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Fiserv, Inc. - Securities
Industry and Financial Services Business Process Outsourcing
(262) 879-5000
255
Fiserv Drive
Brookfield, Wisconsin 53045
www.fiserv.com
Sales
$3
billion
Business Description
Fiserv provides integrated data processing and information management
systems to more than 15,000 financial services providers, including banks,
broker-dealers, credit unions, financial planners and investment advisers,
insurance companies and agents, self-insured employers, leasing companies,
mortgage lenders and savings institutions. The Company operates centers in
the United States for full-service financial data processing, software
system development, item processing and check imaging, technology support
and related product businesses. The Company’s operations are principally
domestic and in 2003 international operations constituted approximately 4%
of total processing and services revenues through business support centers
in Argentina, Australia, Canada, Colombia, Indonesia, the Philippines,
Puerto Rico, Poland, Singapore and the United Kingdom.
The Company was formed in 1984 through the combination of two major regional
data processing firms that began as the data processing operations of their
parent financial institutions. Historically, these firms expanded operations
by developing a range of services for their parent organizations, as well as
other financial institutions. Since its organization, Fiserv has grown by
developing highly specialized services and product enhancements, adding new
clients and acquiring firms complementing the Fiserv organization.
Principal Products and Services
The Company provides an extensive portfolio of products and services to
enable banking, lending, insurance, financial planners and securities
providers to deliver anywhere, anytime financial services to their customer
base.
The Company’s operations have been classified into three primary business
segments. The financial institution outsourcing, systems and services
business segment provides account and transaction processing systems and
services to financial institutions and other financial intermediaries; the
health plan management services segment provides services to employers who
self-fund their health plan, including services such as handling payments to
healthcare providers, assisting with cost controls, plan design services,
medical provider administration and other related services; and the
securities processing and trust services business segment provides
securities processing products and services and retirement plan
administration services to brokerage firms, investment advisers and
financial institutions.
Fiserv also provides plastic card issuance, design, personalization and
mailing services, and document management products.
Financial Institution Outsourcing, Systems and Services. Fiserv provides
financial services and products that are focused on technology needs to more
than 9,400 financial institutions, including banks, credit unions, leasing
and finance companies, mortgage lenders and savings institutions.
“Core” Products. Fiserv delivers “core” products that integrate account
servicing and management information functions for its financial institution
clients, as well as ancillary value-added products and services that
complement the “core” products. “Core” products include systems to process
various customer deposit and loan accounts, a financial institution’s
general ledgers, central information files and other financial information
and include the extensive security, report generation and other features
required by a financial institution to process transactions for its
depositors and other customers, as well as to meet its regulatory compliance
requirements and its own management information needs. “Core” products are
offered through on-line data transmission connections to Fiserv data
processing centers, often called “service bureaus”, or as stand-alone,
in-house, licensed software for installation on client-owned computer
systems.
While many clients contract to obtain all or a majority of their data
processing requirements from Fiserv, the modular design of many of the
Company’s service bureau and software products allows a client to start with
one application, such as a deposit system, and gradually add applications
and features as needed. Fiserv supports a broad range of terminals and other
client-owned peripheral devices manufactured by many different vendors. This
support capability reduces the client’s initial conversion expenses,
enhances an existing client’s ability to change equipment and broadens the
Company’s market.
Bank and Thrift “Core” Products. The Company’s principal service bureau
products used by banks, thrifts and savings institutions include Fiserv
VISION®, Comprehensive Banking System (“CBS”) outsourcing, Information
Technology, Inc. (“ITI”) Premier II outsourcing, and Source One.
Fiserv also offers in-house licensed software products to its banking
clients, including ITI Premier II, Precision Computer Systems Vision® and
CBS. CBS is available both domestically and internationally through its
International Comprehensive Banking System (“ICBS”).
Credit Union “Core” Products. The principal “core” products offered to
credit unions include the Summit Spectrum system, the GALAXY Plus Credit
Union System, the Users DataSafe product, the Integrasys Premier product,
and several CUSA Technologies systems. Each of these products is offered via
a service bureau or as an in-house licensed software system. In addition to
these products, Fiserv offers the AFTECH Advantage® and XP Systems XP2®
licensed software products that are designed to operate in-house on the
clients’ systems.
Insurance “Core” Products. The insurance industry, like other financial
industries, has requirements for basic administration services and
information processing systems. Fiserv provides comprehensive insurance
processing services and products to the insurance and related industries.
