Fiserv, Inc. (FISV) Earnings Call Transcript & Summary

Good morning, everyone. Welcome back. My name is Ken Suchoski, and I'm an analyst on the payments and fintech team here at Autonomous Research. We're excited to have Bob Hau, the CFO of Fiserv; and Julie Chariell, Head of Investor Relations, joining us today. Welcome, Bob and Julie, it's great to see you again. Thanks for joining us.

Great. Thanks Ken. Thanks for having us. Look forward to the conversation.

Great. And just a couple of housekeeping items before we get started. First, to get into each of the sessions, you got the General Sessions tab at the top of your browser. That will bring you back to the landing page where you can navigate across the different webinars. You do have to click into each session to join that webinar. So it's not a one link and you stay connected for the whole day like we had last year. So it will there some navigation. If you're having trouble, feel free to reach out to your Autonomous sales rep or you can ping me and we'll get that sorted out. And then second, we'd like to make these sessions today interactive. So if you do have a question, feel free to put that in the Q&A box on the right-hand side of the screen or you could shoot those over to me via e-mail, we'll get those answered.

So with that, I know we get started, Bob, maybe to start off. I mean Fiserv sits in a privileged position of overseeing more payment volume than any of the other acquirers in the U.S. given the constant evolving economic landscape, we'd love to get your views. How have spending trends evolved since the last time we've heard from you? And what are some of the puts and takes to consider as we think about the different verticals?

Yes, Ken. So I would say broadly, consumer remains stable. We're continuing to see the same trends really today "really" through August, in particular, that we saw back in June and July and even in the first half of the year. July was pretty similar to June. August had a slight uptick. I think like you've seen from some of the others that have been talking about the overall consumer status or situation. We've actually seen a bit of a stabilization of ticket size, where we had been seeing that declining a bit. And I think back-to-school helped retailers a bit and we're absolutely still continuing to see the consumer focused on experiences, entertainment, that sort of thing versus hard goods.

Great. And just a follow-up on that, Bob. The average ticket size stabilizing was that helped by gas prices and the, I guess, moving a little bit higher here and then I guess the year-over-year trends may be improving. Was that part of it?

That's certainly be part of it, yes.

Yes. Okay. All right. Great. Maybe we could dig into Clover a little bit. I mean it's been a great story to follow, and I think Fiserv has executed really well with expanding the products footprint. I guess before we dive in, let's talk about the end markets here, Bob. Can you just remind us of the main verticals that Clover serves? And I guess how spending trends in these end markets have evolved since the start of the year?

Yes. So our overall merchant business, our SMB business and Clover in particular, really have a very broad reach. We're not particularly overexposed to any one vertical. And so how the market goes, so goes our overall business. Certainly, when you see large fluctuations in particular markets or end markets or verticals, we'll see some variation there, but largely very broad reach, both in terms of the end market verticals, our distribution channel, our geographic reach, et cetera. With that said, certainly, as you've heard us speak about in the last several years, we've got a particular focus about growing out 3 primary verticals upfront. Our first foray and really building out vertical capability is in the restaurant, retail and services space, and probably in that order, being the furthest along in a restaurant. We have a tremendous restaurant capability, both Clover and non-Clover for that matter. And we continue to work on those verticals and see good growth in those spaces. As I said in my earlier comment earlier answered the question around continued focus on entertainment and experiences that drives some of that. But broadly, we see good growth across the Clover space. You saw us report that in the first and second quarter. And obviously, we anticipate that continuing as we move towards our goal of having $3.5 billion of revenue from Clover by 2025 as part of our march towards $10 billion for the overall Merchant segment. Clover being a big part of it and building out our capabilities for those 3 verticals: restaurant, retail and services is absolutely part of that growth opportunity for us.

Yes. No, that makes a ton of sense, Bob. And I guess when we compare Clover to some competitors and industry volumes more broadly, I mean it does look like the offering continues to gain share. So what are the main factors, Bob, that have allowed Clover to continue growing faster than the overall market?

