Conversations 2009 Summary Annual Report Fiserv > Collaborative and informed In 2009, we had some heart-to-hearts with our clients about their challenges, their vision and how we could help. We listened. Not only to how the economic situation was affecting their business, but also to what their customers want – frankly, expect – in a “can’t wait” world. And how those expectations continued to evolve. We showed them we had their back by delivering the solutions, innovation, support and guidance they needed to survive. Valuable market insights Easier access to solutions and experts An unwavering commitment to investing in innovation We engaged in a constant exchange of ideas and “what ifs.” All with one goal: to provide the solutions our clients need to thrive in a rapidly changing market. Many were left speechless by the turn of events that forever changed the financial services industry as we entered 2009. At Fiserv, we had so much to say. 1 Our solutions carried more than17 billion digital payment transactions across networks and continents in 2009. 2 To Our Fellow Shareholders To say the financial services industry has been “challenging” during the past couple of years would be an understatement. Talk of survival, losses and failure was so prevalent in 2009 that the public became almost numb to the impact of what those words really meant. Because we lived this reality arm-in-arm with our clients each day, we never did. In conversations where those words were present, we felt our clients’ trepidation about what might happen next. Would their community lose a trusted icon? Would a loyal employee be lost to a layoff? Would a local entrepreneur running a small business be suddenly forced to close his doors? Although market conditions have stabilized and begun to improve – at least on a relative basis – we don’t expect the financial services market to return to its past position. For some, that is a scary proposition; yet for others, the news couldn’t be better. We strongly bias to the latter, and, as such, believe there will be significant opportunities for Fiserv clients to grow through purposeful innovation. We find that prospect to be energizing and exciting. 3 As part of what we do, we are in constant dialogue with clients and prospects. In some cases, our conversations centered on a solution that could help capture a unique opportunity or overcome a regulatory challenge. In other interactions, we offered words of support and an empathetic ear. Our clients are our friends, and often, our friends are our clients. We aren’t spectators sitting in the stands passively watching events unfold. We are all in, all the time. Our confidence in the long-term strength of the financial services industry has never wavered. Would there be short-term pain? Yes. Would the economic crisis change the composition of the financial industry? You bet. Would there be new, better opportunities for clients in this changed environment? Most certainly. Would this be good for Fiserv? Absolutely. The dynamic market has led us to an even stronger focus on service, delivery, integration and innovation. We are providing value to our clients at a time when they need it the most. Strength in Numbers We established three priorities in 2009 to help shareholders assess our performance and strategic progress: Meet our earnings commitments while maintaining capital flexibility Continue our integration efforts with an increased focus on revenue opportunities and product innovation Enhance our go-to-market approach leading to increased sales results to new and existing clients We continue to manage the Company – your company -- to optimize long-term performance while delivering near-term earnings results. We have increased our investment in new products that will move the market. Enhancing differentiation remains a top priority. We are managing proactively and pragmatically to stay ahead of the shifting environment. Even as revenue declined slightly in 2009, adjusted earnings per share increased by 10 percent to $3.66 – highlighting the benefits of our diverse client base and resilient business model. Over the last two years, we have grown adjusted earnings per share by nearly 40 percent while increasing our investment in new products and capabilities, all in the midst of what historians will eventually refer to as a once-in-a-century market event. Free cash flow was up 11 percent for the year to a record $668 million, and free cash flow per share increased by an even greater percentage. Adjusted operating margin, a critical measure of business health, continued to shine. Our adjusted operating margin expanded by 110 basis points in 2009, and has grown by 580 basis points since 2006. This performance reflects the quality of our business model and the multiple sources of our attractive earnings growth. 4 $3.66 $4.00 3.00 2.00 1.00 0 06 07 08 09 Adjusted earnings per share CAGR: 18% $700 $668 600 500 400 300 200 100 0 06 07 08 09 Free cash flow (in millions) CAGR: 21% 30% 28.7% 25 20 15 06 07 08 09 Adjusted operating margin 580 bps improvement 2009 presented a larger-than-expected number of opportunities to showcase our technology solutions across the globe. We kept our attention on an external market that was transforming before our eyes, and leveraged our deep industry knowledge to launch several, significant new products such as Acumen TM, our next-generation credit union account processing platform. We invested in game-changing technology solutions, such as person-to-person payments and analytics-as-a-service, both of which highlight our focus on integration and innovation. We also continued to receive accolades for excellence in account processing, bill payment, and Internet and mobile banking. We contend that the true test is how often participants vote for our technology. In 2009, we won more of the contests for our market-leading solutions than we did in the prior year. Not just in terms of a greater percentage of the available transactions, but these transactions were larger and contained more content than we have seen before. In addition, integrated sales to existing clients increased 36 percent over a strong 2008, highlighting the continuing momentum of our Fiserv 2.0 sales program. Defining a New Culture We took important steps toward defining a new culture for Fiserv as we celebrated our 25th anniversary in 2009. First, we launched a powerful new brand identity to further punctuate our leadership position in the financial technology industry. But a new look, no matter how compelling, is not enough. The real strength of a brand does not lie within a logo or a color palette. The essence of a brand is in the emotional connection that is created through the quality of the experiences one has with it. We have successfully transferred the energy that had been present across our portfolio of brands to our now unified market presence and continued to strengthen our market approach, giving us a firm foundation for the future. We celebrated our 25th anniversary by giving back. Our associates engaged in a program to donate at least 25,000 hours in the communities in which we live and work. We quickly passed that initial goal, and as of this writing our people have volunteered more than 50,000 hours. We couldn’t be more proud of our associates’ contributions to making the world a better place at a time when it’s needed the most. We introduced a common slate of values to serve as a basis for decisions and as a guide to expected behaviors. The Fiserv Values were developed to focus our efforts in support of our mission. Earn client trust every day. Create with purpose. Inspire and achieve excellence. Do the right thing. Deliver on the promise of one Fiserv. Jeff Yabuki, President and CEO Our Mission To provide integrated technology and services solutions that enable best-in-class results for our clients. 