Earnings Call Transcript
FISERV INC (FISV)
Earnings Call Transcript - FISV Q4 2025
Operator, Operator
Welcome to Fiserv's Fourth Quarter 2025 Earnings Conference Call. As a reminder, today's call is being recorded. I will now hand the call over to Walter Pritchard, Senior Vice President and Head of Investor Relations at Fiserv.
Walter Pritchard, Senior VP and Head of Investor Relations
Thank you, and good morning. With me on the call today are Mike Lyons, our Chief Executive Officer; and Paul Todd, our Chief Financial Officer. Our earnings release and supplemental materials for the quarter are available on the Investor Relations section of fiserv.com. Please refer to these materials for an explanation of the non-GAAP financial measures discussed on this call along with the reconciliation of those measures to the nearest applicable GAAP measures. Unless otherwise stated, performance references are year-over-year comparisons. Our remarks today will include forward-looking statements about, among other matters, expected operating and financial results and strategic initiatives. Forward-looking statements may differ materially from actual results and are subject to a number of risks and uncertainties. You should refer to our earnings release for a discussion of these risk factors. And now I will turn the call over to Mike.
Michael Lyons, CEO
Thank you, Walter, and welcome aboard. Good morning, everyone, and thank you for joining us. This quarter marked a decisive and positive step for building the foundation to consistently deliver on the pillars that have long distinguished Fiserv. These include exceptional client service, world-class execution, value-added technology and cutting-edge innovation. While there remains significant work ahead of us, we are clear on our strategy, laser-focused on our priorities, and are optimistic about our multi-quarter path towards delivering strong, sustainable operating performance and ultimately realizing Fiserv's full potential. While Paul will review our financial performance in detail, I would note that our Q4 results demonstrated stable broad-based business activity trends, and there were no major surprises relative to the outlook that we provided in October and that our 2026 guidance is in line with the preliminary view from Q3. As we told you in October, our headline results are below our go-forward expectations, and they will remain that way for the first half of 2026 as we invest in the franchise and lap a higher mix of nonrecurring revenue. Importantly, we continue to add senior talent, complementing the high-quality team that was in place when I came aboard. In addition to Paul, Walter and Dhivya, we have added leaders in technology, Clover and merchant product and sales, among other areas. Overall, I'm encouraged by the team's energy and pleased that our overall employee retention is up with retention of our top talent reaching a multiyear high in 2025. With the team in place and focused, we were firmly in execution mode in Q4, taking decisive actions across the One Fiserv plan. One Fiserv is at the foundation of our strategy and firmly integrated into our 2026 plan. With this in mind, I want to provide a brief update on the progress we have made across each of the 5 strategic areas of the plan. Operating with a client-first mindset, building the preeminent small business operating platform through Clover, creating differentiated, innovative platforms in finance and commerce, delivering operational excellence and efficiency enabled by AI and finally, employing disciplined capital allocation for the long term. Under our client-first pillar, we made targeted investments to better align around client needs, especially in our Financial Solutions business. Over time, we expect this shift to enhance client satisfaction and ultimately drive sustainable growth in average revenue per customer, which has been a hallmark of Fiserv. The actions we took this quarter included broadly increasing client-facing resources, revamping and improving our approach to working with consultants, including closing the Smith transaction. Delivering against the first phase of product development-related commitments we made at our Fiserv Form client event. Leveraging innovation, including AI trained on our DNA core to streamline product upgrades and implementations and accelerating our investment to modernize our technology platforms, including additional multisite resiliency measures across most of our consumer-facing payment platforms. We remain on track to complete this effort by mid-2026. We are encouraged by the early positive client response to these efforts and will be steadfast in our focus on delivering great service and value-added solutions to our clients. And to this point, corporate sales were up solidly in Q4 versus last year and the prior quarter, with positive contributions from both the Merchant and Financial Solutions segments. Some of the more meaningful wins included new and expansion Commerce Hub agreements with a leading medical device company, a large specialty retail company and AT&T, among others. An expansion of our relationship with California-based Mechanics Bancorp now with over $22 billion in assets, which selected Fiserv's core and added our XD digital platform following their merger with HomeStreet Bank. On Optis, we signed a multiyear extension with our client Atlanticus, a leading issuer, which includes converting the accounts they recently added with their Mercury acquisition to Fiserv. A new core deal with Republic Bank & Trust Company, a Kentucky-based $7 billion bank moving to DNA, enabling the bank to give their clients faster access to deposited funds through real-time continuous processing and enabling real-time account alerts and an expansion of our credit card relationship with Robinhood to add debit processing. Turning to our second pillar, Q4 saw continued momentum toward establishing Clover as the preeminent small business operating platform. In vertical markets, we remain on track to launch our PracticePay health care initiative and our professional services offering this quarter. In restaurant, we continue to see market share gains as we consolidate a number of strong assets to expand our offering under the Clover Hospitality brand and achieve economies of scale. As part of this, we are rolling out new capabilities, including multi-location support, AI-generated menus, streamlined delivery enrollment checklist dining and new diner engagement tools. Horizontally, we are seeing strong early success in our workforce management partnership with Homebase, and we continued our build-out with ADP, a partnership that is already producing strong sales collaboration and that has significant potential over time. In December, we integrated CashFlow Central, our transformative AR/AP product directly into ADP's RUN platform, allowing small businesses to manage their cash flow more effectively. And finally, on the horizontal front. Clover Capital grew 30% in 2025 in North America as we continue to see significant upside with this high-value client offering, where we only