Fiserv at Bernstein Conference: Strategic Insights and Growth Plans

On Thursday, 29 May 2025, Fiserv Inc. (NYSE:FI) presented at the Bernstein 41st Annual Strategic Decisions Conference 2025. CEO Mike Lyons, reflecting on his first hundred days, addressed shareholder concerns about communication while emphasizing the company’s strong client relationships and growth potential. Despite some issues, Fiserv remains committed to its strategic goals, focusing on client acquisition, operational excellence, and capital allocation.

Key Takeaways

• Fiserv aims to maintain low double-digit growth for Clover, excluding gateway conversions.
• The company plans to allocate $1.5 billion annually for capital expenditures to support growth.
• International expansion, particularly in Brazil, is a key focus for Clover.
• Fiserv’s financial solutions segment targets partnerships with banks to leverage technology solutions.
• The capital allocation strategy remains unchanged, prioritizing business funding, share buybacks, and strategic acquisitions.

Operational Updates

During the conference, CEO Mike Lyons highlighted Fiserv’s steady strategy focusing on winning and growing with clients. Key areas include:

• Clover Performance: Clover’s volume growth was 8% in Q1, normalizing to low double digits when excluding certain factors. Fiserv is committed to maintaining this growth rate in Q2.
• Growth Drivers: Five main drivers for Clover include horizontal and vertical integration, international expansion, operational excellence, and distribution channel growth.
• Financial Solutions Segment: Fiserv serves 10,000 banks globally, providing critical software with high recurring revenues. The segment focuses on card issuing, US core consolidation, and embedded finance.

Future Outlook

Fiserv is poised for growth with a clear focus on strategic opportunities:

• International Expansion: Brazil is a key market due to its large SMB base and partnerships with Caixa, Socrates, and Software Express.
• Clover’s Evolution: Fiserv plans to transform Clover into a comprehensive operating system, extending beyond a point-of-sale system.
• Capital Allocation: The company will continue its long-standing capital allocation framework, emphasizing organic growth, strategic acquisitions, and share buybacks.

Q&A Highlights

In response to questions, Lyons reiterated the unchanged strategy and the company’s commitment to communication improvements. He emphasized the value of Fiserv’s integrated FI and merchant services and the quality of its workforce, particularly its 13,000 software engineers.

In conclusion, for more detailed insights, readers are encouraged to refer to the full transcript below.

Full transcript - Bernstein 41st Annual Strategic Decisions Conference 2025:

Harshita Rawat, Senior Analyst, Bernstein: 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 forty first annual strategic decisions conference. Mike, thank you so much for joining us today.

Mike Lyons, CEO, Fiserv: And thank you for having us.

Harshita Rawat, Senior Analyst, Bernstein: So, Mike, it’s been almost hundred days since you arrived at Fiserv as CEO elect at the time and only a few weeks, since you took over as CEO. So as you reflect in the past few months and weeks, tell us about what you’ve learned and what has surprised you.

Mike Lyons, CEO, Fiserv: Well, it’s it’s been a busy, first hundred days, for me and, obviously, a disappointing first hundred days, for our shares. And as you would expect, I spent a lot of time, I’m sure, with some of the people in the room and with all our shareholders, and, it’s the you know, 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, and you have my full commitment going forward to do just that. If you pull away from that and think more broadly, it’s been exciting and and an energizing start. Met with a little over a thousand of our clients across the world, lots of our employees across The US sites, and spent some time in Europe and and Asia, and really have been going through and, systematically reunderwriting all of our businesses, and operational areas and and studying all aspects of the company. It’s been great to do it alongside, some veterans of First Data and Fiserv, like Guy Chiarello, who ran technology for a long time and now is our vice chairman.

And then with and then some of our new talent, that we brought in, including Takis Georgikopoulos, who joined us from, JPMorgan, is now our COO and was head of payments at, JPMorgan. So 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 value 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 increasingly those businesses increasingly interconnected has been great great part of 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, they just go on and on. So we’ve got these privileged market share positions, but still a ton of room to run-in 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, of and the quantity of data that we produce that we’re just at the nascent stages of of learning how to monetize and 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. So it’s it’s been great 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 to grow with them and add value to them in this position that we sit in.

