Fiserv, Inc. (FISV) Earnings Call Transcript & Summary

Good evening, and welcome to our Merchant Acceptance segment briefing. I'm looking forward to the next hour where we will be sharing our terrific growth story. I'm joined by our President and Chief Executive Officer, Frank Bisignano; and our Head of Investor Relations, Shub Mukherjee. Please familiarize yourself with the forward-looking statements page. We have provided several pages in the appendix with further information on non-GAAP measures. As most of you know, our business is comprised of 3 segments: the Merchant Acceptance segment; Payments and Network; and Financial Technology. The Merchant Acceptance segment is our largest and fastest-growing segment and constitutes 42% of Fiserv's global adjusted revenue and is the focus of today's presentation. Here's our plan for the next hour. Frank will share with you our strategy, outlook and key growth drivers for this segment. We will then take your questions. Given that the focus of this presentation is in our Merchant Acceptance segment, please limit your questions to this segment only. We are utilizing the chat feature to help us get as many questions as possible. Please type your name, the name of your firm and your questions into the chat function. At the end of the prepared remarks, Shub will host a fireside chat with Frank and me on your behalf, fielding as many questions as possible. And with that, let's dig right in. Frank?

Thanks, Bob, and thank you all for joining us today on this call. I've spent the last 9 years deeply engaged in the transformation of our Merchant business. If you remember just one thing from this presentation, it's this, we are transforming from selling merchants individual point solutions to offering operating systems, Clover, for small- to medium-sized merchants and Carat for large enterprises. This operating systems approach expands the size of our total addressable market and makes us more valuable to our customers. As we continue to drive this approach across the business, the lifetime value of each of our customers will naturally expand. Average revenue per merchant will grow and churn will be reduced. We've been building the Clover and Carat platforms, including our solution for ISVs, as well as our international distribution capability, the benefits are now beginning to be felt as top line growth steadily accelerates. I have never been more excited about the future of this business and I'm grateful to be able to share our outlook with you today. Let me start by looking back a couple of years. As Slide 5 shows, our global Merchant segment ended 2021 with adjusted revenue of $6.5 billion, up from $5.7 billion in 2019, a 7% compounded annual growth rate or CAGR. At $4.5 billion, small business is the largest component of the Merchant segment revenue, accounting for nearly 70% of total revenue in 2021. Enterprise is the second largest with $1.1 billion of revenue and the remaining $900 million of segment revenue comes from processing, primarily through our bank and wholesale partners. Looking ahead, we see a clear path to accelerate our growth from $6.5 billion of revenue in 2021 to $10 billion by 2025, a CAGR of 11.5%. There are 2 parts to our growth algorithm: attract and retain more merchants and expand relationships with them through higher penetration of software and services. Our unmatched global reach and strong distribution channels allow a differentiated commerce operating systems, Clover and Carat, to win more merchants and increase their adoption of software and value-added services. This, in turn, increases our average revenue per merchant and reduces merchant churn. Let's take a deeper look at the Clover. Clover is our operating system for small- and medium-sized businesses delivering fully integrated business solutions and modern services for targeted industry verticals. Clover is the critical technology partner for small- and medium-sized businesses, a customer base that is deeply underserved by software today. Clover is expanding into white space by automating what SMBs previously did manually or by creating new use cases to drive SMB revenue and profitability, allowing them to thrive in a highly competitive marketplace. For Fiserv, software and services is a large addressable market opportunity. Clover offers a set of critical horizontal solutions that more effectively enable clients to operate, fund and grow their businesses, which you see on the right side of Page 8. These solutions include reporting and analytics, financial products such as lending and insurance, payroll and time management, and loyalty and marketing tools to help businesses expand. On the left side of the page, you see Clover also offers integrated SaaS business solutions for fast-growing verticals, such as restaurants, retail, and services. Clover also serves the high-growth ISV channel through the Clover Connect platform. The breadth of capabilities accessible through Clover means it is deeply embedded in daily workflows for our SMB clients. It is a daily use product and single source of truth for the business. The importance of Clover to our SMB customers puts us in a privileged position to continue to innovate and add to our capabilities over time. The [ TAM ] for these value-added software and services is over $5 trillion. By executing on our exciting product road map and driving adoption of more software and service modules, we will accelerate growth beyond payments, increase ARPU and reduce churn. Moving to Slide 9. Clover ended last year with revenue of $1.3 billion, a CAGR of 27% over 2019. More importantly, we are exiting 2021 with strong momentum, with Clover's annual recurring revenue growing at 29%. We expect annual recurring revenue to continue to accelerate as we drive growth in Clover outlets, capturing the associated payment volume, software and services and continue to reduce churn. We have a clear plan to continue to drive outperformance via Clover. Our plan focuses on 5 strategies that build on Clover's compelling value proposition, further amplified by Fiserv's unmatched distribution strength. First, drive average revenue per merchant through increased adoption of our existing software and services solutions and the addition