Good morning, everyone, and welcome to all of you. Those of you joining us here in New York, or for those of you who are joining us via the webcast, excuse me, I'm Barbara Gasper, Head of Investor Relations. On behalf of the entire MasterCard Management team, we all welcome you. Thank you for joining us this morning for our annual Investment Community Meeting. There we go. We've developed a program for you today which addresses many of the topics that we've heard you ask about and we think are of interest to you. Similar to last year, we've combined a morning of formal presentations with an afternoon of product demonstrations. Ajay Banga, our CEO, will kick off today's formal presentations with some comments about our progress in executing our strategy.
You'll then hear from several members of our management team, beginning with Alfredo Gangotena, who is our Chief Marketing Officer. Alfredo will be followed by the heads of our two product groups, Tim Murphy and Ed McLaughlin, who will each provide an update on some of the products and services from their respective core products and emerging payments areas. Following Tim and Ed will be Kevin Stanton, who's President of MasterCard Advisors, who will discuss our Advisors consulting business. Following a mid-morning break, we'll move to hearing about the regions from their perspectives, beginning with a look at two of our high-growth regions, Vicky Bindra and Richard Hartzell, who are Presidents of our AP, MEA, and LAC regions, respectively. We'll talk about the opportunities in their regions. This discussion will be followed by an update from Chris McWilton, who's President of our U.S. markets.
After that, Martina Hund-Mejean, our CFO, will provide a financial perspective on the business. After our Q&A session, we will quickly preview this afternoon's product demo and a mobile experience for you all. Finally, Ajay will be back up for some closing comments before we adjourn about 12:30 P.M. for lunch and the product demo. A copy of the slides that we'll be using here today can be found in the binders that you picked up on your way into the auditorium. They were also filed publicly this morning with the SEC as an 8-K. The slides are also posted on the Investor Relations section of our website for your reference. Additionally, a replay of this meeting will be available for 30 days.
Along with our presenters this morning, we have the other members of our Executive Leadership Team, including Gary Flood, President of Global Products and Solutions, Noah Hanft, our General Counsel, Walt McNee, Vice Chairman and our former President of International Markets, as well as Ann Cairns, our new President of International Markets. Rob Reeg, who is President of MasterCard Technologies, and Stephanie Voquer, our Chief Human Resources Officer. We also have our two other Regional Presidents who are not on the formal agenda today, Javier Perez from MasterCard Europe, and Betty DeVita from MasterCard Canada.
Additionally, each of our demonstration rooms this afternoon will have a Senior Management representative, including Mike Manchisi, who leads our Global Processing business, Garry Lyons, who's the Head of MasterCard Labs, Deborah Janssen, who heads up both our IPS efforts as well as our recent Access Prepaid acquisition, Mungki-Ki Wuu , who's the Head of our Mobile area, and Ron Hines, who runs our Prepaid group. I also want to acknowledge all the hard work and effort from the other members of our IR team, Greg Boosen, Adam Engelman, and Tina D'Amato. Now, just a few administrative items to get out of the way before we get started. Behind your name tag is a little coupon, a ticket that says, "Do not lose this ticket," which you will need to participate in this afternoon's product experience. Please don't lose it.
If you are not able to stay for the afternoon session, that ticket is also your exit pass from the venue. Please hold your questions to the Q&A session, which we expect will begin somewhere around 11:40 A.M. We will have the ability to take questions from those listening in on the webcast by hitting the "Ask a Question" button on your webcast player. Our agenda calls for a 20-minute break about 10:20 A.M. For those of you on the webcast, you can either stay connected or reconnect. It's up to you. Out of courtesy to the other speakers and for those around you, I would ask the attendees here in the room in New York if you would please silence both your cell phones and your BlackBerries now. Finally, just a reminder that today's presentation includes some forward-looking statements about our expectations for future performance.
Actual results could differ materially from those suggested by our comments today. Additional information about the risk factors that could influence future results is detailed in our SEC filings, including our Forms 10-K, 10-Q, and 8-Ks. With that, I'd like to turn the presentation over to Ajay Banga, MasterCard's President and CEO. Ajay.
Good morning, everybody. Thank you for being here, but also thank you for your interest and support for our company. I hope you like the fun facts. I'm going to start with some less fun facts about real numbers as against all the funny numbers there, which was just a way of—we use that video very often with new clients and new employees as a way for them to understand our company in an easy, tangible way. The one thing about this location that drives me crazy, by the way, is when these curtains go down because it's such a gorgeous view outside. When the damn curtains go up, you can't see the slides. Since we paid for you to come here, you're going to see the slides. Go ahead. All right.
The first thing I want to make sure you get across from us is we set up some commitments to you around this time last year. We talked about our revenue growth profile. We talked about what we would be willing to do in terms of sustaining margin. We talked about our EPS growth profile. All I want to show you on this page is that the first half is off to a decent start. Now, first halves don't three years make, but the first half is off to a decent start. Behind a lot of these numbers, behind this thinking of revenue growth, behind the thinking of margins, and behind the thinking of profitability lies some basic principles that with some of you I've had a chance to talk to individually or in groups, but never in a session of this type.
I thought I'd spend a few minutes going over how I think about our franchise and its possibilities over the next few years. The next slide really focuses on that. It's a very simple way of talking about what I call the three concentric circles that determine how and where we can grow. The outermost circle is personal consumption expenditure growth. It depends on a ton of things that I have nothing to do with. It depends on globalization. It depends on the growth of the middle class. It depends on urbanization. It depends on financial inclusion. It depends on so many things that governments and societies and economies go through ups and downs with. It is, at the end of the day, the factor, the foundation that decides the role we play in that space. It's an important space to keep in mind.
If you were to look at that number over the last 15 years through periods of ups and downs and economic crises in different parts of the world, it tends to show somewhere between a 5 and 6 perc entage points growth in PCE on the average across these years. You will have years when it's higher. You will have years when it's lower. You will have markets where it's higher. You will have markets where it's lower, depending on the year they're going through. It averages out at around that 5 or 6 perc entage points of PCE growth. In fact, if you looked at Spending Pulse, or you looked at yesterday's August spending data, even in the United States, which talked about flat spend compared to July of 2011, it did say 7% something compared to the prior year. Inside this, by the way, is inflation.
Inside this is, as I said, different factors we don't control. It's kind of the ecosystem we work in. It's the first, most important concentric circle that defines the bedrock of our business. The second one is how much or how many of those transactions, a little different from the spend, how many of those transactions go into cash and check versus electronic. You've heard me talk about 85% of the world's retail transactions are still cash and check, and only 15% are electronic. Again, in a trend sense, if you looked at this over a period of time, this secular change of cash and check to electronic tends to add somewhere between another 3 and 4 percentage points of growth into the system. You get kind of 5% or 6% from the outermost concentric circle. You get 2, 3, 4 percentage points from the next concentric circle.
