Good day, and thank you for standing by. Welcome to the fourth quarter 2021 and full year Mastercard earnings conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one on your telephone.
Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today, Mr. Warren Kneeshaw, Head of Investor Relations. Please go ahead.
Thank you, Jamaria. Good morning, everyone, and thank you for joining us for our Q4 2021 earnings call. With me today are Michael Miebach, our Chief Executive Officer, and Sachin Mehra, our Chief Financial Officer. Following comments from Michael and Sachin, the operator will announce your opportunity to get into the queue for the Q&A session. It is only then that the queue will open for questions.
You can access our earnings release, supplemental performance data and the slide deck that accompany this call in the investor relations section of our website, mastercard.com. Additionally, the release was furnished with the SEC earlier this morning. Our comments today regarding our financial results will be on a non-GAAP currency neutral basis unless otherwise noted. Both the release and the slide deck include reconciliations of non-GAAP measures to GAAP reported amounts.
Finally, as set forth in more detail in our earnings release, I'd like to remind everyone that today's call will include forward-looking statements regarding Mastercard's future performance. Actual performance could differ materially from these forward-looking statements. Information about the factors that could affect future performance are summarized at the end of our earnings release and in our recent SEC filings. A replay of this call will be posted on our website for 30 days. With that, I'll now turn the call over to our Chief Executive Officer, Michael Miebach.
Thank you, Warren. Good morning, everyone from New York. I'm starting off with the key highlight for the quarter. We delivered strong revenue and earnings growth as we saw further improvement in our underlying operating metrics. Quarter four net revenues were up 28% and EPS up 46% versus a year ago on a non-GAAP currency neutral basis.
On the same basis, quarter four net revenues are 19% above pre-COVID levels in 2019. With that, let's take a look at the macroeconomic front. The outlook remains positive despite the recent supply chain constraints, geopolitical uncertainties and inflationary pressures. Although there has been a recent surge in COVID cases, there are signs that these may be peaking. While each of these areas merit monitoring, underlying spending trends remain strong as consumers, businesses and governments have become more adaptable to a changing environment.
In the U.S., economic growth remains solid with low unemployment and healthy consumer confidence. According to our quarter four SpendingPulse report, which is always based on all payment types, including cash and check, U.S. retail sales ex auto, ex gas were up 6.4% versus a year ago and up 10.9% versus 2019.
In Europe, GDP growth has been strong, although recently impacted by mobility restrictions. As the impact of the Omicron variant reduces, we expect the economic growth to pick up in the coming quarters, in large part thanks to considerable pent-up demand from the past year. SpendingPulse shows that overall European retail sales in quarter four were up 3.3% versus a year ago and up 1.3% versus 2019.
In Asia Pacific, vaccination rates continue to improve and we expect the economic recovery to pick up pace as both governments and businesses ramp up investment. The travel recovery in Asia Pacific has lagged that of the rest of the world and has significant growth potential. The growth in Latin America is expected to moderate a bit following the re bound in 2021.
As it relates to COVID specifically, there are early signs that the Omicron surge will be relatively short-lived. The reality is that the tools we have to deal with the pandemic are more advanced than ever. 60% of the world's population is now at least partially vaccinated. Effective therapeutics are becoming available. Governments are using more targeted measures to limit the spread. More borders have opened and have stayed open despite the recent variant.
Although we've always said the path forward will not be linear, there are signs we are moving toward the endemic phase of the disease. Looking at Mastercard spending trends, switch volume growth continued to improve quarter-over-quarter. Both consumer credit and debit continued to grow well. Turning to cross-border, the recovery has continued with overall quarter four cross-border levels now higher than those in 2019.
Cross-border travel continued to show improvement relative to quarter three levels, aided by border openings in the U.S., U.K. and Canada. While Omicron has had some recent impact on cross-border travel, we continue to believe that cross-border travel will return to 2019 levels by the end of this year. Cross-border card not present spending ex travel continued to hold up well in the quarter.
Overall, the spending trends are moving in the right direction with some near-term travel related headwinds as a result of the variant. Now turning to our business highlights. As outlined at our Investment Community Meeting in November, we remain focused on our Grow, Diversify, Build strategy and our three strategic priorities, which are Expanding in Payments, Extending Our Services, and Embracing New Networks.
Here's an update on how we're progressing against each of those priorities. First, we're expanding in payments by growing person to merchant payments, scaling across other payment flows, and leaning into innovation in new payment technologies. In aggregate, these targeted flows represent 115 trillion in opportunity. First up, we're driving growth in personal merchant payments through new wins across the globe.
In the U.S., I'm excited to announce that we're partnering with Chase and Instacart, the leading online grocery platform in North America, on a new Instacart-Mastercard co-brand program. This partnership marks an additional co-brand win with Chase, quickly following the recent launch of the Chase Aeroplan World Elite Mastercard. In addition, with First Interstate Bank's planned acquisition of Great Western Bank, we will flip Great Western's consumer debit, credit, and commercial portfolios to Mastercard.
I'm happy to note that the consumer credit portfolio of Merrick Bank, over 3 million customers, will transition to Mastercard beginning in the second quarter. Merrick Bank plans to leverage several Mastercard solutions, including our fraud prevention, consulting, open banking, and loyalty services. Over in the Netherlands, we've renewed our partnership with Rabobank, which includes the migration of 8 million Maestro cards to Debit Mastercard.
We've signed an exclusive deal with Westpac in Australia for their new banking-as-a-service platform. This platform will allow new players to leverage Westpac's banking capabilities. Afterpay, the first partner on the platform, will connect Debit Mastercards to their Money by Afterpay app. In the U.K., the NatWest debit migration is progressing to plan as we're in the early stages of consumer rollout. We're also expanding in payments by capturing new payment flows, including commercial, B2B accounts payable, bill pay, and cross-border remittances.
