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More thoughts on $FISV following investor day last week

This time focused on the newly named FinTech segment: core account processing and digital banking arm of legacy Fiserv

TLDR: While it’s the smallest segment (~20% of FISV revenue), it’s the “glue” that ties things together

1) $FISV FinTech segment is the #1 provider of core processing and digital banking solutions to the ~11,000 banks and credit unions in the US

Its mission critical systems power 3,700 FIs:
- core processor for 1 out of every 3 banks
- digital offering for 95 out of top 100 banks

2) This segment dates back to the origins of $FISV, and today it’s the market share leader with nearly 40% of all US banks relying on FISV to power everything from new account opening, items processing, online/mobile banking, regulatory compliance, general ledger/reporting, etc

3) Not just the market leader, $FISV is also has a best-in-class offering

Well regarded Aite Group rates it better than nearest competitors $FIS $JKHY

Today, these 3 dominate the market and maintain an oligopoly structure, with various other point solutions pretty far behind

4) $FIS skews larger multinational banks (2x+ as many $10B+ banks as FISV/JKHY combined) and $JKHY is 1,700+ community/credit unions

However, the sweet spot for $FISV is $1-50B banks (now 500+ as clients) while also maintaining a strong base of 3,200+ community/credit unions

BlueToothDDS
@BlueToothDDS

$FISV investor day this week provided some new insights into the composition of — and more importantly, the growth engines within — each of its 3 operating segments

Will attempt to deep dives on each to build on some of my musings from earlier in the year on this topic 🤗 https://t.co/Amlnje1Qiq

3) The revenue mix of $FISV today (post FDC merger) is roughly ~40% merchant acquiring, ~45% issuer processing and other payments related services, and ~15% core bank processing. Will take these in turn, then highlight growth levers I\u2019m most excited to watch in the coming years pic.twitter.com/yhvkCQrsF8
— BlueToothDDS (@BlueToothDDS) March 6, 2020

Will also try to bridge to an earlier thread laying out the $FISV growth algorithm and the operational/financial levers that support its medium-term outlook of 15-20% FCF/share growth

Here we focus on the top line, most notably the impressive acceleration across all 3 segments https://t.co/8HzMhEC5Bj

12) $FISV has both operational levers ($0.6B revenue synergies, $1.4B combined cost synergies + add\u2019l cost take out) and financial levers ($30B+ deployable FCF) to support its 15-20% compounded FCF/share growth

... and this is all before underlying business momentum (tomorrow) pic.twitter.com/JBtlGQIfBT
— BlueToothDDS (@BlueToothDDS) December 9, 2020

Let’s start with Merchant:

1) This segment, which ~40% of $FISV revenue today, is the #1 merchant acquirer globally processing $3T+ annually for 6M merchants worldwide

2/3 of revenue is from SMBs, ~20% from mid-to-enterprise merchants, remaining ~15% is wholesale processing

2) 🇺🇸 is 3/4 of the $FISV Merchant segment and the scale of this business is unmatched: it processes 40% of all in-person purchases in the US, covers 80% of all US zip codes and accounts for 10% of US GDP. This book of business is the most balanced in the industry https://t.co/Qlkk7lz3jQ

4) $FISV merchant business is the largest US acquirer processing $2.4 trillion of payments annually (including through JVs with BAC, WFC, PNC, C) accounting for 10% of \U0001f1fa\U0001f1f8 GDP. This segment includes Clover, which focuses on SMBs and is $105B runrate today growing at 40%+ annually pic.twitter.com/M5j4mbeiJX
— BlueToothDDS (@BlueToothDDS) March 6, 2020

3) Internationally, $FISV Merchant has strong position in EMEA (top 3 through various JVs and alliances) and several high growth countries, among others: India 🇮🇳 (top 3 with ~15% share), Argentina 🇦🇷 (~50% market share today), Brazil 🇧🇷 (routing ~30% of all electronic payments)

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