5 Don Dillon, Chairman of the Board, with Jeff Yabuki, President and CEO Over the last two years, in what historians will eventually refer to as a once-in-a-century market event, we have grown adjusted earnings per share by nearly 40 percent while increasing our investment in new products. 6 Our values – elegant in their simplicity – form a foundation for us to grow. These promises will anchor our actions for the next 25 years as we continue to provide leading technology and services solutions. Most importantly, the overarching element of the Fiserv culture is an unwavering commitment to client success. Leading for Growth “ There are always two choices. Two paths to take. One is easy and its only reward is that it’s easy.” – Unknown There are few people, if any, who believe the financial services business is easy right now. We certainly would not disagree. However, we recognize that ease and opportunity are different, and we see a wealth of opportunity available today. Over the earlier part of the decade, it was far simpler for banks, thrifts and credit unions -- at least comparatively speaking -- to grow earnings and market share. And as industry participants, we all benefited from the adage “a rising tide lifts all boats.” As nice as that was, we didn’t rest on our laurels. We continued to evolve our business model and are well-prepared for the future. As the economy shows the early signs of what we believe will be an elongated recovery, the industry is faced with choices around growth and leadership. The economic dislocation that we experienced has permanently altered consumers’ attitudes and behaviors toward interaction with -- and what they expect from -- their financial services providers. Whether through online bill payment, mobile banking or remotely depositing funds, consumers and businesses are transacting differently -- and that evolution will continue. The digital transformation is upon us. Consequently, our focus is balanced between delivering results today, and providing new, innovative technology solutions that will enhance franchise value for our clients well into the future. We have been investing in the midst of the economic storm because we believe the financial services industry will emerge stronger than ever. You can take that to the bank. Our industry is at a tipping point. Change is everywhere, and we see significant opportunities on the horizon. Most importantly, we know what we have to do to get there. The rewards are significant for those who are willing to lead. We prefer the view from the front, and wouldn’t have it any other way. Jeffery W. Yabuki President and Chief Executive Officer Donald F. Dillon Chairman of the Board 7 Our most important accomplishment in 2009? We were there for our clients. We helped navigate the convergence of economic, regulatory, social and technological change – forces that are forever reshaping the financial services industry. We guided them from a place of “Oh, no!” to “Oh, really?” and showed them the exciting possibilities of a new digital world. 9 Fiserv > Economic factors are changing the conversation Back to Basics; Staying Power – Keywords for 2009 Amid the media cacophony about the historic financial crisis of 2009, an important point got lost: “Financial institutions throughout North America are now servicing a record number of deposit accounts. More than 700 million of them, with higher account values than ever before. At current growth rates, the number of deposit accounts in North America would reach one billion by 2015.” – Don MacDonald, chief marketing officer, Fiserv In fiercely competitive times, banks are using technology to better connect with customers and grow revenue. In 2009, Southern Community Bank and Trust was named a Celent 2009 Model Bank for its successful online banking strategy, which the bank implemented using a number of Fiserv solutions. Results included a 40 percent year-over-year increase in new account openings and a double-digit decline in account closures. 10 The market is ripe with customers, but the financial services landscape is forever changed. Industry consolidation, tightened margins, and regulatory changes that put our clients’ revenue at risk have caused banks and credit unions to re-think their approach to attracting, serving and retaining customers. Today, our conversations with clients are about getting back to the basics: how can Fiserv help grow deposits, drive increased revenue and reduce costs? A strong account processing solution forms a foundation for growth Financial institution customers can be put off by a poorly executed merger or acquisition. In fact, they are up to three times more likely to walk away after their financial institution merges with or is acquired by another, according to J.D. Power and Associates. Changes made to routine customer banking activities, such as automatic payment or debit functions, contribute significantly to customer dissatisfaction. During 2009, with more than 150 financial institutions subject to regulatory action, “forced mergers” were the name of the game. For Fiserv clients engaged in acquiring failed banks, the scalability and flexibility of our account processing solutions helped eliminate the service glitches that can turn customers off during mergers. Take MB Financial Bank: “We did four FDIC acquisitions in 2009,” says Larry Kallembach, executive vice president and chief information officer of this $10 billion, century-old Chicagoland bank. “Because we have the internal expertise and we’re on Fiserv’s Signature TM platform, we were able to get the acquired banks’ employees and customers integrated very quickly and seamlessly. In fact, each of these conversions was completed within 90 days -- an extremely aggressive timetable. “We can easily customize Signature and integrate solutions to enhance our customers’ experience throughout the transition,” he says. Kallembach also points out that many of MB’s nearly 90 branches serve many of Chicago’s ethnic communities. The bank can wrap multilingual programming around the Signature platform. Online banking “clicks” with customers in a tough economy We heard something interesting from consumers in 2009: they perceive online banking as an important tool for financial control. A commissioned survey conducted by Forrester Consulting on behalf of Fiserv revealed that between 2008 and 2009, the use of online banking increased more than any other banking channel, including branch visits and automated telebanking. Fifty-three percent of respondents said managing all of their accounts online from one site would help them feel more in control of their finances. The strategic importance of the online channel isn’t news to financial institutions. In an on-demand, on-my-own-terms world, geography and bricks are of less importance. But high-touch service still rules. > Fiserv Proof Point: In 2009, we earned more than 50 percent of potential new account processing relationships to grow our market share. Today, we are the market leader – 37 percent of financial institutions rely on Fiserv for account processing solutions. 