of new offerings. Second, become the premier provider of fully integrated business solutions for targeted industry verticals on a platform with broad-based business services. Restaurants are a great case study. We're the furthest along in our vertical focus on restaurants, and our strategy has gained significant traction. Software and services is over 20% of total revenue in the restaurant vertical versus 12% across all of Clover. We are very excited about the next leg of software penetration in our restaurant vertical led by BentoBox, which we acquired late last year, are in the process of integrating fully into Clover. Third, the lever of leading omni-commerce solution for small businesses. Today, Clover enables merchants to meet consumers in their channels of choice, begin the transaction online and end in the physical realm or vice versa, all in a completely seamless manner. Fourth, amplify Clover's compelling value proposition by leveraging Fiserv's market-leading financial, non-financial and software partnerships while further expanding our direct channel. We will continue to invest in our digital direct acquisition strategy by focusing on the merchant experience, lead generation and expansion of our direct sales force. We believe that further building our direct merchant book can fuel growth and improve merchant unit economics. On the partner front, Clover Connect provides the power and tools of Clover's ecosystem to ISV partners. With Clover Connect, ISVs get the best of both worlds. They can deliver their leading proprietary software via the Clover ecosystem, including Clover hardware and Clover omnichannel processing. They are also able to provide Clover software and services to increase their customer engagement. In addition to the technology platform that allows ISVs to integrate with Clover, they can use CoPilot to track all their merchant activity from application processing to hardware delivery. We're in the early stages of capturing the ISV market potential and are excited about the growth in this end market driven by the strength of the Clover platform. And last, but by no means least, our fifth pillar is to rapidly accelerate global growth with singular branding and technology set aimed at delivering a consistent experience along with local adaptations. We expect international to be a meaningful accelerant to our new merchant growth. Today, our percentage of Clover revenue outside North America is in the high single digits. We are in the early innings of our growth journey, but the foundation is in place. Later this year, we will be launching Clover in India through our partnership with ICICI Bank, the largest private sector bank in the country. We'll also rollout Clover in Brazil and expand our German offering through the newly formed Deutsche Bank joint venture. Additionally, we plan to roll out Clover in Australia through our partnership with National Australia Bank. Our international rollout plan will put Clover on the map across key growth markets outside the U.S. An important point to note here is that our international expansion strategy touches, not just Clover, but also the non-Clover SMB and enterprise businesses within the Merchant segment. We have shown an impressive 22% CAGR in merchant outlets over the last 4 years. Currently, Clover has 560,000 merchants, making it the industry leader in serving small- and medium-sized businesses, complex enough to meet software and services. Merchant outlet growth is a fundamental driver of revenue expansion, and we expect the continuous momentum through growth across our distribution channels, both within the U.S. and internationally. Slide 12 shows our success in selling more software and service modules to merchants over time. The chart shows cohorts of merchants starts with the year they were onboarded and then tracks how many modules they have in each year that follows. Please note here that we do not count hardware as a separate module. Two observations I would like to highlight here. First, each successive cohort adopts more modules in year 1 versus the prior cohort. With the 2021 cohort continuing that trend by onboarding with more modules for merchants than any prior cohort. This trend is a result of effective product bundling, vertical sales specialization and new and increasingly compelling solutions. Secondly, each cohort adds more modules over time, driven by the growing need for merchants to digitize and have omnichannel capabilities, as well as salesforce incentives driving upsell. We expect these positive trends to accelerate, driven by our vertical focus and our software and services product road map. Increasing the attach rates for software and services is the key driver of Clover success over time. As I mentioned, Clover's ability to go beyond payments and into business enablement has the effect of enhancing the lifetime value of a merchant to reduce churn and higher average revenue per merchant. Slide 13 illustrates the lifetime value of a restaurant merchant on a non-Clover terminal versus the Clover platform. As the graph shows, there's a 50% increase in the LTV of a Clover merchant driven by higher software and services penetration, as well as lower churn. Looking ahead, we expect the LTV of a Clover restaurant to increase to 3x that of a non-Clover restaurant, driven by adding more software and services modules, such as the integration of BentoBox into our Clover offering. Also built into this LTV U.S. is the opportunity to retain higher merchant economics as we further build out our direct merchant acquisition channel. We see comparable accretive economics for Clover merchants across our other 2 vertical sectors of focus, retail and services as well. Over time, we will continue to expand Clover's capabilities and product offerings and the customer LTV will continue to expand with it. Let's take a look at some Clover videos that clearly demonstrate Clover's value proposition for merchants. In this video, we trace the start and impressive expansion of Tin Pot Creamery and Reyna's Tacos. The video also showcases BentoBox critical digital front-end offering for restaurants, a growth driver for the next leg of growth within our restaurant vertical. Please roll the tape. [Presentation]

