Fiserv, Inc. - Shareholder/Analyst Call

| About: Fiserv, Inc. (FISV)

Fiserv, Inc. (NASDAQ:FISV)

October 11, 2011 9:00 am ET


Erich Litch -

Peter Holbrook - Vice President of Investor Relations

Rahul Gupta - President of Card Services

Jeffery Yabuki - Chief Executive Officer, President and Director

Thomas J. Hirsch - Chief Financial Officer, Principal Accounting Officer, Executive Vice President, Treasurer and Assistant Secretary

Mark Ernst - Chief Operating Officer and Executive Vice President

Steve Tait - Executive Vice President and Group President of Depository Institution Services


Bryan Keane - Deutsche Bank AG, Research Division

Glenn Greene - Oppenheimer & Co. Inc., Research Division

Brett Huff - Stephens Inc., Research Division

Ashwin Shirvaikar - Citigroup Inc, Research Division

Tien-Tsin T Huang - JP Morgan Chase & Co, Research Division

John Kraft - D.A. Davidson & Co., Research Division

Unknown Analyst -

Darrin D. Peller - Barclays Capital, Research Division

David J. Koning - Robert W. Baird & Co. Incorporated, Research Division

David Togut - Evercore Partners Inc., Research Division

Peter Holbrook

Ladies and gentlemen, please welcome Fiserv President and Chief Executive Officer, Jeff Yabuki.

Jeffery Yabuki

Good morning, everyone. Okay, that was a good start. Welcome to our 2011 Investor Day. It's always great to be back in New York. I did have in my notes to say it was a beautiful day. Of course, it was the last couple of days. Today doesn't look that great, but hopefully the energy in here will compensate for the weather outside. We're happy to have the opportunity to share our story with you here live and people on the web. We've got a pretty packed day, so let's get started.

As always, please familiarize yourselves with forward-looking statements and non-GAAP disclosures that we are likely to make.

Our theme today is going to cover 3 key elements. The first is around innovation. It's a major driver to our business model which is, as you know, quite strong and resilient. We've been talking a little bit about investments we've been making in innovation over the last couple of years, and we're going to share a lot of detail on those investments and how we see that turning into revenue.

The second is a -- for those of you who know us, you'll understand this. We're going to provide a very detailed view about how we intend to accelerate our revenue, our earnings and our cash flow growth over the next several years. And then [indiscernible] -- share our confidence that we have in operating margin our [indiscernible] continue to expand that.

We are very focused and committed to delivering against these 3 areas. I want to make sure that everything is, of course, pointed up into the light.

As I mentioned, we have quite a full agenda today. I'm going to quickly go through Fiserv at a glance. We're going to share perspectives on how the key trends -- how key trends in the market are affecting our business. We're going to talk about what we're going to refer to today as the growth algorithm, what it is that we expect in order to have growth accelerate. We're going to provide, as I mentioned, a detailed view on our new investments and how they're going to translate to new revenue over the next several years. Then we'll provide you with insights into our view on margin expansion, capital allocation. We'll wrap up and then have Q&A. Our goal is to be out of here by 11:30 but again, it's pretty tight. We don't have any set breaks, so if you need to exit, feel free.

So Fiserv by the numbers, when you think about Fiserv, it's a pretty simple story in terms of what we deliver, all right? We're scaled. We've got expertise. We're quite consistent, some people would say boring. We're about quality for our clients and quality for you, our investors. We don't take actions for the headlines. We're not about today. We're not about a quarter. We build for the longer term. That commitment, that business model, that resilience has actually delivered something we're pretty proud of. Last year, we actually hit our 25th year in a row of double-digit EPS growth. And actually, there are 2 years before that, but we weren't yet a public openly. Fiserv has never, in its history, not had at least 10% earnings growth.

So what we think that means is, I probably shouldn't say this, but we think you can actually take our earnings commitments to the bank. Sorry, it's early.

We're very focused on delivering today as well as building for tomorrow. We've been talking a lot about, again, the investments that we've been making. We'll share a lot with you today, but we really are for the longer term.

As a company, we move about $1 trillion a day, so we've got a lot of expertise; that's about $3 billion every day. And in 2010, we actually created a community of clients who interact with us strategically on a regular basis. 12,000 people have enrolled in this over the last 21 months or so. And that was in response to people saying to us hey, you know a lot about the industry. We'd like you to provide us with regular strategic insights. And it really matches up well to the fact that we believe clients are at the center of our universe.

Every once in a while, we actually win some awards. We currently have 15 #1 rankings in a variety of solution areas, some of them you'll see in front of you. We're pretty proud of what you see on the bottom there. Like ZashPay was named one of the 20 most innovative ideas to steal. It's kind of an interesting category. I guess speaking of ideas to steal, we're actually spending a lot of time on things like intellectual property. We have 90 patents that we've currently been awarded, but we actually have filed for 60. So we have 60 more pending. We've really been putting energy into developing new types of intellectual property. And so we think that again, that combination of innovation, execution and delivery is what will set us apart over time.

I'm not going to spend any time actually on the historic financials. We think you know a lot about us. You'll see it in the appendix of the deck. Tom will spend a little bit of time on the financials. We think these are the things that matter the most.

So now, I'm going to turn the stage over to Mark Ernst, our Chief Operating Officer, who's going to talk about market dynamics.

Mark Ernst

Good morning. So I want to take a few minutes to share what our view is into the environment for financial services technology, specifically the technology on how it fits into the financial services industry today and in particular how that perspectively is it going to impact Fiserv in the coming years.

In general, we see that the financial services industry is regaining its health. And I think we all see that as good, although there continue to be challenges with that. And while there is plenty for most bank and credit union management teams to focus on in any event, this regulatory environment which we've all heard a lot about layers on an even more challenge for a lot of these management teams, giving them more and more that they've got to be focused on.

At the same time, there's growing consumer demand. We're going to talk much more about this today. There's changes in the way consumers expect their financial institutions to be serving them, and that is driving a lot of the agenda for a lot of institutions, so we're going to talk a little bit more about that. And again, against that backdrop, technology increasingly is seen as a pathway for institutions to meet those various combinations of challenges, whether that is meeting new regulatory environment challenges or driving additional revenues. They -- in most cases, what we hear from institutions is that technology actually is the key enabler for what they see that they have to do on their agendas.

You certainly might be tempted to conclude that there's got to be major shifts going on inside this industry given the fact that the financial institutions are in the news virtually every day. In fact, the evidence that we see is that financial institutions have become actually quite focused internally on how they address their individual challenges within the boundaries of their own institutions, and they're not looking outside their institution for solutions. They're really looking inside to say how can we make our operations as successful as possible?

There's one place in particular where that shows up very prominently, and that is in the absolute number of U.S. financial institutions. The rumors that the demise of the traditional banks and credit unions has been greatly exaggerated. Despite the very high profile of the past several years, the long-term trend is really very little changed in recent years. The number of financial institutions serving the U.S. market continues to contract at about the same 3% rate that we have seen now for several decades.

And the measure frankly that matters the most to Fiserv in all this, the level of bank deposits has continued to grow at about 5% a year all the way through the same time period. Through the recent economic turmoil in fact, banks and credit unions have become even more attractive for most consumers as the place they want to go and conduct their financial affairs because of the security of the U.S. banking system.

As you've heard from us before, regulatory actions have been far fewer than many people had anticipated. The pervasive kind of financial crisis impact has been to focus on recapitalizing troubled institutions rather than on a large number of closures that we've seen in other points in the cycle. With the end of 2011 now in sight, I'd tell you that it appears the number of closures that we're going to have this year will be near the low end of the estimate that we had coming into the year. This doesn't mean that there isn't a lot of change, of course. Fresh capital into a lot of institutions has been accompanied by things like ships and market strategies, changes in some management teams and along with that, some changes in the way in which many institutions are thinking about their strategies for their individual markets. But we're not seeing wholesale closures the way I think a lot of people once anticipated.

One of the consequences of the capital that's going into financial institutions and to a larger degree, maybe the regulatory conservatism toward new charters is that there's been a nearly complete elimination of De Novo institution creation in the U.S. in the last couple of years. We seem to be now at a cyclical low in terms of new institution creation. Certainly, it would be our estimation that this is not likely to be the new normal. We've seen this cycle happen before, and we fully expect that the recovery in the industry will result in new opportunities in coming years. But today, we're experiencing a cyclical low in the number of De Novo institutions.

Another consequence of the industry recapitalization has been the reduction in voluntary combinations between institutions. With less excess capital inside the industry, there are fewer attractive opportunities for M&A. In fact, the level of M&A in the past 3 years is about half of the already lowered level of the past decade. This leaves a picture of an industry that rather than looking outside of their institution's walls for solutions to their challenges, they are intently focused on what will make their individual institution successful within the constraints of whatever their market position is, whatever opportunities they have in front of them in their markets and what their profitability needs are.

This new environment, we believe, calls for new sources of revenue, and we're hearing this from clients. They're looking for new sources of attractive loan demand and at the same time, addressing the new competitive challenges that they have in their individual markets. At Fiserv, what we see this doing is translating into demand for new technologies that will enable that kind of new revenue growth that will drive greater operating efficiency and allow financial institutions to better serve their customers.

The fundamentals of the industry would be difficult enough, but there obviously has been a lot of clamor for regulatory change and that has resulted in changes and is now creating new sets of burdens on financial institution management teams.

As we highlighted for you last year, the level of regulatory change affecting financial institutions is truly unprecedented in U.S. history. How these are impacting and being reacted to by the industry is the stuff of today's everyday headlines. Dodd-Frank implementation and the strategic choices that must be made in response to Durban are on the agenda in one way or another of virtually every financial institution out there.

Financial institutions, in our experience, are not, of course, sitting still. Whether the change is how do I replace revenues or if the question is how to take advantage of those people who are trying to replace revenues, we hear virtually every bank management team out there trying to decide how they will play in response to these new pressures.

Technology, certainly the right technology is, in fact, seen by most institutions as fundamental to how they will enable their institution to strategically grow for the future.

Which technologies those are, whether to enable consumer revenue generation, to solidify relationships with business customers, to drive efficiency, to focus limited resources where they can add the greatest value for customers, all depend on each institution's unique position. What we see are highly targeted investments being made that serve distinct purposes in the execution of each individual institution's strategies as the way in which technology buying is now being done within this industry.

Of course just because financial institutions are busy addressing all their issues that come along with the challenging environment and the challenging regulation doesn't mean that consumers are giving anybody a pass. In fact, consumers continue to demand that their financial institution adapt to their changing desire to be served how, when and where they choose.

At Fiserv, one of the things that we do is we commission original research to understand not just what our clients are demanding, but also to anticipate how changes in end-consumer markets are likely to impact our clients in the future. This is part of what helps drive our thinking around our innovation.

A way to illustrate this is with what's known as a word cloud, where we ask bank customers what they're looking for in their ideal banking relationship. And those individual responses collectively paint this picture of how expectations are changing. In the most recent research, we are finding that consumers want an institution that's easy to do business with, who they can trust that provide services the way they want them. In a word, they're looking for an institution that put the customer at the center of their entire operation.

Putting the customer at the center matters first and foremost in how they're able to interact with their institution. There's a fundamental shift that's underway. In 4 short years, the Internet banking has now become the dominant channel that is preferred by most consumers. The Internet no longer is an alternate channel. It is, in many cases, the first channel for most consumers. Of course, obviously, Internet banking is not new. But this change in preference is foreshadowing where the next battles will be fought between financial institutions in attempting to serve their customers. Online Banking moving to mobile banking, means the center of competition has dramatically shifted.

How consumers are able to interact with their financial institution and the capabilities available to them in those interactions are driving a new cycle of reinvestment into critical consumer-facing technologies. And mobility increasingly means that not only do consumers see their smartphones as a phone, as a camera, for their email, for texting but also as their newspaper, as their music library, as their personal library and increasingly now as their bank or their credit union. These many forces, squeeze margins, regulatory mandates, changing consumer expectations mean that financial institutions must be highly strategic with their technology spending as it occurs.

As we shared with you last year, spending on financial technology remains a very large business, of which Fiserv capabilities span a broad range of institutions and their various needs. We continue to focus our investment and innovation on those capabilities that create leverage across a broad spectrum of those institutions.

Various industry analysts project the rate of growth in technology spending at financial institutions. This graph depicts the range of those estimates for growth over the next several years. Despite all the pressure that they feel, technology spending remains a priority at virtually every financial institution. We remain confident that these estimates, for growth of at least 3% or more, are correct.

In the near term going into 2012, we're a bit more cautious. I think given the economic uncertainty that's out there, we're a little bit more cautious than these estimates may be in our own planning. But clearly, we think that over time the 3% or greater growth is consistent with what we're seeing in the market.

Obviously, it's not enough to look for the tailwind of increased spending to kind of drive our business. We do similar research into what top industry advisers are recommending. And what it reveals is that those areas where new technologies can address changes in consumer and regulatory demand are on the top of the list of things that are being recommended. So things like mobile, channel renewal, risk management and developing the ability to leverage the vast data that financial institutions have available to them. These are the areas that we are focused on delivering and in fact are the places where our strategic investments have been focused as a result of this research.

For us, this all creates a picture of an industry where health is being restored but there's obviously further to go, where regulation is taking up time and attention for every management team at a time when there's plenty of other things for them to be paying attention to, where consumers are rapidly changing what they expect from their financial institutions, all leading to technology spending that while increasing, is more than ever being directed toward those capabilities that enable strategic change at individual institutions.