11 “We are a very full-service Bank and I am offering a self-service channel,” says Matt Macomber, executive vice president of Internet banking at Bank of the West, a $60 billion asset institution with more than 700 locations in the western and midwestern United States. “Our customers are accustomed to outstanding service in our branches. So they have lofty expectations for our online channel. It must be intuitive, easy to understand and able to fulfill all their service and transaction needs.” Last year, San Francisco-based Bank of the West implemented Corillian® Online from Fiserv, an integrated banking experience designed to create deeper customer relationships. In 2010, the bank is implementing our CheckFree® RXP® bill payment solution to integrate online banking and bill payment into a more seamless and intuitive online experience for their customers. Why Fiserv? “This is a space where you are very reliant on your technology partners,” Macomber explains. “This is an unassisted service channel, and it has to work 100 percent of the time. Fiserv has a strong focus on the customer experience within the online channel. They understand the need for usability and simplicity, and they continually invest to make the products better and better.” The bank’s online strategy seems to be working. “In the six-month period after going live with Corillian, our customer satisfaction rates have increased, as has our customer adoption.” Electronic bill payment and presentment adds stickiness How many more payments do you make now than you did 10 years ago? Chances are, your monthly activity has increased. Perhaps you download music or movies on a regular basis. Maybe you pay for online technical support for an electronic device or subscribe to an online magazine. Today there are as many as 50 billable services available to support our daily lives, compared to about 15 in 1970. The number of potential payment transactions per person is growing every day. Electronic bill payment and presentment (EBPP) not only represents significant transaction volumes for financial institutions, it also creates an opportunity for driving customers and members to their bank or credit union website on a regular basis. Customers who use electronic bill payment as part of their online financial management are more than twice as profitable for the institution and 75 percent less likely to leave. Profitability and retention stats are even better for frequent users of bill pay – those who pay upward of six or seven bills per month online. As the clear EBPP market leader, nobody is better positioned than Fiserv to help clients leverage the power of this online channel. We electronify more bills than anyone and have the industry’s largest network of places to pay them, both through financial institution websites as well as the billers’ own websites. Because of our direct biller relationships we’re not simply scraping data and creating representations of bills, we’re delivering bills specifically designed for electronic distribution through online and mobile banking systems. This results in more accurate and efficient billing, payment and reconciliation for banks, billers and their customers. 12 Report from Aite Group: 50 percent of online channel executives from 20 of the 100 largest U.S. banks surveyed anticipate a budget increase of more than 15 percent from 2009 to 2010. As the mainstream continues to embrace online banking, not only from the desktop but also through mobile devices, we have a terrific opportunity to increase adoption rates. Currently, the highest EBPP customer adoption rate among all financial institutions in our client base hovers just under 30 percent, with the average at under 10 percent. We believe we can increase this average four- to five-fold. Fiserv > Regulatory factors are changing the conversation Ready to respond to the Hill “The changing regulatory environment and all the changes the federal government is proposing have made compliance an all-consuming task. Banks are dedicating vast amounts of time and resources trying to understand how to comply with the new rules and existing regulations such as the Bank Secrecy Act. They are looking for software solutions that can help reduce the overall cost of compliance.” – Jack Hopkins, president and CEO, CorTrust Bank 13 Fiserv > Regulatory factors are changing the conversation “ Anytime there are regulatory changes, Fiserv is always on top of them and ready with a solution. This really helps us keep our business moving while keeping pace with regulatory change.” – Lisa Harris, chief operations officer, Home Federal Bank In 2009, Fiserv was named “Best Financial Crime Prevention Supplier” by readers of Banking Technology magazine. 14 We heard a lot from Washington in 2009. Legislators and regulators called for a number of actions that will change the way financial institutions make money and engage with their customers. In the meantime, new and ever-changing compliance requirements for managing transparency, reporting and financial crime continued to siphon time and resources from these institutions. Fiserv continues to stay a step ahead with a close eye on Congress and innovative solutions to meet clients’ changing needs. Deposit Transformation: the opportunity beyond overdraft A new Regulation E amendment and other proposed legislation will significantly reduce overdraft fee income, forcing financial institutions to find new revenue streams. To compensate for this lost income, Blake Williams, president of Revenue Enhancement Solutions at Fiserv, advises banks to consider three approaches: “Offer new products; repackage or reprice existing products; and take steps to improve efficiency and effectiveness to better compete.” Fiserv engages with clients to put these ideas into practice in a number of ways. Revenue through relationships. Many banks that use Fiserv account processing have added Relationship Pricing SM to increase fee income. This solution makes it easy to design a customized set of offerings based on the characteristics of the account. “It helps us better segment our business accounts because the size and needs of business customers vary so much,” explains Barry Sandstrom, CEO of Home Federal Bank, a $182 million institution in Grand Island, NE. “We can tailor services and pricing to better fit larger businesses as well as the small ‘mom and pop’ type of business that plays such a large role in our economy.” Financial institutions also use Relationship Pricing to incent certain behaviors with consumer account holders, perhaps waiving fees on services in exchange for using a signature debit card. Increased debit card usage to grow fee revenue. Our collaboration with Merck Employees Federal Credit Union is a great example. This $1 billion institution used a combination of Fiserv technology, our award-winning loyalty rewards program, and good old-fashioned creativity to boost debit transactions by 15 percent within just six weeks of implementation. Central to the strategy was Merck joining the ACCEL/Exchange® Network from Fiserv, making it easier for cardholders to get cash back at the point of sale and reducing their dependence on ATMs. Merck also implemented our UChoose Rewards® program, whereby members earn points for every signature debit transaction. Points can be redeemed for merchandise, travel, event tickets, gift cards or thousands of other items. Within six weeks, 5,000 