Yes. I think I'd probably point to a couple of key areas. One, we have the broadest distribution network of anybody in the market. We have deep relationships with our financial institution partners banks, credit unions, ISOs, ISVs and, of course, recently started building out our direct channel. And so we go to market in a variety of different ways -- to me, a variety of different ways that give us broad reach. I think we have the broadest set of horizontal software solutions and that industry expertise to bring those solutions. Our business consultants, as we call them, the sales folks on the ground sitting across the table from those businesses bring a significant set of software solutions and really have become the operating system of small businesses. It's not just point sales solution. It's not just a payment solution. It is an operating system for small businesses. And that really resonates for a typical small business. If you think about the guy who opens up a Pizzeria, he's doing that because he loves making pizzas. And the easier it is we can make him -- or make it for him to run that business, the more he's going to appreciate having that operating system and the more solutions he's going to buy from us. And so as we build out more capability, as we build out those verticals, that gives us a significant opportunity to continue to gain momentum and outgrow the market with that large Clover operating system. Additionally, obviously, we're building out those value-added solutions, as again, as we talked about in our Merchant call, now more than a year ago, building out those value-added solutions to being 25% of our revenue by 2025. Not only does that obviously drive revenue growth but it also drives revenue growth per transaction, ARPU. It deepens our relationship with those merchants, so the relationship becomes stickier, attrition goes down, revenue per unit goes up and we continue to gain share through that process.

And just to double click on that value-added services solutions piece, Bob, just -- I mean, one question I thought of was does the pace at which you're penetrating that revenue, so that percent of revenue that's coming from value-added services. Is that -- do you think that accelerates as you kind of roll out more solutions as you address different verticals? Or do you think it kind of continues on that same pace?

No, I think it accelerates. We'll continue to add more capability and more deeply integrated capability to the Clover solution. One of the things that we've talked about with our Clover solution over the last couple of years is every year we see more solutions purchased per merchant. So if you think about a group of merchants in an annual cohort, so to speak, the merchants that we bring on board into the Clover solution this year will buy more solutions from us than the group that bought last year and that the group that bought the year before that. In addition, we see benefit of the cohort, say, from 2021 is actually adding to the number of solutions. So we continue to get growth from existing merchants, existing businesses that have been on us for a year, 2 years or 3 years as we build out that operating system. But as we sign up new merchants, they start with more solutions and continue to add. So we see it as a significant opportunity as we build out those verticals as we become more deeply integrated solution. Some of those are solutions that we develop ourselves. Some of them are third-party solutions. Some of them are third-party solutions that become first-party solutions, i.e., we've got a lot of partnerships out there. And one of the recipes for our success over the years has been to develop those partnerships, in many cases, making investments in those partners and then acquiring those solutions and increasing the integration or the embeddedness into our operating system as well as deepen the distribution capability because it's now an own solution, and we continue to look to do that. BentoBox is probably the most recent example. Nextable, two solutions that help build out our restaurant vertical allow us to continue to expand that value-added service penetration.

Yes. And Bob, just to round out this discussion. So these first-party solutions, are those only acquired through M&A? Or do you actually go out and would you develop your own solution? Because I think there's companies like an Intuit that deals with, okay, we have third parties on our platform, but we're also building out payroll, bill pay, things like that. So it's almost just like you're competing, but you're also bringing in third parties. So how do you guys manage that?

Yes. I think the way we look at it is we're looking to bring the best solution to our clients that we can, and we'll do that in 3 different ways. We'll build it, develop it ourselves. We'll buy it, acquire it directly or will "borrow it" partnership and bring it into our solution. That may eventually become an acquisition or it may stay as a "borrow and partnership."

Yes. Okay. Great. And I love that chart that you guys had in that merchant presentation on the cohort. So look forward to seeing an update at the Investor Day. I think that will be much appreciated. Bob, I mean, investors typically associate Clover with restaurants. You kind of hit on this earlier, getting into other verticals. And I think you've built out the offering most holistically in that vertical. But as we think about the growth algorithm from here, I think expanding into other verticals like retail and services also on the table. So how can you replicate the success that you've had amongst merchants as you push into these other verticals more aggressively?