It gives you a 7, 8, 9, 10 percentage point growth rate in the market for our space. The second concentric circle, which hasn't been a traditional focus of conversation or of resources, has traditionally not really been seen as something we can influence. In fact, we can. While in that circle, there are global trends we don't touch upon, things like the growth of youth. The more you have a younger population, it's much more likely they will go electronic payments than cash. My children are like that. Yours are like that. Some of you are like that, much younger than I am. That gives you the advantage of having the perspective of understanding the aspect and the attraction of electronic payments to cash and check. The fact is that there are tons of other things we can do here. Acceptance, the most simple one.
You will see this being talked about when Vicky and Richard Hartzell get up to talk about how acceptance is one of their priorities. In their kind of markets, basically, that determines one of the biggest possibilities of cash and check versus electronic payments and that trend. There are other things, too. There are all the new technologies that are coming into place that help fight that. There are our relationships that we need to build even stronger on with governments and talk to them about the cost of cash. Cash is not free. To a lot of people in government and regulators and politicians, cash is free. Electronic commerce has a cost to it. Cash is not free. It costs between 0.5% and 1.5% of GDP to print, secure, and distribute cash by a central bank in an economy, 1.5% of GDP.
In a new Canadian study just done a few days ago, it actually talks about 1.1%. At different markets, it's 0.5%- 1.5% of GDP. Add to that the cost for a bank of actually taking that and taking it into its branches. We need a truck. Normally, Brinks is the guys that supply it. That's a great share to own, by the way, because they've got a great model. If you take a Brinks truck, it has two armored turrets because you need more than one guy protecting your cash. You need two people accepting the cash, one to count it, one to check the counter, because otherwise, if you're one person counting cash, it kind of tends to disappear. Cash has got all kinds of issues with it.
That's just before it even reaches the stage of thinking about the cost to society of tax evasion, of cross-border issues. Drugs don't come into this country from another country in exchange for a credit card payment. Last, I figured that one out. Neither do guns go from here to somewhere else in exchange for a wire transfer. Electronic payments don't facilitate either tax evasion or cross-border issues. Cash is not free. Unfortunately, the dialogue has been one where cash is free from a government's point of view, from a society's point of view. Cash is not free for merchants. Cash is not free for consumers. That's the dialogue. One of the things we are doing very actively is to change that dialogue. That's why I'm spending so much time on this.
I believe increasing the pie, focusing on that second concentric circle, is as important to our future as a company as is our share in the 15% today. A lot of our dialogue tends to be around the 15% and not about converting the 85%. The math is obvious. If the 85% goes faster to become 83% and the 15% grows faster to become 17%, that growth rate of the market is way more interesting than just trying to fight for share in the 15% that today is electronic. I think our role has got to be to help drive that second concentric circle in the right way.
Today, during the course of today's conversations, you will see this thread played out in different parts of different people's presentations, from the way Tim talks about it in core products to the way Ed talks about it in his emerging product area to the way that Chris and Vicky and Richard will talk about this topic. It's not something we talk about directly, but it's now permeating into everything they're doing to focus on that middle concentric circle. Finally, the obvious one is the inside concentric circle, which is the one that we talk about all the time. What do we do to be able to grow our share in there? If you put those three things together, growing the pie in the second circle as well as improving the share that we have in that pie is kind of what drives our future and our revenue.
There are three key influencers that determine how those two circles change. The first one is the consumer and their behavior for all the obvious reasons in terms of why and how they are determining the growth of this market. One of the things that we have done in the past is that we used to be, as everybody said, a B2B company. All I'm saying is we don't want to be an issuer. I don't want to be a B2C company. That's not the role. In fact, these days, it's probably not a good idea.
I want to be a B2B2C company in the sense I want to make sure that I bring insights, expertise, and knowledge of that end consumer and their segments to my clients, be they banks, be they merchants, be they governments, be they transit authorities, and talk to them about products and services that are designed to meet the unmet and other needs of that crowd, of that segment. A working, affluent, traveling woman has very different needs from a non-traveling affluent woman, very different. Her payment products should reflect that. That degree of clarity on consumer segmentation is not something that the payments industry has over the years done with that degree of sophistication. I believe that's coming. I believe it's a real opportunity. That's one of the things that you'll see Alfredo will touch upon. You'll see Tim and Ed touch upon the issue.
You'll see Kevin Stanton talking about insights and expertise. You'll see all this threading through. The second big piece is governments and opinion leaders, merchants and the like. I believe that not engaging with them, you heard me talk about the cost of cash and with some degree of passion, I believe not engaging in a positive way with governments and opinion leaders over time around the world, not just in the United States will be something that could hold our growth back. On the other side, governments are great opportunities for business, be it Social Security cards in the U.S. or with the post-Italian in Italy, be it transit authorities that they own and operate. All these things are opportunities for us that I think can grow the pie as well.
If we work with them well, like we're working in India on converting 600 million rural Indians into having a bank account, which they can then access with their fingerprints, which is being facilitated by the Unique Identifier Authority, that's 600 million people, small ticket sizes, but 600 million who weren't in the formal electronic payments space some years ago. It'll take 10 years to get there. That's the kind of thing that I believe can help us change this aspect of the influencer on our growth. The final one is technology. Technology is just the ultimate enabler for creating so many ways for our products to reach out, not just through the traditional expensive distribution, but so many other ways that you'll hear Richard and Vicky and Ed and Tim talk about again. Focusing on innovation, you'll see demonstrations outside.
You'll see things that we are doing with QR codes that merchants recognize. Some of you who take a flight today in the U.S., you get your boarding pass with a QR code on your smartphone. You can use that to board. You will see it in merchant locations. You probably saw it with Yankee Stadium seats we had lying around in the city for a while. They had QR codes on them. You could get that QR code and from there enter a raffle to get a ticket to the Yankee Stadium. There are things you can do with QR codes, not just payments, but the entire experience. You'll see some of that outside. Those are the kind of things investing in innovation and investing in productivity that I believe will be very critical to us.
I genuinely believe that we are a technology company that's in the payments industry. If we use that data that we generate through those billions of payments transactions, then we can convert that with insights and expertise into data and information services with Kevin Stanton's business. That's the virtuous circle and cycle that we're trying to capitalize on. Three concentric circles, growing the pie as well as our share inside. These three influences are kind of what determine a lot of what we do. Now, how do you execute this strategy of being in this payments business and trying to use insights and expertise to grow the pie and grow your share? It's this grow, divert, buy, build execution roadmap, which is not to be confused with a strategy. It's the way we are executing against that thinking.
