Good morning, everybody, and welcome. Either those of you here with us in New York or those of us who are joining on the webcast, which is being video streamed for the first time this year. I am Barbara Gasper, Head of Investor Relations for Mastercard, and on behalf of the entire Mastercard management team, I would like to thank you for joining us to spend time today at our annual investment community meeting. We think that we have developed a program for you again this year, which addresses many of the topics that we have heard that are of interest to you, and we are, again, as our standard practice, combining a morning of formal presentations with an afternoon of product demonstrations. Ajay Banga, our CEO, will kick off today's formal presentations with a strategic overview and our progress to date.
You will then hear from several members of our management team, beginning with Gary Flood, President of Global Products and Services, who will provide an overview of our products and services efforts. He will then hand it over to Ed McLaughlin, our Chief Emerging Payments Officer, for some thoughts about what the opportunities for Mastercard are as the physical and digital payment spaces converge. We will then move to hearing about the regional perspective, beginning with Chris McWilton, who is President of North America, and Chris will be followed by a panel that includes Craig Vosburg, Group Executive U.S. Market Development, Tim Murphy, Chief Products Officer, Kevin Stanton, President of Mastercard Advisors, who will discuss some of our efforts to provide value to our merchant partners.
Following a brief mid-morning break, Ann Cairns, President of International Markets, will give an overview of our non-U.S. operations and then kick off a panel discussion with three of her regional leaders, Daniel Monehin, Bella Stavchansky, and Eddie Grobler, along with Kathy McCall, who will each talk about delivering on several of our key priorities in their respective areas. After that, Martina Hund-Mejean, our CFO, will provide the financial perspective on our business. After our second Q&A session, Ajay will be back up for some closing comments before we adjourn about 1:15 P.M. for lunch and the product demos. Copies of the slides that we are using today can be found either in your binders for those of you who are here, and they are also posted on the investor relations section of our website for your reference.
Additionally, there will be an audio replay of this event available on our website for 30 days. Along with our presenters, we have a number of other management members from the senior leadership team here with us this morning. Rather than take time to introduce them now, I would just point you to the back of the bio section in your binder, where you will see a list and their pictures. Those are the other people who are here but not up on stage. To help facilitate the dialogue with our executives over lunch, there is also a diagram in your binder right behind the agenda, showing the location of several lunch and discussion tables that will be down on the lower level, and the executives who will be hosting those tables. Any executives who are not hosting a table will be stationed around the product experience room.
Before I go any further, I do have to acknowledge the other members of my investor relations team who put a lot of effort into this event, Catherine Murchie, Ryan Beaudry, and Tina D'Amato. Just a few administrative items to get out of the way. You can see from the agenda that this year we're splitting the Q&A into two sessions. The first one will begin about 11:15 A.M., and the second one at about 12:40 P.M. As in the past, we will have the ability to take questions both from the audience and those of you who are joining us by the webcast. There is an 'ask question' button on your screen if you're dialing in or listening in on the webcast, and you can get instructions there as to how to submit your question. Our agenda does call for a brief 15-minute break at approximately 11:30 A.M.
Those of you on the webcast can reconnect or stay on for 15 minutes. You might just want to stay on. As a courtesy to our speakers and those around you, I need to ask people who are here in the room if you would please silence your phones and your BlackBerries now. Finally, just as a reminder, today's presentation includes some forward-looking statements about our expectations for future performance. Actual performance could differ materially from those suggested by our comments today. Additional information about the risk factors that could affect future results is detailed in our SEC filings, including our forms 10-K, 10-Q, and 8-Ks. Now with that, I'd like to turn the program over to Ajay Banga. Ajay.
Good morning, everybody, thank you for being here. Thank you for your unstinted support and your questions and your participation over the course of the year. We guys get to meet you in a number of different settings, and this is only one of them, but it's good to be together, thank you for being here. Let me start off. There we go. Something looks familiar here, and you'll see this coming up in a couple of times over the course of today, those three concentric circles. The reason I've got them is because they inform the basis of our strategy. The fact that personal consumption expenditure, which grows on the average through cycles between 4% or 5%-odd%, and Martina will talk about this in some detail later. Think of this as the three circles as being three legs of a stool for a minute.
That leg of the stool is the one that has the most instant reaction on the company's revenue. It's also the one that in which we have no control. That's one of the realities of how our revenue comes. It comes out of how much people spend around the world. The only good news is, over the years, while some countries may be going up at a particular point of time and others may be struggling, overall, the world has been demonstrating a four, five-odd percentage point growth of personal consumption expenditure. The second leg of the stool is the second concentric circle, that's really the share of those transactions that contribute to that personal consumption expenditure, how many percentage of those transactions are in cash and check versus how many of them are in electronic forms.
That typically has been 85/15, and over the last few years it's still 85/15 because what's happening is that the developing world, the emerging markets, which are growing faster in terms of their consumption, but remember they're starting from a lower base, they're much more cash intensive in general. Whereas the developed world, which grows a little slower in personal consumption expenditure but off a much higher base, and therefore in the weighting they still play a large number, they tend to be much more electronically oriented. Remember, Germany is 78% cash. Remember that Japan is 78%, 80% cash. Remember that the United States is 50% cash. Relative to an India or a China or a Russia, they are more electronic oriented.
That growing the pie is what you see us working on through the things we're doing on financial inclusion, whether it be what you've heard or you'll see downstairs with the South African Social Security System, SASSA. Or whether what we've been talking about in Nigeria, where we're doing both the ID system for the government as well as their social payments on one two-sided card. Or what we're doing with the U.S. Department of the Treasury, or what we're doing in India with the unique identifiers team. In fact, we now have 100 such things around the world that are going on in 20 different countries right now. That's one aspect. The World Food Programme, Digital Food. There's just a series of examples of this. You'll see a number of these in the product setups.
You'll see that, by the way, we've tried to set up the product exposures in a way that they connect back to what you're hearing so you can get a good sense of touching and feeling what you're listening to from us during the next couple of hours. Other examples of growing the pie. Small merchants, low-value payments, high-value payments, Simplify. You will see an effort downstairs to begin making it easy for merchants to sign up to accept payments, card payments online in a way that hasn't been as easy for them if they were doing a Mastercard, Visa kind of connect. We think we can make it easier for them. You'll see that downstairs. You'll see efforts in Parkeon a parking equipment manufacturer and supplier that also runs parking franchises.
You will see new meters coming up in New York, actually in Queens, in a few weeks, which are solar-powered but also intelligent and can generate offers and rewards powered by Truaxis, which also you will see downstairs. The guy who sold us Truaxis, Ashok, is now a part of our management team. He's downstairs as well. You'll see different aspects on small merchant acceptance, low-value acceptance, high-value acceptance in the system downstairs. That growing the pie, the second leg of the stool, is longer than the first leg of the stool, meaning it takes longer to respond or generate revenue to us. It's also less volatile than personal consumption expenditure, maybe in any one country. Overall, personal consumption expenditure for the world as a whole, remember, is not as volatile.
By country, it can create challenges for the guys who run countries and their scorecards, and they get their knickers in a twist sometimes. That is part of what the business is about. The third part, the most inside concentric circle, the third leg of the stool, is the part that people tend to focus on, our share in what is today electronic. There we have got a lot of things going on. You will see in a number of presentations, in Gary's as well, that we have done well in certain aspects of growing our share. In commercial payments, in debit, in prepaid, in credit and consumer credit, we are doing well outside of the United States. In the U.S., as I have talked about openly, we have not done enough. They are changing.
They are winning 60% of every co-brand deal that has been around in the U.S., and Chris will talk about them, including a few more that we have signed, and he will refer to which of those he can talk about and which of those he cannot talk about. We have got those deals. That is changing where we are. The other three product categories, debit, commercial, as well as the old prepaid area, we have clearly grown share. Now we are doing it through not just going out and fighting with price, because that is the question that I and Martina get often, but actually through building competitive advantage through technology and services. I have talked about In Control, and I have talked about Smart Data. Actually, you will see Smart Data downstairs.
I have also talked about other things that you will begin to see downstairs, one of which is an effort we did in Mexico recently, which is called Mi Amo, which is really interesting. It is how you take music and you make it part of somebody's digital life. When you talk about physical-digital convergence, it is not just in using a phone to tap and pay or somehow using your eyeballs to pay. It is how you interact with the consumer. It is how you interact with the merchant. It is how you interact with the government. It is how you interact with everything you do when you do commerce. You will see examples of that again downstairs. That is the first part. We have not changed what we are trying to do. The company's changing, but.
I have been here four years, and we have, over the last five, six years, I would say from the IPO, but I know for the four years as a personal experience, we have tried to not only focus on issuers. Obviously, we focus on issuers. They are the point of entry into the system. Also to provide the right kind of engagement with merchants, with governments, and with consumers. I am hoping you will see a number of those examples in the conversations today, but also in the product demos downstairs. We believe that our brand has improved tremendously. Without the brand, we have gone from, again, in Gary's slides, you will hear about going from number 87 to number 20. The fact is, we are spending the same money, in fact, in dollar terms, probably around a little less or more than we used to four years ago.
It's how we spend it that has changed. We think we've got differentiated offerings. I've talked about a couple of them in terms of Smart Control and Smart Data and In Control and the likes, you'll see more. We think we're far more oriented towards innovation. This is one of Gary Lyons' slides with our strategic plan of the board, and he wrote that, more jump in our innovation step, and I would encourage you to ask him to jump a little. It's an attractive slide. That's basically what this is about. We believe that we have the ability today to embrace technology and fight for being seen as being innovative with the products we're doing and bringing to the market. The most important thing is we've got the people.
We have, in the last 4 years, of the top 100 people, more than 25% are brand new to their jobs from outside the company. Another 25 odd percent have moved into their jobs inside the company. That number is not different for the top 200. When I joined here 4 years ago, the percentage of millennials in our population was 4%. It's now 30%. 30% of the company is as young as a few of you in the room and way younger than me. That's a good thing for us because they ask different questions. They make us think differently. They're making us respond differently. I think we need to encourage them to be a part of our company for many years to come because that mix of experiences is what makes us who we are. We've put more people overseas.
We used to have 60 odd percent, close to 65% of our people in the U.S. We're now down to 50 odd percent. The rest have moved out overseas. We've actually physically moved people. We have product categories run from overseas. We have Ann Cairns, who runs International Markets based in London. There's a whole series of efforts going on to move resources closer to the bank, the merchant, the government, and the consumer in the countries. Again, Ann will talk about that. We think we're changing. We're changing because we want to be more than just payments. Gary Lyons describes this really well that nobody comes to sort of wake up in the morning or go shopping, waiting and looking forward to making the payment. That's not the most exciting part of that whole interaction. It's all the rest of it.
Whether you're a consumer or a merchant or a government or a bank, our objective is to try and get beyond just being slotted into all that little payment space there. I think we can add value with our data, with our technology, with our people, with our expertise in the whole interaction, whether it be what a merchant wants to do, grow their business, attract new customers, keep customers longer, increase their profits, figure out where to locate their stores, figure out which marketing offer gives them a high ROI, all those things. Just one example, the merchant. You can have those examples on the slide for all the other categories. We believe we can play a role in that form, that's part of what the investment is going into. Later on in the deck, you'll see us talk about investment.
A large chunk of that is going into making ourselves more than just payments. Today, what I hope you'll get at the end of today, and you'll hear it through every one of these slides, is the first one, that 85% of retail transactions that are still cash, they provide us with a long runway for growth. It is changing. The markets are changing in the way they respond to electronics, but the convergence of physical and digital is changing not just the percentage of payments, but changing the entire payments experience, which is why we've been investing in trying to get past just being the payments guy to providing more value to merchants, to governments, to banks, and to consumers. We're clearly trying to expand our reach, therefore, across the ecosystem to get that done well.
Most importantly, you will find us putting our money where our mouth is and growing our expenses, hopefully, at least in some of the cases, in the right way. We make mistakes like everybody else, but we're trying to put our money in investing for the growth of what we think could be our future. We haven't changed how we're executing that strategy. Aim for the 85% by growing the core business. That's the consumer credit, debit, prepaid, and commercial businesses. Win those deals, have products that are differentiated, have offerings that are differentiated, have a brand that is differentiated, have the capability to bring those to the market at the front edge by investing in the right resources at the right point in the countries, in the regions, not in Purchase. That's kind of the difference that we're trying to put into growing our core business.
We're also trying to diversify our geographies and our customers. Ann has opened up a number of offices in the last two years that she's been here. You will see that expanding geographies, we're also expanding into merchants of different types as a customer, into governments, into telecom companies. All that is a part of what we're doing. Building new business is an obvious one. We've all talked about the physical-digital convergence, but most importantly, the data that we think can really inform how we do things with this wider ecosystem. Kevin Stanton is on a panel later that Barbara talked about. He's going to talk a little bit about how that data is used for just merchants, and so is Craig, and so is Tim. You're going to hear about merchants in a number of ways as we go forward.
The key to all of this is having the data and having the technology with the right people, I've already talked about that. That's where I am. That's what we're trying to do. Go after the 85%, do it through growing the core, diversifying our geographies, and building out those new businesses. Have a little spring or jump, as Gary would say, in our innovation step, earn the right to get the business from all the players in the ecosystem, the banks and the financial institutions, but also merchants, consumers, and governments. With that, Mr. Flood, over to you.
Those of us that get to work with Ajay every day, we know what jump means. All right? We also have understood the definition of quick. We know what that means, right? What I'm going to do is take you on a little bit of a journey. I'm going to share kind of how we're thinking about things, progress, what's happening on the ground, the progress we're making, and then I'll conclude with what's on our mind. All right? Then I'm going to transfer it to Ed, who's going to dig deeper into the physical-digital convergence discussion, which is on many of your minds. Okay? As I think about showing up every day, and it seems like it's earlier and later, which is very healthy, the two things that I concentrate on are growing share and growing the pie.
It doesn't do us any good every day if we come in and we're not driving our share in debit, credit, prepaid, and commercial around the world. All right? We do that fundamentally by having the right people on the ground in partnership with Ann and Chris's teams locally. All right? We embed certain value-added components into that mix, which differentiate our proposition versus the competition. All right? A couple things I'll talk about. I'll talk about IPS. Kathy's on a panel later. That's our prepaid and debit processing platform. We've been able to actually work with that to drive brand decisions. Not only making processing revenue, but driving brand revenue as well. I'd reflect on Advisors. This year alone, Advisors will do 1,200 projects worldwide. All of those are working either with issuers, governments, or merchants focused on driving our business. Okay?
That's up about 45% from last year. All right? That's their trajectory. Last one that's interesting is MRS for us, which is a rewards loyalty platform, one that we started building several years ago. We have 70 million accounts on that platform around the world, mostly outside the U.S. When you combine those types of assets with the people we have and the competencies baked in data, the propositions work. All right? In a few slides, I'll give you a little sense of where we are and the progress we're making. Now, processing is interesting. I talked about it in a sense in terms of extending brand decisions. All right? It also puts us on the ground locally. All right? I'll build on this a little bit later, then Kathy will pick it up on the panel this afternoon.
When you think about innovation, there's nothing better than being on the ground at the point of sale, working with merchants, working with issuers, working with acquirers to drive innovation. All right? I'll build on that concept a little bit later. Grow the pie, new consumers, and new merchants. The one example I love is SASSA, which Ajay touched on. A lot of times, we focus on the 10 million cards that are out and the potential for many more. All right? What it's doing to include consumers. Those are absolutely true. We're digitizing benefits. What's interesting is you're also including merchants. More merchants coming into the system, more accepting merchants of digital payments. Down in South Africa, the team locally worked with a technology firm called Blue Label. They basically had a technology infrastructure in place dealing with mom-and-pop convenience shops.
If you think about beneficiaries, this is where they shop. All right? Acceptance wasn't where it needed to be. The local team leveraged a competency and a capability already in market to grow acceptance, and we're on our path to about 20,000 to 22,000 of those locations accepting payments over time. That's the ingenuity that occurs locally on the ground. When I talk about payment flows, new payment flows may be for us, but they're payment flows that are additional payment flows. They're out there. Whether that's government benefits, whether that's businesses providing benefits or paying people, or whether that's me sending money to you. All right? P2P type payments. We estimate that's about $62 trillion around the world. All right? We see that. Cash conversion, we wake up every day thinking about cash conversion, guys.
I will tell you that the best example I can kind of play off on this one would be the work we've done with PayPass. I'd say Canada, Australia, and Poland, where PayPass transaction penetration is north of 20%. It ranges. The teams later will talk on Ann's panel. The average transaction is $21. That's cash displacement. Okay? When I take a step back and assess where we are, we've got cash front and center. All right? We also have this convergence of digital, physical, and the opportunities that that creates worldwide. Building on that, 85% of the world's transactions are still cash and check. All right? You have emerging markets developing a little different than developed markets. Chris will talk about the North American markets. Each of them possess opportunities to convert cash. All right?
Each of them are going to provide wonderful opportunities to balance and pay off the conversion of physical and digital. Now, the best way I like to talk about this is to bring in a little bit of what you're going to see downstairs. I'll go to align with government goals. Ajay talked about Parkeon, which is a parking management company, one of the biggest around. They're in about 50 countries, 3,000 cities, and they have hundreds of thousands of devices deployed. We think of them maybe as a transaction device. No. They're actually working with municipal governments to make the paying of tolls and parking fares more efficient. All right? They're also enabling opportunities to create marketing platforms to provide local merchants with the opportunity to communicate with you when you park your car. All right? Think about it. It's a little different than just a transaction.
All right? Next one, consumer and merchant extension is huge. I talk about a time saying, all right, today we have about 36 million merchant locations worldwide. If you think about what's going on with technology and phones and things like that, this could quadruple over some time. All right? Ajay touched on the World Food Programme. We talk about enabling consumers again to benefit through digitized provision of these benefits, versus dropping physical food in a location. On a parallel path, one of the biggest opportunities is what the implications are for merchants. Whether it is a convenience store that doesn't accept or a farmer that wants to sell their goods. Not only again are you including consumers, but you're including merchants that haven't been included. You're digitizing, all right? You're managing the convergence of physical and digital. All right?
