does sometimes, but you know, I think now it's elongated, but I think in this tranche, if you backtested it, it looks like a good holiday season, but I just say, you know, it goes to the 24th, and sometimes I feel like it starts on Halloween. It really does.
Yeah. No, just to go back to the merchant business here. So you laid out 12%-15% organic growth at the investor day. Obviously, Clover is a big piece of that, clearly taking share. You know, the industry's probably growing high single digits. So if we just double-click on Clover, it's still growing close to 30%. You've laid out a target for $4.5 billion of revenue in 2026, which implies kind of high 20s% growth from here. You know, mid teens to high teens volume growth. Just talk a little bit about the sustainability of that growth. What gives you confidence? You mentioned Brazil and Mexico international rollout. You still haven't really done much with the Backbook, but just help talk a little bit about the success at Clover and what's driving that sustained high level of growth into 2025 and 2026.
Yeah. I have a smile on my face because I have an objective here to change our vernacular a little bit. You know, Backbook was never my term. It's my client base, right? You know, what am I going to do with my client base? And generally, I'm in my client base trying to sell them more product and innovate with them. So, and so, you know, here's the way I think about it, because really we're asking, you know, it looks like you can get from here to there, but tell us how you're going to get from here to there. You know, we have this fabulous set of distribution systems. And, you know, acquiring, we're in the sport of acquiring new merchants and selling them more products. You know, I don't have really fancy strategies, you know, get more clients and bring them more product.
And we've been very successful at that. So you look at our pen rate going up. And, you know, if you think about, call it circa approximately 1,000 financial institutions, and then you see us do something like ADP, right? That's a great partnership. I love Maria Black, the CEO there. We said, you know, we should be able to do something together. We put our teams together and we came out with us distributing their product and them distributing our product. And it's so darn logical, I think. So you can think about those types of partnerships. Then you think of our plus or minus 1,000 financial institutions. And I think in all of those, our pen rate in that install base that they have can go up.
Said differently, you know, if I look at a lot of partnerships, I think we could double the amount of clients in those partnerships that we have. Then secondarily, I think we're going to continue to create more partnerships because the reality is, you know, Clover's darn good. Clover, you know, financial institution and partners like Clover and our ability to put more software. You look at us putting Cash Flow Central on Clover. You look at us having, you know, payroll through ADP on Clover. Those are all, you know, additive in a big way. And then you go outside the U.S. and you also bring it to your other distribution partners. You know, I was down in Brazil, right? I mean, think about CAIXA. CAIXA, you can't love it enough. And so, you know, that's a pretty big engine to deliver in Brazil.
So, you know, and I don't really, you know, look at two new products that we put into Clover this year. If you think about it, it's Cash Flow Central and payroll. What, you know, I believe Cash Flow Central is an industry-leading solution. Now we're going to deliver it in an integrated fashion with our financial institutions. And, you know, I feel really, really good about being in business with ADP to deliver their payroll product. So those weren't, you know, they're not in our numbers today. They're not in our pen rate. And then you think about what we could do. And yeah, we will go into our client base at some level, but the amount of TAM that's not in our client base today is large.
So that's why I'm always focused on like, yeah, when clients want to have Clover in the full suite, we'll be sure to give it to them. But, you know, I think there's plenty of market share to go out there in terms of SMBs. And so I think you think about those things, you know, and think about what we've done and then think about 13,000 software engineers, over 1,000 technologists on Clover. Our ability to continue to still innovate and deliver is pretty high.
Yeah. And you touched a little bit on it, but, you know, VAS penetrations ticked up nicely to 21%. You've got targets out there for 25% next year and 27% in 2026. You know, what's been the key, what are the key products? I'm just curious also, as we think about cohorts of customers, are your newer customers adopting more software today or is it the older customers?
Well, you know, it's interesting. If you think about the thing I think about, the client base, right? You know, I guess you like to use that phrase, client base, because we're going to go back into the client base and bring payroll. We're going to go back into the client base and bring Cash Flow Central. So those will also be drivers of growth on pen rate in the current client base, not just the new sale base, newly acquired clients. And then you look at the stack itself is highly acquired. And then, you know, Clover Capital plays a leg in there. You know, it's different in retail than it might be in services. So depending on what your product's at.