We feel that in all these -- in this environment, we are well positioned for this landscape. Our mobile capabilities, which you're going to hear more about today, our market-leading Internet banking assets, our early move into analytics, our payment capabilities and the vast range of solutions that we have. These enable financial institutions to focus on their customers to create strategic differentiation in their individual markets.

So with that background for the industry, let me turn it back to Jeff, who's going to talk about Fiserv's strategic contacts against that environment.

Jeffery Yabuki

All right. So as Mark shared, a lot going on in the market and one of the more interesting aspects is this evolution, I'm not sure I can call it a revolution, but the evolution is happening in realtime. And very quick, people are making decisions that will impact their institutions for a long time. It's amazing when you think about the change in behavior, right, from people going from a 37% preference for Internet banking to a 62% preference in 4 years. And that's just an amazing change. I suspect 4 years from now, right, it'll be a lot different when you ask people how they feel about mobile banking as it relates to Internet banking.

So from our perspective, we think moves like that are actually macro -- I'm sorry, macro trends like that are very good from a tailwind perspective. And again, we'll spend some time on that later on in the session.

From a strategy standpoint, it's always good to make sure people understand what we're trying to do strategically. This framework has generally been developed for -- since 2006, and then we shared some new market strategy last year. I'll tell you upfront, we actually haven't changed anything. So I'll actually move though it pretty quickly and get a little bit more depth on growth.

From a vision perspective, we're really about creating a leadership focus on transaction processing and also being very diligent about areas in which we can create new types of transactions. Meaning there is actually a lot going on in the market right now where we can leverage key types of capabilities that we have to create new areas and new transactions.

From a mission perspective, as Mark mentioned, we all are about having the client at the center of the universe doing everything we can to help them create great results, deliver the Fiserv advantage, so to speak. And from a value standpoint how we operate, the principles that we use on a daily basis. I've been here at Fiserv now since the end of '05, and I can tell you cultural change takes time. But we're making great progress, and we're proud of the work that we're doing.

From a principle standpoint, we introduced these themes back in 2006 and these are deeply integrated into how we think within the company. We stay quite disciplined against these principles whether it's how we think about capital, how we think about do we have the right businesses and our overall mix or how we look at different ways to make ourselves more effective. These themes are an important part of Fiserv, and you'll actually hear more about this during the day. If someone actually -- if someone inadvertently says theme 2, you'll know that's about being focused on clients. Sometimes that vernacular slips externally, so I apologize in advance for that.

We introduced our market strategy last year. It really has 3 elements: the target segments; our market focus, aware of the solution areas which we think we can differentiate; and then what are those capabilities that are differentiating for Fiserv.

From a segment standpoint, we have 3 groups we're focused on. Financial institutions, so obviously the 16,000 banks strips and credit unions that are in -- or 15,000 banks strips and credit unions that are in the U.S. as well as the thousands of institutions that are outside the U.S. but FIs in general, billers and consumers. And we think those 3 actually create a bit of an ecosystem that works well for the different kinds of payments capabilities that we have and other solution capabilities.

From a biller standpoint, our billers are charging for paper. Consumers are finding apps for absolutely everything. And FIs are reacting to all the challenges that Mark talked about earlier. We think that this actually creates a ton of opportunity, and that can be really good news or not so good if you're not reacting and again, we're paying a lot of attention on reacting to what's going on in the market.

We have the 5 key go-to-market strategies. First is own digital channels, lay that foundational pipe for how you move transaction capabilities and other solutions across the ecosystem. And actually Erich Litch is going to talk a bit about our mobile strategy in a bit. Win payments is our second area. Bill pay, P2P, small business, biller, debit; any number of areas in which payments are the center of the universe. We're going to talk a little bit about some nuance changes in how we're thinking about payments later on.

The third key strategy is around account processing or core account processing and driving more wallet share, build off of our 1 in 3 market share where we have 1 in 3 banks strips and credit unions who use our core account processing technology today.

And then the fourth item is around international. And we continue to be quite focused on our international strategies being around channels and retail and payments. We're not looking to broadly expand wherever there's opportunity. We're trying to be very narrowly focused in where we have competencies that we think are extensible around the world, and then lastly around innovation to keep the cycle going.

From a capability perspective, there are 4 key capabilities that we believe are differentiating. Number one, we're very focused on having the best sales force in the world. And as you've been hearing as we've been reporting results, we've been having some great success. Tom Warsop and our global sales organization are doing a fantastic job in making sure that we have -- don't just have the best sales force in the industry, but in fact the best sales force in the world.

Second, is really around pricing. What are those new and innovative pricing models that can be moved into the market, given that the pricing in our industry is relatively?

[Technical Difficulty]

Jeffery Yabuki

All right, that's great. Thank you. If I have to get a third one, I'd be a real problem. All right. So those are our strategies again. Nothing really particularly new here, right. We're very focused on making the right strategic decisions that allow us to consistently deliver high-quality revenue, earnings and cash flow. Second, to build out networks through our leading products and capabilities. We love the aspects of networked businesses. And third, to make sure that we're increasing our level of differentiation as it relates to the competitive landscape. We'll stay very focused on capital. Tom will talk a bit about that and then bringing this all together to make sure we're delivering the right value for you, our shareholders, as well as our clients.

So now I'm going to transition to what we're going to talk about as a growth algorithm; a much more detailed conversation about how our strategies are going to accelerate our revenue growth.

So as you know probably better than most, any problem in the world can be stated mathematically. And the algorithm for revenue growth is actually fairly complex; to say it's a multi-variable equation would be a great understatement. But it includes many different areas such as client wins and losses, pricing, existing client sales, market trends, solution quality, delivery and innovation. And while it's awfully complex, it's not necessarily linear because we have to take into account what happens, little blips such as the great recession, which get in the way of the progress that we're making.

But over the last few years, we actually think we've been boiling this down to something that makes it a little bit more explainable. And so our equation actually has 3 key variables for where we sit today in October of 2011. So first is to get our existing businesses back to whatever is a new normal, get back to where we were and I'm going to talk about each of these areas. Second, is really around innovation. As you know, historically, Fiserv has not been known for delivering new innovative solutions into the market. We've made significant investments over the last few years. They're moving into the market. I think you're going to be excited about what we have to share with you in that area. And then third, continuing to use strategic acquisition as a way to accelerate both the revenue growth but also the level of, again, strategic differentiation. Bringing that all together making sure that we're executing on each of those 3 variables will allow us, we believe with a fairly high degree of confidence, we expect that we'll be able to deliver 4% to 8% internal revenue growth over the next several years.

I should also say that from a revenue growth perspective, we stayed very focused on the right kinds of revenue, right, high quality recurring revenue and that adds to margin and adds to cash flow.

So I'm going to break this down and start talking about existing business -- existing businesses. Remember, Fiserv's 4.x billion of revenue. So this is by far the majority of the company.

Now as you can see on the chart in front of you, our total company internal growth rate peaked back in 2007 and unfortunately bottomed out in 2009. And that had been actually stepping up quite nicely, for those of you remember this, since 2005. We expect the improving trend that you see in front of you to continue as we continue to move forward to where normal will end up being. The revenue rate of the existing businesses is moving up, but it moves slow and steady because of the very nature of the businesses that we're in, but we do expect that to accelerate.

The new -- I should also comment that the new solutions that you've heard us talking about for the last, basically the last 6 quarters are adding no material revenue to us today. So that's important to keep in mind. Today about 50% of our revenues are in payments, and 50% are in the financial segment. And as you can see by the chart in front of you, most of our businesses are scaled. So they have the added benefit -- also have the added benefit of being market-leading solutions and of course, those new revenues come on in attractive ways.

Today, we're going to provide color on what are the key drivers within our existing businesses. We don't have time to talk about every one of the businesses that you saw on the pie charts a moment ago. But the businesses that you see in front of you represent about 70% of the revenue in the company. So I'm just going to give a little bit of perspective on each of these areas.

Now as we've been talking about, Internet banking is front and center right now. We talked about the American Banker survey, a big deal, 62% of consumers view this as their primary channel. Why? Because consumers are now in charge, right. Consumers are making the decisions, institutions are reacting, right, and that's creating a bit of a perfect storm for us from an online banking perspective.

As you know, we have the largest market share of all Internet banking providers in the world. There's something that we we're referring to as online renewal going on across the world, and it's not just us. It's the larger institutions who are doing their own with homegrown systems. Everyone seems to be focused right now on reshaping their sites. And not just because consumers are demanding it, that's a good way to say it. There's a whole digitacracy [ph] out there who are pushing forward, wanting new services, wanting apps, wanting to transact in a different way. But also let's face it, the Internet is the lowest cost channel available and institutions are quite focused on operational efficiency.

So from our standpoint, we're involved in lots of deals. And these deals, as they relate to Tier 1 institutions, tend to be quite large in the $15 million to $25 million a year; lots of activity. And the good news is, is laying again, laying out the highway allows you to add on additional transactional services in a far more integrated way. So we're very bullish on Internet banking.

One of our most important businesses is bill payment. Our bill payment franchise is going quite well. We've had about 2,200 total wins since 2007. Now what you see in front of you are the RXP, the CheckFree RXP technology, those wins over the last 4.5 years. I was warned to point out you should not extrapolate the 2011 numbers. Those are just 6 months. You shouldn't just double it. Tom Hirsch said if I didn't say that he was going to slap me later on, so I want to make sure I say that.

But it's important to know RXP, which carries both our integrated e-Bill capability and our bill payment technology, represents 90% to 95% of our sales today. Importantly, we rarely lose standalone CheckFree RXP clients. In fact you can see on the chart in front of you, we've lost 5 clients since 2006 on a standalone basis, and we actually have won one back; Zions Bank recently decided to come back to Fiserv. So we rarely lose those kinds of clients. We're really pleased with the market share that we're building because we understand that from a bill payment perspective, it takes both adding clients as well as adding transactions, so getting the consumers that are using your technology to transact more.

Today there are about 70 million households in the U.S. who are paying about 13 billion bills per year. Interestingly, about 60% of those online households don't use what we would call the consolidator model, bill pay through a bank. And even more interesting, 30% don't pay any bills online. So those households that are most likely to transact electronically still are not doing it. So one of the things that we're looking at is what can we do to obviously change that trend.

So we did a survey talking to people in these online households. As Mark said, we try to do a lot of proprietary research to find out why they aren't using a consolidator service. 29% of the people said they'd use it if it were free. Now you know as well as I do that it actually is free. 19% said they would use it if there was an economic incentive, say $1 a month. So interestingly, it doesn't take people very much. Third, 15% of the people said they'd use it if they could control the due date and the amount that was going to be taken out of their bank account. Now it's interesting the misperceptions that exist around bill pay. 12% said they'd use if they didn't have to be concerned about fraud. I would bet that there's less fraud with bill pay than there is with U.S. Postal Service. That's not a slam on the U.S. postal service, it's a slam on the fact that post mailboxes typically aren't locked, right?

So there's lots of interesting misperceptions out there, which is intriguing given how long bill pay is out there. We believe that there's $3 billion to be unlocked in the bill pay market, much of which can be cured by changing these misperceptions. So we remain quite bullish about bill pay.

Third, is our biller strategy, and we've not spent a lot of time talking about this. But today we actually serve 70 of the top 100 billers in the U.S. We supply through these technologies over 50% of all the bills that Americans receive today. So we have a great relationship with the billers. Well why is this important? Because we believe that the bills, the request for money, the people who are trying to get you to pay something are actually arguably more important than the payment themselves, right. And so integrating the requests in the payments we believe is a critical way to think about accelerating electronic payments. So you'll hear more about that as we think about how to integrate that into our strategies.

The other thing that's nice is that evidently, bills are growing in the U.S. The biller market's growing kind of a natural growth is in the 4% to 6% per year rate. So given our share in that market, we think this is a great -- a great and good solid business for us.

Interestingly, only 10% of the bills in the U.S. are actually electronic. That's a little bit of a pickup, it was 9% last year, it's up to 10%. And actually a couple of -- there's a couple of less bills in the aggregate than there were last year, but they're still 18 billion bills, right. So there's a lot of room to electronify payment request. And some of the noise is going on with the U.S. Postal Service right now in terms of mail delivery, while it may not have a direct effect on us, we think it'll raise awareness on other ways for consumers to think about bill payment.

Today we deliver about 340 million bills electronically through our Data Fed e-Bill technology. We have by far the largest share in that market, and we're delivering those to about 22 million bill pay users. So we have a great footprint there that we believe allows us to be able to capture some of the $2 billion that is sitting out there in the electronic bill space today. So as between the bill payment opportunity which is $3 billion and the e-Bill opportunity which is $2 billion, that's a lot of potential growth out there for us, right? So while we like the macro tailwinds that we have here, we know we have to do something differently and you'll see more focus on this area moving forward.

Debit processing has been a great business for us over the last few years. It continues to perform extraordinarily well even in a, I guess we could put in quotes "an evolving landscape." But as you can see in the chart, we have transaction growth that's well above market. And we're adding new clients on a pretty regular basis, about 840 over the last 4 years.

We're also developing new products in the debit business. We've developed some risk add-on services and some adoption add-on services which have grown into some very attractive lines of business leveraging those privileged relationships that we have with our clients across the U.S.

Importantly, and this is really important for you to understand, given where we play in the debit business, which is primarily in the Tiers 2, 3 and 4 space, we are seeing only limited issues around the interchange because for the most part, these institutions are exempt from the Durban changes. So all in all, we feel quite good about where we are in the debit market. And this is an area where we'll just continue to execute as well as we can.

The core account processing, our account processing business as we talked about, is strong across all charter types: banks, risk and credit unions. Today, we have the largest share. We have a 1 in 3 share in the market. And so when you can see by the chart the number of decisions that are being made to switch or add core processing technology has been declining, that doesn't bother us very much because of the share that we have.