Those two examples you're going to see downstairs. When I think about 66% of the world's adults connected. Let me go to an example you'll also see, which is Zuum in Brazil, which is part of our Telefónica relationship. In that scenario, they have about 64 million consumers in Brazil, many of them not touched by financial institutions. You're going to have a prepaid physical card, and you're going to have a phone. You're going to have ability to use the card at the point of sale, and you're going to have the ability to make P2P as well as bill payments on the phone. You're going to be able to load it in all their retail stores. For me, that's extension. That's enabling issuance and again, building more and more acceptance for our franchise.
Last one is improving the buying and selling experience. I'm not going to spend time on Masterpass, although that, I think, is an outstanding demonstration of what this means. Ed's going to do that for you. What I'm going to do is just go to Qkr!. Think about sitting in the Legends part of Yankee Stadium. You want a hot dog, you want a soda, or you want some popcorn? The ability to take your phone, scan, have it delivered. How about a movie theater in Australia? Same scenario. The technology will enable us to deliver a user experience that's convenient and simple. Cash is a big focus, and again, leveraging that convergence of physical and digital is front and center, and you're going to see that demonstrated downstairs.
Coming to work every day, we have to make sure that consumer credit, debit, commercial, prepaid, and processing are on the right trajectory. Ajay touched on these. There's no give and take. That's fundamental to our business. I'm going to dig into that in a minute a little bit more. Customers and geographies, governments and merchants. I've given you examples of government programs. SASSA is one. Non-government type organization program, World Food Programme. Those represent big opportunities for us to expand and grow our franchise. I think about merchants, about 10% of the advisor projects are merchant-focused. The panel that'll be up in a few minutes, they're going to share some of what they work on with merchants and how we leverage our data with merchants. It's about more from existing customers and getting more customers.
Unbanked and underbanked, I've touched on, as well as new markets, convergence of physical and digital. The best example I can share with you is the work we're doing with over 30 telco operators, MNOs around the world, covering 28 countries with a consumer patch of about 1.2 billion. This will all take a lot of time. We're embedded, we're engaged, and we're defining experiences and working with them. The last point is advisors and information services. Advisors is fully integrated with all of our go-to-market disciplines. As a matter of fact, downstairs, there is a demonstration of a cashless journey. The fellow who's going to be orchestrating that discussion is Mark Barnett, who runs our consulting services for us worldwide. The data and the information behind that are foundational to what we do with our clients.
When we leverage it the right way, we produce more accounts, more volume, newer products, and more growth. Let me dig in just for a second. Ajay touched on consumer credit. Double-digit growth. We're focused on affluent. We're concentrating on mass. We're looking at new universes coming into the system by the virtue of convergence of physical and digital. We're growing faster than the market outside of the U.S. around the world. Chris is going to talk to you about the progress we've made in the U.S. and what we're going to do to make sure we keep working that through. On debit, we're concentrating on optimizing portfolios, converting ATM to point of sale, leveraging IPS as a debit processing platform. We also have Advisors fully engaged on portfolio optimization there as well. On commercial, we've made a number of investments.
We deploy people who work with corporates directly around the world. We've invested in Smart Data. We have over 500,000 companies on our Smart Data platform around the world. All right? 180 countries, 220 issuers. All right? Here we also have Advisors integrated, concentrating on extending our penetration to small business around the world. Last point is prepaid. We're growing faster than the market everywhere. We're growing our share, we're leveraging IPS, and we're integrating this into all the MNO and all the government programs that we're concentrating on executing. With all these, it's a concentration of rich propositions which are based on the assets we've built over the last four, five, six years, and the on-the-ground coordination with Chris and Ann. A lot of that is driven off issuers, you got to stay focused on the extended set of stakeholders.
On a consumer side, you'll hear about Masterpass. I'll touch on Priceless Cities in a couple of moments, buying and selling, connecting consumers domestically and cross-border. Qantas Airlines converting their loyalty card to a dual loyalty card, prepaid card with the ability to host nine currencies and to manage that through a mobile app, as well as benefit from in-airport experiences like lounge access, trolleys, and the like. All right? All of this leveraging IPS and Access Prepaid Worldwide as a processor and a program manager. If I think about merchants, I touched on Advisors. About 10% of their products and programs and initiatives are merchant-based. Ajay hit on Simplify Commerce, which is what we're doing to make it easy for small e-commerce merchants to get online to accept payments. That'll be demonstrated downstairs. I think about DataCash.
DataCash is connected to 68,000 merchants around the world. The combination of the gateway we had in Asia and what we purchased with DataCash has put us in a wonderful position. DataCash alone will add 20,000 new merchant locations to Masterpass in 2014. Truaxis. The work we're doing with Schwark, who will also be downstairs, in targeting offers and providing the right kind of value to consumers and issuers so that they value what we bring to them. At the same time, creating currency in the system. Merchants want value. They want the right consumer at the right time, and they're willing to pay for it. Okay? Governments and NGOs. The one I'm going to concentrate on here is just the World Food Programme. We talked about SASSA, Direct Express, India, UID. You're familiar with the program.
We've kind of touched it a couple of different ways. There's one unique twist to it that I love, which is the fact that as a consumer, if you're one of our 2 billion cards around the world, you can register to make donations every time you use your card. All right. Now, what's great about that is that's a reason for merchants to want to switch through us. Okay. The only way we can execute the program is if we see transactions. All right. We think we've got a powerful program. We also have leveraged our network to do some very interesting things. Now, brand momentum. When you run a network worldwide, you have to have a variety of things that matter.
You have to have your acceptance infrastructure, you have to have your technology, you have to have your people, you have to have the confidence of your participants that you're going to be able to run a network for them worldwide that's going to enable them to grow. Brand is fundamental. Priceless is 16 years young, and I'll emphasize young. It's in over 112 countries. It is an asset that partners want. Our ability to create, to innovate, and to leverage that platform worldwide provides us with outstanding opportunities. All right. Ajay mentioned the budget and how we're basically managing that. We ensure that our ROIs on programs are exactly where they need to be. We inform all of our decisions with very strong analytics. We've integrated Kevin's scientists that produce and execute data analytics for us, for our Advisors customers within our marketing group.
We have all the insight, intelligence we need to make sure that we're optimizing that investment and getting as much out of it as we possibly can. I think the results here speak for themselves. Now, how do you pay that off? I'll just give you a couple of examples. Priceless Cities. Connecting buyers and sellers domestically and cross-border. We have about 120 issuers supporting the program. Our satisfaction scores are strong and our net promoter scores are up. When I think about Stand Up To Cancer, third year in the program in the restaurant category, we're up about 3.5 percentage points over industry growth as we execute this program. Started in the U.S., now it's off to Russia with Bella, and she's extending that across the rest of high growth and emerging markets as we speak. Priceless Music.
This integrates what Ajay mentioned, which is Myamo. Which is that digitized profile. It's a comprehensive platform focused on new consumers, youth, 25% of the world's population. Providing them with the right type of music experiences, which is their passion or one of their passions in the right way and format, digitized and social. Strong marketing assets, leveraging the right partners around the world puts us in a position where we'll keep winning big business. Next point I'll go back to is just processing. Ajay touched on it. We've been very thoughtful about extending our participation in the processing landscape. From MIGS and DataCash on the acquiring side, where we'll touch 68,000 merchants, SBS in Australia, where we're driving about 5,000 ATMs, 20,000 point-of-sale devices, 600 million transactions, and then ECS and Trevica.
ECS, a minority investment in India, Trevica, a wholly owned company in Poland, both providing us with agile competency and capability on the ground in those areas, both extending beyond those particular countries. On the issuing side, IPS. 16 customers, 25 countries. Getting done exactly what we want to get done. Working hand in glove with Access Prepaid. I've got a processing platform and a program management platform. Combine that with outstanding product people, we should be in pretty good shape on prepaid, and that's what is driving a good amount of those results. Again, on the issuing processing side, ECS and Trevica. Local installations, agile, relatively small, can take care of the smaller opportunities that are represented in these parts of the world. As I think about this, the one point I want to leave you with here is touching more transactions.
If we touch more, our ability to innovate is enhanced. All right? This is the road we're on from a processing perspective. Now I just want to go back to grow the pie. We talked about the unbanked and underbanked. I don't need to get too much more into that, two and a half billion. From a market organizing perspective, you have sources of funds coming in. All right? For us, the challenge is getting at those funds before it gets activated in the form of cash. You want to digitize it. Whether it's on a phone or a prepaid card. Okay? I mentioned how large those sources of funds are. $62 trillion. Then storage of funds. Multi-dimension accounts, one-dimensional accounts, prepaid accounts with not a ton of flexibility, debit cards. A variety. Then use of funds.
This is the part that actually resonates extremely well for me when I think about the World Food Programme and SASSA. Funds in is one thing, funds out is another thing. I go back to that farmer, I go back to that convenience store. All right? That's Flash Shop in South Africa, and the need to connect both of those things. All right? The ability to have funds and not use it doesn't work. All right? Our initiative's along those lines. When I think of new small merchants, I think about all the progress you've all seen with phones and enabling merchants to leverage phones. I think under-penetrated categories, I think of transit. All right? Whether that's Moscow, Chicago, Seattle, doesn't matter, transit.
Acquirers and non-traditional partners, I'll go to the firm that Michael Miebach's team used in South Africa, Blue Label Telecoms, to help us solve an issue and open up a wonderful opportunity and keep it going. Then scale new streamlined acceptance models to Simplify Commerce, which you're going to see downstairs. Take the friction out of the process for a small merchant who wants to be able to accept payments. Now, world beyond cash. We've been talking about this for a few years. I'm not going to go through every part of this slide. All right? The journey or the cash journey Mark Barnett can explain to you downstairs will cover many of these areas. We know that cash isn't free. We know we got to concentrate on low-value payments. We know engagement with government matters. All right?
20 countries, 100 programs with governments growing every day, and we know that acceptance development is fundamental. All right? Determining how you can open up new acceptance channels. I've talked about that. Mobile payments, again, happening in front of us. A lot of activity around the world. Over 30 programs we're working on right now. What I want to do is just demonstrate one thing for you. The diagnostic that goes into understanding how a consumer converts from cash to electronic payments. It's a journey. This is a small component of what Mark will share downstairs. But you can see as a consumer progresses from relatively minor use of a debit card to a habitual user, where the category extension is broad. All right?
What we do is work with customers, go in, diagnose their portfolio, see where consumers are on this particular journey, and then develop and execute programs that will help them advance through these stages. What we found is this works country to country. All right? Of all the projects that Kevin and his team have done, we've kind of synthesized it down to this framework. All right? At any point in time, we probably have 10 to 15 of these going on around the world, and it's all about that conversion to cash. Going to conclude in a minute. I've talked about differentiated assets driving new business. We've invested in payment gateways, data analytics, program management with Access Prepaid, processing with IPS. We invested in the staff that we have as part of our team on Advisors.
We made this decision 10, 12 years ago to build this functionality and capability. Loyalty, I touched on. Ed's going to kind of take you in a minute through emerging payments, but these things come together and provide our teams, our local country management with the solution sets they need to win business. Access and IPS driving home Qantas, processing, program management. DataCash, white labeling, and acquirer solution to Redecard in Brazil. When we bought DataCash, it was a straight-to-merchant proposition. Now we're working through acquirers and proceeding to address more and more of those around the world. DataCash was live, I think, Gilberto, August 21st. Fraud Shield in Germany, leveraging our In Control platform, data analytics from Advisors, 50 million accounts drove fraud down 65%. Okay? It's the leverage and the ingenuity behind the assets. And then Advisors. Last year, Kevin was up here.
He talked about the three divisions within Advisors, consulting services, managed services, and information services. All right? I've reflected for a minute on over 40% growth in projects. Almost 10% of those projects are merchant-based. All right? So that group has advanced and has provided tremendous leverage for us worldwide. Now as I think about going forward, strategy efforts are paying off. Frankly, scaling more of the solutions and initiatives to drive more markets is what we're concentrating on right now. Broader stakeholder focus, the business opportunities that are coming by working with governments and merchants around the world, they're not shallow, they're deep, and they represent wonderful opportunities for our franchise. Cash is converting to electronic. Yeah. Make sure we're getting at it as fast as we possibly can. All right? Big opportunity for our franchise. Ajay touched on innovation technology. I'll touch on execution.
We structure our organizations regionally and locally. We've developed customer delivery functions out in the regions to enable us to get a lot more done on the ground with pace. All right? This is gonna continue to be a key focus for us. Many of these projects, they're not easy. You got to make sure you have the right people with the right focus driving hard. Next is don't take your eye off the basics. Tim Murphy's accountable for debit, credit, commercial prepaid, and a few other things for us. We got to make sure that those things are humming and that our growth rates continue to be faster than market. As I said on credit, we're doing really well outside the U.S.
Chris has made great progress in the U.S., and he's going to share that with you, but we're not going to take our eye off the core at all. Last thing is we get a lot of questions on the convergence of physical and digital. Hopefully, what I've kind of expressed to you is we are tackling this worldwide. We are embedded and in the middle of all this. We are not taking it lightly. We are investing, and we're getting after it. All right. With that, I'm going to conclude, and I'm going to invite Ed McLaughlin to jump up here. All right. Talk to us a little bit more about this convergence.
Thanks, Gary. Thank you, Gary, and good morning, everyone. I'd like to take a moment, I'd like to take this opportunity to expand on the incredible growth opportunities that we have as a result of the ongoing convergence of the physical and digital worlds. Also take a moment to tie together, I think, a lot of the examples and a lot of the experiences you're going to see from us today. Let me start with something you already know. As you've already seen in your own life, and particularly in the lives of our children, we are in the midst of a global transformation in consumer behavior. In both the developed and the emerging markets, what is changing is nothing less than how consumers interact. It's how we interact with our families, how we interact with our friends, and how we interact with our communities.
These fundamental changes in how consumers interact will also transform how they transact. Because as consumer behavior shifts ever more to smart connected devices, the previous distinctions between the physical and digital worlds are becoming even more blurred. What does this mean for Mastercard? Well, we believe the opportunity is nothing short of enormous because it now enables us to do things we could never do before with simple plastic. For the consumers who use the nearly 2 billion Mastercards that we have out there today, we can increase spend. We can create new value. Perhaps more importantly, for those consumers who may have another card or for issuers evaluating their portfolios, we will win share by being better at what's next.
As exciting as thinking about all the new experiences are that we can provide for those consumers we have today, I think it is absolutely inspiring to think of how we can use digital to serve hundreds of millions of new consumers. These are consumers we could never reach before with our traditional products, with our traditional channels. This conversion of physical and digital is creating incredible opportunities for Mastercard to generate more value and drive more business for the nearly 36 million merchants who accept Mastercard today. As Gary said, beyond the merchants we already work with, convergence enables us to reach tens of millions of new merchants who previously had never had access to the Mastercard network. We can now bring them all of the benefits of electronic payments and eliminate even more of the cash transactions.
The last point I'd like to make, and the really important thing, is every one of these new merchants extends the reach of the Mastercard network. It increases the value of the Mastercard network and makes all of those products that our current consumers have and those hundreds of millions of new consumers will have that much more valuable. The next question: how are we delivering on this promise? Let me quickly cover three key topics. First, we're optimizing our network. We're making it easier to access. We're allowing richer data to flow through the system, and we're using digital technologies to make it ever more secure. We are creating an operating system for digital commerce, and we are making sure that every Mastercard issuing bank, every Mastercard accepting merchant, can be fully enabled for digital transactions. Everyone is ready for this world moving beyond plastic.
Secondly, we're engaging with new partners, and you'll see examples of that all through the presentations today. Gary mentioned the over 30 active mobile partnerships we have around the world, ranging from Samsung to Deutsche Telekom, to our joint ventures with Telefónica, to ISIS right here in the United States. With our open APIs, our goal is to make it simpler for developers, both corporate and independent, to deliver innovations and build their businesses with Mastercard. Third and finally, we're helping extend new payment flows and increasing the opportunity for consumers to interact with us. We know this isn't just about helping consumers make payments. It's also about helping them receive the funds that they deserve. That is where this focus on government benefit distribution, payroll, and other access to funds come from.
As importantly, after consumers have received their funds into Mastercard account, we have tremendous opportunities to provide payment flows that are relevant to them in their communities, whether it's domestic transfer or bill payments or being able to shop online for the first time or even SMS-based payments with the local merchants they shop with, all of which are more secure and more convenient than the cash-based transactions they have today. We also believe, and this is fundamental, that the key to winning this transition is not to simply recreate what you could do before, but to enable for consumers all of those things that you could never do before. We know consumers don't want to make a transaction. They're trying to do something else. They're looking for better experiences. They want shortcuts. They want things to be simpler and faster.
We also know they certainly don't want to lose any of the security, any of the benefits they enjoy today from a genuine Mastercard transaction. What are these digital shortcuts that we can deliver? First, when you're at the register, Mastercard's PayPass allows you to tap your phone, now your watch, anything for a fast, secure payment. What we have seen in 56 markets around the world is consumers love the speed and convenience of contactless. It's the ultimate proof. After they tap two or three times, they almost never go back to their prior payment behavior. Merchants are seeing this benefit. We've had 136% growth in PayPass locations in just the last year to over 1.2 million locations globally.
