All right, let's get started. Good morning, everyone. I'm Rayna Kumar, and I lead U.S Payment Processors and IT Services Equity Research at UBS. Today, it is my pleasure to introduce our keynote speaker, Mastercard Chief Financial Officer, Sachin Mehra. Sachin, thanks for being here today.
Well, good morning, everyone. Rayna, thanks for having me. I'm happy to be here.
Yeah. Maybe if you can just start off, telling us a little bit about what you're seeing out there, from a consumer spending perspective at Mastercard.
Sure, I'm happy to do so. So look, I mean, what we see from a consumer standpoint is that the consumer continues to be resilient. They continue to be spending on travel, they continue to be spending on experiences, even as we look at the data through the end of August. You know, candidly, the way we kinda think about this is, you know, what's the shape of the economy, broadly speaking? What are we seeing from a, you know, labor market standpoint? And we all know that the labor market continues to be strong. We're seeing strong wage growth to take place. Yes, inflation is at, you know, higher levels, although it is moderating. So overall, as we see the consumer, the consumer continues to be resilient.
As we mentioned in our second quarter earnings call, what we are seeing is, with some level of moderation and inflation, that there is a little bit of moderation, which is taking place in domestic spending in select markets. But, you know, overall, if I kinda step back and think about the health of the consumer, still very resilient. When you think about what's going on from a cross-border standpoint, cross-border continues to be strong. You know, in the second quarter, we saw cross-border travel, at index, indexing at north of 150% of our 2019 levels. And then when I think about cross-border non-travel, as most of you know, cross-border non-travel had actually seen a very, very nice uplift take place during the COVID years. That continues to be the case.
So again, very healthy levels from a cross-border standpoint. We continue to see some level of potential, in terms of recovery in cross-border, particularly in Asia Pacific, more specifically in China, both inbound and outbound China. But broadly speaking, that's where we are from a macro standpoint.
We've seen a lot of movement in FX lately, especially with the U.S dollar strengthening. How do you believe that impacts the guidance you've given?
Yeah, you know, look, it's interesting. I mean, I think all of you know the way FX impacts our business. We are a global business. You know, we've got a presence in the U.S We've got a huge presence overseas, and at the time of the second quarter earnings call, I kind of shared with you what our expectations for FX were for both net revenue and operating expenses for the third quarter. Since then, the dollar has strengthened. I had shared at the time of the second quarter earnings call that, for Q3, we thought that FX would be approximately a three PPT tailwind to net revenue. We now see that as being approximately a two PPT tailwind because of the dollar strengthening, which has taken place.
And then from an OpEx standpoint, it said that we saw OpEx be impacted from a headwind standpoint from an FX of about one-two PPT. We now see that above one-1.5 PPT of a headwind from an FX standpoint. Again, you know, the FX markets will move around. We do our best estimates in terms of what we think the impact for a given quarter will be. This is what we see, though.
Very helpful. You noted a number of wins in the last few quarters. Can you share details on those wins and help us understand what enabled Mastercard to be successful? And then maybe if you can talk a little bit about the financial impact of these wins. Are you finding the environment more competitive than it used to be?
Sure. First, I gotta say, I'm incredibly pleased with the level of success we are having with our client base, as it relates to the wins in the market. As you know, you know, we are out there, we are competing in the market, which is, you know, competitive and has always been competitive. We're thrilled with the level of responsiveness we're getting from our clients. When we step back and we think about why we're winning, it all starts and stops with: Are we meeting our clients' needs? And that's kinda the first, second, and third of our business, to meet our clients' needs. This is not about what we want to do, it's what we can do to actually accelerate the growth of our clients, because if they win, we win.
And really, we have adopted what we call a solution selling approach to get after that. To say it differently, our approach to winning with our clients is to go in and understand what we can do to drive their top-line growth and manage their expenses. And to drive their top-line growth, what we are doing, we're leveraging a set of capabilities that we have been investing in as a company for some time now, and they range from everything we've done in nature of investment on digital capabilities, so the digital innovation we're doing, the tokenization efforts we've been kind of putting into place, to the investments we made in our services capabilities, to the investments we're making in new networks and our multi-rail strategy.