For example, in the commercial space, we've expanded our relationship with Bank of America, where we'll be the lead brand for new commercial card issuance. We've also renewed and expanded our relationship with WEX, including being chosen as their strategic partner in adding open loop functionality to their millions of closed loop fleet cards.
For B2B accounts payable, we continue to scale Mastercard Track as WEX, BMO, BOK Financial, Melio, and Deluxe will connect to the platform. We also announced the launch of Mastercard Track Instant Pay, which uses machine learning to analyze and initiate automatic virtual card payments, streamlining processes for buyers and improving cash flow for suppliers.
We're driving new B2B acceptance through a global partnership with Boost Payment Solutions, with an initial focus on expanding the use of commercial card in seven key markets. We're addressing new payment flows and consumer bill payments as well. We recently announced the acquisition of Arcus to help deliver bill pay solutions and other real-time payment applications in Latin America. Arcus enables digital payments for the majority of household bills in Mexico and its connections with banks, fintechs, and digital wallet providers across the region.
Finally, we continue to capture new flows in cross-border remittances. This quarter, we established a partnership with Travelex in Brazil, who will use Mastercard's cross-border services to send P2P transfers to the U.S. and Europe. For domestic disbursements in the U.S., we partnered with fintech processor TabaPay to make Mastercard Send easily available to fintechs and merchants across multiple use cases.
Now shifting gear. We're also expanding in payments by leaning into payment innovation in areas like installments, contactless acceptance, and cryptocurrencies. Here are a few examples. Our open loop Mastercard installments program that we announced this week. Watch this space. Now we're making great progress in expanding contactless acceptance by turning the world's billions of active smartphones into potential acceptance devices, enabling people to buy and sell whenever, wherever they want.
We now have 100 deployments of Tap on Phone and increased to 1 in 2 of our in-person swipe transactions globally this quarter. This is up from approximately 1 in 3 prior. Financial inclusion and consumer convenience is substantial. We're also bringing capabilities, experience, and reach to help enable the crypto NFTs. Tried that myself.
Our work with ConsenSys will make it easier for software developers to increase the scale, efficiency, and speed of transactions on Ethereum and permissioned blockchains. Our CBDC Sandbox test platform, which we launched in 2020, continues to gain traction. We're helping central banks, financial institutions, and fintechs simulate the issuance and distribution of a CBDC, along with the integration of CBDCs with our card network, our real-time payment modules, and native blockchain wallets. Now, shifting to services.
Our services support and differentiate our core products and have played a critical role in enabling many of the things I just mentioned. We grew services revenue at 25% in 2021 on a currency neutral basis. We will continue to extend our service capabilities to enhance the value of payments.
We're even further accelerating our growth by expanding into new areas and new use cases, particularly through our data and services and cyber intelligence propositions. Again, a few examples for you. In December, we announced an agreement to acquire Dynamic Yield from McDonald's. Dynamic Yield uses enhanced AI to deliver customized product recommendations, offers, and content to consumers.
Their customer set includes over 400 global brands, ranging from financial services companies like Synchrony to retailers like Lenskart. When combined with SessionM's loyalty platform and our Test & Learn experimentation software, we will be able to offer a unified consumer engagement and loyalty hub to our customers. McDonald's is a great example of a company who's using all three of these platforms today, with plans to further scale and integrate Dynamic Yield's capabilities globally.
In addition, our Ethoca platform continues to experience strong traction in preventing unnecessary chargebacks, a real pain point. We added new customers in every region in 2021 for Ethoca. Recently, we launched Ethoca Consumer Clarity, which gives consumers detailed information about purchases on their mobile banking app. The solution is live with issuers across the U.S., U.K., and several European markets, including OTP Bank, Central Cooperative Bank, and Paybox Bank.
Now, beyond expanding in payments and extending in services, our third strategic priority area is embracing new networks. Specifically, we are leveraging our expertise in payments to build out new networks, with a current focus on open banking and digital identity. On the open banking front, we have closed the acquisition of Aiia in November, which brings strong API connectivity to over 2,700 banks across Europe.
When combined with Finicity's North American connection, which cover more than 95% of deposit accounts in the U.S. market, Mastercard has an unparalleled footprint in the key open banking regions, upon which we're building solutions to solve for a wide range of use cases.
One example is in the mortgage verification space, where Finicity has signed deals with several new partners, including loanDepot. In the digital identity space, we're helping our customers with fast, frictionless identity verification services.
Ekata has performed strongly over the last quarter, expanding through strategic partnerships with companies such as Zip and Equifax, as well as growing its global footprint with leading fraud providers Tongdun and iClick in Asia-Pacific. Combined, open banking and digital identity extend our value before and after the payment transaction.
These are large, attractive and growing opportunities that we are uniquely positioned to be a leader in both. In summary, we delivered strong revenue and earnings growth this quarter. The macroeconomic outlook remains positive with a few areas that we're monitoring, and we're executing against our three strategic priorities, expanding in payments, extending our services, and embracing new networks. All that with substantial progress on the product and deal front this quarter. Now, Sachin, over to you and the numbers.
Thanks, Michael. Turning to page 3, which shows our financial performance for the quarter on a currency neutral basis, excluding special items and the impact of gains and losses on our equity investments. Net revenue was up 28%, reflecting continued execution of our strategy and the ongoing recovery in spending.
Acquisitions contributed 3 basis points to this growth. Operating expenses increased 19%, including a 7 percentage points increase from acquisitions. Operating income was up 37%, which includes a 1 percentage point decrease related to acquisitions.