New markets like Japan are opening up for Mastercard contactless, with over 400,000 terminals announced to go in in just the next few years. This is because merchants are seeing the benefits. At Coles, which is one of the largest retailers in Australia, over 60%, that's over 60%, of Mastercard transactions today are already contactless. When we talked with Douglas Swanson, who's Coles' head of payments, he told us, "We have seen the share of cash payments fall. Contactless is replacing cash. Our view is that customers are at a tipping point in the way they wish to pay." That's straight from how this is helping Coles' business in Australia. This is not just for retail. As Gary mentioned, transit systems from London to Chicago to Las Vegas are implementing contactless to help speed commuters through the turnstiles.
This is an environment where milliseconds literally matter, contactless is by far the best way for consumers to pay. Beyond what happens at the physical point of sale, we know that perhaps the best way through the queue is to avoid it entirely. Mastercard is doing exactly that by enabling consumers to shop in-aisle or shop in-app. Merchants are no longer constrained by their physical store or even their online website, and they can now reach their customers anywhere at any time. Of course, as you all know, most of the volume today is still through the e-commerce channels. In that channel today, over 20% of total consumers worldwide use a Mastercard directly for online purchases. To put that over 20% in perspective, that's almost 4 times more than the leading alternate payment provider.
With Masterpass, we're building on that advantage, providing consumers with simple and more secure ways of using your Mastercard from any device. Finally, as you know, Mastercard's position has always been that any device will be a commerce device. This was never about PCs or even smartphones. Now we're seeing with connected watches and glasses and even appliances getting wired up. Mastercard is now ready to enable all of them for commerce. One great example, perhaps my favorite example from earlier, is when you go downstairs, you'll be able to see a pair of Google Glass that Mastercard Labs has already enabled for Masterpass payments. Which I think really brings home our fundamental point. The device doesn't make the payment system. It's the payment system. It's Mastercard that makes the device that much more valuable.
One other point, to be clear, we believe that for consumers, it is not about any one of these experiences. It's about all of them. We may have many competitors trying to enable alternatives in some of these areas, what we have seen is what consumers really want. Think about it. What you really want is for all of this to work together, that's what Mastercard does. Perhaps the best news of all is you can't use cash. You can't use checks in any of these environments. To echo what Gary said, the convergence of the physical and digital world, these new shopping experiences are a major driver of that world beyond cash. Mastercard is ready. At the Barcelona Mobile World Congress in February of this year, we formally announced Masterpass, our platform for digital commerce.
We are now live in the four target markets. We are working with financial institutions globally, like Commonwealth Bank of Australia, Bank of Montreal, Citibank, we will have seven additional markets implemented by the end of this year. Our merchant acceptance is also gaining momentum, with over 20,000 merchants live in just the first few quarters. We are working to make Masterpass available to all Mastercard issuers as an integral part of the overall Mastercard global network. Masterpass is digital Mastercard, our focus remains the same. We're providing a globally interoperable platform supporting all types of digital transactions in store, in aisle, in app, online. Please remember, Masterpass has been designed to enhance, not to interfere with the relationships our customers have with their customers. Masterpass has been designed to enable integration across a wide range of partners.
Masterpass has been designed to make it as simple as possible for merchants to integrate it in with their systems and leverage the investments they already have in place. Finally, while it's still very early days in this overall conversion of physical and digital, the opportunity for Mastercard is tremendous. In fact, we see this as the greatest opportunity for Mastercard since we first helped introduce the plastic credit card a generation ago. It's that significant, we are on it. We're enabling a full spectrum of digital shopping experiences for consumers. Not just one channel, every channel today, we are ready for whatever the future will bring. We are executing. We're delivering new capabilities more rapidly in more markets than any of our key competitors.
With that as a backdrop, I absolutely look forward to seeing everyone later today in the product demonstration area we can fully demonstrate Mastercard's digital technologies and the incredible potential that digital convergence holds for Mastercard. With that, I'd like to turn it over to Chris McWilton, who's going to cover the North American markets. Thank you very much for your time, I look forward to seeing everyone later. Chris?
Thank you. It's great to have someone like Ed who is so passionate about his space and so knowledgeable, leading us in this great convergence we're going to be undertaking. Good morning and thanks for coming. I know this is a difficult day for many people, being the 12th anniversary of those terrible events just a few blocks from here. I'm Chris McWilton, President of North American Markets. If you remember last year, I was introduced as Chris McWilton, President of U.S. Markets. You're probably aware that on January 1st of this year, we combined our Canadian and U.S. regions under a North America umbrella. We're really glad we've done that. Besides Ann Cairns's not having to cover an additional three time zones, which I know she's happy about.
The U.S. to Canada consumer cross-border corridor is one of the biggest in the world. We're seeing increasingly our customers, whether they be merchants like Target or Walmart or issuing banks like Capital One or TD Bank or BMO, cross borders in both directions to meet their growth objectives. We're seeing a lot of good business coming out of that reorganization. We're very happy Betty and her team continue to do a great job up in Canada. For the next 15 minutes or so, I'm going to share with you the journey we're on in North America Markets. It's a journey that's taking us to a place that we're going to be a very well-balanced and diversified profit engine for the company for a long time. We're doing really well in debit in North America.
We're doing really well in commercial credit. I'm going to spend some time sharing some of the great news we're seeing in that space and in the prepaid space, as Gary mentioned. I know there's a great interest in our U.S. consumer credit position. I'll spend a few minutes of my remarks sharing our progress in that space. I hope you leave with an appreciation that while North America is more developed than some of the markets Ann covers and her region presidents cover, that doesn't mean it's a no-growth or slow-growth region. It's a high-growth region. We're very bullish on the prospects. Let me, if I can find the button. There we go. Let me just frame the North America region with some factoids. First off, it's the largest revenue-generating region of our company. Generates about 40% of our revenue.
We've maintained strong financial results through a very complex operating environment. We've obviously lived with increasing levels of government regulation, starting with the Card Act, the Durbin amendment to the Dodd-Frank bill. We've seen consolidation in the industry, not only the financial institution side of the equation, but on the merchant and our co-brand partner side of the equation. Obviously, consumers have been impacted significantly by the economic conditions, the high unemployment rates, and the foreclosures in the housing market over the past five years. We've been pretty resilient through that. The first six months of 2013, we've grown our revenue 11.6%. We're quite proud of that. Eight of 10 of the largest cross-border corridors that we see consumers using Mastercard products and services either start or end within the U.S. It's a key market for our cross-border activities, particularly affluent and traveling consumers.
Our revenue yields in the U.S. are quite high relative to our other regions because we switch nine of 10 transactions of Mastercard products. North of the border in Canada, we've been the leader in technology and innovation. Betty and her team led the rollout of EMV and broad-based acceptance of PayPass, our NFC-enabled contactless technology. She's doing a great job up there with Masterpass as well, which Ed has talked about. Rogers Communications, a large cable and television network in Canada, has been the first telecommunications provider to receive a payments license in Canada. We're really honored that they have selected Mastercard as the network for their first payment card. That'll be rolling out very shortly. There are great growth opportunities in North America, new verticals that haven't been fully tapped, healthcare, insurance, and rent. There's still a large swath of underserved and unbanked customers.
Gary talked about that in terms of the cash conversion opportunities. Small merchants are continuing to look to ways to sell their products and services online. Simplify, you're going to see down in the product showcase. We have Masterpass rolling out. I'll talk a little bit about the success of that in the U.S. and elsewhere. We're very optimistic. We've got great momentum in that space. Let me rewind five years ago, explain where we are, then I'll let you know where I think we're headed in terms of changing our business. Five years ago, we had a very concentrated customer base. We were highly reliant on a single large credit card issuer. We had no debit franchise to speak of. Insignificant. We had no real merchant interaction.
Within the halls of Mastercard, we referred to merchants as customers, but to be honest with you, it was probably a little bit more lip service than it was real interaction and concern about helping them grow their top lines. We were reactive to government regulation. We certainly didn't consider in any broad way that the government could be a big customer of ours. We had a good brand, but a brand that consumers were aware of, not necessarily that they were engaged with or necessarily preferred. Fast-forward today, we've got a much broader mix of customers, a much diversified mix of customers, including regional banks and a growing base of independent banks and credit unions, which provide us a great revenue yield compared to some of the larger issuers. We have a very robust debit franchise.
We are enabled either on a signature or PIN basis on half the debit cards in the United States. We have gone from approximately a 3% or 4% share of the PIN debit network of PIN debit to becoming the largest PIN debit network in the United States. We have a growing commercial base, again, I'll talk about that in a few minutes, and a growing prepaid business. We've diversified our product mix in addition to our customer base. We significantly expanded our merchant interaction, and this isn't something that happened six months ago. Craig Vosburg, who's going to be on the panel in a few minutes, has been leading our efforts in merchant development and market development for about three years. We have 40% of our account management personnel dedicated to merchants. Wasn't even close to that five years ago. We made investments in this space.
Gary mentioned Truaxis, which I'm very excited about. It gives us a chance to interact with merchants and with issuers in delivering products and services to consumers based upon their payment patterns. You'll see that down in the product showcase. Government is now a big customer of ours. Direct Express, the Social Security payment program, is issued on prepaid Mastercard cards, and disbursements are made on prepaid Mastercard products. We have a brand, as Gary mentioned, that is in a significantly different place than it was five years ago. With Stand Up To Cancer and Priceless, both consumers and our issuing bank customers and merchants view our brand much differently than they did five years ago. Let me talk about credit, and I'm going to talk about credit holistically in terms of both consumer and commercial, because that's the way we view it.
In the past, I've highlighted the reasons why we weren't where we thought we should be and need to be from a U.S. consumer credit perspective. I've discussed things like the fact that we probably underinvested in big T&E co-brands in the past. I talked about customer mix as well. The fact that some of our large issuing bank customers and our large co-brand partners had more difficulty navigating the Great Recession than those of our competition. I also talked about the fact that getting back in the space was not going to happen overnight. It wasn't going to be a grand slam home run. It was going to take doubles and singles and stolen bases to get our share back to where it needs to be. Speaking of stealing bases, we're actually stealing a lot of co-brands from our competition.
As Ajay mentioned, 60% of the co-brands that have been up for RFP, up for bid over the past 12 months, we have taken from the competition while not losing any where we were the incumbent. You can see some of the co-brands up on the screen here. InterContinental Hotels Group, which is a co-brand with JPMorgan Chase. Virgin Atlantic, which is a co-brand with Bank of America. Bass Pro Shops with Bank of America as well. We drove our production people a little crazy over the past several days. We did have two other co-brand deals that are signed and will be announced shortly. However, the co-brand partner in that case called us up and asked us not to announce that because they didn't want to create customer confusion in advance of actually reissuing the cards with our network. We obviously honored their request.
It's not just in the co-brand space, but in the financial institution proprietary card space that we're seeing progress. Bank of America's Better Balance Rewards card has been issued and will be issued under the Mastercard network. SunTrust and KeyBank are rolling out and expanding their credit programs. We're seeing increased interest again from the growing base we have in independent banks and credit unions of getting into credit as a way to diversify their revenue streams. Shifting to commercial credit, this is a great story. It's a space I'm really excited about because a couple of reasons. One is, I think we have a distinct advantage over the competitors in this space. With respect to American Express, we have a distinct acceptance advantage, not only domestically but internationally. When business people travel overseas, they want assurance that their card is going to be accepted.
It also tends to be sticky revenue. Consumers today are bombarded with card offers, teaser interest rate, balance transfer offers, new rewards propositions, new cards, et cetera, so they can sway between card they carry in their wallet or which card is top of wallet, many times during a year. When you get into and embedded in the financial reporting systems and in the wallets of employees of a large company, they're not going to change that on a whim. They're going to be thoughtful about it. It's going to be in there for a while, it gives us an opportunity to then sell in our consumer products to those employees. It's great sticky revenue. We've got great product differentiation, Smart Data In Control, really gives the back-office insight into how employees are spending and procurement organizations are spending.
The proof of the pudding here, in all of that is that, if you looked at the Nielsen report a couple of weeks ago, we've actually grown our commercial credit business 25%, which is pretty impressive, and again, is supporting the growth we're seeing in our overall credit position. Legal and regulatory landscape, I'll touch on that for a minute. You can't escape it. I was actually down in Washington yesterday and had an audience with Director Cordray of the CFPB. Clearly, regulation is not going away. It's here. We've done a pretty good job, I think a very good job of navigating it. We don't like it. We particularly don't like government price controls. However, the fact of the matter remains, we've done pretty well when the regulation and the legislation has challenged the incumbency positions of our competitors.
I'm referring here to the Durbin Amendment and the great wins we've seen in our PIN debit space as a result of the exclusivity provisions of that amendment. From the Durbin Amendment perspective, you're probably all aware that the federal district court objected to the Fed's implementation of the Durbin Amendment of the Dodd-Frank bill. We're glad the Fed appealed. We believe that overall, more regulation in this space is going to hurt consumers and hurt the industry. I saw a statistic the other day that there's been a reduction of 49% in the number of financial institutions offering free checking accounts since the Durbin Amendment was implemented. I don't think consumers are feeling that they're the beneficiary of about $7 billion of interchange that was moved between parties in the system. Once again, this may present an opportunity on the signature side to pick up some market share.
We've dusted off the secret sauce we had for PIN, we're ready to go, if in fact it ends up that way. Not something we're looking forward to, but we will take advantage of it. North of the border in Canada, we received a favorable ruling from the Competition Tribunal on the key rules we have governing acceptance of Mastercard and Maestro products. We're glad the Competition Tribunal ruled in that direction, obviously, reinforcing the fact and our belief that our rules are not anti-competitive. That battle is not over. That's on to the legislative front, Betty and her public policy team are working hard to make sure we get to a favorable spot on that venue. The merchant settlement, very timely. Tomorrow is the court hearing for final approval of the settlement.
There have been a number of large big box retailers that have done their best to disrupt the progress in that space. Noah Hanft and his team here, as well as others in the supporting cast for the banking industry, have done a great job in getting us to a settlement. We're addressing opt-outs financially. We're very comfortable we'll get to a good place on that and very comfortable this will move to final resolution, and we'll get it in the rearview mirror quickly. One of the areas we are watching is the prepaid space, particularly in payroll, and there was some discussions yesterday with Director Cordray around this.
Mastercard is out front with our public policy team and our prepaid product team, making sure that this doesn't become another black eye for the industry and another tarnish on Mastercard, that we really promote best practices in this area and protect underserved consumers that may be using prepaid products going forward. With that, I'm going to wrap up here. I hope you appreciate, after my remarks, that North America is a growth market for our company. There's incredible verticals out there, like I said, that are untapped. You probably read the paper over the past couple of weeks that many large employers, IBM, Time Warner, et cetera, are moving their employees out of company-sponsored healthcare plans into employee-directed healthcare plans or the exchanges, et cetera. Just think about the dislocation in payment flows that's going to create in this country once Obamacare kicks in.
We're going to be spending some time looking at opportunities with all our products and services in terms of how we perhaps navigate and pick up business in that space. 20,000 merchant locations we have Masterpass enabled on in the U.S. Great progress. That's just a snowball running downhill. The more merchants you get signed up, the more issuers sign up, and we've got some great momentum in that space. You can't forget that the U.S. is the backyard, the home turf of the digital giants of the world, the Amazons, the Googles, the Facebooks, the Apples, et cetera, and they're going to change the way consumers behave, live their life, and purchase products. We're going to partner with them in ways that make sense, in ways that expand the reach of our brand and our network going forward. We've got momentum.
We're making the right investments, and North America is going to continue to be a big part of the growth story of Mastercard for a long time. With that, I'm going to turn it back to Barbara, who will introduce our esteemed panel.
Thank you. While my fellow panelists are wandering up here, I just want to add a statement that Chris just made, that over 20,000 merchant locations is Masterpass. PayPass is actually hundreds of thousands of locations. With that, we're going to move to our merchant panel. We want to talk a little bit about the merchant value proposition that Mastercard is driving, has been driving, will continue to drive. I want to start out, Craig, with you. I know some of the folks here in the audience have met you in some small group meetings, but for a lot of people here, this is their first time to hear from you. As Chris mentioned, you've been in your job for just a little over 3 years. Why don't we set the stage with what we're doing around merchant relationships. What's your group doing?
Sure.
For those of you who do remember Greg Boosin, Greg left IR a year ago and is now reporting to Craig.
For better or worse. I like to think for better. Anyway, let me just set the stage a little bit in terms of what we're doing with merchants in the U.S. As Chris mentioned, this is an area that we've been focusing on and investing in for a number of years in order to deepen the relationships we have with merchants, both as important participants in the payment system and as important customers of Mastercard. The merchant account teams that he referred to are directly engaged in managing relationships with more than 200 of our largest merchants that cover 16 industry verticals that we've prioritized as being most important for our current and future growth. Just to give you some sense of the scale of that, those 16 verticals represent roughly 60% of our volume in the U.S.
You can see we're directly engaged with areas of the market that represent a sizable portion of our merchant customer base. That, of course, is in addition to the more than 60 acquirers, ISOs, and merchant service providers that we work with on a B2B basis to continue expanding the network. The approach is delivering results for us in areas that are important to Mastercard's revenue growth. Things like expanding our acceptance footprint, increasing usage and preference for our products at the point of sale, and increasing the use of value-added services and solutions. Let me take just a second to expand on the point about acceptance. Acceptance is a really important source of competitive advantage for our company.
Our acceptance footprint is unsurpassed by any network and continues to grow at a healthy pace through our focus in a couple of areas, some of which have been alluded to already this morning. We're focusing on bringing large merchants into the network in verticals that have traditionally been card-accepting verticals, but where individual merchants may not have accepted the full range of Mastercard products. The dollar store category is a good example of that. One of the fastest-growing segments in retail in the U.S. over the last several years, we now have full acceptance of the full suite of Mastercard products within that important category. New verticals have been alluded to. Areas like rent payments, tax payments, B2B payments.