I hope you share the energy and excitement we feel when we see our merchants prosper. In wrapping up the Clover section, Clover is winning in the marketplace because of its superior value proposition to businesses and unparalleled access to customers through Fiserv's network. From omnichannel to software and services to vertical solutions, the Clover operating system helps merchants to operate, fund and grow their business. Now, let's turn our focus to the Carat operating system and our enterprise business. Carat is a full-stack global omnichannel ecosystem that allows clients to imagine and realize new customer experiences, drive more commerce and streamline the way they run their business. Many of the largest and most admired brands around the world rely on Carat. This is illustrated on Slide 17. To the last of the circle on the blue are a host of value-added merchant solutions that Carat offers to its clients, including omnichannel payments, disbursements, payment optimization services, vertical focus solutions and cross-border. To the right of the circle are pan Fiserv solutions that span Accel and STAR, card, including retail, private label and prepaid, non-card, including Zelle, ACH and real-time payments, bill payment solutions and Banking-as-a-Service solutions, including embedded finance. Fiserv's breadth of capabilities, combined with the Carat operating system is unique in the marketplace. Merchants benefit from getting access to a wide range of pan Fiserv solutions and Fiserv benefits from higher average revenue per client and lower churn, key outcomes of becoming the critical technology partner for large enterprises. Turning to Slide 18. Enterprise is a $1.1 billion business serving large global businesses. The adjusted revenue grew at 12% CAGR over the last 2 years. This was driven by a 21% CAGR and Carat's revenue over the same time period to $450 million or 40% of global enterprise revenue. Moving to Slide 19. Let's talk about why Carat is winning in the marketplace. Carat provides a single entry point for merchants to access the suite of Fiserv capabilities. This line shows a few examples. On the right, you see illustrative examples of 3 of our verticals: retail, quick-service restaurant and grocery. On the chart, you see the percent revenue from services within the Merchant Acceptance segment like payments, security and optimization and the revenue from the broader Fiserv segments. Across all 3 examples, our clients consume a multitude of services to meet the modern needs of their customers. These needs include financial services such as bill payments, stored value, money movement and banking. As our clients grow by utilizing our full solution set, we win by making more revenue at better economics. The breadth of the Fiserv business makes us the partner of choice for enterprise merchants with complex and diverse needs. Commerce is global as is Fiserv. Slide 20 shows Carat's global reach with local presence in more than 50 countries, including high-growth markets like India and Brazil. Our depth of products, local expertise, global reach and strong partnerships with banks makes Carat the partner of choice for large enterprise clients. Again, Fiserv is unique in its ability to offer such global capabilities. In closing, given the compelling value proposition of our operating systems, Clover and Carat, combined with our unmatched global reach, we expect our Merchant segment revenue to grow to $10 billion by 2025 and 11.5% compounded annual growth rate over 2021. The scale of this business affords us the ability to reinvest for growth while expanding margins. We expect Clover to be a $3.5 billion revenue business by 2025 and represent more than 60% of the overall Merchant segment growth over the same time period. Importantly, the growth outlook for Clover assumes minimal active conversion of the non-Clover back book. The positive operating leverage inherent in an operating system model such as Clover will ensure margin growth. In closing, I hope you go away feeling as excited about the prospects of our Merchant business as we are. Our differentiated platforms, Clover and Carat, global reach and continued ability to invest and innovate, position us to win. And with that, Shub, can we turn it over to Q&A?

