ACI Worldwide, Inc. (ACIW) Earnings Call Transcript & Summary

Welcome to ACI Worldwide's Analyst Day 2020. Please welcome ACI's Vice President, Investor Relations and Strategic analysis, John Kraft.

Welcome, everyone. We're sorry that we can't be together in person this year, but we're happy so many more of you were able to join us for our virtual event. To state the obvious, much has changed in the world this year, and that's also true at ACI. We're excited to introduce you to our new leaders and to share important and exciting changes we're making to the organization, strategy and brand. To start us off, I'd like to introduce our new President and CEO, Odilon Almeida. Odilon joined ACI in early March, coming to us with a proven track record of value creation for large global companies. He has 2 decades in payments and senior leadership experience in multiple industries and countries. He was an operating partner at Advent International, and held a number of senior leadership roles at Western Union. Most recently serving as President of Western Union Global Money Transfer. Odilon's experience includes a strong track record of value creation through both organic and inorganic growth as well as a demonstrated go-to-market and operational excellence. As you'll hear today, he has hit the ground running with a plan to accelerate revenue growth and deliver long-term value to our shareholders. Welcome Odilon.

Thank you, John. When I start looking at ACI, what I saw from the outside was the same that I found on the inside after joining the company in March. There were no surprises, which is good news. Our strengths. What I confirm is that ACI is a large, dynamic company in a market that's experiencing tremendous growth. And in fact, the COVID pandemic has further accelerated. I confirm that ACI has blue-chip customers with high retention rates that use ACI's mission-critical software to perform the payments functions that are so critical to their businesses. It has an R&D center of excellence, a great portfolio of products and solutions, and it has a successful track record of creating value through M&A. On the other hand, I saw several areas of improvement that we need to focus on: profitable organic growth, go-to-market execution, the predictability of our results, a simple story on operating model. These areas of improvement are what attract me to ACI as they overlap with my experience. I also found the Board of Directors ready for change and eager for significant value creation. In summary, ACI needs closely align with what I bring to the table. The readiness of our Board of Directors gives the company and its leadership support for change. It's a great fit, and I'm very energized by that. With that in mind, I and the leadership team have used this first months at ACI to create a plan for a new ACI. If I can give you 1 key takeaway for today, it would be this, ACI has the opportunity to create significant value in the coming years. We will do this through continuous profitable organic growth, a more predictable business on an annual basis, step change value creation with M&A. And last but not least, a simpler story. Our program of today, we'll dive into each of these areas, so fasten your seatbelts because today, we launched our new ACI. We will show details of our plan, and we will also introduce you to some members of our leadership team, who will lead the company into this new phase of growth. Let's take a look at our agenda for today. Fit for growth. We will start with Tony, our new CHRO, who will describe how we are structuring our organization to become nimble and agile. Al Monserrat, our new Chief Revenue Officer, will show you why and how we are aiming to become a best-in-class sales organization. Focus on growth. In this segment, we learn about our product strategy and where we are focusing our investments. Jeremy, our Chief Product Officer and Eve, our Chief Technology Officer, will lead us through this important pillar. Step-change value creation through M&A. Craig Maki, the key leader behind our successful past with M&A will lead this pillar. Craig will share how we will use acquisitions and divestures to drive inorganic value creation. After that, we are going to have a panel discussion, and it will feature gas from Barclays Payments, Mastercard and the Federal Reserve Bank. For a discussion about real-time payments. In simplifying our story, Mike, our Chief Strategy and Marketing Officer, will make our current complex story, modern, powerful and simple. In the long-term outlook, Scott, our CFO, and most importantly, a pillar of our company, will talk about how we will shift to greater financial predictability. And what to expect from ACI worldwide going forward. By the end, I will come back for closing remarks. And after it, we will open it up for Q&A. With that, I'm happy to introduce Tony Dinkins, our new Chief Human Resources Officer, who joined us in September. Tony, I believe it feels more like 2 years than 2 months, right?

Yes.

Tony has more than 30 years of experience guiding both the people and the business sides of HR. And he's known for bringing unique strategies to companies that help drive growth. He was most recently the CHRO of Fiesta Restaurant Group and led the international HR function during the Avaya spin-off from Lucent Technologies. He also led HR during the Cable & Wireless post-merger integration with Columbus Networks. And at Citrix, he led all of global HR support, as well as organizational development efforts, including succession and executive development. I'm proud to say that Tony has hit the ground running at ACI. Tony. The bow is with you.