It’s it’s a unique position. That’s just in our current TAMs. And then, you know, we we can talk about it if you want. Our ability to expand TAM without significant incremental costs, is there. And, there’s giant areas, in and around our space that we haven’t touched yet deeper in the health care and government verticals.

The b to b space. We’re small in in there, stablecoins. You can go on and on and on some of these big areas we haven’t touched yet. So great company. I’m honored to have the opportunity to lead.

I got a lot of work to do, but, obviously, you you know, been a busy start in lots of different ways.

Harshita Rawat, Senior Analyst, Bernstein: That’s a lot for a hundred days. So, Mike, as you look out into the future, is there anything you would like to change about Pfizer’s strategy or guidance frame framework?

Mike Lyons, CEO, Fiserv: No. The the strategy remains unchanged. I’ve said that from the very beginning. It’s a great it’s a great strategy. It’s time tested, and we’re just starting to scratch the surface of 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. Then 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 to the virtuous cycle. So our time hasn’t been spent rethinking strategy. The focus is all about execution and, you know, tweaking things here and there, but it’s about execution on both the financial and operational side. And, obviously, from a financial perspective, we’ve been focused on executing against all of the commitment commitments we’ve made, including 15 to 17% EPS growth this year and hitting the $3,500,000,000 Clover target, Sheryl will talk about.

And we’re also, you know, we’re also focused on continuing to stay disciplined with our use of excess capital with the goal of maximizing growth in free cash flow per share over a long period of time. So from an operational perspective, I think the focus has really been if there’s a tweak or or an emphasis, it’s really doubling down on a client first mindset. And 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 mission critical software.

But it’s really about getting in, understanding their strategies, making sure that we collaborate internally across both businesses to come up and 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 in a in a very competitive bank environment on the technology side. So very focused on execution. The strategy is good.

It’s worked full on time.

Harshita Rawat, Senior Analyst, Bernstein: Great. So, Mike, let’s talk about Clover.

Mike Lyons, CEO, Fiserv: I’ve got three questions.

Harshita Rawat, Senior Analyst, Bernstein: So volume growth has been an important topic amongst investors. In the first quarter, Clover volumes decelerated to 8%, and you’ve highlighted that this number is more like low double digit, normalized for gateway leap year, Easter, Canada, etcetera. 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?

Mike Lyons, CEO, Fiserv: I’ll start by saying Clover is a great asset. It’s got a long growth runway, and it’s gonna 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 q one and expected in q two. And 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 q two. So to be clear on these points, we haven’t we don’t see if you take away the gateway, we don’t see a deceleration, in Clover volume growth. And if you look at all of the other KPIs for Clover across the whole spectrum, we don’t see anything that’s changed in any way that would indicate anything negative. We haven’t seen any changes in the competitive environment. We have great competitors.

They were great competitors before they are today. No no changes there. And we don’t see any signs of market saturation. In fact, you you know, we’re seeing the opposite where our our distribution partners, banks, ISCs, ISOs are asking for more Clover, and it’s our goal to continue. And they want more value added on the Clover platform, more Clover, and and it’s our job to deliver that to them.

So not I I think you captured it all, and and no no new news there. Last thing I mentioned is or mentioned two thing I’d add two things. The volume growth we had in the first quarter was in line with our expectations to get to the $3,500,000,000 target. And then we have identified, built to drive growth this year and then for many years to come, really, the five different areas, horizontal integration. So that’s the think about ADP, cash flow essential, and some other stuff that we’ll continue to put on the platform.

Vertical integration, we launched Clover Hospitality, a couple weeks ago, at a big conference, and we’ll continue to to build out functionality for different verticals. The third is the international expansion. Fourth is operational excellence. From a you you know, if you if you put every KPI on a one to 10 scale, there’s room do better in everything we do around Clover. It’s not that we’re doing bad in every area, but we’re not tapped out in any area where what I’ve spent my life doing sort of running core operations of businesses.

There’s operation there’s opportunity for us to do everything everywhere. And then the fifth is continue to grow the distribution channels. And we talk about banks and ISO partners over time, but ISVs are increasingly important. And ADP’s a totally new aspect of a distribution partner on that front. So lot of opportunities for us to go execute against on the on the Clover front.