Yes. I think there's multiple elements of our growth algorithm as we look forward, so to speak. It's continuing to grow in the restaurant business, continuing build out our capability within that space itself. There's more to be done, and there always will be. You never stop innovating. You never stop bringing new solutions, not only because there's more opportunity out there to continue to build out the capability, but the world evolves. Rewind to March of 2020, suddenly having a restaurant have the ability to take an order online and have it picked up at the curb was absolutely essential. And restaurants that you would never think that would need to do that or be willing to do that, particularly as you move up into -- towards the fine dining experience, having that capability became almost overnight critically important. And we very quickly developed that and made it available and had it sold to thousands of restaurants almost overnight. So we'll continue to build out that capability. We're furthest along in our restaurant build-out. We've got a retail solution. We have a services solution. Some of that is fully embedded in the Clover operating system. Some of that is available through the App Store. Some of that is available in other solutions. And so not only will we add more capability, but we're more deeply integrate it into that operating system and make it easier for the business to consume that service. And then we also -- in addition to those 3 vertical solutions, we're very focused on developing horizontal capability that goes across all of our verticals or multiple verticals to bring the best solution to all of our almost 6 million merchants.

Great. And just in terms of time line, Bob, I mean when should investors expect these verticals, I guess, to become more meaningful contributors to volume and revenue growth?

Yes. I think the real answer to that is every day. There isn't a magic button that says on March 30 of 2024, we're done with the restaurant build-out and suddenly, we've got an instantaneous popping growth. It's an ongoing build-out, and we've got opportunities in all 3 of those verticals as well as the horizontal. There's a long list of investments that we've been making that we may have been making and will make as we continue to build-out those capabilities. As you've seen, we've got a goal to get to $3.5 billion by 2025. We're well down that path. We have good visibility as we continue to progress to that date. And we feel comfortable and confident we'll deliver on that.

Right. Okay. The other area we wanted to dig into a little bit was Clover's international expansion, Bob. I mean what are some of the main markets that the offering is currently available? And I guess how big do you think that international business can get over time as a percentage of revenues or volumes versus where it is today?

Yes. So right now, obviously, our biggest market is North America, which is really both the United States and Canada. We are also in market in Europe, in the U.K, in Ireland. You heard us last year announced our joint venture with Deutsche Bank. Clover is a big part of that joint venture. And that will help us, obviously, grow Clover to that $3.5 billion as that joint venture is now in market and continuing to grow. In Latin America, we have a nice presence in Argentina. And that continues to grow nicely. Right now, our merchant business overall is about 22%, if my memory serves me correctly, about 22% of our merchant business, and we continue to see that to grow as we talked about in our last Merchant Investor Day, as we approach that $3.5 billion as we approach the $10 billion, one of the many growth -- parts of that growth algorithm is expanding our international presence, both by continuing to grow in those markets by adding new markets, which I think you'll see us do next year and beyond.

Okay. And just to make sure you said international was 22%. That's just like revenue or volume?

That's revenue for the segment.

Revenue for the segment. Okay. All right. Perfect. Yes, I look forward to following that progress. And have you guys disclosed the Clover business specifically, how much of that is international?

We have not.

Okay. Okay. We'll stay tuned for that. I guess in our conversations with some of the other acquirers, we've heard that software penetration is meaningfully lower internationally than what we've seen in the U.S., I was just wondering if you could talk a little bit about that, Bob. Why is that? And how can Clover overcome that as should we think about that 25% software penetration target by 2025?

Yes, I would definitely agree with that view, that sentiment. I think the U.S. has a broader, deeper overall software mode in the small business segment. And we see that today, and I expect to see that for some time to come. It's a different merchant behavior, different business behavior outside the U.S. And one element is, I think, an integrated payment solution is just a more nascent opportunity or view outside the U.S. And so as more capability spreads into those regions, we see an opportunity for that to expand. Our path to 25% value-added service penetration for Clover by 2025 is not dependent by any stretch, some exponential improvement in that internationally. International growth, absolutely part of that $3.5 billion. But today, our order of magnitude kind of mid-teens percentage value-added service penetration is largely U.S. There is some international, we'll see that continue to build out. And that path to 25% doesn't require some "bending" of the curve on an international space. That's an opportunity for us. But I don't think you're going to see a magical change between now and 2025. So it would be future opportunity.