But what we do like is when these decisions are being made, we've now hit an 80% level of outsource, right. So while the market itself is about 50-50, I think it's actually about 52% outsourced and 48% in-house, you can see by the trends in front of you that, that is going to continue to move forward as institutions say hey, we'll give that to you. We'll focus on banking, you focus on technology. So that's great, and Steve Tait is going to talk a little bit about what that's meaning for our Acumen technology. But you can take that story and apply it actually to any of our platforms as far as adding additional content. The last thing I would say is basically, we're winning one out of every 2 decisions for account processing. So 47%, one out of every 2.

And as you may remember back in '06, we told you that we would be focused on delivering additional value to our clients in the form of add-on technologies. We actually hit our target a year early, $365 million of add-on annualized revenue. That's not total contract value. That's annualized revenue. We did that over 4 years. And that was largely around products like debit, bill pay, other kinds of high value products. We've now expanded that program and set a new target of $950 million which we introduced to you last year that we will accomplish over the next 5 years ending 2015. Delivering additional value we think is both great for us, but also an important indicator in how we're doing with our clients.

So those are the key existing businesses. We are also developing some new solutions that are contained within the spectrum of existing businesses. And the distinction is important because we're actually going to break out these more innovative base solutions in just a moment. But a couple of areas, prepaid, these are meant to be illustrative, a common origination platform, something called Relationship Advance in analytics. So I'm just going to give you a little bit of overview on what we're doing in these areas.

We talk a lot about the negatives that have come out of Durban, and clearly there are many. Perhaps the only silver lining that we saw out of Durban is for a while, everyone believed that prepaid was going to be the great exemption. And while it didn't actually end up that way in the final rules, lots of institutions decided to take a look at prepaid. And in fact, people are now adding prepaid to their suite. And as you can see in the chart in front of you, it's a rapidly growing area. Something that adds another stream of revenues that's important as institutions are scrambling to make more money.

And as you know, we've got thousands of relationships, about 5,300 account processing relationships and thousands of other important relationships. We did an acquisition earlier in the year to bring a full set of prepaid capabilities in, general purpose reloadable, payroll cards, rebate cards, gift cards, the whole deal, to be able to provide that to financial institutions. I can tell you this is at the very beginning of the cycle, but we're very encouraged at what this is going to do for us. Now we don't see ourselves going out and frankly competing with the green dots in the world, that's not our space. But what we do see an opportunity for is to be able to integrate our prepaid with some of our market-leading capabilities, like bill payment or P2P, mobile, rewards, all kinds of different things perhaps using our network, as Rahul Gupta will talk about to move prepaid transactions even faster. So an interesting opportunity for us.

The second area is called Relationship Advance. As Mark mentioned, financial institutions are searching high and low looking for ways to make more money. Several years ago, we designed a technology solution that allows larger institutions to provide low dollar loans to their customers. It's a very compelling revenue opportunity, attractive economics. As I mentioned, it's been in the market for a few years at some large institutions creating some very attractive pools of revenue. We've spent the last 1.5 years looking at what would it take to bring that to a much broader base. We're now in a place where we've developed an ASP solution, it's turnkey and an institution can have it licensed. They can run a turnkey, but they can make some real money. And so we're getting a lot of interest here. The pipeline is extremely strong. We've had some very nice mid-tier signings over the last 3, 4 months and we see this as an interesting driver of that high quality recurring revenue we've been talking about.

The third area is around our common origination platform. We've developed a new technology across many of our lending platforms, whether it be home equity or auto, some other asset-based, mortgage business, commercial creating a single platform. We've been working on this for a few years. We don't think this is necessarily rocket science, but we do believe that all of the pressure on efficiency ratios is having people say I need to do something different with all the disparate systems that we have. Coincidently, we began working on this several years ago. We finally put -- we finally have our first live clients. We've gone from alpha, beta and now live, so we feel great about that. We've sold 2 more clients. It doesn't sound like much, but we've got quite an active pipeline and we haven't even launched it in the market. So again, it's a great opportunity to help institutions at a time when they're quite focused on raising revenue and reducing costs.

The last area that I'm going to talk about in the context of existing businesses is around analytics. And we've been talking about this for about 1.5 years now, and we continue to make some really strong progress. We recently back tested, our analytics philosophy is taking the multiple transaction streams, putting them together to create different profiles of our -- of the customers of our clients that we believe is exponentially better than it is in using single streams of transaction data, and that's actually proving out to be true. We recently took models that one of our financial institutions clients were using from a competitor and back tested it against the consolidated multi-factor consumer pictures that we built. And we actually got a 60% lift on those models. So those models create a lift for the financial institution in the 20% to 30% range. We actually got a 60 or almost 3x lift on that data.

We also recently implemented for a large client this technology in a way to focus on asset-based lending and specifically in this case, auto lending. And we stratified the clients, help them do a mailing. They got a -- this will -- hopefully this will resonate, they got a 3% response rate on direct mail and over a 50% close rate new auto loans on this population. This is quite compelling as it relates to helping institutions make better decisions. As we've been saying for a while, we think it's the right time, right. We are working diligently to get this into it the market in a way that maintains our competitive advantages and our differentiation as well as helps clients. We've actually also filed for 6 -- we will have filed for 6 patents by the end of the year on different algorithms that we think are pretty special. We filed for 4, and there'll be 2 more by December.

So from a growth acceleration level, which is I know what you care about the most. We believe that these existing businesses, so just carving of the things that we've talked about today within our $4 billion revenue base, we'll be able to add 1% to 2% a year over the next several years. So our current guidance this year is 2% to 4% on revenue. We believe that this area of the company will be able to add 1% to 2%. So get it up to the 3% to 6% range in this area alone over the next 3 years. Now remember, when we talk about guidance or outlook long term, we talk about average performance in any 3-year period.

The pie chart shows how we've broken down these different sources of growth on a relative basis. And in the market segment, we also include some of the sales -- I'm sorry, in the other segment, we include some of the sales performance. It's also important to know that we aren't counting on the market changing in any kind of dramatic way. So the market growth that we think about is really lined up with what Mark was saying. We expect 2012 to be a little bit more of a cautious year, but we don't expect there to be anything like the way it was in 2009. But importantly, we think financial institutions will make spending decisions. We do not think that there's going to be any kind of freeze or shutdown on technology spending. However, we do know that financing institutions will put money where it's needed the most. And they will take money away from other areas but those areas in which it's needed, they will spend.

So again, we're quite comfortable that these existing businesses alone will be able to get us up to the 3% to 6% range. And it makes all the sense in the world if you think back to the chart that we opened up with.

So again, comfortable that we can get up to the 3% to 6% level. Add-on sales will play a very important role in our growth. Remember, we serve 10,000 financial institutions in the U.S, right. So what we do with existing clients is just as important as how we're winning new clients. And the nice thing is we have multiple ways to grow in our portfolio today, right. Some of which we've shared with you and some of which we have not in the interest of time. But remember on a $4 billion portfolio, that's $40 million to $80 million just getting up to those areas.

So existing businesses was the first part of the algorithm. The second part of the algorithm is around innovation-based growth. We've talked a lot about the investments we're making. We now feel like it's time to share with you, in a fair amount of detail, what we're doing, why we're doing it and how it's going to turn into growth over the next several years. So we're going to profile Acumen. We're going to talk about our realtime network. And we're going to -- and so Rahul Gupta is going to talk about our realtime network. Also you may have seen me announce this morning that as of this morning, Rahul Gupta was promoted to be our group President. He's running our payments businesses now, so Rahul will talk about the network, which is part of that. Erich Litch is going to talk about Mobiliti, which is our mobile product and stands for what we're doing in the mobile space. And then I'm going to spend a little bit of time talking about the CashEdge acquisition, why we did it and what we expect out of that.

So let me invite Steve Tait up to talk about Acumen.

Steve Tait

Okay. Good morning, everyone. It's a pleasure to have the opportunity to speak with you today. What I'm going to talk with you about and update you on is the progress that we're making with our Acumen new account processing platform, which is one of the key innovation growth initiatives that Jeff just outlined earlier. And already, this platform has experienced incredible success and it really is transforming the large credit union space.

To put this presentation in context, though, Acumen is a key component of our overall enterprise strategy to drive account processing solutions and wallet share growth, which Jeff was talking about in his presentation. And as you can see from this pie chart, we have an extremely strong account processing market position in the bank and credit union segments where our share is more than double that of our nearest competitor.

Jeff talked about this a little bit. We have a best-in-class win rate performance in this space, which is substantially higher than any of our competitors. And it really represents a significantly better-than-market sales execution. In fact, approximately 3x as many FIs select Fiserv for account processing than any alternative offering, which is really an enormous endorsement of the value that we bring to bear as a company.

We've been delighted with the progress made on integrated sales into our AP client base. This slide demonstrates really the continued success, the momentum that we've been able to achieve with this program since the inception in 2007. We clearly plan to improve on our ability to provide our clients with the full value that Fiserv can bring to bear. And you can expect us to continue to see impressive growth on integrated revenue on a go-forward basis.

A key point to make here is that Acumen, in its own right, will add substantially to our integrated sales performance.

Acumen itself plays in the large credit union segment and as you can see from this particular pie chart, this is a market where we already have significant market presence and are by far the market leader. In fact of our 389 large credit unions that are represented in this space, 160 of them are already Fiserv account processing clients. Now that sounds like a very strong position. However, prior to Acumen, we had lost momentum in this space. And we truly believe that Acumen affords us the opportunity to change that and if that will provide a significant catalyst for future market share growth. And indeed, this is already started and I'll demonstrate that in a little while here.

This segment represents an estimated annual revenue potential to Fiserv in excess of $500 million, and it has great IT spend growth dynamics. Additionally, this is a vibrant space with high asset share and which is expected to grow over the next 5 years. Most important though, is that these institutions are highly member centric and technology progressive. And that makes them a perfect fit for the transformational technology shift that Acumen represents.

Acumen has an extremely compelling market proposition. It is by far the newest platform on the market. It encompasses modern state-of-the-art architecture, being 100% Java and browser-based and enables full web services. It also allows full open integration and 24/7 continuous processing. And very simply put, this modern architecture provides the maximum flexibility to customize and integrate the broadest set of solutions available in the industry. While we are clearly very, very excited about Acumen, and we could sit here and talk about the compelling value proposition all day long if we had time, but probably more important is to share with you some perspectives from the voice of the customer.

This is a quote received from Tim Bosiacki, who is the CEO of TruStone Financial Credit Union, who are one of our earlier adopters. And this speaks to the value that this CEO believes that Acumen will have on meeting the business priorities and growth aspirations of his particular credit union. Acumen's ability to positively impact service delivery is acknowledged and also quoted that the value of the technology solutions and expertise that surround this platform. TruStone, by the way, had no prior relationship whatsoever with any part of Fiserv prior to Acumen.

Not only is Acumen the most modern platform in the industry, it has the most innovative customer-serving functionality. And this is really, really important. Acumen enables a credit union to serve their members how, when and where those numbers want to be served. Its ease-of-use functionality enables greater simplicity and efficiency for associates within the credit union to better serve their members. And the bottom line, really, is that this state-of-the-art functionality enables credit unions to deliver a much more compelling and consistent member experience across all delivery channels, which is obviously very key in the context of the growth aspirations of these institutions.

This is a quote from Kelly Garmon, who is a senior executive at Georgia's Own Credit Union. And really does speak volumes about the impact that Acumen will have on its particular member experience. Kelly also talked to the leading edge enterprise, digital and channel products that we're enabling as part of our overall enterprise solution to them.

Acumen isn't technology looking for a solution. It really does fundamentally deliver real ROI improvement to the credit unions that it serves. Progressive and leading credit unions are selecting Acumen because it supports their aggressive growth plans. It enables them to provide unmatched service and delivery to their members, and it really does improve organizational efficiency and productivity and, of course, helps enable an overall lowering total cost of ownership as a consequence.

This is another great client endorsement, this time from Randy Smith, who's the CEO of Randolph-Brooks Federal Credit Union. These guys are a top 20, $4 billion credit union, who are transitioning off of their in-house system to Acumen. And Randy essentially summarizes the overall business impact that Acumen can help his credit union achieve.

What you see in front of you is the reason we built Acumen. For the 3 years between '05 and '07, we didn't win a single large credit union deal. In the '08 to '09 period, we achieved 2 wins and we launched Acumen into the U.S. In 2010, we did gain a lot of momentum and we achieved 5 wins. We've already secured 3 wins so far this year, and we have a further 18 high-probability deals in our U.S. pipeline. A number of these are already board-approved or in the contract stage, if you like, and we feel very, very confident that we will achieve 8-plus deals for the year.

Particularly impressive is that we have a 75% win rate in the United States, which is incredible. As a side note, however, since our first live client went live in Canada in 2005, we have won 16 Acumen deals north of the border with a 90%-plus win rate. I mean frankly, all in all, this is a truly awesome success story, which will continue to grow.

Acumen is a great enabler for the board of Fiserv's portfolio, and we've already had a lot of success in integrated sales and believe we can get a lot better. This slide represents the total contract value for the 8 deals we've already won in the U.S, as well as the 18 high-probability deals that are in our sales pipeline that I just discussed. These deals represent a total revenue -- contract revenue opportunity of $100 million on Acumen alone. A further $17 million is represented in broader Fiserv add-on revenue. And our goal, of course, is to get as much content sold upfront as we possibly can, and we are getting better at that.

