All right. Good morning. Thanks, everybody, for joining. Super excited to have Fiserv here speak with us. Frank Bisignano, CEO, spending some time with us. Thank you for being here.
Happy to be here. Always.
We've had a lot of your peers and others give us different updates. As I was preparing, Frank, I thought as a lead up question, just this question of unified growth. I know you mentioned it, a couple times in the last couple of earnings calls, but just seeing some of your peers do some different things, yet you've been focused on this unified growth, and you've delivered some premium growth relative to those peers because of it. I wanted you to go into that first, if you don't mind. Like, what does that mean, and is that really what's driving the premium growth?
Yeah, I think you gotta go back, you know. I like to go back to there's a reason these two properties got put together. Although we declare, integration over, merger done, not talking about synergies, the opportunities just abound. Maybe it's makes sense to step back a second.
Please.
I think, you know, if you go back in time, which these things that appear minor and people sometimes can't see are strategic pillars that create opportunity. At First Data, after we raised $3.5 billion in a private offering that allowed us to deliver the company and, we began feeling like we'd be able to invest a little more, we took the first $1 million we had and put it in a company called Finxact, which was just a thought. It was really a statement about the e-bank ecosystems.
I had a deep belief that the company we had, which was highly FI-centric, although serving some of the finest merchants, but through, you know, financial technology and a fintech on its own, that if you could take that and the systems that I had known so well from sitting inside financial institutions, the debit and the core, as people call it. I call them deposit systems, loan systems. If you could put those together, you could have an unparalleled ecosystem to help both merchants and banks grow. It wasn't that the Fiserv-First Data merger was just that. It was a thought from a long time ago on both sides. Fiserv also always thought about what if we had a merchant business. When we put the two together, we saw it was greater than we actually believed it was. I mean, I had a deep belief about it.
Mm-hmm.
When you think about the ability to be a great bank partner and merchant while you own the rest of their ecosystem. Yesterday I was with two bank CEOs and, you know, in different parts of the country, one from Pennsylvania and one from North Carolina. They were both talking about how we help them grow, right? I think it is about being in business to help your clients grow and to take things like the debit networks we have, you know, our ability to take our Aptitude platform, which is for credit, and bring it through all those banks in our ecosystem. You take a product like Ondot, which both companies were clients of.
One was we were at First Data, an investor in it, and we actually figured out if we owned it, we could actually do more for our financial institutions. You think about Finxact, which ultimately we came to own, and one of our best clients in the world, Walmart, buys ONE Finance, and there we are being the provider of this technical infrastructure. I think the combo unlocked way more value than maybe we thought on day one.
Maybe not in some way, but, you know, if you got up on an opening day and said you were gonna do all these things, people might think, "Yeah, that's interesting." It's a ground game, it's an air game, it's just explosive opportunities. Our clients, I mean, remember the whole purpose of our existence is serving our clients and then ultimately getting the right return for our shareholders. Our clients like the combo, and our clients can consume a lot of the combo.
I mean, look, hats off. It's come together really nicely, and I know it's not easy, so that's why I wanted to lead with that. The combo that I like to think about the most, Frank, is the debit networks, right? With STAR and Accel. I know I've nagged you about this before in the past.
I nag myself about it.
Owning that debit network, right? Which is what, the third largest?
Yes.
You have a big merchant portfolio and you've got a large bank portfolio, right? You have Regulation II coming. That's gonna give you a lot of opportunity to go after some business. Talk to us about that Regulation II opportunity and what that might mean and the surround opportunities.
Yeah. I think, you know, I very early on, you know, kind of fell in love with one of the assets, which was a debit network, because you can't create debit networks. You just can't wake up in the morning and say, "I'm gonna be a debit network." You know, it's a two-sided network. It services our whole client base. It serves our merchants very well. It serves our issuers very well. As new entrants come along, it serves them well too. You know, there's always been, you know, this challenge around, say, e-com and whether, you know, you needed a third unaffiliated network, and obviously Regulation II changed that. You know, we just think it's leveling a playing field, creating more opportunity.
You know, the way we think about the debit network is how to use it for our clients. I frequently show up in a client's office and say to them, "If you had all my assets, how would you use them? Because I'm happy to do that with you." Then they kinda start thinking beyond the boundaries, like, "Well, how can that debit network help us grow? How does it exactly give us more?" I'm super excited. I know you always try to pin me down on how much it's worth. It's worth more than if we didn't have Regulation II. We were growing that base both on the issuer and on the merchant side pre- Regulation II. I expect, you know, as we spend more times with our clients, it's gonna get more application.