So when I think about the package, not every client needs everything, but then when you go and understand what a client needs, and you start to actually tailor solutions to meet their needs to drive their top line, you tend to garner a level of endearment, which is different than if you just went to a client and talked about, "Look, I want you to switch your business because, you know, at the end of the day, that's what serves our purpose." It can be, from a client standpoint, for them to move from a competing network to Mastercard is a zero-sum game, they can't really drive appreciation in their top line as part of that process. So everything we can do with our solutions, whether it's services, our multi-rail strategy, our new networks, our digital capabilities to drive their top-line growth, is what's helping us win.
And we have invested very heavily in capabilities, which are actually paying out pretty nicely. And this is true not only for driving their top line, it's also true for managing their expense base. So, for example, if you really step back and you think about, you know, the cost structure of our clients, yes, they pay switching fees to Mastercard. They do have a significant cost element, which comes from the cost of fraud.... The fact that we invest heavily in our fraud capabilities, and then we continue to invest in that space to help minimize their fraud levels, goes a long way in terms of helping win with our clients. And you kind of talked about the wins we've had. I'll just share a few, which we kind of recently announced.
So in the U.S, we've had wins with Citizens Bank and Pfizer, just to name a couple, where Citizens is now going to be a Mastercard exclusive customer across all products, which we are incredibly pleased with that. We believe that the meeting of the minds between Citizens as a customer and Mastercard in terms of what they need and our objectives and our capabilities aligns with them, was a critical factor in getting us to be, you know, the compelling kind of company or partner of choice for Citizens. Then I step over to Europe, and I think about the wins we've had there. We announced the win with UniCredit, which is, you know, we're gonna get. We had an existing relationship with them. We have now an expanded relationship with them.
It is basically a multi-market, single card approach, which we're gonna be taking. 13 banks are in the UniCredit family involved across 12 countries in Europe. 20 million cards migrating over to Mastercard, which we call the Mastercard. So that's pretty sizable. And then when I kind of go into the U.K., I think about the wins we've had around NatWest, where we converted 16 million debit cards off NatWest over. When you combine that with first direct, that's a total of 27 million debit cards, you know, transitional to Mastercard. So anyway, these are just a few examples. I could go on, and I'm not gonna kind of give you the laundry list of wins we've had. The reality is, the reason we're winning is because we are working with our customers to understand what their needs are.
We have existing solutions to meet those needs, and when we don't have them, we make investments to actually figure out where we want to go next in order to continue to drive that growth.
Anything you could say on timing of the wins in UniCredit?
You know, look, they're gonna play themselves out over, you know, a period of time. You don't, you shouldn't expect anything in the nature of big bang, bang approaches. These things will play out over multiple quarters. We want to do it right, because the idea here is to put in a manner of driving, you know, minimal disruption to the consumer who our customers work with, and that's kind of part of it. We work very closely with them as part of the process.
Understood. Can you talk about the runway that remains in the person-to-merchant payment space, particularly after the pandemic?
Yeah, look, I mean, we. First of all, I think you all know that there's been a decent amount of secular shift, which is the conversion from cash to electronic forms of payment, which took place during the pandemic. We continue to believe that not only is there, you know, room to move further in terms of that conversion from cash to electronic forms of payment in person-to-merchant payments in the near term, but we believe that's a long-term opportunity which continues to exist. It exists in both developed and lesser developed markets. And very often, you know, the focus has been around what is the volume, as in the dollar volume, of, you know, of spend, which still remains to be converted. And I think that's an important metric where we see decent long-term runway.