You'll see today examples of how we're growing our core business, credit, debit, prepaid, and commercial around the world. You will see examples of diversifying our geographies and our customers, be it what we're doing with China somewhere else, what we're doing in Latin America, what we're doing in different parts of Middle East and Africa, what we're doing with Walmart, with payroll cards and consumer reloadable cards, or with the Italian post office or with the U.K. public sector wins that you will hear talked about in the course of today. There's a whole building out of new businesses, whether it be the prepaid program management business now beautifully relabeled Access Prepaid Worldwide, which is just a huge sort of mouthpiece. That's Tim Murphy at work. He's got to figure that one out. Or it would be DataCash and the e-commerce gateways.
Or it would be all the work we're trying to do in the mobile space, from NFC-enabled to SMS-enabled. Or it would be the work we're doing in information services. To me, these three pillars are how we execute. I tell our company inside, and I tell all of you outside, I spend 50% of my time on the first pillar, making sure that our core businesses are aligned in the right way. I spend 25% of my time thinking about how to get new geographies and new customers into our ambit. I probably spend a quarter of my time really working hard on all these new spaces. That's me. It changes as you go into the system. Similarly, when you see grow, divert, buy, build being presented by different people in this first row, you're going to see their interpretations of this. It doesn't fit these boxes exactly.
For Tim Murphy, theoretically, he's only in the grow business. He's done growing, right? I mean, physically. You'll see in his case, divert, buy, and build will show up on his chart, as will Ed's for grow, divert, buy, and build. Don't get hung up on the three pillars. Get hung up on the grow idea, the diversify idea, and the build idea. It gets implemented by different people in our company for what suits their space. All of this depends on technology, insights, expertise, and good people to power this G, D, and B strategy and its execution. I can't do all this if I don't earn the right to invest the money back into what I'm trying to do. I'm very focused on pursuing efficiencies in advertising and marketing. You'll hear Alfredo talk a little bit about that, very focused on technology spend and G&A.
I've said this earlier. I believe in using pricing selectively, not as a blunt instrument. We have 3,000 lines of pricing in our system right now. Some guys in our company are figuring out which couple could be doing something with in some country. It all rolls up at the end of the quarter into a number that Martina talks about. Last quarter, it was 200 basis points, 50 from one activity, 150 from a ton of other activities. That's kind of how we want to use our pricing selectively. I want to use this process of managing expenses and using pricing selectively and the leverage in our P&L to actually put money back into growing the franchise for those concentric circles, growing the pie and share, using consumers, technology, and governments as our key focal points.
If I can do that and deliver that 50%+ operating margin annually, then I'm sticking by my commitments to what I made to you this time last year. Before I end, I want to make sure that I come back to the idea of why I talked about low to mid-teens as being the kind of revenue growth I see us having. We quantified it for these three years as 12%- 14% cumulative average growth rate. Basically, it's the low to mid-teens. It comprises both that growing the pie as well as our share through strategic investments. That's what we are focused on. That's what you're going to hear about today in the execution. You're going to see new ideas outside. You're going to talk to our people in the products as well as some people from the geographies.
I'll come back up, and we'll do a Q&A and hopefully spend some time mingling together. Once again, thank you for your time. Thank you for your support and your investment and putting up with us, guys, through our crazy sense of humor. I'm going to hand it over to Mr. Alfredo Gangotena, who's half French, half Ecuadorian, lives in the U.S., and is just slightly crazy. It's over to him.
Thank you.
There is no doubt you are 100% Indian.
Ladies and gentlemen, good morning. Ajay, many thanks for this introduction. It is my pleasure to give you an overview of the role that marketing plays at Mastercard and to give you some greater insight on how we will evolve our marketing strategies as we move forward. The fact is that marketing plays a central role in our grow, diversify, build execution roadmap. For example, the primary focus on our grow pillar is to deliver integrated product and marketing so that we drive preference and, in turn, generate revenue growth. In our diversify pillar, marketing actually focuses on winning, winning new consumers, and winning into new geographies. This is key for our footprint development as we bring in more consumers into the franchise.
Third, in our build pillar, marketing's role is to accelerate MasterCard's expansion into new areas, the areas that my colleague Ed McLaughlin is going to discuss, which is e-commerce, mobile, or social media. Now, as we look into the market development, it is very clear that we are focused on business growth. Together with the rest of Global Solutions and Products, we identify local market opportunities, prioritize them, and develop appropriate execution plans. It is very clear that marketing is developed country by country because it depends very much on the development level. For example, you will see that we move from awareness into preference as the market develops. Let me take an example like Nigeria with very strong growth prospects. The focus there is squarely on consumer education and building awareness among merchants as well.
In a market that is now in transition and very fast growth, such as Brazil, the game is different. What we need to focus on is activation and usage of card by bringing together issuers, merchants, and the value proposition that Mastercard brings. If I turn to the more developed markets, the United States, Western Europe, the game there is squarely put on gaining preference. We want to gain preference and affection, particularly among the key segments, the affluent, the travelers, or the new segments, such as youth and, in the future, the unbanked. At the same time, our aim is to build new acceptance opportunities, for example, low-value payments, which I will comment on in a few minutes. Our third priority is to support the development of our issuers by bringing in Mastercard-specific benefits.
Over the years, MasterCard has developed a world-class advertising, which is the Priceless campaign that you all know and hopefully enjoy. It has become a major asset for the brand's development around the globe. We like to say it is 14 years young. It has aired in 112 markets around the world and in 52 languages. If you check around, this is an extraordinary achievement. I've been in marketing for most of my life, and I can tell you that fills us to be very proud. The campaign is built on a very deep insight that transcends geographies, that transcends cultures and languages. That's why we're able to see the same commercial in Brazil, in Colombia, and sometimes in Australia. That drives significant synergies and significant cost reduction. That means efficiencies.
Today, we are embarking to evolve the Priceless campaign by making it more competitive, more directly linked to the product and the product benefits. We combine, in a way, the heritage that the Priceless experience has given us, together with strong new functional product benefits. This combination, this integration, delivers a much stronger, more visible, more palpable, if you wish, reason to prefer Mastercard. We want to do this towards the consumer, the merchant, and the issuers as well. Let me start first by zeroing in onto the consumer, where the aim is to build preference and, if I may say, brand affection. It is very important to understand first the consumer needs. There is no question that a 50-plus-year-old like me would have certain needs, whereas an 18-year-old may see it totally different. I'm looking at you. OK, 28, fine.