of the credit union’s ATM cards were retired and replaced with new debit cards. “Our members have already benefited greatly through our partnership with Fiserv,” says Merck Employees Federal Credit Union CEO Ray Del Nero. “We’re looking forward to working together to keep our card usage at high levels and to continue growing our debit card program overall.” Barking up the right tree to connect with customers. Studies show that 70 percent of customers would like to personalize a debit, credit or prepaid card with a photo of their choice – and 76 percent of those folks say they’d use that card more than any other. Done. In 2009, Fiserv introduced > MyCardCreation SM, an online tool that allows bank customers and credit union members to order a card bearing their favorite photo of Fido, a vacation spot or any other image they’d like – right from their institution’s website. Cost capture. Fiserv clients of all sizes are using our Source Capture Solutions® to curb costs and gain efficiencies in check handling. In 2009, Merchants Bank in South Burlington, VT, implemented Branch Source Capture TM across its 34 locations. “We reduced our annual courier costs by $150,000 and eliminated our deposit cut-off for all branches, which made our customers very happy,“ says Barbara Toof, vice president of the $1.4 billion bank. An integrated approach to reporting and compliance A recession-fueled boost in financial crimes combined with the changing regulatory framework and compressed profit margins have stretched compliance departments to the limit. Under greater pressure to “increase their watch” while controlling costs, many institutions have sought tighter integration of anti-money laundering (AML) systems, internal controls and risk management to better leverage data and operational efficiencies across the enterprise. This is exactly what Fiserv risk management and compliance solutions are designed to do. Fiserv clients that seamlessly integrate account processing with risk management, AML and activity monitoring solutions gain compelling benefits. Financial institutions are craving solutions that eliminate duplication; for example, they don’t want to have to enter customer information both into their internal systems and a customer background checking solution. By providing an entire customer identification package, Fiserv delivers the convenience, accuracy and cost efficiencies our clients desire. Consider the experience of Nevada Security Bank, a $465 million institution with locations in Nevada and California: “We were already on Fiserv’s Premier® bank platform, and added AML Manager to replace the siloed, paper-based system we were using to monitor wire traffic, prepare currency transaction reports and manage other areas of compliance,” explains Debra Bell, the bank’s compliance officer. Instead of filling out Excel spreadsheets, branch employees can concentrate on serving customers. The integrated solution monitors all customer and account data, as well as Office of Foreign Assets Control and other watch lists, and delivers prioritized alerts about suspicious activity directly from data collected by Premier. Best-in-class monitoring across the enterprise. The latest version of our financial crime risk platform responds to recession-related increases in financial crime and the drive toward enterprise risk management. AML Manager offers several new and optimized capabilities, such as list matching, behavioral profiling and reporting, and helps maintain compliance with newer regulations such as international ACH transaction operating rules. For protection in an environment of new and evolving payment types and channels, Fraud Risk Manager TM provides innovative transaction and customer monitoring for highly accurate detection. Implementing anti-money laundering and fraud management capabilities on a unified platform allows better visibility of potential financial crime across the enterprise together with efficiency gains resulting from a common case management and investigation system. Watertown Savings Bank uses Activity ManagerTM for Cleartouch® to track the activity of customers traveling abroad and meet various regulatory requirements. “We had a pretty good system in place, but this elevates it to the next level,” says Lisa Nichols, vice president and operations officer. “Now we’re able to ensure we are meeting the deadlines for Regulation E.” 15 Fiserv > Social factors are changing the conversation The customer has the floor “A high degree of accessibility – that’s what customers want today. They expect to be served in real time, in the manner that works for them: whether it’s by computer, a hand-held device or in the bank. Fiserv enables us to connect with customers through all possible channels.” – Alan Fosler, senior vice president and cashier, Union Bank and Trust 16 People are voting with their feet – and their fingertips – like never before. Research from International Data Corporation (IDC) says that in the United States alone, we’ve tethered ourselves to approximately 470 million Internet- connected devices -- and by 2015, we’ll have 3 billion such devices in use throughout North America. The power shift is under way -- fueled by a speed, accessibility and “app for that” mindset where the financial services consumer is in control like never before, saying, “Serve me on my terms or someone else will.” What this means to the world of financial services, particularly electronic payments, is nothing short of revolutionary. Banks, credit unions and billers need to be more closely connected to their customers. Geography doesn’t guarantee market share, and consumers love the idea of banking near the bread aisle. But there’s a payoff to conforming to this new level of accessibility: the potential for billions and billions of payment transactions, bringing new sources of revenue and costs savings for financial institutions and billers. Mobile MoneyTM from Fiserv takes financial services to a new level Our first-of-its-kind mobile banking solution gained traction in 2009. The technology, which offers unique and secure “triple play” banking access via SMS (text messaging), a mobile browser or a downloadable application, does more than just check balances. Its tight integration with online banking, account processing and payment systems enables users to do things, such as transfer money or pay bills, while they’re on the go. In 2009, we made enhancements to optimize Mobile Money’s functionality on a broad range of mobile devices, including Blackberry® Smartphones, the Apple® iPhone and the Palm Pre TM. We also introduced a fully outsourced, hosted version of the solution. In its first year on the market, Mobile Money was selected by a wide range of financial institutions, from Top 25 banks to community-based credit unions. One of them, Merced School Employees Federal Credit Union, says Mobile Money is generating excitement across its member base. “We expected our Gen Y members to love it – but we’re pleasantly surprised that other member segments are expressing interest in the service as well,” says Nancy Deavours, chief executive officer of the $371 million credit union in Merced, CA. Bradley McKenzie, a vice president at $400 million First Security Bank in Iowa, seconds that notion. “We have a number of customers who are snowbirds and think mobile banking is the greatest thing,” he says. “They do nearly all their banking from a cell phone when they’re away for the winter, sometimes even from the golf course.” Indeed, research shows that mobile banking services are not limited to young, Web-savvy online banking users. The technology also appeals to people who still rely on telephone and in-person banking services. Not only that, mobile banking costs the institution pennies per transaction compared to more traditional forms of customer contact. Fiserv connects with Walmart to provide walk-in convenience for bill payment The FDIC said that as of December 2009, more than a quarter of U.S. households are relying on alternative financial services, such as non-bank > The next generation of financial customers: According to our research, Gen Y-ers, those consumers 21-29 years of age, sought the greatest number of financial services compared to any other generation in 2009. 