Yes. No, absolutely. That's really helpful, Bob. And I wanted to touch on Carat for a bit because we do get questions on this business. I think creating a true omnichannel offering for enterprise merchants presents a massive opportunity just given your vast card present, card-not-present expertise. Maybe for those who are still trying to conceptualize the offering, can you just talk about who your -- I mean what is the offering? Who are your main competitors? And I guess what gives you the right to win in this market when it comes to RFPs?

Yes. So we definitely see a really meaningful opportunity in the enterprise space, particularly for Carat, which is our omnichannel operating system for large enterprises. Clover being an operating system for small businesses, Carat similar in terms of a broad operating solution operating system for large enterprises. I would say a number of things. We continue to have significant value-added service capability for those large enterprises. One of the meaningful differences between a small business and a large enterprise, is a large enterprise in many cases will have some of their own capability. They're also looking for best-in-class solutions. And so they may integrate solutions themselves. And one of the important aspects of having an open system that allows them to seamlessly and easily integrate different solutions into whatever system they have, whether they want to build that out themselves or simply use APIs to bring in capability. And we have developed and continue to build out that capability for our Carat solution for those enterprise clients. Competitors are the obvious ones, Audience, Stripe, Braintree, Worldpay, those types of clients. We think we have an advantage in that we have a tremendous distribution channel, whether again it's through the banks, through our relationship with those banks, whether it's our international footprint, both in terms of our merchant capability today, but also the rest of our business. We are a known entity outside the U.S. in broad capability. And so when you're talking to a large enterprise, they understand who we are. We have name recognition, and we have a reputation of being able to provide excellent solutions and significant customer experience and customer support. With these large enterprises, when you're building out their operating system, they're counting on their partner to be there and to deliver that solution. And they don't want a one-size-fits-all. We think that's one of the significant advantages for Carat. We have a solution that they can customize that we can help them bring the different pieces that they want because we have a wide capability, and we have Commerce Hub is that central capability for them. They might want 3 or 4 of the different solutions today and next month, next quarter, next year to bring on additional solutions that we offer and our open solution allows them to do that quite seamlessly. We have that deep brick-and-mortar capability as those enterprises decide to add enterprise via e-commerce capability. We can bring that together quite seamlessly and offer them what they really need at the end of the day is an omnichannel solution, not just in e-commerce and not just a brick-and-mortar point of sale, but that omnichannel capability.

Great. And Bob, I guess as we contrast Carat with Clover, the pushback we get from bears is that maybe there's less of an opportunity to lift yields through increasing software penetration, just considering how difficult it is to replace that incumbent enterprise software vendor list that they have. In that context, I mean, where do you see the biggest opportunity for Carat to drive take rate expansion over time?

Yes. I think there's plenty of payment-related applications that are not necessarily part of an enterprise software company. And so we can bring particular solutions and then add on to that capability over time. Again, having that wide menu of capabilities, there's different entry points into those enterprises and bringing different solutions, whether it's fraud and security or our loyalty and gift solution, our debit capability, having an integrated hardware and software solution really gives us different opening or penetration points that we then expand our capabilities to those enterprise clients. It's a very competitive space. No surprise, it always has been. So is our small business space. We continue to develop new solutions, both hardware and software. We continue to make sure that we are front and center, able to support those clients. And when you get to an enterprise client, that's even more challenging because they have significant requirements. Typically, they're very customized to their solution, to their business. And we have a long track record and demonstrated capability to satisfy those requirements.

Okay. And Bob, on the 2Q call, the company highlighted that Carat lost a meaningful client, which weighed on the revenue growth in the business. Can you just elaborate on what happened there exactly? And I guess what is Carat doing to mitigate these client losses from reoccurring moving forward?