And thank you all for participating at this session. We have some very interesting questions. Let's get right to it. We have several questions on the 11.5% CAGR that we've offered. Is that organic? Does it have any M&A contribution? Could you comment?

Yes. Ultimately, the $10 billion or 11.5% CAGR essentially is forecasted, modeled out at 2021 constant currency rates. So no FX are factored into that number and for all practical purposes, no M&A. As you all know, we may have variability in FX over the next several years by the time we get to 2025. As that moves, there's obviously also the opportunity to do acquisitions. So overall, we think those kind of are generally a push. And so that $10 billion essentially is an organic number.

Several questions on the growth expectations for the non-Clover parts of the business. We've clearly talked about what we believe Clover could grow to by 2025. What are the expectations for the other parts -- pieces of the business?

Yes. So we have Clover at $3.5 billion, and that's 60% of the growth in GBS. When you look our enterprise business, we believe there's an opportunity even from its current levels to accelerate growth with the investments we've made in Carat and our ability to continue to build out that enterprise operating system. Remember, the model assumes no growth in going at processing and also that we're not going at the back book with Clover. But it does also contemplate our international expansion, the continued growth in the market, the continued growth in those markets of non-Clover clients also. We got the strong distribution channels, and you heard us talking about extensions of those strong distribution channels. So those are the elements that go into the calculus.

Can you talk about the driving forces and your confidence in Clover's growth going forward?

Yes. We talk about a -- what we view as a compelling value prop. One is having built out the Clover platform, having being universally accepted, continuing to have a strong growth, our ability to bring more software and services penetration into it. Also, you heard us talk about 3 verticals, one which we started early on, and we continue to build out very, very well, and you see what our expectation is around it in restaurants. We believe the delta will be 3x in non-Clover to a Clover because it is addition to BentoBox and other services. You should expect similar outcomes in retail and services. We also believe the omnichannel capability and our strength in both physical and Clover not present, it really gives us a strategic advantage for the long haul. And then our distribution capability is both through all our channels. And then on top of it, our international expansion that we've talked about, the ability to scale Clover in additional international markets from where we are today.

The next question we have is, in the past, you've said that 90% of Clover net adds are new to Fiserv. Is that still the case? Is there any plan to convert the existing SMB clients over to Clover?

We've historically been focused on adding new clients. Adding new clients, we believe in client choice, and we have had back book converted at a 10% rate. And when you think about what we've laid out in this model, that's exactly what's in the model. Now, we do believe in continuing to grow merchants. That's the #1 job, growing merchants and bringing more revenue per unit on a merchant level. It is possible over time, not contemplated in this model that we see opportunity in the back book. But we really have focused on the front book, and we think we've been usually successful in our growth of it and attracting new clients and growing the number of merchants globally.