Net income was up 44%, which includes no impact from acquisitions, as the impact of acquisitions on operating income was offset by a one-time acquisition-related tax benefit. EPS was up 46% year-over-year to $2.35, which includes a 4-cent contribution from share repurchases.
During the quarter, we repurchased $1.3 billion worth of stock and an additional $528 million through January 24, 2022. Let's turn to page four, where you can see the operational metrics for the fourth quarter. Worldwide gross dollar volume, or GDV, increased by 23% year-over-year on a local currency basis. We are seeing continued trends in debit and credit. U.S. GDV increased by 23%, with debit growth of 15% and credit growth of 34%. Outside of the U.S., volume increased 23%, with debit growth of 25% and credit growth of 20%.
To put this in perspective, as a percentage of 2019 levels, GDV is at 125%, up 4 points quarter-over-quarter, with credit at 116%, up 5 points sequentially, and debit at 134%, up 3 points sequentially. Cross-border volume was up 53% globally for the quarter, with intra-Europe cross-border volumes up 45% and other cross-border volumes up 63%, reflecting continued improvement in travel-related cross-border as several borders opened during the fourth quarter. In the fourth quarter, cross-border volume was 109% of 2019 levels, with intra-Europe at 122% and other cross-border volume at 98% of 2019 levels.
Turning to page 5, switch transactions grew 27% year-over-year in Q4 and were at 132% of 2019 levels. Card present growth continued to improve while card not present growth rates remained strong. Card present growth was aided in part by increases in contactless penetration in several regions. In addition, card growth was 9%.
Globally, there are 3 billion Mastercard and Maestro branded cards issued. Now let's turn to page 6 for highlights on a few of the revenue line items, again described on a currency neutral basis unless otherwise noted. The increase in net revenue of 28% was primarily driven by domestic and cross-border transaction and volume growth, as well as strong growth in services, partially offset by higher rebates and incentives. As previously mentioned, acquisitions contributed approximately three basis points to net revenue growth.
Looking quickly at the individual revenue line items. Domestic assessments were up 24%, while worldwide GDV grew 23%. Cross-border volume fees increased 61%, while cross-border volumes increased 53%. The APPD difference is primarily due to favorable mix as higher yielding ex-Europe cross-border volumes grew faster than intra-Europe cross-border volumes this quarter.
Transaction processing fees were up 28%, generally in line with Switch transaction growth of 27%. Other revenues were up 30%, including a 9 ppt contribution from acquisitions. The remaining growth was mostly delivered by our Cyber & Intelligence and Data & Services solutions. Finally, rebates and incentives were up 38%, in line with our expectations, reflecting the strong growth in volumes and transactions and new and renewed deal activity.
Moving on to page seven, you can see that on a currency-neutral basis, total operating expenses increased 19%, including a 7 ppt impact from acquisitions. Excluding acquisitions, operating expenses grew 12%, primarily due to increased spending on advertising and marketing, higher personnel costs to support the continued investment in our strategic initiatives, and increased data processing costs.
Turning now to page eight, let's discuss the specific metrics for the first three weeks of January. First, as a point of process, we continue to provide volume and transaction metrics both on a year-over-year and as a percentage of 2019 basis. However, it is important to note that as we turn the calendar and move into 2022, the index versus 2019 metric now looks at three years and therefore includes a compounding improvement relative to the 2021 index metric.
This compounding impact must be taken into consideration when considering the sequential trend from Q4 to January. At the highest level, Omicron has had a minimal impact on overall switched volumes and transactions, but has caused some moderation on cross-border travel. Going through the metrics in turn, starting with switched volumes, through the first three weeks of January, we are now at 149% of 2019 levels, up 13 points versus Q4.
This increase is primarily driven by the compounding effect I just referred to. After adjusting for this compounding effect, switched volumes are tracking similarly to what we saw in Q4. The underlying trends in switched transactions, adjusted for the compounding effect, are generally tracking the trends we are seeing in switched volumes.
In terms of cross-border volume growth, as I mentioned earlier, spending levels as a percentage of 2019 in Q4 are now above pre-pandemic levels. The Omicron variant, which hit partway through December, impacted the strong cross-border travel momentum we saw in November. That impact has carried over into January. This has been partially offset by an increase in cross-border card-not-present ex-travel.
Overall, cross-border volume through the first three weeks of January is now at 116% of 2019 levels, up 7 points versus Q4. In this case, the compounding effect is partially offset by the impact of the Omicron virus on cross-border travel in January. Turning to page 9, I want to share our thoughts on the upcoming year. While there is some uncertainty related to Omicron and potential future variants, our overall expectations for 2022 are positive.
The macroeconomic outlook is for continued growth and domestic spending levels have held up well despite the recent surge in cases. The recovery in cross-border travel was progressing well prior to Omicron, and we expect the recovery in cross-border travel to resume as the surge passes.
As Michael just noted, the tools available to deal with the pandemic have improved with time, and although the path forward may not be linear, there are signs we are moving towards the endemic phase of this disease. Many countries have relaxed their border restrictions, and we continue to expect cross-border travel to recover to 2019 levels by the end of 2022. Our recent deal wins, travel-oriented portfolios, and diversified set of services position us extremely well to capitalize on these trends.
Turning to our expectations for the full year 2022, our base case scenario is for net revenues to grow at the high end of a high-teens rate on a currency-neutral basis, excluding acquisitions. Acquisitions are forecasted to add about 1 ppt to this growth, while foreign exchange is expected to be a headwind of 1-2 ppt for the year, primarily due to the strengthening of the U.S. dollar relative to the euro.