Harshita Rawat, Senior Analyst, Bernstein: So, Mike, let’s unpack that a little bit more. So 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?

Mike Lyons, CEO, Fiserv: Yeah. I 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 product service, this client first mindset mentality, and that means meeting our clients where their needs are. So 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. And 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. So I think so 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. So there is no we don’t believe there’s an algorithm nor should there be an algorithm that we have any control over. The client 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. And if we do that and continue to build a platform of VAST 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 bad I don’t think it’s a bad thing. So it’s a our job is to build an operating system, and that’s what our goal is with Clover.

Harshita Rawat, Senior Analyst, Bernstein: And you talked about the big opportunity for Clover. So let’s talk about the addressable market for Clover a little bit more. So there is a perception that the addressable market may be more limited in The US because of this possibly being kind of restricted to restaurants and retail and the competition that exist there. And you have noted that Clover has having mid single digit penetration within its addressable market. So 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?

Mike Lyons, CEO, Fiserv: Yeah. There’s obviously been a lot written on TAM. By the way, the work you did last week was very good. I thought we should be proud of that. For us, when we look at, the TAM, we start with the, the Fiserv Small Business Index.

The Fiserv Small Business Index is built off US census data, so we feel good about that. And when you look at The US 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%. And if you look internationally, it’s pretty close to zero, and, you you know, 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.

And with and and we see that with, as you mentioned, smaller restaurants. We don’t wanna be specific around restaurants. And retail dipping into the double digit market share numbers. But in running our businesses there, we’re not feeling like there’s limited growth opportunity in terms of either new customers coming on to platform or, importantly, penetrating the existing customers with more and more services. And we see opportunity.

I talked about Clover Hospitality. We see opportunity to expand TAM more. We gotta do some work and and invest and and execute there, but areas like professional services and health care are both, what we think are very attractive going forward to to build additional solutions into that, and it’s very common in the feedback we get from our banks as to where they wanna engage with us in the verticals. So we’ll do that over time, and I think we’ve got a pretty good track record at least as as I’ve watched Fiserv and Clover over time. When they focus on a vertical, market share goes up.

So good opportunity there. But overall, on US market saturation, you know, we’re not feeling it. We have go 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.

Harshita Rawat, Senior Analyst, Bernstein: And I also wanna 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

Mike Lyons, CEO, Fiserv: gotten plenty.

Harshita Rawat, Senior Analyst, Bernstein: I meant, you know, outside of 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?

Mike Lyons, CEO, Fiserv: Yeah. As 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, you know, do all the math, but you defined the TAM for our relevant markets as something like 3,000,000,000,000 of processing volume.

So, 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 spend for a long period of time. They’re established relationships. We have offices. We have people.

The brand’s known and the like. And we’re going into those markets with the same approach that we’ve gone into distribution approach we’ve gone into The US market, so both direct sales forces and partnerships with premier finance institutions in those markets. And you can look for the for the as you go through the 13 markets, the type of partners we have. You got Lloyd’s and NatWest in The UK. You got Deutsche Bank in Germany, AIB in Ireland, Unicredit now in Austria, Unicaha in Spain.

These are premier financial institutions, and, we’ll continue that path, as we go into to to more and more of the new, markets. So 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 you know, one, because of the size of the market. The size of the SMB base in Brazil has a very, significant SMB base. And then 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 US bank has four or 5,000 branches, so the size here is massive. Socrates, another great banking partner, 2,800 branches, and then Software Express, which we had done in an acquisition. So Brazil is super attractive to us. We launched officially launched in q four. It’s been a long awaited launch.

We keep forgetting to ask questions, but we officially launched and announced in q four. And then to the deliberate point of being thoughtful about what we’re doing, we spent the first quarter, training our partners. You don’t just turn on you don’t go to a new country and just turn on Clover. So training our partners, and then we first started selling in April. So, we’re excited about, the partnerships across all of these markets and the opportunity across all these markets, but I think Brazil stands out on top.

Not to add that there are you you know, we’re 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 you know, actively trying to get a bigger position largely through, additional partnerships, or new markets, that that we would go into in the same course of the other two. So I think there’s a there’s a long runway here. Of course, we gotta execute, and we’re just starting to scratch the surface of this.