But we need to keep in mind also that there is another element, which is the number of transactions that have migrated from cash to electronic forms of payment. As most of you know, our revenue model is, we make basis points on the volume, and we make cents per transaction. The amount of transactions that has converted from cash to electronic payment is actually significantly less than the volume which is converted over, and the reason is the higher ticket stuff is converted first. The lower ticket stuff is actually yet remaining to be converted. We remain very focused on targeting not only the volume opportunity, but also the transaction op. In addition to that, what you have observed is, over the last few years, there's been a shift in the way businesses develop and consumer are spending. Let me give you an example.
So historically, when my daughter would go to buy lunch, she would go to wherever in Manhattan she wants to go and buy lunch. She would pay with her credit or debit card, and that would be $10 for a salad, if I'm lucky. I wish. $10 for a salad and one transaction. Now, you will see that same transaction takes this as well. She will get an Uber Eats. She will order that same salad. There will be a transaction which will take place between what my daughter spends on with Uber Eats. That will be a card-based transaction. There will be a transaction which will take place between Uber Eats and the restaurant where she purchases it. That's the second transaction which never took place in the old environment.
And then there will be a transaction which will take place where Mastercard Send will be used for paying Uber for this, and the Uber delivery person for what they're doing in the nature of delivery. So what's happened is, with the business models and consumer behavior, what used to be a single transaction has now become three transactions, and in some instances, greater amounts of volume as well, depending on what the case might be. So we believe that secular opportunity exists on volumes, exists on transactions, and we're going right after it. So there's the what, which exists in the nature of the opportunity, and then there's the how. How we're going after it is by investing in contactless. We believe contactless is a great way to go after small ticket spend, and that's what we're doing.
At our last earnings call, we had shared with you that approximately 60% of all in-person swipe purchase transactions are now contactless transactions. The good news is, it's 60%, which is higher than it was in the prior quarter. The even better news is, there still remains 40% of opportunity to go after in terms of how we can go after contactless to tap into the smaller ticket opportunity. So that's one example. We're going after Tap on Phone, which is the acceptance footprint. So there's lots of things which we're doing because we believe very deeply in the secular opportunity, both from a volume standpoint and a pricing.
That's a great example. Let me know where she gets it.
I will.
valid.
I will.
So, prior to your role as Chief Financial Officer, you led the commercial business at Mastercard. Can you share some progress that you've made?
Yeah. Look, I mean, we believe commercial is a—it's near and dear to my heart for the reasons you said. I mean, I spent, you know, a decent part of my career at Mastercard running commercial products. We think it's a sizable opportunity. It's an underappreciated opportunity, and it's an underdeveloped opportunity from an overall potential standpoint, which is the reason we've been investing heavily in it. So let's kind of peel back the onion as to what exactly this commercial opportunity is and where it lies, right? The underlying growth algorithm for commercial is actually not meaningfully different than it is for P2M payments, which is there's baseline spend, which takes place just like there's PCE spend, which takes place with P2M payments. Commercial, this is the equivalent of what happens from a B2C standpoint, right?
The spending businesses do, which takes place. The secular opportunity we talk about in P2M exists in space, in commercial, because cards have been very minimally used to actually tap into that commercial opportunity. If you look at the potential support for converting cash and check in commercial spend to card-based forms of payment, it is meaningfully higher than, than anything which we've ever experienced on P2M payments. The question really is: How are we going after this? And first, let's define what's into commercial. There's spend, which small business owners do. There's spend, which takes place in your T&E corporate card propositions. There's card spend, there's purchasing card spend. This all kind of is encompassed in what we call commercial point of sale. And then there's virtual cards, which is going after the accounts payable flows. That kind of sizes up what the commercial opportunity is.
Just to level set for you as to what the size and magnitude of this is for Mastercard, in 2022, commercial, Mastercard branded commercial, credit, and debit, represented approximately 13% of Mastercard's total GP, and it grew at approximately 24% on a local currency basis, which is an important part of our business. It's a fast-growing part of our business, and we're going after it, leveraging our card rails. So this is not about creating new mousetraps. This is about taking your card rails along with complementary proprietary systems, which are fit for purpose for going after the use case required. I'm going to spend just two minutes talking about what that is, right? When you think about SMEs, in the SME space, every small business owner needs a debit or a credit card proposition to enable their business.