In this -- to this end, though, the fully realized total contract revenue opportunity represented by these clients and prospects totals a further $300 million, which we believe we will secure over time as we continue to develop opportunity and value for these particular clients. And it really is indicative, if you like, of the enormous growth value that Acumen can generate for the company.

Also highlighted here are the key portfolio products that Acumen helps drive into the space, and it's all the usual suspects, if you like; the sort of best-of-breed products that we have where we're beginning to get a lot of traction.

What I'd like to do now is transition into the financial impact that Acumen is having on overall company performance and will have on overall company performance. And we are extremely upbeat about the growth potential of this product. We already have strong line of sight to 2012, where we estimate we will achieve a minimum $15 million of incremental revenue growth next year. Now as conversions go live and as we drive further sales success, we anticipate significant growth in the outgoing years with an increase in impact from integrated add-on sales. All in all, it's just a fantastic growth opportunity.

In summary, we truly couldn't be more pleased with the success we are achieving with our [indiscernible] platform. It really is a transformational market-changing technology and it's gaining a lot of traction. It's a competitively advantaged and very differentiated platform. We have a value proposition that really brings enormous value to large credit unions and their respective members. We've already demonstrated great early momentum and believe that we can grow market share and wallet share substantially over many years to come. Of course in so doing, create significant incremental value to our shareholders.

So that's all I was going to talk about today. Thank you for your time.

What I'd now like to do is introduce Rahul Gupta, who is going to discuss the expansion opportunities in our ACCEL/Exchange network. Thank you.

Rahul Gupta

Good morning. I'm the second guy with a funny accent, so we'll be talking about the network today, i.e. ACCEL/Exchange. But let me start for a second by amplifying the context that Jeff gave you about our debit business, because I do believe our PIN network very much represents similar trends as our overall debit business.

The business overall is experiencing change. This is not new news. I think everyone knows about the changes that the business is going through. Clearly though, consumer demand remains very, very solid behind the business. I had several questions about this in my earlier commentary this morning or earlier conversations this morning, and so we do remain very bullish about the debit business. The consumer demand is very solid. Obviously on the negative side, regulatory changes are hurting profits, and that's pretty important, and banks are reacting. They're establishing fees, they're eliminating rewards and could this have an impact on the overall growth of the debit business? We do believe with the margins, it could. But our overall case, and you'll see this in a minute we'll talk about some numbers, remains consistent. Our expectations of growth very much remain consistent. Some slowdown, but overall very much in the zone of growth.

Now Jeff already discussed our overall debit business. Video, you saw some slides about that. It's important to remember in this context that we are continuing to grow faster than the market, and this is happening for 2 reasons. One, because our client base is earlier in its adoption life cycle Tier 2, Tier 3 clients in the debit business earlier in their adoption life cycle. And then as Jeff mentioned, somewhat insulated from these regulatory impacts that are occurring in the market. So overall, our debit business is doing quite well.

If you look at the overall debit market, it's a $41 billion transaction market in 2010. Specifically within that, if you look at the processing piece of the business, it's almost a $5 billion processing business of providers such as us. 2/3 of that is what is dubbed signature processing and about 1/3 is PIN processing. And that mix is important. I'll talk about that in a minute. We do expect that mix to change in favor of PIN debit. Now it won't change radically, we believe, but it will change and we'll talk about that again in a minute.

Overall, we expect the market to grow 7% to 9%. And depending on these impacts, regulatory impacts, this could be at the low end of that or the high end. We still do expect the market to continue to grow in that range. And if it does, we expect it to add 20 billion new transactions through 2015. And that obviously represents a very large opportunity for us to capitalize on.

Let's take a look at the specific piece of the market that we are discussing today, the PIN debit market or the PIN processing piece and quite specifically within that, the $600 million piece that is taken by the PIN networks. These PIN networks, of course represent similar characteristics today, 16 billion transactions, about growing 7% to 9%. And if nothing had changed in the market, you would expect them to continue to grow along with the overall debit market. But there are some very important growth accelerators. And the first one, I think everybody knows about it, Jeff discussed it, is Durban. I won't give you all the ins and outs of Durban certainly, but 2/3 of all transactions now post October 1 carry the same interchange, approximately the same interchange, whether they are signature debit transactions or PIN debit transactions. And when that happens, we do believe that PIN debit will be advantaged going forward. This is because PIN debit is less fraudulent, it's cheaper, it's more efficient to process and that clearly all participants in the system, certainly the financial institutions, the consumers and the merchants will favor PIN debit.

This is also a second growth driver, which we'll talk about in more detail later, which is consumer demand. Jeff talked about the world moving to realtime payments, and clearly consumer demand for realtime payments is very much a factor driving all payments. And we do believe PIN debit -- the PIN debit network is very well positioned to take advantage of that trend.

So in that market context, how are we doing? We own a national PIN debit network today. It is the top 5 network, growing 20% to 30% a year. The network has been growing principally because of 2 reasons. One, over the last few years, we've close the acceptance gap and we are accepted at more than 2 million merchant locations, PIN point-of-sale merchant locations today and over 300,000 ATMs of the space. And there's virtually no difference between us and any of the other major networks today. Where there is a difference is the fact that ACCEL, we believe, is much more of an issuer-centric network compared to our major competitors. And fundamentally, that issuer simplicity manifests itself in a number of different ways in terms of interchange, which is revenue for our clients; in terms of cost that they pay to process the network; and the efficiency with which we can provide these services.

Now this is a major departure or a major point of difference compared to many of our larger competitors. So we do believe that, that has driven much, if not all, of our growth in the last few years.

So what else can we do to help differentiate or grow this network further? We believe we can take advantage of the overall Fiserv position in the market, and we intend to do so. Fiserv has very strong relationships with the financial institution community. Jeff talked about PIN's house and financial institution relationships. Within the top 30, these relationships are deep and very, very strong, and we'll talk about this in a little more detail.

Certainly there's another 5,300 or so privileged account processing relationships and a number of other such relationships. We believe we can take advantage of these "have been" in terms of growing our debit and ACCEL/Exchange business. We're certainly going to take advantage of these relationships because many of the critical payment applications and processing systems are installed in these financial institution relationships, everything from our online banking, certainly our mobile, we'll be talking about that. But equally important bill pay, A2A, P2P, debit and certainly all of those relationships. And we believe we've touched 60 to 70 million consumers across these payment applications and payment relationships. So that's an area we intend to leverage in ACCEL/Exchange.

All of these systems today use state-of-the-art technology, they have scale and they can certainly deliver the next transaction at little cost. That is also very important in terms of growth characteristics going forward.

So my thesis today is ACCEL is poised clearly to integrate these various applications and technologies to deliver incremental value over what it has been doing so far. I will get into some of that detail.

So how does all this translate to growth? Today if you were to look at the transaction growth in the market, you would see that the market is growing, as I said, about 7% to 9% a year and we expect that to continue. Our baseline growth has been 2x to 3x larger than that and this is driven for 3 reasons. Number one, higher organic growth in our client base. We already discussed why that is occurring. Two, we've had stellar sales success in this area especially. Jeff talked about the 200-plus wins that we do -- we have had in debit every year, 800 in the last 4 years. And those are bundled debit deals which enable us to position ACCEL/Exchange very effectively with the client base. What we don't talk about typically is another 200-plus opportunities every year to win branding battles in the market where the number of cards, the PIN debit -- the number of brands on these cards, PIN debit brands are evaluated and we have been very successful in reducing those or eliminating the competitors in favor of ACCEL/Exchange.

Finally, there's some very early evidence of movement of accounts from the largest financial institutions to the midsized as these market changes occur that we have been talking about. Obviously not huge amounts of data on that and it remains very early, but we believe all of those trends give us confidence that our baseline growth will continue in -- between the 20% and 30% range that it has been so far.

In addition, Durban represents a fairly large opportunity on top of that. Now 40% of the top 95 institutions in the country are currently evaluating their PIN debit lineup. They are looking to see should they continue with their existing relationships, add, replace, et cetera, et cetera. The market -- the new law requires them to make those changes certainly by April 1 of next year.

We are participating in virtually all of those opportunities, and it's early. These decisions will get made in the next 2, 3, 4, 5 months, so we don't really know the outcome. But any wins in this area, 1, 2, 3 wins, will be nice upside for us. And so at this moment we can't predict, but we do believe there is some nice upside in transaction growth from Durban.

And in the medium-term, as we've been saying, we expect to generate some new transactions, new realtime transactions. We'll get into this in more detail that these -- today the network, as you know, is used for purchases and cash. But the characteristics of the network lend itself to some very nice new transaction growth. We'll show you how we'll take advantage of that.

So in fact, let's get into that. Today's network is realtime, authenticated and guaranteed funds. That's what's made this a great network for the purposes of purchase transactions and cash transactions, generated $41 billion of those. If we were to extend that case to P2P, and we have talked about this, P2P, built today, is a 1- to 3-day transaction and we believe that users will want realtime transactions in this space because 11 billion of those and very few of those are realtime transactions. When they do occur, consumers do pay $3 to $8 for the privilege of realtime payment transactions. And of course, we own most of the leading-edge technology around P2P, so we are very well positioned to take advantage of that situation.

Bill pay is another use case. We facilitate about 1.5 billion bill pays every year and again, bill pays today are on a delayed basis. But certainly, there is an opportunity to generate expedited or to facilitate expedited bill pays. And when that happens, consumers again pay between $3 and $10 for that privilege.

So ultimately we expect to connect all of these different transaction types into what we are calling a next-generation network. And the advantage of this network, many people can do this, many people have realtime rails, but the advantage of this network, we believe, is that we own many of these, if not all of these front-end applications that you see listed out here that we can connect in a differentiated way with ACCEL/Exchange and turn this into a proprietary advantage for Fiserv. This should translate to a very nice revenue growth. This is incremental over our current growth rates, over our current baseline growth that I've been talking about. We expect to see about $40 billion of that growth over the next few years in revenue. Most of this comes from Durban and Durban-related activities. And there is some next-generation transactions although, as you can imagine, we've been fairly conservative in estimating next-generation transactions in here.

So in summary, baseline growth is solid and we expect it to continue. Durban clearly represents some upside. We are really excited from an innovation point of view about the next-generation opportunity. It's truly unique because we own all the front-end applications, not all, but many of the front-end applications that these FIs use for online payments and we certainly believe we can marry our ACCEL/Exchange network with that.

Okay, with that, I'd like to invite Erich Litch to talk to you about innovations in the mobile space. Thanks.

Erich Litch

I'm Erich Litch. I'm the Division President of Digital Channels. I lead our online and mobile banking business and I'm here to talk to you about our Mobiliti solution, which we're really excited about the opportunity that we have. Prior to joining CheckFree and then Fiserv, I was an executive at Corillian rent, sales marketing and strategy for Corillian and was really with them since the early days of online banking. And I really think that our history in online banking at Fiserv across all segments and deployment models provides us with a really unique and enlightened perspective on mobile banking, which I'll share with you today.

We're seeing tremendous growth in consumer demand for mobile banking. One of the more conservative analysts out there actually estimates that by 2014, there'll be over 45 million end users of mobile banking. Some of the more aggressive analysts actually predict that by 2015, mobile banking will exceed online banking in terms of penetration. And we're seeing this across our -- in terms of strong consumer demand across all of our customer deployments. Example, at FirstMerit Bank, within 2 weeks of launching our mobile solution, they had over 10% of the online banking users adopt the solution. So really fast, rapid adoption across most of our deployments across our customer base.

And this consumer demand is causing all of our clients to increase investment in the mobile channel. We did a survey recently of over 2,400 clients and 3/4 of them -- over 3/4 of them responded that they plan in the next 12 months to increase investment in the mobile channel. And this is creating a significant near-term opportunity for Fiserv to capitalize on this significant demand for mobile banking technology.

The importance of the mobile channel in terms of investment priorities is primarily driven by several factors. One, of course, is the consumer demand that I talked about. Number two is a lot of financial institutions out there are aggressively marketing this capability, and so a lot of financial institutions believe they really need to respond by having similar capabilities, and so you're seeing a fair amount of that. The third, there is some pretty attractive economics to mobile banking. It's an extremely low-cost channel. And our research has shown that users of this channel tend to have very good dynamics in terms of satisfaction, uptake on additional products and services, and they tend to be avid users of a lot of different financial products that the financial institution offers. And then the fourth and critical area is a lot of the more strategic financial institutions really see this as a new platform for creating an entire new services and transactions. I'm going to talk about some of those.

I think it's important first to understand how Fiserv anticipates value creation from this channel. So first and foremost, we're going to generate over time a significant amount of revenue from the channel solution itself. So clients pay as us fees for our mobile banking technology, either in user fees or license fees and we generate revenue in that way. But more importantly, on top of that, we will also get increased transaction usage for the transactions that we provide today. And you've heard a lot of some of those so, for example, bill payment, e-bills, small business payments and transactions like that, account-to-account transfers. And then on top of that, we have the opportunity to actually create new transactions and services that can really be optimized for the mobile device and the unique characteristics of that device. And to address those away from your PC moments that we never could address before with some of these transactions.

Online banking, I think, is a really useful analogy. It's not a direct proxy for the mobile banking market, but a really extremely useful analogy to understand value creation through mobile banking. So on online banking, we generate today a significant amount of revenue from the online banking channel solution itself. But more importantly, the services that we provide through this channel, we generate a substantially greater amount of revenue from those. And obviously, the top ones are -- you see there bill payment, e-bill, account-to-account transfers and small business payments.