Several questions on margin. We've given out our revenue outlook. How do you think of margins for this segment? Any comments on Clover, in particular?

Yes, [ let me ] handle that one, I guess. First and foremost, I remind everybody that this is quite a scaled business. And what I mean by that is, an incremental dollar of revenue does not mean an incremental dollar of cost. And as we continue to grow out our system by adding more merchants, we add more software and services, you see the value of that scaled model really paying off. And ultimately, what you end up is, with what I like to refer to is refer to as cycle. Strong top line growth, in this case, in our model, 11.5% growth and a scaled business means you're expanding operating margins and also able to reinvest while still expanding operating margins, reinvest into new product innovation, new products and services for your clients, which accelerates the growth on a scaled business, and therefore, you continue to have an opportunity to expand margins. As a point of reference, just to recall, from 2019 to 2021, we expanded operating margins in this segment, 340 basis points. We continue to see opportunity to see that margin expand going forward.

Several questions on the various distribution channels. Any commentary on the difference in economics between the different channels? How do we view them from a strategic standpoint?

Let me start with that one and obviously jump in. First and foremost, you heard us talk about the breadth of our distribution channel. So we go to market in a number of different ways. And one of the focuses we've had recently and we'll continue to work on through this time period to 2025 is continue to build out our direct channel. We believe the economics of a direct channel are accretive to the overall company. So good, strong wide variety of distribution channels, different partners, different ways we go to market so that we can attract as many clients as possible. Again, on that scaled business means economics are good across the board. But having a good, strong direct channel is kind of the next evolution of building out our overall distribution channel and something we've been working on. And that direct channel is not only feet on the street, our own sales force, but it's also building out a digital acquisition capability so that clients can come -- merchants can come to a website and essentially sign up for Clover and go live through digital acquisition model.

Questions on yield. As we know investors love that. Any commentary on yields [indiscernible] about what happens to yields going forward? What supports it? Any commentary would be wonderful?

Yes, and certainly get a lot of questions on this. And Clover, like the Merchant business overall differs by channel, differs by merchant size, and we go to market in a variety of different channels. And so yields can ebb and flow within a given quarter depending on the size of the market, depending on the strength of the channel within a given quarter. We actually like the breadth of those channels, that might create some quarterly fluctuation and noise in the overall yields, but it gives us tremendous scale on that overall business. And ultimately, as you heard in our prepared remarks, we're focused on signing up more merchants and selling more software and services to those merchants. And by doing that on a scaled business, you'll see yield improve. And so we'll continue that focus. And both Clover and Carat give us the opportunity to do that in the future.

A couple of questions on the verticals. We've clearly talked about 3 verticals that we specialize in. Are there plans to focus on other verticals? And when we think about developing a tool or a capability, how do we think about developing in-house versus working with third parties? Any commentary?

Yes. I mean, we started with restaurant because of the size and scale of that vertical and our client base. We talk about retail and services for the same reason. So we think that covers a large population. And that's why those are the verticals that we're investing in. We're bringing more software. We believe that it drives LTV lift. And we also believe that the margins, with the scale in those business, will continue to perform well. We do have, as you all know, in the development of Clover, we started out a long time ago with a few apps -- 8 apps [ so it's ] the first time we brought the product to market and now we have 100 apps at the development community does publish to and our clients consume. And then on top of that, after we drive through the first array or in process, we will take a step back, look at our app marketplace, look at the utilization, look at how we can [ canisterize ] other applications within our marketplace from those other segments and then take it further to other development opportunities. We will always partner with third-party developer. And that was the concept of Clover from the start, being an open ecosystem where people can publish to and our clients could subscribe to.