Areas that have traditionally been very heavy in cash and check-based payments constitute a large part of that 85% of cash-based transactions that Ajay referred to, that on an individual basis, those verticals represent hundreds of billions of dollars in payments that are available to us to pursue. We're working aggressively to bring those into the network. Finally, small merchants. Both expanding the reach of the network to include small merchants through things like working with mobile point-of-sale partners, taking advantage of the new technology that's available there to expand the network, and deploying our own proprietary solutions like Simplify Commerce, which has been mentioned a few times this morning as well.
We've made some great progress, what's behind it all? What's driving the success of all this?
Well, there's a couple of things. I think first and foremost, the value of acceptance is strong. We've worked with a number of merchants, in fact, to quantify the value of accepting Mastercard products for payment. While there is and there will continue to be discussion about the cost of acceptance, we've consistently seen the benefit in terms of increased sales, reduced risks outweighing the cost. That's a good position to be in as a starting point. Beyond that, a lot of the value-added products and solutions that I mentioned earlier are being developed with the specific intention of addressing areas that matter to merchants and matter in improving the performance of their P&L. Things like attracting new customers into their franchise, increasing the amount of sales they have with their existing customers, or increasing operating efficiencies in their business.
While we have a wide range of capabilities that address some of those needs. Data and analytics and the avenues through which we turn insights into action for the benefit of merchants are particularly important. There's real value in the data and the insights that we can derive from that data in addressing a variety of merchant issues. In fact, as one measure of that value, more than 20% of the merchants we manage directly in the U.S. today are using Mastercard data and analytics in some capacity to power their business. That's in addition to an even larger number of small merchants who are leveraging similar insights in their business. Kevin will expand a little bit more on how we're using the data, but underneath that is what I've described as an important dynamic that's really helping us change the nature of our dialogue with merchants.
By focusing on things that matter to their business and matter to their P&L, we're able to have much more balanced discussions about their business rather than being singularly focused on cost.
Craig talked about the three critical elements that a merchant looks at in their P&L with increasing sales, attracting new customers, and improving operating efficiencies. That third one might be the one that isn't quite as obvious to some as to why Mastercard can help in improving that working with merchants. Kevin, why don't you talk a little bit about that, if you would?
Sure, we do it in lots of ways, not least of which, I'm going to note that Craig is an Advisors alumnus. Since we're going through pedigrees. Before I get into specifics on that, maybe it would be useful if I cover some of the basics that we've talked about before.
Since last year, the data analytics business has made a lot of progress. Gary talked to you about the number of engagements going up to 1,200, a 40% increase. In the first half of this year, we saw a revenue growth north of 20%. We expect that to improve over the balance of 2013. This is driven by a lot of factors, including the data we have, I'll go through some of that. The data we have, the people we have, and the technology we have, all which drive at scale, enable this business to return pretty high margins as well. That's a good thing. Going through that, we've been able to scale the human element of big data by doing things like opening up our office in India.
Rob Reeg and his team run a very efficient, scaled technology operation to handle our data. Just to remind you, the data we see is massive, and it is a by-product of our payments business. It's not all about the quantity, it's also about the quality of our data. There are really three things there. First, our data is anonymous. We don't have the name or contact details of the cardholder. That's important and, keep in mind, attractive to our customers in a world of greater and greater complexity around privacy. Our data is received on a real-time basis. It's not lagged. That means our customers can act on our insights on a near real-time basis. Finally, our data is actual data. It isn't survey data or reported data, so it never needs to be corrected.
You have to put that in contrast to a lot of data sources merchants rely on heavily are often corrected, government sources, for example. That's a bit of the background on the data. I think it's important to note, I think we've had some questions. Our data delivers a lot of value in and of itself, but we can and do augment it with other data sources in order to tailor the data to the needs of the particular engagement. I'm going to get to your question to avoid seeming like a politician these days around efficiency. I'm going to do it by way of three examples. I think that's the best way, some of them are going to surprise you. I'll start with some work that we did with a major discount retailer.
There, they needed to understand how consumers spent across multiple categories from store to store on that most critical day of the retailer's year, which is Black Friday. We were able to use our proprietary geographic spend sequencing analysis to reveal to them that their customers, in particular, spent 70% of the money they were going to spend on Black Friday at the first store they visited. That number popped up to 98% by the second store. Now, that's information a retailer can use to really focus scarce promotional dollars. It delivers in spades. We'll talk about some of the metrics later. This isn't just for the big guys. You heard from Craig, you heard from Gary, and you heard from Chris that we are going to place enormous importance on maintaining our lead in acceptance.
That, in large part, relies on delivering value to small merchants beyond the basic payment functionality. We can do it with our data and the power of our data. We have a market report specifically geared to small merchants. It's easy to use. It provides some basic but powerful analytics about their competitors, how they're benchmarking against their competitors, and where their customers are coming from, and where their customers could be coming from. That helps them resource scarce dollars as well. Then the last one I think might be the most surprising, and that's work we did for a specialty clothing retailer. They had grown very quickly, and they realized that they needed to get more scientific around site selection and store closures.
They came to us, we were able to use our geographic spend and draw analysis, which is slightly different from what I talked about before. Now they use that tool to make some very tough capital-intensive decisions on a multi-year engagement basis. The end of the day, the common theme here is that while a merchant may, and I say may, have good data about what their customers are doing when they're in their stores, our data reveals what their customers are doing when they're not in their stores, when they're doing things with other people. That can drive some pretty powerful efficiency decisions, but it can drive lots of business-driving decisions. I think targeting is a good example too.
That's an interesting point that you bring up, Kevin, with targeting. I want to build on that a little bit because targeting is such an important component in terms of the loyalty proposition that merchants are interested in.
Yeah.
Tim, since loyalty and rewards was one of the things that falls under your bailiwick, what can you offer on that?
Sure. We've touched on it a little bit today already. You heard Ajay and Gary mention it. Mastercard has a strong and growing loyalty and rewards business. It's very much grounded in data and analytics, as Barbara mentioned. We are investing to really position our network as a loyalty platform that can serve issuers, merchants, and other partners. You'll see some of them downstairs today, that's already been mentioned. We like the space because it generates incremental revenue from the network, because it generates really sticky relationships with issuers and merchants, it lets us power very strong products for our consumers. We're particularly focused on the merchant loyalty space. We've had an issuer rewards business for a number of years, now focused on merchant loyalty. Main driver there is the acquisition of Truaxis, which really closed now about a year ago.
As Ajay mentioned, Schwark Satyavolu who was a co-founder of Truaxis, is running the business for us today. He's in the product innovation space, we'd love you to stop by. We'll show you what it can do. The reason we like that model, we like being in this business is that it's uniquely positioned to serve the needs of all our stakeholders, right? Truaxis provides merchant-funded rewards. In doing so, it really gives consumers the ability to get a targeted offer, a very relevant offer, not that undifferentiated massive offers that people are getting through the daily deal sites, to redeem those offers very quickly and easily because they're linked to card use. Great consumer value proposition. Great issuer value proposition. It's really a way for our issuing partners to provide more value to their consumers without having to pay for the reward.
The really interesting thing happens with Truaxis and its business model, which we call card-linked offers, on the merchant side. In that, because Truaxis is leveraging actual consumer spend data because it has very strong targeting capabilities, it means merchants can be very precise and focused when they do their marketing through the channel and earn a very attractive return. That's really how we think of the business. We think of it as a merchant marketing platform that really, through our network, allows merchants to tap into a whole new marketing channel, which is getting to consumers through their banking relationships, really much in the same way that Google opened up search as a marketing channel a number of years ago. Very interesting space. We're seeing some very good progress with Truaxis and its growth.
We now have relationships with over 900 financial institutions in the U.S., both directly and through processors. We're connected into our own processor, IPS, that Kathy McCall runs, she'll be up here a little bit later. Through those relationships, we're serving literally millions of consumers today. Our merchant partners are really starting to take notice. We've built relationships with a lot of names that you'd know. People like Neiman Marcus, like Sears, Walgreens, Theory, OshKosh B'gosh, Lane Bryant. A lot in the retail space, a lot of T&E and restaurant customers as well. We're seeing merchants both continuing campaigns with us increasing their marketing commitments to the platform. We're very happy with what we've seen so far.
What attracts them to come work with us? Maybe more importantly, what keeps them coming back? You said we have a lot of repeat opportunities.
Right. It's a couple of things. It's a very easy-to-implement platform. It's a pay-for-performance model, which I think helps Craig as you talk about an overall merchant value proposition, right? We have to deliver value in order to get paid for this business. The real value, the real reason that merchants are coming back is because of really the first question, which is targeting, right? We acquired the business because we thought it had the most effective targeting data analytics platform and capability in the industry. As Kevin's data, as Kevin mentioned, it is doing targeting on the basis of actual consumer spend data, which is by far the most accurate, not only predictor, but story, right, of how consumers are actually behaving and showing preference.
You are what you spend.
You are what you spend in so many ways. It's doing it actually on a very wide data set. In addition to the Mastercard network data, because we work directly with issuers, we have access to a whole range of data beyond the single form of payment. It's actually an even wider data set than the network itself sees, which in itself is quite big. If you can do all that, good engine targeting access to a wide data set, it means the platform and Truaxis can help merchants be very precise in how they market. That precision earns the return, right? If a merchant wants to do new customer acquisition, it can focus an offer through the targeting capabilities only on customers who've either gone away, who've attrited, or who've never shopped in that store before.
It doesn't have to put the whole store on sale. There's a lot of value in that.
If it wants to focus on increasing spend, it can provide offers only to consumers who are an occasional shopper. If you're a shopper who's in the store every day, you don't have to get the offer. Again, it's that precision reduces marketing waste, drives a very strong return, and we're seeing good results. I'll give a couple of examples like Kevin did. For a national retailer, over the course of this year, Truaxis ran a campaign focused on new customer acquisition, 39% increase in new customers. For an international auto rental chain, we did a campaign focused really on increasing spend, saw a 62% increase in basket size, so in spend per customer. Another campaign for a regional quick-service restaurant chain, also focused on increasing spend, 164% increase in frequency, so customers coming back.
These are strong numbers for merchants, and they show that loyalty through the targeting capabilities based on the data and analytics can really help Craig in merchant relationships because these are exactly the things that he talked about as the main needs that merchants have from us.
Before we get to wrap up. There are two other priorities, the new customers and the increased sales that are also important to merchants. Kevin, can you give us a couple of quick examples on what Advisors does on that front with data to help?
Well, we do a lot of that kind of work. Just getting to the point. I'll start with a major national discount retailer of consumer electronics. We did work for them around Christmas time. We were able to use our digital audiences product, and help them run a campaign that pinpointed late holiday shoppers likely to buy consumer electronics. It's very targeted the way Tim was talking about. The second example I can give you very quickly is some work we did with an oil and gas retailer. We conducted a very sophisticated analysis of the behavior of their high loyalty versus moderate loyalty customers for promotional purposes. The third example I'll give you is, a grocery store example, and they retained us to identify specific growth opportunities within their existing loyalty and rewards program.
Let me just add to that actually.
I know we're focusing mostly on data and analytics and a lot of the things we can do through Advisors, but we're also building and investing in platforms across the business that merchants can leverage to increase awareness, drive sales with customers, build loyalty with their customers. Some of those things you've seen before, others are on display this afternoon. Tim already talked about Truaxis. The Fuel Rewards network is an example of that. Priceless Cities, cross-border marketing campaigns we're executing to attract international shoppers. Stand Up To Cancer has been mentioned a few times. These are examples of platforms that we're putting in place for merchants to leverage to achieve some of those objectives.
Tim, you had some stats, I think, on the success of merchant campaigns and what their payoff is that the Truaxis is able to provide.
I gave some specific examples, but the Truaxis' major measure of value to merchants is return on ad spend. It's a measure of for every $ of advertising spent through the platform, how much top-line revenue can be generated. The platform is consistently delivering a return on ad spend five to 12 times, so 500%-1,200%, really suggests the value that we can provide and the value we can uniquely through our network, having embedded Truaxis in it, untap in terms of our consumer relationships, reach through issuers, but really delivering value to merchants.
Just to wrap up, Craig, I'm going to let you give.
Get the last word.
Get the last word in.
Yeah. I'll close just by reiterating a point I made earlier, and that's that by focusing on and investing in things that really help merchants deliver on what's important to them and driving P&L performance, we're fundamentally changing the nature of the relationships we have with many of our merchants. That's not something that happens just by saying it. It's not something that happens quickly, but we're years down the road in making that into a reality, and it's an area that'll continue to be a real priority for us going forward.
Okay. Great stuff, guys. Thanks a lot.
Thanks.
Thanks, Barbara.
Okay. Now we're going to move to the first of our two Q&A sessions, and I'm going to invite Gary and Chris and Ed back up on stage for this one. If we can turn the house lights up so we can see who the audience is instead of just the bright lights. Don't forget, if you are on the webcast, we do have an ability to take your questions. So far nobody on the web has queued in, so we're going to start here in Brian, you want to? Bob.
Thank you. Bob Napoli from William Blair. I guess with the Fed appeal and just Judge Leon, if you could maybe, Chris, talk about the challenges of implementing dual signature, the timeframe something like that would take, if you could think of maybe go through what value-added there would be to merchants or consumers through adding dual signature to that.
Sure, Bob. It took me a second to find you in the lights up there. I think it's a longer-term proposition than most people would anticipate. I think Noah can help me here, that the appeal is probably going to take-
About a year
About a year to get through before we have a decision as to whether signature exclusivity will be permitted to continue. We get frequent questions, well, how hard is it to do it? It's not impossible. It's not an easy thing to do. As I joked with Barbara Gasper recently, we put robots on Mars. We ought to be able to figure out how to do dual signature routing and debit cards. There are people smarter than me that know the network and are working very diligently to make sure we're prepared for that to happen. I think what it does is it basically gives more flexibility to merchants in terms of routing decisions. They're looking for cost savings on every line of their P&L. Payments is a big one. They felt over the years that they didn't have the appropriate voice in routing.
The first passage of Durbin gave them the ability at least to route over different PIN networks. If you're not in a PIN environment, if you're in the restaurant business or a hotel or a situation where the final amount isn't known at the immediate time of the transaction, it didn't do you much good. I think adding signature will give the merchants more flexibility and maybe take some air out of the balloon in terms of their angst and anxiety about payment choice and routing.
I guess maybe as a follow-up. Does a change in the head of the Fed, and maybe you thought this through or not, or if you have an answer. We're going to have a new head of the Fed. Does that change the enthusiasm of their appeal?
That's a good question. I imagine that this is probably at a level of the Fed organization that is not going to be as influenced by a change in the head of the Fed. It's anybody's guess where it will go, how the court will rule, et cetera. I don't see the passion either waning or increasing based upon a change at the very top. That's my thoughts. Personal opinion.
Okay. Up in the back. Gene, right there to your right. I can't see who it is. I can see the hand.
Aaron Powell with Barron's. Thanks, Barbara. There's obviously been a trend, as you alluded to earlier, towards more focus on the merchant side, really trying to get more loyalty solutions, more value add there. I think with the regulatory, just to follow on Bob's point, with the regulatory intervention you're seeing here in the U.S. as well as in Europe, there seems to be a shift towards exactly what you were just talking about with regard, Chris, to trying to put more in their hands around routing decisions.
Yeah.
Beyond just the loyalty and the Truaxis, what are you doing to work on the pricing model in the sense of it looks like the relationship that you have and the way you interact with banks, you might have to shift a lot more attention to merchants over time.
Yeah.
Do you think that might impact pricing, and maybe not just to Mastercard or the networks, but in the entire food chain, the interchange model?
It's a good point. I think the influence in the payments ecosystem is shifting more to the merchant side of the house, and they're obviously not standing idly by as we're experiencing the shift to new forms of payment in the mobile factor and in near-field communication. They are going to battle for control of the till, as Ed says, as we go through this change in technology. From a pricing standpoint, we're always in the game of balancing. We're always trying to figure out how we price something so that there's broad-based issuance and broad-based acceptance. We get as many cards into the market as we can. We displace cash and check. We get as many merchants accepting as we can. There may be changes in the balance of who's getting the economics at the end of the day.
Since we sit in the middle of all this, and the fact of the matter is there's going to be more transactions, we hope, as mobile takes over and as merchants embrace more electronic forms of payment, then we'll navigate it like we've navigated all the other shifts over the many years we've been in business. I don't necessarily see it cataclysmic. It'll be gradual evolution over time. There's no doubt that merchants are getting more influence in the system.
Would you expect to see a shift of incentives in terms of it going from the banks to merchants or even reduced overall over time? Thanks, guys.
Again, it's balanced. I think it's fair to say that if you have more influence in the system, there is more appetite from a network like us to incent those who determine routing or determine whether our network carries the transaction. The drift will be in that direction. Again, don't see it cataclysmic. Don't see it falling off a cliff any one specific quarter.
Right up there.
Thanks. Donald Fandetti, Citi. The Visa Chase deal seems to have gone a little quiet in terms of discussion. I was curious what your thoughts, what you're hearing from issuers. Looks like Wells recently did a deal with American Express. I was curious if you could talk if that's really shifted any of the balance or psychology of how issuers are thinking today.
Yeah. It has gone quiet. You're absolutely right, I think it's very early days in terms of what the impact of the Chase Visa relationship is going to have on the market. One of the things that you realize about the banking industry is people that run these businesses are not rash decision-makers. They're not going to run out in emotional fury and all of a sudden change the network they've been partnered with for many, many years.
I think it'll end up in sort of one of the fact patterns as new deals emerge, as agreements come up for renewal, as the dialogue with Mastercard and other networks changes over time. Again, it won't be something that happens dramatically. We're still scratching our head, to be honest with you, on how this all works. I'm a former finance guy, you do the math in terms of the value in the system of a transaction and how you provide additional benefits to a consumer to buy at a certain merchant and keep the issuer whole and keep the merchant whole. It's pretty tight economics. We're still scratching our head in that space. We still have the opportunity to do it if another issuer is interested in doing it and has the acquiring footprint. It's not rocket science what was done.