Harshita Rawat, Senior Analyst, Bernstein: Lots of things scaling this year. And one of the other things that you talked about earlier is the ADP partnership. So can you expand more on that? And what does this do for Clovis Distribution and also the referral relationship you have them on the payroll business as well?

Mike Lyons, CEO, Fiserv: Yeah. It it goes I go back to, the client first mindset with Clover, and you’re building an operating system. Small businesses, with 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 done.

Whatever it is, can you put that in a suite of services for them? So you have a couple 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. And in the midst of that, they’re obviously out looking for small businesses every day, and those small businesses need payment processing and and a point of sale terminal with an operating system on it potentially. And so they now become a distribution partner for us.

We become a distribution partner for them. In May, we went on that their their software their run software got integrated to Clover. We’ll go the opposite way there, and then we’ll work closely with them on mutual referrals, back and forth. So 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, and 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 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.

Harshita Rawat, Senior Analyst, Bernstein: Fantastic. So, 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? And maybe also frame the back book opportunity.

Your roughly 10% of Clover’s merchants come from the back book. What drives that number higher and how?

Mike Lyons, CEO, Fiserv: Sure. So SMB, non Clover, roughly 4,000,000,000 in revenues, and growing. So that’s that book. With respect to back book conversion, you know, it’s it’s the question always comes up. If a SMB wants Clover and Clover is the right platform, we don’t deny them a Clover.

We get them Clover, and and, obviously, that’s serving your customer and have a client first mindset. In both The US and outside The US, we are and continue to test broader back book strategies to see what would work or not work going in in in bigger scale from non clover to clover. But we haven’t tried anything, any type of force broad based conversion yet. But it’s clear to us, and I I was it’s clear to us, and I assume it’s clear to you all that going forward, Clover is the primary platform for the SMB customer base because given the functionality it provides the customers and, obviously, the opportunity for long term revenue growth it provides for us. So I think it’s fair to assume as we go into 2026, you’ll see more directed back book strategy, but we wanna test and learn first before we go and do that and make make sure we understand, again, from a customer perspective what works.

And that’s the same thing that we’ve said over, over the years, 2026.

Harshita Rawat, Senior Analyst, Bernstein: I also wanna ask about enterprise and Carrot. Mhmm. How is Fiserv positioned here compared to peers in your view?

Mike Lyons, CEO, Fiserv: Yeah. Go back to this for a second. Carrot, where 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. And then we have a consolidated back end, real time information based back end.

And a large merchant can integrate once and get access to all of the great value added services that that we offer through the through the enterprise business. So if you think about it, it’s just Clover for big enterprises. And once you’re in there, you get global reach. You get you know, our we’re driving improved authorization approvals with AI. We do lowest low cost routing.

We’re driving modern types of payments with buy now, pay pay later, with pay by bank, whatever wallets, whatever you wanna engage with us and take advantage of the data that I talked talked about earlier, payouts, and and probably one of the most exciting areas for us going forward is the embedded finance platform. So Commerce Hub on the front end is is an area where we’re putting it’s an exciting investment area for us, and we’ll continue you’ll continue to hear about and focus on it. It’ll be really be the epicenter of innovation for us going forward, whether that’s stablecoin, whether it’s Agenda Commerce. And we’re taking you know, competitively, we need to get Commerce Hub global. We’re taking it global.

It’ll be live in Latin America by the end of the year. We’ve made it available to our banking partners, on the, for their enterprise, clients. And, over time, we, you know, look at opportunities to have Clover go through Commerce Hub so that large merchants have an opportunity to benefit from the the Clover platform. So I think we have a very competitive platform. There’s some gaps.

We’re continuing to invest in those gaps to fill them. But the amount of surrounds and the value added solutions that we could give to our clients, it’s it know, it’s as robust as anyone. I was with a large retailer earlier this week that basically go back over time. You study the relationship. It’s basically every single year they do five more products with us.

And it’s not we’re we don’t go and say and, you know, 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 where 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. And if they grow off of it, they keep coming back, for more. This is the strategy of the company. So we left. This meeting was all about modern, you know, the shifting commerce payments going forward, and we’re there as in the forefront of that conversation as competing with anyone, and we have years and years of background to do it.

And we left this meeting with at least five more, products, and services that we could go back to them on, and we gotta go deliver that promptly.

