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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Welcome to the Fiserv 2021 First Quarter Earnings Conference Call. All participants will be in a listen-only mode until the question-and-answer session begins following the presentation. As a reminder, today’s call is being recorded.
At this time, I will turn the call over to Shub Mukherjee, Senior Vice President of Investor Relations at Fiserv.
Thank you, and good morning. With me on the call today are Frank Bisignano, our President and Chief Executive Officer; and Bob Hau, our Chief Financial Officer.
Our earnings release and supplemental materials for the quarter are available on the Investor Relations section of fiserv.com. Our remarks today will include forward-looking statements about among other matters, the impact of the COVID-19 pandemic on our business, expected operating and financial results, strategic initiatives, and expected benefits and synergies from the First Data acquisition.
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. Please refer to our earnings release and supplemental materials for today’s call for an explanation of the non-GAAP financial measures discussed in 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 and all references to internal revenue growth are on a constant currency basis.
And now, I’ll turn the call over to Frank.
Thank you, Shub. Great to have you on our team. 2021 is off to a strong start with Q1 at or better than our expectations across a broad range of metrics. The strength of our results reflects our continued investment in technology, innovation, our client portfolio, and our people through the COVID-19 pandemic.
Let me provide a brief overview of our strong financial results in the quarter. You may have noticed our Q1 earnings presentation has been updated. If you're following along, I'll provide some overview comments captured on the first three pages, and then Bob will provide more detail on the subsequent slide.
Total company internal revenue growth was 4% for the quarter, including low double-digit growth in March. That performance was led by our merchant acceptance segment, which was up 8%, an exceptional result in light of the global pandemic and continued COVID restrictions, particularly in Brazil, India, and a variety of countries and EMEA for much of the quarter.
Adjusted operating margin grew 360 basis points, resulting in an 18% increase in adjusted earnings per share. Free cash flow grew 8% to $821 million, a 103% conversion to adjusted net income. Our sales momentum remains quite strong as first quarter sales were up 42%, with strong results in our payments and international businesses. And this momentum continues into the second quarter.
Yesterday, we announced a 20-year agreement with Caixa Econômical Federal to become the exclusive provider of merchant acquiring services. Caixa is one of Brazil's largest banks, with more than 26,000 sales outlets and a broad presence throughout all of Brazil, making this one of the largest wins for our company in Latin America and one of the largest globally.
Also this morning, we announced a new solution with PayPal to enable our merchant network across the Clover and Carat platforms to accept payments via PayPal, and Venmo through QR codes presented at the point of sale. We believe this is an important offering for our merchants as consumer preferences continue to shift towards touch free transactions.
The combination of robust sales and excellent pipeline is evidence that our formula of bringing the strength and breadth of Fiserv's offerings together with our integrated sales model is extremely well received in the client's office, and we believe bodes well for the future.
Now, I'd like to update you on how our leading digital enabled merchant business is performing. Through Clover, our leading SMB platform; Carat, our enterprise omni-channel commerce solution; and Clover Connect, our rich ISV Solutions set, we continue to drive innovation, expand partnerships, and deliver leading solutions to our merchant clients. The momentum within the digital enabled segments of the merchant business continues to be excellent.
Clover’s gross payment volume grew 36% year-over-year to $141 billion annualized. To provide some more context around the strength of the Clover platform, GPV has grown 75% from $81 billion in Q1 2019 to -- in Q1 to $141 billion in Q1 this year, despite the economic headwinds from the pandemic.
Carat, our enterprise omni-channel solution continue to perform very well. eCommerce transactions grew 24% compared to the prior year. Omni-channel transactions such as order ahead and pick up in store were up over 122% year-over-year. We won a record 51 new enterprise level eCommerce clients in the first quarter, including Cost Plus World Market, a U.S specialty retailer for which Fiserv has been chosen to provide eCommerce gateway, point-of-sale hardware devices, and value added services like security tokenization.
We had a very strong result for sales internationally. The notable wins in EMEA include Selecta, Europe's leading self service retailer, offering coffee and convenience food solutions for which Fiserv has been chosen to provide acquiring services in unattended POS hardware. In LatAm, we ended our relationship with one of the largest eCommerce marketplaces in the region. In APAC, we won the Merchant Acquiring business where Australia's second largest bill payment provider.
We also expanded our relationship with key brands such as State Farm, where we are piloting a new digital payout experience for insurance claims. Recognizing our innovation to bring digital payments to all consumers, Fiserv was named one of the world's most innovative companies by Fast Company, for our role in enabling the acceptance of U.S Department of Agriculture's SNAP online EBT payments during the pandemic.