In terms of operating expenses, we continue to carefully manage our spending as we invest in our payments, services, and new network priorities to drive short- and long-term growth. For the year, we expect operating expenses to grow at the low end of a low double-digit rate on a currency-neutral basis, excluding acquisitions and special items.
Acquisitions are forecast to add about 4 ppt-5 ppt to this growth, while foreign exchange is expected to be a tailwind of approximately 1 ppt for the year. Turning now to the first quarter, year-over-year net revenue growth is expected to be at the high end of a high teens rate, again on a currency neutral basis, excluding acquisitions.
This reflects some sequential improvement in cross-border travel spending trends within the quarter relative to 2019, as the impact from Omicron starts to recede as the quarter progresses. Acquisitions are forecast to add about 2 ppt to this growth, while foreign exchange is expected to be a headwind of 2-3 ppt for the quarter.
From an operating expense standpoint, we expect Q1 operating expense growth to be at a high end of high single digits rate versus a year ago on a currency neutral basis, excluding acquisitions and special items. Acquisitions are forecast to add about 6 ppt to this growth, while foreign exchange is expected to be a tailwind of approximately 1 ppt for the quarter.
As a reminder, we discretely disclose the impact of acquisitions for the year in which they close and the subsequent year, after which time we do not split them out. For instance, Finicity, which closed in November of 2020, is now folded into the base. We are pleased to have closed the acquisitions of both Aiia and Arcus in November and anticipate closing the pending acquisition of Dynamic Yield in the first half of 2022. Other items to keep in mind.
On the other income and expense line, we are at an expense run rate of approximately $115 million per quarter, given the prevailing interest rates and debt levels. This excludes gains and losses on our equity investments, which are excluded from our non-GAAP metrics. Finally, we expect a tax rate of approximately 17%-18% for the year based on the current geographic mix of our business.
With that as a backdrop and turning now to slide 10, I would like to update you on our three-year performance objectives for the 2022-2024 period that we first introduced in November at our investment community meeting. The bottom line is that there is no change, although our jumping off point for earnings is slightly higher due to our Q4 2021 overperformance.
As a reminder, these objectives are on a currency neutral basis, exclude special items, gains and losses on equity investments and acquisitions closed after 2021. Using 2021 as our base over the 2022-2024 period, we expect to deliver a net revenue compound annual growth rate in the high teens.
This assumes an annual card volume growth rate of 10%-11%, cross-border travel returning to 2019 levels by the end of 2022, and growing our services revenues at a 20%+ CAGR. From an operating margin perspective, we will continue to operate with the philosophy of delivering a minimum annual operating margin of 50%.
Having said this, I would like to emphasize that we continue to believe that it is important for us to invest for the long-term growth while delivering positive operating leverage, and we continue to execute with this philosophy in mind. Finally, we expect to deliver an EPS CAGR in the low twenties range on a currency neutral basis, excluding the impact of special items, gains and losses on equity investments and future acquisitions. With that, I will turn the call back over to Warren.
Thank you, Sachin. Jamaria, we're now ready for the question and answer session.
As a reminder, to ask a question, you will need to press star one on your telephone. To withdraw your question, press the pound key. Please stand by while we compile the Q&A roster. Your first question will come from Rayna Kumar with UBS.
Good morning. Thanks for taking my question. With cross-border spending now above pre-pandemic levels, are you anticipating any pent-up demand in travel spend in your financial guidance, particularly as we get to the travel months in the summer?
Hi, Rayna, this is Michael. Let me kick this off. As I said in my remarks earlier, we do see pent-up demand. We've seen pent-up demand in the last year and the year before, and it continues. People will wanna travel and get out whenever they can, and it has been proven again and again. There is an assumption there, and we've been pretty vocal about that we do continue to believe that cross-border travel will return to pre-pandemic levels by the end of the year. Sachin?
Yeah, no, I think Michael, you pretty much covered it. Rayna, the only thing I'd just add is, you know, we just need to go back to 2021, where we saw that when people had the ability to travel, they expressed their intent to travel. We do believe that the impact of Omicron is gonna be short-lived. As borders start to relax a little bit more and people get a little bit more comfortable around this, people will get out there and express their demand for travel, back to what Michael was just saying.
In fact, I'm heading to Europe tonight, so there you go.
Great. Thank you.
Thanks.
Your next question will come from Harshita Rawat with Bernstein.
Good morning. Thank you for taking my question. Michael, I want to ask about FedNow. Looks like it'll be live with the U.S. in 2023. A domestic RTP system in many countries is used for payments other than consumer to business. You have examples like the ones in India with UPI, where it's used for retail payments. How do you see that playing out with FedNow, and how can you participate in some of the services enablement for that? Thank you.
Right. Thank you, Harshita. FedNow, we'll have to see when it actually comes live. Broadly speaking, if we go with our experience in other countries, you know, we believe there is in real-time payments a real alternative payment solutions. There's demand by governments, there's demand by businesses and consumers. The ISO 20022 standard allows to carry more data.
There's all sorts of reasons why this might make sense. To your question on how participation looks like, you know, when we just, you know, bought VocaLink in 2016, I promise I won't take you back five years now, but, you know, that was a conscious decision, realizing exactly what I just said, and that we want to play and we have to have those alternatives.
If I look at it from a use case perspective, there are some use cases where cards are just simply an excellent answer today. It's an ecosystem that drives huge value. There might be alternatives, but we continue to invest in that and focus on that. At the same time, there's a whole range of use cases where real-time payments account-to-account makes a lot more sense than basic ACH or cash, and that's a displacement opportunity that we certainly want to engage in.