Okay, good. Let's get the macro question out the way so I don't get any more dirty looks.
I thought that was me they were giving the dirty looks to.
I'm used to it. I'm good. On the you see the consumer side, you know, through the merchant business, of course, and then on the bank side as well with banks spending. What do you see?
You know, I think the consumer's still out there, right? If you come into most of our offices, you'll see a screen up there, and it shows transactions per second. You know, my pattern recognition's pretty good walking by that screen for a bunch of years and looking at what verticals are being spent in and what cities are being spent in and what's e-com volume, what's mobile volume, what's order ahead volume. I think, you know, you heard us talk and, you know, about a slight slowdown in March. We have not seen any acceleration to that. I view it as expected. Obviously, you see varying reports coming out of varying retailers. I think one of the strategic benefits we have is the diversity of our portfolio.
You saw in the worst times, that durable set of clients we have perform, and you saw in a rising spending environment how it performed. I think the consumer's still spending. I think, there are savings still.
Mm-hmm.
That you saw before. You know, we have the benefit of looking at the totality of our banking system and, you know, we think of it if it was one large bank, what has happened there. Savings, you know, are not depleted by any means, and the consumer's out there. I know the second part is, hey, lots going on with banks. Are they spending? I'd say the answer is yes. I do have this belief, and you know, having been inside these financial institutions, two of the finest in the world in my mind, you know, that tech spend is mandatory to grow. You know, the two CEOs I was with yesterday were talking about how we're gonna help them grow their business. Implied in that is opportunity. I do think there's a little distraction going on right now.
Sure.
Right? Having sat inside these places, you know, at this moment in time, it's not whether it's an on/off switch on tech spending, it's, is that the most important meeting to go to right now? I think that it will clear itself out as in the next month, so to speak. Obviously, there's more regulatory, oversight coming in at some level. You know, if you're running a bank, you're focused on let me have my house in order, and maybe I'm gonna tell my CIO, "Come see me in two weeks." I consider it a slight distraction going on.
Okay. Let's dig into the fintech business, right? I know with all the turmoil and the distraction you just mentioned, we think of the traditional account processing business of Fiserv, your fintech business, as being pretty defensive. I know you and Bob and Julie get this question quite a bit, what can you tell us about that defensibility? It held up very well during the global financial crisis. With all this deposit activity and, you know, some of the bank activity you know well, what does that mean for the business short term?
Well, I think, you know, first of all, we have clients who the FDIC shut, and then we have clients who took over the books. I love our portfolio. You know, Finxact gets tremendous demand right now. Remember, that's our future growth. It's not anywhere in our numbers today, but when we think about the structural growth of this business going forward, it will be longer term. I mean, it's a privileged position we have in this, in this, in this account processing space, and it's actually an engine that allows you to do more with your clients. I mean, you know, not to go back to the merchant business, but we've been usually successful going into the smaller institutions that maybe didn't have relationships with us in merchant and bring them. I think it's a privileged position.
We're maniacally focused on how to be better at that every day. You know, there are fluctuations. You know, I remember probably in the third quarter people were like, "Oh my God, their growth rate, what's going on?" You know, it's a very steady business that we're gonna keep piling on to. It will have variations at time, but I, you know, I think it's a privileged position. Our clients respect us a lot there. It gives us opportunity to do more and, you know, it's a key element. It's a key element to drive growth across the company too. You know? Yes, there's, w hich I think we, you know, have proven that we could be a bigger grower than we were in the past.
As always, we have aspirations of being a bigger grower in the future. I think it also. You know, when you look at the growth rate of the company, right? You know, you know, we could debate what either company's growth rate was before. You know, call one mid-single digits, call the other a hair less than mid-single digits, whatever that might mean to your creativity. You know, and today, you know, two years of 11, we eight to nine on the last guide. It is about the power of all the assets in a place. I think that core, you know, as people call it, I call it deposit and loan systems, just 'cause, you know, like I like to say at Citi and JP Morgan, nobody works in. They call it their core. You know?
It's the deposit and loan systems. That was probably true in other institutions. It is so mission critical that the ability to come in and do other things is just so darn valuable. I mean, I think the structure of this company is what's allowed the growth rate to exceed. Then I'd say the execution of the team has been very, very high.
Agreed. Yeah, look, accounts grow and you attach more product against it and then so you see what works. You've mentioned Finxact a couple times here already, Frank. We think of Finxact as the Clover for the fintech business, right? Sort of the.