We continue to see great momentum in the ISV space with Clover Connect. In the first quarter, we signed 42 new ISV partners. Our continued strength in expanding partner relationships is driving strong results in active merchants, which were up 38% in Q1 and ISV channel revenue growth, which was up 34%. For example, during the quarter, Fiserv further cemented its lead in the mortgage servicing software verticals by signing a strategic partnership agreement with Mortgage Cadence, an Accenture company, which provides lower origination software for the mortgage industry. This is yet another example of a successful integrated sale, continuing to fuel future growth in our ISV channel.
Additionally, we are continuing to build and enhance our existing ISV relationships by leveraging our technology and market knowledge. In the quarter, we finalized an agreement with eTail [indiscernible] to move their large set of existing merchants to us and build upon the agreement we had in place for new merchants.
Moving to our account processing business, we continue to expand our number of privileged relationships across financial institutions of all sizes and types. We signed 10 new core account processing clients in the quarter, including 5 on the DNA platform. I'd like to highlight a few of our recent wins. As we mentioned, on our last earnings call, we signed Republic First Bank, a commercial bank with more than $5 billion in assets and rated America's best bank by Forbes for a full service of Fiserv products including core processing, card services and output solutions in February.
Additionally, we signed two de novo banks in the quarter, including Genesis Bank, a newly chartered bank focused as a minority depository institution. This win continues to show our commitment to supporting minority communities. A majority of these illustrative wins were competitive takeaways with the common characteristic. The client selected a leading core platform plus multiple surround digital solutions to support their goals of sustained growth and superior customer service. These wins also reflect the strength of our offering for a wide range of clients from de novo banks to large financial institutions.
In our Payment and Network segment, we continue to leverage the power of our combined solutions to drive revenue synergies. In Q1, we signed a significant new agreement to provide statement and letter services to a major U.S health care services provider, strengthening our position in this industry vertical. Further building on our digital momentum, in q1, we signed agreements to provide digital solutions to First Horizon Bank as well as PenFed Credit Union. In both cases, leveraging our newly acquired Ondot capabilities. Through Ondot, we can enable our FI clients to offer their cardholders personalized real time digital experiences, driving cardholder engagement and spend. We expect continued adoption of these digital solutions across our client base.
With that, let me update you on our integration efforts. Through Q1, we've already actioned nearly $1.1 billion of cost savings, and are well on our way to fully action our $1.2 billion cost synergy objective by the end of this year. With the majority of integration work behind us, we are focused on driving further growth and sustainable value in the years ahead.
On the revenue side, we're pleased with the level of synergy sales, which accelerated in the first quarter. As of the end of Q1, we've already actioned $265 million in annual revenue synergies and our synergy sales pipeline is growing robustly, and we expect to meet or exceed our $600 million target over the 5 years post merger.
Our bank merchant program continues to be a synergy opportunity and offers financial institutions of all sizes the ability to offer their important merchant clients a modern suite of merchant acquiring capabilities, including the innovative Clover platform along with digital capabilities like loyalty programs and eCommerce solutions.
In the first quarter, we added 34 new bank merchant clients, 6 with assets over $1 billion. Additionally, half of these wins were competitive takeaways. The pipeline remains robust through the rest of 2021.
One final point on our digital initiatives before turning it over to Bob. As you’ve heard us discuss in the past, one of the most important strategic initiatives is to redefine the client experience by utilizing the latest technology to drive innovation and offer digital capabilities across our payments ecosystem. An example of our commitment to this area is the acquisition of Ondot Systems, a leading digital experience platform provider for financial institutions of all sizes, which close in the first quarter.
We also acquired Radius8, a cloud based platform that had hyper-localized commerce capabilities to Carat, thereby enhancing our beyond the buy button strategy. Last but not least, we announced the definitive agreement to acquire Pineapple Payments, a leading ISO focused on integrated payments.
Now, let me pass the discussion to Bob for more detail on our financial results.
Thank you, Frank, and good morning, everyone. If you're following along on our new slides, I'll cover some detail on each of our segments. We had a strong first quarter in light of continued pressure from the pandemic across the globe. Q1 represents the final period of pre-pandemic comparison points, with the impact beginning to materialize in the final two weeks of March last year.
Total company internal revenue growth was 4% in the quarter, led by the Merchant Acceptance segment, which grew 8%. First quarter adjusted operating income was up a strong 15% to $1.1 billion and adjusted operating margin increased by a very strong 360 basis points to 31.4%. This margin improvement was driven by our rigorous cost synergy execution, which produced $129 million of incremental cost synergies in the quarter as well as strong operating performance.
First quarter adjusted earnings per share increased 18% to $1.17 compared to $0.99 in the prior year. Free cash flow in the quarter was $821 million, up 8% over Q1 last year, and a 103% conversion to adjusted net income impacting Q1's free cash flow was an increase in accounts receivable driven by a strong revenue rebound in March.