If I take an example, the affluent consumer, research has consistently told us one thing, that experiences matter more than things. They have all the money in the world, and getting an emotional hit is very rare. That's what we have built for the last 14 years in our advertising because we say there are things that money can't buy. For everything else, there is Mastercard. In essence, we realize it's key to connect people with their passions. My colleague Tim and my colleague Ed are now delivering more and more products that can help make your life a little bit more priceless. Let me share with you a recent development of such an advertising. We developed for what we call the World Elite Card, which is aimed at the affluent segment. We have taken golf, and as you know, golf can be a passion. It can be an obsession.
If it is an obsession, the ultimate experience is to actually play on one of the iconic courses, such as those that are played by the tour professionals, what we call TPC courses, like Sawgrass in Florida. Let me share with you that commercial. Something was wrong with the DVD. I hope you enjoyed it. Actually, if you want to play on such a course and you happen to have a MasterCard World Elite Card, you can call me. We'll make sure. Now, we're turning to the faster gear. We will go further as we launch the new Priceless Cities campaign. This is an entirely new and exciting program that connects people to their passions, right where they live or where they travel to. These are the greatest cities around the world.
Priceless Cities will allow MasterCard cardholders to enjoy experiences that are more dear, such as shopping, dining, sports, arts and culture, or travel, everything that makes the ecosystem that you like, being a New Yorker, for example. The advantage of Priceless Cities is that it caters to not just a few, but all our cardholders in gradually making MasterCard a preferred card. It's a little bit like if I were to tell you the access card to gorgeous New York. We just launched Priceless New York on July 11. We will intend to grow this program around the world. It's a wide-ranging campaign that goes from television advertising to print to outdoor to make sure that consumers that live in New York and want to enjoy what is available here can really get access to it.
They also go on to social media to share comments on our Facebook page, on Twitter channel. Therefore, we are also strengthening our advertising campaign one step further. Here is an example, no sound, of print. As you can see here, we chose to celebrate the unique moment between a father and a son. That is what we call passing on the tradition. The Yankee Stadium is the setting. The experience is the unique batter's eye view area that is reserved for Mastercard cardholders. I understand that the advantage of sitting in that area is that you can see right where the batter's line of sight is and where he plays. Don't ask a Frenchman to explain baseball to a U.S. audience. That, by the way, is also priceless.
Apparently, from everything we can see, the Yankee Stadium has become a great place to enjoy, and even more so if you hold a Mastercard. We have developed, actually, offers throughout the stadium, something special for everyone, such as the family meals that offers, if you have a Mastercard, a free Pepsi. On a hot day, it's a good thing. They have been selling like hotcakes. What is important is our MasterCard market share has gone up to 60% among the professionals that participated over the period since the launch last April. We heavily feature the Yankees' experience in social media as well. In fact, we brought the Yankees to the city. As Ajay was mentioning, we have been able to put the historical seats of the old stadium throughout the city at Caps, Deli, Murray-Bagels, Juniors, or even for you, especially for you, at the New York Stock Exchange.
People were there. They would scan the seat, which has a QR code, sit on it, and have a chance to win tickets to the batter's eye view in Yankee Stadium. This generated very big buzz, 55 million impressions, and increased our Facebook likes by over 100,000. Big success as far as the consumer is concerned. Turning to the merchants, a similar experience. Merchants have two primary goals. The first one is increased sales. The second one is to satisfy the consumers the best they can. We have been partnering with Singapore for the past eight years. Singapore is a fierce competitor in the region. They want to be seen as a primary destination for shopping ahead of Hong Kong, ahead of Shanghai. We have created, together with the city-state, what is called now the Great Singapore Sale.
Over 120 merchants participate, 350 stores primarily in Orchard Road, if you know the town. For the two months, what I call MasterCard land. You can't go anywhere if you don't have a MasterCard. When you see the results, which we have announced, the city-state saw MasterCard's volume grow by 49% year- on- year and, importantly, by 44% for cross-border because the city attracts people from India, from China, from all over the region. Based on this success, we have taken the Great Singapore Sale to Indonesia, to Malaysia, and most recently, as well, to Dubai. Third is our partners, the issuers, who have become, over time, the core of our relationship and will continue to do so. One way for the banks to increase their own business is to enter into new spaces that are dominated by cash.
That is, for example, the low-value payments area, the spending that is below $25. By the way, this category of spend is the vast majority of transactions around the world. We introduced a new technology known as PayPass, an innovation led by MasterCard, which will be shared by Ed a bit later. That was launched in 2002. In 2006, we moved into Canada with major success. Today, over 90% of the active Mastercard cards are PayPass enabled. That, in turn, has led all the merchant community, including new merchants such as Tim Horton's coffee shop or the Coke vending machines, like the ones you will see in the demo room, to also adopt PayPass. What is important are the results because the PayPass-enabled cards have seen a 24% lift in spend. Needless to say, a very big win for the issuers.
I have shared with you some of the great examples of successful marketing campaigns. We continue to address our program and make sure that they work around the world so that we can build our business efficiently. We have significantly increased our marketing effectiveness programs while, at the same time, managing, as is shown on the slide, to maintain our brand opinion intact. Over 2008 and 2010, we have reduced marketing by 20%, as you know, by focusing on greater efficiencies, such as advertising production, agency fees, or a much better use of our sponsorship assets. Over the period, this has been very critical because if you look at the slide, brand opinion is vital for the growth of the business. This points to efficiencies and increases in effectiveness. Of course, we continue to do so as we move forward. Three major metrics are being followed.
First, transaction frequency, which measures brand usage. Two, what we call position in the wallet, the fight for market share consumer by consumer. Third, Net Promoter Score, which is a widely used metric to define brand loyalty, brand recommendation, in other words, brand health. In conclusion, we have made major strides in the marketing area by building more efficiency and more effectiveness to the game. We do that to ensure that we satisfy not just the existing consumers, but the new consumers: youth, unbanked, China, India, not just the existing merchants, but also moving to new merchant categories. Third, the issuers in the existing geographies, as well as the new frontiers, the next 1 billion consumers in India, in China, in Africa, all of this to fuel our future growth. You will learn opportunities that are being developed in MasterCard products, core products specifically, through my colleague Tim.
Thank you for your attention, Tim.
Thank you, Alfredo. Good morning, everyone. My name is Tim Murphy. I'm MasterCard's Chief Product Officer. I want to take you through our core product strategies today. As investors and analysts, you know that MasterCard is delivering on a strong growth story. What I'd like to try to do is focus that story to you a bit because I suspect that many of you have come in here this morning thinking about e-commerce, mobile, other new payment channels as key drivers for our growth. That's very good. What I present to you today is simply this. MasterCard is a growth company because our core cards business, credit, debit, prepaid, commercial, is a growth business today. We are well placed to capitalize on opportunities, and we're executing on strategies in the core to drive faster-than-market growth. E-commerce, mobile, new channels, those are critical, but they're accelerators to drive future growth.