In a similar fashion, we will generate a significant amount of revenue over time from the mobile channel solution itself, and we will get incremental transaction usage of those in transactions that we are already exposed today, through the online channel. And then on top of that, we believe there is an opportunity to create new transactions and services that can really capitalize on the unique characteristics of the mobile device. The mobile device allows us to always be connected to the end user. And we think this is going to be critically important in the future of banking. We can reach users in real time and notify them about realtime events, allowing them to transact upon those right away instantaneously. This is something that we've -- has been proven very, very valuable in getting users to transact.

And in terms of increasing usage, we've actually done some studies with some of our where we've shown users of mobile banking actually make more transactions after they start to use mobile banking. So we do anticipate a significant impact from that.

Our leadership position in online banking provides us a really, really advantaged position in terms of getting market share in mobile banking. There are a lot of technology integration and relationship advantages to having the online banking business in terms of winning the mobile banking business. And this has already played out in our ability to generate a market-leading share position in the mobile banking market largely by penetrating our online banking client base. And with over 3,800 financial institutions using our online banking and over 55 million end users already using our online banking solutions, we have a lot of room to grow in terms of penetration. What you see here is just the lifelines that we have. We have a number in implementation. And to date, we've already signed over 500 financial institutions for our mobile banking solution, Mobiliti.

These advantages are enhanced even in a greater way by our account processing relationships, which put us in a really advantaged, privileged relationship position and it provides us a significant advantage in the sense that mobile banking needs to expose all of those services and all the data that we actually house within our account processing solutions. [indiscernible] this to be extremely valuable factor in cross-selling solutions to our client base.

We're also seeing strong evidence that the mobile channel will be a significant source of transactions and have a significant impact on transaction usage. So mobile bill payments initiated auto mobile device comprise the fastest-growing segment of our bill payment transactions today, and the users are the fastest-growing segment of users within our system. So they're growing at over 100%, both transactions and users, and these are actual mobile bill payment transactions through our CheckFree bill payment system, where we can track the method of origination, really strong growth in transactions today.

And we're in a really good position for capitalizing on all these trends and this growth. Obviously, I talked about our online banking advantages and what that means for us from the mobile space but with our acquisition of M-Com, we really have the leading solution in the market from the top end of the market all the way down to the bottom end of the market. We support all deployment options. We're in very rare company. We're actually the only provider that really supports all deployment options from one single company and one single solution. We have global Tier 1 clients. We have international clients and demonstrated international expertise and capabilities. We also have demonstrated proven payment capabilities with deployments across NFC-enabled payments, bill payment, P2P and other transfers and money movement types.

And the market for the mobile channel solution just itself is a pretty attractive market. We estimate that it'll be about a $270 million market by 2014. And this is really just the addressable U.S. market, which comprises ASP-based user fees, license fees, professional services, maintenance revenue and excludes the top 4 banks, which in our experience generally spend all of their money on custom-developed solutions. So excluding the top 4 banks, this also excludes all of the international opportunity that we have, which today comprises about a little less than half of our revenue today. And so a pretty attractive market growing at about 65% per year.

We also believe it's going to add really, really highly recurring revenue over time. Today, our ASP services are a small percentage of our revenue. We support 2 models. We have a license model, where our fees are largely comprised of professional services and licensees fees. And over time, the maintenance revenue from that license business will grow in significance. But we also support an ASP model where we get paid monthly subscription fees for the users of the mobile banking solution. By 2014, over half of our revenue will come from highly recurring and consistent elements.

And we anticipate the revenue to be fairly meaningful by 2014, both domestically and internationally. By 2014, we expect this to be about a $95 million a year business for Fiserv. And this does not include any of the transaction benefits that I spoke of.

In summary, we believe the mobile channel presents a very lucrative opportunity for Fiserv in terms of channel revenue and incremental transaction revenue, and we have a significant leadership position in this extremely important area of financial services.

With that, I'm going to turn it back over to Jeff to talk about CashEdge.

Jeffery Yabuki

So that third part of the algorithm is around strategic acquisition, making sure that we execute and that we achieve the synergy opportunities that are there. And we announced at the end of June that we intend to do acquire CashEdge, and we ultimately closed that acquisition in September. So today, I'm going to give you a little bit of perspective on CashEdge, given it was a private company although they have a number of products and services that are well known. I'm going to talk about why we see the opportunity. Also going to integrate a discussion around P2P into this conversation, but one of the things that I want to make sure that I point out upfront so you'll keep this in mind is when Erich was talking about mobile and giving his example as it relates to online banking, it's important to know that the majority, if not everything, all of the solutions that we acquired when we acquired CashEdge will fit into that channel. So not just the online banking channel that exists today where we have a leading position, but the mobile channel, as Erich talked about, which is growing very rapidly. These solutions will create transactions in the new mobile channel. And well, obviously, we can't say everything will look like the bill payment technology. It isn't a bridge too far to see how that kind -- those kinds of linkages will make sense for many of the products here in CashEdge.

So CashEdge, which was founded in 1999, they really do 3 things really well at the core of who they are. They develop and deliver leading payment products. They have superior aggregation technology. But very importantly, they've built very unique and differentiated risk management models and capabilities, which allow financial institutions to gain a very high degree of comfort with the very complex solutions that they used. So this type of risk capability and reputation, as you'll see in a few minutes, has allowed CashEdge to have very deep relationships with the top 30 financial institutions in the U.S. Very strong business model, highly transaction-based, 90% -- greater than 90% recurring revenue, long-term contracts, all the things that we at Fiserv like a lot.

By the numbers, it's relatively small in terms of clients. Sanjeev Dheer, who is a cofounder and CEO, is actually here today. Somewhere you can corner Sanjeev and ask him lots of questions about CashEdge we warned him so I think he'll be okay.

But it -- Sanjeev and his team, they're about focus. Focus on great products, focus on great delivery and focus on innovation. And we're really excited to have him and his entire management team joining Fiserv. And when you corner him, ask him why this was something he wanted to do, I think you'll get some great perspective there.

From Fiserv's standpoint, there were 5 key strategic drivers behind his acquisition. Number one, their -- these solutions are extremely high-demand solutions in areas such as account-to-account transfer, online account opening and funding and aggregation. For us, it actually fills out our money movement suite. We have been trying to replicate some of the products that CashEdge had for a number of years and frankly, we were not successful doing that. And so this fills out our suite. And when I wrap it up, I'll give you a visual of what that actually means.

It extends our relationships with top 30 banks. You heard Rahul talked about the relationships that we have with top 30 banks. And whether it's top 20 or top 40 these top banks much of the spend, as you know, if you think back to the chart that Mark showed, right, the spend in this industry biases significantly to the larger financial institutions. So having these relationships is really important, and bringing these products together from a single provider gives us unique advantages as well.

I mentioned a very strong readership that's very important. One the things that I've said many times is I think the only barrier that we have is the ability to execute. We've got some great execution from CashEdge.

And then lastly, we got some wonderful intellectual property. And in today's competitive world, having intellectual property is very important. So you put this together, we will drive -- we believe it'll drive revenue, build networks and create differentiation.

The 5 products that -- the 5 main products that CashEdge has today, first one is TransferNow, which is the A2A product. And you can see on the chart, I'm going to give you the penetration in the top 30 and the number of clients overall. Now when you're looking at the number of clients overall, make sure you think about the number of clients that we have. Make sure you think about the fact that we've sold 838 instances of debit processing over the last 4 years. Make sure you keep in mind that we sold 2,200 instances of bill payment over the next -- over the last 4 years.

So today, we have 12 million users on our TransferNow product. OpenNow, FundNow, about 760,000 accounts opened, 31 institutions. And that's a little misleading because virtually every direct bank of any scale in every branch bank of any scale uses this technology. But what it tells you is that we're fairly early in account opening online. But that won't last, if you listen to things that Erich was talking about earlier.

Third is around Popmoney. Popmoney is CashEdge's version of P2P. I'm going to talk a little bit more about that in a few minutes, but you can see again it's very early 9 of the top 30 and 167 overall. And we've signed up about 816 institutions on ZashPay so far. So we're getting close to about 1,000 institutions on P2P currently.

Fourth is Popmoney for small business, only 5 instances right now. I'm going to save my dialogue on that for a moment. I think you'll be very interested in that. And then Alldata, which is the aggregation technology, specifically, this is used in both -- used in several areas but specifically they've got a great presence in the wealthy area serving 6,000 advisers today and about 1.1 million accounts, $65 billion gets aggregated on a regular basis. So very solid products, best-in-market leading positions.

Let me talk about P2P just for a moment. From a background perspective, the P2P space in 2010 was $865 billion of payments, about $11 billion transactions. If you break that down on a household basis, it's about 100 transactions per household, about $75 per year. Monetizing that is somewhere in the area of $5 billion to $8 billion annually, moving it from checks and cash and the payments that are used today into electronic methods. And there's lots of calculus there, but that's a reasonable way to think about it.

The other thing that's important is to know that P2P is not just about splitting checks in a restaurant. This is a view of Popmoney transactions in February 2011. And then you can -- what you can see by this is that people will use it for lots of different things. The average P2P transaction in that month was $300. We're seeing an average in our own technology that's slightly higher than that. But what's great here is it's being used for everything from allowance to paying your mortgage; gifts, loans, purchases, all kinds of things. And in the other category, which frankly we weren't allowed to put that small of a font, there are 8 other categories, everything from direct purchase to paying for education and charity. So lots of different uses of P2P, which tells us that, that $865 billion a year is really a possibility with this technology.

In order to really make this happen, we think you have to use a financial institution-centric model, and not just because we're biased that way. We actually think that's the way to get scale because whether we like it or not, you saw it on Mark's word cloud, people trust their financial institutions. And that's where they bank.

So we -- in 2009, CashEdge did a survey. 77% of the people said they would prefer a bank over an independent service such as PayPal for P2P. And over 80% of the people said if they -- if their bank offered the service, they would use it. Now that's only a survey, I recognize that, but that's the right kind of momentum. But still, that won't take off until you can create a real ecosystem that consumers want to use. And like I said, we think it has to be FI-centric. It has to fit into what people do. It can't be separate. It has to be part of their overall "banking experience." And as Erich and Mark pointed out, that banking experience is more and more mobile, more and more remote. We think P2P has got to be mobile. That's the way to make it happen. We think it needs to be within a single-branded network to really make it happen, and you need to have technology advantages, you've got to innovate people. There's an app for everything, you got to keep it going. And then lastly, it's about settlement timing. And so the ability to have realtime transactions makes P2P a reality.

So we got a lot of questions. Why did you buy CashEdge if you already had your own P2P solution? And there are really 2 answers to that. First of all, as hopefully you've seen, CashEdge is way more than P2P. In fact, P2P is a tiny part of even CashEdge today because it's such a new and nascent technology. But the second reason why we did it is, in fact, while we had what I would call basic P2P functionality, multichannel access, pay anyone, bank-to-bank, we had plans to do much more. But, of course, CashEdge had beat us to that punch. So acquiring CashEdge allows us to move our roadmap forward 2, 3, 4 years on day one. And so what you see in front of you is the full suite of technologies that Popmoney brings to Fiserv. Popmoney functionality allows basically pay anyone anywhere with any method of funding any time. It allows for social payment requests, sender requests to someone have them send you money. It allows for the usage of gift cards, use P2P as gifts instead of using a limited or limited gift card option.

So -- and again, merging this with realtime is what we think makes this quite special. You also notice a small business capability and I mentioned earlier, I talked about it, so let me just lay that out. As we mentioned, banks are constantly looking for new ways to build revenue and build revenue and serving their most important clients we think is a really great opportunity. Electronic invoicing in payment and presenting it in payment, we think is -- has some real eggs.

So CashEdge had built that technology. I mentioned it to 5 banks. There's about 115,000 small businesses live on this technology today. So a small business tends their invoice, they log into their bank website to grab the invoice basically building a deeper relationship with their financial institution, send the invoice, the customer reviews that they look at it in online banking they can pay it either using check or they can use Popmoney.

The customer then pays that invoice directly from their bank account. One of the things that we are pretty excited about is what if we integrated that into our XP experience. We immediately have a network of 22 million users to deliver that content into. And then that payment is transmitted directly to the small-business accounting. No paper, immediate payments, potentially realtime access depending on what the small-business owner wants to use. It's interesting since we bought CashEdge each of the customers, clients that I talked to said, "Why did you buy a CashEdge?" and everyone expected because they P2P. Once I explain this technology, I think they get a very good understanding of why it's something we decided to do.

So I want to point out for you how we're thinking about CashEdge from a synergy standpoint. I mentioned those 5 key solutions that are part of CashEdge. And so I'm showing you how we're thinking about the mix. So today, TransferNow has 12 million users. Well within Fiserv, we process 66 million DDAs and have 55 million users online. And so we think we have a very strong opportunity to increase that subset of users on this technology by proliferating this through the system. And again, TransferNow is by far the industry standard on A2A.

The second area is around aggregation. Today, there are 1.1 million users, 6,000 advisors. Well within our investment services world, we actually deliver technology to advisor desktops and to other wealth management tools to 98,000 advisors. So we have an opportunity to go from 6,000 to potentially 98,000. And again, we have 55 million online users. One of the things that you'll see us do is integrate that aggregation, that PFM capability, into our online banking which will not only drive revenue for the aggregation fee, but also make our online banking and our mobile capability that much more compelling.

The third item is around Popmoney and P2P. We're very bullish about that. We've got basically 10,000 institutions serving 100 million households -- I'm sorry, 100 million consumers, I should say, and global networks. It's interesting we're actually engaging in conversations with not just banks around the world but governments around the world about their interest in adding P2P technology as part of what they do.

Fourth area is about OpenNow and FundNow. Again, we think it's an interesting opportunity as people want to transact more and more online and then lastly around small business. I fully expect that this small business capability will become one of our core offerings integrated into our business Internet banking technology.

