Timothy Chiodo: Great, thank you for taking the question. A similar question around the ISO versus the direct channel in the U.S., looking at the growth divergence there. Can you just characterize some of the reasons for the growth divergence? Is it related to either gross adds, is it churn of the underlying business, is it pricing? What are the reasons? Maybe it’s a different product being sold direct versus through the ISO channel. What are the reasons why the growth is so divergent?
Bruce Lowthers: Yes Tim, good morning, and thank you for dialing in and asking the question. When we look at the SMB channel, there really is a couple things that are going on there. One, in our direct book versus our ISO channel, there is–the underlying merchant is a much smaller merchant in the direct book than in the ISO book, so the ISO book is about four times larger merchant than what we experience in the direct book. Our direct team is actually selling very well. Those smaller merchants just churn at a higher rate, candidly, than the other. We’re not experiencing much pricing pressure. We see good stability in our take rates across the board both in the ISO and in our direct book. I would say there is a little bit of product difference between the two in the direct book because we’re selling it to a smaller merchant in the direct book.
They’re not looking for necessarily the same things that the larger SMB client is, that we’re servicing through our ISO channel, so there’s a little bit of each of those things going on within the profile. We feel good about our ability to correct the direct channel. Certainly as we expand into new markets, each state gives us great opportunity to adjust who we’re going after, where we’re going after, the type of merchants that we want, and to help mitigate that attrition and churn on the direct side.
Timothy Chiodo: Excellent, thank you. As a related follow-up on the ISO side, you mentioned that the revenue take rates are stable across both the direct and the ISO channel. Could you talk a little bit about the trends and the commissions being paid out to ISOs, maybe over the last five to 10-year period how much that might have changed, and if there’s been any change at all in the last, call it year, two or three years.
Bruce Lowthers: Yes Tim, I would say there’s been little to no change in the last two years that I’ve seen on the rates that we’re paying out on the ISO channel. Certainly, as you know, and you know this industry as well as I, that ISO channel has changed quite dramatically over the last 10 years as far as what the percentage payout residuals are. Our book is not really any different than anybody else’s – they escalated over time going back five, seven years ago and have been relatively stable in the last couple years here. It’s a higher percentage, so it really impacts the margin of that book.
Timothy Chiodo: Thank you Bruce – yes, exactly, would have thought more stable more recently, but over the longer term might have stepped up, but completely checks out. Thank you so much for the time.
Bruce Lowthers: Thank you Tim.
Operator: Thank you. As a reminder, if you would like to ask a question, please press star, one on your telephone keypad. Our next question is coming from the line of Jamie Friedman with SIG. Please proceed with your questions.
Jamie Friedman: Good morning, and congratulations on 2023. There was obviously a lot of hard work here.
Bruce Lowthers: Thanks Jamie, good morning.
Jamie Friedman: I wanted to ask Bruce first about the digital wallet. I’m looking at Slide 8, and I was wondering if you could help us think through how you think through the inputs to the revenue flywheel. Is it the average transaction per user, is it the growth in the users or is it the ARPU? What would you advise if we’re trying to think through those inputs?
Bruce Lowthers: Yes Jamie, so me personally, I focus on the ARPU number. That’s kind of where I gravitate in as I try to look at my litmus test of whether things are going well or not going well. I really kind of dial in on that, then I really click into our three-month active and consumer acquisition, is really where I’ve been focused on as I look at the business and how we continue to turn this business around. Those are really the metrics that I follow. I think as we think about ’24, we’ll continue to evolve some of these slides so that you guys can track more easily our progress in this digital wallet side of the business, the consumer side of the business, especially as we get into e-cash as well and the continued turnaround of that business as we move into ’24, so we’ll be probably introducing some new slides to help you guys as we’re moving forward.
Jamie Friedman: Then I did want to ask about the merchant take rate. Just looking at the appendix, and it did increase to 80 basis points. Alex, I think you alluded to some of the inputs there, but what should we be contemplating as we model, because we model volume with the take rate to get to revenue, so how should we be thinking about merchant take rates in ’24?
Bruce Lowthers: Yes, I think you’re going to see them to be stable where we are. I think we’re having the opportunity to introduce some new product into the merchant side. We feel good–we’re not seeing a tremendous amount of pricing pressure in the SMB space, and in the ecomm space we’re doing very well. I think as we mentioned previously, we’ve had really strong growth in our ecomm book. We feel that that will continue and feel very solid about the merchant business.