Did you steal the clicker?
Oh, yes.
Yeah. We're going to stick on this slide for the next 20 minutes unless I have that. What do I mean? We're showing you here first half volume growth on a year-over-year basis. We've broken out specifically prepaid and commercial to indicate clearly that all of our core products are driving growth today, very strong growth. As Ajay indicated, more importantly, the prospects for the future are very bright. 85% of transactions around the world are still cash and check. Our ambition is very clear. It's in the core to grow faster than market, to deliver consistently faster-than-market growth for MasterCard . How do we do that? Very simply, we execute the corporate strategy that Ajay discussed with you. What I want to do today is spend some time talking to you about how our core products are deeply integrated into our grow, diversify, and build execution roadmap.
I'll also touch on some of the places where we're investing to grow the pie over the long term, that second circle that Ajay talked about, enabling more electronic payments. It's threaded, as he indicated, into everything we do at the core. Most importantly, I want to emphasize how we're driving faster-than-market growth, how we're leveraging market growth trends in our debit business to capture outsized opportunities and bend the growth curve in debit, if you will, to our favor, how we're investing in innovation in commercial payments and in our affluent consumer business to drive growth, how we're diversifying through prepaid, reaching new consumers with new partners, driving new revenues. Finally, I will give you an update on Access Prepaid. If you don't like three words, you can just shorten it to Access Prepaid. I've said that before. Ajay, I think you know his view.
I want to give you an update on that because it's a great example of building new businesses in high-growth segments. We'll go through all these things. The first way that we can drive growth is by taking aggressive advantage of one of the strongest facts within the payments business today, which is that we remain in the middle of a major multigenerational shift in consumer preference from paper to electronic forms of payment. Debit really is the principal beneficiary of that shifting consumer preference. Our debit strategy is very simple. It's to take advantage of that, capture outsized opportunities, bend that growth curve in MasterCard's favor. The way we do that is twofold. The first thing we need to do is we have to win with issuers. In debit, it's critical to be on the card.
The second thing we need to do is accelerate cash conversion, not to electronic payments generally, but to MasterCard specifically. How are we doing here? The short answer on the issuer side is we're doing very well. In the U.S. this year, and Chris will talk some more about this later this morning, we've built on our success last year converting the SunTrust portfolio to the Mastercard debit brand by further brand wins. I'd point out one in particular, which is Sovereign Bank. Sovereign is a unit of the Santander Group. It's a top 30 debit issuer in the U.S., measured by volume. In June of this year, it completed its conversion from Visa to debit Mastercard, a very welcome addition to our business and an indication that we've been able to get deals done, notwithstanding the regulatory uncertainty in the U.S. over the last year.
We're doing well outside the U.S., too. In Europe, Swedbank, one of the largest issuers in all of Europe and a major player in Sweden, announced that starting next year, it would convert its portfolio of debit cards to Mastercard. It's a major win in the Nordics for us. It's a sea change, frankly, in the Nordics, which has traditionally been a strong Visa market. It shows you that we can win in new markets in Europe outside of the strong position in the SEPA markets with Maestro that we've talked to you about over a number of years. When you put these deals together, $50 billion of incremental volume on our network when they're fully up and running, sort of on an annual run rate basis, 8 million cards not on the network before. That's driving growth. Beyond winning with issuers, we need to accelerate cash conversion.
There are many examples of this, places where we're investing across the franchise. One of my favorites is in Italy with the Sconti Banco Posta program. Banco Posta is the bank of Poste Italiane, the Italian Post Office, a longstanding partner of Mastercard on a range of issues. Banco Posta has the largest Maestro portfolio in Europe today, 6 million Maestro cards. In the last few years, they've been looking for a way to drive more activation, more spend, more usage on their debit portfolio. We worked with them to build the Sconti program, which stands for Discount. This is a multi-merchant rewards program in which participating cardholders can earn cash rewards for everyday spend at merchants. The program has been very successful. Over 20,000 participating merchants. It's doing wonderful things for Banco Posta.
It's giving them the lift and the performance improvements that they were looking for in their portfolio. Importantly, it's a win for merchants, too, which emphasizes the fact that this cash conversion effort very much has a win-win in it for merchants. Participating merchants in this program are seeing significant lifts in ticket sizes, 3x in the petroleum sector. They're seeing competitive share shifts. What I like most about the Sconti program is that it is powered by MasterCard . It was designed with substantial help, and merchants were sourced by our Advisors team. Kevin is going to talk to you about that in a minute. Our MasterCard rewards system, which is a service of our Cardholder Solutions team, is powering the rewards, redemption, and processing. Our marketing colleagues are optimizing the program in Italy.
Only MasterCard could pull that set of resources together to differentiate and to capture that cash conversion opportunity. Nice example of what we can do. OK. Beyond leveraging growth trends, there's also innovation. Innovation is critical, giving new features, differentiated solutions to corporations and consumers, and driving more business to MasterCard . The consumer space, particularly for affluent consumers, which Alfredo touched on, is a great example here. We know affluent consumers are critical. Across 21 global markets around the world, we estimate that affluent consumers are something like 11% of the population, 42% of personal consumption expenditure. They have an outsized impact. Our aim here is to deliver a new generation of world-class affluent consumer products that draw people to MasterCard because of their differentiated features and their benefits.
We think we have a lot of room to play with affluent consumers, particularly mass affluent consumers who are already familiar and connected with our brand. How are we doing? This year, we will launch, either have launched or will launch, 73 new World and World Elite programs around the world. We're showing you some card art here, 73 programs across 57 issuers, generating when, again, fully run rate up and running, something like $23 billion of incremental GDV not on the network before. We're driving wins. How are we doing that? We're doing a couple of things. We're simplifying our product requirement. We're asking our issuer partners to focus on best-in-class rewards. We are standardizing our naming conventions and our brand design. We're investing in our services.
Do you know our cardholder solutions teams answer 6 million calls a year from MasterCard cardholders in connection with driving services like emergency card replacement and emergency cash advance? That gives us a great opportunity to interact with and influence the experience of affluent consumers. We're investing in those call centers to ensure they get a high-touch, high-quality experience. We're putting in place differentiated features and benefits. Alfredo talked to you about the Priceless Cities program. We're enormously excited about that, offers and experiences that consumers can only get from MasterCard , both in their home markets and when they travel. It's a wonderful partnership. On the product side, we're doing things, too. In the second quarter of this year, we launched Price Assure for our World Elite Cardholders here in the U.S.