The other thing just to throw in there, in some cases, those third-party apps become first-party apps. The partnership turns into the opportunity to actually join the firm through an M&A opportunity. And the 3 verticals we're focused on now are the 3 verticals we're focused on now. It doesn't mean that in the near future, we may choose to add a fourth vertical or fifth vertical depending on what the opportunity is and how the third-party apps are containerized.

Quite a few questions on what your views are regarding Clover as part of the Fiserv ecosystem versus a stand-alone entity? Any commentary would be very helpful.

Well, we've been on this journey, and we've invested heavily in Clover, and we've watched the growth of Clover. And we believe that Clover has a positive effect on our whole ecosystem. It does affect our bank partners, and we have a tremendous bank business with a privileged position of core, and that has extended out. I think we see the investments have paid off, [ when you say about ] 560,000 merchants and expectation of a growth curve that stays very, very strong, we believe it's operated well within the company, and we're going to continue to invest in the product to attract new clients, attract new partners. And we think the Fiserv family works very, very well for the Clover ecosystem.

One specific thing I'd point out as an example is, our international expansion plans for Clover are absolutely aided as being part of Fiserv because we have strong international footprint in things like India and in Brazil and in Australia. And so we're not entering a country as a company for the first time. We have strong local presence in terms of management and leadership. We have good banking relationships to help bring those products to market. And so you're not walking into a country for the first time trying to sell Clover. You've been established, you've got a team there, and that means the success rate is much higher and you can ramp much quicker.

An interrelated question I would think, Clover is a fantastic platform. But the integrated POS market is crowded. What are 2 to 3 ways in which you believe Clover is differentiated versus other major players?

Yes. Well, I think there is -- I've always said that we were going to be a growth platform. If you look at 560,000 merchants on it and its growth, its GPV size in the market, I think we've already demonstrated its capability. Its open architecture for a software store that can be published to. Its ability to operate in an omnichannel capability and allow both digital and physical. And then its ability to be able to deliver for all types of verticals and all sizes. I think the further you drive up in size SMB, it is a dominant player in helping the clients grow their business and then you take the ecosystem we surround it with. So I think the power of our ecosystem and what we laid out, whether it's marketing or whether it's loyalty and all the other capabilities we bring along, makes it a differentiated product, and we're going to continue to invest in our clients' needs to help our clients grow their business.

You've heard to us refer to Clover as the operating system. It's much more than just a point-of-sale device. It really does help the business leader, the merchant run their business and make things easier for them by being a full operating system. We think that dramatically increases the value to them and therefore, increases the value back to us.

What is the mix between the verticals, restaurant, retail services, how much is that is the portion of overall Clover? Any estimates you could provide?

Yes. If you aggregate those 3 together, they're a bit more than 50% of the overall Clover revenue base. We see tremendous opportunity to continue to grow those. As Frank mentioned earlier restaurant is probably our furthest along, it's the one we went after first, given the size and scope of that market. We continue to see tremendous opportunity in that space. And as we further expand our capabilities in the retail and services area, we think that can continue to grow. As you saw on the charts, the LTV differential between a non-Clover and a Clover restaurant, for example, is pretty meaningful. And so those are important verticals for us to continue to expand in, to grow in and increase value for.

Speaking of the LTV uplift, sounds rather counterintuitive that you wouldn't cannibalize the back book. What are your thoughts on that?

Well, as I said before, we've been about attracting new merchants, and we continue to grow our merchant count, and we continue to develop the product. And we're going into international markets, and we expect [ there ] to be expansion. We believe the ISV and our Clover Connect is a great expansion and it was, not only we deliver Clover along with their software but have the opportunity to deliver other software. When we look at that set of initiatives, we see a robust growth opportunity. Now, it's not to say that at some point in time, we will not go into the back book. We've had 10% of the back book clients in their natural evolution become Clover clients and it's possible, but this calculus of where we are right now and how we [ bleed out ] it did not contemplate anything greater than the current 10%.

Ultimately, I think it's about choices and where we put our resources and our investment dollars. And when the time is right to convert the back book, we will work to convert that back book.

