2007

Fiserv tops in tech 12/30 MilwaukeeJournalSentinel Fiserv will start the new year as something it hasn’t been before: the nation’s #1 provider of technology for paying bills online. That position comes by virtue of its $4.4b acquisition this month of Checkfree that has about 50% of online bill payment market share. The acquisition - biggest in Fiserv’s acquisitive history - isn’t necessarily transformational, said Fiserv’s Jeffery Yabuki. Fiserv always has been & will continue to be a major provider of automated accountkeeping & other basic functions for banks & credit unions. Yabuki said the acquisition is a ‘catalyst’ for Fiserv’s drive to be the best one-stop vendor for any product or service financial institutions of all sizes might need or want. Joining forces with the top provider in online bill payment - technology that allows bank customers to receive & pay monthly expenses like utility bills through a bank’s Web site - has brought about a companywide bonus that Fiserv executives said they didn’t see coming. ‘It has energized the whole organization,’ said Fiserv’s Norm Balthasar. ‘I think people are really excited about being in the forefront.’ Fiserv would have continued to do well even if it hadn’t picked up Checkfree, said Franco Turrinelli, William Blair. But the acquisition is a good move. ‘If they do the right things with the combination of the 2 companies, then I think it can be transformational for both in the sense that now Fiserv will have all of the pieces - bill payment, online banking, core banking, plus all the infrastructure that needs to go around that - to develop a superior next-generation system for the modern bank where the online channel probably is as important if not more important than some of the physical channels.’ Not that there aren’t challenges. The financial technology business is extremely competitive, & Fiserv’s biggest competitor is right next door in Brown Deer - Metavante, which was spun off by M&I this fall. It’s no secret that the banking industry as a whole has been walloped this year by fallout from the subprime mortgage crisis & the credit crunch. The banking industry is the buyer of Fiserv’s products & services. But woes in the banking industry won’t necessarily mean a reduction in technology purchases by banks & credit unions, said David Koning, Robert Baird. Baird completed a survey of 153 small banks & CUs ‘& we found pretty overwhelmingly that they don’t expect to slow down core processing spending.’ Part of the reason is that they’re under contracts of 5-7 years. But perhaps more importantly, the basic technology that Fiserv provides is necessary to run the bank. ‘And the smaller banks are always trying to compete with the bigger banks, so they’ll need to layer on new products like security products, online banking & bill pay products, more compliance products. All that stuff keeps spending going.’ Fiserv picked up some larger banks as customers through the Checkfree acquisition, but that has its dangers, some analysts say. BofA accounted for 20% of Checkfree’s annual revenue & now will make up 5% of Fiserv’s. There’s no guaranty BofA will keep using Fiserv, said Avivah Litan, Gartner. ‘If BofA is out of the picture, they are not as formidable.’ Koning said it would be complicated for BofA to leave Checkfree’s system & would take time - if the bank even makes a decision to handle its technology in-house. Fiserv has been built through acquisitions - 140 of them since it was founded in 1984 - & will continue to look for companies that would strengthen it. Yabuki, a former H&R Block executive who joined the firm as CEO 2 years ago, has shown a willingness to shed units. In November, Fiserv announced it would sell most of its health care businesses to UnitedHealth Group for $775m in cash. The health unit didn’t fit in well enough with Fiserv’s focus on the financial industry. ‘At the end of our analysis we believe that Fiserv Health would be better off in the hands of someone like United Health. That’s their business, that’s what they do. By the same token, it’s why we went out & paid $4.4b for Checkfree - because we believe Checkfree in our hands would create more value than it would on a stand-alone basis.’ Fiserv is significantly bigger than Checkfree, with $4.5b in revenue in 2006 to almost $1b for Checkfree in its most recent fiscal year. Yabuki said he sees no reason to move headquarters from the Milwaukee area, although the company, with 270 locations worldwide, is quite decentralized. ‘We’ve been in Milwaukee forever & we like Milwaukee & we have no plans to be anywhere but Milwaukee in terms of corporate headquarters.’ Yabuki said his top priority in 2008 will be ‘taking the Checkfree acquisition & making it a core of Fiserv.’ ‘Hopefully, at the end of 2008, people won’t say, ‘How are things going with Checkfree?’ They’ll say, ‘How are things going with electronic bill payment?’ We won’t have that reference anymore because we will all be part of the same family singing off of the same song sheet. I think we’re going to get there.’