I say it's Clover-esque.
Clover-esque, sorry. Are you primarily serving fintechs with that business or is there potential to serve traditional banks there as well?
100%.
Tell us a little bit more why you chose that asset versus some of the other fintechs that are out there?
Well, you know, I mean, I'll give a plug to the Sanchez family for a second.
Yeah. Sanchez Computing.
You know, Sanchez Computing, it's not often, you know, that in this industry, a father found a company, his sons worked in the company, the company got sold, and then they came back and did it again, you know?
Yeah.
you know, we spent a lot of time, Frank and myself and Guy Chiarello, on the technical build of Finxact, and we were an early investor, and then we were leading later rounds because we really, really believed we had something special. Its applicability is very, very wide. Our real issue is, you know, right now we have, you know. We just renewed five years with One Finance and, you know, obviously that's serving all of Walmart. it's scalability, right? It's live. You know, we like to say we believe we have more live institutions than anybody else on a, you know, modern cloud-enabled platform. I think, you know, it will be a banking platform.
Okay.
There's no question it will be a banking platform. In many cases right now it has financial institutions up and running on it. We love our DNA platform. It does a great job for our clients. The combo of that plus Finxact, I think gives us the best arsenal in the industry. We do like the fact that it can provide the capability to build a digital bank well, and it doesn't cause one of our clients to have to convert off of their current platform. We've stitched it together in a, in a way we know how with a layer that causes it. We'd call it a sidecar. I think it just strengthens our arsenal. I do think it's Clover-esque, and we love the technology. You know, we like founders. We've been very fortunate doing, y ou know, whether you take Ondot, whether you take Clover, whether you take CardConnect, whether you take BluePay to bring founders in, whether you take BentoBox, have them be part of the fabric of the company and stay with us for a long time.
Yeah. No, it's cool that you brought up Frank Sanchez. I haven't heard that name in a while.
I hear it like every day when I dial his number.
I know you do.
When I dial his number.
No, it brings back memories having covered that name back in the day, Sanchez Computing. On the card issuing side, let's talk about that. We just heard from Marqeta just to be transparent. You've done well there. I know there's a big push on credit, and the pipeline seems to be quite good. You've had some good conversions as well. What are you doing differently there, Frank, that's driving some good production?
Well, I think, you know, platform. For us, everything's platform strategy. Whether it's Clover, whether it's Ondot, whether it's BentoBox, whether it's Finxact, it's platform strategy and then client-facing opportunity. 'Cause if you build platforms, but you're not building it in a manner that clients wanna consume it, you know, it's interesting, but it's not gonna be good for our shareholders. you know, we took what was, probably an industrial strength capability. We modernized it, we cloud-enabled it. You know, we don't walk around and, you know, I like to say when people wanna say, "How are you doing on the cloud?" I was like, "Well, 10 years ago we were building Clover in the cloud, so we're a pretty cloud native joint," you know? I view that as technology.
I think what the modular nature of what we did with Aptitude, its capability has caused us, you know, to have Target, Desjardins, you could go down the list. I think it's platform strategy, it's scalability, it's the surrounds that we bring, whether it be on loyalty or fraud. From the credit perspective and, you know, as I said, talking to a client this week, they're like, "We're moving to Aptitude. That's the best system there is." You know, our small institutions now get the benefit. You hear us talk about the big wins.
Yeah.
You know, serving the fabulous set of, you know, privileged cores we have and bringing credit and debit together for them has really been part of the growth strategy here.
Yeah. No, I think you've lit up a lot of those banks to, to compete. It was Bridge into payments and then ultimately to merchant. I know Zelle, you know, Fiserv has been at the center of a lot of that activity around P2P, we get a lot of questions on FedNow, of course, and what does that mean. You've talked about being a connecting point for the banks, small and large.
Yeah.
Into systems like FedNow. How impactful might that be, and where do you see those use cases going today versus longer term?
Well, I think, you know, we've always had a strategic view that our job is to enable any way people wanna move money, right? Everywhere from ACH to if people want Zelle at the point of sale, right? Our job is to enable it, right? We can't force it, we can't hold, you know, an institution down to do it, we can't force. I think what you have inside this company is the best set of rails in the world, you know? That's everywhere from the merchant business to, you know, our ACH capabilities, to our Zelle capabilities, to our real-time payment capabilities. I think it's adoption. I think it's adoption.