Turning to each of the segments. Internal revenue growth in the Merchant Acceptance segment was 8% in the quarter. Our results were once again driven by strong performances in our portfolio of SMB clients, supported by our Clover platform, enterprise clients supported by Carat, and another strong quarter from our ISV business. This result includes a meaningful headwind from our EMEA region, which experienced restrictions for much of the quarter in several important markets for us, including the U.K., Germany, Ireland and Poland.
As Frank discussed, our Clover GPV continues to grow very nicely, up 36% in the quarter. The outlook for the SMB business looks strong, as the sequential uplift that we witnessed in this business in the last few weeks of March has continued through April.
Our integrated payments or ISV business continues to perform extremely well, with continued strong revenue growth in the quarter. As we discussed at our Investor Day, we recently rolled out Clover Connect, a Clover integrated solution for ISVs. We believe that this solution will further extend our differentiation for ISVs and their merchant customers and continue to drive excellent growth in the future.
Adjusted operating income in the Acceptance segment increased 37% to $387 million in the quarter and adjusted operating margin was up 650 basis points to 27.7%, driven by the strength in the top line and continued cost synergies.
The Fintech segment internal revenue grew 2% in the first quarter compared to the prior year as growth and high quality recurring revenue was again partially offset by lower periodic revenue, most prominently termination fees, which created approximately 150 basis points of headwind to internal revenue growth in the quarter.
The shift towards digital banking and the result in strong demand for our broad array of digital solutions continues. For example, total mobile subscribers across our leading digital platforms mobility and architect grew 12% in the quarter. Mobile deposits in Q1 grew 30% over the prior year, while self service ATM deposits grew 65% over last year. We expect these trends to continue as users who have moved to mobile or ATM for check deposits may adopt these as preferred channels after experiencing their convenience and safety.
Adjusted operating income was up a strong 21% in the quarter to $246 million. Adjusted operating margin in the segment increased a robust 510 basis points in the quarter to 33.4% on a combination of growth and processing revenue, operational effectiveness benefits and cost synergies.
The Payments and Network segment saw internal revenue growth 2% in the first quarter as growth in our current services, output solutions, Zelle and prepaid businesses, including the benefit from revenue synergies was partially offset by headwinds in our bill pay and credit businesses. Debit transactions grew a strong 16% year-over-year slightly ahead of levels last quarter.
We continue to see excellent transaction growth in solutions such as our account-to-account transfers and P2P. Both Zelle transactions and the number of clients live on Zelle within doubled in the quarter versus a year-ago.
Our bill paying credit businesses, in particular given our retail private label mix, saw headwinds from the pandemic that we expect to subside as we reach the second half of the year with better economic activity and better revenue comparisons.
Adjusted operating income for the segment was up 2% to $585 million and adjusted operating margin was up 20 basis points to 41.4% in the quarter. The results were driven by positive impact of both revenue and cost synergies, in part offset by the lower revenue in our higher margin credit processing and bill paid businesses.
The adjusted corporate operating loss was $102 million in the quarter in line with our expectations. The adjusted effective tax rate in the quarter was 17.2% flat versus prior year. We also expect our full year adjusted effective tax rate to be fairly consistent with the 2020 rate in the range of 21% to 22%.
During the quarter, we continued our disciplined capital allocation strategy by repurchasing 5.2 million shares for $612 million, and we have more than 16 million shares remaining authorized for repurchase. In addition, as Frank mentioned earlier, we completed the acquisition of Ondot Systems in January and increased our investment related to the Tegra118, our former investment services business in connection with this combination with Wealthtech Holdings.
Total debt outstanding was $21.2 billion at March 31 and the debt to adjusted EBITDA ratio remained at 3.6x. We are on track to achieve our targeted leverage of less than 3x in the second half of 2021 as we anticipate both strong adjusted EBITDA growth and debt repayment this year.
As you heard us emphasize throughout our Investor Day in December, we're fully committed to our long standing capital allocation strategy, which includes maintaining a strong balance sheet, making organic investment in innovative solutions and pursuing high value acquisitions like Ondot, Radius8 and Pineapple Payments. Importantly, share repurchases remains our benchmark for capital deployment.
With that, let me turn the call back to Frank.
Thanks, Bob. Given our strong Q1 performance and a improved economic outlook, we are raising the low end of our outlook range for both internal revenue and adjusted EPS growth. We now expect 2021 internal revenue growth to be in the 9% to 12% range versus 8% to 12% previously. We expect adjusted EPS to be in the $5.35 to $5.50 range, which is a 21% to 24% growth over last year. This is $0.05 at the bottom end from our prior outlook.
