Fiserv Logs Robust Results in Its Merchant Unit As Its Clover Tech Surges Ahead

Fiserv Inc., already a behemoth in merchant processing, is preparing to straddle its twin pillars of acquiring-bank relationships, on the one hand, and its own acquiring operations through a Georgia bank charter, on the other.

The charter, which the big processor applied for last month, has “a very specific purpose,” Fiserv chief executive Frank Bisignano said early Tuesday. “It’s a very specific-purpose license that allows for merchant acquiring. We can control more of the outcome than we could before.” He hastened to add Fiserv is “not abandoning our bank partners, but the ability to sponsor merchants would be very valuable.”

Bisignano’s remarks, which came in response to an analyst’s question as Fiserv reported its fourth-quarter 2023 results, emerged as the company logged a robust quarter for its merchant segment and its technology, particularly the Clover point-of-sale device. Its merchant-acceptance unit, at $2.11 billion in revenue in the quarter, up 13.7% year-over-year, now accounts for 43% of Fiserv’s total take.

Fiserv’s processing business doesn’t depend on one device, but clearly the Clover terminal is lending considerable momentum, given the attention it received on Tuesday’s earnings call. The technology, which Fiserv acquired in 2019 through its massive merger with First Data Corp., accounted for $271 billion in annualized gross payment volume in the quarter, up 17%, reported chief financial officer Bob Hau.

That performance helped account for a 30% year-over-year jump in revenue from Clover in the quarter, Bisginano reported. In particular, “restaurants continue to outperform” with the device, he added. More to come, the top brass projected. “Clover’s growth rate is accelerating,” said Hau during the call.

Much of this growth, he added, is coming through relationships with independent software vendors, the parties that weave payments capability into overarching business software. “We continue to grow pretty meaningfully in the ISV channel. We see growth there for Clover,” Hau told the analysts.

Bisignano pointed to the company’s development of capabilities in artificial intelligence as an outcome of the sheer quantity of data Fiserv scoops up through its payments technology. “Our data and AI-powered intelligence puts us on a path to be an effective enabler of AI. We’re in the early innings,” he said. “We start from a position of strength because of the sheer amount of data.”

The data, he added, springs from the company’s varied processing segments in acquiring but also beyond them, including 1.6 billion card accounts on file. “Data is a powerful AI asset,” Bisignano said.

Another contemporary topic was also on the minds of Bisignano and Hau. Fiserv’s debit network, Star/Accel, is gaining momentum from a Federal Reserve ruling last year that underscored the requirement that banks offer merchants choice in networks for online debit transactions as well as for in-store debit. That requirement, which has been in force for more than a decade as part of the Durbin Amendment, was widely ignored by banks before the Fed’s ruling. Now, “we feel good about the Reg II opportunity,” said Bisignano, referring to the part of the law behind the amendment that mandates the debit-routing rule.

For the quarter, Fiserv reported $4.92 billion in revenue, up 6%. Revenue for all of 2023 came to $19.1 billion, a 7.6% rise. For the company’s payments and network segment, revenue for the quarter totaled $1.72 billion, up 3.2%. For the year, revenue rose 7% to $6.7 billion. The financial-technology unit reported revenue of $800 million for the quarter, down from $823 million a year ago, while for the year revenue was flat at $3.17 billion.