It's 10:30, America. Do you know where your money is? Fiserv does. The company provides financial services technology to banks, thrifts, credit unions, and other entities. Its offerings include core processing systems, electronic billing and payment systems, ATM management, and loan processing. It also provides licensed software, consulting, and other support services to round out its offerings. Fiserv serves customers of all sizes, but its bread and butter has traditionally been small to midsized banks without in-house processing units. Other clients include insurance companies, merchants, leasing firms, and government agencies. Fiserv primarily operates in the US but has offices in about 20 other countries.
The company makes about 80% of its revenues from processing and services revenue and the balance comes from ancillary product sales. It serves approximately 16,000 clients worldwide and enjoys a very high renewal rate of 99% (excluding clients lost because they have, themselves, been acquired). Banks typically stay with their service providers as the cost and work involved in changing providers is prohibitive.
Fiserv has capitalized on the increasing reliance on transaction-oriented services, which demand a large data-processing capability. The company has made more than 100 acquisitions in its history to broaden its offerings and stay relevant in the changing world. Most recently, it acquired Open Solutions, a provider of collaborative, enterprise core account processing technology for financial institutions, for $55 million (plus the assumption of $960 million in debt) in 2013. The deal allows Fiserv to add some of Open Solutions' products and services to its portfolio, including Open Solutions' DNA platform, a real-time open technology account processing platform.
Among Fiserv's most notable deals was the purchase of electronic bill payments firm CheckFree for $4.2 billion in 2007. The CheckFree acquisition was the largest in Fiserv's history and allowed the company to serve a broader market.
The company has since continued building its operations through acquisitions and new offerings. In 2010, it acquired AdviceAmerica, which provides desktop technology for financial advisers. It also introduced ZashPay, a peer-to-peer platform available to consumers. The following year it acquired two firms it had previously held partnerships with: credit union payments processor Credit Union On-Line and mobile banking provider Mobile Commerce. Fiserv also bought digital payments company CashEdge for some $465 million in mid-2011.
Adding CheckFree and other businesses helped Fiserv become one of the leading financial technology providers but also raised its debt levels. Company management has been repositioning the firm by selling noncore units, cutting costs, and reducing its debt. The careful repositioning of the group and the key role Fiserv plays for its customers have helped ease the sting of the financial crisis. The company's earnings have remained steady, even through the downturn. In 2011, revenues grew some 5% to $4.3 billion from its 2010 revenues of $4.1 billion, while net income slipped about 5% to $472 million (down from $496 million in 2010). The growth has been led by the company's payment segment and by revenues from acquired companies.
Despite some belt-tightening in the banking industry, core processing services remain essential to Fiserv's customers, and lenders rarely jump ship and switch service providers. Among the threats to Fiserv and its competitors is the ongoing consolidation among banks, with record numbers of small to midsized firms failing and banks buying one another. Additionally, a growing number of larger banks have been converting to in-house systems. Finally, primary competitor Fidelity National Information Services has been doing some growing on its own through mergers and expansions, which could potentially cut into Fiserv's 37% market share. – less