Cross-border remittances, bill pay, and the likes. I think where our participation and our differentiation comes in is we have tools across the whole gamut of payment solutions. That's our multi-rail strategy. You know, we have advanced this quite significantly over the last couple of years to true multi-rail solutions.
Not like that we have one and the other in parallel. It's one single solution. If you look at Mastercard Track, that's exactly what it is. You can pay any which way through, any which way you like through Mastercard Track, but the payment optimization, the security, the pricing, the predictability, the Mastercard good is all the same across all of these options. I see it as a fundamental opportunity to participate in new flows rather than anything else.
Thank you.
Your next question will come from Darrin Peller with Wolfe Research.
Thanks, guys. You know, Michael, when we think about the parts of your business that are outperforming partly because of the pandemic, but partly given where we are just in the acceleration on spending on electronic payments, can you just walk through that in terms of what kind of sustainability you see to the parts of the business that have sustainable upside now?
In other words, debit volumes now probably bigger than you would have otherwise thought it would be. Services is another piece that's probably higher than it otherwise could have been. Are those sustainable? Then maybe, you know, remind us of the parts of the business besides just cross-border that can catch up as we see the recovery again. Thanks, guys.
All right. Thanks, Darrin. I'll start that off, and then maybe Sachin can kick in. First of all, the secular shift has gotten a real push out of COVID. I mean, we had to spend online and, you know, when I look at that, I think that is a fundamental structural trend, more online commerce, more online banking, more online e-everything.
You know, what has really come out over the last two years that this is a lasting trend. Every bit of consumer research that we do, market research that we do, people will say, "I learned to like it, so I'm gonna continue to do that." I think that is an accelerated growth opportunity.
You know, it's a big assumption in our three-year long-term guidance that we gave, that we continue to believe that the race towards a more digital economy will be a positive driver for us. Sustainable growth driver. You see it come through in how we build out acceptance, 19% acceptance growth.
We continue to find pockets and opportunities and flows and segments that are just not penetrated with our solutions yet. I see the underlying secular growth. I see pillar one of our strategy. You pointed to services. Services in a world that is more digital, that shows up more data, in C&I services, our security service solutions, we basically can't run fast enough. That has been outperforming.
I gave you the growth rate for 2021 in services at 25%. You know, that's for sure an elevated growth rate, and we continue to see that you know very positive. On data and analytics, more data, more people will want to do something with the data. A merchant will understand now that they have more, you know, more merchants are entering into the digital space, how do they find customers in an easy way? How do they retain customers?
That's where Dynamic Yield comes in, a perfect tool to really make more of that. Then all of that data in the end will fuel the world of open banking, which is part of our whole new network strategy, is essential and of course the need for digital identity solutions. All of that is sustainable.
You know, the catch-up opportunity, back to your question, is for sure travel. It is, you know, travel, domestic travel has been leading, leisure travel has been leading. Cross-border travel and corporate travel and, you know, over different curves over time, there's significant catch-up opportunity for us. I think those are the headlines.
Helpful. Thanks, guys.
Your next question will come from Lisa Ellis with MoffettNathanson.
Hey, good morning, guys. I was hoping to ask about net yields. Just looking back pre-pandemic, Mastercard's net yields were steadily increasing about half a basis point or a basis point a year, but then over the last two years have dropped, you know, first in 2020, then again somewhat over in 2021.
Can you just help parse for us a bit how much of the pressure on yields recently is due to cross-border travel weakness versus perhaps competitive pressure or something like that, and kind of what gives you confidence in one versus the other? I guess looking out into 2022, are you now expecting yields to move back the other direction? Thank you.
Sure, Lisa. I'll take that question. Look, I think the short answer to your question is the vast majority of what you've seen in terms of net yields has been driven by the changing mix of the business over the pandemic, primarily cross-border volumes coming down and the impact of that.
As you know, cross-border volumes and revenues are less indexed from a rebates and incentive standpoint. You know, you have the impact of that playing through. I would say fundamentally, we've always operated in a competitive environment. We see no real change in the level of competition relative to what we've seen over the past few years.
You know, candidly, I would tell you our assumption going into our planning cycles and going into 2022 as well as over our three-year performance objectives has been one of, you know, the impact of having minimal net pricing, which is net of rebates and incentives. We still continue to believe that to be the case. That was very much the case a couple of years ago as well.
The point really is a lot of what you're seeing on the net revenue yield is being driven by the changing mix primarily cross-border. Services continues to do really well and has been accretive to our yield in the past, and we expect that given the opportunity in services, that will be the case going forward as well.
Terrific. Thank you.
Your next question will come from Sanjay Sakhrani with KBW.
Thanks. Good morning. I have another follow-up question on the cross-border. I guess when we think about Omicron, I know there's been a small impact, but I'm just curious if there's any learnings from it. Do you feel like the resiliency of the consumer and obviously the tools that we have put us in a better position than where we were maybe when you guys provided your expectations, understanding your expectations haven't changed? I'm just curious, as we've seen the U.S. inbound travel improve, were there any learnings from that? Thanks.
All right, Sanjay, I'll kick that off. Clearly there have been learnings across the whole industry. You know, you may have followed some of the airlines during the earnings season. You know, this whole thought about the time period between a surge, a case surge, and how bookings are coming back is narrowing. The first learning is that consumers just become more adaptable.
You know, I said that earlier. It's not just consumers, it's actually businesses, consumers and governments. Governments have also learned in terms of how broad-based social distancing measures and quarantine rules and the likes are. Those are much more targeted these days.
You know, as I said, more borders stayed open. When the U.S. opened in November, surges were going on in Europe and there are no, you know, entry hurdles at this point. I said I'm traveling to Europe, there's no hurdle at all. It's just pretty easy to get back. I think the combination of vaccination rates going up, learnings in governments and so forth makes it a much more benign mix to deal with whatever might be coming there.