17 Our Commitment to Communities Fiserv associates exceeded a goal to spend 25,000 hours on volunteer work in 2009. Over a four-month period, we lent a hand to schools, children’s organizations, shelters, food pantries, animal shelters, community events, fundraising for disease research and various other worthy causes. money orders or check-cashing services, instead of regularly using checking or savings accounts. Still, these 30 million or so unbanked and underbanked households have bills to pay, especially for recurring expenses such as utilities and car insurance. To capture this untapped market and provide the world’s largest retailer with another way to increase its value to customers, Walmart and Fiserv launched bill payment services at 3,700 Walmart stores across the United States. This means the more than 150 million customers who shop at Walmart twice a week can now pay their bills via cash or PIN-based debit cards at Walmart’s Money Centers or customer service desks. Payments flow quickly and seamlessly to more than 3,200 billers via the secure electronic payment network from Fiserv. “Walmart is about saving people money so they can live better,” explains Scott Sandlin, senior director of Walmart Financial Services. “When people are in difficult financial times, they tend to hold onto their money a little longer. Now they can pay their bills at the last minute at the same place they’ve come to buy food and other necessities. They don’t have to go all over town to pay the billers in person. Our customers are enjoying the convenience, the gas savings, and the safety and security that comes from shopping at a Walmart location.” P2P payments: best-friend billing and payment A new Fiserv technology coming in 2010 will allow individuals to make electronic person-to-person (P2P) payments instead of using cash and checks. Want to reimburse a friend for football tickets? Simply sign into your banking site, click a P2P payments icon, and enter the details along with the recipient’s e-mail address or mobile phone number. He or she picks up the e-mail or text message, verifies their identity and the money is deposited straight into their account. With the expected growth in smartphone capabilities, P2P also will be a natural fit for the always-on-the-go, mobile consumer lifestyle. Payments will be securely processed through the Fiserv online payment network, leveraging the FraudNet TM automated fraud detection system to prevent fraudulent transactions. The only problem? No more “check is in the mail” excuses. Green banking “Many of our customers are passionate about environmentally friendly solutions. eStatements from Fiserv has really hit home with them. They love not getting paper statements,” says Union Bank and Trust’s Senior Vice President and Cashier Alan Fosler. Indeed, moving statements and bills to the digital world is an environmentally responsible thing to do. Newsweek Magazine named Fiserv one of the “Greenest Big Companies in America” in 2009. As a founding member of the National Automated Clearinghouse Association’s PayItGreen TM Alliance, Fiserv works to promote the environmental value of electronic billing, statements and payments. Additionally, for the past three years, we have teamed up with our clients and the Arbor Day Foundation on the “Go Paperless, Go Green” campaign to plant trees when consumers convert from paper to electronic billing and payments. The results: almost 250,000 trees planted – and thousands of new e-bill enrollments. 18 Fiserv > Technology that made the conversation real The data dialogue “We continually focus on delivering high-tech and high-touch. Our vision is to have the technology in place to provide the types of solutions that all the big banks have, while maintaining a focus on customizing our products to the unique needs of our individual customers.” – Michael Roberts, chief information officer, Bank of Alameda Even in the loneliest places, someone has his back. Fiserv debit fraud detection systems help protect the cardholders of Service Credit Union in Portsmouth, NH, which serves 130,000 military personnel around the globe. 19 Fiserv > Technology that made the conversation real “ We’re constantly competing against the mega-banks in the Atlanta market. Yet when we get in front of customers, and show them we have the technology to back us up, we rarely lose. That’s due to hard work on the part of our team and the team at Fiserv.” – Doug Williams, president and CEO, Atlantic Capital Bank In 2009, ACCEL/Exchange became the first payments network to enable Internet users to make secure debit transactions online using a PIN number. 20 Technology has knocked down so many barriers in financial services. It has equalized the playing field for financial institutions, and injected flexibility and freedom into the business of managing our money. As consumers, we can go days – even travel the world – without so much as a dollar in our pockets. A mere swipe of a card, click of a mouse or sending of a text message, and money gets from point A to point B. Fiserv has helped bring forth the electronification of financial services, and we continue to innovate in this realm. From the back office to the palm of a customer’s hand, we’re efficiently and securely facilitating billions of financial transactions – digital “conversations” – throughout a network of interconnected systems. We enable our clients to turn these bits of “data dialogue” into a holistic view of their customers – yielding valuable insights to increase assets, manage risk and improve operations. Fiserv clients are using our technology to transform their business. Here are some developments from 2009. Acumen from Fiserv: a new perspective in account processing In the fall of 2009, Fiserv introduced U.S. credit unions to a bold new account processing platform – the first for this market in 18 years. Acumen is designed for larger, technology-savvy credit unions looking for the utmost in scalability, flexibility and ease of maintenance. Building this innovative system from the ground up, Fiserv leveraged the same open architecture common in Web development. The result: a browser-based, front- to back-office platform that’s easy to customize, simple to navigate and can be supported with minimal resources or disruption. Christian Community Credit Union, based in San Dimas, CA, has been a Fiserv customer for 25 years. The $520 million credit union is the first U.S. implementation of Acumen. Christian Community’s leaders were especially drawn to the commercial account capabilities of the system, given that more than 60 percent of the credit union’s portfolio consists of loans that