We continue to expect adjusted operating margin to expand by at least 250 basis points and free cash flow conversion to be greater than 108% for the year. The improved range for internal revenue and adjusted EPS growth outlook are grounded in our performance to date. The current state of the economy and our internal assumptions about the trajectory of economic recovery, both of which have improved versus February, when we provided our prior outlook.
To remind you, the low end of our original outlook in February assume no material economic recovery from where we were at that time. Similarly, the 9% at the low end of our updated outlook assumes the same, no material economic recovery for the remainder of the year.
Regionally, we are seeing good economic progress in the U.S., driven both by government stimulus as well as COVID-19 -- COVID vaccine distribution with uneven recovery outside the U.S., as more pronounced COVID impacts persisted in parts of EMEA, LatAm and APAC.
As we indicated during our last earnings call, given the timing of the pandemic impact last year, we expect more variability in quarterly growth in 2021. Given difficult comparisons, we expected Q1 performance to be below our full year outlook range, and it was. We expect Q2 growth rates will be above the full year outlook range driven by our business momentum and an easier year-ago comparison.
I'm proud of the results we've delivered as we navigate the ongoing global crisis. Our business have shown incredible strength and resilience, leading to what we expect to be our 36th consecutive year of double-digit adjusted earnings per share growth in 2021, and setting a foundation for even stronger results beyond.
In addition to delivering on our financial results, we continue to focus on our communities. During the quarter, we successfully completed our Back2Business grant program in the original six locations that were selected in 2020. We also held two additional programs in Milwaukee, partnering with the Milwaukee Bucks to celebrate Black History Month, and in March the second of it partnering with the Bucks and Nancy Lieberman during Women's History Month to award additional grants to minority women owned small businesses.
Last, let me thank our more than 40,000 talented associates around the world for their commitment and courage as we stand together to deliver value for clients, our colleagues, and for you, our shareholders.
With that, operator, let's open the lines for questions.
Thank you. [Operator Instructions] Our first question comes from Dave Koning from Baird. Your line is open.
Yes. Hey guys, great job.
Thanks, David. Good morning.
Thank you.
Yes, thanks. So I guess, first of all, just on the Acceptance segment, really nice momentum there. Maybe could you kind of walk through how January and February trends were and then how kind of March and April trends were just to kind of understand how the months worked as things kind of progress.
Yes, I take it at the macro level. January and February obviously began a little movement up in volume, but really not very much. If you remember in February, we talked to you all and gave a little look at what we saw up till then. And that's when we took really that bottom end up from for the full firm up from 7 to 8, because we felt it felt better than it did when we talked to you on December 8 at our Investor Day. We did see a strong March. We saw a weaker February in the U.S. I would credit a fair amount of that to weather that you store going on. We saw a stronger March, but I think on top of that, we saw more lockdowns in EMEA. And Brazil, as I had talked about previously, although hampered tremendously by COVID still had spending going on. And I'd say as we come in to April and as we're kind of headed to the end of it, we see the progression in the U.S. Obviously, India has a challenged environment in total right now and EMEA is beginning to open up and Brazil continues to perform and why we take the bottom up from 8 to 9 there, if that's helpful to you.
Yes. Thank you. And I guess another way kind of to think through this as we look really into Q2, I look back at the last 5 years of First Data, the GBS segment in very routinely it was up about 10% sequentially in Q2, very close to the same every year and margins were up like the incremental margins were nearly 100%. So the -- it's like a 300, 400, 500 basis points sequential jump in margins. Is there anything different about that seasonality? It would almost seem like the seasonality would be even better this Q2 than some of those past trends, but just trying to triangulate that?
Yes, I think you're thinking about it, right. I mean, look at -- as in January versus last January, was definitely a bad compare. I would consider Q2 and why we talked about it as being outside the top end of the range is because it's against a weak comp, so I would expect that seasonality to perform better than you would have ever seen.
Dave, recall during our earnings call last quarter, 90 days ago, when we talked about the cadence of our revenue growth, we expected Q1 to be below the guidance, the full year guidance range given the comps against pre-pandemic period, really all of January, February and half of March, then second quarter would actually be above the full year guidance range with the second half of the year more in line with that overall full year. We do expect sequentially to continue to see seasonality benefit Q1 to Q2 in the Merchant segment. We will also see the benefit of pandemic continuing to subside, particularly in the U.S as more and more people get inoculated and hopefully improvement in EMEA as some of the lockdowns begin to be relaxed.
Yes, great. Thanks, guys. Nice job.
Thanks, Dave.
Good to talk to you in the morning Dave.
Thanks.
Thank you. Our next question comes from Darrin Peller from Wolfe Research. Your line is open.
