Good afternoon, everyone. I'm Harshita Rawat , Bernstein's senior analyst covering payments processes and IT services, and I'm delighted to be joined today by Mike Lyons, Fiserv CEO, at Bernstein's 41st Annual Strategic Decisions Conference. Mike, thank you so much for joining us today.
Thank you for having us.
Mike, it's been almost 100 days since you arrived at Fiserv as CEO-elect at the time, and only a few weeks since you took over as CEO. As you reflect on the past few months and weeks, tell us about what you've learned and what has surprised you?
It has been a busy first 100 days for me, and obviously a disappointing first 100 days for our shares. As you would expect, I have spent a lot of time, I am sure, with some of the people in the room and with all our shareholders. The clear message to us is that, as a company, we could have done a better job of communicating on some of the underlying growth drivers of our businesses. You have my full commitment going forward to do just that. If you pull away from that and think more broadly, it has been an exciting and an energizing start.
I met with a little over 1,000 of our clients across the world, lots of our employees across the U.S. sites, and spent some time in Europe and Asia, and really have been going through and systematically re-underwriting all of our businesses and operational areas and studying all aspects of the company. It has been great to do it alongside some veterans of First Data and Fiserv, like Guy Chiarello, who ran technology for a long time and is now our Vice Chairman. Then some of our new talent that we brought in, including Takis Georgakopoulos, who joined us from JPMorgan, is now our COO and was head of payments at JPMorgan. I knew the company well coming in, having worked with it for a long time as both a client and a banker. I know it a lot better now, not totally, but with the added perspective, just more energized about all of the different opportunities we have, growth opportunities we have.
You start with a business that has deep, long-standing relationships with customers of all sizes, where we are providing mission-critical software into them, creating this highly recurring revenue stream and putting us in a really privileged position to continue to add valuable products and services to them. The construct of the company continues to stand out, having merchants and financial institutions under the same roof and watching those businesses increasingly interconnected has been a great part of the company to see. The market share positions we have are just incredible. You go through each one of these businesses: number one merchant acquirer, number one point of sale in the SMB space, number one bank core processor, number one online banking services, number one mobile banking services, number one—so you just go on and on.
We've got these privileged market share positions, but still a ton of room to run in both our TAMs. The opportunity internationally is incredible. The distribution network that we have is incredible, in part with the banks, but also with new sources like ADP. The quality and the quantity of data that we produce that we're just at the nascent stages of learning how to monetize and take advantage of by providing value back to our clients. The talent of the employees: 13,000 software engineers. It's an incredible number, all creating further and further software. It's been great to see all that.
I think I just finished by saying I think the part that I'm most excited about so far is in every client meeting that I go into, I'm struck when you leave it, whether it's on the FI side or the merchant side, very small, about just how many different opportunities we have to grow with them and add value to them in this position that we sit in. It's a unique position. That's just in our current TAMs. We can talk about it if you want. Our ability to expand TAM without significant incremental costs is there. There are giant areas in and around our space that we haven't touched yet, deeper in the healthcare and government verticals, the B2B space. We're small in there, stablecoin. You can go on and on and on, some of these big areas we haven't touched yet. Great company.
I'm honored to have the opportunity to lead it. Got a lot of work to do, but obviously been a busy start in lots of different ways.
That's a lot for 100 days. Mike, as you look out into the future, is there anything you would like to change about Fiserv's strategy or guidance framework?
No, the strategy remains unchanged. I've said that from the very beginning. It's a great strategy. It's time-tested, and we're just starting to scratch the surface of what we can do. Sort of the way I describe it in the most basic terms is win clients, grow with those clients by providing value-added products and services, understanding what they're trying to accomplish, and then going into that and meeting them where they are. Leverage scaled operating platforms, which are all across the company that we see, which generate substantial free cash flow. We take the free cash flow, reinvest it in products and services to sell back into those clients or to expand TAM and start the whole process over, the virtuous cycle. Our time hasn't been spent rethinking strategy.