fund church construction, missions and outreach ministries all over the world. “Our industry is quickly evolving, and an open system will allow us to keep pace with changing consumer and business demands now – and five years from now,” says Dr. John Walling, president and chief executive officer for Christian Community Credit Union. “The beauty of the Acumen platform is that it’s designed using an open architecture and today’s latest technologies. Acumen positions us to meet today’s challenges and efficiently deliver new services to our members in the future.” Debit: the next frontier They say cash is king – but for consumer payments, debit is reigning supreme for many financial institutions. Our ACCEL/Exchange debit payments network handled a record number of transactions in 2009, up nearly 40 percent from 2008. Beyond that single network, we processed more than 7 billion ATM and debit transactions for the year. The growth of debit transactions is outpacing all other payment transactions, with The Nilson Report projecting debit to overtake cash in total number of transactions by 2012. > Recognizing the debit trend early on, we have been helping financial institutions maximize this growth opportunity. Our Fiserv Debit Office implements services and solutions to boost debit card usage; as does our award-winning UChoose Rewards program. Combined, these efforts resulted in average debit usage improvement rates of more than 40 percent for our clients. Because debit cards are tied to checking accounts, Risk Office SM from Fiserv is another important component of our debit strategy. Our risk management solutions help financial institutions better manage the risk associated with fraudulent card usage. One key differentiator for us is our neural network, which tracks trends in cardholder patterns on a granular level to more accurately detect aberrant card usage. Risk Office has experienced a 400 percent increase in new clients since the beginning of 2009. Fiserv rolled out Integrated Desktop SM in the past year, taking functions out of the back office and putting them in the front office allowing for more immediate service to cardholders. It’s an innovative capability that provides easy access to Fiserv-managed cardholder applications and information – and eliminates the need to switch among various Fiserv systems. With Integrated Desktop, cardholder data is available through a single sign-on to any workstation connected to Fiserv, resulting in reduced staff training, and more efficient and productive use of staff time. Tesco goes full service with Fiserv In 2009, Tesco Bank – part of Tesco PLC, the world’s third largest grocery retailer – chose Fiserv to support the supermarket’s expansion into full-service retail banking. Tesco has offered a range of personal finance services since 1997. Tesco is well known for having powerful insight into its customers’ buying patterns. Our ability to help the retailer leverage this data into a tailored set of financial products and services makes for a good fit. “We went through a very thorough process to decide who to partner with (for our infrastructure),” Tesco Bank CEO Benny Higgins said during the 2009 Marketforce conference in London. “In the end, we chose people who had done this before, had done it in the U.K. before, and who we knew we could trust to make this happen for us. We’re delighted to be working with Fiserv.” A smart way to gather intelligence What happens after the transaction? Through data analytics and business intelligence, Fiserv delivers the tools our clients need to analyze financial, customer and market data; draw valuable insights; and apply them toward improving their businesses. Our integrated solutions provide the perfect foundation for mining this information. “Bank Intelligence Solutions from Fiserv give us a complete picture of our strengths, weaknesses and opportunities along with the ability to fully analyze our marketplace,” says Mark Fox, executive vice president of The Palmetto Bank in Laurens, SC, a bank with assets of $2.2 billion. “The comprehensive information we obtain through the BancAnalyst® tools has enabled us to determine where we stack up against the competition so we can confidently map out a strategy and apply our resources – based on hard numbers – to marketing efforts for highly targeted opportunities.” UChoose Rewards, our cardholder loyalty product, won several industry awards in 2009 – including being named “Best Innovation in a Loyalty Program” by Cards International and one of Bank Technology News’ “Top 10 Technologies of 2009.” We’re making it easier for our busy clients to gain access to accurate industry information that can help shape business decisions and further improve their business performance. The Fiserv Boardroom Series is an online community exclusively for clients. It’s a direct link to relevant industry data, financial information and expert insights, offered through videos, briefing papers, virtual events and more. A digital dialogue aimed at helping our clients grow their businesses. http://communities. fiserv.com 21 Recognized as one of “10 Unsung Financial Heroes” by Money magazine Recognizing a visionary SourceMedia’s Bank Technology News innovation award bears his name – the Peter J. Kight Lifetime Achievement Award International Health, Racquet and Sportsclub Association’s John McCarthy Industry Visionary of the Year Award Featured in Fortune magazine, where CheckFree personal electronic payments functionality was named one of the “Seven Silver Bullet Technologies” Ellis Island Medal of Honor In March 2010, Fiserv Vice Chairman Peter J. (Pete) Kight retired from Fiserv after a 30-year career as one of our industry’s most distinguished innovators. Pete founded CheckFree in 1981, pioneering electronic billing and payment more than a decade before “online” became part of the everyday vernacular. By the time Fiserv acquired CheckFree in 2007, millions of consumers had discovered the convenience of moving their financial routines from the kitchen table to the small screen – interacting with banks, thrifts, credit unions and billers via the Internet. Pete’s vision became a daily reality that has changed the face of several industries, including financial services and health and fitness. The way finances are managed and expectations for customer service have been shaped by the convenience, speed and cost savings afforded by the e-commerce solutions he introduced. The story of how Pete started CheckFree in his grandmother’s basement, with only $700 to his name, is legendary. Those early days speak volumes about the qualities that best describe Pete: unrelenting drive, innovative vision, honesty, transparency, and an unyielding commitment to do the right thing. Pete had a vision to make financial activities easier before that was in vogue. He remains just as committed to that goal as he ever was. Boys & Girls Clubs Hometown Heroes Award Pete will remain a member of the Company’s board of directors, providing Fiserv with strategic insights and direction that can only come from an industry pioneer. To Pete, on behalf of Fiserv and our industry, we say ‘thank you’ for your vision, commitment and unwavering belief in tomorrow. We wish you and your family continued success. 