That is a significant assumption that we took as we looked at the rest of the year. You also see that, you know, more routes are being opened, more people wanna get out whenever they can. There's a desire and their ability to go out, I think, together make the kind of right package for us that gets us pretty positive.
Yeah. Sanjay, I'll just add to what Michael just said. You know, I think you read our November investment committee inbound cross-border travel corridors represented of our total, you know, cross of 2019 levels. This is the data we shared with you at the ICM.
Well, just as an update, which Michael talked about U.S., U.K., Canada. The same metric, which is the U.S., U.K., and Canada in Q4 is now at 70% of 2019 levels. That's just an expression of our confidence about how when people can travel, they will travel.
You know, I just wanna add one more point. I shared some of the macro learnings. You know, Sachin just talked about the upside potential. Now, taking both of that, what we have learned from our customers that are active in the travel space is that everybody is of the same opinion, and hence leaning into the travel sector, and winning more co-brands, engaging consumers so that they book with our partners versus somebody else.
All of that is going on. You see the whole range of wins. The JetBlue renewal was one of the more recent ones. The Aeroplan launch with Chase, IAG last year, et cetera, et cetera. There's a lot of learnings by the travel industry that co-brand programs worthwhile, which we like a lot.
That's perfect. I have my fingers crossed. Thanks.
Yeah. Very good.
Your next question will come from Tien-Tsin Huang with JP Morgan.
Thank you. Good morning, Michael and Sachin. I wanted to ask about just. Well, it sounds like your macro view, it hasn't changed too much from what you guys talked about at ICM, aside from some of the near-term travel headwinds. Just wanna check your 1Q outlook here for high teens revenue growth when it looks like your January trends are growing above that, nicely above that. Any call outs there or is that just conservatism?
Look, I mean, Tien-Tsin Huang, here's what I think what I've shared with you in terms of our Q1, the headwind which is coming in from the strengthening U.S. dollar, which I kind of talked about what our estimate around that is. That would be one kind of color.
But other than that, all we're kind of expressing is where we're seeing our current metrics and how we're assuming the recovery of Omicron to come through over the course of the first quarter, which I kind of shared with you in my prepared remarks. Really nothing else going on there. I will emphasize one more time what you're seeing in terms of the first three weeks of January indexed back to 2019 has got a compounding effect.
that you have to take into consideration when you're looking at the sequential trends, which is why I was giving that additional color around what the impact of Omicron was adjusted for that compounding effect on switch volume, switch transactions and cross-border.
Understood. Thank you.
Your next question will come from David Togut with Evercore ISI.
Thank you. Good morning. What are your expectations this year for the pace of account to account payments rollout in Europe under open banking, and how do you see this affecting credit and debit card growth in Europe?
As a follow-up, I would appreciate your perspective on Amazon's very public negotiation with Visa over credit card acceptance at Amazon U.K., and whether this reflects, you know, more payment options, for example, account to account, or is this, you know, a one-off negotiation between two corporates?
All right. Let me start, David, with that. Account to account in Europe. You know, when you look over the last years in Europe, it's been relatively slow-paced in terms of consumer adoption and rollout. You know, we have invested, we're heavily invested across that with Aiia on the open banking side of the account to account with Nets with VocaLink. We're deep in the space. We generally like what we see in terms of direction. Takeoff, I think it's paced. That's the first thing I would say.
Initiatives like EPI, you look at that and say their initial focus is actually on the card side, and they're thinking about account to account in the longer run that reflects the same that I just said. Continued significant opportunity for cards in Europe, but we see the long-term growth opportunity in account to account.
Y ou know, we've kind of covered our bases there. With our open banking investments and, you know, our initial use cases there, particularly in the U.K., I think we can be pretty optimistic about that. Our partnership with Tesco and with Lloyds is looking very positive. Your question around Amazon, you know, that's fundamentally a question for Visa, I would say, and for Amazon.
We have seen these kind of negotiations in the public domain now and then over the years, relatively short-lived, and, you know, were resolved. These particular news did not involve us at all. We have a strong and long-standing relationship with Amazon, and we agree that, you know, consumer choice matters. That's why we have a multi-rail strategy, and we're gonna continue to work with Amazon, delivering a whole differentiated set of products. Nothing particularly to worry about from our perspective.
Thank you.
Your next question will come from Bryan Keane with Deutsche Bank.
Hi, guys. Good morning. Just two quick ones for Sachin. Just looking at switch volume on the January month to date in the U.S. at 15%, that's down a little bit from where it was running before. I don't know if that's just a anniversary-ing of some of the comps.
I know the three-year percentage still increased to 139. Just thinking about on the year-over-year basis, that 15%, anything to call out there? And then secondly, on rebates and incentives, any guidance you can give us for fiscal year 2022 as a growth rate or as a percentage of revenue? Thanks.
Sure, Bryan. On the first point, you're referring to the 15% year-over-year growth in the first three weeks of January, and you're looking at the sequential trends there. Well, that is a tougher comp issue, and this goes back to the impact of the economic stimulus, which was enabling better spending back in the comparable period last year, and that's what you're seeing happen there.
So that's kinda the answer to that first part of the question. On your second point, look, I mean, you know, the whole rebates and incentives thing, I need to just emphasize one more time. Look, I know people are focused on the competitive environment.
Trust us, we too are, because we operate in that competitive environment, and we wanna make sure that we compete effectively with our products, capabilities, services, whatever the case might be. We have not seen a meaningful shift in the competitive environment relative to what we've been used to operating in the past.