Thank you, Odilon. Our simpler story begins with the change from 2 business units to a more efficient, nimble and agile functional operating model. That will unleash ACI's rapid growth potential. Core to the model are 3 operating units: commercial, which will achieve revenue opportunities ahead of the competition. Product management with full P&L accountabilities for our key growth markets and tech and operations, which will accelerate our innovative cycle. But this isn't just about the changes in the boxes on the organization chart. We are eliminating redundancies and creating new cross-functional processes and installing decision rights. Decision rights like annual sales planning and quota setting, marketing program planning and execution, and of course, product innovation, road maps and life cycle management. This new ACI functional model is flat, lean and has less layers. The benefits of this flattened structure and streamlined management are senior leaders are closer to the action and to the customer. We eliminated redundancies and shadow staff. And the cultural impact is enhanced employee engagement and morale, because supervisors are no longer required to be micro managers, and employees are empowered with broader responsibility. Employees are now more decision-makers versus analysts. And we create opportunities for strongest talent to get exposure and have greater impact and take on more responsibility. Our new functional model is built to be more efficient and to maximize productivity with less expense, less senior leaders at the Director and above level, fewer supervisors and increased number of direct reports, meaning a broader span of control and communication flows effectively and quickly through fewer layers while ideas are less distorted as they move up the organization. The decisions will be more relevant and implemented more rapidly. And the decisions will be made by those with detailed understanding of the business circumstances and the customer needs. The new functional ACI model will be lean, flat, efficient with clear accountabilities, better communication and more opportunity for employees to grow and reach their career potential. But we will also achieve significant annual savings through eliminating redundant departments and low-value work, through eliminating shadow functions and having less management overhead. These savings result in $35 million that will be reinvested to drive ACI's future growth. Another part of the strategy has been rationalizing our office space. ACI's office footprint will go from 56 locations to 39 locations. During the global COVID-19 pandemic, most of our employees have worked remotely. This has prepared our workforce for flexible work arrangements. Going forward, more than 25% of our total workforce will be full-time remote workers. They'll still have the ability to access office space on demand for in-person collaboration. But we will have lower facility footprint and lower fixed real estate expense. We're also moving our corporate headquarters office from Naples to Miami's finance district. Where we'll have lower operating costs in the new Miami headquarters compared to Naples because our smaller space footprint, more than half. And we'll have minimal disruption for those Naples employees who are relocating to South Florida. We'll also have greater access to markets, customers and investors. And greater access to additional world-class talent. It will be easier and more convenient to access international travel and transportation, and most importantly, we will be in the gateway to the world and increasing business opportunities. Next, I'm happy to introduce Al Monserrat, our Chief Revenue Officer, who joined ACI in August to lead our commercial organization. Al previously served as President of the Imaging division of Nuance Communication as well as CEO at RES Software, and he has extensive experience leading sales organizations at global software companies. In his role as Senior Vice President of Global Sales and Services at Citrix Systems, he nearly doubled the company's revenue, in part, by igniting growth in key emerging markets and rethinking market strategy and investments. As he takes on a similar growth challenge here at ACI, we're confident that Al will help drive comparable results.