22 Fiserv > About us What does Fiserv do? We help clients solve complex business challenges. Maybe they want to grow deposits or do a better job of attracting and retaining customers. Maybe they are fighting fraud or need to get a handle on regulatory compliance. We provide the expertise and tools to address these types of issues. Q. So how do you do that? A. We bring market perspective gained from working with thousands of financial institutions and businesses, a collaborative partnership approach, a commitment to purposeful innovation and investment in R&D. We combine all that with industry-leading technology and an ability to turn data into actionable business insights. Q. What makes you different than other companies? A. We recognize that our clients are solving issues against a backdrop of unprecedented change. Our broad and deep client base, across a broad range of markets, provides access to diverse, real-world insights, which we use to create innovative solutions. We work closely with our thousands of clients to help them capitalize on the opportunities that exist in the midst of a transforming market. Q. Thousands of clients? A. Yes; 16,000 worldwide. They include banks, credit unions and thrifts of all sizes; mortgage lenders and leasing companies; telecommunications and utility companies; brokerage and investment firms; healthcare and insurance providers; retailers and municipalities. Q. Banks, credit unions and thrifts of all sizes – does one size fit all? A. Every client is different. Some want more of a turnkey approach in which applications are integrated around one of our banking or credit union platforms. Others want to be able to integrate best-of-breed solutions into an existing technology environment. We give clients the level of integration and flexibility they need. How we do it Fiserv delivers innovation in five primary areas of competence: Payments Solutions for optimizing all aspects of the payments mix to help create efficiency and drive growth Processing Services Solutions for reliably and securely managing account-based transactions Risk & Compliance Solutions for proactive risk prevention and mitigation Customer & Channel Management Solutions for attracting, retaining and growing customer relationships Intelligence & Optimization Solutions that help transform data from information to actionable business insights 23 Fiserv > Fiserv by the numbers Financial highlights (In millions, except per share and stock price data) Revenues Adjusted revenues Adjusted EPS Cash flow from operations Free cash flow Stock price Note 2009 2008 2007 2006 $4,077 3,871 3.66 850 668 48.48 $4,587 3,893 3.33 766 603 36.37 $3,677 2,718 2.64 547 428 55.49 $3,301 2,463 2.22 527 374 52.42 Adjusted revenues, adjusted EPS and free cash flow are non-GAAP financial measures. See page 27 for additional information about these non-GAAP financial measures. Segment revenues Revenues of $4.1 billion in 2009 Payments & Industry Products Electronic Banking Card Services Output Solutions Risk Management Investment Services Payments 53% Financial 47% Financial Institution Services Account Processing Item Processing Lending Solutions Source Capture Solutions About Fiserv Publicly traded for more than 20 years (NASDAQ: FISV) Consistent recurring revenue More than 600 products and services About 20,000 associates Approximately 200 locations worldwide 24 Proof Points #1 on the 2009 FinTech 100 survey of top technology companies by American Banker, Bank Technology News and IDC Financial Insights for the fifth time in six years #1 online banking provider for three consecutive years by Celent #1 in North America and Top 5 overall in the Chartis RiskTech 100 report #1 Financial Crime Risk Management System by Chartis Research #1 in the financial applications category in the Software 500 #1 biller direct and walk-in electronic bill payment vendor in the United States by Aite Group Recognized by Fortune magazine as one of the World’s Most Admired Companies in the financial data services industry Rankings Barron’s 500 Forbes Global 2000 Fortune 500 InformationWeek 500 NASDAQ 100 Consolidated statements of income In millions, except per share data Years ended December 31, Revenues: Processing and services Product Total revenues Expenses: Cost of processing and services Cost of product Selling, general and administrative Total expenses Operating income Interest expense Interest income Loss on sale of businesses Income from continuing operations before income taxes and income from investment in unconsolidated affiliate Income tax provision Income from investment in unconsolidated affiliate, net of income taxes Income from continuing operations Income from discontinued operations, net of income taxes Net income Net income per share - basic: Continuing operations Discontinued operations Total Net income per share - diluted: Continuing operations Discontinued operations Total Shares used in computing net income per share: Basic Diluted Note ) 2009 $ 3,329 748 4,077 1,844 536 751 3,131 946 (220) 8 - 734 (273) 12 473 3 $ 476 $ 3.06 0.02 $ 3.08 $ 3.04 0.02 $ 3.06 154.5 155.4 2008 2007 $ 3,464 1,123 4,587 $ 2,448 1,229 3,677 1,949 917 813 3,679 908 (260) 13 (21) 640 (288) 6 358 211 1,449 979 513 2,941 736 (76) 7 - 667 (255) - 412 27 $ 569 $ 439 $ 2.21 1.30 $ 3.51 $ 2.20 1.29 $ 3.49 162.0 163.1 $ 2.47 0.16 $ 2.64 $ 2.44 0.16 $ 2.60 166.6 168.8 Our Annual Report on Form 10-K, which includes Management’s Discussion and Analysis, Financial Statements and related Footnotes, is available online under “For Investors” on our website, www.fiserv.com. 25 Consolidated statements of cash flows In millions Years ended December 31, Cash flows from operating activities: Net income Adjustment for discontinued operations Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and other amortization Amortization of acquisition-related intangible assets Share-based compensation Deferred income taxes Loss on sale of businesses Settlement of interest rate hedge contracts Other non-cash items Changes in assets and liabilities, net of effects from acquisitions and dispositions: Trade accounts receivable Prepaid expenses and other assets Accounts payable and other liabilities Deferred revenues Net cash provided by operating activities Cash flows from investing activities: Capital expenditures, including capitalization of software costs Advances to unconsolidated affiliate Payment for acquisitions of businesses, net of cash acquired Proceeds from sale of businesses, net of cash sold and expenses paid Other investing activities Net cash (used in) provided by investing activities Cash flows from financing activities: (Repayments of) proceeds from revolving credit facility, net Repayments of long-term debt Proceeds from long-term debt Issuance of common stock and treasury stock Purchases of treasury stock Other financing activities Net cash (used in) provided by financing activities Net change in cash and cash equivalents Net cash transactions transferred from discontinued operations Beginning balance Ending balance Note 2009 2008 2007 $ 476 (3) $ 569 (211) $ 439 (27) 188 145 36 64 - - (13) 44 (9) (71) (7) 850 (198) (57) - - 7 (248) (100) (375) - 45 (175) 4 (601) 1 132 230 $ 363 200 150 34 (1) 21 - (8) (39) (4) 44 11 766 (198) - (85) 497 (9) 205 (740) (563) - 37 (441) 2 ( 1,705) (734) 669 295 $ 230 143 33 23 21 - (30) (12) (41) (32) 22 8 547 (152) - ( 4,333) - 19 ( 4,466) 285 (71) 4,248 50 (469) (9) 4,034 115 65 115 $ 295 Cash flows from discontinued operations are excluded from the above statements of cash flows. Our Annual Report on Form 10-K, which includes Management’s Discussion and Analysis, Financial Statements and