Yes. I think a couple of things. One, you're right, we did mention that in the second quarter earnings call. Two, I think we said on the call, we certainly tried to make this obvious or direct. We didn't lose it to a competitor. They brought it in-house. So it's a bit of a unique capability. This was a very large e-commerce client that had a long-standing desire and a multiyear build-out. So we've known this is coming for a number of years to bring this capability in-house. There are a lot of enterprise clients that would never have that capability and certainly don't have that desire. So they rely on people like us to do that. And this has happened to us a couple of times over the last 3 or 4 years. We had 1 last year. You may recall, a Stripe brought their capabilities in-house. We actually work with them to help them do that. If that's something our clients want to do. It's a pretty unique circumstance. There aren't a lot of clients that have -- either have the capability or even if they have the capability and the desire to do that. So I consider this kind of a one-off type of a thing, well telegraphed. We actually have been working with that client for a number of years as they build that up, and that came to fruition in the second quarter, but we don't anticipate that happening on a regular basis, a pretty unique circumstance.

Yes. Okay. Great. The remaining two pieces of the merchant business, Bob, that we didn't touch on, if we understand it correctly, are the processing business which I think is running around $1 billion of annualized revenue, and then you had the rest of your acquiring business. How would you characterize this kind of non-Clover, non-Carat, non-processing part of the acquiring business because it is still a good chunk of revenue. And I guess how do you go -- how do you typically go about converting these merchants over to either Clover or Carat?

Yes. So let me try to break that non-Clover, non-Carat, i.e., other merchants and actually separate that a little bit from processing. Our processing business, as you say, is about $900 million, $1 billion of revenue. It's actually order of magnitude, what is at about 1/8 of the company's business, the merchant business, but it represents a significant portion of volume. Relatively low price point, relatively stable business. In fact, when we talked about the path to $10 billion, we indicated in that $10 billion, we essentially have that processing business remaining flat over the course of the next several years and we continue to kind of anticipate that overall. The remaining non-Clover, non-Carat business, so the non-Carat enterprise business and the non-Clover SMB business continues to grow nicely. It's an important part of our business. There are a lot of merchants that don't need nor want that full operating system. And so we have a variety of different solutions that we can bring to them to help them continue to operate their business with merchant acquiring, and we see good growth opportunities and that, obviously, not to the level that we see Carat and Clover growing, but those other two businesses, non-Clover and non-Carat will continue to grow for us. In terms of our ability to convert those non-Clover, non-Carat to either Clover or Carat, that's up to those businesses. We don't have a particular attack plan, so to speak, that we're executing against to convert those. As we've said in the past, particularly in the small business section of our merchant business, roughly 90% of all new merchants on Clover are new to the company. So roughly 10% are actually converting from a non-Clover solution to the Clover solution. And that's been relatively stable for the last few years. There is a point where we will more actively try to convert that back book. But today, number one, you have a lot of clients that don't want, don't need that full system. They're happy to have the terminal sitting on their counter. They've had that for 5 or 7 or 10 years. And it works perfectly fine for them and they want to maintain that. And we're happy to continue to provide that service. As their business grows, as they find opportunities to have new solutions, that's when we talk about converting them to Clover. And again, we do see that happen. About 10% of our Clover merchants do come from the back book. And as we continue to build out new solutions, more of those non-Clover merchants look for the opportunity to convert, and we're happy to do that. As we continue to build out those capabilities, there will be a time where we "run" a campaign to convert that back book. And that will be another growth opportunity for us because that's adding that value-added service to those merchants.

Great. And Bob, I guess just a couple -- I mean there's a lot to unpack there. Just a couple of follow-up questions as I'm -- that we need to speak. You mentioned the -- there's merchants that you don't need or they might not want an operating system. Is there any way to size that versus what might be addressable by some of the solutions that we talked about before? And then I guess the second piece is you talk about potentially doing a campaign to convert that back book. Is that -- would that be something that you do to hit your targets that you laid out? Or do you think it would come after that time line?