have mid-single-digit penetration of our eligible client base today. Internationally, our launch in Brazil continues to be highly successful with results tracking ahead of plan, reflecting the importance of partnering with market-leading financial institutions like Caixa. Canada grew strongly in 2025 and should further accelerate as we ramp up our new strategic relationship with TD. And we introduced our flagship partnership with SMCC to offer Clover to SMBs in Japan starting later this year. This is a focused market for us given its size and low card penetration. Additionally, we are excited about the special support visas provide in this partnership. We grew and further diversified Clover distribution channels across the board in Q4, including adding 47 banks to the Clover referral ecosystem, refreshing our merchant relationship with Truist, which will now support businesses of all sizes across the bank's large footprint including 1,900 branches, expanding our industry-leading ISO and agent platforms, continuing to add direct salespeople in North America, where we have over 600 today, launching a new digital tool for our bank partners, which integrates Clover merchant onboarding into the bank's digital banking experience, introducing AI prospecting tools to assist with the identification and conversion of high-value merchants. And finally, building on the takeaways from prior pilots we began targeting select non-Clover SMB merchants in the U.S. with a Clover offering. While these efforts have been narrow in scope and it's still early, we have seen some promising results with benefits for our clients and higher revenue yield for us. Our efforts here will remain deliberate, ensuring we prioritize the right experience and fit for the client. To finish on Clover, we are driving a number of merchant experience improvements, including digital feature enrollment and setup, AI-driven end-to-end merchant life cycle orchestration, a range of automated and high-touch service capabilities and simplification to pricing and billing statements. Next, on the innovation front, we have prioritized appropriately resourcing and completing a focused set of deliverables that are driven by strong demand from our customers. In the quarter, we made significant progress on these strategic priorities. Commerce Hub is progressing well towards a fully integrated cloud-native global omnichannel gateway, supporting a best-in-class enterprise value proposition. In Q4, we launched this capability across the Americas and are ramping a leading video streaming service provider client. The platform continues to scale in North America, processing over $200 billion in 2025, a greater than 200% increase year-over-year. In Financial Solutions, we continued to invest in modernizing our core banking and card issuer processing platforms. In banking, we are building cloud-based, real-time, secure, API-enabled and more open capabilities, a modernization effort that began in 2022. At our Client Forum in September, we made it clear that there will be no forced upgrades or conversions as part of this effort, reflecting feedback we receive from our customers. With respect to our newest course, we went live with our first clients on CoreAdvance and Finxact continues to perform exceptionally well and gained broad recognition for innovation. The Finxact platform surpassed 30 million total accounts and positions, representing over 80% growth in 2025 and is becoming the ledger of choice for fintechs and digital banks. In card issuer processing, we continue to modernize Optis and build out Vision Next, our next-gen card issuing platform. On Optis, we signed a multiyear extension with PNC and a new mandate with Fidem Financial, a fast-growing credit card asset manager that has acquired over $15 billion in assets. Fiserv will power Fidem's new co-branded credit card programs. We are now live with 5 FI clients on CashFlow Central with over 100,000 of their SMBs using our transformative all-in-one AR/AP payments platform and seeing real value. With over 155 FI signed since launch and a pipeline of over 400 prospects, we are excited about CashFlow Central's long-term potential. We advanced our efforts in stablecoin through the exploration of pilots with Huntington and several other banks, including use cases in cross-border payments, digital escrow, and interbank money movement. With the closing of the StoneCastle acquisition, we introduced stablecoin custody capabilities, allowing us to recycle reserves back to financial institutions, a unique capability in the space. We're also excited about StoneCastle's ability to introduce next-gen cash management capabilities to our merchants, including Clover clients. Lastly on innovation, we continue to develop agentic commerce capabilities for our merchants and are particularly excited about our unique position with Clover to bring turnkey agentic capabilities to small businesses. We see agentic fundamentally changing the payments landscape and are working with Google, Mastercard and Visa to bring agentic to mainstream commerce. Additionally, we're exploring arrangements to enable agentic commerce across the landscape of conversational AI platforms. Fourth, we are in full swing with Project Elevate, which is a highly structured enterprise-wide evaluation of all of our activities. We are encouraged by the potential here, given we have identified ample room to simplify the business, and execute faster and more efficiently, and we are attacking these opportunities with urgency. This includes a comprehensive review of how we can further deploy AI across Fiserv. We look forward to providing a more fulsome update on Elevate at our Investor Day. Rounding out our One Fiserv plan is our commitment to highly disciplined capital allocation. As we mentioned on our last call, we continue to evaluate businesses and assets to ensure that they are consistent with our go-forward strategy. This exercise is critical in focusing our time and resources on our most important assets and activities. In summary, we made good progress in Q4. We are focused and confident in our strategy and ability to execute. No other company has the assets, breadth and scale to connect all parts of the financial ecosystem. Our unique position at the center of Commerce and Finance, two massive TAMs strengthens the market position of both our merchant and financial solutions businesses and creates opportunities in areas like embedded finance, stablecoins, networks and merchant liquidity optimization, all expanding the boundaries of how our market is defined today. New technologies, especially AI, further accelerate our ability to capitalize on and scale these opportunities. We have scheduled an Investor Day for May 14 and look forward to sharing additional details on our strategy and financial outlook and introducing you to the leadership team responsible for executing on our plan. I'll finish by thanking our employees for their hard work and dedication and our clients for the continued trust they place in us. I will now pass it off to Paul to go into more detail on Q4 and 2026.