Fiserv insurance products and services include the Freedom suite of
administration systems, such as Claims Workstation, TRACKER Unclaimed
Property System, Regulatory Series Annual Statement 2000 and Freedom
Reinsurance system; the Fiserv Life Insurance Solutions ID3 system for life,
annuity and health requirements; the Fiserv SIS property and casualty
systems; and claim processing services for flood and workers compensation
insurance companies. Emerald Learning Solutions and RegEd sell
computer-based training for insurance and securities professionals.
Complementary or Add-On Products. In addition to the “core” products, Fiserv
offers complementary products and back-office products and services. These
products and services allow financial institutions to offer additional
services to their clients such as home banking, automated teller machine
access and other treasury and related services of varying complexity and
sophistication, such as asset-liability modeling and cash management.
Specifically, Fiserv offers products to its financial institution clients
that allow them in turn to offer sophisticated banking services to their
individual customers such as electronic funds transfer services offered by
Fiserv EFT/CNS that include the ACCEL network and related ATM access
services, as well as Internet banking products offered through Fiserv
eSolutions that allow individual bank customers to bank from home.
Fiserv also offers its financial institution clients complementary or add-on
products that amplify the “core” products such as item processing and
imaging systems for the item processing needs of clients, treasury and
investment management systems including a series of treasury management
products sold under the BANKLINK® name and the CBS Worldwide MetaBank
Portfolio Management and Investment Portfolio Accounting systems as well as
a suite of EPSIIA and Imagesoft electronic document management systems.
Finally, Fiserv has many other complementary product offerings that allow
its financial institution clients to improve the management and efficiency
of their businesses. Such products include IPS-Sendero decision support and
performance measurement systems, including ASAP/Spectrum, DecisionServ and
the VISION family of integrated software and support services that enhance a
financial institution’s asset/liability management and profitability
measurement capabilities; the CCS suite of products includes call center
systems and the InformEnt data warehouse utilized for data warehousing and
data mining; loan origination and tracking systems, including Fiserv Lending
Solutions’ products such as easyLENDER® and UnFi PRO Mortgage offerings,
MortgageServ, Integrated Loan Services including ILS Quickclose and Lenders
Financial Services; real estate settlement services offered by Integrated
Loan Services and General American Corp; credit reporting services and
systems through Chase Credit; the Fiserv LeMans auto leasing software
products and the Remarketing Services of America lease maturity systems and
other products offered with regard to the termination of auto leases; and
credit services offered by CBS Worldwide with its FACT 400 product and by
Fiserv Credit Processing Services with The PLUS System.
Fiserv offers these products and services through multiple delivery channels
primarily in the United States.
Health Plan Management Services. Fiserv, through its five health plan
management operating units, Benefit Planners, Benesight, Fiserv Health,
Harrington Benefit Services, and Wausau Benefits, provides a variety of
services for the administration of health plans to customers nationwide.
These services include claim adjudication and payment, customer service, and
other related services. The Company provides these services to more than
1,000 employers that self-fund their health plans. In addition, Fiserv
provides these services to other health plan sponsors such as insurance
companies and HMO’s.
Complementary and Other Products. Fiserv also offers additional
complementary services to its health plan administration customers and
others. Fiserv offers care management services ranging from traditional
services, such as utilization management and case management, to newer
disease management, population health and prevention programs. Through 2003,
these services were offered through the Company’s Benefit Planners, Wausau
Benefits and Value Check units. Beginning in 2004, Fiserv combined these
services into a single operation, Avidyn Health, in an effort to offer a
single source of integrated services. Through its Innoviant business, the
Company offers health plans prescription benefit management services. The
Company also offers health plan sponsors services for risk management.
Through its Third Party Solutions and Direct Comp RX businesses, Fiserv
assists employers, insurers and retail pharmacies with the management and
processing of workers compensation prescriptions. Fiserv’s PPO One business
provides technology services to Preferred Provider Organizations for data
management and claim repricing.
Securities Processing and Trust Services. Fiserv offers high-quality,
integrated securities clearing, execution, margin lending, stock lending,
mutual fund processing, customer account processing and facilitation of
traditional and Internet brokerage services through advanced technology that
makes executing trades faster, easier and more economical, focused customer
service and economies of scale.
Through TradeStar Investments, Inc. (“TradeStar”), a registered brokerage
firm headquartered in Houston, Texas and a wholly-owned subsidiary of Fiserv
Securities, Inc., Fiserv’s clearing business, Fiserv also offers retail
brokerage services at discount commission rates. TradeStar also markets
Fiserv Securities’ processing and support services throughout the United
States. The Company’s clients include more than 500 broker-dealers and
financial institutions, including full-service and discount broker-dealers
(sometimes called “correspondents”), registered investment advisers,
municipal bond dealers, underwriters, retail brokerage operations of
financial institutions, insurance firms and mutual fund companies.