The focus is all about execution and tweaking things here and there, but it's about execution on both the financial and operational side. Obviously, from a financial perspective, we've been focused on executing against all of the commitments we made, including 15%-17% EPS growth this year and hitting the $3.5 billion Clover target, which I'm sure we'll talk about. We're also focused on continuing to stay disciplined with our use of excess capital, with a goal of maximizing growth and free cash flow per share over a long period of time. From an operational perspective, I think the focus has really been, if there's a tweak or an emphasis, it's really doubling down on a client-first mindset. What does that mean for us? That means we have incredible products and services.
We have this privileged position that we sit with our customers because of the mission-critical software. It is really about getting in, understanding their strategies, making sure that we collaborate internally across both businesses to come up and identify value-added solutions, deliver that promptly, and stay operationally resilient. If we do that, and this is where we're spending the bulk of our time, if we do that, we have the ability to just keep growing average revenue per client, sort of an ARPU-type measure, for a very sustained period of time. They need our help, either facilitating sales on the merchant side or competing in a very competitive bank environment on the technology side. Very focused on execution. The strategy is good. It has worked for a long time.
Great. Mike, let's talk about Clover.
I've got three questions.
Volume growth has been an important topic amongst investors. In the first quarter, Clover volumes decelerated to 8%. You have highlighted that this number is more like low double-digit, normalized for Gateway, Leap Year, Easter, Canada, et cetera. Any changes to call out in terms of same-store sales or new customer acquisition or churn within the first quarter or the second quarter Clover numbers?
I'll start by saying Clover is a great asset. It's got a long growth runway, and it's going to be an important part of the Fiserv story for a very long time. As you know, we've spent the last few weeks trying to highlight some of the puts and takes around Clover volume growth in Q1 and expected in Q2. I think just listening to you ask the question, I think you've answered and captured the key takeaways of what we said. There's nothing new to add to that. If you take away the Gateway conversion, recent Clover volume growth has been in the low double-digits, as you said, and that's our expectation for Q2. To be clear on these points, we don't see—if you take away the Gateway, we don't see a deceleration in Clover volume growth.
If you look at all of the other KPIs for Clover across the whole spectrum, we do not see anything that has changed in any way that would indicate anything negative. We have not seen any changes in the competitive environment. We have great competitors. They were great competitors before, they are today. No changes there. We do not see any signs of market saturation. In fact, we are seeing the opposite, where our distribution partners, banks, ISEs, ISOs, are asking for more Clover, and it is our goal to continue. They want more value-added on the Clover platform, more Clover, and it is our job to deliver that to them. I think you have captured it all, and no new news there. Last thing I mentioned is—I mentioned two things. I would add two things.
The volume growth we had in the first quarter was in line with our expectations to get to the $3.5 billion target. Then we have identified both to drive growth this year and for many years to come, really the five different areas: horizontal integration—so that is the—think about ADP, CashFlow Central, and some other stuff that we will continue to put on the platform. Vertical integration: we launched Clover Hospitality a couple of weeks ago at a big conference, and we will continue to build out functionality for different verticals. The third is the international expansion. Fourth is operational excellence. From a—if you put every KPI on a 1-10 scale, there is room we can do better in everything we do around Clover. It is not that we are doing bad in every area, but we are not tapped out in any area.
What I've spent my life doing, sort of running core operations of businesses. There's opportunity for us to do everything everywhere. The fifth is continue to grow the distribution channels. We talk about banks and ISO partners over time, but ISVs are increasingly important. ADP is a totally new aspect of a distribution partner on that front. A lot of opportunities for us to go execute against on the Clover front.
Mike, let's unpack that a little bit more. A key question amongst investors is, what is the right growth algorithm for Clover in terms of volumes and also revenue growth? Can you unpack that not only for this year, but also for next year and beyond for us?
Yeah. I think the best way—the way I'd explain this answer is we approach Clover the same way we approach all of our other businesses across Fiserv: this client-first mindset mentality. That means meeting our clients where their needs are. Our clients, the SMBs in this case, are telling us they want a highly integrated, highly intuitive suite of products: hardware, software, and cash management solutions to help them run their businesses better. That's exactly what we're trying to build with Clover. It's an operating system. It is not a point-of-sale system driving payments volume that's measured—driving payments processing that's only measured by volume.