Paul Todd, CFO
Thank you, Mike, and good morning, everyone. I will cover details on total company and segment performance in the fourth quarter and full year and then review our guidance for 2026. Beginning on Slide 6, total company Q4 adjusted revenue of $4.9 billion was flat and adjusted operating income was $1.7 billion, resulting in adjusted operating margin of 34.9%. This results in full year total company adjusted revenue of $19.8 billion, up 4%, with adjusted operating income of $7.4 billion, resulting in an adjusted operating margin of 37.4%, a decrease of 200 basis points, right in line with our guidance. Total company organic revenue was roughly flat, down approximately 40 basis points in Q4, resulting in annual organic revenue growth of 3.8% in the upper half of the 3.5% to 4% guidance range we gave on our last call. Turning to Slide 7. Merchant Solutions grew 6% organically for the year, while Financial Solutions grew 2%. Fourth quarter adjusted earnings per share was $1.99, resulting in annual adjusted earnings per share of $8.64, above our guidance range of $8.50 to $8.60. Free cash flow for the quarter was $1.6 billion and $4.44 billion for the year, ahead of our guidance of $4.25 billion, representing approximately 93% conversion. Now I will turn to the performance by segment for Q4, starting on Slide 8 on Merchant Solutions. Merchant Solutions organic revenue growth was 1% for the quarter, while adjusted revenue grew 2%. Small Business revenue grew 2% on an organic basis in Q4 and 3% on an adjusted basis with the impact of the CCV acquisition slightly greater than the FX headwind. In addition, the Clover fee eliminations we discussed last quarter were a 2-point headwind to small business growth in Q4. Small business volume grew 7% in the quarter, inclusive of CCV. Clover revenue grew 12% in Q4, 2 percentage points higher than our guidance. There was a 6-point growth headwind to Q4 Clover revenue from the fee eliminations we called out on our last call. Clover volume grew 6% on a reported basis and 9% excluding the previously discussed gateway conversion. Clover volume growth was below our expectations for the quarter, driven largely by softness we experienced in the month of November in the U.S., particularly in the restaurant and retail sectors where we have a large presence. This softness in the U.S. was consistent with broader industry trends and Clover volumes reaccelerated on a combined basis in December and January to approximately 11% ex the gateway conversion. Value-added services contributed 27% of Clover revenue in Q4, up 5 points from a year ago, driven by anticipation, software attach and Clover Capital. Clover revenue finished the year at $3.3 billion, up 23%, while non-Clover small business revenue ex Argentina was flat in Q4 and up 3% for the year. Consistent with our preliminary view in October and assuming stable macroeconomic conditions, we expect Clover GPV growth of 10% to 15% in 2026 ex the gateway conversion. The lower end represents the core growth rate, while the higher end assumes more significant conversion of non-Clover merchants. Based on these volume expectations, the impact of Clover fee eliminations and more moderate growth from Argentina, we expect Clover revenue to grow in the low double digits for 2026. On a structural basis, our medium-term revenue growth rate target for Clover remains in the 15% to 20% range. Moving on to enterprise. Our business grew 1% on an organic basis in Q4, while declining 2% on an adjusted basis. Excluding the revenue from network fee timing associated with a large PayFac client that went live in Q3 2024, adjusted revenue for enterprise would have been 6% higher in the quarter and more in line with the 6% transaction growth. Transaction growth slowed sequentially from Q3 due to lapping the ramp of the large PayFac client mentioned earlier. And finally, in processing, organic revenue declined 1%, while adjusted revenue grew 1%, driven by FX tailwinds. Fourth quarter adjusted operating income for the Merchant Solutions segment was $816 million, down 17%, with adjusted operating margin of 32.1%. For the full year, Merchant Solutions' adjusted operating income was down 2% to $3.5 billion with adjusted operating margin of 34.5%. Now I will cover Financial Solutions starting on Slide 9. For the quarter, both organic and adjusted revenue in Financial Solutions declined by 2%. In Digital Payments, organic and adjusted revenue declined by 1%. We saw good volume growth in debit processing and network volumes consistent with the growth levels from last quarter. Zelle transactions grew 15% in the quarter as we continue to see a slowing of the growth curve for Zelle as the product matures. Also, we started to ramp revenue from CashFlow Central in the quarter. Finally, ATM Managed Services was an approximate 1 point headwind to revenue growth in digital payments. In Issuing, revenue declined 1% on both an organic and adjusted basis, as global active accounts on file grew in the low single digits. Finally, in banking, revenue decreased 4% on an organic basis and was down 3% on an adjusted basis as we continue to be impacted by certain actions taken over the last several years. While an improvement sequentially, we are still facing comparative headwinds, and we'll continue to face these throughout the first half of next year, after which we expect a return to stability. As Mike mentioned earlier, this is a