We would be prepared if it made sense based on a number of factors to do that. Again, slow evolution, not revolution based upon that transaction.
Okay. How about somebody else? Jason.
Jason Kupferberg from Jefferies. The increased engagement with the merchants is certainly encouraging. At the same time, we're hearing more and more about MCX and obviously a lot of the big merchants coming to market perhaps sooner rather than later with their own mobile wallet. Wanted to get your read on how much of a competitive threat that could be, because we've heard that they may be focused on kind of non-Visa, Mastercard funding options in that wallet, at least initially, and perhaps even with some real-time authorization capabilities at the physical point of sale, which is something that ACH in its current form can't provide.
Got you.
Just your general thoughts on that as far as competition.
Yeah. I'll take that one.
Sure.
You can chime in.
Absolutely.
I think in the MCX space, we haven't seen a lot of details around it. I think a lot of it is speculative, and to their credit, they've sort of kept things to themselves. I think a lot of the impetus for MCX and like programs has been diffused by the price caps on debit interchange. When a merchant was paying 140 basis points for a debit transaction, yeah, there's a lot of impetus to go and create your own network and take the till back-
Right
so to speak, particularly as the technology changes and what's going on at the point of sale changes. If you're down to $0.21 for a debit transaction, and perhaps lower, depending upon how the Fed appeal of the district court ruling goes, you've taken a lot of the economic incentive out of that space. Again, I don't think you're going to see this get traction really quickly. It's something obviously we monitor. We'd love to be a part of that system if it's going to embrace our cards. We have a network. We can switch. We do switch between issuers and merchants. That's our bread and butter. We could play a role in MCX or another like type opportunity going forward. Ed, you spend time in this space, too.
Yeah, I would say these are all incredibly rational people. 15 years ago, I ran an ACH-based bill pay business, and I would have killed for the real-time capabilities of what Mastercard can provide with the debit network. I think as some of the economics come off the table and our eagerness to embrace them enable the new technology, also the recognition, like I talked about earlier, consumers don't want lots of different fragmented options in their finances. They want it brought together. I think the merchant community and the consumers are best served by figuring out how we can make sure that that best offer is being preserved through the new technologies.
Do-
Somebody here. Craig?
Yeah, thanks. Craig Moore, CLSA. It seems like with everything we've talked about this morning, Masterpass, whatever, the holy grail is to capture consumer pre-shopping intent and convert it into a transaction. It seems like there might be two companies in the world positioned to do that. How do you partner with those companies? Or do you, or are they moving on their own? Without that, everything else is noise.
Well, that's a great point because you can never consider any of this a zero-sum game. We believe Mastercard is bringing tremendous value to all of these environments where consumers want to shop. That's the basis of opening up the network through APIs. That's what we're doing with the Masterpass enablement. We're absolutely open for those partnerships because our objective is to make sure every Mastercard cardholder, every Mastercard issuing institution, they can get the best possible experience in whatever context they want to do. That's why we're engaging with the new partners. That's why we're enabling our network for digital commerce. I think we're incredibly well-positioned to work to some of the organizations you're alluding with and many others across the ecosystem.
I think that's the great message of all of this convergence, is it allows us to serve new markets and help new constituencies and create that greater value than we could with the simple plastic that we had before.
I just had five years ago, people thought the mobile telephone operators were the Death Star of the networks. Right? Going to put us all out of business. Now we have partnerships in how many partnerships around the world?
More than 30.
More than 30 partnerships with telecommunications company. I think what happens is over time, it looks like a shiny object to a lot of players to sort of play in the space, right? They realize that it's a heck of a lot different running a telecommunication network than it is a payment network. The infrastructure, the movement of money, the controls, the redundancy, et cetera, and the sort of the network economics is very hard to replicate. Instead of doing it themselves, they partner with us, and we're going to partner with all those players you referenced and more in ways that expand the use of our network. Obviously, we'll protect our turf. We're not going to just cede it without a fight.
Okay, before we run out of time, Gary is not getting off stage.
Ann, no, Gary, come on.
without answering a question. Who's got a question for Gary?
There we go.
Right here. David?
Don't pick the Jets.
Thanks. David Togut, Evercore Partners. Gary, I think you and Ajay both talked about the partnership with SASSA in South Africa. Two questions. Number one, what do your economics look like on that type of a business? What's the business model there? Because there are a number of people involved there, for example, like Net1. Number two, how do you extend that business model to other countries where you have extensive social welfare benefits that are essentially given out through prepaid cards or other payment cards?
Yeah, sure. I think each market's different on economics. I think you know that. I think in that example, Michael, we're basically processing and earning revenues off of the typical processing and switching type of fees we would make. I think taking that and extending it, you learn an awful lot by working these programs locally. The combination of both the issuance and the point about the inclusiveness on the acceptance side and the variety of technologies that actually can get you there is the big differentiator, particularly in developing economies. I think our work locally that Michael and his team has done, Ann's team around the world, working with governments, they understand what it means to make things more efficient and how much money they're going to save. I think that program alone is looking at $375 million in savings over just a few years.
Empowering consumers, saving money on more efficient benefit distribution, leveraging technology on the acceptance side and vendors and people that are out there that can do it, and the ingenuity behind that. There's learnings on both sides, and I think packaging that and working it country to country is frankly what we're doing. We're doing that through our enterprise development group, which Walt Macnee runs in partnership with all the division presidents sitting over here.
What are the other major?
The only thing I'd add to that is.
Oh, Ajay. Kathy, could you give Ajay the mic?
Oh, okay.
The only thing I'd add to that is that in the beginning, what happens is the first thing they do is they go take out cash because that's what they're used to. It actually, in some ways, when we get questions in earnings calls about the yield of transactions around, part of it is the good news/bad news is they're getting more cards in there, but they're basically taking out cash. The key is to let that happen so you at least get a card or an electronic form of payment into their system, so you intercept the money coming in, which Gary talked about earlier. Money going out is where we typically make more money when they spend using an electronic form of payment at a merchant. That requires acceptance and education.
The Blue Label idea in South Africa is all about building acceptance through a provider who had installed electronic terminals in tons of small mom-and-pop outlets where there was no electronic terminal acceptance for a card, but there was for things like top-ups and lottery tickets. They're cashing in on that and getting a whole bunch of new outlets that'll accept cards. Now you've got to educate consumers to use the card there and not take out cash. It's a very slow build. That's why when I started out, I talked about those three legs of the stool. Those legs of the stool have got time involved in them. Doing work with governments, unless it's the Social Security card in the U.S., which has got a more developed infrastructure, tends to be a slow build on revenue.
The economics are based off the same way that we build economics in our traditional business, processing fees, transaction fees, yakkety-yak.
Okay. We are running about 15 or 20 minutes behind schedule, we are going to keep a hard 15-minute-
Hello. Thanks to everyone who made it back from the break. I still think there may be quite a big queue downstairs. My name's Ann Cairns, and I'm head of International Markets. I'm here to introduce the second part of the session and talk to you about the things that we're doing all over the world. Just to start, to talk a little bit about our growth rates. We continue to have very good growth rates in international markets, as you can see from this slide. Probably the number that surprises you on the slide is the volume growth in Europe, still up in the double digit range, very respectable at 13%. I'll start there to describe what's really driving the business there.
You've probably heard many times that Mastercard is in a great position in Europe because we're very strong in the North, in the strong economies, and we're also extremely strong over in the Eastern Bloc, and we're less exposed in the southern economies that are still having difficulties. That's one of the reasons why we have such a good growth profile in Europe. The other thing is that in the U.K. we are the major credit card provider, and the U.K. is having good PCE growth of about 4% right now. We're winning deals in the merchant sector with the second biggest retailer in the U.K., Asda, for credit cards for their 18 million consumers. We're winning in the airline business. We just signed a big deal, another credit card deal with Flybe, which is the biggest regional airline, 65 countries covered.
We're also doing really well in the commercial sector that I know Chris said he was very excited about. I'm very excited about too, because that's massive growth for us around the world. For example, Bank of America just signed up with us in the U.K. this year. Good growth story there in the U.K. If we look at Northern Europe going into the Scandi area, you're all well aware of the Swedbank deal. Now we consolidate our position in the Nordics, where we've actually signed up Nordea, and we've signed up Danske Bank. We're very strong in Northern Europe. At the same time, we're growing our business in Italy, and it's really a prepaid story in Italy. We've got very big deals with the large banks there. I'm going to talk a little bit more about that later.
We're also having massive growth, as I said, in the Eastern Bloc. Russia, satellite Russia, Poland, Turkey is included in that. We have Bella here with us on our panel this afternoon, who's going to tell you about the growth story there. Moving down to Latin America, the growth's very strong still in Latin America, 16%, as you can see from this graph. The story in Latin America is our business remains still very strong in Brazil, which is the largest market in international markets. Brazil has PCE growing at 3%, so it's pretty healthy. We're not only winning good core business there, but as you heard earlier from Gary, we're actually going into the mobile space in a very meaningful way with our joint venture with Telefónica, and that's called Zuum. That's rolled out to 26,000 people right now.
Not in the main towns yet, not in the main cities. You're able to do P2P payments. You're able to do payments to merchants. Later this year, we're adding bill payment, and early next year, you'll see us rolling out in the massive urban conurbations of Rio and São Paulo. Big change happening there in Brazil. Other parts of Latin America, Mexico sort of had a weaker start to the first half than we thought, but it's actually getting better in the second half. Mexico is a story about acceptance, and we're rolling out new infrastructure to reach the unbanked there in a partnership with a local provider called Pagatodo. You're well aware that there are some wild cards in Latin America, particularly places like Venezuela and Argentina, that may well have devaluations towards the end of the year. Our business is doing well there.
We're not overly exposed there. We're not concerned that it would affect these growth rates. Moving across to Asia, the Middle East, and Africa. Of course, this is our star region of the world in terms of growth. Fantastic PCE and cross-border PCE growth rates out in Asia. Something like 7% and 12%, 12%-13% respectively. What we're seeing is very strong growth in all of our core businesses across these continents, actually gaining market share in the large markets, big e-com deals. Opening new markets, as RJ talked about. Building from the ground up in Myanmar. In the Middle East and Africa, we're actually rolling out with Etisalat and the National Bank of Egypt, the first real mobile payment service, which is going to reach about 5 million users to start with.
All of the telcos are joining this, which would bring in an entire user base of something like 94 million people, potentially. It's going to be a completely open loop system. These are the types of things that are driving business in this part of the world. Now, you're all well aware of what's been happening with the WTO and China. Discussions there about opening up China so that other players can be involved in the domestic deals there. Right now, there's certainly a view that China will open up, but we don't know when and the shape of it and how it's all going to play out at this point in time. In the meantime, we have been closing big deals in China.
For example, we've closed deals with ICBC and Agricultural Bank to do global travel cards, sort of dual-branded cards, and our business continues to do extremely well in China. That was a quick trip around the world. Ajay mentioned at the beginning of the session all about how we've been changing over the last four years. That change has really been quite dramatic. What I've tried to do in this slide is just sort of say to you what we've been focused on in the recent past and where we're moving to. What's our current direction? One of the things that was said was we've got many more people actually outside the U.S. now than we had to begin with.
That's because we're actually driving our business down to a country level, having people on the ground that understand the business, know the people, know the governments, know how to execute things on the ground while continuing with Gary's area to build those much needed global products to be able to get the scale to roll out around the world. It's a distributed execution model with a global product model overlaid. Very successful business model. We're moving away from just focusing on financial institutions to governments and telcos and merchants. No more so than in the international markets. I'm going to talk in detail about one or two markets to give you a real flavor of that. The panel that follows me will also do that after my part. We were very issuer focused. Chris alluded to this. How the sort of balance continually shifts.
Our balance is now really starting to focus on acceptance. We're still issuer focused, but we are putting acceptance people on the ground. We are building relationships with local partners because we want to reach the next 500 million consumers. In order to do that, you have to get into the underserved, the unbanked sector, and you have to work with local partnerships to be able to do that. Originally, we played a very traditional role in the value chain. Now we're really very much in the digital space. I'll illustrate that with some of the things I say about Asia. Also, as I said, we were targeting banked consumers. Now we're really changing our approach and taking a much wider consumer base because obviously the thing we're trying to do is really reach that world beyond cash.
Just to take a deep dive on a few countries around the world. I'm going to start with Italy and the U.K. The story here is going to be prepaid. That might surprise you because you might have thought that I would do prepaid in an underdeveloped country. Actually, no, prepaid is something that's really taking off across Europe. The reason that this business is so exciting is that a study about global open loop prepaid cards has told us that the flow through these will be about $822 billion by the year 2017. Just shy of 20% of that will be in Europe, and 50% of that will actually sit in the U.K. and Italy. These are very important markets for that space. Already in Italy today, we have 10 million prepaid cards.
You've heard a lot about the South African government, but in Italy we have the first major prepaid social card program rolled out across the country, about 1 million cards. It's actually done through the Poste Italiane and all their branches on the ground. This is a big benefits program. Just again to say, look, it's not just governments in emerging markets that we're dealing with, and it's not just emerging markets that need prepaid. The other thing that we've been doing is, you're all well aware of Eni. It's one of the biggest companies in the world. It has petrol gas stations. It has coffee bars and so on in Italy. They are actually rolling out contactless infrastructure all across the country.
They are changing the way that Italians live, the way that they use money, and it's really, again, sort of a war on cash. In the meantime, we're also rolling out with them contactless loyalty cards as we have done with Vodafone in the past. Also in Italy, in the market, the big banks have been working with us for a number of years to create what's called a prepaid light card. What's that? That's basically a bank account on a card. It's a card which has an IBAN number on it. That's a number that's sort of used internationally for banking purposes. On this card, you can send and receive money. This is now becoming very popular in Britain. Britain is growing at something like 40% in the prepaid space.
The prepaid space has started to be all about what's going on with the big telcos in Britain. The first prepaid telco card to launch there was launched with Orange in 2011. Now it's Everything Everywhere. We've moved on, and we're starting to have Samsung handsets that you can actually go out and buy things with. It's going to completely revolutionize the space. I can't leave this page without mentioning that prepaid's also becoming a very big thing in the airline industry, as evidenced by the fact that we've done our first card with British Airways, which at the end of the day, is my second home. Actually, my husband says it's my first home. It's great. I'm looking forward to getting my new card.
The next area of the world I'm going to talk about is Latin America and change to a completely different tack. The tack here is all about what's going on in the merchant sector. When we were looking at Latin America about five or six years ago, we realized we had to come up with something that really reached the unbanked sector. Looking at Brazil, 50% of unbanked Latin Americans actually live in Brazil. While we think of Brazil as a very advanced economy in Latin America, there's still a lot of underserved people there. We knew that in order to reach these people, we were going to have to really work with the retailers. That was a big challenge for us, actually, because our rules weren't written in a way that retailers were issuing.
The way that we're developing our products wasn't designed that way. Also, our people didn't come from that sector. We had to change all three things in order to really be able to address this sector. In 2010, we issued our first really true retailer license, and now we're reaching 30 million consumers through our retail relationships today. Just to give you a sense of that's something like 16% of our volume in Brazil going through these channels, going through these customers. We said, "This is a great model for the whole of Latin America. Let's do it in Mexico. Let's do it in Argentina.
Let's do it in all of the other Latin American countries we can." Brazil is only 40% of the story here because, as you can see from the pie chart, the other 60% of our retail growth is actually occurring in the rest of Latin America. A very, very clear example of how Somebody asked Chris, "Are things switching towards merchants?" I would say, "Hey, they already switched. They switched a number of years ago." This is really evidence of the fact. Moving on to Asia Pacific. As I said, fantastic growth region for us. We're going to hear from Eddie Grobler soon, who's flown all the way from Australia to talk to us about what's going on in Australia and the whole digital convergence story. Here I'm going to focus on e-commerce in Greater China and Singapore. A very big market.
You can see here over $500 billion worth of flow. It's one of those markets, the statistic here about 22% growth. That's just a general growth figure. These markets that I'm talking about are practically double that size right now in terms of growth. What we're doing here is, again, we're thinking about retailers as an entry into this segment, especially the e-commerce segment. That's why we signed this fantastic deal with Alibaba in China. You know that they have millions of merchants on their site, and they have hundreds of millions of consumers. We are talking to them about issuing, we're talking about them connecting up to our internet gateways. We're talking about being the fraud infrastructure that they operate on. We are talking about lots of different avenues for flow of this absolutely enormous, probably biggest e-commerce site in the world.
These are the types of opportunities that offer themselves to you in these geographies. At the same time in Singapore, if we actually look at what we're doing on the NFC side, we've signed up all three of the major telcos in Singapore. Already, you can go to Singapore, you can walk up Orchard Road, you can buy things in the shops, you can tap and go. All that infrastructure is there. Now with these three major telcos, Singtel, StarHub and M1, if you have a smartphone in Singapore, whichever telco you use, you will be able to have a Mastercard on there that you can use to actually buy things. The thing is, it's a completely open loop solution from the point of view of Mastercard. That's something which we are striving to do everywhere in the world.
It would be remiss of me to leave this slide without mentioning that also in Taiwan, it's the first time we've launched an NFC mobile solution in the market, working with four different operators. Taiwan's very advanced as well in this space. Finally, on the South African side, you've just heard a tremendous amount about the government deal in South Africa, so I'm not going to dwell on it too much. Suffice it to say, it took only a year to get up and running. Those of you who were here last year probably saw that little case that has the biometrics on where people go and put their fingerprint and voice recognition, and they get their SASSA card.
Well, that was used all over South Africa to launch 10 million cards in a year, reaching 22 million people because 11 million of the recipients of the benefits are actually children. Their benefits go onto their parents' cards. The great news, and you've heard about Blue Label, is that now those little shops in the township are starting to be able to accept cards. I was actually in Soweto a couple of weeks ago, went into one of those small shops. There's a whole queue of people, and I actually saw a lady take out her SASSA card and put it in a machine and be able to do the PIN number. That is a massive change in the way that people are living. There was a lot of excitement in the rest of the queue when they actually saw this happening.