Fiserv also provides a variety of administrative, custodial and processing
services to individual investors, third party retirement plan and pension
administrators, investment advisors and financial planners and financial
intermediaries. The specific products offered include self-directed
retirement plan administration services and mutual fund custody trading
services. First Trust Corporation, Fiserv’s principal trust company
subsidiary, is the largest independent trust company in the United States.
Specific product offerings to financial advisors, individual and business
holders of IRAs, Roth IRAs and other self-directed retirement investment
vehicles include DATAlynx, providing trust and asset custody and back office
services to investment advisers and other financial professionals; iFlex, a
suite of 401(k) products for companies ranging in size up to 100 employees;
OptionsPlus, a self-directed investment window for participants in a
retirement plan that is sold to large institutional insurance companies that
offer record keeping services and investment options to individuals;
TRUSTlynx custody and electronic trading support services for daily
valuation of retirement plan assets; and trust and custodial services that
support the administration of self-directed retirement plans.
Business Strategy
The market for products and services offered by financial institutions
continues to undergo change. The financial industry introduces and
implements new alternative lending and investment products with great
frequency. The distinctions among financial services traditionally offered
by banking and thrift organizations as well as by securities and insurance
firms continue to narrow, as traditionally different entities compete for
the same ultimate customers with competitive services. Financial
institutions diversify and consolidate on an ongoing basis in response to
market pressures, as well as under the auspices of regulatory agencies.
Although such market changes have led to consolidations that have reduced
the number of financial institutions in the United States, consolidation has
not resulted in a material reduction of the number of customers or financial
accounts serviced by the financial industry as a whole. New organizations
entering the once limited financial services industry have opened new
markets for Fiserv services.
To stay competitive in this changing marketplace, financial institutions are
providing their customers a broad variety of new products and services that
are typically transaction-oriented and fee-based. The growing volume and
types of transactions and accounts have increased the data processing
requirements of these institutions. As a consequence, Fiserv believes that
the financial services industry is one of the largest users of data
processing products and services.
Moreover, Fiserv expects that the financial industry will continue to
require significant commitments of capital and human resources to the
information systems requirements, to require application of more specialized
systems and to require development, maintenance and enhancement of
applications software. Fiserv believes that economies of scale in data
processing operations are essential to justify the required level of
expenditures and commitment of human resources.
In response to these market dynamics, financial institutions obtain data
processing services by different means than in the past. Many smaller, local
and regional third-party data processors are leaving the business or
consolidating with larger providers. A number of large financial
institutions previously providing third-party processing services for other
institutions have withdrawn from the business to concentrate on their
primary, core businesses. Similarly, an increasing number of financial
institutions that previously developed their own software systems and
maintained their own data processing operations have outsourced their data
processing requirements by licensing their software from a third party or by
contracting with third-party processors to reduce costs and enhance their
products and services. Outsourcing can involve the licensing of software,
which eliminates the costly technical expertise within a financial
institution, or the utilization of service bureaus, facilities management or
resource management capabilities. Fiserv provides all of these options to
the financial industry.
To capitalize on these industry trends, Fiserv has implemented a strategy of
continuing to develop new products, improving the cost effectiveness of
services provided to clients, aggressively soliciting new clients, and
making both opportunistic and strategic acquisitions. In 2001, Fiserv
acquired 12 businesses, adding combined annual revenues of more than $380
million and approximately 4,000 new employees. In 2002, Fiserv acquired five
businesses, with combined annual revenues of more than $210 million and
approximately 1,100 employees. In 2003, Fiserv acquired 12 businesses, with
combined annual revenues of more than $610 million and approximately 3,200
employees. The following is a summary of acquisitions made by Fiserv since
its organization.
Servicing the Market
The market for Fiserv account and transaction processing services and
products has specific needs and requirements, with strong emphasis placed by
clients on software flexibility, product quality, service reliability,
comprehensiveness and integration of product lines, timely introduction of
new products and features, cost effectiveness and service excellence.
Through its multiple product offerings, the Company believes it successfully
services these market needs and requirements for clients ranging in size
from start-ups to some of the largest financial services providers.