You know, I'm kinda proud of having the opportunity to serve, you know, financial institutions from credit unions to small and mid-sized bank and bring the same capability that large institutions can have. Obviously that's a lot more adoption to occur, but I think it'll get to how that institution, you know, drives their client behavior. My job is to make sure we're ready, and that will happen. We spend time with the Fed and talk about it a lot. I want us to just really move the thought to real-time payments.
Okay.
Whether it's, you know, FedNow or, you know, RTP in another matter, or whether it's Zelle, this institution's job is to enable it and have every rail together and then help our clients, the fabulous thousands of financial institutions we serve, be prepared to serve their clients.
Right.
I think like any initiative, we've seen it, you know, we're an early enabler of Apple Pay, you know. I mean, they take a while for adoption but, you know, we believe in choice. We believe in consumer choice, we believe in institutions choice, and we believe in merchant choice. Our job is to create the capability and then, you know, we'll monetize it appropriately in the process.
Right. Though you're indifferent, your job is to enable and let the merchants, the banks and others choose.
Yeah.
That's the approach.
You okay with that?
Yeah m e too. No, I think it makes sense. It's good to be.
No, I mean it.
Get to play switch along.
Because, you know, it's kinda like they're all our rails. They're all our capability. We'll let the market decide and we will be a participant.
Clover. Let's talk about Clover. We did hear from the team yesterday. They fielded a lot of questions around the growth of Square. It's very notable that Clover is outperforming Square and, you know, Square is sort of indem-meant to the market, so it's fair to use that as a benchmark. What's driving, you think, Clover's performance? Tell us about distribution versus the technology, sort of the concept of adding more software, BentoBox you mentioned. What are the driving forces?
You know, first of all.
Yeah.
You know, I don't know if this is conventional, but it's Frank.
Yeah.
You know, I admire what Jack's done.
Sure.
You know, I visit with Jack and I think we, you know, we both like what each other's done, and I think that's the way the world should work, first of all. Too often people get up here and tell you what's wrong with the other person. I see great competitors all over the place, and I love the industry and I love the work. I'd say I probably learned that at JPMorgan, how to treat your competitors very, very well. I think we're different. We're both different. You know, we may. You know, it's one of these things, like all types of business models, you know, it's like many of our competitors, we just have a different set of assets and a different set of attributes. I think we have the best distribution network in the world.
Sure.
I mean, you know, the early days of Clover was about utilizing distribution, and we got it wrong in the beginning. I say that all the time, and, you know, I was deep in the technical build of it, and this concept that we were gonna have an iPhone for small businesses, which I was so hung up on, I was just wrong about. What do you do? You go to round two, you say, "How are you gonna do it?" You say you're gonna verticalize, and you're gonna think about what is the canister that will be consumed by everybody, which is a horizontal capability. You say, "Okay, what's my verticalization?" You know, yes, we go buy Bento because we love restaurants. Why do we love restaurants?
Because there's a lot of them, and we have a lot of clients who are restaurants, so it's an easy path to drive ARPU, drive LTV. I don't really think whether we're beating them. I think more about, like, are my small businesses able to grow better 'cause they have our capability? Are my distribution channels leading distribution channels 'cause they can distribute Clover and others can't? I just look at the amount of TAM we haven't touched yet.
Mm-hmm.
Right? Both outside the U.S. and inside the U.S. and other channels. You'd have to say at the end of the day, I've always been a deep believer in distribution. You know, I do think, you know, we have unparalleled distribution, and unparalleled distribution could be in Argentina, or it could be, you know, an ISV channel. I. You know, look at the product has to work. You know, I used to say early on, we could have distribution, but if it's not really serving the SMB owner, it's not really good. We spend a lot of time, you know, we have advisory groups that come up in the office, and we collaborate to listen to our clients on what the next builds are.
We're a tech firm, I love to tell people the number one job inside the company is a software engineer. That's, you know, sometimes that gets lost in the process. We have great software engineering, number one job class in the company, you know, tens of thousands of technical people, and we have great distribution and, you know, it's probably one of the better $60 million buys out there.
No doubt.
Clover.
Yeah.
Of course, there was hundreds of millions that went in after that.
Yeah.
You know? I also think Ondot, I know I'm veering off on you.
That's all right.
You know, think about Ondot. We're in 1,000 financial institutions, not only doing card control and bringing all the digital card capability, but embedding it in mobile banking to give it a top banking experience, and that's our job for our community bank. I like to, you know, kinda accentuate the point 'cause sometimes I think it gets lost that we're a very technical company that builds and integrates and focuses on client experience with a client.