That's kinda just to level set where we are. Specifically to your question on rebates and incentives, it's dependent on the timing of deals and how the volume index plays out through the year. In Q1, we expect rebates and incentives as a percentage of growth to be similar to Q4. That's kind of the extent, and all of this is contemplated in what I've shared with you on our full year thoughts as well as on Q1.
Got it. Thanks so much.
Sure.
Your next question will come from Ramsey El-Assal with Barclays.
Hi, and thanks for taking my question this morning. I wanted to ask about supply chain pressure and whether you're seeing any changes, and with that pressure abating and how much of that might be contemplated in your full year guidance. Separately, I just was wondering if you could help us contextualize your exposure to Russia and what we should expect there if sanctions, in fact, tighten due to you know, political unrest in Ukraine. Potential.
All right. Yeah, Ramsey, let me start with the supply chain and touch on Russia quickly. Supply chain pressures are clearly there. You know, you're looking at chip shortages. There are also all sorts of things affecting the supply chain. We continue to believe that these are rather short-lived as the supply chain actually balances out.
That's the first thing I would say. There's not a huge assumption in our outlook around that. What we've also seen is, you know, particularly through the holiday season, pretty significant holiday spending, positive season. People spend what they can spend on. If you can't buy something, they buy something else. We've seen shifts in categories. From that perspective, again, the pent-up demand is an important aspect here.
On Russia, very, very early to tell how this is gonna play out. This is certainly, you know, was one of the points that I referred to earlier, geopolitical uncertainties that we have to keep in focus. We have seen sanctions applied in previous years, and we basically managed through that. We'll have to see what it is. Russia is a substantial and important and strategically important market for us. We'll have to see how that plays out.
All right. Thanks so much.
Thanks.
Your next question will come from Dan Dolev with Mizuho.
Hey, good morning. Thanks for taking my question. There was a question before on overall yields. I wanna ask about domestic assessments specifically. If I look at Q4, I think you're running at about 13.1 basis points. Historically, the number was higher, more closer to 14. Is there anything to call out on that front? Thank you very much.
Yeah. Look, I mean, on domestic assessments, I think what you've seen is that typically in Q4, we see the yield of domestic assessments to maybe actually drop off a little bit. That's just what we have historically seen. There's a bunch of moving parts which are going on in that and really nothing unusual to call out there. You know, the trajectory of what we've seen historically still holds true on a going forward basis.
Got it. Thank you so much.
Yeah.
Your next question will come from Moshe Orenbuch with Credit Suisse.
Great, thanks. You know, you did discuss the account to account side of things a little bit. I'm just wondering, given how often this comes up in discussions with investors, you know, we've seen some issues that some of the domestic players have had from a regulatory standpoint.
Any thoughts about how that could affect kind of the evolution of that product, advantages perhaps that being part, you know, of Mastercard might be for Tink and Aiia. You know, other kind of thoughts about you know, just the growth of that bot h in Europe and the U.S. Thanks.
Right. Moshe, excellent question. You know, we see there is clearly an interest of regulators in new forms of payment. Regulators are always keen on security, on data protection, on consumer protection. That is always in focus. We have most recently seen this with an interest in buy now, pay later. U.K. regulator is doing a consultation.
Various regulators have shown interest to regulate the space. In account-to-account, you should expect something similar. We do know that, you know, from VocaLink and Pay by Bank in the U.K., that is very much in focus. I think it differentiates an established player like us to basically come in. We have very clear data principles. We don't sell data to anybody.
We believe in the consumer, strong consumer consent, the likes and dislikes, and all of that is codified in the Mastercard franchise. A company that goes beyond just being a fintech and providing a connection and getting money from A to B, but doing it in an organized fashion with very clear rules that people sign up that partner with us, I think is gonna be a differentiator.
You know, I'll just add to what Michael said. I think you're gonna remember that when we talked about what we were doing in the open banking space, we were very deliberate about how we went about our activities there, particularly as it relates to how we got data from the banks, and that was all through APIs. It has been our philosophy.
The idea being, you gotta do it in the right way. You cannot do it through screen scraping. You should be doing it through APIs, not only because it's the right thing to do from a safety and security standpoint, but also the data elements you can actually get by virtue of doing it in that manner helps you create a much more sustainable long-term product which you can offer. Very much part and parcel of what the philosophy has been from the get-go in this space for us.
Great. Thank you, Michael and Sachin.
Thank you.
Your next question will come from David Koning with Baird.
Yeah. Hey, guys. Thank you. I noticed U.S. average ticket size in Q4, I think it was only up 2%, the prior three quarters up 6%-7%. You know, you would think with inflation it would be accelerating, not decelerating. Is that just consumers returning to card present, maybe lower transaction sizes or just splitting transactions? What's the impact? That seems positive to you, right?
Yeah. David, again, I want to make sure I got the question, but what we observe if you look at our trends for, you know, how switch volume and switch transactions are trending, you'll see effectively that the improvement quarter-over-quarter in switch volumes from 131% of 2019 to 136% of 2019 is a five-point improvement compared to switch transactions, which have improved from 131% to 132%.
That should signal to you that there is a higher ticket size which is happening, which you would expect, because as people get out and travel more, they do so. That's higher ticket in general. They do it on credit products which are higher ticket size, as e-commerce happens, that happens to be an uptick. You've seen that come through in the delta on a sequential basis.
Yeah. I was referring more towards it looked like it's decelerating in the U.S., which seems positive. It seems good to have splitting transactions possibly happening is what it just seems like or different types somehow.
Yeah. No, I wouldn't see anything materially different in our U.S. trends than what I just shared globally in terms of what we're seeing from a ticket size standpoint.
All right. Thank you.
Your next question will come from Andrew Jeffrey with Truist Securities.