I would anticipate it being an incremental opportunity above that $3.5 billion for Clover. As I said, we do see people convert today. And I think in its broadest sense, if you look at the size of the business, as you see smaller and smaller businesses, they're less and less inclined to want/need the full Clover solution. Typically, when we do see conversions take place, it's when their original contract or current contract for that existing terminal is expiring, time to renew. And so number one, it's time to renew. So they start thinking about what they need and it opens a conversation with us versus walking into a store that has been on their terminal for 2 years, but it's got another year left or whatever and just randomly talk about converting to Clover, that's less likely unless something has changed in their business. But again, as they continue to grow and have more needs for additional services, that's when they start looking for Clover.

All right. And when we think about...

Ken. And one more thing, Ken, on the strategy, as you're talking about the merchants who may not want to move over to Clover, there are still additional things we can sell to those merchants, right? We're looking at low-cost hardware. Maybe that is more attractive price point for them. Other value-added services we find they would be interested in, things like Clover Capital offering a gift card solution. So even if they're not converting fully fledged over to Clover, there are incremental opportunities that we would have to drive ARPU there.

Yes. That's a great point, Julie. So basically, it's still addressable. It just might not be the same ARPU lift, but there would be an ARPU lift.

That's right.

Okay. That's really helpful, Julie. And then I guess when we think about converting customers over to Clover, I think you might have already hit on this earlier, Bob, but just remind us how many of those new Clover customers are coming from the existing client base versus the new customers? And then I guess the key question that we get is what's the lift to ARPU when you do convert an existing customer over to Clover?

Yes. So broadly, for every 100 merchants that sign up for Clover, 90 of them are new to the company. So new to our merchant acquiring capability and 10 are converting from an existing solution, a non-Clover solution. So 10% of the growth in Clover is a conversion from an existing merchant acquiring client, 90% are brand new, and that has been stable for a period of time. From a lift standpoint, I'm trying to remember the data that we showed back in March of '22 at our Merchant Investor Day. But I think the way to maybe most clearly think about it is as an example, if you take a non-Clover restaurant merchant and convert them to Clover, we see about a 50% uptick in lifetime value from that merchant. So a difference between a non-Clover restaurant and Clover restaurants about 50% higher. And then as we build out more capabilities for that restaurant, add more value-added services that we see on the drawing board for the next couple of years, we actually see that non-Clover restaurant to the Clover restaurant actually being a 3x LTV as we bring more value-added services as we start approaching that 25% overall restaurant will be a big part of that. So there's a meaningful uptick. Again, it's not for everybody, but some significant opportunity for us.

Yes. No, that's super helpful, Bob. And we just got a question from the audience on Clover. So I just wanted to weave it in here. So it says, you've announced a number of big client wins recently for Clover Sport. When you win these RFPs, are you getting a payment processing business across all of the stadium's functions. So concession stands, retail, ticketing, et cetera? Or is it usually a certain function where you win the contract?

Yes. I think it depends on the contract and it depends on the venue. And certainly, we have seen where you might start with just concessions, for example, once they see the power of the solution, they added to things like the retail stores. The Milwaukee Bucks Arena Fiserv Forum is a great example of that. It started with just the concessions in the midst of the pandemic. They worked with us, and we built out the capability where you can order from your seat, and in some cases, depending on where you're sitting, what you paid for the ticket, you can have that brought to you. If you're sitting courtside, they actually have wait staff come to you with the Clover Flex device, take your order right there and then bring it to you. If you're up a little bit higher, you can order and they bring the food down to you, put your order on your iPhone. And if you're up a little bit higher, you can order on your iPhone and then go actually pick it up yourself in a designated space. So it's not just walking up to the concessions and swiping a card, but it's actually a full touch list, improved ordering system and then also in the retail stores, go buy your box merchandise, you're doing that through the Clover solution.

Okay. That's a really cool feature. We'll have to buy some courtside seats at the Buck's game to check that out. I wanted to ask about margins, Bob, in the Merchant segment. I mean do you -- how do the margins vary across the distribution channels? Because that's one of the pushbacks that we've received from some investors in that they were just hoping that the strong top line growth in Merchant would come on at a higher incremental margin?