But they not only need that debit or credit card proposition, they need that debit or credit card proposition with the likes of what we provide them. For example, they need an expense reporting capability to manage the expenses of their small business. Mastercard has something called our card data platform, which does exactly that. We have invested in this for more than a decade. We have built it to meet the needs of what our, our small business owners need, and we, we bring that together with our card proposition to kind of go after. That's just one example. The other one would be our savings platform, which is a multi-funded loyalty platform. So I'm a small business owner. I have a Mastercard debit or credit card. I'm signed up for Easy Savings. When I travel, and I want to get to...
I go, get to a different city, and I want to do a rental car. Mastercard has got those rental car companies engaged in our Easy Savings platform to have an always-on offer made available to that small business owner. You might say, "Well, how is that unique? How is that different?" Well, that is exactly what it is. You're meeting the needs of the small business owner to have been incentivized to use that card. We go after that in that way. Let us just, you know, a couple of examples just to give you a flavor of going after it. On the virtual card side, I would say, look, we are market leaders in that space. We love the growth we're seeing there. We've invested heavily in our control platform.
Our In Control platform is our virtual card platform, which enables us to tap into and meet the pain points which are there in the accounts payable space. So the pain points are around process efficiency, it's around availability of data to reconcile payments with the invoices which are being paid, it's around providing working capital, all three of which a virtual card proposition does. We recently announced the launch of a product called Mastercard Receivables Manager. What Mastercard Receivables Manager does is it basically combines and brings through straight-through processing, which deals with the process efficiency pain point. It deals with providing enhanced data to the receiver of the money to allow them to do better reconciliation of invoices. And the virtual card proposition, by its very definition, provides working capital.
So when you bring the package together, you're taking away reasons for people to not to actually convert away from checks, and in many instances, APs to come into the virtual card side of the business, which is why we're seeing the growth we're seeing in that space. And then we continue to partner with ecosystem partners such as the likes of Coupa and SAP Taulia, and most recently, GEP, we announced. All of which we're embedding our virtual card technology into to allow for greater and faster growth in that space. So, look, I continue to be very encouraged by not only what the potential is, but how we're going after that potential.
Got it. Moving on to services, this obviously been a great area of growth from Mastercard. Can you share some of the key components of the services business and how you choose the areas you're invested in? Your competitor often speaks about how they have an advantage in the service business. We'd love to hear where you think you do better.
Yeah. I'm going to. Look, I mean, I, with, with all due respect, I'm going to let the competitor speak about what they do on services rather than me actually going through the back and forth on that. I'm going to talk about what we do from a services standpoint and what our definition of services is. Our services portfolio primarily consists of our, what we call our C&I capabilities, which are our cyber and intelligence fraud management tools. It consists of our data and services capabilities, which insights, analytics, our loyalty platform, marketing services, payment consulting capabilities. We've got processing assets, we've got API assets, that's part of it. But the lion's share of what we generate in the nature of revenue and growth comes from our fraud management capability, C&I, and our data insights and analytics, consulting, marketing services, and loyalty, which is at the end.
So that's just the definition of what Services for Mastercard is. It is a fast-growing part of our business. We have invested in this part of the business for a few reasons. There are actually four reasons: One, it grows at a fast clip in terms of revenue contribution. Number two, it helps us diversify our revenue stream, and we saw this in spades during COVID, when payment revenues came down because of all the impacts of COVID, services held up pretty nicely, right? Number three, it's a great source of talent. The people we're able to hire in our services capabilities are a fantastic entry point to bring really good talent into the company who then migrates into other parts of our business.
Last but not least, it really helps us what we do on the payment side and what we do on the network side. It goes back to the question that you were asking earlier about why we win. Well, one of the reasons we win is because of what we've got in the nature of our services capabilities. That's the differentiation point I'm talking about, which is your ability to actually truly call yourself a partner to a customer with what you're able to provide them in the nature of data, insights and analytics, and/or fraud tool, helps us differentiate and win at the core. And we think these are very integrally tied. And look, the way we are going after the services opportunity, it's not rocket science. It's the following, which is we have a set of existing services.