Hey, guys. Great job. Thanks. I want to just hone in on looking at the performance in the Merchant side going back. Frank, if you look at what you guys outperformed on, there's a lot of debate, was it mix or was it the technology. You showed some really good data points on Clover and Carat ISVs. And now when thinking about coming on the other side of this pandemic, what -- first of all, if you can comment on that point, that it's probably a good combination of mix and technology, what was the areas that really stood out technologically? What are the areas that you now see on the other side of the pandemic that are doing more than you would have thought pre-pandemic and could drive even better growth to that 9% to 12% merchant range you've talked about?
Yes, I think first you had to think about Clover growth, very, very strong e-comm wins and that’s the backlog that onboarding continues to be a very, very strong. Our ISV business performing well. I mean, lockdowns in EMEA definitely affect us and I would see us coming, we could feel that in the U.K opening up. Our client mix, we've been bullish on the whole way, but I've also been very clear that we have a huge diverse client base from SMBs to large enterprises and across every industry sector as well as a large presence in geographies. And so I think when you look at our portfolio, we still have lagging -- lagging verticals, restaurants, travel and services. So we have an expectation in the later second quarter and in the third quarter that recover well. We've invested heavily in Clover, continue to do it. Heavily in Carat continue to do it and heavily Clover Connect. So I look forward to us being able to continue this type of momentum we have for a long time.
Okay, all right. So all of those areas are really going to be a bigger percentage of the mix coming out of this than they were before I guess, right?
Say that again, Darrin.
So whether it's Clover or Carat or ISVs, the mix contribution, the revenue contribution from those areas probably will be notably bigger percent of revenue coming out of the pandemic than they were before, I would say, and I don't know if you can give any update on data coins around that, but the Investor Day started us off with some good ones. Is that fair?
Yes, Darrin, I think there's a couple of things that will play. Number one as Frank pointed out, we -- while we have strength of diversity of geography and client base, meaning we serve the largest retailers in the world all the way down to the smallest SMBs. The breadth has served us well. But we also of course have pretty meaningful exposure to restaurants and retail that have still a lot of recovery ahead of them that will help us with growth. Going forward, we think we've outperformed the market in the last 4, 6, 8 quarters, quite frankly and we have the opportunity to continue …
Right.
… that the other dynamic, of course, is as Clover and ISV and e-comm, which are growing faster than the overall average become a larger part, you'll see better growth from those becoming a more meaningful piece of the overall company. As we pointed out, $1 billion e-comm business continued to grow nicely. It becomes a bigger part of that $6 billion segment and providing some nice growth.
All right. Just very quickly, repurchasing shares, I think you did 5, a little over 5 million shares. Again, that's a key area that we focus on for you guys, especially given good free cash conversion. So just can you update us on your appetite and your capacity for the rest of this year? And thanks again, guys.
Yes, sure. We feel great about the position that we're in, good cash generation in the first quarter. I mentioned in my prepared remarks, a little bit of accounts receivable growth driven this given the strong March, which of course will generate cash in the second quarter as we collect those receivables. 103% conversion in the first quarter, well on track to do the 108% for the full year. So we feel like, a, we've got continued good strong free cash flow generation, gives us the capacity to buy back shares. And of course, as you heard us lay out in our earnings, in our Investor Day back in December, $30 billion of capital to deploy over the next 5 years. We did a meaningful buyback in the first quarter and we see the opportunity to do that for the balance of the year.
Great. Thanks again, guys.
Thank you. Our next question comes from Lisa Ellis from MoffettNathanson. Your line is open.
Good morning, guys. I had a specific question on the use of the digital sales channels for Clover. If I recall prior to the merger with Fiserv, this was an area First Data had invested really heavily in building online sales channel so a merchant could apply, get approved instantly by the -- their Clover's directly. And I realized we hadn't heard a lot about this too much in the last year or two. So just wondering, at the time that was a major differentiator for your platform compared to your large competitors, could you just update us on how widely this channel has been deployed? And how significant of a factor is in Clover sales? Thank you.
I'd say, first of all, we’ve continued to be here and there. And when you hear us talk about the addition of new bank programs, we view every one of those as us ultimately driving digital adoption, right? We've always believed that partners were great places for digital adoption. And we believe Clover itself was great place for digital adoption. When you look at the totality of our business globally, I would still put it in the not meaningful and total category, but a channel which continues to accelerate its growth and one that we believe we will deliver more integrated opportunities for digital sign up. And when you think about the things we will do longer term, what our bank partner is having a one of a kind digital experience for that bank merchant partner, while continuing to work with Paychex and the Verizons also and using our direct channels to digitally sign up. So I think it'll be part of the 5-year journey we talk about. It's not the overwhelming part of our signup machine, but our capability is huge and our ability to attract new partners because of that digital capability and sign up merchants is been contributing to the growth rate.