A couple of questions on international. What's your current mix? What's the expectation for 2025? Any commentary? Clearly, you've laid out international as being a leg of growth.

Well, first and foremost, first, today, international represents about 22% of our overall merchant revenue, and it's growing faster than the overall segment. So it has been a source of growth for us. And, of course, as it grows, the contribution towards the overall growth rate expands and you heard us lay out a couple of specific areas where we are adding our footprint, so growing in Brazil, in India and Australia over the next kind of firing order, so to speak, and of course, continue to grow in the places we are. We're already in Germany, but with our Deutsche Bank joint venture that we planned that we're launching right now, we'll sell Clover into that space. So again, an area where we are already physically present, we are selling products and services, and we expand that capability through an expanded distribution channel. So we see the international market as a tremendous opportunity for us.

Something regarding more current dynamics. Given inflation, especially in gas and food, what is your exposure to these sectors? And how do you reckon you'll be impacted in these categories?

So from a vertical standpoint, different segments, obviously, we have got a good position in gas. We've got a good position in food. We're not overexposed or underexposed to any one particular vertical. One of the interesting dynamics is, if you are priced on transactions versus volume, obviously, inflation plays a different characteristics in that. And one of the things that you typically see, for example, in gas, as gas prices go up, the number of transactions actually go up. And so we actually have a formula that says, with an x percent increase or x dollar increase in the price of gasoline, we'll see a tick up in the number of transactions because consumers will go out to put $10 a gas in their gas tank and that $10 [ link ] gets them less fuel, now only 2 gallons instead of 3 gallons. And so they're actually going to the pump more and so we'll see some impact to that. The ultimate question is, what happens to overall consumer behavior and buying as inflation goes up? And how long does the current inflation -- we're seeing quite high right now, how long does that persist.

Clearly, there's a war for talent. A question around your ability, our ability to attract talent in the Merchant business, especially Clover versus peers?

Yes. I mean, we've always felt good about our ability to attract talent, both in the U.S. and outside the U.S. And so I feel that there's always been a war for talent. It's not a new issue. It may be talked about more as the dynamics in the workforce are changing, and as we evaluate those changes also. But we love to recruit. We love to retain and we love to motivate in Clover along with the rest of the enterprise is highly attractive to engineers.

Software and services revenue currently at about 12% in Clover. What is embedded in your 2025 outlook for Clover? How high can that percentage go up to?

Yes, the answer might be a little bit less than fully fulfilling. I don't have a specific number to give you. Obviously, we've modeled this out, and we have specific plans in place to grow that software and services pretty meaningfully over the next few years. It will be an important part of the growth as we move from $1.3 billion of revenue in 2021 to $3.5 billion in 2025, which will help obviously with yield, will help with overall profitability and allow us to continue to invest back into the platform.

I think we are getting very close to the time limit. So I'll squeeze in one last question. Does the $10 billion outlook, does that impact your 7% to 9% overall revenue growth in any way for the medium-term?

So the simple answer is no and not at this point. So if you recall, we gave the 7% to 9% medium-term outlook, which is an outlook for 2022 and 2023. That 7% to 9% included a growth rate for the Merchant business of 9% to 12%, for our Financial Technology of 4% to 6% and for our Payments from 5% to 8%. With a $10 billion number, obviously, at 11.5% CAGR from 2021 to 2025, we're at the upper end of that range, but there's a bit of an overlap in terms of the medium-term is only '22 and '23, and we've extended the outlook, so to speak, for merchant. We're at the top end of that range. But ultimately, we're early in that medium-term outlook period. And it's a little early. We're at this point, not updating it, and we feel quite good about the 7% to 9%, which, by the way, happens to be the outlook/guidance for 2022.

So I'd like to thank everybody for their time today. I hope you enjoyed the presentation. We really enjoyed the questions. So I thank you. If you have any further questions, please contact our IR department. Have a great day, and thanks for everything.

Thank you.