We're going to call for deeper penetration by existing services. Point number one. Point number two, we're going to take that existing set of services, and we're going to tap into, and are tapping into new flows, new networks, and new customer segments. Really important for us. And number three, it's about while we're doing all of that, we can't be complacent that the existing set of services is all that matters. We continue to expand our set of services, both organically and inorganically, so that we can keep that. And really, that's what we're doing. I mean, services continues to actually be a key differentiator for us. We think when I think about our focus areas, I think about, you know, our cyber intelligence capabilities and why I believe there's a large addressable market, which is there for the long term on this.
If the world is going to go more digital, which it is, right? The reality is, fraud is migrating from the physical environment into the digital environment. In the physical environment, there were a set of tools which were previously available for payments, such as, you know, chip and PIN and things of that sort, which were hacking fraud. As the world has gone more digital, our customers and their end consumers need more capabilities to manage their fraud experiences. That's what we're investing in, because that's where we see the demand coming from a going-forward basis. We see that on card rails, but we also see that on non-card rails. We launched a solution recently, and we publicly announced this. This is a consumer fraud solution. It's actually being tested out with 9 banks in the U.K right now.
But really what it is, is it's about taking our technology, taking our advanced AI capabilities, and effectively leveraging the fact that we get to see through our multi-rail strategy, flows that take us over both card rails and non-card rails in the U.K. because of our acquisition of Vocalink, right? We get to see that. We're able to like actually preemptively predict for our customers where scams take place and where scam is taking place. Scam is a big problem. We all know this, we all see this, we all experience it. And our customers are giving us very good feedback right now on the response and the results they're getting from that. So that's just an example of how we're kind of going after...
Again, we've got to start off with what the need in the market is, what are we hearing from our customers, and then come up with solutions, which is what we do. That's how we're going with services.
You just mentioned that the services business held up very well during the pandemic. Are you able to talk about how much of that revenue is recurring of the services business?
Yeah, you know, what we had shared with you in November of 2021, right? We had kind of shared with you that a decent component of, you know, our services related revenues are recurring, and we had shared with you at that point in time that approximately 50% of our services revenue was linked to transactions. That's important. And the reason I think that's important is because that 50% is actually a nice place to be, because it gives you a blend of two things. One, the remaining 50% is not necessarily dependent on what goes on in the payment universe, right? As in directly related to that. But the 50%, which is linked to transactions, has got a natural secular tailwind associated with it.
A natural secular tailwind associated with it is exactly what we were talking about earlier, what we expect in the nature of the potential for growth to take business on the payment side. So if you are able to deliver services that are tied to, you know, transactions, and if you expect transactions to grow at a particular clip, you get that natural tailwind even for your services growth to take place. We like that mix which is there, and we like the recurring nature of what's there, more broadly speaking. You know, just to kind of give you a little bit more color, our C&I capabilities are more recurring in nature and more linked to our transactions. Our D&S capabilities have got some level of recurring revenues.
There's a lot in D&S, which we've got to go and win every year, which is important, like consulting, for example, right? Some which is linked to transactions, but not nearly as C&I.
... Understand, that's very helpful. Shifting gears to the regulatory front in the U.S with Reg II, do you view this more as, so as opportunity or a threat to Mastercard?
Yeah, look, I mean, first we are compliant with what was stipulated as part of Reg II, right? I mean, which was really to make sure that there were two unaffiliated card networks available for card-not-present transactions in the U.S, right? That was supposed to be by one. We are fully compliant with that. We view this as both an opportunity and a risk at the end of the day. Look, is there going to be some amount of volume and transactions where a lower cost alternative network, which is less secure, goes after certain merchants to get them to actually without a certain network? I would argue, yes. But I would also, from everything we're hearing from our client base, including all the merchants we talk to, is they're thinking long and hard about my point about less secure.