Okay. And then my follow-up another one related to go-to-market or distribution on the merchant side. Just a question on your strategy with eCommerce platforms. And I'm thinking specifically about businesses that aggregate SMBs in a particular industry like restaurant aggregators, or retail aggregators of a particular type. With everything you're doing with Clover, with Carat, with Clover Connect with the recent acquisitions, how are you serving these types of customers? or how are you -- how do they sort of fit into your strategy in merchant? Thank you.
Well, I think it's completely in our strategy. We've always viewed us as a partner of choice, a great distributor. We operate in basically every vertical, every capability. And you hear us today talk about extending our relationship in Brazil and Latin America with one of the largest e-comm players, that's really an example of us, our commitment to marketplaces actually, and you'll see that happen internally on new open coming marketplaces, us being an enabler and a distributor for them too. So I think we have a deep commitment there. I think our capabilities are strong, and you hear it in the things we say today in our announcement.
Terrific, thank you. Good stuff.
Thank you. Our next question comes from Dan Dolev from Mizuho. Your line is open.
Hey, thank you. Amazing results. Very impressive. Great job, Frank and team.
Thank you, Dan.
So, I almost refuse to accept the explanation that it's just a macro improvement. I mean, I think there's significant share gains that you guys are getting out there and that's what we're hearing from the channel. In merchant acquiring, can you maybe give us a little bit of an understanding of who you're taking share from, who you're displacing? What are you seeing out there? How are you winning and who are you winning against? Thank you.
Well, if you think about -- it's a global business we are in. So you saw us announce a large deal in Brazil and we've been -- we started that Brazilian business back '14 and '15 and we've been taking share beyond where anybody had thought was capable on that market itself. So I'd point to that because we weren't a big ISV player back in '15 and '16 or probably '17 until we bought CardConnect and BluePay, but there we fit together with Clover and began that journey and we see that. You well know probably people thought we're an e-comm lagger and we continue to win in that space. Now in some of these cases, it's new markets. But in many cases, it's taking it from all the places you won't suspect and you know I would look at us saying, hey, if you go through the hundreds of bank merchant wins we have talked about, fundamentally, those are 50% takeaways. So we continue to compete against everybody very strongly. And that in every market and in every vertical and it gets back to what we had said on Investor Day, when you look at this portfolio with Clover, with Clover Connect, with Carat, with global distribution with the client base that we’ve from largest in the world to the corner as I like to say it the corner store, I think we've built a business that's the most diverse and probably has the most technology in all state.
Thank you. And then a quick follow-up. If I think about that 8% growth in Merchant, would you -- and I'm sorry if I missed it, can you give us maybe the cadence like January, February, March, and what it's looking like in April specifically on that 8% in Merchant? Is there any way to parse it out a little bit?
Yes, Dan, I think there is a couple of things. If you look at the year-over-year growth rate obviously given the pre-pandemic comparison in January and February and then March half of the quarter was pre-pandemic. The other half -- half a month -- the other half of the month was a pretty severe shutdown as particularly in the U.S., but also in Europe. People really significantly went home and commerce really took a hit in the second half of March last year. So you see the year-over-year comp get significantly better in those last two weeks. If you just look at kind of the raw transactions, January started out the year, the quarter strong. February as Frank mentioned, we saw some weather, particularly in the south in the U.S slow things down a bit, and then March came back quite a bit stronger. If you -- if you can adjust for weather, I would say January started out nice, February again adjusted for weather was again in line or good with January and then we started seeing things really pick up in March, I'm sure not coincidentally and help supported by the [indiscernible] 3 payments that started flowing out, and we've seen that continue into April. So we're definitely feeling the recovery of the pandemic as vaccines really spread in the U.S. We are seeing more and more commerce retail picking up, restaurants starting to pick up, still down year-over-year in a meaningful way, but starting to improve sequentially pretty nicely.
Thank you. I appreciate it.
Thank you. Our next question comes from Andrew Jeffrey from Truist Securities. Your line is open.
Hi. Pardon me. Good morning. I appreciate you taking the question. Lots of helpful inputs and commentary in the Acceptance business. Can you talk a little bit about churn. I'm just trying to get a sense of how that might improve or what the dynamic looks like as we reopen in terms of what's coming in the top of the funnel be that Clover, SMB, enterprise e-comm versus what's coming out of the bottom of the funnel and how we think about that sort of all translating into sustainable internal revenue growth in your Acceptance business?