Hi. Good morning, everybody. You know, one of the more discussed topics in the market generally today is inflation. I wonder if you could just touch on, you know, if we do see persistent embedded global inflation, whether or not that's positive for your business from a volume and/or yield standpoint.
Right, Andrew. Definitely a significantly discussed topic. All sorts of views on it. Here's our take. First of all, depending on where it happens, you know, we generally distinguish to look at it first at the macro level, what is happening across a particular market. What's the policymakers' response? You know, we heard the U.S. policymaker talk about this yesterday.
Then there's broader impacts that go beyond our immediate business. Wage growth. You know, how does all of this in the end affect the consumer's ability to spend? There's a lot of macro things to consider. On the micro side, you know, basically, it's not homogeneous. Inflation is affecting our business in a different way than it would be the overall CPI.
If you have inflation expecting rent, well, that's generally not running through our rails to a large extent. That could again be a very different picture. Taking all of that into account y ou know, fundamentally, notwithstanding the impact that inflation has, and it could be negative on consumers, on businesses and so forth, there is an impact on GDV, if it's moderate inflation that is, you know, that would be showing in our numbers.
Okay. I assume that's been taken into account in your guidance.
Right.
Appreciate it. Thanks.
Thank you.
Your next question will come from Jamie Friedman with Susquehanna.
Hi, thank you for taking my question. I just wanted to ask about the difference between other revenue and services revenue. I know services did great, you know, up 28%, 25% for the year, 28% for the quarter. Other actually grew a little bit faster. Sachin, maybe if you could remind us what the nuance difference is. I know one's a subset of the other.
In other revenue, we have a bunch of our services revenue would sit there, but there's other stuff going on in that as well. You've got, for example, some of our Local Link revenue sits in there. The Nets acquisition would sit in there.
I f you're looking at the other revenue growth rate of 30%, remember nine points of that growth came from acquisitions, which is just basically a lapping effect of the fact that we didn't have those acquisitions last year at this time, and we do at this point in time. On services continues to grow very nicely.
A large part of that sits in other revenue. Some of it sits in transaction processing. But the growth you're seeing in other revenue i s a combination of strong services growth plus some of the acquisitions which you're seeing come through in that growth rate there.
Got it. Thank you for the clarification.
Sure.
Your next question will come from George Mihalos with Cowen.
Great. Thanks for taking my questions, guys. Just very quickly, Sachin, I'm curious, as you look through the weekly trends, year to date here through January, are you seeing a lot of variability? Meaning are you seeing sort of a bigger pickup as we go through the month? Then somewhat related to that, if you could talk a little bit about what you're seeing in rest of the world.
Sorry, what we're seeing in the rest of the world, did you say?
Rest of the world versus U.S. I mean, it looks like if I look at your volumes for credit, at least, the worldwide volume is now starting to accelerate a little bit and pick up. I'm just wondering if you're starting to see that really come into the numbers over the last couple of weeks.
Yeah. Okay. I got your question. Look, I mean, in terms of weekly trends, they bounce around, right? I mean, there's so much which goes on in the nature of weekly trends. You know, it varies depending on the month in question. I'm not seeing anything which is highly unusual in terms of what we're sharing with you on our first three weeks of Januar y in terms of weekly trends.
But there is volatility week-over-week, and you would expect that to be the case. And sometimes it's a comp issue as well. You gotta remember that you've got to kind of go back to what you're comparing the comp to and to see if there's differences in growth rates which is emanating from that. When we look at spend levels, that's kind of generally the case.
As it relates to rest of the world versus the U.S., you know, look, you know, the U.S. on a growth rate basis has a tougher comp this year in the first three weeks of January, just by virtue of the fact that we had a whole bunch come in from the economic stimulus last year.
Conversely, in the rest of the world, particularly in Europe, right? When you really think about what's going on there was a lockdown in Europe which took place last year and in January. You have an easier comp on Europe from a growth rate standpoint. You have to factor those in when you're looking at the growth rates there.
I think we have time for just one final question.
We'll take our final question from Jason Kupferberg with Bank of America.
Thanks, guys. Just wanted to ask a question about how we should think about quarterly cadence here of net revenue growth. Obviously, you told us about Q1. Sounds like Omicron and FX and rebates are somewhat of a headwind there. Your year-over-year comp obviously is much harder in the second quarter than the first quarter, but arguably you won't really have Omicron headwind at that point. Just wanted to try and get things calibrated from a modeling standpoint, at least through the first half of the year, directionally as we work towards the full year targets.
Yeah. Yeah, Jason. Here's what I'd say. Obviously, we've given you some thoughts around Q1 and for the full year at this point to get you started. We'll talk a little bit more about other quarters as the year progresses. Just stepping back a bit, you know, as we said in our remarks, we expect that cross-border travel recovery will resume as the surge passes and that we'll reach the cross-border travel back to the 2019 levels by the end of 2022.
Look, we continue to be very active on the deal front, and so that needs to be taken into account. Overall, here's what I would say, that the pace of cross-border travel recovery will be a key determinant as to how that cadence plays out. Mo re to come as we go through the year. I'll share a little bit more about, you know, what we think about ensuing quarters, but right now that's the extent of what I'm gonna share with you.
Great. Thanks, Sachin. Michael, any final comments?
Yeah, I was hoping the last question would be for me. Anyway, thank you for all your questions. As you see, we're optimistic with the outlook. We reaffirmed our three-year guidance that we gave you in November. I don't think there's any need to repeat anything we said. I'd just like to thank you for your support and, as usual, a call out for people that make all of this happen. Thank you, and speak to you next quarter.
This concludes today's conference call. Thank you for participating. You may now disconnect.