Jeffery Yabuki says he never doubted his company's ability to endure the financial industry's recent downturn, which eliminated a handful of the banks using its technology and is an ongoing threat to the survival of others.
"There was no question that the industry would survive," said Yabuki, president and chief executive of technology vendor Fiserv Inc. "What I was not clear about at the time was how the industry would evolve and how we would evolve around it."
With the economy slowly improving, giving banks more clarity on what their financial future holds, planning and responding to the evolution has become easier.
A key change is the importance of new core processing systems - historically the centerpiece of the Brookfield, Wis., vendor's business - to banks' technology investment plans. The need to upgrade a core system used to be the catalyst to buy new technology for most banks, but that no longer is the case. Banks' and credit unions' budgets remain constricted, making them reluctant to embark on major core upgrades.
There's strong interest, though, in adding systems to enhance Internet banking, bulk up remote-deposit capture services, and add person-to-person payment options and other features that typically are less costly and less onerous to install.
Fiserv saw the writing on the wall a few years ago and took action by buying smaller competitors - including CheckFree Corp. at the end of 2007 - to gain strengths in many of these areas while developing its own capabilities in others.
"I don't see core switching as the big driver of technology spending," Yabuki said. "It's a big undertaking. ... It takes a lot of energy from a human resources perspective and the returns on that on a standalone basis are not necessarily compelling."
"We are very focused on making sure we are delivering bundles of value...[and] looking at what institutions can do to generate revenue and continue to focus on using technology for efficiency," he said.
Fiserv, which ranks No. 1 on this year's FinTech 100, has taken steps that analysts say position it well to meet interest in these areas. Earlier this year the company unveiled ZashPay, its person-to-person payments system that banks and credit unions can offer their customers. About 200 financial institutions had agreed to offer the service as of the end of the second quarter, according to Yabuki. "There's just a lot of energy there," he said, adding that while much of the focus on P-to-P payments has been on how consumers are using the technology, there is potential to apply it to business users.
"P-to-P is generally talked about as person-to-person but it's really peer-to-peer, so being able to allow one small business to electronically pay another small business ... is a pretty new frontier," Yabuki said. "Corporates do that today, but the small businesses generally are not paying each other electronically."
Fiserv's recent move to offer a mobile service as part of its suite of remote-deposit capture products also could help drive adoption of a technology many banks say they are considering but few are actually offering to their customers. "I think there's an increasing concern out there with the banks that they are going to be disintermediated by newer technology [like] the PayPals of the world," said John Kraft, a research analyst with D.A. Davidson & Co. in Lake Oswego, Ore. "For Fiserv to come out with some of these pretty innovative things like the P-to-P payments - ZashPay - that isn't what you would have said that Fiserv would have come up with a few years ago."
Fiserv, like its peers, has been smart to integrate the new technology it has gained from its acquisitions with its legacy products. "Their prior strategy was just different," Kraft said. "It was, 'Let's make these acquisitions and let's let these individual companies operate autonomously.'
"It was what maybe worked at the time but now times are different and the new strategy seems to be" working, he added.
Despite its technology investments, Fiserv expects industry conditions to remain tough.
While the spending environment has improved, "the overall business environment is still choppy" and "it's going to be choppy for a while," Yabuki said.
Fiserv's revenue fell 11% to $4.08 billion in 2009. Yabuki said spending will pick up to "a more normalized level" during the next two years, though he does not expect it to reach pre-2008 levels, "which we think were extraordinarily high."
Helping banks identify areas where they can recoup revenue lost to new regulations is an emerging focus for Fiserv.
The company unveiled a Revenue Enhancement program in August with which it plans to work with banks and credit unions to develop new products in light of restrictions against charging certain account-overdraft fees. Said Yabuki, "There's still a fair amount of unknown, and that really hurts the banks' ability to make decisions and move forward."