Remember, you know, we have a deep belief that we're going to come out, when I say a deep belief, we are going to come out with a restaurant, a new restaurant capability. That will have very good capability in terms of also growing our pool and growing pen rate.
Yeah. And if I go back even further in history, and you were joking about this earlier, whether North America business first day was going to grow 2% or 3% and to see where we are today, how has the competitive landscape changed over the last decade or so? And why have you been so successful? Is it Clover? Is it integrated payments? Like, just curious to get your thoughts of, you know, you were the big 800-pound gorilla with a great distribution, didn't have a great product till you got Clover. That seems like it's changed the game. But curious how you see the competitive landscape today.
Well, maybe I define that starting point a hair different. We were the legacy incumbent that was a shared donor. And I have a very simple philosophy. When we stop being a shared donor, that'll be really good. And I have a second simple philosophy because all I need is more things to sell to my current client base, voilà, Clover. Now take all those thoughts and then say, look at legacy incumbents that can innovate, have a strategic advantage, scale, right? So like I don't find, I've worked in legacy incumbents my whole life. I think one of the great legacy incumbents of all times is JPMorgan. I think another great, in my day, another great legacy incumbent was Citigroup, where we built a lot of scale and a lot of capability and tons of distribution.
So we now are in a position where we're a legacy incumbent, you know, forecasting, you know, almost $5 billion for free cash flow. And so a legacy incumbent that reinvests in its business, you watched us take a cash flow conversion rate down, nothing dramatic, but that was about a legacy incumbent investing in its business to drive growth. Now you got to have the capability, you have to have the product, you have to have the execution ability. You need to make sure the product is one that is desired. And we've been really particular about the things we do. So your question was about the competitive landscape. I don't know that it's changed, gotten better, gotten worse. You know, I used to say, hey, you know, I want to, we're going to be a heavyweight battling in the SMB market.
I wouldn't mention which company, but everybody knew. We were a couple of years behind. I love competition, you know. If you like sports, you want competition. You don't want to come on and have a, you know, route. It gets boring. So there's great competitors. Our philosophy is we're going to disrupt ourselves continually, you know. Cash Flow Central, and you hear me talking about it, obviously it's a big deal and banks are loving it and we think, but if you really think about it, it's we're changing what we do for SMBs, going to move them off our bill pay system, which has one set of economics and a different model, and move them to, you know, an ARAP solution that allows them to innovate the bank. So in theory or in practice, we're disrupting some portion of our bill pay business.
At First Data, you know, we had the FD130 and then the series, and people are like, no, you know, we make a lot of money on these. You're going to, and I used to always think, should I, like how am I going to capture market share? Should I give this away and then reap it on the back end? And, you know, we're a public company, so I couldn't give anything away. So, you know, we did the old-fashioned way, door to door. But where I'm really going with all of that is the competition is in so many places. It's different in Brazil than it is in Poland, than in the U.S. We got it all over, but we got the ability to invest. We're smart about it. We're good technologists. We know how to build product. We know how to partner.
Ultimately, you know, I think you see it in the current results and the future guide and why we feel so darn good about the future of this company.
Absolutely, and I could talk about.
Is that an okay answer?
More than okay.
Okay.
You know, if we think about the ex-Clover merchant business, right? We can talk all day about Clover. And maybe actually before we wrap on Clover, you know, you're a baseball fan. What inning do you think Clover's in?
I mean, if you take, if you ask about size and scale, the second, if you think about, you know, industry leadership, it's probably a little further. But, you know, it's a young product, right? When I bought it, it had, you know, three patents and seven engineers, right? You know, and that was in, you know, 2013. So you go, wow, 11 years old. But, you know, in a technology lifecycle of a founder-led company, you know, we kept that founder here for seven years. And, you know, then it was big enough for him to say, this is too big. But I, you know, there's just so much more we could do. And there's so many more integrations. So that has a lot of life as long as we continue investing in the product, which we're really good at, investing and getting outcomes.
Yeah. And maybe just touch for a minute on the ex-Clover merchant business. Can you talk a little bit about the success you're having in enterprise, kind of other initiatives that are driving, you know, pretty healthy growth outside of Clover?