I think—I guess what I'd say, accordingly along those lines, is the revenue mix of Clover will be determined by how the customers engage with Clover, which will be dependent upon how good of a platform we put out there for them. There is no—we don't believe there's an algorithm, nor should there be an algorithm that we have any control over. We want our clients to engage with the platform in any way that they want, specific to their geography, industry, or other area that meets their needs. If we do that and continue to build a platform of VAS that's highly valuable to our customers, the gap that you're talking about between revenue growth and volume growth should continue to grow. It's not a—I don't think it's a bad thing.
Our job is to build an operating system, and that's what our goal is with Clover.
You talked about the big opportunity for Clover. Let's talk about the addressable market for Clover a little bit more. There is a perception that the addressable market may be more limited in the U.S. because of this possibly being kind of restricted to restaurants and retail and the competition that exists there. You have noted that Clover has a mid-single-digit penetration within its addressable markets. Tell us more about this. What are the different areas where you see Clover having potential opportunity, and how is that a little bit different from some perceptions?
Yeah. There's obviously been a lot written on TAM. By the way, the work you did last week was very good, I thought. You should be proud of that. For us, when we look at the TAM, we start with the Fiserv Small Business Index. The Fiserv Small Business Index is built off U.S. census data, so we feel good about that. When you look at the U.S. holistically, this is the stats you have, whether it be volume or merchants, our market share is less than 10%. Less on volume, a little bit more in merchants, but it's both less than 10%. If you look internationally, it's pretty close to zero, and we're just getting started there. If you go into some of our longer-standing verticals, our market share is higher, which we're very, very proud of.
We see that with, as you mentioned, smaller restaurants. We do not want to be specific around restaurants. Retail dipping into the double-digit market share numbers. In running our businesses there, we are not feeling like there is limited growth opportunity in terms of either new customers coming onto the platform or, importantly, penetrating the existing customers with more and more services. We see opportunity—talked about Clover Hospitality—we see opportunity to expand TAM more. We have to do some work and invest and execute there. Areas like professional services and healthcare are both what we think are very attractive going forward to build additional solutions into that. It is very common in the feedback we get from our banks as to where they want to engage with us in the verticals. We will do that over time.
I think we've got a pretty good track record, at least as I've watched Fiserv and Clover over time. When they focus on a vertical, market share goes up. Good opportunity there. Overall, on U.S. market saturation, we're not feeling it. We have—go back to the strategy—win new clients and grow with them by providing value-added services. That's not just big banks and big merchants. It's SMBs too.
I also want to ask about the international opportunity for Clover, where I think there's probably less attention on, and there should be more. You've had big country—
We've gotten plenty.
I meant
Yeah, of course.
You've had big country launches in Brazil, Australia, Mexico. You have CCV for distribution in Europe. You have a lot of bank partnerships. To make the international opportunity for Clover more real for us, what countries would move the needle the most and why?
Yeah. As I just said, our market share internationally is pretty close to zero. We added five countries. We're in eight, so we're in 13 of them now, and I'll come back to that. I think in your work, you defined—I couldn't do all the math, but you defined the TAM for our relevant markets as something like $3 trillion of processing volume. Obviously, the opportunity is huge, and we're excited about it. We're taking a very deliberate approach at this point, and we're going into markets where Fiserv's been for a long period of time. They're established relationships. We have offices. We have people, the brand's known, and the like. We're going into those markets with the same approach that we've gone into—a distribution approach we've gone into the U.S. markets, so both direct sales forces and partnerships with premier financial institutions in those markets.