Harshita Rawat, Senior Analyst, Bernstein: So, Mike, we spent so much time discussing the merchant business, but Fiserv has an equally enviable asset in its financial solution segments, 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 Pfizer is positioned to win in this market?

Mike Lyons, CEO, Fiserv: Yeah. You know, I I worked at a bank, but we did a you you know, we did a lot of payments, and, you know, I think it goes back to that construct. $4,000,000,000 payments business. We’re big users of the Clover platform and use Pfizer for all kinds of things on the payment side of the business. So I I you know, as we go through it, just this recurring theme of the unique construct of the company with FI and merchant under the same roof just It keeps coming up as an opportunity.

So the FI business, I agree with you. It’s a great business. We’re providing mission critical software, highly recurring revenues, attractive operating margins, and these are broad based deep relationships that where where we operate with the banks. So it’s this concept of the ARPU theory of just more revenue per client if we stay operationally excellent and and add value of products and services. 10,000 banks we work with globally, 5,000 in The US, over 3,000 in The US.

We run their core operating platform, which is sort of in in bank etok. That’s sort of the mitochondria of the of the bank cell. So 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. And rough numbers, the company has always said you sell a dollar of core and you generate $3 of surround type revenue, and that includes, obviously, the significant partnerships we have with merchants, with banks as on the merchant side. So that part, the the the business at its core is incredibly good.

And now we face a world where banks are competing in a wildly competitive space that is increasingly dominated by technology. And if you don’t believe me, you know, pull up last week’s JPMorgan Investor Day and gotta add up various numbers, but it looks like they’re gonna spend $13,000,000,000 this year on technology. Right? And this is you you know, there’s now 9,000 other depository institutions in The US, credit unions, and banks that have to compete against that. And I was trying to explain it the other day.

It’s not like high school sports where there’s a five a division and a one a division. You’re out on street, and you gotta compete against Chase. So how do these banks and credit unions do it? Our belief is that we can be of help to them, and we’ve got scaled operating platforms. We’ve got a ton of technology, and they don’t all have to use it the same way, but, it’s our job to be their partner in this increasingly competitive world.

So we think there’s a tremendous growth rate there for for a long period of time, you know, leveraging this client first mindset and just delivering products, more and more products into them across the platform so they can compete. So, 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 didn’t meant I don’t know if I mentioned earlier, but number one card issuing platform. So there’s core of the bank, and there’s core of the card platforms. We’re number one in that. It’s a global business.

We’ve got great momentum in it, so we’re continuing to invest in in our platforms there, and and and we think there’s great opportunity there. We’re consolidating and enhancing some of our US 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. And then, on the modern, core piece, we’re leveraging Finzac, in a way that that we haven’t before both inside The US and outside The US.

And I think we haven’t had Finzac and a platform we’re investing on the on the card issuing side called VisionNext. You go internationally with Fintech and Vision Next, and we’ve got a real suite of products on the international side. And and it’s been a while since we’ve we’ve been competitive on the international side. US, obviously, it’s the cores plus Optus. The other thing, you know, so it’s card issuing, US core consolidation, Finzac, leveraging Finzac in a lot of different ways.

Embedded finance, I talked about it earlier. If you take our card issuing side plus Finzac plus the acquisition, which we just did, which is an embedded finance orchestration layer with PayFair, we think we have as competitive a product suite as anyone in that space. And, you know, the headline deals there for us have been DoorDash and Walmart’s One Finance, you know, banking company. But there are so many other opportunities on that front, so so we’re formalizing our efforts around that and and really honing in on it. And then we continue to to onboard clients to XD, our new digital platform.

And then finally, we continue to do development work on Cash Flow Central, which we think is a bit of a killer app for the SMB cash flow management space. So great business, lots going on, and we think we’re in a privileged position to continue to deepen our relationships with these institutions.

Harshita Rawat, Senior Analyst, Bernstein: So, Mike, let’s talk more about Cash Flow 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?

Mike Lyons, CEO, Fiserv: Yeah. It’s, we’re super excited on the Cash Flow Central, piece. We’re building it in conjunction with Meleo, which is a fantastic, software, company. It’s a great, partnership. For those who don’t know Cash Flow Central, it’s essentially an ARAP 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 down market a cash management solution that was created for middle market businesses or or sometimes even large corporate businesses, and 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.

