Monday , September 26, 2022

Clover And Carat Help Propel Strong Results for Fiserv

Merchant acquiring is Fiserv Inc.’s largest and fastest-growing business, and in the second quarter it showed no signs of slowing down. Driven by technologies like Clover, a set of point-of-sale gear, and Carat, a fast-growing commerce platform, the acquiring unit posted $1.9 billion in revenue in the quarter ended June 30, up 14% from the same period last year, according to results posted early Tuesday.

Both technologies have had a strategic impact on the company, accounting for accelerating growth, top officials at the company said during a call with equity analysts. “We are transforming from selling merchants point solutions to selling operating systems. That makes us more valuable to our customers,” Fiserv’s chief executive, Frank Bisignano, told the analysts while discussing the company’s second-quarter results.

Clover, which generated $233 billion in annualized gross payment volume for the quarter, ended up with a 24% jump in year-over-year revenue. Carat’s revenue, meanwhile, grew 22%. Fiserv did not break out the actual revenue figures for either platform.

Bisignano: “We are transforming from selling merchants point solutions to selling operating systems.”

At the same time, the acquiring unit benefited from strong growth among independent software vendors, the operators that weave payments capability into their clients’ business software. Payments volume among this group grew 39% year-over-year and 44% year to date compared to last year, Fiserv reported. Some 89 ISVs signed on to work with Fiserv during the period.

Nor is Fiserv retreating from a recent trend toward acquisitions. Clover and a number of other recently added technologies came to Fiserv via deals, and the company expects to keep looking for prospects. “The strength of our balance sheet gives us the ability to look at both stock buybacks and accretive acquisitions,” chief financial officer Bob Hau said during the earnings call. “We’ll continue to do both.”

He conceded, though, that inflation, which has trended dramatically upward over the past year, has played a role in Fiserv’s favorable results. “We’ve got some revenue growth driven by inflation. Inflation is certainly driving some of that,” he told the analysts. The inflation rate for the year ended in June was 9.1%, the highest rate since November 1981, according to the U.S. Labor Department.

Fiserv’s payments and network unit benefited from continued  growth in Zelle, the peer-to-peer payments service owned by Early Warning Services LLC and offered via banks and processors. Zelle transactions grew 35% for Fiserv year-over-year, while the number of clients offering it climbed 54%. More than 1,000 financial institutions now offer Zelle through Fiserv, the company said.

An investigation by certain members of the U.S. Senate and by the Consumer Financial Protection Bureau, prompted by concerns about fraud on P2P payment networks including Zelle, has cast a shadow over the service in recent weeks, though Hau told the analysts the service accounts for 2% of the payments segment’s revenue. “We’ll continue to see good growth in Zelle,” he said. “It continues to ramp in number of users.” Overall, the payments and network unit recorded a 7% year-over-year growth in revenue, to $1.52 billion.

Financial technology, the smallest of the company’s three units, ended the quarter with $803 million, up 6%. The division’s integration of Finxact Inc., a core software provider for banking, is “well under way,” Bisignano said. The deal for the company closed April 1.

Overall, Fiserv posted adjusted revenue for the quarter of $4.23 billion, up 10% year-over-year.

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