Yes. Well a pandemic gets a lot of people to shut down their businesses and get a lot of people to open up new businesses. I think we're going to see the strongest small business formation in the second half that we've ever seen. And that's why these channels we have are so darn valuable. Our commitment to the small businesses you probably saw us even as a technical provider, one of a few to the SBA for the restaurant brand. So I think we've done a good job over the long haul of keeping our clients and I think our Clover platform, our ISV platform, our Carat platform all are well received by our client base. And I look for strength in small business formation even for those who shut down to come back in a different shape and form. So I guess churn seems very good for us, if you want to think about attrition, I mean we feel strong about what job we're doing and of course any client leaving upsets us at any level. But I think the other part we got to put on top of it is the tremendously strong small business formation and why all of these channels we have we believe are so darn valuable for us in that process.
Okay. That’s helpful. Thank you. And a quick follow-up on payments. Again really nice KPIs, whether it's Zelle or debit transaction growth and I realize there are some pandemic headwinds perhaps in credit. Can you offer some insight as to when some of the digital solutions P2P, I'm thinking in particular really start to move the needle from a top line perspective in that business.
Yes, Andrew, there -- as you pointed out, we saw some very nice KPIs support in the overall payments business, Zelle with both the number of transactions and number of users doubling certainly supports debit processing as well as the debit network performing quite well. We continue to love the acquisition of Ondot and our ability to provide additional digital services for card controls and card activation to our overall channel. We see that as a significant growth opportunity not only to obviously provide that particular capability, but that as an overall part of our solution. We certainly have the benefit of some of the significant wins in the credit issuing business that we talked about over the last couple of quarters beginning to ramp late 2021 and into 2022. The 2% growth in the Payments segment in the first quarter here is not an indication of where we see the opportunity for the full year. There are some definite headwinds there from the pandemic that we expect to subside. And I think we said this at the end of last earnings call, but still believe it today. We expect the Payments segment for the full year to be at the upper end of the medium term outlook for internal revenue. So we believe 2022, '23 that Payments segment can grow 5% to 8% and we think this year will be at the upper end of that as we head into the second half of the year and we see the full year results. So I think we're in a great spot. We will see some continued growth, particularly in our digital side of the Payments and we will see improvement in that bill pay and credit issuing particularly the retail private label in the second half.
Thank you.
Thank you. Our next question comes from Tien-tsin Huang from JPMorgan. Your line is open.
Hi, good morning. Really appreciate the new slide formats, real good. Just looking at the Acceptance side here, the 8% internal revenue growth and 13% global volume growth, do you see potential for that spread between revenue volume growth to narrow or even flip in the second quarter or the second half of the year? I'm asking because based on what Frank said around new businesses reforming and hopefully more in-store behavior that should help you I think on the spread. So I just wanted to check that.
Yes, I think, that's the right way to think about it. There is certainly opportunity going forward and we will see obviously how the economy rebounds into the second half of the year. All indications right now are quite strong. It's why we lifted the bottom end of our guidance range now twice in a row from 7% back in December to 8% in last quarter and now 9%. We see the economy improving and that helps overall Merchant Acceptance, it helps the overall company but Merchant Acceptance in that spread also.
Okay. That’s great. And then just a quick follow-up. I wanted to ask about STAR and your PINless debit initiatives and investments in light of I think Visa did disclose that DOJ is looking into some of the debit practices so those good time to check in with you on, on what's happening with the PINless debit.
Yes, I mean, STAR and Excel [ph] are standout performers for us and our investment and business continues to be large. I think you will continue to see us invest where card on PINless debit and other aspects around signature too as we had talked about over time. That's a long haul. It's not a short haul. It's a lot of the infrastructure work, but we're investing heavily in the network and we’ve a deep belief in the growth in network and the power of the network, especially in this company where we have a network business and we’ve merchants and it is good for financial institutions, STAR and Excel together and good ground merchants. So a long journey, but that will continue to be something that we will talk to you about it and we are committed to and show as part of the star performing businesses in the company [indiscernible] intended.
Got it. Thanks for the update.
Thanks, Tien-tsin.
Thank you. Our next question comes from David Togut from Evercore ISI. Your line is open.
Thank you. Good morning. Looking at the acceleration in Clover GPV growth from 25% in Q4 to 36% in Q1, can you drill down a little bit into the drivers there, for example, how much would have been from onboarding new clients versus an improvement in same-store sales? Just trying to understand the sustainability of this higher growth rate for Clover.
Yes, I think the way to think about it is, number one, we do think the growth rate of Clover is quite sustainable. We've seen very strong growth the last several years, 25%, 30%, 35%, 40% in a given quarter. I think you saw in fourth quarter really the second half of last year some slowing driven the pandemic obviously as we anniversary that and continue to see, as Frank pointed out, new business formation that certainly is a beneficiary to Clover given the depth of our channel capability and our distribution system, we think we can benefit very nicely from that new business formation. So I would expect that Clover revenue -- to me the GPV growth to continue for some time going forward and we continue to invest in capability there and continue to enhance our solution set.