Thank you, Tony. We are investing $35 million to drive growth in the new ACI. This includes investing in high-growth product areas where we see the greatest potential. Our Chief Product Officer will share more on this. It also includes creating a commercial organization and investing in sales and marketing to grow revenue and deliver exceptional customer satisfaction that builds long-term trusted relationships. ACI has a valuable, loyal customer base, and this investment will lead to substantial organic growth. Here's our strategy. We are increasing sales and marketing investment by 25% and and increasing the number of sales associates by 35%. Overall, this includes investment in demand generation, sales, solution consulting and systems to optimize our efforts. By doing this, we will have higher sales coverage to deepen our customer relationships as well as to participate in a larger number of deals. We have great products and a growing market. I've heard from our customers that they want to spend more time with us sharing their strategies and involving us in their growth plans. Now we will have more people engaging with customers and winning deals. As Tony mentioned, we are flattening the commercial organization to decrease levels between CEO, sales reps and ultimately, customers. Customers have told us that we need to move more quickly, simplify how we work with them and encourage access to our leadership team. These are all things that build strong relationships and our changes to the organization structure will lead to increased customer responsiveness and faster decision-making. This is very important, especially in competitive markets or when competing against start-up organizations that are very flat, which we frequently do. This also improves communication within our company, so we can respond more quickly to customer needs. Next, we are organizing commercial teams by geography first, then customer segment. Customers often mention that they are not aware of ACI's many areas of payments expertise. We will now deliver a cohesive message to all customers. ACI is a strong, established company and an industry leader across multiple financial technology segments. When delivered consistently across segments, the effective use of our brand puts us in a position of strength against our competitors. This is much more powerful than fighting individual battles in each segment. Through this greater geographic focus, we will also better understand local customer needs and improve local execution. We are building detailed plans for the intersection of each geography, segment and solution, thereby ensuring that our teams have the right products, strong marketing support, complete training and the right level of staffing for each opportunity. Our local teams know which opportunities to pursue and how to win those opportunities. They will be better prepared to have valuable customer conversations. This will yield the highest return on investment. Our next step in the strategy is to build an exceptional sales organization. This includes process, people and the enabling systems. What has worked well for me in the past is organizing in a way that creates specialization for roles and defines clear goals for each part of the commercial team. We will have specialization across the team based on 4 roles. Growth team members will focus on increasing the quality and quantity of the opportunity pipeline and accelerating the time to close deals. We will execute marketing programs geared towards demand generation and opportunity creation. And we will have best practices for the sales team to take those opportunities to closure in the fastest possible way. New sales team members will specifically target new logos and major cross-sell opportunities. Our retainment expand team will ensure we deliver high customer satisfaction, maximize renewals and expand our business within existing customers. We have a team improving our enabling systems so that we can use business intelligence and predictive analytics to improve our performance. Their goal is to build monitoring capabilities to drive accountability. As part of building an exceptional sales organization, we're also evaluating our people to ensure we have the right skills and talent. For example, we've already hired an experienced leader with a history of success accelerating revenue growth to lead all of our growth activities, including demand generation. Additionally, we have started to bring in new regional leadership in specific markets. Individuals with a strong, strategic, solutions-oriented sales background from big technology industry leaders. These are all people with previous experience, leading transformations like ours. And we have taken several existing ACI team members and put them in new roles where their experience can have a greater impact on the overall team. Optimizing sales efficiency and productivity will be critical to improving focus and discipline. We're designing a simple compensation plan that motivates our sales associates and will highly reward achievers. We will use analytics to identify and prioritize the target markets and opportunities with the highest and quickest return on investment. We have a series of projects in place to automate back office and sales admin functions, so that our sales associates have more time to sell. We're implementing consistent ways to better train and more rapidly evaluate sales team member performance from individual metrics and targets to predictive analytics to business intelligence, we will be able to identify who, what and where we get the best return on incentive. I've shown you how we are adding capacity, getting closer to the customer, creating focus and optimizing our team. The next important action is transforming our customer relationships from transactional to becoming their trusted adviser. This involves 5 elements. We are shifting our pricing strategies from cost to value. This change will reward customers for doing more business with ACI. Our customer engagement has historically revolved around the point of renewal. We will transform this to be an ongoing nurturing process. Going forward, we will be proactive in developing account plans that identify additional opportunities at each customer. Our sales team and sales training will move from being product-centric to being customer-centric. And when combined, these changes will result in us moving our customer relationships from being tactical to being strategic. Some of this is basic, but implementing it in a consistent manner will drive organic revenue growth. It will make us the first person customers call when they need help with any of their digital payments initiatives. This is how you build consistent, repeatable success that drives revenue growth. Lastly, as we move forward, we are aligning sales, marketing and product organizations. We know that when these are cohesive, consistent and customer-centric, companies achieve faster revenue growth and deliver higher profitability. We want to be one of those companies. We began this work with the development of the 2021 plan, which will put us in a position to execute strong from the start of the year. Now I'm pleased to introduce Jeremy Wilmot, ACI's Chief Product Officer, to tell you more about our product strategy. Over the last 20 years, Jeremy has led our geographical growth expansion for ACI outside of the U.S. through leadership roles based in South Africa, then Europe, then Asia, then Latin America. Before moving to a headquarters role leading our marketing and revenue functions in 2015. His most recent role as Group President of our banks and intermediary P&L prepares him very well for his new role as Chief Product Officer. Jeremy has firsthand experience and connection to our customers and how our solutions generate value for them. Jeremy?