significant area of investment and focus for us. Fourth quarter adjusted operating income for the Financial Solutions segment declined 20% to $997 million and adjusted operating margin was 42.2% versus 51.7% in the prior year. The most significant impact on margins in Q4 was related to incremental vendor spend and headcount investments to improve client experience. For the year, adjusted operating income for the segment was down 2% to $4.4 billion with adjusted operating margin of 45.3%. At the corporate level, our adjusted effective tax rate was 19.3% for the quarter and 18.6% for the year. From a leverage standpoint, we finished the year with a debt-to-adjusted-EBITDA ratio of 3x, in line with our expectations. We continue to target long-term leverage at 2.5 to 3x. Turning to Slide 10. We also repurchased 3 million shares during the quarter for approximately $200 million and paid down over $1 billion in debt after funding the acquisitions of StoneCastle and a portfolio of TD merchant contracts. With respect to Project Elevate in Q4, we incurred $73 million of expenses related to this program, and we will continue to have related one-time costs in 2026. Now with Slide 11, I'll move on to 2026 guidance, which is in line with the preliminary view we gave on our last call. First, on revenue. We are continuing to provide guidance regarding our organic revenue growth for 2026, and we plan to supplement this with additional information about our assumptions to help investors and analysts arrive at adjusted revenue. Also, to provide further insight, we are giving growth expectations for the Merchant and Financial Solutions segments. We expect 2026 organic revenue growth in the range of 1% to 3% with Merchant Solutions revenue growth in the mid-single digits and Financial Solutions flat to slightly down. Reflecting higher nonrecurring revenue a year ago, we expect adjusted revenue growth in both quarters of the first half of 2026 to decline to the low single digits, with Q2 representing the trough in terms of the rate of decline. In our Financial Solutions business, we expect a more pronounced grow-over trend in the first half, resulting in a decline at the high end of mid-single digits. As we get to the second half of the year, we expect our adjusted revenue growth to be more tightly correlated to underlying drivers such as volume, transaction and account growth. We expect offsetting FX and M&A impacts for 2026 driving our expectation for adjusted revenue growth that is also in the range of 1% to 3%. As a reminder, Q1 is the last quarter of impact from the CCV acquisition, and thus, we expect an approximate 1 point difference between organic and adjusted revenue in this period. We expect Argentina will have a modest positive impact on organic revenue growth in 2026, while having a slightly larger negative impact on adjusted revenue growth. As compared to prior years, based on our current expectations, this is a much more modest contribution from Argentina. We expect our effective tax rate to be in the range of approximately 19% to 19.5% for the full year and weighted average share count to be approximately 530 million. Putting it all together, we expect adjusted EPS of $8 to $8.30. Similar to our expectations around revenue, we expect a different level of operating margins in the first and second halves of the year. In the first half, we expect adjusted operating margin of 31% to 32%, with Q1 representing the low point just below 30%. In the second half of the year, we expect adjusted operating margin of 35% to 36% with Q4 representing the high point in the year. For the year, this translates into approximately 34% adjusted operating margin. To complete our strategic investments, we expect capital expenditures to remain approximately flat with 2025 levels and end the year with a leverage ratio of approximately 3x. We expect free cash flow conversion of approximately 90% of adjusted net income for the year, in line with historical levels. As always, Q1 will be our trough for free cash flow conversion. Finally, to the extent we generate any excess cash from business and asset optimization activities, we intend to deploy this additional cash to share repurchase. And with that, I will turn the call back to the operator to start the Q&A session.
Operator, Operator
Our first question comes from Darrin Peller from Wolfe Research.
Darrin Peller, Analyst
Mike, can you just touch on whether you believe the review you've taken in the business has really accomplished everything you need and you fully see what you needed to see that you feel confident on the numbers going forward?
Michael Lyons, CEO
Yes, thank you for the question. We feel great about the progress we're making and the pace we're moving at. Regarding the conclusions from our Q3 analysis, there’s nothing new, and it's fully reflected in what we expected for Q4 and the guidance for '26 aligns with our preliminary view from October. As I mentioned, this is a multi-quarter journey, and I'm pleased with our progress. We're fully aware of what we need to do to position our business for our constant growth goals. Our entire focus is on executing the pillars of the One Fiserv plan that I discussed. As Paul noted, we face a tough comparison in the first half of the year since we shifted our strategy in Q3 to emphasize more recurring revenue. Overall, we feel good as this quarter was about execution, and that's our focus going forward.
