Fiserv is one of those quiet success stories that is common to B2B ventures that dominate niche markets; they don’t need to tell their story to consumers. The difference is that the niche which Fiserv dominates is very, very big.

Fiserv is part of the Emergent Fintech Public Index. In fact they are probably the bellwether of the Fintech Index. Lending Club is obviously better known due to a recent IPO but at 35x revenue (yes, you read that right, that is revenue not profit multiple), Lending Club are too far removed from an ordinary company to be a bellwether or a comparable. You are betting on Lending Club being the Facebook in a network effects winner takes all story.

Fiserv’s market cap is around $18.5 billion, which is more than 2x Lending Club’s market cap, without any nosebleed valuation multiples.

If you were smart enough to buy Fiserv stock in March 1990 at just below $1, you would have a 77x return over 25 years (stock is currently over $77 per share). $100,000 would have turned into $7.7m. That is nearly 20% IRR over 25 years and I think that even beats Warren Buffet’s track record.

So Fiserv must be doing something right.

Fiserv is not well known outside circles of those who work in Fintech or who have been smart enough or lucky enough to be an investor.

The accepted breakdown in Fintech is between Emergent and Traditional. This was the breakdown defined in the E&Y study for UKTI. In simple terms Emergent means services direct to consumers and businesses = “eating the bank’s lunch” = young, fast growing, exciting. Traditional = selling technology to Banks = old, slow growing, boring.

In that simplistic categorization, Fiserv is boring and Traditional. Fiserv is clearly not boring. When you see that kind of “it works in practice, but not in theory”, it is time to re-visit the theory. In this case, re-visit the theory of a neat breakdown between Emergent and Traditional. That theory is based on the idea of disintermediation. Looking at past tech waves of change, it is almost never disintermediation; it is usually re-intermediation.

Fiserv serves Banks, but not the big Banks that have been the target of traditional enterprise software vendors. Fiserv primarily serves small Banks. In America, these would be Community Banks. In Germany, these would be Sparkasse. They are local bankers who thrive on local relationships (as in “lend to people you know and trust”). They are too small to have their own IT, so everything is outsourced on what used to be called timesharing and is now called Cloud. So a vendor to those small firms has low churn and high moat, because it is tough to break into that market and so the customers renew because they don’t really have a viable alternative. As long as the vendor keeps their product relevant to a changing world, the customers get agility and the vendor gets to keep that dominance.

This need to keep relevant in a changing world is where the reports that Fiserv is one of the companies looking at buying Monitise is significant.

The broader story of re-intermediation is playing out in Private Equity through vehicles such as Angel List Syndicates. It is not that Fund Manager are disappearing and consumers buy everything direct, it is that new types of Fund Manager are appearing. Amazon is an intermediary, just a different type of intermediary than Barnes & Noble. I am also seeing this re-intermediation in Wealth Management through Fintech startups that are serving the small wealth advisory firms. In the lots of small and agile beats a few big and cumbersome theory that Ronald Coase set the framework for, small banks will thrive and so Fiserv will continue to thrive.