Yeah. Well, I mean, I think, look at, you know, ultimately we built Commerce Hub and, you know, we have an orchestration layer and you see us winning now in the enterprise, and we'll call it omnicommerce because a lot of our clients have it going both ways. But we got the solution that we believe can serve omnicommerce better than anybody else in the industry because we're fabulous at in-store, but we're also fabulous at now the ability to give them an orchestration layer, deliver more BaaS into that too, and be able to help them grow. So I'd say that there. I'd also say, you know, we have an unbelievable ISV business that was the byproduct of two acquisitions when we got a couple of dollars back in the day.
You know, BluePay and CardConnect, which one was an e-comm, one had an ISV. We brought it together. We used the technology of that to grow our agent business in a different way. And many of those are not necessarily Clover, but they're these technical integrations. Now we do see a world where Clover shows up there too. But right now that would sit in a non, as you describe it, non-Clover business. So I think our product set's strong. I think our technical integrations are good. I think, you know, we look at everybody we compete with and feel like, you know, yeah, there's people ahead of us and things, but our ability to invest and our ability to have technical expertise and our client base's desire for us to win all put together makes us a long-term winner, I believe.
Yeah. And then maybe shifting over to financial solutions for a minute there. You've also guided to an acceleration in revenue growth next year to 6%-8%, and kind of that should continue into 2026. You had some big wins with Target and Verizon. But just talk a little bit about the confidence level in that acceleration and what the real drivers are.
Well, I think the real drivers are, you know, one, this idea that we have a backlog that takes a while to onboard. And, you know, I frequently say, you know, when we did 2020 Investor Day, I'll get this a hair wrong because, you know, that was a long time ago and I've now moved to, you know, the Investor Day we did in 2023. But I thought the backlog we had in our issuing business. I think I called it a once-in-a-lifetime event. But, you know, maybe I'm like one of those weathermen who say, you know, it's a hundred-day storm, but a hundred years storm, but it happens every year. But we were able to do more today in the backlog we have in the issuing business than we had back then. And we thought that was pretty outstanding.
You know, I would make a point yesterday. I sat with a review of one of those Bread, one of those large. It was ADS that we converted. Like that partnership is so darn good that all we're talking about is what more business we could do together, right? I have a lot of respect for the CEO there and we have a great relationship. My macro point is you should count on that. We believe in card growth in our debit business. You know, we think that's the key and you should see that occur. I also think that we think we can. You know, you look at what we did in embedded finance. You know, that's an element of that.
You know, Finxact sits there, you know, and when you think about what we did with Finxact, you know, I mean, you know, one is completely, that's the Walmart, the Walmart JV that they've created for FinTech, you know. I mean, that whole organization runs on it. So I think we have a future path for everybody. Our current solutions are super strong. We win. Cash Flow Central sits in there. You know, that's going to play big. And, you know, next year that starts coming online. It won't be a big number, but a couple of years out it will be. Going to put all those components together, you know, we see the acceleration.
Yeah. And if we just think about the balance sheet, it's in great shape. You know, generate north of $5 billion of free cash flow next year. How do you think about capital allocation? You know, are you seeing kind of a thawing of the M&A market, maybe some more reasonable expectations? Obviously, you've been a big buyer of your own stock. Just talk a little bit about the push and pull there and what potentially would be attractive from an M&A perspective.
You know, I think I feel good about our asset base. You know, like I say, I love the construction of the company. You know, we have the capability to put products, you know, I don't know if it's a bad phrase, but throughout distribution system and put them on steroids. So things that will make sense to come in that we could distribute that are naturally synergistic, digital capability is fairly logical for us. You know, I frequently say, I may get this wrong, but I think we probably bought back $4.7 billion of stock last year, right? And we bought the stock during the course of this year and you know how much we bought over time.
Well, there's large parts of me that feel like, geez, I wish I had done something that drove top-line growth and made a different difference than buying back our stock, which kind of has worked out fabulously, I think. I hope you feel that way. But there's nothing that traded that I wish I had done. So I kind of give myself the sanity test of, okay, you know, you've been judicious, you've been a good steward of capital. You definitely look at everything possible. I mean, we haven't, I mean, we sure look at a lot of stuff. And, you know, there's nothing that traded that I kicked the dog over, don't report me to the SPCA. I love my dog. I've never touched my dog other than pet it. But, you know, I'm just concerned about things I say.
