The stock has jumped about 6% since the announcement.
With the recent passage of the Guiding and Establishing National Innovation for U.S. Stablecoins, or GENIUS, Act, in the U.S. Senate, stablecoins are expected to explode across the financial landscape.
The bill must still get approved by the House, and then signed into law by the president, but it seems likely that some version of the bill will soon become a reality.
What are stablecoins? Quite simply, they are a type of cryptocurrency pegged to an asset, like the US dollar. They are often used for cross-border payments, among other uses, and are considered more stable, because they are pegged to an asset like the dollar.
While there are already stablecoins in the U.S., namely USD Coin (USDC) and Tether (USDT), they aren’t fully, federally regulated, which the GENIUS Act looks to change. With a regulatory framework for stablecoins, they are expected to gain more mainstream appeal and relevance, as there will be more legal clarity and consumer protections. In addition, it should strengthen the US dollar in the global digital economy.
Which brings us to the latest entrant in the stablecoin universe, Fiserv (NYSE:FI), a fintech that provides the provides the digital infrastructure to handle transactions for banks, merchants, and consumers.
A bank-friendly stablecoin
This week, Fiserv announced plans to launch its own digital asset platform, along with its own stablecoin – FIUSD.
FIUSD is targeted for use by banks, an industry that the fintech serves with its digital transaction infrastructure. It has a massive presence and a strong reputation among banking customers.
Fiserv has relationships with roughly 10,000 financial institutions and 6 million merchants, and processes 90 billion transactions annually. This network will provide instant scale for FIUSD. The new stablecoin will be added to Fiserv’s banking and payments infrastructure by year’s end.
“Through our privileged position as a trusted infrastructure provider to financial institutions, merchants, and their customers worldwide, we are relentlessly focused on delivering state-of-the-art innovation, efficiency, and choice to all of our partners,” Takis Georgakopoulos, chief operating officer at Fiserv, said. “With our scale, reach, and technology leadership, Fiserv is uniquely positioned to advance stablecoin-powered payments and help democratize access to blockchain financial services.”
Further, FIUSD will use stablecoin infrastructure from Paxos, which issues the Pax Dollar (USDP) and Circle Internet Group, which issues USDC, to make it interoperable with these leading stablecoins. In addition, it is looking at developing deposit tokens to create a more “capital-friendly structure” for banks.
Fiserv officials call FIUSD a “bank-friendly” stablecoin, allowing banks to maintain full control of their customer experience. It fits within the existing Fiserv platforms and is designed to enable compliance through existing built-in features like fraud monitoring, risk management, and settlement controls.
“FIUSD is designed with our clients in mind, a financial institution-friendly coin that simplifies stablecoin access through a secure and scalable ecosystem,” Sunil Sachdev, head of embedded finance at Fiserv, said.
Is Fiserv stock a buy?
The market seemed to like the rollout of FIUSD, as the stock shot up nearly 12% after the announcement on Monday. It has since settled back down to around $173 per share, up about 6% over the past week.
Fiserv stock is down about 16% YTD but has been a stellar long-term performer, with a five-year annualized return of 12% and a 10-year annualized return of 15% — the latter of which beats the S&P 500. It speaks to its consistent earnings growth and its status as a leader in this space, particularly within banking infrastructure. The new FIUSD launch should strengthen that position.
Fiserv’s P/E ratio has dropped to 30, but its longer-term valuations are more appealing. It has a 12-month forward P/E of 16 and a five-year PEG ratio of 0.80, suggesting its undervalued.
Further, analysts seem extremely bullish on the space Fiserv has carved out for itself in the budding digital economy. It has a median price target of $225 per share, which suggests about 30% upside. Fiserv stock does not look like a bad option right now.