Thank you, Al. ACI is focused on growth. So what does that mean? It means we will not try and be everything to everyone. It means we will focus on a smaller number of market opportunities, and we will win in those target opportunity areas. ACI will drive increased organic growth rates by investing and winning in 3 high-growth market opportunities that will yield double-digit organic revenue growth. Number one, low-value real-time payments. For the consumer, this means immediate funds availability when sending and receiving money. For the merchant or Biller, it means instant confirmation, settlement finality and real-time information about the payment. And all of this available in seconds and enabled by local and global banks all over the world. Number two, large global merchants and global merchant acquirers. Very simply, ACI will enable acceptance of any payment through any channel. Number three, emerging markets. We will focus on the fastest-growing geographies in the world, and we will leverage the impressive ACI global footprint. Let's double-click on each of these 3 focused on growth opportunities. The democratization of real-time payments is a generational shift of power that impacts the entire payment ecosystem from banks to merchants and billers. Real-time payments are forecast to grow 3x faster than card payments over the next few years as consumers choose more convenient and easy-to-use payment methods enabled by real-time schemes. India leads the world in a number of real-time transactions via its UPI scheme and ACI software is used by 8 of the top 10 Indian banks for DDA deposit account payments. ACI holds a similar position in 13 of the G20 countries. Our growth opportunity is to extend these customers from DDA deposit account payments on card rails to real-time rails. And to attract new customers in those markets. Value-added digital services like Request-to-Pay, will enhance the customer experience, and it's a critical part of the value to attract consumers to real time. The National Payments Corporation of India, or NPCI, is the central infrastructure for real-time payments in India. Here in the U.S. TCH and Zelle play that role today, and they'll soon be joined by the Federal Reserve, one of our panelists with their FedNow offering. Across the globe, central infrastructures are establishing and enhancing real-time rails. ACI have partnered with Mastercard to win this opportunity and we'll hear more about this exciting partnership in our panel. The accelerated maturation of the merchant payments ecosystem with COVID-19 has caused changes to the industry in the last few months that would have taken years to happen. E-commerce payments are forecast to grow twice as fast as in-store payments as consumers adopt the easier and faster way to pay. E-commerce has become the #1 channel of choice for consumers. The CEO of Barclays Payments, who will also join us on the panel today stated that at the start of COVID-19, the mix has shifted from 60% in-store to 60% e-commerce. We have experienced double-digit growth in our e-commerce portfolio this year. And we expect that to continue with pure-play digital merchants, as well as multichannel, omni commerce solutions to global and sophisticated large merchants. Acquirers play a critical role to enable merchants of all sizes. Latin America is an example of a large and growing opportunity for payment acquirers, delivering solutions to small and medium-sized merchants. Today, ACI is winning new customers as well as adding acquirer functionality to its existing bank processor customers in Argentina, in Brazil, in Chile, Colombia, Mexico and Uruguay. Our acquirer capability and opportunities also extend to Asia Pacific, to Europe, to the Middle East and Africa and North America. Serving the needs of merchants via global and local acquirers will yield double-digit organic growth outcomes for ACI. Emerging markets. Emerging markets outside of Europe and North America house the majority of the world's population. And they represent the biggest percentage organic growth opportunity for ACI. The digital payment opportunity will grow at more than double the pace in emerging markets versus in Europe and North America over the short and the long term. The democratization of real-time payments, driven by the widespread adoption of smartphones, and combined with the needs of a digitally savvy mass market. These are the sources of this growth opportunity. Person-to-person or P2P and consumer to business or C2B will drive the majority of transaction growth, while business-to-business or B2B, will create a high-margin opportunity for payment ecosystem players. ACI will drive double-digit organic growth results by investing more in sales and marketing and feet on the street in emerging markets, as well as extending our offering to enable value-added digital services for merchants, for our acquirers and for banks and for processes. Today, we are winning in Asia with large deals in Indonesia, in India and in Japan. We're winning in Latin America, per the countries I listed earlier, and we're winning in the Middle East and across the African continent. To summarize, we will grow at double-digit organic growth rates across our real-time, our global merchant and our emerging market portfolios. To continue the focus on growth story, let's hear about our 2 largest portfolios: Bill payments and Issuer and acquiring. Eve Aretakis, ACI's Chief Technology Officer, will cover these topics. Since joining ACI in 2016, and Eve has led product development and delivery for ACI and most recently served as Group President for our Biller and merchant P&L. In her role, leading our technology and operations area, she will use her deep understanding of software engineering and technical deployment to ensure that our solutions evolve to meet the needs of our customers. Welcome, Eve.

