AUSTIN, Texas–In January of this year, Chuck Fagan said he received a phone call at 6:30 a.m. and was immediately nervous, because early-morning calls are seldom good.
But this phone call has turned out to be a positive, according to Fagan, PSCU’s CEO. The call was from Frank Bisignano, then the chairman and CEO of First Data, which has long been PSCU’s processing and payments partner. Bisignano was calling to let Fagan know First Data was planning to merge with Fiserv, an industry-shaking announcement that would be followed later in the year by similarly big news that FIS and WorldPay were merging.
During PSCU’s Member Forum here, Fagan and Bisignano participated in a Q&A. Here’s a look at what was discussed:
Fagan: Tell us more about this combination.
Bisignano: This combination is about growing revenue for clients. It’s about scale and embedded offerings. They are very, very, very complimentary companies. Ultimately my job as chairman and CEO is to do right for the shareholders and the clients, and in this case it checked both boxes. The market has reacted very, very positively. We made a commitment to $500 million in new innovation we are not working on today. We have 20,000 technologists. What I saw was the opportunity. Fiserv wasn’t the dream. The dream was to take what was once a broken down, siloed First Data and parlay that into a great technology company.
We’ve spent a lot of time and energy on integration. One of the first clients I came to see was PSCU when we did the deal. PSCU is in this combined company one of the most important clients and to me doing a great job for you is what it’s about. I think we’ll be able to embed product and technology better so you can grow your business even better than you can today.
Fagan: The FIS and WorldPay merger immediately followed your announcement. Do you see this continuing in the payments space as we look ahead?
Bisignano: I spent my whole career in financial services and banks. There is this line, ‘Scale matters.’ When I came to this job it was interesting because to me First Data seems like a big, complex company and to me it seemed like a Maserati. Everything a financial institution does is a payment. And then you get into some more narrow slivers. The other side of it is there is more innovation going on in payments than anywhere else, I think. I don’t know what the next combination is, but I think our scale and the amount of money we are going to invest is going to allow you to have unprecedented scale. I think we’ve set a bar pretty high with this combined entity, which has a combined market cap of $60 billion and an enterprise value of $80 billion. This will be one of the great companies if we do our job right.
Fagan: Clover is an application built by First Data for small business. Can you comment on how Clover can connect with credit unions?
Bisignano: I have been talking about this for a while. Everyone has more opportunity in my opinion than talent to deploy against it and the ability to consume it all at a pace. I’ve always had a dream that the business we generate, about $6 billion in revenue annually in the merchant business, could be deployed to credit unions.
Square wants to compete with you all in their own way, and Clover and Square are in a heavyweight battle. We started after Square and do about 75% of the volume now, and I’m proud of that. It’s an iPhone like platform for small businesses that gives them business in a box.
My view is with digital applications we could bring to credit unions the ability to sign up small businesses, many of which are individuals, really. In my view we could deliver Clover in one click to your clients. I think it’s a great product to expand the product set and we could do it in a very integrated fashion.
Fagan: PSCU and First Data are to mark their 30th anniversary this year. Can you talk more about that and what’s ahead?
Bisignano: Digital is a huge, huge opportunity. It doesn’t mean the piece of plastic is going to go away. I always say it’s not really that hard to take it out of your pocket. This new company will have exponential opportunity. We have a lot more investment capital with this new company than we did with our old company. To me there is a huge data-driven business out there to do everything from driving down fraud rates to helping acquire new clients to being able to bring to your clients more information to be able to do more, and to help you to understand more about your clients. In payments, it’s not a race to the bottom, it’s a race to more opportunities. In this industry, it’s about creating a bigger, targetable market by bringing more innovation and technology.
Fagan: What keeps you up at night?
Bisignano: I always say when I started in this industry when very, very young there was a phrase, ‘data security,’ and I didn’t know what it meant. That was about resetting passwords. Then it became information security. Then it became cyber-security, and then it became way more scary. If you poll 500 Fortune 500 CEOs about what they are most concerned about, it’s the number-one item.
My view is it scares the you-know-what out of me, but the best thing to do is build the best defense. Bad guys, they are all hanging out together. The dark web is like a bad neighborhood. That’s where they are trafficking. We have a lot of great ex-government officials and hackers inside our shop. My philosophy is protect the perimeter, patrol the interior. Most crimes happen as inside jobs; why would cyber not take the same path? You have to stay vigilant. I love cutting expenses, but not there.