Operator, Operator
Timothy Chiodo from UBS.
Timothy Chiodo, Analyst
I want to touch on digital payments, so that subsegment within the Financial Solutions segment. That is the largest bucket there. I believe it's about $4 billion or so in annual revenues. And correct me if I'm wrong, but I think STAR and Accel, the debit networks make up about maybe 1/4 of that, so say, $1 billion or so of that $4 billion of revenue within digital payments. Last quarter, you called out some pricing actions within that subsegment, and I believe some of them related to the debit networks as well and maybe some other portions of that subsegment. Maybe you could just add some more detail on those price changes and maybe an update or a response to what you saw in the market, whether it brought on additional volume, it protected volume that might have been lost? And anything else you can provide around really STAR and Accel as the focus. I know you mentioned that things are pretty consistent, but anything else you could add would be appreciated.
Paul Todd, CFO
Sure, Tim. Thanks for the question. And yes, we did make comments on the last quarter call in regard to that. I wouldn't add anything new to that. There wasn't any new development in Q4 related to any of those actions. I would say we're very pleased not only with the sequential improvement in digital payments, but also what we saw on the volume side, particularly on the network side. We did see growth on the network volumes. And in that overall digital space, we also saw good transactions in our debit processing area as well. And I think that's what was the underpinning of the performance there. Just like with all the segments, we do have comparative headwinds that will continue in digital payments for the first half of next year, but there wouldn't be anything else I would add on the network side.
Michael Lyons, CEO
I would just add, strategically, we continue to be very pleased with both STAR and Accel and the value we add on both sides of our business, classic synergy play between FS and MS sides of the business, and we continue to try to look for all ways that we can fully leverage those networks.
Operator, Operator
We'll go to the line of Tien-Tsin Huang from JPMorgan.
Tien-Tsin Huang, Analyst
It seems like you got some good line of sight into the business, which is great. I want to better understand the expenses required to execute on Fiserv, specifically how much is structural versus one-time like consulting or IT staff augmentation, that kind of thing. It looks like you're going to exit the year at 36% margin. How clean is that 36%?
Paul Todd, CFO
Yes. So Tien-Tsin, thanks. I would speak to the overall margin first and the expense. We don't see any material kind of expense ramp-up. As we kind of said on our last call, we have largely baked in the expenses related to One Fiserv and particularly around the infrastructure and some of the resiliency investments and such. So just as an operating margin standpoint, there is an increase year-over-year on expenses from an operating standpoint, but it's in line with exactly what we were expecting when we gave the guide and hence, the margin guide is in line. As it relates to the transformation Project Elevate expenses, particularly, we did call out the size of those. There was start-up-related expenses, particularly around professional services in there. We did have some infrastructure expenses as well. And that is about the right kind of cadence of what we expect quarterly expenses related to Project Elevate to be. They will increase some as we move forward and broaden the project as we focus now on process efficiencies and other efficiencies that we expect to get out of the business. And those will then be more kind of technological-related expenses as opposed to more professional services related.
Operator, Operator
We'll go to Dave Koning from Baird.
David Koning, Analyst
And I guess my question is on the SMB portion of the Acceptance segment. You mentioned the Clover part will probably grow revenue low double digits. But I'm also wondering what do you expect from the non-Clover part of SMB that's been declining, maybe flattish ex Argentina. But then as a corollary to it, Argentina, the merchant cash advances look like they were down dramatically, like there's a lot less. So is that creating a little bit of a headwind in that non-Clover part? So I guess kind of multiple layer question just on how SMB is going to do in '26.
Michael Lyons, CEO
Yes. Overall, we discussed the Clover aspect of SMB. We anticipate slight growth in the non-Clover SMB for next year, suggesting it will be flat or see minor growth. Regarding Argentina, it is no longer a growth factor in our projections for 2026. We noted that in 2025, if Argentina is excluded, the non-Clover segment did grow. However, looking ahead to 2026, we expect the non-Clover SMB to remain flat or experience slight growth, which is reflected in our guidance.
Operator, Operator
We'll go to the line of Andrew Jeffrey from William Blair.
Andrew Jeffrey, Analyst
Mike, I'd like to dig in a little bit on your outlook for Clover yield. The medium-term revenue guidance in Clover obviously implies some nice share gains relative to at least the U.S. market. And yield growth, obviously, given the fee changes has slowed quite a bit. But can you talk about the areas where you think you have the ability to add sort of durable value with value-added services and what the yield progression in that business looks like over time? Just trying to get a little more clarity on the outlook for accelerating Clover revenue growth.