So what you can see is lots of opportunities for synergy. We've used the plus signs to designate the relative synergy opportunity across them. And then we thought it would be important for you to see what our revenue forecast look like for CashEdge over the next few years. These are pretty attractive forecasts, but I can tell you that the synergies that we've included in these numbers are fairly limited. It has a synergy's go. It's always difficult to execute. Although in this case we've built an awful lot of muscle in distributing product through our ecosystem. So we feel awfully good about this. I should note again, this is another Tom Hirsch you better make sure you say this, I should note that the 2011 numbers are CashEdge's full year numbers which we acquired in September. So much of that revenue will be excluded from our future organic revenue growth calculation. Did I say that right, Tom?

Thomas J. Hirsch

Okay. Got it.

Jeffery Yabuki

So we're awfully excited about CashEdge. We get some great differentiation. We add key elements to our money movement strategy. Very importantly, we get an even stronger position in P2P, which we believe has an incredibly strong opportunity and that this acquisition will create some very attractive returns. So let me now summarize what these 4 areas of growth mean. I remember, I said upfront that the existing businesses would -- we believe over the next few years get up to 3% to 6%. Now that's only part of the algorithm. I just want to make sure we apply the rest of it here.

So let me quickly sum this up. So our existing solutions we believe are climbing back up to where they were before, slow and steady. We think it will continue to move to that of 3% to 6%. We've also talked about 8 different areas of innovative base solution and 4 in detail. And again, those 4 or those 3 of the 4 at least are areas where we have been talking a lot about the investments that we're making. Hopefully, you now have a good understanding of why we've been making the investments that we've been making because we believe this will accelerate growth importantly over the next few years.

We believe that these innovative solutions, say including CashEdge, will deliver 1% to 2% incremental growth over the next few years. And again, we're talking about this in the context of our overall long-term guidance. And that if you put the different pieces together, so we're starting back in 2009. You can see our historical. But the 2 to 4 is the baseline, which is this year, 1% to 2% for growth in existing businesses, 1% or 2% for the innovative base solutions that we talked about, which links into the 4% to 8%, gives you the pieces that allow us to get to the 4% to 8% and why we're confident in the 4% to 8%. But very importantly, we're also pretty excited about the shape of the curve you see in front of you.

But let me try to take this down a little bit more to the estimated annual performance. Now for clarity, this is not 2012 guidance. We give guidance in February, so we'll give guidance for 2012 and February of 2012. So this is not guidance.

So in the existing businesses which are 2% to 4%, right, that's our entire company today, we expect that those businesses will deliver growth in any annual period of 50 basis points to 200 basis points. And then again on a weighted basis, that equates out to 3% to 6%. On the innovative base solutions that you heard several of our management talked about, so Mobiliti, Acumen, CashEdge and network expansion, we expect that in any year, that will add from 80 basis points to 300 basis points depending on what's going on in the market. But then again, on a weighted average basis that, that will be 1% to 2%. And that's simply is how we get to the 4% to 8% and how we're quite comfortable with that moving forward.

So with that, let me hand it off to Tom to talk about margin and capital.

Thomas J. Hirsch

Thanks, Jeff, and good morning, everyone. Saving the best for last, like usual. Today I'm going to talk about a little bit about how we're going to turn that organic growth that we just talked about into increased long-term operating income growth. It's all around driving operating margin expansion by driving more efficiency into the business, at the same time delivering improved quality for our clients.

It all starts with the strength, stability and resilience of our business model, which has been tested by one of the most difficult times ever experienced by the financial industry. We are the market leader in a number of our key businesses, including account processing and payments. And our business model has many significant positive attributes, including high recurring revenue, high client retention and scalable businesses.

Today I will cover the 4 key drivers within our control to drive further margin expansion. First, operating leverage; second, operational effectiveness; third, favorable mix shift; and finally, the scaling of the new solutions that we've talked about for the last hour. But first, a little historical context on how we have done to date.

This slide speaks to our execution. We have delivered and strategically executed our plan. The businesses we have today are much stronger than the businesses we had 5 years ago. We expanded our payments businesses significantly by the acquisition of CheckFree at the end of 2007 and the recent acquisition of CashEdge. But most important to you today is we have a tremendous opportunity to continue to drive further margin expansion through a number of key drivers that's all within our control.

First I'd like to talk to you about operating leverage. You have seen this slide before, where I've highlighted in orange those businesses where we have significant scale and opportunities to further expand operating leverage. These businesses, whether it be account processing, bill payment, biller solution, our data processing business have a number of common characteristics, significant number of clients, scale businesses, market leadership positions and ASP delivery business models. Approximately 70% of our total revenue as a company is derived from these businesses. The incremental revenue growth we talked about that we are going to drive in these existing scale businesses should generate high incremental margins.

Operational effectiveness is all around driving best-in-class quality for our clients and further operating efficiency. We have built over the last few years significant organizational strength around our talent, processes and overall capability. This will benefit us tremendously as we move forward to attain our next cost-saving target.

Our execution has been very strong. We achieved our first target of $250 million one year early. But most importantly, last year I laid out another $250 million cost-savings target by 2015 that's driven by a number of transformational activities within the company. Data center transformation and globalization of our workforce continue to have the most opportunity. Our data center transformation strategy is also driving an enhanced client experience.

We have attained $16 million of savings through June 30 of this year and well on track for the full year. We remain very confident in our ability to hit our $250 million cost-savings target by 2015. We anticipate $40 million of incremental savings in 2012, which will clearly have a positive impact on future margins.

Our next driver of margin growth is a secular shift we are experiencing in a number of our businesses. Consumers are moving away from cash and check and transacting much more their activity every year through electronic payments, including using their debit card and bill payment through online banking. This benefits Fiserv given the significant scale we have in a number of these transaction processing businesses.

Now I want to take a step back and look at what has happened within our item processing business and the mix shift that has actually occurred over the last several years. Back in 2008, this business was well in excess of $300 million of revenue. The bad news is the revenue has been declining at an accelerated pace as paper processing declines. The good news is the revenue is declining at a much lower rate as we head into 2012. We have converted almost all of the front-end processing of checks from paper to images, resulting in much more efficiency and an increase in our overall adjusted operating margin.

Another item processing impact has been a major shift in the types of transactions we are processing. Of the $100 million decline over the last several years in check processing revenue, that revenue is being replaced by revenue from our other scale businesses in debit processing and bill payment, where our overall margins are much higher.

Finally, the last lever is the scaling of our new solutions and early stage investment we have been discussing today. As Jeff highlighted, we have been investing significantly in these solutions in 2011, generating approximately $40 million of operating losses. We have built the primary infrastructure ahead of the recurring revenue, which takes time to build. Clearly, we anticipate accelerated revenue growth from these new solutions and as recurring revenue builds, we will experience significantly higher incremental margins.

In summary, we have a great business model with a number of positive attributes and a number of key levers to drive further margin expansion, including our $250 million cost-savings target by 2015. The scaling of our new solutions will have a positive impact on revenue and margin not just over the next several years but very long term as that recurring revenue builds year after year after year.

With that I'd like to turn to capital allocation but first, I'd like to cover some very important financial metric.

As you are aware, we have grown our adjusted EPS over the last 5 years at a 16% compounded annual growth rate. We continue to deliver and execute our plan notwithstanding the very difficult environment that we've experienced over the last several years.

I also examined our adjusted EPS growth rate over the last 25 years since the company went public compared to the annual growth in earnings in the S&P 500. The blue line represents earnings growth in the S&P 500 over the last 25 years; clearly a lot of variability. The orange line represents Fiserv's adjusted earnings growth. There are not many companies, if any, that have delivered double-digit EPS growth for that extended time period, a true affirmation of the strength and resilience and sustainability of the overall business model. The growth in the first 20 years was largely driven by acquisition. In the last 5 years, we have been focused on integrating Fiserv, investing in capabilities to expand organic revenue growth and allocating our capital primarily towards share repurchase and strategic acquisition.

Now my favorite slide. We'll turn to our free cash flow growth. We have almost doubled our free cash flow over the last 5 years, reaching $735 million in 2010. That's almost 20% of our adjusted revenues as a company. Our high free cash flow conversion is a strong indication of the quality of our earnings. As we highlighted today, we are very focused and disciplined on building high quality, long-term recurring revenue that converts into solid earnings and cash flow.

Our free cash flow per share has grown at compounded annual growth rate of 23%, exceeding our adjusted EPS growth rate. We generated in 2010 almost $5 per share in free cash flow, and our free cash flow yield today is approximately 10%. We decreased our shares outstanding by almost 60 million shares since the end of 2004. That's almost 30% from almost 200 million to 140 million shares outstanding as of June 30. We are very confident in our ability to continue to grow our free cash flow per share.

As our revenue growth profile continues to improve, we have significant opportunities to expand margin and a disciplined deployment of our free cash flow will create more value.

This is our capital allocation framework, which has not changed. Share repurchase is the capital allocation benchmark. We are also focused on strategic acquisitions that are aligned with our strategy, like the 2007 acquisition of CheckFree and our recent acquisition of CashEdge and earlier this year our acquisition of M-Com. We should generate in excess of $2.5 billion of free cash flow over the next 3 years, and our deployment of this free cash flow should continue to shift towards higher return areas.

As this slide highlights, we have delevered significantly after the 2007 acquisition of CheckFree and our allocation of capital has moved more towards accretive areas. Recently, I received a number of questions around whether our capital allocation approach has changed given the recent acquisitions we have made. Clearly it has not. In fact, as this graph highlights, our capital deployment has been very disciplined. In the last 3.5 years, we have spent 2.5x as much on share repurchase as acquisition, $1.5 billion on share repurchase and $600 million on acquisitions, which includes the recently closed acquisition of CashEdge.

We have also continued to optimize our debt structure, lowering our cost and staggering our maturities, which will benefit Fiserv significantly over the next decade. We have $1.1 billion of debt that we plan on refinancing that's due in November of 2012. We also have in place a $1 billion revolver that comes due in 2014 with about $880 million of availability on that today after funding the acquisition of CashEdge. Today we are within our targeted debt-to-EBITDA range of 2 to 2.5x and given our anticipated growth in free cash flow over the next few years, clearly we are very well positioned from a capital flexibility standpoint.

In conclusion, we are focused on enhancing shareholder value really just in 2 ways. First, building long-term, high-quality growth and recurring revenue that drives operating earnings growth and long-term growth in free cash flow. Second, by allocating that significant free cash flow in a very disciplined manner using share repurchase as a capital allocation benchmark.

With that, I will turn it back over to Jeff and cover guidance and close off the day.

Jeffery Yabuki

I suppose you'll leave it up there. Thank you, Tom. Nice job. So let me quickly wrap up so we can get to the section that you want the most, and that's Q&A. So I hope that mic doesn't go again.

So for 2011, given the timing, we are absolutely on track for our full year guidance. We anticipate being at the higher end of our EPS range for the year and at the lower end of our margin range again for the year. We still anticipate Q4 to be stronger than Q3, as we've said all year due to license and other higher-margin revenue expected in the fourth quarter.

On a long-term outlook basis, everything remains intact. We like our growth momentum quite a bit, as we have explained to you today. We fully expect to have results that will be on average within the range over the next 3 years. Investment levels should decline over the next few years, and operational efficiency benefits will ramp, adding to margin opportunities. Cash flows will -- should, sorry -- cash flows should remain strong and will continue to allocate capital, as Tom talked about, to build value.

So I want to close, providing you with a bit of a visual perspective on how we're thinking about the market and the things that we've been doing over the last few years and really think about this in the context of your own DDA or a consumer DDA, and we've been doing part of this organically and part of it from an acquisition perspective. So today, we have very strong positions in online banking, mobile banking and account processing. We really think about that from a channel perspective, right? And these are either industry rankings or share rankings or both. And as Erich did a nice job of explaining, you build the channel and then you look for other transactional opportunities to put through that channel, and we've got a number of them: TransferNow, bill payment, e-bill, online account opening and funding, ACH, debit. Actually we have a very, very strong transactional opportunity, on top of that highway, which is now a multi-tiered highway. But it's not just branch, it's not just back office, it's mobile, it's online, right? It's whatever the consumer wants to be doing at any point in time. And we believe that these experiences, the elements of our model, will lead us to be able to actually create and deliver new types of transactions that will allow us to take our model, our growth, our results, our value to clients, our competitive differentiation to a brand new level. And this is really what we've been doing over the last few years is building this set of integrated channels and transactional capabilities, and there are lots of other layers on top of that. There's a risk management layer. There are lots of other services that we deliver, but being able to create this synergy between the channels and the transactions is a key element of our strategy.

So let me just wrap up, not to be overly redundant, but we clearly expect increased levels of high quality revenue growth over the next several years. The new solutions that we've been kind of pounding on quarter after quarter, right? We're investing in new solutions. Hopefully, you've gotten a sense today for not only what are these solutions, but how will they make a difference in the market and what kind of revenue growth and value momentum can we create with those products. Third is just reinforcing about the fact that we've got a very strong model that will allow us to create additional free cash flow but also, we're quite optimistic about the operating margins just because of the very nature of the recurring revenue that we create as a company. And then lastly, you won't see any change in how we allocate our capital, right? And we will continue to allocate capital in the way that we believe will build the most value for you, our shareholders.

So that's really the summary of our prepared remarks, our quasi-prepared remarks. Let me now invite the other speakers up, and we'll take some Q&A.