Price Assure is a service that allows cardholders to register their airfare purchases, and in the event that a ticket price is subsequently reduced, to be able to claim a credit. Cardholders tell us they love the security and the peace of mind that this gives them. It's available only from MasterCard , a good example of differentiation. Commercial is another category where we're focusing on innovation to drive fast business growth. We love the commercial space. We think the opportunity is untapped and substantial. We're seeing very strong growth now in markets around the world. Growth is very well balanced. We're showing you first half GDV growth for commercial across all our regions here. Our strategy in the commercial space is really to do two things. First, it's to capitalize on our investments, the investments we've made over time in some platforms that are providing differentiation for MasterCard today.
We've talked to you in the past about the In Control platform, which is advanced authorization and alerts. Within the commercial space, we've invested in a platform called Smart Data, which is an information reporting expense management tool powered by Mastercard, now being used by half a million corporations in 53 countries around the world. Our issuers in the commercial space consistently tell us that these sorts of programs differentiate MasterCard through a reason to bring us business. We want to both invest in them and then leverage them to drive our business. Beyond that, in commercial, we see real opportunities in procurement, helping companies use cards to spend to buy the things they need to run their businesses. Purchasing cards have always been part of the space. The reality is the commercial business has been very T&E focused.
We see a real opportunity to grow that part of our commercial business. Here, for example, is a grow the pie initiative because one of the key things we need to do is invest in acceptance in categories where companies spend for procurement purposes. This is a good example of how we can grow the pie for electronic payments. In terms of innovation within the commercial space, which is so key, there are a number of different ways to go about this. Sometimes innovation to drive the business is thought leadership and industry insight. The U.S. has obviously been through a difficult economic period in the last few years.
As we've looked at that, we've recognized that our small business issuers would change the way they acquired new customers by going from a very broad-based kind of mass approach to much more targeted solutions aimed at finding and winning with the most credit-worthy, the most high credit quality small business customers. We helped our issuers with that shift. We built marketing toolkits. We built new customer acquisition models. In connection with that, our customers have appreciated the work. Earlier this year, Chase awarded an exclusivity for acquiring new small business customers through its U.S. branch network, a wonderful opportunity for MasterCard . We'll add something like 400,000 new accounts by 2012. Great opportunity for us to grow our share with Chase, such an important customer. Nice example of thought leadership winning us business. Technology is important, too.
Here, Smart Data and In Control are leading the way for us in the commercial space. Over the last 18 months, we have won 12 of the largest public sector portfolios in the U.K. We've been selected as the brand for public sector agencies such as the Foreign and Commonwealth Office in the U.K., Department of Justice, and so on. Those wins really, which, by the way, make us a player in the U.K. public sector space, a space we had not been in previously, represent a major opening of a key segment for us there, really driven by Smart Data and In Control. Government agencies in the U.K., and in so many other places, are facing serious issues in reconciling invoices and controlling employee spend, precisely the kind of solutions that Smart Data and In Control are designed to address. Those platforms have been key in delivering wins for us.
Let me now move to diversify, how we're seeking to grow, or rather to diversify our core business. Here, prepaid is key. New customers, new revenues. Our prepaid strategy has been consistent over the years. We think three verticals are critical in prepaid: consumer unloadable, corporates, and governments. We're focused on those. We think MasterCard should play a larger role in the prepaid value chain, and the Access Prepaid acquisition, getting us in the program management space, is a great example of that. We see real opportunities to migrate non-branded prepaid volumes, things like transit and meal vouchers, which are big in Latin America and big in Europe, to the MasterCard network. Our strategy stays the same. Growth is very fast. You saw those numbers earlier. The real news in prepaid is that the opportunity continues to be strong. This is the BCG sizing study that we did last year.
We'll refresh it again next year. It should be an $840 billion market globally by 2017, with particularly fast growth outside the U.S. The way we leverage this diversification opportunity is by making sure we're paying attention to the key drivers of prepaid's growth. Financial inclusion is and will continue to be the fundamental driver of prepaid. 2.5 billion adults around the world without access to mainstream financial services—prepaid is the bridge to this consumer base. Governments are very much leading the way in helping us get there. I want to talk to you about some things we're doing in the government space. In the U.S. this year, we've seen great progress. You know we've talked to you in the past about our work at the federal level with the Direct Express program. That continues to grow nicely. This year, we've seen some real progress at the state level.
In fact, over the last 18 months, MasterCard has been chosen as the brand for a number of 60%, actually, measured by volume of all competitive public sector prepaid programs, incremental $16 billion of GDV that will now run on our network that did not before. It's winning us business with new issuers. I look forward to talking to you more about some specific wins in the coming weeks and months. We're seeing nice progress there. We're also seeing progress outside the United States. Frankly, our single global structure gives us a wonderful opportunity to work with governments and transfer best practices. In Egypt, the government has chosen MasterCardg payroll cards as the means of paying monthly salaries to its employees. 65% of adults in Egypt are unbanked. This program has now got over a million cardholders.
My favorite point of today's presentation, you know Egypt has been in a series of political and social unrest over the last period. During this entire period, the only public sector employees who have been paid on time were those who had this card, who had the MasterCard card. Great example of what we can do tangibly to improve people's lives with financial inclusion. I think a great example of what prepaid can do. Beyond the underserved, we know increasingly that prepaid will be driven by bank consumers looking for solutions to segment their spend bucket as opposed to an overall approach. The travel business is a great example of that. We'll talk about more of that when we talk about Access. There are some other examples as well. In the retail space, we've opened up this year for MasterCard the Walmart Money Card program.
You know that we've had Walmart's payroll business for a number of years. Their consumer unloadable program sold through all their stores in the U.S. has traditionally been branded with a brand of our competitors. We've brought them. They said to us, bring us some ideas. We're open to MasterCard . Over the course of this year, we've talked to them about different unique ways to segment their Money Card program and brought a couple of ideas to market, an EasyPay program, which you can see if you go to Walmart, and a FamilyCard, both of those now in store with Walmart, MasterCard branded. Another example of, I think, thought leadership driving a win. Mobile. Ed will talk more about mobile in a minute. The reality is prepaid is now emerging. Its flexibility is now emerging as the key driver of many forms of emerging payment, right? P2P, remittances, mobile payments.