Thank you, Jeremy. Jeremy spoke about double-digit growth businesses. I will introduce 2 major businesses, which we will protect and grow. First, let's talk about issuing and acquiring, our largest solution by net revenue. Our issuing business is managing retail payments for card issuers to consumers. Our software enables them to issue, manage and route payments for credit, debit, prepaid and a number of other card types. Our acquiring business is managing consumer payments for merchants. Merchant acquirers use our software to receive and root payments. Today, we hold a leadership position in a massive market of 1.4 trillion transaction. We are powering a majority of the markets, representing 13 of the top global 20 markets. This market is growing modestly in the mid-single digits. Our focus is to protect and grow our installed retail banking customer base, which is benefiting from market growth enabled by our unmatched scalability and reliability. We are also supporting the modernization of our customers' infrastructure and their migration to the cloud. For example, State Bank of India recently seamlessly updated and expanded its payment switching system using ACI's enterprise payments platform to meet its requirements of processing over 30 million daily transactions. An additional growth strategy for our retail franchise is cross-selling retail payments or real-time payments acquiring and fraud management. Also, we will pursue focused new logo opportunities concentrated in emerging markets and cloud-first solution deployments. Following our acquisition and integration of the Speedpay business, we now are the market leader in U.S. Biller Direct, a market of 15 billion annual transactions growing in mid-single digits. To reignite growth and win, we are doubling down on key verticals, where we hold leadership positions, such as utilities, credit, higher education and insurance. We will be adding more sales resources to increase our coverage of those target segments. We are also building our end-to-end solutions addressing the needs of the specific verticals. For example, our student portal offering in higher education vertical, disbursements targeting credit and insurance and subscription payments. And finally, we are innovating in the user experience domain. For example, with our moBills bill presentment experience and the Delay My Payment functionality, we launched in record time at the start of the pandemic to support our consumers affected by the pandemic. On the technology front, we are consolidating platforms to drive cost synergies and capabilities. We are taking the best of ACI and Speedpay technology platforms and combining them. This enables the realization of cost synergies, avoiding duplicate developments. We can also take advantage of the capabilities of the best from each platform to target our verticals. We are also converging our merchant platforms. This allows our most mature customers to leverage the combination of e-commerce and point of sale. In addition, through our secure e-commerce and omni commerce platforms, we are converging online gateway, fraud management and omni commerce capabilities into integrated solution. To enable seamless operational support, we are introducing a common configuration management user interface across all these capabilities. Beyond the consolidation of platforms, we are also accelerating the digital transformation of payment technologies. First, we're enabling the migration to the cloud. In doing so, we support several hosting models for our technology, traditional on-premise, running natively on the public cloud and leveraging open source databases, and hybrid cloud models. We believe this is a strong differentiator supported by a partnership, including Microsoft Azure. Finally, we are making it easy to connect to the last mile with a rich set of connector and payment types from a technology base that is broad scale. This allows us to exploit them across our global footprint and the broader portfolio. Our endpoint factor is leveraging endpoints across multiple solutions. Avoiding the need to build and maintain several versions of the same endpoint. The configuration builder allows a new endpoint to be rapidly built and configured for quick production deployments. In addition, we have support for open source and API-based innovations. We are migrating our code base to microservices and API-based interfaces. Our ACI developer portal opens up our solutions for the creation of new services and the rapid iteration and market testing. Now I'd like to introduce Craig Maki. Executive Vice President, Corporate Development Officer at ACI. Craig joined the company in June 2006 and has successfully led us through multiple acquisitions and divestitures. Including our most recent acquisition of Speedpay acquired from Western Union in 2019. Welcome, Craig.

Thank you, Eve. I will now spend the next few minutes talking about ACI's third strategic pillar, step-change value creation. On top of delivering consistent organic revenue growth, you should expect us to use accretive acquisitions, investments and divestitures in order to accelerate our growth profile and to enhance value creation for our shareholders. Given our portfolio of mission-critical payment solutions, combined with our global customer base and market reach, we believe ACI is an underappreciated and undervalued software company. On the left side of the slide, we will continue to acquire complementary software-led payment companies that are aligned with both our strategy and focused commitment on cloud-first innovation. In addition, our new fit-for-growth organizational model will provide clarity on acquisition integration, accountability and execution. Moving to the right side of our slide, I will now discuss our inorganic priorities. With the acquisitions of online resources, official payments and most recently, Speedpay and Walletron, we are one of the market leaders in U.S. electronic bill presentment and payments. bill pay is a large, complex and highly fragmented market. From an inorganic perspective, we are looking to add complementary capabilities to cross-sell to our customers as well as scale acquisitions to expand our profitability. Like our Biller solution, we are also a market leader in global acquiring and switching. Here, we are looking to further advance our modernization and cloud enablement efforts and adding key localized capabilities, especially in our focused geographies, in order to create new revenue stream opportunities for ACI. In support of our organic growth strategy, we are also looking to strengthen our real-time and merchant payment solutions, via extending our cloud-based capabilities and adding value-added services that will sit on top of our existing payments infrastructure. Lastly, over the past few months, we have worked with our advisers to evaluate the strategic relevance of our product portfolio. Going forward, you should expect us to divest noncore products, which will sharpen our focus and allow ACI to reallocate capital to our retained strategic solutions for future revenue growth. Now I'd like to turn it back over to Jeremy Wilmot, our Chief Product Officer, to welcome our guest panelists for a discussion about real-time payments.