Question-and-Answer Session

Jeffery Yabuki

Now I'm sure there is some instruction that they're going to give me in a minute that's going to say, "Well, if you want to ask a question, please raise your hand, wait for a microphone." We've got several runners here. We'll come right up front here and then -- and Susan may bring that up. We'll start up here as we're getting everyone set. And then please limit yourself to a question and maybe a follow-up, not a question and 19 follow-ups. Those are afterwards. And I should say, management -- come on up, guys -- management will be available after the conference to meet and talk and it's very complex -- we're not allowed to touch the chairs. You know how that goes. Okay, good? All right, Susan, let's get -- oh, I'm sorry, if we could get started right here.

David Togut - Evercore Partners Inc., Research Division

David Togut with Evercore Partners. Jeff, the BofA relationship where the contract with CheckFree terminates in March 2013, what percentage of that revenue do you expect to retain and at what price?

Jeffery Yabuki

So the over, under on that was 5 questions. So number one, that's perfect. We -- BofA is a really important client to us. We have, obviously a long relationship. We have very deeply integrated technology. Our contract does come due with them in March of '13. We are doing a lot of work with Bank of America right now. I would say that our relationship with Bank of America is as good as it's been in the time that I've been here, and we are optimistic that we'll continue to have a very long relationship with Bank of America. That said, there are lots of things going on within Fiserv and lots of things going on with Bank of America and as soon as we know something, we'll share it. But we feel good about the relationship and the condition of the relationship and the things that we're doing with them, both operationally and strategically.

David Togut - Evercore Partners Inc., Research Division

As a quick follow-up, do you have the base case on what the economics of that contract will look like post March '13?

Jeffery Yabuki

Yes, that might be -- yes, I mean, it's just -- it's premature, right? You can -- there are lots of different scenarios that you can run, and it is imprudent for me at this stage to speculate on anything other than we have a long-term relationship with Bank of America, they're deeply integrated into our technology and I suspect that we'll continue to have a relationship with Bank of America. And we'll go over there.

Glenn Greene - Oppenheimer & Co. Inc., Research Division

Glenn Greene, Oppenheimer. A couple of questions. The first one on the 3% to 6% organic growth on the existing business. Could you sort of talk what's implicit within there? Is the pricing detriment included and also the client losses sort of assumed within there?

Jeffery Yabuki

Sure. That's a great question, Glenn. So the way to think about the existing businesses is on balance, all the bad news that is embedded in any year. So you remember earlier in the year, we said we have things going up and things going down and that happens all the time, client losses, pricing increases, decreases. It's all in the business as we know it today. Now it doesn't imply that there's a major catastrophic event, but it implies that things are good stay about as they are, and things that are bad stay about as they are.

Thomas J. Hirsch

Yes, and I think, Glenn, just to add, remember that pie chart that we kind of went over on that particular slide? I mean, it just assumed there wasn't a big piece in there for pricing. So it really assumed the environment kind of stays as is because that's baked into our current run rate. So to get a feel for that, you've got to kind of look at that pie and that's our best estimate of where that growth is going to come from.

Glenn Greene - Oppenheimer & Co. Inc., Research Division

Because you do have like 1% loss of business or pricing?

Thomas J. Hirsch

Yes. I mean, it's with a competitive market that's been -- we have a 99% client retention. We have pricing pressure in our business. That's built into our guidance, which is roughly between 2 and 4 today. So it doesn't assume anything gets better or anything gets worse than where we're at from that point.

Jeffery Yabuki

And it's important to think about it as an increment to the existing condition as opposed to it's on a standalone basis. But now remember, one of the things that's important to keep in mind is we laid out for you how we thought it could -- how that increment could work in any one year. It's a part of why you see that spread between 50 and 200 is in the category of "stuff just happens," right? And so you could have an offset against other growth or other things, but we believe it's contained in that 50 to 200 on an annual basis.

Glenn Greene - Oppenheimer & Co. Inc., Research Division

Just quickly, P2P, the business model, is it -- it looks like it's $0.50 a transaction plus there's sort of a license fee, or...

Jeffery Yabuki

Yes. So P2P today is generally a hosted ASP kind of model and there are different pricing elements, right? There's a transaction element. There is a risk element depending on who's bearing the risk on the transactions. There's a question of realtime, not real time. So we are using a proxy for that. A realtime payment will cost more than a 4-day ACH. And we really believe that over time, a FedEx-oriented pricing model is the one that will work in the industry, but it's early and it's an estimate. But it's a large market where we think there's a lot of opportunity. Let's go over there.

David J. Koning - Robert W. Baird & Co. Incorporated, Research Division

David Koning at Baird. And 2 questions. The first one, I thought the slide on investment spending, the magnitude of that the last couple of years was very helpful, because the optics in the last couple of years, it looked like when we looked at operating income growth, cost saves were a huge driver of that and it looked like the revenue growth wasn't generating a lot of EBIT, but I think it was really just optics. And now what we can see is that if investment spending is coming down a lot, should we expect cost savings to continue to be a big operating income driver? But also as the revenue grows, at least, the optics are driving a lot of EBIT growth as both that high margin and investment spending is coming down.

Jeffery Yabuki


Thomas J. Hirsch

And David, yes, that's a great point. I think I highlighted in the margin shift that stealing of the new solutions that you want to bring to light today because we have a lot of dialogue around that and we're building the infrastructure in these long-term businesses. Like I said, just in those solutions alone, we're incurring an operating loss in 2011 of about $40 million. So as that recurring revenue scales up, clearly we have most of that infrastructure built, so that's going to be a nice margin avenue as we kind of go into '12 and clearly into '13 and '14. And you'll see more benefits from those saves at the bottom line clearly as that happens also.

David J. Koning - Robert W. Baird & Co. Incorporated, Research Division

Great. And then secondly, just in 2012, $1.1 billion of term debt. It looks like -- I'm sorry, loans come due or you have to refinance. Just given where rates are today, I mean, is it fair to assume that some of that can be refinanced at a better rate assuming rates hold in here?

Thomas J. Hirsch

Yes. I mean, clearly we'll be from a cost-effective standpoint, that data's up there a little bit. It's clearly around 5% or 6%, so we're going to do what's right, though, for the long term as we've done over the last 2 years, which is really put those maturities out. So we're positioned well for the next decade as a company but clearly, the market is going to be good from that standpoint and we will take advantage of that over the next year.

John Kraft - D.A. Davidson & Co., Research Division

John Kraft from D. A. Davidson. I wanted to go back to the Durbin changes in routes, specifically walk through some of the opportunity you had to gain some share. But can you remind us what the economics of how those transactions work? And specifically, if you're so issuer-centric, won't the merchants that have the sophistication to direct the routing choose another network?

Rahul Gupta

So let me take the second part of the question first. I don't mean to overemphasize it. I mean, ultimately, there are 2 sides to every network, and we do have to balance competing interests but push comes to shove, we do believe that we would favor the issuer. And so when we're starting to change rates and when we look at all the routing preferences, we do believe that merchants are route-based on a number of factors. So that's just one aspect of it, and we're quite comfortable that we can balance those 2 despite being issuer-centric. And sorry, your first question was about the economics of the transaction?

John Kraft - D.A. Davidson & Co., Research Division

Your revenues generated per issuing card and also per transaction.

Rahul Gupta

So the business model around the network is that we get paid a network fee from the merchant and a network fee from the issuer, and that's on a per transaction basis.

John Kraft - D.A. Davidson & Co., Research Division

Is it about split?

Rahul Gupta

You know the industry averages, so we're pretty similar.

John Kraft - D.A. Davidson & Co., Research Division

Mark, in your presentation, you indicated that you thought in 2012 spending would be less than 3%. So now I'm just trying to get a sense of as you are looking at business today, where do you think 2012 IT spending could be? And more importantly, how does it impact Fiserv? Because I heard Jeff talk a lot about these innovative solutions and your ability to gain market share in many of these other areas. So could you maybe tie that together and see how it impacts 2012?

Mark Ernst

Yes. So what we're seeing out there in the industry is that -- I think the economic uncertainty that we're kind of going through right now is just now having the effect on financial institution budgets, and that's why we're just a little bit cautious because there's no question that financial institutions increasingly are describing their problems and looking to technology to solve those problems, whether that revenue growth, whether that's their own internal efficiency. I think they increasingly recognize that technology is going to enable whatever solution they're looking for. So the concept of the 3% or greater long-term growth in IT spend across the industry, we think, makes sense. It's consistent with what we're -- not just what analysts are saying, but it is consistent with what we're hearing from our clients and prospective clients. It's more as we look into '12 and for our own internal planning, we're being just a little bit cautious because of the kind of environment now we'd taken here and budget setting time. The other thing that I think is important to understand, however, is that it's not just kind of pervasive. We're going to spend -- we're going to see more spending on everything, but there is very much a trend toward very targeted spending on those kinds of things, like channel renewal, those kinds of things that are sort of using technology to sort of update the value proposition the financial institution is offering into the market.

Jeffery Yabuki

Yes, correct. I would say -- I mean, the other thing is just as a group, we probably did more cautious and pragmatic than every -- than others in the industry because we do think it's still relatively tenuous out there. That said, I mean I can't tell you the last time I had a conversation with a client, and I suspect all of us have the exact same story, who hasn't indicated that they are going to spend money on mobile or online or anything that creates revenue or anything that reduces expenses. Now ultimately, it's not unlimited, that's why there's a cap on spend. But to make a finer point, banks are making decisions to spend that and they're going to reduce it somewhere else because they don't feel like they have the luxury of waiting. I mean Bank of America announced earlier this year that they were going to rework their entire mobile technology. People just won't allow the competitive landscape to get ahead of them in some of these important areas.

John Kraft - D.A. Davidson & Co., Research Division

And then just one follow-up. Rahul, you talked about the opportunity at ACCEL/Exchange and it seems like it's a large opportunity on the Durbin side for network. How do you differentiate your network? How is it that you can win market share when there are all these other networks? And why is it not a commodity?

Rahul Gupta

Yes. So I think as I highlighted in my presentation, Fiserv has a tremendous advantage in terms of its own distribution system. I think we have demonstrated 200-plus wins on the debit side of the business, which we do believe -- per year, which we do believe is market leading and that's fundamentally a testimony to our distribution power. And so that is one huge factor. And then second is this huge install base which is forward-looking relative to these new transactions that we have been talking about all day relative to P2P, certainly the real time nature of bill pay or any of these other transactions. We do -- we are the market leader in remote deposit capture. So you can name all of these technologies and have an installed base and so it's not just -- the network by itself is only a piece of the puzzle. And if that's all we had, it would be relatively similar or commoditized. Or we can marry it in many interesting ways and to all of this market-leading technology that we have installed out there and it's leveraging those 2 factors.

Unknown Analyst -

Monet Rebel [ph], Trust Company of the West. You mentioned that most of your solutions are really financial institution-centric and with the P2P, the new trends toward mobile that's not really financial institution-centric, and also the issue with the unbanked, especially for international applications where people believe that the bank does not really exist as the center for everything.

Jeffery Yabuki

So in the U.S. -- and Erich, you may want to add on to this, but in the U.S., even though you could argue that the financial institution is not at the center of that P2P relationship, certainly, there's a facilitation rule for the financial institutions and the trust and confidence in security that's attributed to the financial institutions make them an appropriate place to focus energy. That said, right? The real dilemma is do you wait for -- how do you manage take-up rates? Do you wait for financial institutions to push on it? Do you push it individually? Do you do things that are viral from a consumer perspective? So I think it's more of a question of marketing as opposed to industry structure. We think the financial institution structure is the right way to go. Outside of the U.S., right? It's clear that places -- and within the U.S., there are groups of unbanked and marginally banked large groups of people who prefer not to use a financial institution. And using the technology that we have integrated with mobile, it's possible to do those kinds of things. Popmoney, for example, is integrated into prepaid, right? So you -- that functionality exists, so I think we can take advantage of the strengths if we have that desire and then may become more important if ultimately you can figure out how to use P2P to move cross border.

Ashwin Shirvaikar - Citigroup Inc, Research Division

Ashwin Shirvaikar from Citi. A couple of questions. One is if I look at your bill pay and I guess to some extent the better slides this year, last year, the year before that, they sort of look similar with larger opportunity, incremental changes in consumer behavior, offset $5 billion that is cumulative opportunity. What's realistic to expect to come to Fiserv in the next 1 to 2 years?

Jeffery Yabuki

In the next 1 to 2 years?

Ashwin Shirvaikar - Citigroup Inc, Research Division


Jeffery Yabuki

Nowhere near that number. There are 2 things that are really important when thinking about bill pay. And you're right, those slides, it looked very familiar in the last few years and rightfully. We are doing work right now on how to more clearly take advantage of that opportunity, and it's easier for me to say I think that there is an opportunity over the next 5 to 10 years -- I'll just use that time frame because that will keep Tom happy -- there are opportunities in the next 5 to 10 years that are larger than that entire business, and that is probably the easiest way for me to frame that up. If you ask me what's going to happen over the next couple of years, there'll be something, but it's a matter of thinking about 3 things: it's the convergence of the different payment methods, right? So bill payment, P2P and request for money and the combination of those 3 solutions potentially converging with mobile or different access. And we think there's a real strategy there, but we're not going to say anything else right now.

Ashwin Shirvaikar - Citigroup Inc, Research Division

Okay. And when I look at your total, you mentioned a couple of times the really good track record of 10% plus EPS growth. In terms of capital allocation, how much are you willing to keep doing the buyback to keep it at a 10% plus level over the next few years?

