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Fiserv Inc (FISV - Analyst Report) recently signed a contract with Community Bank - Wheaton / Glen Ellyn. The community bank, a subsidiary of Community Financial Shares, Inc. , chose Fiserv’s DNA account processing platform to upgrade its banking infrastructure.

The community bank serves Wheaton, Glen Ellyn and surrounding communities in DuPage County, Ill. and has more than 29K customers. It manages assets worth $355.0 million. The bank selected DNA due to its closely integrated complementary solutions, customer friendly approach and strong business intelligence tools.

The DNA account processing solution has gained significant momentum in recent times. Recently, Fiserv won contracts from three leading credit unions namely Greater Nevada, MIDFLORIDA and Navigant, which on a combined basis have more than 302K members.

DNA banking platform was the primary reason behind Fiserv’s acquisition of Open Solutions early this year. The acquisition of the DNA platform is expected to expand Fiserv’s customer base going forward. Most of the DNA contracts are long term in nature, which is significant. These will add a recurring revenue source to Fiserv’s top line.

Fiserv expects to earn revenue synergies of more than $75.0 million and cost synergies of $50.0 million over the next several years from the acquisition of Open Solutions. The acquisition is expected to be significantly accretive to earnings per share going forward.  

Accretive acquisitions have been a key growth factor for Fiserv over the years. In the first quarter of 2013, processing and services revenues increased 7.6% year over year to $966.0 million, of which $65.0 million was derived from acquisitions.

Acquisitions have helped Fiserv expand its foothold in the financial and payment solutions business through its diversified product portfolio and continued technology upgrades. The company’s advanced product ranges are likely to further enhance its revenue streams.

This is evident from the fact that the company signed 90 new clients, which helped it to expand its total number of clients for the Mobiliti solution to 1,500 at the end of the first quarter.

Client demand for the Popmoney solution continues to remain strong as Fiserv signed 89 new institutions in the quarter, bringing the total number of customers to 1,900. During the quarter, Fiserv signed 78 electronic bill payment clients and 36 debit processing clients.

We believe that various contract wins and accretive acquisitions will help Fiserv to fight stiff competition from Fidelity (FIS - Analyst Report) and Mastercard (MA - Analyst Report) in the near term.

However, a volatile macroeconomic environment, banking and financial service consolidation, poor cash flow, tough competition and increasing industry regulations are the primary near-term concerns.

Currently, Fiserv has a Zacks Rank #3 (Hold).

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