Fiserv believes that the position it holds as an independent,
growth-oriented company dedicated to its business is an advantage to its
clients as compared to many of its competitors that are regional or local
cooperatively owned organizations, data processing subsidiaries or
affiliates of financial institutions or hardware vendors. Due to the
economies of scale gained through its broad market presence, Fiserv offers
clients a selection of information management and data processing products
and services designed to meet the specific needs of the ever-changing
financial services industry. The Company believes this independence and
primary focus on the financial services industry helps its business
development, client service and product support teams remain responsive to
the technology needs of its market.
“The Client Comes First” is one of the Company’s founding principles. It is
a belief backed by a dedication to providing ongoing client service and
support—no matter the client size.
The Company believes its commitment of substantial resources to training and
technical support helps it retain clients. Fiserv conducts the majority of
its new and ongoing client training in its technology centers, where the
Company maintains fully equipped demonstration and training facilities
containing equipment used in the delivery of Fiserv services. Fiserv also
provides local and on-site training services to its clients.
Product Development
To meet the changing technology needs of the clients Fiserv serves, the
Company continually develops, maintains and enhances its systems. In 2003,
product development expenses represented approximately 7% of the Company’s
processing and services revenues.
The Fiserv network of development and financial information technology
centers applies the shared expertise of multiple Fiserv teams to design,
develop and maintain specialized processing systems around its multiple
technology platforms. The applications of its account processing systems
meet the preferences and diverse requirements of the various international,
national, regional or local market specific financial service environments
of the Company’s many clients.
Although multiple Fiserv development and financial technology centers share
the Company’s variety of nationally developed and supported software, each
center has specialized capabilities that enable it to offer system
application features and functions specialized to its client base. If the
client’s requirements warrant, Fiserv purchases software programs from third
parties that are interfaced with existing Fiserv systems. In developing its
products, Fiserv stresses interaction with and responsiveness to the needs
of its clients.
Fiserv provides a dedicated solution that is designed, developed, maintained
and enhanced according to each client’s goals for service quality, business
development, asset and liability mix, local market positioning and other
user-defined parameters.
Intellectual Property
Fiserv regards its software as proprietary and utilizes a combination of
trade secrecy laws, internal security practices and employee non-disclosure
agreements for protection. The Company believes that legal protection of its
software, while important, is less significant than the knowledge and
experience of the Company’s management and personnel and their ability to
develop, enhance and market new products and services. The Company believes
that it holds all proprietary rights necessary for the conduct of its
business.
Competition
Financial nstitution Outsourcing, Systems and Services. The market for
information technology products and services within the financial industry
is highly competitive. The Company’s principal competitors include internal
data processing departments, data processing affiliates of large companies
or large computer hardware manufacturers, independent computer service firms
and processing centers owned and operated as user cooperatives. Some of
these competitors possess substantially greater financial, sales and
marketing resources than the Company. Competition for in-house data
processing and software departments is intensified by the efforts of
computer hardware vendors who encourage the growth of internal data centers.
Competitive factors for processing services include product quality, service
reliability, product line comprehensiveness and integration, timely
introduction of new products and features, and price. The Company believes
that it competes favorably in each of these categories. In addition, the
Company believes that its position as an independent vendor, rather than as
a cooperative, an affiliate of a larger corporation or a hardware vendor, is
a competitive advantage.
We compete with vendors that offer similar transaction processing products
and services to financial institutions and other financial intermediaries,
including Aurum Technologies, Inc., The Bisys Group, Inc., Fidelity
Information Services, Inc., Jack Henry and Associates, Inc. and Metavante
Corporation. There has been significant consolidation among providers of
information technology products and services to financial institutions, and
we believe this consolidation will continue in the future.
Health Plan Management Services. The market for the Company’s administrative
services is highly competitive. The major competition for the Company’s
services comes from national and regional health insurance companies selling
administrative services only. Many of the Company’s competitors serve a
larger number of customers, have greater financial resources and proprietary
products. In addition, the self-funded health plan market is typically
broker-controlled, highly price sensitive and frequently placed out for
competitive bid. Significant competitors of the Company include Blue Cross
organizations, United Health Group, Cigna and Aetna.
Securities Processing and Trust Services. The Company competes with several
larger companies in the securities clearing business. Specifically, the Bank
of New York, FleetBoston Financial Corporation, Fidelity Investments, Bear
Stearns & Co. and others provide competitive services to those of the
Company. Many of these competitors are engaged as well in the retail
brokerage business and thus have a captive supply of clearing business that
the Company does not have.
In the trust services area, several trust companies, the most notable of
which is Delaware Charter, compete with the Company in custody services for
self-directed retirement accounts. In the provision of services to financial
advisors and the mutual fund trading area, Charles Schwab & Co., which
handles a much larger volume of such trades, is the Company’s most
significant competitor.
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