You can look for the—as you go through the 13 markets, the type of partners we have. You got Lloyds and NatWest in the U.K. You got Deutsche Bank in Germany, AIB in Ireland, UniCredit now in Austria, Unicaja in Spain. These are premier financial institutions. We will continue that path as we go into more and more of the new markets. The opportunity is exciting. I think as you go—if you look across the new markets we just went into, Brazil obviously stands out, not one because of the size of the market. The size of the SMB base in Brazil has a very significant SMB base. We have three really high-quality distribution partners: CAIXA, which is a state-affiliated banking organization with close to 30,000 outlets.
You think about the biggest U.S. bank has 4,000 or 5,000 branches, so the size here is massive. Secredi, another great banking partner, 2,800 branches. And then Software Express, which we had done in an acquisition. Brazil is super attractive to us. We launched—officially launched in Q4. It has been a long-awaited launch. We keep getting asked questions. We officially launched and announced in Q4. To the deliberate point and being thoughtful about what we are doing, we spent the first quarter training our partners. You do not just turn on—you do not go to a new country and just turn on Clover. Training our partners, and then we first started selling in April. We are excited about the partnerships across all of these markets and the opportunity across all these markets. I think Brazil stands out on top. Not to add that we are not done.
There are other large markets that we either have a—international markets that we either have a modest position in that we're trying—actively trying to get a bigger position, largely through additional partnerships, or new markets that we would go into in the same course of the other two. I think there's a long runway here. Of course, we got to execute, and we're just starting to scratch the surface of this.
Lots of things scaling this year. One of the other things that you talked about earlier is the ADP partnership. Can you expand more on that, and what does this do for Clover's distribution and also the referral relationship you have with them on the payroll business as well?
Yeah. I go back to the client-first mindset with Clover, and you're building an operating system. Small businesses, at least what they tell us, and I think what they tell other providers in the market, they don't want to go to 20 different sources for the ability to run their business. They want a highly integrated suite of products and services. They want payment processing, certainly. They want tax. They want payroll. They want employee management. They want inventory management. Maybe they want website down. Whatever it is, can you put that in a suite of services for them? You have a couple of alternatives when you think about that, and you're building out that operating platform.
We could go find and buy a payroll processor, or you could go partner with the number one payroll processor in the world and put them on your platform, which seems obviously it was a good—we thought that was the right decision. In the midst of that, they're obviously out looking for small businesses every day, and those small businesses need payment processing and a point-of-sale terminal with an operating system on it, potentially. They now become a distribution partner for us. We become a distribution partner for them. In May, we went on. Their software—their RUN software got integrated. Clover go the opposite way there, and then we'll work closely with them on mutual referrals back and forth. I think it's one example of meeting the client where the client needs to go.
It's one example of making sure we fit what our clients are telling us they want from us, which is a robust set of products and services. We get the added benefit of incremental distribution. There are other types of transactions we're working on to fill out that suite of services for the operating platform and some of the other areas I talked to you about, and hopefully, we'll be able to tell you about those over the coming months.
Fantastic. Mike, let's talk about your merchant business, excluding Clover, so the rest of the merchant business. Tell us about the SMB book ex-Clover. How is that doing? Maybe also frame the backbook opportunity. Roughly 10% of Clover's merchants come from the backbook. What drives that number higher, and how?
Sure. SMB non-Clover, roughly $4 billion in revenues and growing. That's that book. With respect to backbook conversion, the question always comes up. If an SMB wants Clover, and Clover's the right platform, we don't deny them a Clover. We get them Clover, and obviously, that's serving your customer in a very client-first mindset. In both the U.S. and outside the U.S., we are and continue to test broader backbook strategies to see what would work or not work going in bigger scale from non-Clover to Clover. We haven't tried anything, any type of force broad-based conversion yet. It's clear to us, and I assume it's clear to you all that going forward, Clover's the primary platform for the SMB customer base, given the functionality it provides the customers and obviously the opportunity for long-term revenue growth it provides for us.
I think it's fair to assume as we go into 2026, you'll see more directed backbook strategy. We want to test and learn first before we go and do that and make sure we understand, again, from a customer perspective, what works. That's the same thing that we've said over the years 2026.
I also want to ask about Enterprise and Carat. How is Fiserv positioned here compared to peers, in your view?