Michael Lyons, CEO
I would like to start by expressing our satisfaction with the positive trends we observed in Clover during the fourth quarter. We discussed some of the macroeconomic factors and, more importantly, the advancements we made in line with the Clover business priorities outlined in the One Fiserv action plan. These elements are essential to achieving our aim of establishing what we believe will be the leading small business operating platform. Our goal extends beyond merely facilitating payments; we want to assist small businesses in managing their entire operations. This includes partnerships with Homebase, ADP, and CashFlow Central, and integrating services like Clover Capital to enhance yields for our entire small and medium-sized business segment, not solely Clover. We are dedicated to developing our vertical expertise and will be launching initiatives in the healthcare and professional services sectors this quarter. By incorporating more custom and value-added solutions into the Clover platform, we anticipate that yield will increase over time. We are confident in this long-term outlook and are focused on creating a compelling value proposition for the approximately $4 billion in revenue coming from non-Clover small and medium-sized businesses. For more specific details on yield, I'll turn it over to Paul.
Paul Todd, CFO
Yes. So Andrew, I think it would be fair to say we're very pleased with yield maintenance for 2025 overall, and we don't expect any change really on the yield side in 2026. And you can kind of see that based on our volume growth being in line with our revenue growth on a kind of overall kind of high level. And I think as it relates to go forward, like Mike commented, as we look at like vertical expansions, you would see 15% to 20% kind of growth on the revenue side in the longer term against that 10% to 15% growth, which speaks to a higher yield on a go-forward basis as we penetrate more in Clover Capital, as we do more on the software side. As Mike said, as we do more on the platform side, you'd see kind of that yield maintenance or even slight yield improvement on a go-forward basis so that's consistent with our strategy. And certainly, we'll give more color on that at our upcoming IR Day.
Operator, Operator
We'll go to the line of Andrew Schmidt from KeyBanc Capital Markets.
Andrew Schmidt, Analyst
Just a quick 2-parter on the banking segment. Mike, I hear your comments on the sort of the core client retention. Maybe just a little bit more color on what you're seeing there. It sounds like you've been very proactive in being high touch with clients. And then just beyond the core, can you talk about how you view the portfolio today? Do you need additional capabilities, thinking digital, et cetera? Or do you feel good about where you're at from a capability perspective?
Michael Lyons, CEO
Thank you for your question. Regarding the core aspect, as mentioned in my opening remarks, we are actively pursuing core modernization. We take pride in our strong market share in core banking and the support we provide to numerous banks and credit unions nationwide. We initiated the core modernization process in 2022, focusing on building a cloud-based, real-time, secure API with more open capabilities. This plan is still in effect and is beneficial for all involved. At our Client Forum in September, we made it clear based on client feedback that there are no mandatory conversions in this modernization process. Changes can be made at the clients' convenience. However, due to actions taken over the past couple of years, including previous core conversion strategies, we've lost some market share, particularly among smaller credit unions, which is disappointing in terms of banking segment results. We believe that our new approach discussed at the Forum, along with various client commitments and significant investments in both technology and personnel, will lead to a return to positive growth in banking, which we expect to be in the low single digits. Importantly, we have full control over the solutions and are investing directly to implement them. These are not unsolvable issues; they are necessary steps for our clients. In terms of core client attrition in 2025, it was higher than we would have liked but steady compared to 2024 and 2023, showing no changes. As we plan for next year, we are aware of the impact of previous decisions and how quickly we can make adjustments, and that is reflected in our strategy. Our goal remains to properly serve all our valued clients and to compete effectively in the marketplace. As for the second part of your question, we are very optimistic about the portfolio solutions we are developing. We are attentive to what banks and credit unions need, including generating core deposits, which the StoneCastle capability has supported. We are also addressing the emerging challenges of stablecoins by launching our stablecoin on behalf of financial institutions. Additionally, we believe we have created the first closed-loop stablecoin deposit network through the acquisition of custody capabilities from StoneCastle this year. Our focus also includes exploring AI solutions and developing offerings like CashFlow Central to support small businesses. We are enthusiastic about our solution portfolio. While we may need to add smaller capabilities, as we have done with StoneCastle, we are eager to enhance our service commitments to ensure we provide excellent client service while focusing on our valuable capabilities.
Operator, Operator
We'll go to the line of Jason Kupferberg from Wells Fargo.
Jason Kupferberg, Analyst
I wanted to come back to Clover for a second. If you can talk about what drove some of the improvement in December, January, you said to 11%. And then the midpoint of your guide for '26 would suggest maybe a little bit more acceleration of this December, January levels so what drove the improvement in December, January? And then what are the drivers of some of the potential further improvement as you go through 2026. And if you can just remind us also when you think we lap the gateway conversion, that would be really helpful. Yes.