It is an education process, as RJ was saying to you. You're trying to get people to move from taking cash out of the ATM to actually using their card to buy things. That revolution is starting to happen, and it will happen very quickly. I can tell you when I was there, the people in the queue started to talk to each other saying, "Hey, you can use this card to buy things." I mean, revelation. Very exciting story. The other thing we're doing in South Africa, you've heard us talk previously about transit solutions. We are actually working with two of the biggest banks there, Standard Bank and Absa, to have contactless transit solutions. When I got out of the airport in Joburg, I could actually tap a card and go through the turnstile and get on the train into the city.
These transit solutions are being rolled out in taxis and buses, so that it will actually reach something like 15 million of the population. It's not just South Africa where this is happening. We have nine projects. This was mentioned during our second quarter results. Nine projects that are actually going to reach something like 350 million consumers when they're completed. One of them you're going to hear about is in Nigeria. That's a great segue for me to invite my panel up today, which is Daniel Monehin, who runs Sub-Saharan Africa for me, and he is going to tell you the Nigerian story. Bella Starczanski, who actually runs the high-growth markets, the whole of Eastern Europe, a huge area of growth for us, and she will be talking about the development of PayPass across Europe.
Eddie Grobler, who is come in from Australia to tell you about moving to digital convergence in one of our biggest markets in the world. Kathy McCall, who is actually our guru in processing because as we said at the beginning, processing is one of our bread and butter things that we are focusing on doing everywhere in the world that we can. When we process, we can do our information products and we can layer all of the great fraud detection and all of the wonderful technology that we have bought and deliver that to the customers. Thank you, guys.
Thanks, Ann. My name is Daniel Monehin. I joined Mastercard, it was seven and a half years ago in Canada. Ran the Canada Finance as RFO for four years, followed the money to where the investment was going, which was Africa. Actually this month, three years ago, was employee number 1 in Nigeria, tasked with growing the business in the heart of Africa. Very exciting to be here and very excited about what we are doing in that part of the world. I was joking with Ed that when he wins business in his part of the world, it is about market shares, about new revenue. For us, it is all that and then seeing the lives of the people practically change. Ann alluded to that there.
It is very exciting, but changing the world one person at a time is a big challenge because of the enormity of the opportunity. 2.5 billion people worldwide are underbanked or unbanked at all, going about it in a traditional method way is not working for us. It is obvious that a new model is needed. Approaching it as a charity, it is obvious that that is not working because international donor organizations and NGOs are finding out that throwing money at this challenge, it is not going to make it go away. It is obvious that a new model is needed. Approaching it as a business model by itself, as a business entirely by itself, will give a lot of CFOs a headache. It is not working that way, a new model is needed. That new model is what Mastercard is rolling out in Africa. You have heard about South Africa.
We are rolling this out in Angola, in Mozambique, in Kenya, in Morocco and Egypt, just to mention a few. What I will hone in on right now is our story in Nigeria. That story will illustrate to you why we cannot do it one person at a time, why we cannot do it alone, why we cannot do it as a charity purely or as a business entirely by itself. That what is needed is a collaboration between the private sector and the public sector. A partnership between state-of-the-art technology and very strong political will, a handshake between a global multinational and local players and local financial institutions, which is overlaid by very solid business plans that now make sense to the CFO. Right. Why Nigeria?
The problem there, which you can apply to all of Africa, is that people need money to spend and where to spend it in a safe, secure electronic format. Basically, that's what's going on. Nigeria is a country of 170 million people, the largest African country. If there were four people here in this audience, one of them would be a Nigerian, statistically speaking. In terms of economic growth also, it's very solid. For the past three years, GDP of 7%. 70% of the people are underbanked or unbanked. A few years ago, there was no payment, there was no acceptance infrastructure. The card schemes were all local. In the past three years, we've partnered with the government, we've partnered with regulators, we've partnered with financial institutions to open up that market, and it's exciting what you see.
Acceptance has grown more than 10 times in that short period of time. It's like it's what we've been waiting for to make happen. We've taken care of where people could spend money. At least we've made a lot of progress there. In terms of issuance, Mastercard has grown tremendously. Q1 this year, we grew by almost 100% in terms of card issuance. Looking at the enormity of what we have to do, that model is still not enough. Therefore, in May 2013, in the backdrop of the World Economic Forum, we made an announcement about the most transformative financial inclusion program ever witnessed on the source of Africa, and in some respect, the world as well.
In that model, with one fell swoop, we will eradicate financial exclusion in that country by giving access, because that's the biggest thing to crack when you talk about financial inclusion, is access. By giving access to everyone 16 years old and above. How is it rolling out? We're right now at the pilot stage. Let me describe what a pilot is in Nigeria. The pilot is 13 million cards. Now, to put it in perspective, 13 million is more than 34 countries, the population of 34 countries in Africa. 13 million is more than the population of 171 countries worldwide. That is a lot of numbers. That's what we're rolling out, and Mastercard has been chosen as the lead payment provider for that. These cards are biometric enabled and payment functionality, Mastercard payment functionality enabled and protected by EMV chip and PIN.
When EMV chip and PIN was introduced in Nigeria four years ago, after a year of introduction, fraud plummeted by 98%. It's almost non-existent in that market. The people are getting very comfortable using their cards. A few years ago, this will have been unimaginable without the right technology in place. It would have been impossible, it would have been useless without the acceptance infrastructure that we now have in place. It would have definitely been like walking through a wall without the right partnership with the government and the financial institutions and the local technology players on ground in there to make it happen.
The local, large financial institutions in the country are strongly behind this because they've seen that it's an avenue to reach people that used to cost a lot to reach, but leveraging our technology, they can reach them at lower cost to them, away from the brick and mortar approach that was a traditional approach. What we see now is that the cards are not just being distributed, but the government is going to use the vehicle of that card to put money on there through payments of salaries, payments of pensions, social benefits. It's going to take on a life of its own. Why I'm so excited is the change that's going to happen in that country.
In that it's going to change the way that people receive money, it's going to change the way they store money, it's going to change the way they transact with money, it's going to change the way they transfer money. Mastercard will be in the heart of that, making it happen. When it comes to financial inclusion in Africa, we're not doing it one person at a time. We're doing it one large country at a time, and we're very confident that it's going to change the face of Africa. It's changing it already. We're very confident that it will move Mastercard to the next 500 million customers. Starting with a country like Nigeria is a very good step in that direction. Therefore, as Ann concluded, in Africa, we're definitely doing well, but we're also doing good in the process.
On that note, I'll pass on to Bella, who is also in a similar market, but a lot more advanced, and we're looking forward to your part of the world.
Thank you. Thank you, Daniel.
You're welcome.
My name is Bella Starczanski, and I'm in charge of high-growth emerging markets. It covers 30 countries and spread around 11 time zone. If you picture the map, we're starting all the way Russia and south, Turkey and Israel, Czech, Slovakia, Hungary, all the way to Asian republics. It's a really big part of the world, but it's very interesting part of the world. We going to talk about Australia pretty soon, and Eddie will mention that his population is 23 million. H-GEM population is 500 million. A little bit different. Opportunities here. One more point, only 14% card penetration on 3 trillion PCE. That's why we call ourself high-growth. Innovation is a key for our success, and PayPass become a silver bullet as an innovation tool. PayPass bring a lot of benefits to our consumers.
It's a fast and more convenient way to pay, and it's a building block for conversions, and Eddie is going to talk about this later, conversions from PayPass to Masterpass. For us, we need to build infrastructure first. In order not only to have a PayPass, but have a stage 2 is an NFC-enabled acceptance. I'm going to talk about Poland, and that's why you see it on the map, about Poland tap-and-go revolution. We really call it revolution. In this case, it's a positive word, not negative like in Russia. Let's go to Poland. We started, it was not easy sell. Customers were very reluctant to sign for this initiative, for this program. It was new. It was not a proven. It did not make a lot of economic sense at that time.
We found two key players on the market, one issuer and one acquirer, the one who really want to change the market landscape, the one who always look for innovation, new technology, new way of doing business. Sorry. They've been our bread and butter. We started with them, and they support us. Also we went to the merchant. Of course, merchant was in stage 2 in our program. The biggest segment of merchant was in fast food segments like McDonald's, coffee shop, and so on. Consumer embraced it right away. It was really convenient way to pay. They love it. In stage 2, we decided to go to the supermarkets, gas station, and transit, and that make a huge difference for us. On top of it, we looked at the chain type of merchants.
If you have a great acceptance in Warsaw, the consumer has to experience the same type of acceptance in Poznań, completely seamless for them. Also, we looked at a lot of marketing investment. We support that. We spend a lot of money for right type of very focused approach. We looked at special promotions in stores, in supermarkets, in big department chains. We did a tap and buy and get type of promotion, and some of them discounted, some of them more specific retailers. It was very significant improvement in consumer education this way. We really saw big change. Another way we looked at our education is through festival. In Poland, we have a lot of music festivals. It's really musical country. We put a lot of devices in music festivals, and consumer adoption went to 60%.
It was really, really good move on our part. PayPass become a generic term for tap and go. Even now, people don't understand about payWave. They always say PayPass even they will see other brand. That's how we really achieve great results. You can see it. It's on a slide. We right now are really leading brand in the market. The consumers adapted so fast that 30% of that debit portfolio of PayPass holders exhibit top-of-the-wallet behavior, which means their card spend year-over-year increased by 70%, and voluntary attrition really reduced. All these factor combined produce really great results. We took these learnings from Poland, and we apply for other high-growth countries. We did it much faster. We have experience already.
What took us 3 years to achieve 10% penetration in Poland took us only one year in Czech on the same side, issuing and acquiring. It's not only consumer who really embraces benefits or moves to contactless pay. Merchant is eager as well. They love increased spend. They love loyalty that produce, and they love opening new categories. Look at Moscow. We just introduced Moscow Metro PayPass. Moscow Metro never accept cards. Plastic was not even in their lexicon. Now, Moscow Metro accept cards, and you can buy ticket with PayPass. I don't know how many of you been in Moscow, but Moscow is not easy type of city, and it's always congested. We have Aeroexpress that takes you from center of the Moscow all the way to airports.
You just tap, you board the train, you will be in the airport. You don't need to sit 3 hours in a car to get to your destination, which is a big deal. We use all kind of traditional form factors. We use stickers, we use watches, we use PayPass card, now we're going to most of the sophistication level. We're using mobile phones. In 10 countries in GM, NFC programs already live and well working. In 3 countries, Turkey, Hungary, and Poland, we have a very big major multi-party rollout with NFC. Consumer loves PayPass, merchant love PayPass with loyalty in a higher spend. We love PayPass because it increase our transaction and increase our merchant location. In GM, we always look for new way of doing business. We always look for innovation and new technology.
Our goal is to see in the future, not only a cashless society, but cardless society. Thank you. Eddie?
Bella, thank you. Internally, we refer to Bella as the Iron Lady of the high-growth markets. Hopefully, it's clear to you guys now.
Thank you.
She even takes Australia on as well from time to time. I grew up in Africa, and just listening to Daniel and what's happening in South Africa as well, it's just amazing to see how the franchise is actually developing in that part of the world. I don't want to discuss Africa. I want to focus on Australia. I specifically would like to focus on three strategic topics that's important for us. The first one is cash displacement, the second one is innovation. The third one is our digital convergence agenda. If we look at cash displacement, the vehicle that we're using for cash displacement is PayPass. We've started on this journey about four years ago. Currently, we have 85% of all our cards in the industry are PayPass-enabled cards.
It's on Mastercard Debit, it's on Mastercard Credit, and it's even on Mastercard Prepaid. The Qantas card that you will see downstairs today, it's got the PayPass application on it. We've seen very strong penetration on the consumer side in terms of PayPass enablement. What's very interesting as well is that we've reached that tipping point in terms of usage. In August, we processed 16 million transactions through our own network. If we add the online transactions as well, it will be close to about 30 million transactions. In other words, a million transactions per day. It's actually referred to Coles and the fact that they really like contactless. They're very intensive in terms of time and motion studies, and they've identified that PayPass transactions are actually 30 seconds faster than a cash transaction.
That fits very well in terms of their strategy for their consumer experience and where they want to go on that. Talking about consumers as well is we've seen that we've actually moved through the early adopter phase now, and we're now in a phase where consumers, actually 40% of the consumers use the PayPass card for more than four times a month. A year ago, it was less than 20%. We're through the early adopter phase, and we're now in the mass phase where it's really moving forward. I think what is very important as well is that we look at the trend in terms of cash displacement. Currently, what we see is that three out of 10 transactions below $100 are PayPass transactions. If you go down and you look at $30, seven out of 10 transactions are now PayPass transactions in Australia.
What's quite interesting as well is that there's been phenomenal growth in that category. There's been a 50% growth in that lower ticket value space. Gary Flood actually touched on it as one of our strategic objectives is to grow in the low-value tickets. That's really growing very fast in that area as well. Just to demonstrate this to you as well, a PayPass debit card transaction, the average transaction on a PayPass debit is 36% lower than on a debit PayPass contact transaction. The gap is even bigger on credit. The difference is 89%. Again, a very strong evidence that we're actually moving down into lower ticket values. We've also got very strong evidence that the PayPass application on the card, and to use a term that we use, bring the card to the top of the wallet.
The usage is more for other applications as well. We've seen very strong penetration in supermarkets, food stores, restaurants, and obviously in Australia, bars, as well as for petrol or gas. From that point of view, phenomenal growth. This brings me into NFC and our NFC agenda. What is in place currently is the strong acceptance network for contactless, which is obviously the foundation for NFC mobile. We're currently working with two issuers in Australia with mobile applications. Again, I believe that cycle will take some time. It will take about 12 to 18 months really to get into a rhythm on that, but it's very high on the agenda. This moves me into the innovation space that we're doing. Again, I think if you focus on Mastercard Labs, Mastercard Labs identified an opportunity with Qkr!, and the demonstration will be downstairs as well.
We took that application to one of our acquirers. They loved it, and we took it into a sports stadium, where we have actually enabled about 1,000 seats in the sports stadium, where you have a Qkr! application, you read it on your chair, the menu comes up, you order your food, and it is delivered where you sit. What is even more exciting is that we took it to schools with the state government in Australia. We have enabled Qkr! in three areas in the school environment. The one is for canteens, where parents can actually order food for their children in advance. The other one is that they can pay the school fees and order school uniforms and stuff like that. We are currently implementing that in eight schools in Australia.
The interesting one, in the first week that we have implemented, one of the canteens actually decreased their cash in their system with 57%. The schools love it. The parents love it. Again, this is innovation in action. We took it from Mastercard Labs, and we have implemented it, and it is now in a production mode. The next one that we are extremely excited about is Masterpass. That is the real digital convergence mode that we are going to move into. If you look at what consumers and merchants want, they want easier, faster, and safer payments online. This is what Masterpass offer. What we are currently doing is we are actually following exactly the same approach that we did with PayPass. We focused on the consumer ecosystem to develop that ecosystem in terms of cards.
In this case, we worked with four issuers in Australia to enable their consumers or cardholders to use Masterpass online. We also focus on the merchant ecosystem. In that context, we have developed partnerships with 16 payment service providers to enable merchants with the Masterpass button on their websites to accept payments through Masterpass. We will add thousands of merchants in the next three to four months in terms of our payment system. Again, just to summarize, in terms of our three strategic objectives, we have executed on that. A point that I want to make, and this has been raised by Ann earlier as well, is this would have not been possible if we have not had the resources on the ground. Down under, we see the benefit of resources and the strategy in getting some of our resources closer to our customers.
That being said, I am going to pass on to Kathy just to talk to you about our network capabilities as well.
Okay, thanks a lot, Eddie. I think no doubt, really impressive work that is going on in these markets around the world. As Eddie says, I'm Kathy McCall. I've been with Mastercard now for just over 5 years, actually. I guess by this time you can also tell that I'm Irish. Sometimes very Irish. What I guess as I wrap up here for our panel, what I want to point out is that, of course, none of all the magic that you've heard about this morning, and also the real magic that we've heard about at the panel today, where it happens on the ground, none of that's possible without processing solutions actually available in the local markets. One of our major objectives as a company is to increase our transaction share above the 50% that it is today.
Gary, earlier on, demonstrated the value chain in the market that demonstrates how important and compelling processing is to actually achieve that objective. Daniel talked more about how a market comes together and lots of different companies and governments integrate to provide basic infrastructure. I want to focus a little bit more on the strategic investments that Mastercard has made in order to fast-track product enablement in the market. We bought Access Prepaid back in 2011 with an eye to that overall global travel prepaid market that Ann talked about. We have invested organically in the IPS issuer processing platform, really to get after large-scale customers. We acquired Trevica very interestingly in 2012 because when the Iron Lady demands, then the Iron Lady usually gets.
To enable her to achieve that fast track, we acquired Trevica to help build out that processing infrastructure that she talked about. Now, of course, she's taking it across the 11 time zones of other HGM countries. MPS is our joint venture with Smart, that enables our mobile processing capability, really important in these days ahead. Finally, DataCash acquired probably late 2010, rounds out our overall processing capability with a focus particularly on e-commerce processing, along with other channels, of course. You'll see a couple of examples back here, but I'm only going to focus on the 2 that you can actually see downstairs so that we can make sure that we get down there.
Eddie and myself are always good buddies anyway, we became even closer as Access and IPS worked with the local market teams and the product teams to build out that leading-edge loyalty card that we referenced earlier with Gary. You will see this downstairs, I really do urge you to look at it through the eyes of the traveling consumer, because that's what we all are at the end of the day. You heard a little bit, you'll see a little bit about the capability, the point that I want to make about this is it was the fact that we could integrate what we had rather than develop from scratch that enabled us to introduce a new product to a new market in less than 6 months, cutting our time to revenue by over a half. That's the power of integration.