Yeah. Let me take questions from the audience. We're at the six-minute mark. If there are any, happy to take it, otherwise I'll keep going.
It's like any other meeting I'm in, you know what I mean? You know, it's like a town hall in my company.
Pull out your pass card. Yeah.
Where are the brave souls?
Just one more, if you don't mind, on.
Of course.
I'll keep going unless we have a question up front. Yeah, please. Thanks.
There we go.
Hey, Frank. Charles Evans, DSM Capital. Thanks for taking my question. When we hear from your competitors, whether it, depending on the segment, obviously we've talked about right now in SMB with Square, Toast, et cetera, and obviously been looking more at the e-com and omni-channel, one of the names that doesn't come up despite the success you've had is Carat. I'm wondering how long is it before I hear, you know, the Adyens of the world, the Stripes of the world say, "You know what? We're really competing with Carat.
Well, it should be right now. It should be right now. You know, I like to go back to, you know, we always had great e-com processing capabilities. We had a single platform, OmniPay, that was the industry leading platform, but we were a processor. On the journey, t hat was kind of a large part of the journey of the company and even the new company at Abrata. How are we more than a processor but a commerce enabler and in fact a driver of revenue growth? I think what we built in Carat, you know, with Commerce Hub underneath it, will end up being an industry leader in the platform. I think we have a strategic advantage, which is we lead the league in physical presence. Ultimately it's an omni-channel world.
That doesn't mean that I don't plan on being able to go to toe-to-toe with anybody, you know? I mean, it's hard for me not to reflect on when I'd walk around and say Clover all over, people laughed me out of stadiums because how could we get to where we are? I think those days are far behind, and I think our technical prowess is large. It has a single API. You got Commerce Hub underneath it. It's multi-currency. I think the combo of bringing it all into Commerce Hub and being able to give a treasurer per se, I love serving treasurers generally because they become CFOs and sometimes CEOs, so take the whole journey with them.
I learned that a long time ago in a different joint. You know, I think our ability to do that will be very, very strong. I think it's a long time grower for us. I think, you know, I feel like, you know, maybe people don't realize that we're in the heavyweight class, but we will weigh in, and we got as good a shot at the championship as anybody.
Just my quick follow-up on Clover, if you don't mind. Just, you know.
I never mind Clover.
I mean, I think one of the things I underappreciated was some of the bank partnerships that you exposed to Clover, especially internationally, right? CaixaBank, Deutsche Bank, that kind of thing. It feels like there should be a strong appetite for that, you know, to go through banks rather than go de novo direct. Was there a pipeline there, Frank?
Oh, yeah.
Anything to comment on the shape of that?
I think you'll hear more shortly. I think, you know, it's even, I actually, of course, I love it in, you know, the biggest distribution network in Brazil.
Sure.
Or in Germany, right? I also love it in our local bank franchises. You know, what they see is their opportunity to grow SMB.
Yep.
At a better pace. I think you should expect us to continue to build integrated functionality for SMB across our ecosystem that causes us to be even able to do more through our Clover offering and through our bank ecosystem. I look at our ability to increase, say, the SMB opportunity inside the bank through both Clover and our whole offering. You know, the way we think about it is how are we helping a bank grow, right? They're making money on all of this that we do. You know, it's way better to be helping a bank grow than to be part of their expense structure, right? That's our mentality, and I think our bank partners see it, you know, from the largest to, you know, five branches somewhere.
The smaller banks can be scrappy, though.
I love them, man.
You want to go out there and sign up merchants. We'll close out maybe with just a, you know, just a question on. 'Cause again, I get the question a lot. It feels like there's been some industry consolidation picking up. You did step up your buybacks in the first quarter as well. Is there a bigger appetite here to do M&A?
Look, I think we've been usually successful at M&A. I think, you know, we've had a very balanced capital allocation, a tried-and-true capital allocation methodology. Obviously, if it's accretive, if it's long-term strategic, we're happy to do it. You know, I grew up in places that really knew how to do acquisitions, and I think I learned a little something in those joints.
Mm-hmm.
Executed on them. We have a great execution capability inside the company. We're gonna be very, very balanced. You know, we're not, I feel great about our hand, our assets. You know, you've seen us do things. I think we do a very good job at taking things and paying hundreds of millions and turning it into a lot. I feel good about our strategy on it.
No, it's nice to see it all come together. It's been, like I said, a joy to track it. Thank you for spending the time here, Frank.
It's my pleasure.
Thank you, sir.
Good to see you.
Yep.
Good job. Bye.