Thank you, Craig. I'm delighted to welcome our panelists today. Rob Cameron, Chief Executive Officer of Barclays Payments; Stephen Grainger, Executive Vice President, Cross-Border Services at Mastercard. Tim Boike, Vice President, Industry Relations and engagement at the Federal Reserve Bank. Gentlemen, thank you so much for joining us today.

Good to be here. Thank you.

Thank you.

Great. Well, let's jump straight into it. Rob, what differences are you seeing in the way that your customers, the consumers, the corporates and the merchants, how they're engaging with Barclays since the introduction of real-time payments 12 years ago in the U.K.?

Well, Jeremy, I think I'm going to start by saying what hasn't changed. A simple premise, I'm sure you'll hear later, not that easy to implement. But a simple premise, 12 years ago of creating a ubiquitous way to move money in real-time from any account in the country in a good funds model has resilience. And so the underlying premise and how it works is the same as it was 12 years ago. What's changed is, and I was thinking back and I was in the U.K. and working on faster payments at the time, and I had a blackberry in my pocket and not much of a browser. And you just think back to that time, and maybe I'm dating myself. But you think back to that time, now look at just how digital we all are. And being such a digital economy and all those different constituents, corporates, consumers, merchants and having a system that allows money to flow in real-time so efficiently has really allowed exponential growth in those payments in the intervening years.

Very good, very good. And it is incredible how much change that's been in the last 12 years. And Steven moving on to yourself, it will be good to hear from you about the acceleration to real-time payments that Mastercard is seeing from governments around the world from central banks and the scheme operators that you're talking to?

Well, I'll just pick on something that Rob had mentioned, and that is, the world has become a lot more digital. And because the world's become more digital, we've seen that being the real driver behind the demand for real-time payments. There have been some early adopters. The U.K. is one. You can look at Singapore, you can look at Thailand. And if you look at some of the use cases and experiences, that real-time payments is enabling, it's no surprise, and it's that, that is driving that increase in demand, whether it's from governments thinking about how they can distribute money more effectively, whether it's central banks thinking about resilience or whether it's scheme operators thinking about how do you drive more choice in the provision of services to underlying consumers, then they're all the factors that we see right now is driving demand for real-time payments.

Fantastic. Very good and great insights. And at the end of the day, a faster velocity of payments leads to greater economic growth and greater inclusion for everybody involved. So very, very important. Tim, let's move from that global level down to the U.S. and with the continued development of Fed now what are the key learnings that the Federal Reserve Bank are utilizing from other countries that have already gone live with real-time rails and central infrastructures?

Yes. Thanks, Jeremy. So as you can imagine, we're in continuous dialogue with our central banking peers across a large number of topics. But as it relates to real-time growth settlement infrastructures, across the board, our colleagues have mentioned in hindsight, a greater emphasis on industry preparedness, preparedness in terms of technical and operational deployment with service providers. Proactively contributing to a better initial end-user experience, but also colleagues have advised us putting greater emphasis on building for the future. This can be witnessed by a lot of the more recent deployments where seemingly, they're a bit more encompassing, a little more flexible, a little more extensible as compared to some of those earlier deployments that are now being evaluated, redesigned, retrofitted on a grander scale. But taking those comments to heart, the Federal Reserve is hyper-focused on its engagement strategy. One that solicits input from all parties through our normal, formalized request for input process that we have. We conduct a number of one-on-one and group meetings across the various sectors and verticals. And then, through the formation of our FedNow community, we've been launching a number of working groups and roundtables to solicit that input as well.

Yes, that's great, Tim. And I think you guys are doing a great job of that, and we really enjoy participating in the industry engagement forums that you're running and sharing our own experiences. So let's go back to the global stage, Stephen. ACI and Mastercard recently announced a partnership. It brings our companies together to deliver real-time payments. Can you talk about why the partnership is good for the industry? And what it means to our respective companies?