So what we’re building, it goes back to this client first mindset, is we’re building what, the SMBs are telling us they wanna 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. The we just went live with our first client, Washington Federal, in April. There are we have 50 mid fifties of other banks signed up to go, and then we have hundreds of banks, maybe thousands, hopefully, but at least hundreds of banks watching to see how this develops. So we think it’s it’s gonna be a a significant tool for us and our really our first significant play into the b to b space, which we’ve identified as an attractive and un underpenetrated for us, TAM, the FI business.

Harshita Rawat, Senior Analyst, Bernstein: And I also wanna 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 gonna be scaling this year. How should we think about the growth prospects of this business?

Mike Lyons, CEO, Fiserv: Yeah. So our our card issuing business today, it’s a it’s of significant size, very attractive, margins. We have, to your point, we have great share, 25 of the 50 largest US credit card issuers, 80% of all the private label card issuers, and then we go global to six of the top eight card issuers in India, Two of the top five in The UK, and you sort of can work 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 that’s now onboarded.

Verizon comes later this year. Desjardins is another win that comes into next year, and there’s lots of the the competitive landscape is for this business is is wide open and lots of good conversations going on there. So we feel like we have good momentum in the business, and that momentum is really coming on the heels of significant investment. So our platform in The US 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 are, you know, some of the most significant and competitive credit card companies in the world are asking for.

So great progress in Optus. And then I mentioned earlier, we’re in the we’re close to rolling out Vision Next, which would be our international cloud platform, which is international card platform, which is cloud based, totally modernized. And that and Finzac bring this modern combination that, again, I don’t think it’s matched in the market, and we have a great opportunity to go forward with that. We talked about on the first quarter call, Vanquist Bank being our first client to sign up on on Vision Next. And so 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, and we are a significant player in the design and customization of the cards, which you may say, well, you you know, you do plastics. But 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, and and we’re a leading player in that. We even do Robinhood’s actual gold card, which is, you know, I think 10 karat gold or something. So it’s a it’s a big end to end great market share.

It’d be a business that that that we roll with for for for a very long period of time.

Harshita Rawat, Senior Analyst, Bernstein: And you’re also expanding, as you said earlier, into new verticals, government, health care, which also present opportunities.

Mike Lyons, CEO, Fiserv: Yep. That a little bit of that on the card side, but more broadly, I talked about some of the TAMs that we either partly in and or not in at all. B2B was one we just talked about. We’re partly in. I put government and health care would be in that same sort of bucket.

We’re in them, but there’s so much more we can do. We have a, on the government side, we have a long standing reputation of excellence in delivering some very significant and meaningful programs, on behalf of the US government, during periods of times of stress, including COVID, and other times, and we’ll continue to leverage that and and execute on that business. And we think we have a lot of solutions that bring efficiency to to certain areas of the payments world. Think we can do a better job, state and local governments, you know, so our expansion in government, we’re we’re growing government, but it’s more sales and distribution and, and focus than it is any type of major investments or or technology. On the health care side, really, the only place we’ve played historically is we’re a leading player in HSA cards.

So back to the credit issuing business, I should have mentioned it earlier. But in the health care space, we’re we’re we’re sure a dominant player in the HSA card space. So health care more broadly is an enormous TAM that we wanna figure out, and 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. So a significant amount of focus there.

We’ll we we’ve never had a formal health care 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 health care, and, we’ll continue to increase our focus on on sales and and and but we will have to add some subject matter expertise. And the trickiness about the health care vertical, even though, you wanna be in it is significant, there is there’s some increased compliance that goes with it. So some investment there.

So government is a, you know, just focus, add, run harder, get to more, levels. Health care, an awesome and very exciting TAM. Just we gotta do some work, you know, some work around it, but, we’re we’re in a great position to start there.

Harshita Rawat, Senior Analyst, Bernstein: I also wanna ask about digital payments, which is a sizable business for you as well. Star is the leading independent PIN debit network in The US. You generally benefit from the regulatory changes that have happened in The US 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. So tell us more about Star, and how how is Pfizer growing this business.