Yeah. Let's go back for a second. Carat is really synonymous for the whole Enterprise system, global Enterprise system for large merchants. We're now running that through Commerce Hub on the front-end, unified single API-based analytics-driven orchestration layer. Then we have a consolidated backend, real-time information-based backend. A large merchant can integrate once and get access to all of the great value-added services that we offer through the Enterprise business. If you think about it, it's just Clover for big enterprises. Once you're in there, you get global reach. We're driving improved authorization approvals with AI. We do low-cost routing. We're driving modern types of payments with buy now, pay later, with pay by bank, wallets, whatever you want to engage with us and take advantage of the data that I talked about earlier, payouts.
Probably one of the most exciting areas for us going forward is the embedded finance platform. Commerce Hub on the front-end is an area where we're putting—it's an exciting investment area for us, and you'll continue to hear about and focus on it. It will really be the epicenter of innovation for us going forward, whether that's stablecoin, whether that's agentic commerce. We're taking competitively, we need to get Commerce Hub global. We're taking it global. It will be live in Latin America by the end of the year. We've made it available to our banking partners for their Enterprise clients. Over time, we look at opportunities to have Clover go through Commerce Hub so that large merchants have an opportunity to benefit from the Clover platform. I think we have a very competitive platform. There are some gaps.
We're continuing to invest in those gaps to fill them. The amount of surrounds and the value-added solutions that we could give to our clients, it's as robust as anyone. I was with a large retailer earlier this week that basically, you go back over time, you study the relationship. It's basically every single year they do five more products with us. It's not—we don't go in and say, and open up the code, "Here's five products to sell you." It's working with them. This is this client-first mindset. Understand what they're trying to do. Go back into our toolkit, what we have, either build it with 13,000 software engineers or enable it with all the technology we have and deliver it back to them. If they grow off of it, they keep coming back for more. This is the strategy of the company.
We left this meeting. It was all about modern, the shifting commerce payments going forward. We're there in the forefront of that conversation as competing with anyone. We have years and years of background to do it. We left this meeting with at least five more products and services that we could go back to them on. We got to go deliver that promptly.
Mike, we spent so much time discussing the merchant business. Fiserv has an equally enviable asset in its Financial Solutions segment, which is a greater contributor to earnings. Let's talk about that segment, which I guess holds a special place for you, given your background from PNC. You spent the last two decades working inside a bank. Tell us about the challenges banks face today in terms of technology and how Fiserv is positioned to win in this market.
Yeah. I worked at a bank, but we did a lot of payments. I think it goes back to that construct, $4 billion payments business. We're big users of the Clover platform and use Fiserv for all kinds of things on the payment side of the business. As we go through it, just this recurring theme of the unique construct of the company with FI and merchant under the same roof, it keeps coming up as an opportunity. The FI business, I agree with you, it's a great business. We're providing mission-critical software, highly recurring revenues, attractive operating margins. These are broad-based, deep relationships where we operate with the banks. It's this concept of the ARPU theory of just more revenue per client if we stay operationally excellent and add value to products and services.
10,000 banks we work with globally, 5,000 in the U.S., over 3,000 in the U.S.. We run their core operating platform, which is sort of in bank geek talk, that's sort of the mitochondria of the bank cell. We have their core, and that puts us in a very privileged position to deliver a whole bunch of value-added services in and around the core. In rough numbers, the company's always said, "You sell a dollar of core and you generate $3 of surround-type revenue." That includes, obviously, the significant partnerships we have with merchants, with banks on the merchant side. That part, the business at its core, is incredibly good. Now we face a world where banks are competing in a wildly competitive space that is increasingly dominated by technology.
If you do not believe me, pull up last week's JPMorgan Investor Day, and you have to add up various numbers, but it looks like they are going to spend $13 billion this year on technology, right? There are now 9,000 other depository institutions in the U.S., credit unions, and banks that have to compete against that. I was trying to explain it the other day. It is not like high school sports where there is a 5A division and a 1A division. You are out on the street, and you have to compete against Chase. How do these banks and credit unions do it? Our belief is that we can be of help to them. We have scaled operating platforms. We have a ton of technology.