Here's a nice, very recent example. In August, or just last month, we launched in Malaysia the first telco prepaid card called the SimpleCard. Allianz Bank is the issuer. Digi Telecommunications is our telco partner. This is starting as a prepaid co-brand card, providing point of sale, bill payment, mobile top-up. It will evolve over time to include a wallet, to include remittance services targeted at young people, targeted at overseas workers. Great demonstration of how prepaid can expand into these new channels. Fundamentally, I think you see prepaid is enormously versatile and helps us get in a variety of different ways at new consumers and new spend and thereby drive new revenues for MasterCard . Let me conclude with an update on Access Prepaid, which is the card program management business that we bought from Travelex in April of this year. That transaction closed in April.
Integration is proceeding very well, very much on plan. In fact, a substantial part of the work is complete. Program management, you may recall, is think of program management as everything you need to do to run a prepaid program that is not issuing or processing. It's things like fraud and risk management. It's consumer service, like a call center, product, marketing, and so on. Acquiring that capability now gives MasterCard the ability to touch all points of the prepaid value chain, not just processing, not just branded switching, but now program management. That lets us put end-to-end prepaid solutions into markets where there's need, but we found the infrastructure to be weak. Having that full set of assets really lets us drive prepaid's growth. That's why we think it's important. We're executing on our growth plan for Access now and doing very well.
We'll continue to keep Access focused on the travel vertical, which is very attractive and strategic for us. We will expand it into new markets, new geographies. We're continuing to invest in the business. We're launching seven new chip and pin markets for Access this year. We'll be bringing our multi-currency push solution into Australia next month. Significant investments into the business. We're looking for select opportunities outside the U.S. to allow Access to go into other prepaid verticals. We'll be thoughtful about that. What we're doing right now is introducing Access to our financial institution customers around the world, helping to propel its growth, seeing great progress in Brazil, the Middle East, and other places. I think a deal is the best way to show you the kind of value that Access can bring us. Ajay talked about the Ryanair deal on the second quarter earnings call.
I'll mention quickly Cathay Pacific, Cathay, a leading airline in Asia. Access was chosen earlier this year to provide a passenger compensation card program, a full turnkey prepaid solution, including program management. It's allowing Cathay to compensate passengers with a prepaid card as opposed to manual, very cumbersome paper processes in the 75 or so markets where it and its subsidiaries operate. Wonderful strategic example of what we can do. It helps us build a new relationship with a new segment, airline, provides us the opportunity to put the Mastercard brand in the hands of consumers who didn't have it before in a way that's high value add and gets us access to, thus the name, I would say, Access, Access, right, access to a very attractive new segment, which is the fast-growing Asian airline market. Nice example of the things we can do with Access.
Finally, let me wrap up. My core message to you today is we're a growth company because we are growing fast in our core cards business. The opportunities there are large, and we're really well positioned to capture them. We're deeply linked into grow, diversify, build. We're growing the pie, investments in things like financial inclusion or acceptance. Most importantly, we're working hard across a range of things to drive faster-than-market growth for Mastercard. Thanks very much. I will turn it over to Ed McLaughlin, my colleague.
Good morning. I'm Ed McLaughlin. I look after the emerging payments product area for MasterCard . If you'll allow me to open with a bit of a statement of the obvious, there are ongoing transformations in consumer behaviors that are happening globally. These transformations are driven in large part by near ubiquitous access to the internet, social connectivity, and mobility. We've also.
seen this in our everyday lives, and these trends will continue to transform commerce. When you look at the 85% of transactions that are still being funded through cash and check that Ajay and Tim have already talked about, emerging technologies provide MasterCard an unprecedented opportunity to accelerate the transition to electronic payments and grow our share of that payments pie, while also enhancing the lives of consumers, merchants, and their communities around the world. Through our consumer-led approach and the relentless focus on innovation that you've already seen from MasterCard , we will take advantage of these new technologies to accelerate the growth of and generate real preference for MasterCard by delivering new experiences and new applications to consumers and merchants.
In emerging payments, we start by leveraging the power of the MasterCard Network, the fastest, most intelligent payments network on the planet, and help grow Tim's core businesses by delivering enhanced payment capabilities such as PayPass Contactless, our mShip Advanced EMV platforms, and integrated transit applications. We also continue to diversify and expand our businesses, leveraging unique platforms like In Control that enables MasterCard cardholders to do things like personalize the alerts and authorizations on their accounts in real time, right from the MasterCard Network, and by providing additional payment services like bill payment or money send funds transfer, and by using the MasterCard Network to do things like power the delivery and redemption of merchant offers and rewards systems.
We are building new businesses with the DataCash payments gateway required, our mobile payment solutions joint venture, and particularly in the area of remote or e-commerce payments and the emerging mobile money sectors. These services extend the value that MasterCard provides to our current customers and enable us to reach and work with new partners we have not been previously able to work with with our traditional products and distribution channels. Now, to help frame the emerging payments growth opportunity for MasterCard , we're going to focus today on three broad but highly correlated trends. First, the continuing growth of internet-connected devices, which is transforming e-commerce and extending remote payments into new platforms.
Secondly, the rapid adoption of smartphones and their ability to fundamentally improve the in-store shopping experience, and the development and integration of mobile money services, which are enabling new ways for MasterCard cardholders to transact, and also creating a channel to reach new customers in both established and emerging markets. Now, running through all of these emerging payments areas is the need to provide ways for consumers to make payments that are both extremely convenient and highly secure. If you think of your traditional MasterCard , this is in many ways simply a convenient physical packaging of your account credentials and some security features. As established commerce migrates to these emerging experiences and newer markets such as digital media goods expand, we are moving not only to that world beyond cash, but we are also starting to enable a world beyond plastic.
This creates an incredible opportunity for us to serve consumers with new experiences, create value for merchants and other partners, and build new businesses for MasterCard . Let's start with e-commerce. PC-based remote payments continue to be a strong growth sector, and our objective in this market is simple: to drive preference for MasterCard by making it easier and more convenient for consumers to shop online, and simpler and more secure for merchants to accept MasterCard payments. One great example of making it easier for consumers to use our cards online is the work we have done last year in conjunction with core products to enable our PIN-based Maestro debit products to work for e-commerce. We are seeing good momentum in working with merchants to begin accepting Maestro using MasterCard's SecureCode, recently adding new merchants like Groupon, Eurostar, and others.
We have grown Maestro online acceptance in Europe over 40% in just the last year. By July of this year, European issuers representing almost half of the Maestro cards in Europe were also enabled for e-commerce. Going forward, MasterCard is developing digital wallet applications in order to make online shopping even more convenient for consumers, giving them secure methods to hold and use their payment credentials, and providing merchants with streamlined checkout processes and improved security through dynamic transaction authorization. Our continued growth in e-commerce will only accelerate as consumers begin to use more and more devices such as mobile browsers, tablets, game consoles, or embedded applications to make online purchases. By some estimate, the number of connected devices by 2015 will be twice the number of the global population.