Mike Lyons, CEO, Fiserv: Yeah. Just one thing I wanted to finish on in health care is the, in the SMB space, the number one requested vertical from our bank partners is health and health care. They love this space for the banks. You know, they love the SMB space in general given the deposit rich nature of the business, but they in penetrating health care, it’s sort of they all want help in that. So a good focus area for us to go to.

So STAR and Excel were the third largest debit network. It’s a great business, relatively sizable in scale. It grows at attractive rates. We serve it serves both the merchants and FI. So 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, Sezzle was the one from the first quarter where we’re in there driving low cost routing, helping them run their businesses better. And 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 start without it. The the the network business is a really attractive business, and and and we we wanna continue to grow it.

Capital One, deal, a lot of banks, a lot of our FI clients had defaulted to put Pulse on the back of their card as because it was you had to put something on the back of the card, and it was Pulse, and Discover didn’t you know, wasn’t interfering competing with them to a greater extent. We don’t know how that that dynamic will change with banks putting another bank on the back of their card, and, you you know, we we stand ready, if somebody else needs an alternative to, put on their card. And, and then 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’s got both, government governmental impacts of that, and then there’s market dynamic impacts of that.

And we’ll be you you know, we continue to be on top of it and and studying it carefully.

Harshita Rawat, Senior Analyst, Bernstein: So, Mike, I want to ask about capital allocation. Strong track record of good capital allocation has been a key differentiator for Pfizer, 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.

Mike Lyons, CEO, Fiserv: Yeah. No change to how we’re thinking about the framework. We’re always we we study everything, and we obviously listen to our owners as to get their thoughts on effective capital allocation. But, you know, Fiserv studied for a long time. It’s been in a privileged position of generating substantial cash flow and having a strong balance sheet.

That that certainly won’t change. And then as we go through the capital priorities, obviously, funding our businesses and and making sure that they’re in a position to support our clients, meet our clients where their needs are so we can drive organic growth is the priority, and you can you’ve seen the capital expenditure levels the last few years in the billion and a half dollar range. And then, we go to, buybacks, and m and a. And, over the last couple years, obviously, buybacks has gotten the bulk of, that, and that will continue. And then on the m and a side, we we study everything.

We feel like we’re in a very privileged position on the m and 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. And what’s emerged historically, other you put aside some of the bigger type deals over the years, what’s emerged is a series of highly strategic value add deals. And we’ve done four recently. Pay I mentioned PayFair earlier, CCV, Money Money, and and Pinch Payments.

These are all, as we work through, we’re totally integrated with our strategy team and our business teams. And as our businesses are pursuing opportunities or either within TAM or outside of TAM, our strategy team’s right there. And we get this look at everything out there and where we can add to the value, we do it, and and and that will continue. So I think, the easy conclusion on on on capital is the framework’s worked, we’ll we’ll we’ll continue to run, the same game plan.

Harshita Rawat, Senior Analyst, Bernstein: So, 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?

Mike Lyons, CEO, Fiserv: Yeah. I think less understood. I think at least I’ll go to to back around to where I started. Some of the stuff I’ve gone through and had had an underappreciation for is real 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 the competitive advantage of having that and a multitude of opportunities that come from it.

Embedded finance may be it may manifest itself in a lot of different ways. Obviously, embedded finance is very exciting. Banks wanna become more payment like, and, a lot of corporates wanna become more bank like, because they have there’s certain solutions embedded in their own businesses and strategies. So I certainly, that’s one. I think the breadth and depth of the relationships, you you know, take SMBs aside.

We hope they use everything on the we hope we put 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, you know, a large regional bank that said we have you you know, we’re on core. We’re on credit. We’re on debit. We’re on bill pay. So don’t forget us.

You you you know, we we go with Pfizer. That’s I don’t think, know, we’re so important as the partners in that 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. And then, you know, I think the, global opportunity, it was underappreciated. And then 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 you know, I was with one this week that say it’s it’s three. So they need us to to grow with it. So it’s a great company. Super honored to have the opportunity to lead it forward.

We have a terrific team, and I think the the the growth, value added client first mindset growth, is in front of us.

Harshita Rawat, Senior Analyst, Bernstein: Mike, I really enjoyed our conversation today. Thank you so much.

Mike Lyons, CEO, Fiserv: Oh, thank for having us.

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