They do not all have to use it the same way, but it is our job to be their partner in this increasingly competitive world. We think there is a tremendous growth rate there for a long period of time, leveraging this client-first mindset and just delivering products and more and more products into them across the platform so they can compete. As we go through the business in terms of priorities in the business, and we can touch on any one of these you want, we are leveraging our—I do not know if I mentioned earlier, but number one card issuing platform. There is core of the bank, and there is core of the card platforms. We are number one in that. It is a global business. We have got great momentum in it. We are continuing to invest in our platforms there, and we think there is great opportunity there.
We're consolidating and enhancing some of our U.S. cores. We've had cores from many acquisitions over many years. We're putting those together in a better package, higher quality enhancements, in a sense, modernizing those for our clients. Then on the modern core piece, we're leveraging Finxact in a way that we haven't before, both inside the U.S. and outside the U.S. I think we haven't had Finxact and a platform we're investing on the card issuing side called Vision Next. You go internationally with Finxact and Vision Next, and we've got a real suite of products on the international side. It's been a while since we've been competitive on the international side. U.S., obviously, it's the cores plus OPTUS. The other thing, it's card issuing, U.S. core consolidation, Finxact, leveraging Finxact in a lot of different ways, embedded finance. I talked about it earlier.
If you take our card issuing side plus Finxact plus the acquisition, which we just did, which is an embedded finance orchestration layer with Payfare, we think we have as competitive a product suite as anyone in that space. The headline deals there for us have been DoorDash and Walmart's One Finance, a banking company. There are so many other opportunities on that front. We are formalizing our efforts around that and really honing in on it. We continue to onboard clients to XD, our new digital platform. Finally, we continue to do development work on CashFlow Central, which we think is a bit of a killer app for the SMB cash flow management space. Great business, lots going on, and we think we're in a privileged position to continue to deepen our relationships with these institutions.
Mike, let's talk more about CashFlow Central. One of the very unique products that you're bringing to the market, bringing together capabilities from a lot of different Fiserv products. Tell us about why this is so differentiated as an offering and what are you seeing in terms of FI uptake here.
Yeah. We're super excited on the CashFlow Central piece. We're building it in conjunction with Melio, which is a fantastic software company. It's a great partnership. For those of you who don't know CashFlow Central, it's essentially an AR/AP cash management tool for small businesses. This has been elusive in the financial services banking sector for a long time. We struggled with it at my past institutions. The general mode for banks has been to port downmarket a cash management solution that was created for middle market businesses or sometimes even large corporate businesses. It gets down to the small business, like putting a 400-horsepower motor on a canoe. The small business is too much there. They don't use it effectively, and it costs a lot of money.
What we're building, it goes back to this client-first mindset, is we're building what the SMBs are telling us they want to build, which is a highly competitive cash management tool that we'll have embedded in Clover and we'll have embedded in our SMB suite of products for our banking clients. We just went live with our first client, Washington Federal, in April. We have mid-50s of other banks signed up to go. We have hundreds of banks, maybe thousands, hopefully, but at least hundreds of banks watching to see how this develops. We think it's going to be a significant tool for us and really our first significant play into the B2B space, which we've identified as an attractive and underpenetrated for us TAM in the FI business.
I also want to follow up on your comments on your issuer processing business. As you highlighted, you have the industry-leading credit card issuer processing business. I know you talked about sizable wins, Target, Verizon, which are going to be scaling this year. How should we think about the growth prospects of this business?
Yeah. Our card issuing business today, it's of significant size, very attractive margins. To your point, we have great share, 25 of the 50 largest U.S. credit card issuers, 80% of all the private label card issuers. We go global to six of the top eight card issuers in India, two of the top five in the U.K., and you sort of can work your way around the world, a billion seven credit card accounts on file, which is sort of a stunning number. As you mentioned, good wins with Target that's now onboarded, Verizon comes later this year. Desjardins is another win that comes into next year. The competitive landscape for this business is wide open and lots of good conversations going on there. We feel like we have good momentum in the business.