Michael Lyons, CEO
Certainly. I’d like to break this down into a few parts. First, December and January returned to our expected performance for the quarter. We anticipated an 11% growth in Q3, but we fell short of that due to the macro weakness we noticed in November, which also affected others in our industry. One of our goals is to improve our yield, but we also want to lessen our reliance on the restaurant and retail sectors, particularly restaurants, which struggled in November. This was a macro anomaly for that month, and we then observed volumes pick up again to what we expected for the quarter, which is encouraging. Looking at the long-term picture, if we exclude the gateway conversion from the past couple of years, our growth has fluctuated between high single digits to low double digits each quarter. In 2025, we maintained growth rates between 9% and 11%, which we believe reflects the core growth of our business, sometimes regardless of macro conditions. Regarding the gateway conversion, it’s important to understand that there isn’t a straightforward anniversary process for it. When we stop converting clients over a gateway, we face ongoing loss over time. As long as we have clients converted to a gateway in the system, any loss from those clients will affect our growth going forward, although the impact will lessen over time. This year, it represented about 3 points, but we expect it to decrease in 2026 and beyond. I hope that clarifies things. Paul, do you have anything to add?
Paul Todd, CFO
Yes. The only thing I would add is, Jason, we feel good about where we sit. When we saw what December did, when we see what January did as it relates to that overall guide that we gave. And the things that we talked about in the prepared remarks around business development, expansion some of the verticals expansion. Those are all just kind of tailwinds that help us get very confident about the overall guide of GPV. And as Mike said earlier, the overall macro, we're assuming kind of a normalized macro and we also commented in the prepared remarks that the lower side of that guide is reflective of less kind of non-Clover transition and the higher side reflects kind of more on non-Clover transition.
Operator, Operator
We'll go to the line of Dan Dolev from Mizuho.
Dan Dolev, Analyst
Lots of good things, improvements across the board, great job here. Mike, it's been a few months now. I mean, is anything that surprised you most? Any new surprises here? Anything you're seeing that hasn't been appreciated that you would like to highlight, that would be great.
Michael Lyons, CEO
Yes, as I mentioned earlier, there are no new negative developments since our third-quarter report, and we are entirely focused on execution. The positive surprises come from our company's ability and potential to deliver on the pillars we have historically met, serving two large target markets that have a strong demand for our advice and advanced technology. This demand continues to grow. We are eager to make these investments and focus on exciting opportunities similar to what I discussed regarding the banking core. Our core solutions are excellent, addressing the diverse needs of various institutions, and we want to ensure the service remains top-notch. This will enable us to engage with banks on how to grow small business customer bases and adapt to modern payment methods. We aim to be the execution and orchestration layer that integrates AI into their businesses. The same goes for the merchant side, where our ability to democratize capabilities for small businesses across the country is right before us. There are many positive surprises ahead, reflecting what people have known about Fiserv for a long time, but as modern technology advances, our capacity to capitalize on these opportunities increases significantly.
Operator, Operator
We'll go to the line of Will Nance from Goldman Sachs.
William Nance, Analyst
I just had a little more here on the enterprise side, you've been calling out the PayFac grow-over issues for a bit now. Just remind us again when those lap and if there's any way of quantifying the magnitude on both revenue and transactions, that would be helpful as well.
Paul Todd, CFO
Yes. Will, in my prepared remarks, I mentioned a couple of things about the enterprise. This will be the last quarter we discuss the enterprise transition of this PayFac client, and there was a 6-point differential in the fourth quarter related to this. If you add that to the revenue side, the minus 2% adjusts to about a plus 4%. The 6% transactions figure is a straightforward number on the transaction side, and that 4% revenue growth aligns well with the 6%. Additionally, that mid-single-digit growth is consistent with what we've observed in the third quarter and what we anticipate for next year. This mid-single-digit transaction growth will also be a good way to view the business moving forward, without the PayFac complications affecting that line.
William Nance, Analyst
Got it. Okay. So converging in the first quarter. Appreciate it.
Operator, Operator
We'll go to Bryan Keane from Citi.
Bryan Keane, Analyst
Just a follow-up on that, Paul. How do we view the mid-single-digit growth for the year in organic growth for merchants? You mentioned enterprise small business with Clover, and it appears that growth rate will be similar to what we experienced in the fourth quarter. So moving from 1% organic growth in the fourth quarter to mid-single digits indicates we get a boost from enterprise, but will there be any increase from SMB and processing as well?
Paul Todd, CFO
Yes, Bryan. I mentioned in my prepared remarks that we expect mid-single-digit growth for merchants next year. Your comment regarding Clover specifically aligns with our guidance of low double-digit revenue growth for Clover, which still holds true. Additionally, if we consider the headwinds we faced in the fourth quarter, we can return to that mid-single-digit growth rate for merchants during that time. Analyzing the overall performance of Merchant in the third and fourth quarters provides insight into our projected performance range for next year. It's important to note that we will experience comparative dynamics in the first half of the year for Merchant similar to what we see in Financial Solutions, though it's less pronounced. We've highlighted the more significant foreign exchange headwinds and comparative challenges for the first half, but I believe the adjusted run rate from the third and fourth quarters gives us confidence in what Merchant Solutions will look like next year.
Operator, Operator
Next, we'll go to the line of James Faucette from Morgan Stanley.