The fact that, you know, you can actually try and save a few pennies on the transaction switching and incur a multiple of that in fraud costs is what they worry about. And so I think people are being very deliberate about potentially just thinking about what that fraud experience might look like in the alternative path, which might be there, before they're actually just migrating away. Candidly, we've seen very little so far in the nature of an impact on this in terms of what we're seeing from a transaction standpoint. It's early days. Now, on the opportunity side, the reality is we stand ready to compete. We are not the largest debit network in the U.S, so we do have the opportunity to compete in that space.
We have the opportunity to compete, not only because we've got debit rails, it's because we've got what we believe are very superior fraud management capabilities as part of that process. So if we can do a good job in terms of bringing together our debit presence, our fraud management capabilities, to convince the merchant base about what we can bring relative to what the competition can, I think that's where the opportunity lies down.
Got it. Okay, that's really helpful. How are you thinking about some of the new RTP payment systems that have developed, like FedNow and Pix?
So RTP is an interesting space. We've been in it since 2016 with the acquisition of Vocalink in the U.K, so we're quite familiar with, you know, what RTP means. The reason we got into real-time payments is we believe in choice. We believe that we should make available multiple payment rails, and we should decide what works for them and what's fit for them. All right, so let's stop there. Let's talk about specifics of FedNow. FedNow is live, doesn't mean that FedNow is widely been enabled. Banks need to adopt and connect to FedNow, both on the send and receive side, and it will take time before that happens, right? Number two, connection alone through the bank infrastructure doesn't make FedNow a utility, broadly speaking.
But I think we've got to step back and we've got to think about what this means for P2M payments and what this means for payments beyond P2M, P2P, P2C. We think there's an opportunity, in terms of real-time rails across B2B and across B2C. We certainly think there will be use cases such as consumer bill payments, which will take place. There will be other B2B applications where you could use the likes of FedNow or even Pix, for that matter, right? On P2M, I think you got to kind of just step back and think about the value proposition exists in the market, which meets the need of the P2M flow today. The FedNow is a pay now solution. It is not a credit solution, it is not a prepaid solution. It is analogous to what people think about as debit.
And when you stack up debit, FedNow, you got to ask the question, "Is debit, debit ubiquitously accepted in the U.S?" The answer is yes. FedNow needs to create that acceptance. Let's stop there. Number two, you as a consumer, when you do a P2M transaction, right? Get the benefit and debit of things like zero liability, the ability to charge back, the ability to return your goods. These are important considerations in the mind of the consumer. Those capabilities and those services don't necessarily exist for the likes of FedNow, or for that matter, Pix as well. And then the third lever to actually think about is: What is the level of investment which is taking place from a fraud management capability standpoint on these rails? And I would argue that a lot of these rails suffer from a fraud management capability standpoint.
And so when I think about the P2M experience and the competition that a FedNow or a Pix creates through the, the debit card proposition, I think we're comparing apples and oranges. And which is why we feel like at the end of the day, the likes of FedNow will, will be very beneficial for use cases in B2B, and, you know, certain, you know, even in certain P2P use cases, right? To the extent that's enabled. In some markets, it is. So, for example, you asked about Pix. Pix is primarily used across P2P, and in some instances it's used across P2M flows in Brazil, in the card-not-present environment, not in the, uh, necessarily in the physical environment and in the card-not-present environment. For that universe of customers who doesn't have access to a credit card. Brazil, Brazil is essentially a credit market for us.
We are market leaders from a credit standpoint. Credit is a proposition which is being used in the, in the card-not-present environment. What was not available in Brazil was a debit proposition for card-not-present, which is where the likes of Pix have actually come in to actually go after. And we're going to put in our own debit solution for card-not-present as well. So I think you've really got to step back. I mean, am I saying it's all for naught? No, that's not what I'm saying. I'm just saying you've got to kind of parse out where it actually creates a threat and where it creates an opportunity. And the way we think about it is, FedNow, Pix, these are all good, important developments. We like the fact that there's choice being created in the market.
