FISERV INC.: Supporting Financial Services

Shareowner, Jan/Feb 2005

Fiserv Health. Major competition in health administration comes from national and regional health insurance companies such as Blue Cross, United Health Group, Aetna and Cigna.

Securities Processing & Trust Services. Fiserv competes with several larger companies in the clearing business, specifically Bank of New York, Fleet Boston, and Fidelity Investments. Many of these competitors also engage in the retail brokerage business, and thus are provided with an internal supply of clearing business.

Important Influences on Future Revenue Growth

Acquisitions

Acquisitions allow Fiserv to enter new product markets quickly (e.g. health services) and to service new geographic areas. Since the company's founding, over 130 acquisitions have contributed significantly to revenue and earnings growth. Last year, the company made 12 acquisitions that contributed more than half of the annual revenue growth.

Internal Business

Fiserv's goal is to be the "one-stop" shop for financial information and technology services. Typically, the company signs clients to three to five year contracts that include annual rate increases. As a result, as much as 85% of the company's revenues can recur the following year. Additional revenue growth is sourced from new clients and cross-selling additional products to existing clients.

Fiserv's recurring revenues provide the platform for consistent earnings growth.

New Products

To meet the needs of changing technology, Fiserv spends approximately 8% of revenues on product development. The company has multiple development centers, each with specialized capabilities, working together to meet the needs of their client base.

Financial Industry Consolidation

Fiserv is expected to benefit from the continuing consolidation of financial institutions. Currently, close to half of all financial institutions use technology platforms from a variety of service providers.

It is expected that as institutions become larger, they will be looking to outsource more services and to consolidate their service providers. This development tends to favor big suppliers with a wide range of product offerings.

Legislation

Recently passed U.S. legislation encourages banks to adopt cheque-imaging technology and gives digital cheques the same status as their paper counterpart. Because this technology is expensive, most financial institutions are expected to outsource cheque imaging. Fiserv already operates the largest network of check processing centers in the U.S., all of which are equipped with imaging technology.

Improving securities Markets

Recently, trading in securities markets around the world has returned to more normal levels (following the weak markets during 2001-2003). Progress in reducing political uncertainty throughout the world; continuing low interest rates; lower-priced oil; continuing strong growth in corporate earnings; etc. are all expected to support more trading, clearing, custody, and trust activity. Fiserv's revenues are expected to increase with that activity.