James Faucette, Analyst
I wanted to follow up on some of the fee changes that you've made and any color you can give there in terms of merchant response. I'm sure they're happy about it, but things that you can measure like changes in churn or retention? And how long do you think you'll see some of those impacts for?
Michael Lyons, CEO
Thanks for the question. The changes we talked about last quarter with respect to the specific Clover fees, they were implemented, and we received positive feedback from our partners. I don't know if you can directly attribute it to in-quarter or any specific in-quarter movements. We just thought it was the right thing to do on behalf of our customers, partners and the business, and that's the way we'll continue to run the business.
Operator, Operator
Next, we'll go to James Friedman from Susquehanna.
James Friedman, Analyst
A more general question on the Financial Solutions segment. Obviously, posted negative organic growth in the quarter. I'm just wondering what from your perspective needs to change for that segment to reaccelerate and grow. What indicators are you looking at? And what should investors watch in terms of the opportunity overall for Financial Solutions?
Michael Lyons, CEO
Yes. Overall, again, we think we have a great platform. We talked about some of the investments in and around the client service and specifically around the core customer service platform that we have to make. We're making those. We're closely monitoring the progress of those. Obviously, there's easy KPIs for those in terms of client satisfaction and the like and average revenue per client. So we continue to watch those. I would say broadly, the impact of comparable periods and you have to continue to monitor that. If we look at the underlying volume growth across almost all aspects of the financial services business, it remains in trend areas that it's been in for a long time, and we feel good about. It's not just purely translating to period-on-period revenue growth as you go over the comparables from a prior period. So one of the most important things we watch and Paul mentioned in his comments is what are those underlying volume growth rates. And again, we feel good about those we told you in the banking space that we're not happy with where we are in performance last quarter. We remain there, but we know what we have to do to fix it, and we're addressing it.
Paul Todd, CFO
Yes. I would like to add that we expect to see growth in all three areas of Financial Solutions in the latter half of next year, driven by the volume trends that Mike mentioned. These businesses rely heavily on volume, and we are pleased to see that the volumes are increasing. For 2026, we face some nonrecurring comparative headwinds, but we anticipate overall growth in the latter half of the year. We have discussed that Financial Solutions is a low single-digit growth business, and that's the expectation for the future after this year.
Operator, Operator
We'll go to Kenneth Suchoski from Autonomous Research.
Kenneth Suchoski, Analyst
Just one on the non-Clover SMB part. I think you mentioned you're assuming slight growth in that business in 2026. We estimated it was down slightly in 2025 and maybe a little bit more of a decline in the second half. So maybe just talk about the drivers of the acceleration and how you get to that slight growth in that business in '26?
Paul Todd, CFO
Yes. And I would start off by saying you're right in that rough estimation of slightly down overall and as we said, up ex Argentina. I would say we've got a very strategic approach as it relates, and I think Mike made some comments on this earlier around testing the non-Clover merchants as they move over to Clover and just a greater attention on just this book in general and how we go about that book. We are very focused on growing the Clover business, but we are also very focused on the transition of non-Clover merchants and the retention of non-Clover merchants as well. So I'd say all of the things that we're doing across the board are collaborative in nature. They're more Clover focused, but we're also focused on this side of the business as well.
Operator, Operator
For the next question, we'll go to the line of Harshita Rawat from Bernstein.
Harshita Rawat, Analyst
I have two quick questions. Paul, regarding the Clover's projected 10% to 15% volume growth for the year, what factors contribute to the pace of back book conversion that could position you at the higher end of that volume range? And Mike, I'd like to follow up on your discussions with banking customers. You've mentioned some satisfaction with the service and product levels you discussed at the Forum, including the issue of elevated churn. As you work on changing the organizational mindset and make these investments, what feedback are you currently receiving from your customers?
Paul Todd, CFO
Yes. Regarding the 10% to 15% GPV, I previously mentioned that the core business, excluding any transitions between Clover platforms, has been experiencing growth in the high single digits to low double digits. This represents an organic growth rate, assuming stable economic conditions over time. We are also being very intentional about any back book conversions, ensuring there is a solid value proposition for merchants since the revenue currently comes from Fiserv. It's crucial that any actions we take are well thought out and clearly beneficial. Achieving the higher end of our range requires significant progress, more than we expect in the short term. Our approach is deliberate, focusing on having the right vertical capabilities and value pathways for our clients. Any success in this area would enhance our core growth rate. On the banking side, our efforts reflect what I indicated for the first quarter and are part of a multi-quarter plan. We are making appropriate investments, and the feedback we receive from clients has been positive, but they are looking for sustained results and fulfillment of our commitments, which is our primary focus.
Operator, Operator
Final question.
Michael Lyons, CEO
Thank you all for joining us today, and we look forward to seeing you at the various conferences and different meetings over the course of the quarter.
Operator, Operator
Thank you all for participating in the Fiserv Fourth Quarter 2025 Earnings Conference Call. That concludes today's call. Please disconnect at this time, and have a great rest of your day.