So I'd love to hear from some of those investors. I believe, Julie corrects me if I'm wrong, I think our incremental margin in the second quarter was 75%. So that's some pretty good incremental margin. In the second quarter, our margins expanded 350 basis points. First half of the year, they expanded 280 basis points. I think last year, the margins were just under 32%. In 2020, they were 25%. So we're seeing pretty significant margin expansion. Now that expansion, all openness, 2020 was obviously impacted by the pandemic, but even from '21 to '22, expanded 100 basis points. The first half of this year, we're up 280 basis points. So we have been expanding margin. There has been good fall-through rate. That 75% that we had in the second quarter is not every quarter. So I'm not suggesting that either in the past nor will it be in the future because we continue to look for ways to innovate, bring new solutions and grow the top line. So we don't let all of it drop to the bottom line. There is an intentional decision to reinvest some of that back into the business, but our margins have expanded quite nicely, and we expect them to continue to expand nicely. As we continue to grow so that, that business grows to that $10 billion by 2025 and, of course, beyond.

Okay. Great. And maybe just to round out Merchant, I know we spent a lot of time on it. So we're getting the most questions. But just regarding Argentina, I believe the anticipation revenues come on at a pretty attractive yield, and that's the prepayment business. So can you just update us on how big that Argentina business is? And how much of that anticipation revenue is impacting the company's free cash flow?

Yes. So I guess a couple of things. First and foremost, to your point about the yield, it's a great margin business. It's a great business for us. As you may know, in Latin America, the payment process is different than you might see in the U.S. It's a more extended funding for those merchants. And so there is an opportunity for a prepayment or an anticipation process down in Latin America. And by the way, it's not just Argentina, it's Argentina, it's Brazil, it's Uruguay for us. And it is a very good margin, very low risk. So we're not making a loan, so to speak, to the merchant. We are in the payment flow, and we are just accelerating the settlement to the merchant for a fee. And essentially, what we get is the spread between what I can borrow the money for to what a merchant might be able to borrow the money for, so we're getting a nice spread. And as interest rates move, obviously, they have been going up in Latin America, we're able to raise prices because we keep a spread on that. So it's a great business. Overall, we haven't sized the anticipation business, which again is beyond Argentina, nor have we sized Argentina in particular. We have talked about Latin America in general, which is about 6% of the total revenue. But when you get down to asking what the anticipation revenue, we've gone from the total company to the segment, to the region, to the country down to the anticipation. You're asking me for kind of 6 levels down. Think about it this way, we're an $18 billion company. Well, it is a great business for us. It's not providing meaningful growth to that $18 billion. But it's an important aspect of the overall business, and it's been a great business for us with good margins at very low risk.

Great. And just the low risk, Bob, that's just because the -- I think the issuer as -- the issuers in that flow as well, right? So who actually -- I used to cover [indiscernible] and Stone years ago. So I'm less familiar with the market, but just remind that's why it's low risk?

Well, if you think about it, because we are in the payment flow. Our responsibility for those merchants is to go to the network and get the money and deliver it to the merchant. So we know the merchant is owed a $1. We know we're getting $1 from that network, in some cases, 30 days. And so we are just prepaying or prefunding that $1 to the merchant for a fee. And when that $1 comes in from that network, it now stops at our bank because we've already funded the merchant for a fee. And so we're talking -- I don't believe in the word no, that's an absolute number. It is very, very -- I think that's 3 very -- maybe 4 very low risk because we're in the midst of it. It's a [ part of the opinion ].

Okay. All right, then. Yes. That's very...

And it's important to note, to compare to some of those local providers, right? They can run into travel ever so often when credit starts tightening in the region because they're relying on outside investors warehouse facilities, et cetera, to give them the funding so that they can fund the receivables. We are funding it from our balance sheet. So we don't have the constraints of the credit cycle in the region.

Yes. Good point, Julie.

Yes, it's a great point, Julie. Okay. So I think we have a handful of minutes left. I mean another part of Fiserv's story that's impressed investors over the last year or so is just the Payments segment. The company has announced some very impressive wins here recently, whether that's Target, Uber, I think you had the unnamed e-com marketplace with millions of underlying merchants. What has allowed you, Bob, to really accelerate the growth rate so nicely here?