We've seen demand across a wide range of geographies. And so how we meet that demand. And if you think about the challenges that, that demand creates, we understood that we needed to work with a partner who could help drive more simplicity and ease the transition of the adoption of real-time payments. And that is -- that's no simple challenge. If you think really, we're going from most countries that are adopting real-time payments are doing that having gone from a batch process that operates 9 to 5 to moving to a real-time payment infrastructure that operates 24/7, 365 days a year. It completely changes the whole interface both into the market and into the consumers that is being forced and imposed upon banks. So ACI has a huge range of connectivity into those banks that can help ease adoption, ease the translation story and provide those adapters that make the adoption simpler, while we can provide the core underlying real-time payment infrastructures and applications that sit over the top of those and then can be embedded into them to provide a greater choice and wider and quicker adoption of this is a new rail.

Great. Great. Well, thank you, Stephen. And I think really playing to each of our organization's strengths in terms of accelerating real-time adoption across the world. So we're really looking forward to that partnership. Rob, let's come back to the U.K. and Europe. And let's talk about how digital payments are evolving for you and your customers during the pandemic? And how you see that being sustained into the future?

Sure. Great question, Jeremy. So we've seen a pretty material step change. And so we process, we're the largest in the U.K. by volume and #2 in Europe by volume. And when we looked at our volumes in, say, January, February pre-lockdown, probably 2/3 of our volume were coming in from a card presence standpoint, in store, 1/3 was coming in online. When lockdown occurred, that basically inverted. And all of a sudden, people that went to the grocery store in person, we're now buying their groceries online. And we saw that across all segments. So that inversion happened and a lot of consumers learn to buy things online that they previously obtained in store. So then, the second part of your question, what happens now is when the U.K. and other countries came out of lockdown, what we saw is a lot of that digital behavior and online behavior continued. So today, we sit at 50-50 roughly online to in-store. And so 2 kind of comments on that. One, from an in-store standpoint, that 50% in-store has actually grown. So in Q3, where we were coming out of the lockdown, our volumes were up about 10% year-over-year, driven partially by online growth, which was really meaningful, but also in-store, people shifted from paying with cash to paying with cards. And even in the U.K., our home market where, obviously, we're very large. We were the first to increase the contactless limits from 30 to 45 pounds. And with that, we saw a tremendous shift from cash to card. So people were no longer carrying cash. And that shift meant that the card volumes actually increased, and cash is down probably 40% in normal times both -- we see that both from transaction volume into our retailers. We see that in terms of number of ATM withdrawals and also deposits back into our branches. So it's really interesting what's happening in-store, but then that online behavior, this morning, I was talking to one of our largest retailers in the U.K. and they were saying that he was saying his mother who now buys his groceries online, isn't going to go back to it. And so that retailer was saying that they're super focused on customer experience online and figuring out how to make sure they get the right transactions authorized and through the system and they prevent fraud, but they really want that good transaction in that one-click type shopping experience. And so we spend a lot of time with our big retailers, driving really good authorization rates, so they can drive that really good customer experience because online has gone from being, say, 20%, 30% of their volume to half or more of their volume, and they don't expect that to change.

Yes. Great, great insights from U.K. and Europe. Thank you very much. Let's cross the pond, the Atlantic over to the U.S. and Tim, come back to yourself, how are the digital services shaping the planning from the Federal Reserve Bank for FedNow?

Yes, good question. Critical to the Fed's planning and functional design efforts has been the input that we've received our engagements typically focus on identifying market direction, specifically how do deposit depository institutions, service providers, market enablers, how are they providing these digital services across a wide range of payment used cases? Important for us, obviously, is building an infrastructure that can host and accommodate these digital overlay services. But in scope per FedNow for either our initial release or some of those subsequent platform improvements are features like request for pay, alias-based payments, APIs support, enhanced remittance and in network messaging, just to name a few, provided -- providing the U.S. with a robust domestic infrastructure that can accommodate these digital overlay services, enable access to all the financial end points and not just a few, is really an attractive proposition for us.

Yes. Absolutely, Tim. Couldn't agree more. Consumer adoption is all about the digital services and making it easier and more convenient and faster for consumers. So a critical element of the rollout here in the U.S. Well, gentlemen, it looks like we're about out of time. So thank you so much for your time once again, Rob, Stephen and Tim, for sharing your insights with all of us. Thank you very much.

Thank you, Jeremy. Good to be here.

Okay. So next up, we have Mike Braatz, our Chief Strategy and Marketing Officer. Since joining ACI in 2012, Mike has held a number of senior product management and operating roles that position him very well to lead our corporate strategy, communications and marketing functions. Most recently, Mike was our Chief Products Officer. Responsible for product strategy, product management and product development, and he previously served as the SVP of the ACI on-demand business. Today, Mike will discuss how we're simplifying the ACI story. It's all yours, Mike.