We think that there's a real opportunity for us in areas like B2B and B2C with these rails. On P2M, we continue to believe that the debit proposition is superior to what UPI and now or a fixed it.
Got it. That's really helpful. There's obviously been a lot of discussion as of late on pricing. Can you give us your latest thoughts on Mastercard's pricing?
Yeah, look, I mean, our pricing strategy is very consistent, and has been the way it has been for the longest time, which is around we price for value. If you deliver value in the market, you should have the right price, and that's what we do. And the reality is, our customers will always push back on us and tell us, "Well, that's not okay if you're not delivering value." And that's really kind of the bottom line of what our strategy on pricing is, right? It's always been that way. When we think about pricing, we think about, you know, how is the value chain benefiting from it? What is our estimate of the value that the value chain is getting from it, and what's our fair share of it?
When we put new products out into the market, price for the value we deliver, right? In some cases, we might launch a new product, we might not price for it upfront just to go and test it out, and then introduce pricing after the fact, after we've really gotten a good idea of what, you know, the value we're delivering is, but it's value-based.
Got it. Okay, we can now open up for any Q&A from the audience. We have a mic going around. Just raise your hand if you have any interest in asking Sachin a question.
One of the drivers of the electronic payments have certainly been rewards in the United States. I wonder what your perspective is on whether we're at peak rewards for consumers. And the second one is, you know, we've seen the creeping premiums for card transactions, for credit transactions versus cash. And what do you think, where do you think we are in that evolution?
Yeah, I probably need a clarification on your second question, but I'll take your first question first, which is on rewards, right? Look, I mean, at the end of the day, rewards are... Consumers care deeply about rewards, and they want part transaction. Do I think we're at the peak on that? That's entirely about what segment of the population is, again, what value. There are value props out there where there are no rewards. They're going after a different segment of the population than it would be if I'm going after, call it an affluent segment, which is willing to pay, you know, an annual fee on the card and the associated rewards which come with that. I think there's the potential for some level of shift to take place in where the rewards come from, right?
Because traditionally, rewards have only been funded from the, by the issuers. So there's a greater hope is coming from the merchant community to fund rewards, to drive affinity towards merchants in question, right? and, and this is why we make investments in our loyalty platforms. the value of delivering personalized offers, both by merchants and by our issuers, is rising right to the top of the list of things which our customers care about based on the feedback they're getting. And top in that personalization piece is: how can you deliver rewards which are fit for purpose for the customer involved? So back in the day, if you went back a couple of decades ago, and you probably see this in card propositions today, you'll see a laundry list of what will be benefits and rewards which come with a card proposition.
I would argue that a lot of those are redundant. Most consumers don't even leverage a lot of those benefits. So now there's a level of personalization we're able to deliver with some of the recent acquisitions we've done, where we are aligned for better catering of both merchant-funded and issuer-funded rewards to our client base. Then on your second question, I didn't quite follow when you talk about premium, what, what is that?
you know, upcharges for credit card use versus cash.
Oh, I see. You're talking about surcharging, which takes place, right? Yeah. Look, I mean, the reality is surcharging is for credit cards in the U.S, you are allowed to surcharge. There are states which have different rules. Different states in the country have different rules around surcharge. You cannot surcharge for debit cards. You can surcharge for credit. Merchants will make that choice, right? At the end of the day, what merchants also experience is, they've got to make that call as to whether they want to turn away a client, because the client basically says, "I don't even have cash in my pocket, so I'm not even sure I really want to go to this merchant because they're surcharging me." And then in other instances, you know, you know, customers might say, "That's okay, I'll pay that nominal fee," which is there from a surcharge standpoint.