That momentum's really coming on the heels of significant investment. Our platform in the U.S. is called OPTUS. We've put a couple hundred—we're in the process of putting a couple hundred million dollars into OPTUS to modernize it, add all kinds of features that some of the most significant and competitive credit card companies in the world are asking for. Great progress in OPTUS. I mentioned earlier, we're close to rolling out Vision Next, which would be our international cloud platform, which is an international card platform, which is cloud-based, totally modernized. That and Finxact bring this modern combination that, again, I don't think it's matched in the market. We have a great opportunity to go forward with that. We talked about on the first quarter call, Vanquish Bank being our first client to sign up on Vision Next.
We think it's a—we like the space. We understand the space. We're actually an end-to-end provider, so not just the transaction processing behind the scenes, but we're a major print player. We are a significant player in the design and customization of the cards, which you may say, well, you do plastics. If you've ever watched and experienced a credit card person study a card and how the card is designed, it's a much more sophisticated process. We're a leading player in that. We even do Robinhood's actual gold card, which is, I think, 10-carat gold or something. It's a big end-to-end, great market share. It would be a business that we roll with for a very long period of time.
You're also expanding, as you said earlier, into new verticals, government, healthcare.
Yes.
Which represent opportunities.
Yep. A little bit of that on the card side, but more broadly, I talked about some of the TAMs that we are either partly in or not in at all. B2B was one we just talked about. We are partly in. I'd put government and healthcare would be in that same sort of bucket. We are in them, but there's so much more we can do. On the government side, we have a long-standing reputation of excellence in delivering some very significant and meaningful programs on behalf of the U.S. government during periods of times of stress, including COVID and other times. We will continue to leverage that and execute on that business. We think we have a lot of solutions that bring efficiency to certain areas of the payments world. I think we can do a better job, state and local governments.
Our expansion in government, we're growing government, but it's more sales and distribution and focus than it is any type of major investments or technology. On the healthcare side, really the only place we've played historically is we're a leading player in HSA cards. Back to the credit issuing business, I should have mentioned it earlier. In the healthcare space, we're a dominant player in the HSA card space. Healthcare more broadly is an enormous TAM that we want to figure out, and our partners want us to figure it out. The biggest play there, obviously, on the payment side, SMB side, and in the payer and provider side of things. A significant amount of focus there. We've never had a formal healthcare vertical like we do government. We'll stand that up.
We'll form a partnership in the SMB space around getting us greater access into healthcare. We'll continue to increase our focus on sales. We will have to add some subject matter expertise. The trickiness about the healthcare vertical, even though you want to be in it, is significant. There is some increased compliance that goes with it, so some investment there. Government is just focus, add, run harder, get to more levels. Healthcare, an awesome and very exciting TAM. We got to do some work around it. We are in a great position to start there.
I also want to ask about digital payments, which is a sizable business for you as well. STAR is the leading independent PIN debit network in the U.S. You generally benefit from the regulatory changes that have happened in the U.S. on the debit side. The Capital One Discover deal, if anything, reminded us of the value of a debit network, which is driving majority of the synergies there. Tell us more about STAR and how is Fiserv growing this business.
Yeah. Just one thing I wanted to finish on in healthcare is in the SMB space, the number one requested vertical from our bank partners is health and healthcare. They love this space for the banks. They love the SMB space in general, given the deposit-rich nature of the business. In penetrating healthcare, it's sort of they all want help in that. A good focus area for us to go to. STAR and Excel were the third largest debit network. It's a great business, relatively sizable in scale, grows at attractive rates. It serves both the merchants and FIs. Not to harp on the construct of the company point, but just another benefit of having the two businesses.