Thanks, Jeremy, and thanks to our panel participants. As Jeremy said, I'm going to cover how we're simplifying our story. For those of you who know ACI from past events like this, you may have noticed that the new ACI also includes our brand. Over the past several months, we've been updating our brand with 3 goals in mind: first, to simplify our story. Second, to differentiate from competitors, and third, to modernize our brand for stronger engagement with all of our key stakeholders, customers, partners, employees and investors. To start, what you see here is our updated logo. Our bold new blue corporate color and a tagline, which clearly shows that our strategy, our positioning and our leadership is all about real-time payments. We've also introduced worldwide to our logo for the first time, based on market research, those responsible for payments purchasing decisions told us that our global footprint was important to them, and including worldwide is positive reinforcement of that. We started our brand update work by focusing on positioning. This is an area where, in the past, we've been told that our business was not that easy to understand. So simplification and clarity are paramount. In the simplest terms, ACI is a global software company that delivers mission-critical real-time payment solutions to corporations. To get here, we evaluated several concepts to understand what was important to customers across all segments and geographies. What differentiated ACI in the marketplace and what is authentic for us based on our strengths. We did comprehensive market research, which showed that a focus on real-time payments was a strong differentiator and also important to customers in all markets. Banks see the growth opportunity for real-time account-to-account payments in countries around the world. Merchants and billers see the benefits of faster, more seamless real-time payment experiences for their consumers. Whether they're buying goods and services or paying bills. For the last 2 years, third-party research has shown that ACI has strong brand equity as a leader in real-time payments. And as a matter of fact, ACI is the #1 brand in terms of awareness and preference in real time. It's also important to understand that we are a software company. That's our business model, and that's how we make money. And it's worth clarifying. Since we're not a processor, we're not an acquirer, and we're not a payment's wallet. And nor are we some of the other business models you see in payments. Simply put, we provide payment software to all players in the market. And that software is mission-critical, part of the central nervous system of our customers' operations and the payments value chain as a whole. We've also changed how we describe what we do. Our story is no longer primarily about us, our products and our technology. It's now about customer needs and how ACI helps with those needs in 4 areas: first, process and manage digital payments. This is what we do for banks, processors, networks, central infrastructures, acquirers and payment service providers of all type. Enabling omni-commerce payments. This is what we do for merchants in verticals like retail, restaurants, grocery, hotels and gaming. Present and process bill payments. This is for companies who want to enable their customers to pay them directly insurance, higher ed, auto finance, mortgage, utilities, government are the verticals that we serve. And then finally, managing fraud and risk. This is what we do for all of the verticals above. And we can solve those needs on a global basis with a local presence to support customers on the ground in our target markets. And now as you see here, we align our solutions to the customer needs they solve, and we've updated the solution names to be more intuitive and easier to understand. In process and managed digital payments, these are the solutions that support both retail banking and wholesale banking as well as others in the payments value chain. These solutions enable every payment type, card-based payments, account-to-account payments, both high-value real-time payments like wires and low-value real-time payments, local payment methods, alternative payments, you name it. In omni commerce, our solutions provide seamless, secure payments across multiple merchant shopping channels. In store, online and mobile. And process bill payments, we're the #1 provider in the U.S. Biller direct market. And again, our fraud solutions provide protection across the entire spectrum. ACI software is used by some of the largest players in payments, global merchants, large banks, large processors and large acquirers and billers of all sizes use our software to power their operations. We serve these players directly through both license and hosted delivery models. These large global players value the control, the flexibility, the scalability and the security of our solutions. And through some of these relationships with large processors, large acquirers and large banks, our software is used in a bit of a wholesale light commercial model to process payments for thousands of small and midsized merchants and financial institutions. These large processors, banks and acquirers use our software and operate it on behalf of their customers, giving us reach to a very large potential market. And access to trillions of transactions annually, as you saw in Jeremy and Eve's section earlier. Finally, in addition to updating our positioning and our solution names, we are focused on updating our visual identity. It's a new ACI, and we want to look the part. You'll see this in the market starting early next year, including a new corporate website, new marketing assets and new sales materials. All reinforcing our simpler, more modern and more differentiated story. Now I'd like to introduce our Chief Financial Officer, Scott Behrens. Since joining ACI in 2007, Scott has provided strong financial leadership as we've evolved our business and grown it into today's $1.3 billion corporation. Scott will share more about the long-term outlook for ACI. Scott, it's all yours.