Clover Sales Grow 26% as Fiserv’s Merchants Embrace Business ‘Operating Systems’

Fiserv reported third-quarter results Tuesday (Oct. 24) that showed a continued embrace of P2P payments and Clover’s point of sale and software solutions for small and medium-sized businesses (SMBs).

In the Payments and Network segment, Fiserv presentation materials revealed that the company logged 44% growth in Zelle transactions and 26% growth in the number of clients. North America credit active accounts grew by 3%.

During the conference call with analysts, CEO Frank Bisignano said that overall organic revenue growth was 12% for the company as a whole, outpaced by the Merchant Acceptance segment, which saw organic revenue growth of 20%.

“Nearly half of our volume and our merchant business is in non-discretionary spending categories. Approximately 85% of our financial institution’s revenue is recurring,” Bisignano noted on the call, amid the puts and takes where there is softness in the retail segment and where restaurants continue to be steady.

“Macro uncertainty remains high, but we are confident in our ability to continue to add new clients, grow with and retain existing ones, and expand our share of wallet with all of them,” he told analysts, and the company is on track to see organic revenue growth hit 11% in 2023, the top end of guidance.

Investors bid the shares up 4% at the start of trading Tuesday morning.

Clover, the company’s SaaS operating system that helps merchants accept payments and run their businesses, saw an acceleration in revenue growth, said Bisignano, to 26% in the third quarter from 23% in the second quarter and was tied to 15% growth in annualized payment volume, at $272 billion.

CFO Robert Hau said on the call that merchant volume grew 2% overall and 6% excluding wholesale processing. Similarly, transactions grew 1% overall and 9% excluding processing. “We’ve been evolving from providing processing services alone to offering full acquiring services and more recently software and other value-added solutions. This transition changes our business model for the better,” he said. Carat, the company’s omnichannel eCommerce operating system for enterprise clients, grew 14%.

Asked on the conference call about Clover’s growth, Hau noted that the company has been focused on “building out that Clover software value added services capability of becoming an operating system. We have an operating system for SMB clients, we have an operating system for enterprise clients.”

Bisignano added on the call that Clover’s evolution is one where “we started with the concept of an app store. We converted that into understanding the natural characteristics of specific verticals, and then what is the horizontal capability that we’ll bring across it. And we feel good about the growth and we see the trajectory of both signing up new merchants and also the ability to bring more products to our current merchants.”

Addressing the Long Tail of Merchants

“With a long tail of merchants growing our addressable market value added solutions, penetration continues to grow reaching 17% in the quarter. We see plenty of white space still ahead, including with vertical specific solutions, horizontal value-added services and software and international markets,” the CEO said.

And with a nod to the recently disclosed pact with Melio, Bisignano said that “together, we will enable financial institutions to better meet the payment needs of small businesses and level the playing field with emerging software led competitors. We’ll combine Melio’s well-known, easy to use accounts payable and receivable workflows with fine serves, market leading pillar and merchant network plus payment capabilities.” By the summer of next year, he said, Fiserv will go to market with Cash Flow Central by Fiserv, billed as an integrated accounts payable and receivable solution for small businesses through Fiserv financial institution clients.