Of course, now our pals at Access actually has a very compelling proposition to take to other global airlines around the world. Now, of course, Ed always woos us internally, and I'm sure he did you guys as well, as he talks about this converging world ahead of us. MPS has been working closely with Trevica and IPS to build out that mobile money capability that is so important for the work that we want to do in emerging markets, enabling financial services and access to banking for the underbanked. You'll see that downstairs. Ann referenced it again. It is amazing to go to that Zuum stand and watch the power of putting financial services in the hands of the underbanked. Absolutely very compelling.
I'll conclude really with the point that our financial innovators are really, really dependent, very operationally dependent on processing in a very fundamental and compelling way in order to implement in the markets. We know that it's our ability to integrate the functionality that we have that delivers the technology and the operational infrastructure that these guys really need. That's what enables us to fast-track our products into market and therefore help us to achieve overall our company objective of increasing that transaction processing share. On behalf of my panel, I'd like to thank you very much for listening to us and invite Martina now to come and talk about our business from a financial perspective. Oh, sorry. I have to get up.
Thank you guys. I'm not really sure about Daniel's comments. Either it's budget season, he needs more investment, or he might want to come back to finance. That would be great. Anyhow, hello, everybody, and thank you for joining us here in New York or listening in on the webcast. This is the last presentation of the day, and then we have another Q&A session, and then you're free to go down to the demo room. I'd like to just pull our morning session together, both from a business driver and a financial perspective point of view. Let's get the agenda up here. First of all, I would like to take a look at our 2013 outlook, again, from a business driver and a financial performance point of view.
I will be talking about our approach to investments as well as our guiding principles to capital planning. I will be closing then with some remarks about our long-term growth and financial performance expectations. Let's start with 2013 year-to-date business drivers. What you see here on the chart, for the first quarter and the second quarter, you see actually our as-reported numbers. Those are the numbers that we typically review with you during the earnings releases. As you know, on an intra-quarter basis, we really can only use our processed metrics, and that's what you see on the right-hand side. We pulled out processed metrics for the second quarter as well as for the July and August period. The July till end of August period is here featured versus the second quarter.
What you really see in all of the metrics that we're about one to two percentage points higher from a growth perspective, and that is very consistent with what our expectations actually were for the second half. The second half is trending a little better than the first half. In part, we are also seeing positive signs coming through in the U.S. in the economic environment. Based on these drivers, our expectations for the full year of 2013 continue to be in line with what we said on the last earnings call in early August. We expect that the second half net revenue growth will be similar to the 12% that we saw in the first half.
As I just said, this is really based on the business drivers that we are seeing at this point in time, and we have exactly assumed those business drivers before, so there's no change. What we did do is we included the higher level of rebates incentives that we typically see in the second half of the year. As you heard from Chris, we have a number of deals in the pipeline. We also assumed a certain amount of incentives that will be only recognized when these deals come to fruition. As you know, these deals, they come to fruition whenever they come to fruition. These amounts will be recognized in those particular quarters. That can be a bit of a moving number. In terms of operating expenses, we still expect them to grow just slightly below 8%.
Versus 2012, as we continue to spend on the right things that support our growth. When you take that together with the top-line growth, that is providing for some operating margin expansion in 2013. For modeling purposes, you should continue to use a tax rate of 31%. On foreign exchange, if the euro and the Brazilian real stay as they were at the end of August 31st, and if they hold for the balance of the year, then we expect that the impact of these currencies will essentially offset each other. Now some of you have actually asked about how we look at investments. I thought it would be helpful to provide some insight on this. Over the last three years, we have invested close to $2 billion.
Roughly half of that we have actually invested in acquisitions like Access Prepaid and Truaxis, but also the investments that we make in joint ventures such as, you heard about Zuum in Brazil, there's Wonder for the rest of Latin America, the joint ventures that we have with Telefónica. This amount actually doesn't include DataCash, which we acquired just in 2010. The other half of this roughly $2 billion of investment was actually invested organically. How we think about it is we are really thinking about it in three categories. First, we have investments delivering growth right now. As you heard this morning, we have done a number of investments in our core products, which brought us share gains in debit, in commercial, in consumer credit outside of the U.S., as well as in prepaid.
It also includes things like expanding the local presence of our sales and marketing team, building acceptance with new merchants and new devices, as well as growing our Mastercard Advisors team capabilities. All of this, as you can see, really supports our strategic objectives of expanding our geographic reach and our consumer base, such as working with governments and with merchants. The second category that you see on here really includes investments that support the expansion of our payments capabilities as well as innovation. These include the loyalty and rewards space, the information services space, and you heard quite a bit about that this morning, as well as our continued investment in Access Prepaid and in DataCash. On the topic of innovation, as Ed mentioned, we are very focused on staying on the forefront of the physical-digital convergence with products like Masterpass and our mobile money initiatives.
Also Mastercard Labs is driving our pipeline of future innovations and many of which you're actually seeing downstairs, when you're going to be released from this room. Finally, we also continue to invest in our technology and infrastructure backbone. As Gary mentioned, we must deliver on the core. We must continue to invest in key assets that allow us to scale our global processing network as we transport more transactions. You heard that from a number of our executives this morning, that that is a real focus of us. We need to ensure that Mastercard continues to provide safe and secure solutions and that we have all the tools that we need as a premier technology company. To summarize, about a third of our organic investment has gone into the delivering the shorter-term growth.
Almost half of our investments over the last three years has been going into gearing medium-term and long-term growth through expansion and innovation. The remainder went really into the technology and infrastructure backbone. Now let me talk a little bit about M&A, mergers and acquisitions, as we are looking more actively at potential M&A opportunities. Here is a summary of how we evaluate the opportunities. I mean, to start with, we assess whether there is a good strategic fit. The sectors of particular interest are related to the loyalty and reward space, the information services space, as well as processing. Clearly, we're interested in technology investments such as assets that can help us in the physical-digital convergence space and anything related to keeping consumers, financial institutions, and merchants safe in the payments-related areas.
Next, we look at whether the target companies provides us with critical capabilities in expanding or strengthening our product and service offering, providing us differentiated technology assets, allow us to really reach out geographically or give us new distribution channels. Then we evaluate, of course, the financials. Like many companies, we look at acquisitions mostly from a cash flow perspective, and we are looking for returns above Mastercard's weighted average cost of capital of about 10%. That hurdle rate can vary by the type of business that we're looking at and depending on which kind of areas in the world it's operating in. However, there might also be some properties that are interesting for us to round out our own technology skill set, but they don't necessarily have an immediate return.
Finally, we obviously look at the risk profile and other considerations, including integration and cultural fit. Let me shift gears and talk about our capital structure. Our guiding principles have not changed, as we want to preserve a strong balance sheet, liquidity, and our credit rating to first and foremost make the investments that I just talked about in order to enable the long-term growth perspective of our business. Given the strong cash flow generating capability of our business, we expect to have excess cash even after pursuing our growth strategies, which we would target to return to shareholders. At this point, as many of you know, our bias is still towards share repurchase programs overall, but we continue to regularly evaluate the dividend level. Let me put this a little bit in context with numbers.
Since 2007, we returned more than $6 billion to shareholders, either through dividends or share repurchases. In 2012, we returned $1.9 billion to shareholders, significantly more than in 2011. When you see we are in an even stronger trajectory this year, having returned $1.4 billion through the first half of 2013, including doubling our dividend in February. With that, let me move on to the last part of the agenda. Our long-term growth potential and financial objective. Several people have already talked about these three concentric circles, let me just move on to some of the numbers on that. Here in the first bar, you can look at PCE growth on a worldwide basis. Ajay gave you the slices on that in terms of how that can vary by country, by economic times, et cetera.
Not much has really changed on an aggregate basis since we discussed this at last year's investor meeting and PCE is still expected to trend around 5% per annum over the 2011 to 2016 period. Second, this is the second concentric circle that you see here in the green bar. The secular trend of cash and check conversion to electronic forms of payment. That has been trending in the 4%-6% range over the last six years. Again, really no change from what we have talked about before, we continue to assume that kind of range going forward. Taking these two factors together, we still expect purchase volume growth, market purchase volume growth to be in the 9%-11% range.
When you adjust for markets where Mastercard cannot compete against domestic schemes, the market opportunity for us remains in the 8%-10% range. Again, no change from what you have seen before. Finally, you can see in the second green bar that is labeled strategic investments. Those are really the strategies, a lot of which you have heard from our panels and from our executives this morning about, that allows us to win, share, and to capture additional value in the market and would bring us to that low- to mid-teens long-term revenue growth target. Let me put this in perspective for our 2013 and 2015 long-term financial performance objectives, they really have not changed from what we presented last year.
We remain confident that we can deliver an 11%-14% CAGR over the 2013 period from a net revenue point of view. Assuming the economic environment remains similar to where it is today, we now expect that net revenue and EPS growth in the early part of this three-year period will likely be at the low end of our stated range. While we said this on our last earnings call, this is slightly better than what we thought a year ago when we met. It's really due to what's happening in the economic environment, where we're starting to feel a little better in terms of what we're seeing in the world. We kept the 50% operating margin minimum here, and I just want to be sure that everyone understands that we're not managing to a 50% target.
Rather, we believe that it's the minimum margin level that our business can generate, even after considering all the right investment opportunities for growth, as well as, of course, managing expenses very carefully. Our ability to exceed that 50% in any given year is dependent on both top-line growth and the investment opportunities that we're seeing. We expect an earnings per share CAGR of at least 20% over the 2013-2015 period. Of course, this assumes some level of continued share repurchases. Tax rate is not changing at the 31% assumed level for the three-year period. As all of you know, these objectives are on a constant currency basis and also exclude future merger and acquisition activity. Thank you, and now let me turn the program back to Barbara and invite my fellow executive committee presenters up on the stage to begin the Q&A session.
Thanks, Martina. Can we turn up the house lights a little bit so we can see who's out there? Again, for those of you here in the room, please wait till you have the mic and state your name and affiliation. We still have a quiet group on the webcast. Nobody submitted any questions, so we're going to start again here. Chris? Brendler?
Thank you. Chris Brendler with Stifel. I've heard a lot about PayPass today, it sounds like there's been some success. You mentioned Canada and some of the foreign markets. When I try to use my phone in the U.S., the merchants tend to look at me like I'm crazy for trying to tap my phone. I tried several times, and I stopped trying because it just feels silly. Now I just carry a credit card in the back of my wallet, a Mastercard, of course, and swipe that instead. It's just easier. I just don't understand. Can you help us explain what's the difference between some of these foreign markets where you are seeing people tap their phones or tapping something, not necessarily a phone, versus what we're experiencing in the U.S.?
Might ask Craig Vosburg up there, since he handles the acquiring side of the business. He always gets phone calls from Ajay when his PayPass doesn't work.
I have the same problem. I'm sending text messages saying shit head, it doesn't work again.
It doesn't work. CVS on 8th Avenue is not working. Craig, get your screwdriver and get out there.
You think he's kidding, he's not. I get those emails most Sunday evenings. Yeah. It's an interesting question, I think it just has a lot to do with the structure of the market. We've seen markets where PayPass has really taken off and been very successful, where the markets are a little bit more condensed, a little bit more concentrated. Certainly on the issuing side, where we get a nice level of scale support for issuing PayPass-enabled devices, and where there are some large merchants who can set the tone in important categories for installing the technology at the point of sale. The U.S. is a large complicated fragmented market. Not as fragmented on the issuing side, but on the merchant side.
We're talking about more than 9 million merchant locations we have in this market that there is a decision to be made about the equipment that's installed at the point of sale. Part of what we factored into our roadmap for implementing EMV in this market is that by creating incentives to encourage not just merchants, but issuers as well, to adopt the technology that we believe is most secure and delivers the best consumer experience, that's going to create an incentive for greater uptake in this market. We have continued to grow PayPass acceptance, as you've experienced, it's nowhere near where it needs to be. We have put incentives in place that we think as merchants go through technology upgrade cycles, it's going to become a natural part of their decision process to enable their point of sale for contactless technology.
We'll continue to work at it. It's just been a bit of a longer slog for us in this market than it has been in some of the others.
EMV will help?
We think it will, in that the question was EMV will help. We think it will in that some of the structure we've put in place around offering financial incentives to merchants, in particular, things like account data compromise relief, PCI compliance audit relief, et cetera. The benefits that they can realize will be greater if they're processing transactions through terminals that are enabled with contactless technology.
Okay. Gene up in the back. I'm sorry, I can't see who that is. I just see a white shirt.
Hey, it's Tim Willi with Wells Fargo. I've got a question about marketing. If you think about the emerging markets and international markets, your customer acquisition is probably coming in a lot different way than it has in North America, where you've relied upon the banks primarily.
I guess, do you think over time, where you have maybe a bit more distributed way of acquiring consumers, how does that impact the return on marketing or the approaches you're taking? Would we expect to see a change in marketing versus volume or GDB or something like that over time as a result of those differences in customer acquisition?
We don't actually acquire very differently. We still acquire essentially through banks or merchants, whoever is the actual card issuer. In some parts of the world, merchants and non-banks can be card issuers, but essentially it's the card issuer who does most of the consumer acquisition. The only thing we are doing differently, and we started doing it in the U.S. as well as overseas, is we've taken our money from spending it on what I called image-building campaigns around Priceless to connecting it to priceless experiences for consumers. That came through the Priceless Cities, which is not just overseas, but here too. New York is one. We've got things going on in Chicago and Miami, and it needs a constant rejuvenation, but it actually makes an enormous difference to the way the brand is perceived.
The task of marketing is different in some of the emerging markets from what it is in some of the developed, better penetrated for electronic payments markets, meaning in the emerging markets, it's about getting a card into their wallet and getting them comfortable with that idea. In the U.S. or in Canada or in Australia, it's about which card do they take out at the point of sale.
It's two slightly different reasons to push at it. We actually don't approach the acquiring of a consumer any differently in the two markets. It's always mostly through the issuer of the card as the primary engine, then some work through merchants, but the issuer of the card is the primary engine.
Yeah, I just think the issuer tactics vary market by market in terms of acquisition. I think if you go more emerging markets, there's a lot more direct sales or store-based sales than maybe online sales or direct mail channels. That's a lot of the work Advisors does and executes around the world, making sure that the issuers and their methodologies are efficient. Ajay's point, in developing markets, it's about educating them on what they can do with a card. That's our role.
All right. Then as you become more educated, it's driving usage and preference. The pure acquisition of new accounts is pretty much driven by whether it's merchants or MNOs or our issuers traditionally.
Okay.
Thanks. It's James Friedman at Susquehanna. I wanted to ask about the commercial corporate angle, because that's becoming larger as a part of the investment thesis. Clearly, the results speak for themselves, as you referenced the Nielsen report. American Express is such a huge company, 80,000 employees. I wanted to ask about your go-to-market strategy. Is that too, Ajay, through the channel partners, the issuers? Or is there an enterprise sales force that you're actually building to go at the corporate client?
Yeah. It's actually a combination of both. You end up having typically the issuers who tend to make the first call. Very often what we do is our sales force either goes along with them because of our knowledge and expertise and depth of comprehension of tools like Smart Data and the commercial card and what it does for a corporate treasurer or a corporate CFO in terms of tracking expenses and managing the way that money gets spent. We tend to send people along, but we do it with our partners, and we've got kind of lead partners of choice in different regions.
Yeah
because of their interest in that region. That's how it's kind of settled into a pattern.
Right
over the last, I'd say, couple of years.
Yeah.
That's the big picture answer.
Yeah.
I'm going to let both Ann and Chris refer to their kinds of experiences to give you a little more color to that.
Yeah. Ajay's right on. We have marketing efforts direct to corporates, where we will go out and call on them and showcase our products and services and acceptance advantage. We also work very closely with the big issuing banks and go with them on calls and provide our products and services sort of on a white label basis to them. One of the things that I think is going to happen, it's an evolution that we watched take place in the co-brand space, the retail co-brand space, that I think is also going to happen in the commercial space. Retail co-brands used to be that the issuing bank made the network decision. The retailers realized over time, with the help of a lot of consultants, to split the decision between issuer and network.
I think what's going to happen in the commercial space as well, for big commercial deals, you're going to see consultants employed, and they are then going to split issuer decision and network decision again. That will change a little bit the dynamics and maybe a little bit more of the importance of us having direct relationships with corporate so we've had in the past.
I think, across the international markets, it is similar to what Chris describes, especially in the mature markets like the U.K., like Australia, very classically like the North American model that we have got, the dual approach through our issuers and also direct. One of the things I would say is Chris said he was very proud of his commercial growth and that we are too all over the world and some places we are growing over 30%, over 40% in some markets. It is a very, very good area for us. The thing that we are focusing on in the international markets is not just the big issuers where you would go with that kind of sales force, but also starting to produce solutions for the small to medium-sized businesses, because that is where the real growth is going to come from in my markets.
Remember that 80% of small to medium businesses are under-banked. Downstairs, what you are going to see is Simplify Commerce, which as Ajay mentioned, or maybe it was Gary, cannot remember, is the way of small businesses actually bringing themselves up in a matter of minutes on the internet and being able to accept cards. When you look at the opportunity for that across the international world, it is absolutely huge. You are going to see even more growth in the commercial sector going forward.
I think also just the go-to-market approach is one thing. The package of tools.
We have talked about Smart Data, we have talked about In Control, there is another element which Mastercard Advisors focus on, which is helping our customers actually penetrate small business. All right. They have developed expertise leveraging acquisition channels, which are different for small business than for consumers with these banks and all the different types of countries we have around the world. It is a complete kind of picture that is one of those things to scale further.