Jeffery Yabuki

So I'll start, and Tom can add in. Now we don't actually -- in the 5.5 years I've been here, I've never had a conversation that says, "We better buy back shares so we can hit that 10% number." I mean we buy back shares because when -- I'll say it this way, when we have acquired shares historically, we have done that because we believe that there is an appropriate discount between the market price and the intrinsic value of the equity, and that's really how we think about it. The majority of the earnings that had been created in the first 20 years of Fiserv came from acquisitions. The majority of the earnings over the last 5 years have come from operating the company. And so we're continuing to do that and we'll deploy the $2.5 billion, I think you said $2.5 billion over the next 3 years in a way that creates the most value.

Thomas J. Hirsch

Yes, and the thing -- the only thing I'd add to that to Ashwin is that clearly, this year, when you look at our capital allocation strategy, right? We're interested in building value for the long term, right? CashEdge, clearly on a near-term basis, is very dilutive compared to share repurchase, but we very much believe that, that is going to add some incredible value over the long term. So it had nothing to do with 2011 or even 2012 earnings from that standpoint, but clearly, there was a lot of strategic value with that particular purchase, and that's going to build value as we saw over the next several years. So that's the other answer I'll give to that.

Tien-Tsin T Huang - JP Morgan Chase & Co, Research Division

Just a couple of questions. Tien-Tsin Huang from JPMorgan. I guess first, just thinking about big picture of the core growth, the deposits, obviously drive and fuel a lot of growth for your base business. I think you mentioned 5%, that's what we're seeing but I'm curious with so many banks standing up fees, Bank of America, Citi raising the minimum balances. How do you see that changing into positive outlook? Do you think it actually could reverse some of the growth that we've seen in which you see the unbanked population rise? Or do you think it's going to be a shift towards smaller banks that are a little less regulated, which would obviously be good for Fiserv?

Thomas J. Hirsch

Yes. I think our general internal view is that the shift towards smaller banks is certainly going to be one of the outcomes of all this. That's a positive for Fiserv because the kind of historic position we've had in that part of the market. Clearly, also, there are -- there's likely a shift where some of the kind of the marginal DDA business is going to drop off. That's why we are so bullish on prepaid. We think there is an entire kind of suite of products that are coming that will serve that part of the market that historically would have been kind of marginal DDAs. So we don't -- clearly, the money is not going away. The money is going to go some place and in fact, the transactions continue to be electronified, so that overall trend isn't changing. The shifting among institutions, we think, actually plays well on our favor if it plays out the way it appears to be headed.

Jeffery Yabuki

Yes. Certainly if you're talking to the smaller, relatively smaller institutions, they view it as a big opportunity.

Thomas J. Hirsch

They're all looking at their own internal strategy, saying, "This is an opportunity for us to differentiate ourselves against the behemoths."

Tien-Tsin T Huang - JP Morgan Chase & Co, Research Division

All right. If it were just on consumers, I'm going to agree with that theme but I'm wondering strategically, you could argue that the thing is going to lose some power and their ability to control the consumer. Obviously, with Durbin, the merchant is going to gain some power. So I guess my question -- I'm not sure what my question is really -- I guess my question is does it make sense to get closer to the merchant? Does it make sense to buy some acquiring depositing asset as well to potentially drive and accelerate some of that business? Or should you buy a consumer service provider and get bigger and actually dictate some of that activity on your own in the event that the banks aren't successful?

Jeffery Yabuki

Yes, I mean, I'll give it a shot and others can add in. I mean, we have those discussions on a pretty regular basis on where the elements of the value chain and we want to make sure that we both understand where we are in and not in, and that we are cautious of potential disintermediation. And clearly, the Durbin change raised this factor of should you be involved on the merchant's side or not. I think for at least right now, our take is we're well positioned. We think we can build different kinds of relationships with some of our technology solution, but it may take different kinds of actions to ensure that, that solutions are delivered by the consumer -- or I'm sorry, to the consumer in the form and function in which we would like them to use and experience that technology. Maybe that's one of the more difficult challenges, but it may be that we can't differentiate everywhere and so I think we're better off picking our spots and being really good at that. Bryan, okay, we'll get back over there. Well go ahead, up here next. Go ahead.

Darrin D. Peller - Barclays Capital, Research Division

It's Darrin Peller from Barclays. Just a follow-up on Tien-Tsin's question, just give us a bit of a sense, if you don't mind, on the overall sentiment you're hearing from the banks. I mean we came out of a year or is still in the year really where credit quality is probably at all-time lows or being closed, charge-offs are down to get among the consumer, and capital levels are pretty sound. Obviously, there's some thought that that's going to -- that could change in 2012. And maybe in your past experiences, past cycles, do you have any anticipation of that impacting decision-making for next year? And then I'll just have a quick follow-up for Tom.

Jeffery Yabuki

Sure. So again, our take is that the biggest -- I'm sorry for how this is going to sound, right? The biggest issue facing financial institutions is they aren't actually generating any organic earnings, and so we believe that will translate to pressure and it will translate to people being much more pragmatic about how they spend money. We do not believe it will put a stop. We don't see a halt. I've not seen any indication and I don't know if anyone else has that spending will halt, but there is a level of pragmatism around technology spend in terms of where am I going to put the money. But there's not a single financial institution that I've talked to that doesn't believe technology is the answer. But there are so many choices, we have to figure out where they want to put that money and how are they going to prioritize it. So we are less optimistic today about the aggregate IT spends and we say I'm less positive today than I was a year ago not because of any difference in how I feel, but because of what I'm hearing from the financial institutions. I'm much more positive on the things that we're doing in terms of where financial institutions will commit spend.

Darrin D. Peller - Barclays Capital, Research Division

Okay. Just a follow-up to that point. Actually, it's a nice segue to Tom. I don't think I've heard the number $40 million used before in terms of how much you're spending on some of the new initiatives over the year. It might have been said, I just missed it. But that sounds like a pretty material sized number for these initiatives. I'm not saying they're not good opportunities, but I guess I'd be curious to know how much of that $40 million should be repeating the next couple of years. You said that could be a nice margin lever for the next coming years. And on top of that, maybe you just touched on, it seems like once that comes out -- I mean, that operating loss comes out, there's some really material margin opportunities in this businesses. The incremental margins, I would think, on Mobiliti and the data products are massive and so you'd get rid of that operating loss. I mean shouldn't that be able to boost your margins or your goals on its own?

Thomas J. Hirsch

I am the last to know, but clearly we're well positioned from that standpoint. I mean, clearly we have invested a lot and I think you'd say, "But when is that going to scale?" Right? And basically, in our products like mobile or Acumen, as that service revenue comes up, we've got most of that expense infrastructure built and that just takes time. And as that revenue scales, those incremental margins are going to continue to grow nicely. I think I had kind of a chart up there that kind of showed that how we think that's going to come out but clearly, that is going to be a positive impact going forward, but this recurring revenue takes time to build. It will build, but it takes time and that's the nature of our business, but that's our laser focus on building long-term recurring revenue streams that have high incremental margin. It's just that number these investments we put the infrastructure in place. But going forward, clearly that is going to have a nice positive impact over the next 3 years.

Jeffery Yabuki

The other thing, just for clarity is we didn't start investing in these in '11, right? We started back in '09, sometimes earlier. So we've been making these investments over time. They're coming to fruition, and that's why we started to get a little bit more exposure. We only have time for a couple more questions. Bryan, and we'll go over there to Brett.

Bryan Keane - Deutsche Bank AG, Research Division

It's Bryan Keane, Deutsche Bank. I guess a couple of quick ones. Rahul, just on debit volume, you talked about it's still maintaining that kind of 7% to 9%. There are others that are saying that, that will be hit, the volume growth will be hit. If you could just talk about why you're going to maintain that level. And then secondly, it sounded like you thought PIN volume obviously would increase and Signature would drop. Any idea the growth rate, the magnitude, we'll see in that change between PIN and sig?

Rahul Gupta

First of all, the 7% to 9%, I mean obviously, my outlook is difficult to project. We are very comfortable with our customer base, maintaining organic growth rates, principally because of the reason, and we do believe that the consumer demand out there is strong enough, that it will overcome once all the moving and shaking had settled down between people migrating accounts or whatever might occur. So whether or not the market does maintain it -- we do believe it will -- we certainly are very comfortable that our customer base will maintain the growth rates that we have been talking, plus more. So that's number one. So from our selfish perspective, that seems to be the more important item. And maybe, Jeff...

Jeffery Yabuki

Yes, Bryan. I mean just remember, our volumes coming from -- our incremental volume over the market is coming really from 2 distinct areas. Number one, we're just winning a lot more deals, right, a couple of hundred a year. And then number two, these smaller institutions tend to have a less mature debit utilization curve, right? So we have people who are moving much faster, maybe our clients and I don't -- we probably don't -- we don't disclose this, but our clients are far less than the top 4 would be in average debit transactions per month. So people are scaling. So you have those 2 factors which has -- will have nothing to do with what's going on in the debit market. And again, to one of your earlier questions, again, smaller institutions will say well, we're going to push debit right now because we see that as an opportunity to attract new customers and [indiscernible].

Bryan Keane - Deutsche Bank AG, Research Division

Okay, just one follow-up for Tom. Just item processing, it was good to see that the growth rate, declining growth, is actually slowing. And then explain to me real quick -- I missed it -- but why the margins popped there in '12? They've been on a decline but the margin popped in '12, and I am processing. And then one last thing, just any other big segment of business that's going to grow below company average of 3 to 6 and existing, maybe output, just anything else that's something to watch out for?

Thomas J. Hirsch

Yes. It's unusual that you would ask a question on item processing, which you've been asking me for 7 years. But besides that, the real driver...

Bryan Keane - Deutsche Bank AG, Research Division

That would be positive now.

Thomas J. Hirsch

Yes. The driver in margin for '12 is primarily around the fact that we have consolidated a lot of our centers. Remember I talked about the front end, paper processing the images. We were able to take a lot of these orders and a lot of people and a lot of handling of the check out of the system, and we're able to do that very effectively. So therefore, a lot of that revenue decline has already occurred. It's much more efficient processing because we've been able to close a lot of our centers around the company in '11 and we're just about done with that right now, and that's really for the efficiency gap. Regarding your question on businesses that are growing outside of that, clearly I would think, just on reflection, I think output solutions is probably one. Clearly, IP is not growing right, so that is stabilizing as we go into '12. But those are probably the 2 biggest businesses out there from a standpoint that are outside of that growth profile a little bit. But Jeff, there maybe one or 2.

Jeffery Yabuki

Yes. I was thinking maybe some of the lending businesses may not be, but on balance, I think we're in pretty good shape. All right, one more question. We'll take it from Brett.

Brett Huff - Stephens Inc., Research Division

Brett Huff from Stevens. One thing that seems to be happening in a business model as you move more to payments, which I think is a good strategy, is -- tell me if this is right, you're relying on the banks to help you drive adoption. There's sort a gate between you and the consumer, yet you're becoming a little more consumer focused. It's not just account processing anymore. You've had success in getting debit adoption, bill pay adoption, Popmoney or ZashPay, and some of the newer things that you're talking about. How do you view working with the banks? Is that a gating factor? How do you get around? Is that a new set of skills that you have to develop? And how should we think about that as you show us that 1% to 2% ramp in some of those new items?

Jeffery Yabuki

Yes. That's a great question, Brett. I mean we have maybe the good fortune of being at a time in the market where again, institutions are looking to drive revenue and to some extent, especially when you start talking about realtime transactions, I think virtually everyone believes that there is a premium pricing opportunity for those kinds of transactions not unlike expedited bill pay and some of the other premium payment opportunities. So we're actually having a fairly large set of robust discussions with financial institutions about how to push on these products. If you go to Google and type in "Ally Bank" and "Popmoney," you'll get bazillions of ads and radio spots and other things. I mean people are really viewing this as a way to drive a new kind of loyalty, so there's a fair amount of interest notwithstanding the potential economic opportunity. That said, we do have to keep in mind that there are institutions between us and consumer in those cases and we've accounted for that. We believe fairly well when we put together our economic model, and we're exploring different ways to potentially change some of that equation.

Brett Huff - Stephens Inc., Research Division

And then a follow-up. Can you just square for me the 3% market revenue growth for some of the things that you're seeing and your maybe at or above that in the near medium term? But then when you talked about talking to banks, it's a little robbing from Peter to pay Paul, "We're going to take money from this bucket and put it in mobile." How does that discussion with banks equal total higher overall market growth? I just want to make sure I get that dynamic.

Jeffery Yabuki

Sure. So we -- bank -- first of all, banks don't always steal from one part of the IT budget to another. Sometimes they steal a lot of other peoples' budgets. And so that is one of the things that's going on. But again depending on the institution, if it's a small institution and we're their primary provider, there could be more pressure. If we're a large institution, we're of a number of primary providers, it isn't, we don't think as much of an issue. That said, don't -- you shouldn't misconstrue my commentary about the market to mean it's going to be flat or it's going to be -- I just think it's going to be more pragmatic and more disciplined and sales cycles will remain long, but we don't think you have to see the market changing very much to get the results that we're talking about. So if you look at that pie chart when you pull the presentation, look at the pie chart, one of the slices is market. Remember, that's a 3-year view, right? We don't anticipate the market being any better in 2012 for our own purposes.

Mark Ernst

One thing I'd add to that is the other thing that is really affecting that is this move toward ASP. So while the internal cost may be coming down, being replaced by ASP revenues to firms like us, which would be a big kind of offset to the lower overall spend increase.

Jeffery Yabuki

Great. Well, thank you, everyone, for spending the morning with us. We really appreciate that. The presentation is available on our website. Typically, we give it to you. We're trying to be more green or more something and save money, and so it's on our website. You can bring it down, and we'll also be providing you with an electronic survey. Thank you for your support, and we'll be available to answer questions afterwards. Thank you.

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