Yes. And I could probably go on for 10 minutes on that question alone. To summarize it, it is the breadth of our capability, the investments that we have made and continue to make in terms of bringing solutions to those clients, and the service that we provide. If you think about someone like Target, they are pretty dependent upon their payment provider. And so bringing our card issuing solution to their RedCard, that's critically important for them. It's not only is it a meaningful part of their business today, but it's something that they anticipate continuing to grow. And so having a partner that's got world-class capability that continues to invest in that capability with them and for them is important. Things like our Ondot solution, where we can bring a world-class mobile banking capability to card controls deeply ingrained and embedded integrated into a mobile banking app for small- and medium-sized financial institutions so that their mobile banking solution is as good or better than some of the largest banks in the world is an important aspect. And not only did we invest in our overall mobile banking capability, but we are an early investor in Ondot to our earlier conversation, an earlier investor and Ondot as a partner which we then acquired enabled us to really fully integrate it in a deep manner so that that's a single solution. As you know, we're the third largest debit network in the United States. And not a distant third and relatively close to bringing that solution. And as the world continues to evolve, as Fed now comes into place, as Zelle continues to grow, having our NOW Network which is a real-time payments capability that we can bring to a financial institution that allows them to bring multiple payment capabilities to their clients. We have thousands of banks signed up for Zelle. They are already part of the NOW Network. And so when they want to add things like RTP or the FedNow solution, that's an easy add for them. And so that gives us that growth opportunity in multiple angles.

Great. That's super helpful, Bob. I love the condensed version because it gives me time to ask a couple of more questions. I guess one question we've been getting is just about the potential benefit that Fiserv might see from the recent regulatory changes. So as you think back on some of your recent client wins? How much of a benefit did that card not present, the dual routing bill provide there?

Yes. I would say very unique -- finally just went into effect beginning of the quarter. I think we've been pretty consistent in saying we see it as an opportunity. It's accretive but remains to be seen how that actually plays out in the marketplace. We've signed up a number of dozens and dozens of our financial institutions, our issuers are enabled for that capability. We've started to see some of the merchants. We talked about some of those that have already signed up over the last couple of quarters. It's a competitive market. The large networks are fierce competitors. And so we'll see how this plays out. I would anticipate it more of a 2024 and beyond opportunity than it is a 2023 opportunity right now.

Okay. Great. Maybe just last question, Bob, and I'll let you go. I mean Fiserv has an Investor Day coming up, I think, in a couple of months here. You guys continue to execute extremely well, and the story continues to play out nicely. So what are some of the areas that you hope to touch on at the Investor Day and provide more visibility to investors.

Yes. So we are hosting our Investor Day on November 15, so in a couple of months now, and it, of course, will be available through the web as well as in person, broadcasting from the New York Stock Exchange. I think what investors will hear from us maybe most obviously or most directly is we'll provide updated medium-term guidance. The last Investor Day we had, we gave guidance, our medium term essentially took us through 2022 and 2023. So we'll be updating that outlook for how we see kind of '24 through '26 our progressing. We'll continue to give more visibility into the growth of our segments. Back in March of last year, we spent some concentrated time on Merchant in particular. We'll obviously update you on our path towards that $10 billion to 2025, give you a little bit of look 1 year beyond as we give a medium term into 2026, but also provide some more visibility into the other two segments, really our two segments that service our financial institutions through core account processing or mobile banking, online banking as well as all of the continued innovation in the payment space. Really focusing on power of the combined franchise, both merchant and financial institutions. The benefit of the integration of Fiserv and First Data that has now anniversaried a couple of times. We closed that in 2019 and continued growth opportunity for us as we continue to grow the business.

Excellent. Well, I can't wait to hear the update from you guys and wish you guys the best of luck. Bob, we're out of time. So I think we're going to have to leave it there. Really enjoyed the conversation that you've provided a lot of great insights. So we'll have to do this again soon.

Great. Thanks, Ken. I appreciate the time. It's good talking to you all.

All right. Thank you so much. And thank you, Julie, as well.

Thanks, Ken.