We've talked on the merchant side of the business, some of the clients, Uber, Lyft, Domino's, CAIXA was the one from the first quarter where we're in there driving low-cost routing, helping them run their businesses better. Then we play a part in 25 of the 50 largest debit card FI issuers. STAR and Excel are on those cards. Historically, I agree with you on the Capital One Discover deal. Without it, the network business is a really attractive business, and we want to continue to grow it. Capital One Discover deal, a lot of banks, a lot of our FI clients had defaulted to put PULSE on the back of their card because you had to put something on the back of the card, and it was PULSE. Discover was not interfering, competing with them to a greater extent. We do not know how that dynamic will change with banks putting another bank on the back of their card.
We stand ready if somebody else needs an alternative to put on their card. We just continue to study ways, innovative ways in which we could leverage the networks better going forward. Obviously, the payments landscape is changing. It has both governmental impacts of that, and then there are market dynamic impacts of that. We continue to be on top of it and studying it carefully.
Mike, I want to ask about capital allocation. Strong track record of good capital allocation has been a key differentiator for Fiserv, especially if you look at your peers. Tell us more about your capital allocation philosophy, areas where you may be looking to invest, acquire, and if there are any changes to the existing framework we should think about.
Yeah. No change to how we're thinking about the framework. We study everything, and we obviously listen to our owners to get their thoughts on effective capital allocation. But Fiserv, studied for a long time, has been in a privileged position of generating substantial cash flow and having a strong balance sheet. That certainly will not change. As we go through the capital priorities, obviously funding our businesses and making sure that they're in a position to support our clients and meet our clients where their needs are so we can drive organic growth is the priority. You have seen the capital expenditure levels the last few years in the $1.5 billion range. We go to buybacks and M&A. Over the last couple of years, obviously buybacks has gotten the bulk of that, and that will continue.
On the M&A side, we study everything. We feel like we're in a very privileged position on the M&A side because everybody comes to us, and we have a robust list of alternatives, but we put it through a very strict underwriting criteria. What's emerged historically, you put aside some of the bigger type deals over the years, what's emerged is a series of highly strategic value-add deals. We've done four recently. I mentioned Payfare earlier, CCV, Money Money, and Pinch Payments. These are all, as we work through, we're totally integrated with our strategy team and our business teams. As our businesses are pursuing opportunities, either within TAM or outside of TAM, our strategy team's right there. We get this look at everything out there and where we can add to the value, we do it, and that will continue.
I think the easy conclusion on capital is the framework's worked and we'll continue to run the same game plan.
Mike, we only have a few minutes left. We discussed a number of opportunities for Fiserv. What are the two to three things you believe that are less understood within the investor community as it relates to Fiserv?
Yeah. I think less understood. I think at least I'll go back around to where I started. Some of the stuff I've gone through and had an underappreciation for is really, I would say first is the continued value of the construct of the company with FI and merchant under the same roof. We continue to see both a competitive advantage of having that and a multitude of opportunities that come from it. Embedded finance, it may manifest itself in a lot of different ways, obviously. Embedded finance is very exciting. Banks want to become more payment-like, and a lot of corporates want to become more bank-like because there's certain solutions embedded in their own businesses and strategy. Certainly that's one.
I think the breadth and depth of the relationships, take SMBs aside, we hope they use everything on the—we hope we stand up an amazing, vast platform and they use everything on it. Go to the enterprise side of the business. We are so critical and so embedded in our clients. That is a great—as I said, it's a great honor, and it puts us in a privileged position. It also comes with a significant burden. I was with an enterprise client the other day that said, a large regional bank that said, "We're on core, we're on credit, we're on debit, we're on bill pay. So, don't forget us.
We go with Fiserv. I do not think we are so important as the partners in that, and in an increasingly competitive and dynamic landscape, our ability both to live up to the burden that comes with it, but also grow with those clients and value-added service is probably underappreciated. I think the global opportunity was underappreciated. Finally, I just finished with just the quality of our people. 13,000 software engineers is a lot building on behalf of our clients. Not many of our clients have—I was with one this week that said they had three. They need us to grow with it. It is a great company. Super honored to have the opportunity to lead it forward. We have a terrific team. I think the growth, value-added, client-first mindset growth is in front of us.
Mike, I really enjoyed our conversation today. Thank you so much.
Thank you for having us.