The merchant really does have to think, though, about what the experience for the consumer is when they actually get to that position. But you're right, you are seeing increasing amounts of surcharging take place. There are rules around that. You cannot surcharge, you know, in an egregious manner. So said differently, you cannot just surcharge ridiculously. There's a cap to what you can surcharge. It's basically mostly tied to your cost of acceptance at the end of the day. And I honestly, we see some of it, but we're not really seeing a change in consumer behavior as a result of that.
We can take one more question from the audience.
Thank you very much. Just a high-level broad one. If you think about big pockets of growth in emerging markets, you know, China probably being a very challenging market, India, still probably a ton of potential, but obviously a very important government-funded local scheme. Brazil, also. Where do you see the biggest mismatch between the market's perception, perhaps of Mastercard's growth in emerging markets and the reality on the ground?
So you're right about China. I mean, like China, it's, it's kind of binary, the answer there. Either you can or you cannot play. At this point in time, we're not playing in the domestic market. We're ready to go, we're just waiting for the right permissions to go on that. So there's no point. The opportunity is you, let's just be clear, but the reality is you can't play there. India continues to be a very important market. We will continue to compete there. It is a interesting market because competition in the context of we want to compete where we can do so while actually making sure that the ecosystem makes money. India is a little challenged in that regard, right? When you have the likes of UPI.
UPI is fantastic at many levels in terms of what it's done to create digitization in the economy. It is an incredibly painful experience for ecosystem participants who all end up losing money as part of that. We continue to see good growth on our debit and prepaid proposition. We see there to be a lot of potential going forward as well. Let's talk a little bit about Africa, because I kind of almost feel like sometimes it's a forgotten continent, right? The reality is there are 1.3 billion people across all the countries there. We continue to invest heavily. More recently, we announced an agreement with MTN, which is a mobile network company. Well, it's a telecom company which has a mobile network operation.
We had previously, a couple of years ago, announced an agreement with Airtel, which is the other big player there. And the reason we're taking that approach in a market like Africa, the number of mobile wallets that are available in Africa is far greater than the number of... And our approach to that market is, if you can partner with those mobile network operators to get after it, to create an open loop, card-based environment, right? Both from an acceptance and an issuance standpoint, it's a great opportunity there. So Africa is one to keep an eye on. We certainly think that... But a little known, a little focused on fact is, let's take a market like Japan. One would say, "Well, Japan's pretty well developed. What's the problem? You know, why is there a big opportunity?" There's a huge opportunity in Japan.
There's a lot of cash which takes place today, a lot of cash which takes place in Germany today. The reality is we continue to remain focused on driving in each one of those markets as part of what we do. That doesn't mean we'll take our eye off the ball in the U.S and in other European markets, but since you asked a specific question as to where the underappreciated markets are, I hope...
Yeah. We're reaching the end of our session, so I just want to ask you one final question. What message would you like to leave to the audience? I know we covered a lot. Anything we missed in our Q&A?
Yeah, look, I mean, first, that was very comprehensive, so thank you for that. It was like rapid fire like I haven't seen. But anyway, it's a good thing I had a couple of cups of coffee before I came in here. Here's what I'd say. Headline, I continue remaining very excited about the growth opportunity that Mastercard brings. And I think we have a very well articulated and a very solid strategy. I think you're all familiar with that. It's around expanding in payments, it's around extending our services. It's about, you know, you know, building these new networks, which we're talking about, right? It's for us to execute on. That's what we remain focused on. So the message is, very often we get caught up as human beings with the new cool stuff.
There's a lot of juice to be extracted from the stuff which Mastercard does, very basic payments and services standpoint, which we are putting our head down and going after. It's everything we've spoken about today. It's about tapping into that secular opportunity, which is there in detail. It's around going after those commercial flows. It's around going after all these services which we're going after, and bringing the power of all of that together to continue to build. I remain very excited about that. And I just say, you know, look, at the end of the day, strategies are great. You've got to execute on them, and this management team continues to be very focused on exactly that, which is making sure we're going after that, that execution piece.
Wonderful. Such a pleasure having you. Thank you for keynoting UBS's FinTech Leaders Conference today.
Thanks very much. Thank you, everyone.