Fiserv Racks up Growth Via Strength in Merchant Services

Fiserv Inc.’s top brass early Wednesday celebrated a second quarter in which adjusted revenue jumped 7% and adjusted earnings per share grew 18%, but it was new programs and alliances—including one with Apple Inc.—that took center stage as the company presented its second-quarter results.

Cash Flow Central, a banking alliance Fiserv announced in November to offer financial institutions a package of digital-payments and merchant-acquiring capabilities, “will go live this quarter [and] the pipeline is full,” Frank Bisignano, Fiserv’s chief executive, told equity analysts on a call to discuss the company’s results.

The new program, which Bisignano said “takes a cost center [at banks] and turns it into a revenue generator,” is billed as a way for banks to offer small merchants simplified processing and point-of-sale technology for a wide range of payments flows. The program, which has attracted half a dozen institutions so far, will include Clover, Fiserv’s fast-growing POS technology. “Banks love the bundle,” Bisignano said. “This will be a long-term growth engine.”

Overall, financial institutions are turning to such offerings—including merchant services—in increasing numbers, according to Fiserv. “Banks are adding merchant acquiring as a way to grow,” Bisignano said, in a trend that follows years after many financial institutions exited the business, leaving it to third-party providers.

With Apple, Fiserv has added a feature that allows cardholders to carry installment loans on their credit cards when they use Apple Pay at checkout. This adds a feature for Apple Pay but also “allows our issuing partners to compete with BNPL,” Bisignano said, referring to buy now, pay later credit programs. The program comes after Apple last month shut down its fledgling Apple Pay Later program, which it had launched only a year earlier as its entry into the BNPL market.

The new program “allows our issuing partners to compete with BNPL. We see multiple opportunities ahead,” Bisignano told analysts on the call.

But Fiserv is also expanding in international markets, and doing so even beyond its well-known moves in South America. The company will have pilots going in Brazil and Mexico next year, and is also looking to grow active in Australia, where a pilot is expected to start next month, according to Bisginano. “We won’t get a ton of growth out of [international activity] in 2024. We’ll see it in 2025,” he noted.

For FedNow, the Federal Reserve’s real-time payments network, Fiserv signed 32 banks in the quarter, bringing its total to nearly 300 so far, according to chief financial officer Bob Hau, who joined Bisignano on the earnings call. That tally indicates Fiserv has accounted for about one-third of the 900 banks that have signed up for FedNow, which launched a year ago.

For the quarter, Fiserv recorded $4.8 billion in adjusted revenue, good for that 7% year-over-year increase. Organic growth—the increase excluding acquisitions—was 18%. The company’s Merchant Solutions unit accounted for half the quarter’s revenue, growing 7%. The unit’s Clover point-of-sale technology racked up $313 billion in annualized volume, representing 17% growth from a year ago.