But, you know, so I think, you know, we're always active. We're interested. I believe we're great acquirers and integrators too. So, you know, if you live the life I've lived, you like buying things and integrating them. So I'm sure we'll do something.
Yeah. And, you know.
But if not, the alternatives played pretty well.
Yeah. Frank, as you know, this may be one of your, you know, last couple firesides as you kind of move on.
Who knows? Who knows?
I'd love just to get your perspective. What do you want to leave investors with as you kind of potentially move on? You talked about the construction of the company, the assets, but you know, maybe just a minute on what you want us in the room to think about how we should think about Fiserv over the next couple of years as you transition on.
Well, you know, I grew up around great athletes. I have one uncle who was a middleweight champion of the world and another uncle who is in the Hall of Fame. And they always taught me, make hard plays look easy. You know, like a diving catch sometimes as you were out of position. It wasn't that, you know, it was quite as good as it looked. And, you know, as my sister wrote me a note the other day, like you never take the easy way out, you know, for some reason, you know, when it was announced.
And so, you know, I go back and I said this earlier today to someone. If you go back and look at, Citigroup did an investor day on a business that was losing money when I took it over back, you know, late to early 2000s, which at that time we called the Global Transaction Services business that was created. It became their marquee business. And the people who ran it all succeeded me. And I'm not announcing a successor here, but, you know, I think really I believe in all the talent in the company tremendously deeply. I don't believe whether somebody came from the outside or the inside, they're going to come and try to do something diametrically opposed. There's a lot of talent, whether you go through the whole lineup and the plans are strong.
So, you know, I mean, I don't, you know, one thing I'd say, and I say it from the heart. You know, I wasn't looking for a job and I didn't want to leave. I don't want to leave, but I think I'm leaving for the right reason. And like many of you have heard, my father, you know, served 45 years for this country and he was Customs and DEA. And, you know, my grandfather came from Italy and joined the army in World War I. And he went back and got his family because that's how he got his citizenship. So when asked to serve, I always felt, you know, if I was ever asked, I would have to do it. You know, and I created a great military set of programs that I always felt were fabulous.
But whenever a general, and whether it was the great late Ray Odierno who ran the army, said, "The things you're doing here are fabulous," I said, "But, you know, and thank you." And I go, "Well, I have one regret. I didn't serve. And I never thought this is what it would mean serving." And, you know, so I feel like I'm going to leave the place in great shape. It wasn't the timing that we ever thought of. On the other hand, you know, everybody likes to write, "I'm a fixer." I'm really a builder. And whoever succeeds me will build. There won't be left with anything to fix. And I think, you know, we're in great shape and the bench is strong. You know, we've had a fabulous, fabulous. I've had a fabulous 11 years as public company CEO in two institutions.
I try and remind people I'm a two-time public company CEO. I'm a two-time public company CIO. I'm a two-time public company Chairman. And I'm a two-time public company, you know, Chief Operating Officer. So, you know, I've tried to impart that on all my players. We got unbelievable senior vice presidents. We got great management committee members. So, you know, I just want to look back at it and have it do better than what we're doing right now. And I think it's 100% possible. This is not a one-player team. You know, sometimes the head coach can go and you got the best offense and somebody's not going to really, you know, nobody's going to come in here and, you know, disassemble stuff. They're going to keep building and the machines there. We got a great board. We got a great board. So I don't know.
I mean, if they were to view me, I want it to be really, really kind. And there's nothing more important in the world to me than get this right. You know, I didn't, I'm 65 years old. You know, I started my career on Wall Street. You know, my first summer internship was at Bear Stearns. And there I was then learning Bear Stearns. And, you know, God bless Ace Greenberg. He came over and said, hey, you know, and we talked about, you know, my internship at 55 Water Street. I worked on the floor of the New York Stock Exchange and I did the largest IPO of 2015. And, you know, the Stock Exchange said there's nobody ever actually clerked on the floor and did an IPO.
You know, shoot, this has got to work really good or else, you know, that dog might get kicked, but it ain't going to happen. You know, this is going to work out perfect. You know, and I got my commitment and I'm going to make sure that it's darn right, you know. I feel good about it. I feel good about it. You know, hopefully you're rooting for me because, you know, I'm working for you. I work for you in this job. I'm going to work for you in that job. Thanks.
All right. We'll have to wrap it there. Thanks.
Does that cover it?