The other thing I'd say about In-Control, although you've heard that used in the context of commercial products, in my markets, we're using that to actually manage fraud. We've rolled out a complete Fraud Shield, for example, across the whole of Germany by getting all of the banks to adopt it. We're also putting it in the clearing system in Taiwan. Some of these products that are developed in one space can be used to actually strengthen our franchise in a completely different way, which is the great thing about innovation.
Okay. Greg?
Yeah, Greg Smith with Sterne Agee. Two questions for Martina. Just the first, how should we think about buybacks going forward relative to the stock price? With your stock up, the valuation up, how much should we consider that in trying to forecast your buybacks? Second question is just, is there an opportunity on the tax rate to lower that? I know you said use 31% next couple of years, as we look over the next five years or so, should that come down naturally, maybe as you grow faster in lower tax jurisdictions?
First of all, on the share repurchases, as we have said before, we're going to run the program into our last $2 billion program. Really, our philosophy is picking up on the dips. That's what we have been doing very successfully.
Probably similar to what most of them are doing.
Yeah, absolutely. What they're trying to do, I think.
We could do a combined thing if you like.
Really the philosophy hasn't changed. When you look at the growth opportunities that we have for a very long time, that is the way that you really have to look at your share repurchase program. As long as we are producing this excess cash, which I said, that is just part of our business model, you're going to continue to see that kind of cadence for us doing. Trying to pick up on the dips so that we are running accretive programs, and I'm proud to say, up to now, we have been really running accretive programs.
Just so you know, that idea of picking up on the dips is not something that Martina started talking about this year or last year.
No.
It's from the year I came in, we were talking about shareholder buybacks.
Yes
She's been pursuing this picking up on the dip strategy, which is the only way you would want us to buy shares. It's the way you do them. That's kind of what we're doing.
Okay. Second, on the tax rate. Yes, I'm saying for all of you guys, use the 31% for modeling purposes. I think you guys know that we have quite effective tax strategies that we put in place in terms of optimizing what we did with our European footprint, as well as with our Asia Pacific, Middle East, Africa footprint. This is all out very much in the public since we have to do 10-Ks and disclosures about that. We optimized our footprint in such a way that we basically put our tax structure there where we're actually generating our business. For example, in Singapore, we have a 1% tax rate for anything that we really generate out of the Asia Pacific region. Singapore is a major business hub for us. We have a lot of people there working. We're doing a lot of development there.
It's really for us a good location. When you do these kind of structures, they're usually transition periods over time, and you don't get the advantage of that kind of tax rate right on day one. You're going to grow into that over a five, seven, 10-year period. Over time, you should be seeing some benefits of that coming through in our taxes. We're continuing to look at that, and it's always really hooked to where we have our business. Where we have our big business hubs, where we do the development of our products, where we run our business from, that's where you will see us migrating to from a tax point of view.
I would think over time, this is not something you're going to get in six months or in nine months or in 12 months, over time, you should be seeing a gradual decline in the tax rate.
This sounds like our budgeting conversation. You won't get this in six months, nine months or 12 months.
Okay. Tien-Tsin?
Thanks. Tien-Tsin Huang from JPMorgan. Just a couple of questions. First, coming back to Chris's comment about the pin debit share that you picked up on the back-
Yep
of Durbin. I think I've heard you and Barbara say that you didn't discount price to achieve that. I'm curious if that's a good case study that we can use if signature debit opens up for non-exclusivity.
Yeah. I think just to Tien-Tsin's point, we've been very disciplined about not discounting pin debit just to win every transaction that's in the marketplace. Craig Vosburg is my gatekeeper on that. Every Friday afternoon, I get a list of every major retailer where Maestro, as our pin debit product stands in the routing tables, up or down against other regional networks. We have a pact that we are not going to just chase share for the sake of chasing share there. We set some targets that make sense for us to meet our overall financial objectives for the year. If we need to course correct, we see within a band of reasonableness our market share moving up or down. We might add a little bit of incentive, but certainly nothing wholesale.
If you flip that to the signature debit scenario, I think the thing you have to remember if signature exclusivity goes away in the pin arena, issuers and merchants were picking from I think there are nine pin debit networks in the U.S., right? If you go into the signature space, there's really only two players. The third being Discover, not quite sure what their staying power is in the signature debit space is. I would suggest that there is probably even less pricing compression if we go to a signature debit non-exclusivity than in the pin space. You go to a dance as a guy, and there's nine ladies dancing, right? The prices are different, I guess, right? You go with two, and-
Hoping somebody's going to dance with you.
Right. Somebody's got to dance with you, right? Before it's too late. The price goes up.
Craig, I think I should rewind that.
All right. I'll stop there. You get my point, Tien-Tsin, right?
I do.
Nine versus two.
Let him off the hook, Tien-Tsin. Here's the kick I'd add to that. One is, I don't know if Senator Durbin would like to hear this being said on the back of Durbin, but I'll let that go.
Yes.
The second one is actually a real number. I said this in some meetings in the past. Where we were in terms of PIN debit transactions, we were processing through our network before April of last year, and now is we're at four times the number. We've kind of stuck to that number, give or take a little bit up or down. As he and Craig look at those Friday sheets, we'll go up a little, we'll go down a little. We kind of stick around that number.
Curious how many dance comments will be on the sell-side notes tomorrow. Question for Martina, I guess the second one, and maybe Ajay, just on the M&A front. Sounds like a little bit more interest there. Any size restriction or level of dilution you'd be willing to take? I'm especially curious to hear if there's any sort of big or chunky deals that you might be looking at. Thanks.
Well, look, most of the deals that we have done at this point in time were anywhere in the ZIP code between $50 million and $500 million, right? That's the ZIP code, we kind of think that there are lots of very good properties out there that are in this ZIP code that would actually benefit us from a business point of view to have. Of course, from a size point of view, when you just look at our financial wherewithal, we would be able to go up in size, it all depends on whether the property really makes a lot of sense.
I haven't come across a lot of deals, Tien-Tsin, that have got valuations that are deserved at much higher numbers in the kind of industry we operate in. In addition to full outright acquisitions, we've been putting money into investments and JVs in a number of locations. Although we watch those very carefully because management JVs are always complicated. Investments are not a bad way to go in some cases. We've got investments in something called ECS in India, which is a processing shop that gave us actually, I think it was in Kathy's screen when Kathy had her screen up there. It's one of the inputs we're using to drive beyond the 50% of transactions that we see today. We were at 40 some time ago. We're at 50 today. We want to get past that's why this lady is focused on that aspect.
We've got investments in things like Mu Sigma in India, where we went and put money in to go and get a chance to build out our data processing capability for the analytics business that Kevin Stanton is developing. We've put money into a provider in Thailand, which is one of the leaders in the e-commerce space that's connecting merchants' banks and payment systems together and so on and so forth. There's money being invested that goes past the outright acquisition of a Truaxis, a DataCash, a Access Prepaid Worldwide into these smaller deals where we may put some money in and then later on increase the share, like we did in Trevica, where we owned a portion, and now we own 100. There's two or three strategies being played out.
There's another piece, which is we've invested with a couple of very early-stage angel investors in the payments technology space. That's the way I'm trying to develop an osmosis skin for our company to see more deals in the payments development of new technology, which we may not see ourselves all the time. It comes in through these people. It makes us more aware and makes us more, I think, clued in. It adds that little jump to the innovation step that Mr. Flood refuses to do it in public.
I'll jump, not dance.
Yeah.
Jane, do we have any questions up there? Okay. You've already asked a question, Craig. Come on. Julio. Ryan, right over here.
Thanks. Julio Quinteros from Goldman Sachs. One of the things you guys talked a lot about today was this shift to analytics and trying to use analytics as a way to sort of add more value. A question, I guess, as I'm thinking about this shift to integrated payments at the point of sale, seeing more of these tablet-based POS systems, even the digital wallet guys, everybody talks about adding value in analytics. As I think and as I hear kind of what you guys are saying, clearly, there's going to be a lot of value generated in using those analytics. Do you think that you need to own a bigger part of the POS itself?
Some kind of cloud-based POS system of some sort to actually get you closer to that data to be able to add that value, or can you do it from where you guys sit at the network side?
Why don't I get Kevin to answer for a second, and then I'll ask Kevin.
As I said before, the data we have through our transaction network is spectacular stuff. We are constantly adding to the data pool that we can draw from. That's with our customers on a case-by-case basis. It's purchase sources. We're always looking at how do we enhance our data on a permanent basis. What you've described is one of the things we've investigated. I think you could as easily have directed the question to Ed because we work very closely with Ed in making sure as we enjoy the convergence of digital and physical, that we're looking at the data angle there.
The thing, Ed, is there are two areas I don't want to go. One is I don't want to know your name as far as possible in the data sheet that I get because I do not want to be involved in marketing to you personally. It's not what my role is. I'm a B2B player with a desire to be B2B2C sensitive. When the consumer signed up for an electronic payment or card account with you, the issuer, or you, the merchant, they signed up with you, the issuer, or you, the merchant, not me, Mastercard. I recognize my place in that space, and I don't want to cross that line because I believe that as the privacy debate becomes stronger, and it will, this will be an important position to protect and defend. I don't need to prove I have a Chinese wall in the company.
I don't get the data. I don't get your name. That, to me, is an important part of what I'm trying to protect and build. I think that's key to everything that Ed McLaughlin and Kevin Stanton do or that Chris McWilton and Ann Cairns do in the transactions we do. The second part is, would I like to get more granular information? Would I like to get to SKUs and not just merchant code and dollar value and point of time? Absolutely. Those can come through many ways, through working with a point-of-sale register, but also working in partnership with merchant associations and other institutions that we're already doing that business with. There's many ways to skin that cat, if it could be called that, and that's kind of what Kevin Stanton and Ed McLaughlin are working on.
Okay. Jim, you want to pass that down? I'm sorry, I can't see who it is.
Way up in the corner.
Thank you. This is James Faucette, Pacific Crest. I wanted to ask a question on the proposed legislation out of Europe, just get an update on where Mastercard feels that we are in the process first. Then second, now that you've had more time to evaluate the proposals, where you feel like you are both on the questions of interchange as well as network ownerships. Thanks.
All right.
Sure. Go ahead.
Have Javier.
Yeah.
Absolutely. Well, I'll start, and then I'll pass over to Javier, my head of Europe, who's here and the guru on the subject. We did give the investor community an update at the beginning of the summer. To be honest, not much has happened since then because, in Europe, we like to have long summer recesses. There's three points that I think are worthy of mentioning in terms of this question. One is the co-badging point. The other is the impact on the consumers of the changes. The third is the separation of the processing and the scheme. I'd like to hand over to Javier, who I think will address those questions very well.
Thanks, Ann. Thanks very much, and thanks for the question. As Ann said, we like to go on holidays and that. It's good because people use their Mastercard, and that's a good thing. The only thing that I can tell you is that I woke up to an interesting piece of news yesterday, I don't know if you saw that, whereby the French government decided and said. I say "decided" because it was a pretty official statement, I don't know if you saw it. They don't feel that a single interchange across Europe is a good thing. You got to remember that the French, six months ago, decided and reached an agreement with all the players, i.e., retailers, bankers, and the government, on a different thing, which has nothing to do with what Brussels is trying to drive. Hey, welcome to Europe.
I guess my point is that you should not take it to the bank just yet that you're going to have a new environment in Europe. It's got to have to play out. Indeed, in this, there will be a lot of risks and opportunities to Mastercard that I think we're really well prepared to take advantage of. You know that some of the things that were worrying you, for example, I get a lot of times questions about the fees. "What about your fees?" You know that our fees are not, I repeat, are not included in any way in what is being proposed by Brussels. Furthermore, another concern is the separation of scheme and brand. Brand and processing or scheme and processing. We do not bundle brand and processing. As a matter of fact, 50% of our transactions are done by somebody else.
We don't do that. Some domestic schemes do. That could hopefully, if indeed it does go through, open up an opportunity for Mastercard to process some more. Come to my table at lunch, and we can talk about it some more.
There'll be wine served.
French.
French wine.
French wine.
There might even be dancing.
We've got time for one more question. Sanjay, I saw you flailing your hand several times.
Really?
Thank you. Sanjay Sakhrani, KBW. I guess you guys mentioned IPS several times. I was just wondering where we are with its penetration and how satisfied you are in terms of that. Maybe, Chris, you could talk about how important it is when you win debit deals that you have IPS. Thanks.
Yeah. Kathy, you want to talk about first part of that?
She's just putting away a pint of Guinness and then getting up.
Actually, I'm putting away my almonds because I'm sure like you all, we're starving in this corner here. I have snacks in my bag. I think that I could say on behalf of all of us that we're thrilled with the performance with IPS. We've increased just over the last 12 months, we've doubled the capacity on the platform itself inside U.S. markets. I know I'll leave Chris to eulogize about what it's done for his business in U.S. markets. I think the investments that we're making now to explode the platform out across the rest of the world, very targeted, I have to say, where the need is well-defined and the capability and functionality that we have is appropriate for what we're trying to do in the market. We're now in Brazil, the Netherlands, Switzerland.
The third area is really the processor of choice for our Access Prepaid, which is really what has exploded out IPS across so many more different countries and has really increased the prepaid dimension rather than the debit dimension. Prepaid growing in the U.S. markets, but also growing globally. Chris, do you want to.
It's great for our sales force to be able to go out to a customer in a one-stop shop. You get brand and you get processing at the same time. It's something we didn't have in our toolkit, and our competition did. Particularly in the independent bank and credit union space, were an area that our competition could offer both. Now we can as well. It's sort of the after-sale stickiness. Again, if you get your system embedded with issuers, big and small, it makes your brand stickier, makes renewals a little bit easier conversation because if you're ripping out the processing, perhaps, and switching brands, et cetera, it gets pretty messy. It's great we have it. We have great testimonials now. Kathy's done a great job in getting that platform stood up and credible in the marketplace. It is state-of-the-art.
People realize it's state-of-the-art, we're seeing some real traction with what she's been able to do.
I think Kathy's comment about being the platform for Access Prepaid. Access Prepaid's in 26 countries right now. That's 26 international markets that multi-currency processing is available. That's fantastic because actually in our markets, the prepaid business, I think it's grown something like 100% over the last five years. It's fantastic growth rates, and the fact that we have this platform just makes it even better.
Before I turn the podium back to Ajay, who's got just a few quick closing comments, I've got two quick administrative things. First of all, we've got lunch available as you leave the room, boxed lunches. Please grab one and head downstairs where you'll find the lunch and discussion tables. Javier, I'm not sure if you're serving wine at your table. It was not in my budget, but if you want to pay for it, fine. Into the product experience area. You've heard all of our speakers today talk about the different things that are down there. In the back of your binders, you'll find a sheet that looks like this. It's in a pocket in the very back. If you open it up, there's a map.
It describes all 20 stations that we have this year, staffed with experts that we hope you'll take the opportunity to talk to. With that, Ajay?
I'm going to keep my closing comments very brief as we're all hungry, most importantly, I do really want the most of you who can stay on to go see this product showcase. We're trying to bring it all together so you can touch and feel rather than just listen to us quack about it. It makes it easier for you to identify with it. What I hoped you got today was a thought, the first one consistently over a period of time. We believe there is this enormous opportunity on the 85%, and it requires a very careful way of thinking about it. It's very easy to fall into the trap of chasing the 15%. You have to do that because that pays for us to have events like this and for Javier to buy somebody wine at lunch.
The fact is, our future will depend on the 85%, that is what we will evaluate ourselves on consistently over the next few years. The second one is we recognize increasing competition, not just from the traditional players who are also aggressive in many of the same areas that we're talking to you about, but also from new players. Right now, there's probably some two kids sitting in a garage in Silicon Valley trying to dream up a way to disintermediate the banks and the networks and find a way to tap into this nice, big profit pool. I think we recognize that. We want to engage with them because we believe we bring a lot of good assets to the party that aren't easy to replicate at an economic sense in a sensible point of time.
We think we can leverage that in the fight against the 85, as against worrying only about the 15. This company has changed substantially in these four years. You would not have had a dialogue about physical-digital convergence with the passion of all the team you're listening to and what you'll see downstairs four years ago. What you're seeing is only a portion of what our dialogues are like inside the company. That's just one example. I gave you the example of the millennials. It's the truth of having to deal with them and using their energy and their way of thinking about our business in a way that's different from the way that I would have thought about it, even myself, four or five years ago. It's an important part of who we are. It reflects in the way we deal with merchants and governments.
You've heard us talk a lot about it, you're going to see examples downstairs, and our people from around the world are living those examples as we speak. The Nigerian example, the South African example, the World Food Programme example, the PayPass examples from Australia, from Poland. You've heard about it from Canada and Turkey in the past. All these are a part of what we're trying to do differently today from the past. We believe that we're well-positioned. We've got a lot of work to do. Much can go wrong, we're well-positioned, and we're going to keep investing in making that happen. That legislative environment is a key part of what we worry about and think about.
That's why we're engaging with governments, not just as a business point, also you will ask any business manager who you spend time with today, anybody from the regions or the divisions, and they will tell you they own the situation on the ground of building the right capability as well as the right conversations with the governments. It is not the job of Noah and his capable team to be available in 210 countries to try and change that conversation with a bunch of lobbyists. That is not what we are doing. We're doing it ourselves. Chris was in D.C. yesterday meeting Cordray. I've been in D.C. seven, eight times a year. I consider that to be a business of mine. I need to get there. I'm out traveling. I was in, the week before last, in Jakarta, in Seoul, and in Singapore, all three with Vicky.
We met the senior-most policy makers and opinion leaders in those countries. I'm going in a few days to Eastern Europe with the Iron Lady, hopefully, she will allow me to do a little bit of the work that I want to do there, and so on. It's a key part of what we do. It is front and center of our future. We're going to keep driving change in all these things, in technology, in innovation, in culture. That's what we're committed to. That's what this gang is signed up for. With that, thank you very much. I'm looking forward to seeing you outside. Thanks again.