Understood. Just as a follow-up, looking at the 2% organic revenue growth in the Fintech segment in Q1, can you call out the headwind that you saw from declining periodic revenue, so we can gauge the underlying internal growth going forward?
Yes. For Q1, that periodic headwind, which again was largely driven by termination fees was about 150 basis points. Said another way, outside of that, we would have grown about 350 bps. We do expect the headwind to continue into second quarter although to a slightly abated rate level and then as we enter the second half of the year that will no longer be a headwind for us going forward as it gets to a diminished level and then we will see what happens beyond that in terms of, as the economy improves, do you see more bank mergers, which tends to be a driver of termination fees, but that headwind subsides a bit in Q2 and then I anticipated not being a headwind that we discussed in the second half of the year.
Understood. Thanks so much for the helpful detail.
Sure. Thank you.
Thank you. Our next question comes from Ramsey El-Assal from Barclays. Your line is open.
Hi, guys. Thanks for taking my question here. I wanted to ask about the broader M&A strategy. Should we expect more deals sort of similar size to Pineapple and Ondot? Or would you take a swing at something a little larger if -- or maybe more transformative if the opportunity presented itself?
Well, I think, first, we feel great about our capabilities and the total hand we have. The tuck-ins have played very, very well for us for a very long time. I think when you look at Ondot, and you're going to see that gets spread across the product base, to client base that digital capability and integrated fashion. I think Pineapple takes us on another area around our ISV capability. I think if you look at Radius8, it is about bringing that across this large platform, so they played very, very well for us. We’ve been very committed to our capital allocation strategy, tried and true, and all of these acquisitions fit exactly within that envelope. But of course, we pay attention, think about everything and as a dynamic world it keeps changing. So I think we're pretty committed to the path we're on, and we think about all things in the market always around the table. And so it has to work for our shareholders for it to make sense and that's why we held our capital allocation strategy.
All right. That makes lot of sense. Lastly for me, this is just a point of clarification, forgive me if you guys already covered off on it, but in the slide deck you mentioned pressure on long cycle credit processing in the Payments segment, what is that exactly? And is it a headwind that you expect to persist?
Yes, I would -- that is essentially -- our credit issuer processing business is not transaction driven. And so as we see the economy improve in more active accounts, we will see an improvement in that revenue. And so that’s a bit of a lagging indicator and we expect that to take place really in the second half, as the economy improves, we will see more activity. In addition, you will get different comparisons. And so we think that helps lift the growth of the Payments segment and obviously the credit issuer processing.
Great. Got it. Okay. So that's just a euphemism for credit issuer processing effect, okay.
Right.
Terrific. Thanks so much.
Thank you.
Thank you. And our last question comes from George Mihalos from Cowen. Your line is open.
Hey guys, thanks. Thanks for squeezing me in. Just wanted to ask kicking things off on the Merchant side, the nice momentum you're seeing there. As it relates to EMEA, we're hearing anecdotally that things are getting better throughout the course of April, particularly in the U.K., and I'm just curious if you could share any high level trends that you might be seeing through the month of April, and would you guys expect that region to be in the black in 2quarter? Is there any reason why that's not possible?
I think the U.K is, we can feel it, we see it. I think I referred to potentially somewhere along the line here too. I think Ireland still has challenges, but our expectation is that in the second half EMEA is in recovery. I don't want to be thinking too hard about this quarter itself as much as the full year. And we believe the EMEA business will perform well in the second half, I think it's been under pressure in the first half.
Certainly feels like it's in the right trajectory though, as you say the restrictions are beginning to lift U.K in particular and hopefully some of the other countries in that region soon.
Okay. That's helpful. And just as a quick follow-up, Bob, on the Fintech segment, should we continue to believe, I mean it seems like it's tracking in the right direction, but is the 4% to 6% growth for Fintech. I think that you laid out last quarter, is that still on the table for '21 or how are you guys feeling about that range?
Yes, we didn't give a guidance for '21, that 4% to 6% is our medium term guidance. We don't give specific in your guidance on our segment level. I will just reiterate we did -- we printed it too, if you adjust for the periodic revenue, it's a 3.5% in the quarter that subsides pretty meaningfully in the second quarter and is no longer a headwind in the third and fourth quarter. So we will see a nice uptick in that segment and believe we will be in that range in the second half of the year for sure.
Okay. Thank you, guys. Congrats on the results.
Thank you very much.
Thank you. I'd like to thank everybody for their time today. I look forward to talking to you all, and we appreciate everything you do. Have a great day.
Thank you all for participating in today's conference. You may disconnect your line and enjoy the rest of your day.