related Footnotes, is available online under “For Investors” on our website, www.fiserv.com. 26 Consolidated balance sheets In millions December 31, Assets Cash and cash equivalents Trade accounts receivable, less allowance for doubtful accounts Deferred income taxes Prepaid expenses and other current assets Assets of discontinued operations held for sale Total current assets Property and equipment, net Intangible assets, net Goodwill Other long-term assets Total assets Liabilities and shareholders’ equity Accounts payable and accrued expenses Deferred revenues Current maturities of long-term debt Liabilities of discontinued operations held for sale Total current liabilities Long-term debt Deferred income taxes Other long-term liabilities Total liabilities Shareholders’ equity 2009) 2008) $ 363 554 46 314 - 1,277 293 2,006 4,371 431 $ 230 591 71 294 1,016 2,202 298 2,091 4,387 353 $ 8,378 $ 9,331 $ 565 337 259 - 1,161 3,382 580 229 5,352 3,026 $ 606 338 255 841 2,040 3,850 537 310 6,737 2,594 Total liabilities and shareholders’ equity $ 8,378 $ 9,331 Note Our Annual Report on Form 10-K, which includes Management’s Discussion and Analysis, Financial Statements and related Footnotes, is available online under “For Investors” on our website, www.fiserv.com. Forward-looking Statements and Non-GAAP Financial Measures This report contains forward-looking statements that are subject to significant risks and uncertainties. Forward-looking statements include those that express a plan, belief, expectation, estimation, anticipation, intent, contingency, future development, objective, goal or similar expression, and can generally be identified as forward-looking because they include words such as “believes,” “anticipates,” “expects,” “could,” “should” or words of similar meaning. For more information about forward-looking statements and the factors that could cause actual results to differ materially from our current expectations, you should refer to our Annual Report on Form 10-K for the year ended December 31, 2009. “Adjusted revenues” exclude customer reimbursements of $211 million, $203 million, $158 million and $132 million in 2009, 2008, 2007 and 2006, respectively; revenues of Fiserv Insurance, in which we have sold our majority interest, of $513 million, $804 million and $706 million in 2008, 2007 and 2006, respectively; and deferred revenue adjustments of $5 million, $22 million and $3 million in 2009, 2008 and 2007, respectively, which were based on the purchase price allocation for the CheckFree acquisition for which we estimated the fair value of deferred revenue from license fees and other client payments. The deferred revenue adjustments represent revenue that would have been recognized by CheckFree or companies it acquired consistent with past practices, which we did not record due to GAAP purchase accounting requirements. “Adjusted EPS” pertains to our continuing operations and excludes amortization of acquisition-related intangible assets of $0.58 per share, $0.57 per share, $0.12 per share and $0.07 per share in 2009, 2008, 2007 and 2006, respectively; merger costs and other adjustments, primarily associated with our acquisition of CheckFree, and severance and facility shutdown expenses totaling $0.08 per share, $0.22 per share, $0.08 per share and $0.03 per share in 2009, 2008, 2007 and 2006, respectively; a 2009 tax benefit recognized in conjunction with the final settlement of a CheckFree purchase accounting income tax reserve of $7 million ($0.04 per share), and a 2008 after-tax loss on the sale of businesses of $55 million ($0.34 per share). “Adjusted operating margin” excludes amortization of acquisition-related intangible assets of $145 million, $150 million, $33 million and $20 million in 2009, 2008, 2007 and 2006, respectively, postage reimbursements, which are included in both revenues and expenses, of $211 million, $203 million, $158 million and $132 million in 2009, 2008, 2007 and 2006, respectively; and merger costs and other adjustments as well as severance and facility shutdown expenses totaling $21 million, $59 million, $18 million and $9 million in 2009, 2008, 2007 and 2006, respectively. In addition, “adjusted operating margin” in 2008, 2007 and 2006 excludes revenues of $513 million, $804 million and $706 million, respectively, and operating income of $44 million, $78 million and $110 million, respectively, for Fiserv Insurance. “Free cash flow” represents net cash provided by operating activities less capital expenditures, plus non-recurring and other items totaling $16 million, $35 million and $34 million in 2009, 2008 and 2007, respectively, related to after-tax merger and severance costs and for the net change in settlement assets and obligations in 2009. 27 Corporate information Board of Directors Donald F. Dillon, Chairman Daniel P. Kearney Peter J. Kight Gerald J. Levy Denis J. O’Leary Glenn M. Renwick Kim M. Robak Doyle R. Simons Thomas C. Wertheimer Jeffery W. Yabuki Executive Committee Jeffery W. Yabuki President and Chief Executive Officer James W. Cox Executive Vice President, Corporate Development Lance F. Drummond Executive Vice President, Shared Services and Human Resources Michael P. Gianoni Executive Vice President and Group President, Financial Institutions Corporate Headquarters Fiserv, Inc. 255 Fiserv Drive Brookfield, WI 53045 262-879-5000 Website www.fiserv.com Investor Relations 800-425-FISV 800-425-3478 investor.relations@fiserv.com Stock Listing and Symbol NASDAQ Global Select Market Symbol: FISV Shareholders’ Meeting The 2010 Annual Meeting of Shareholders will be held on Wednesday, May 26, 2010 at 10:00 a.m. Central Daylight Time at the Fiserv Corporate Headquarters, 255 Fiserv Drive, Brookfield, WI 53045. Maryann Goebel Executive Vice President and Chief Information Officer Shareholder Information Thomas J. Hirsch Executive Vice President, Chief Financial Officer and Treasurer Donald J. MacDonald Executive Vice President, Chief Marketing Officer Stephen E. Olsen Executive Vice President and Group President, Digital Payments Charles W. Sprague Executive Vice President, General Counsel and Secretary Steven Tait Executive Vice President and Group President, Depository Institutions Thomas W. Warsop, III Executive Vice President and Group President, Global Sales 28 Copies of the Company’s annual, quarterly and current reports, as filed with the Securities and Exchange Commission (SEC), are available on request from the Company. Visit our website, www.fiserv.com, for updated news releases, stock performance, financial reports, conference call webcasts, SEC filings, corporate governance and other investor information. Independent Registered Public Accounting Firm Deloitte & Touche LLP Milwaukee, WI Transfer Agent Wells Fargo Shareowner Services P.O. Box 64856 St. Paul, MN 55164-0856 800-468-9716 www.shareowneronline.com See what’s next – right now at newfiserv.com 20% Cert no. SW-COC-002487 The paper used in this publication is FSC-certified, contains a minimum of 20% post-consumer recovered fiber and is manufactured with electricity in the form of renewable energy. Fiserv, Inc. 255 Fiserv Drive Brookfield, WI 53045 800-425-FISV 800-425-3478 262-879-5000 investor.relations@fiserv.com www.fiserv.com © 2010 Fiserv, Inc. or its affiliates. All rights reserved. Fiserv is a registered trademark of Fiserv, Inc. Other products referenced in this material may be trademarks or registered trademarks of their respective companies.