If you just take a moment to think of the number of ways you can now connect, it's easy to imagine how soon every device you have may become a commerce-enabled device. Every commerce-enabled device needs a payments gateway. Our DataCash gateway, which we acquired in December of last year, enhances our acquiring partners' businesses by providing them access to high-quality e-commerce gateway services and extremely sophisticated fraud tools. DataCash capabilities enable merchants to easily and securely practice any type of electronic payment from traditional e-commerce environments or from mobile or other connected devices. The integration of DataCash into Mastercard operations is substantially complete. Year to date, the DataCash gateway is experiencing a 30% growth in online retail transactions with continued expansion of new acquirer and merchant relationships. We are also expanding our gateway and fraud services into additional high-growth markets.
Recently, and most notably, you've seen with our arrangement with China UnionPay to introduce gateway services for the Chinese market. DataCash is also a platform to foster innovation, enhancing capabilities for merchants and extending the acquiring reach of the MasterCard network, particularly in areas that aren't using traditional terminals. For example, the DataCash gateway is the backbone for our open API and the launch platform for new fraud tools created by combining MasterCard and DataCash data as well as our expertise. As you'll see in the experience later today, DataCash is being used by MasterCard Labs as a payment gateway for many of their new innovations. Of all the connected devices that we're looking at, smartphones are by far experiencing the most rapid adoption, and they are now providing a platform for us to deliver new applications that are transforming the in-store shopping experience.
In a recent survey, over 50% of smartphone users have already used their phone to assist them in shopping in some way. In developed markets like the U.S., smartphones will soon represent over half of the handsets in market. Beyond providing messaging, browsing, apps, and other capabilities, smartphones themselves are also becoming payment devices through the adoption of near-field communication, or NFC, technology. Major handset manufacturers, including Samsung, Nokia, and RIM, are beginning to deliver NFC-enabled handsets to market. By 2016, the majority of smartphones will support NFC. Why is this important?
Unlike that simple plastic card, smartphones provide an intelligent device right in the consumer's hand that we can use to interact with them in ways that were never before possible, like showing you your account information before you make a purchase, giving you In Control alerts in real time, delivering specifically targeted offers to your interest and location, enhancing loyalty programs, and providing faster and more convenient ways for consumers to pay. Mastercard is already delivering infrastructure and applications that integrate smartphones into our payments network, providing capabilities like over-the-air provisioning services, which enables the secure delivery of card payment credentials into the handset. As Tim mentioned, virtual MasterCard prepaid accounts to load and store those funds, and PayPass tap-and-go payment applications to shop with them.
We can also provide information services to help merchants target offers to consumers, and transactional capabilities to automate coupon redemption. I am very, very proud to say, while last year at this event, we showed you a map of the world with the innumerable mobile pilots that we had going on, this year, we are demonstrating to you some of the mobile PayPass applications that are in market today. As you will see, at the heart of all of these payment services is a MasterCard account. A few examples: in Korea, SK Telecom and Samsung Card introduced in April their first phone with built-in NFC function using PayPass. This wallet is open to all MasterCard issuers in Korea and features things like integrated advertising, coupons, and other rewards.
In the U.K., we partnered with Barclaycard and Orange to launch a contactless payment service dubbed QuickTap, which works on the Mastercard PayPass platform. The account on the phone is a MasterCard prepaid account, and the consumer can top it up with funds from their Orange co-branded card, a Barclays credit, or debit card. Now, in Turkey, we've had quite a few launches of mobile PayPass, taking advantage of the over 40,000 PayPass locations in the country. In May of this year, MasterCard , Turkcell, and Yapi Credit launched a mobile wallet targeting Turkcell's 33 million customers. Turkcell customers are able to use their mobile wallets for shopping, transit, entertainment, and many other venues.
As you may have heard, earlier this year, we announced a partnership with Google, Citibank, Sprint, and First Data for the first commercial launch of a mobile wallet in the U.S., including loyalty, offers, and an integrated MasterCard prepaid card. We've worked closely with Google and our other partners to enable this innovative platform, and we are extremely excited to see it come to market. I would also mention the Google Wallet reflects our mutual commitment to open systems. As we said when the partnership was announced, the Google Wallet will open up to additional payment brands for other cards consumers may have today. We firmly believe that open systems benefit consumers and merchants and help accelerate the movement to electronic payment.
Later today, you'll have an opportunity to not only see all of these mobile applications in action, we've also set it up so that you'll be able to use the Google Wallet and some other MasterCard mobile applications, so you will have the ability this afternoon to experience all of this for yourself, running live through the MasterCard network. I think even more exciting than the adoptions of smartphones is the broader global movement towards mobile money. Mobile money services can provide every MasterCard cardholder with new and convenient ways to pay from any type of handset. For example, by generating a virtual number to shop online, or transferring money via MoneySend to a friend's mobile, or shopping at merchants using your mobile phone without impacting their current terminalized environment, all creating new value and preferences for consumers using their MasterCard they have today.
Mobile money also creates a unique engine for financial inclusion, enabling our network and services to benefit consumers we have never been able to reach with our traditional products and infrastructure. In markets in Latin America, Africa, Asia, increasingly mobile network operators and financial institutions are providing access to financial services to the underserved through mobile. MasterCard is working with our partners in these markets to use the assets of our network to help facilitate payments and replace cash, particularly in those markets where the penetration of point-of-sale devices for plastic cards may be very low. There are already over 100 proprietary or closed-loop mobile money services operational or being launched throughout the world. These accounts are currently mostly stored value accounts managed by mobile network operators, creating a new opportunity for MasterCard to link these accounts to our open-loop network and reach that next billion consumers and merchants.
Because open-loop mobile money services provide the ability to deliver funds to consumers in a pure electronic environment, creating new prepaid accounts for government distributions, salary or payroll, or remittances. These disbursements can now be done through prepaid cards or be mobile money-based, but either way, the inefficiencies and risk of physical cash are eliminated. Now, when consumers receive these funds, they can then benefit from electronic transactions for things like bill payment, shopping in a store online, or other transactions simply by using the current handset they already have. MasterCard today is providing comprehensive mobile money services through our mobile payment solutions joint venture with Smart Hub. Smart Hub, based in the Philippines, is one of the world's pioneers in mobile money services.
By combining their proven mobile network operator infrastructure with a MasterCard gateway to our global open-loop payment system, we have created a unique and industry-leading platform and one that is already in the market. Brazil is one of the markets where the MPS solution has already been deployed. Working with VivoTech and ETU, the platform is bridging both the banked and unbanked consumers and serving to expand the MasterCard network. For one example, with MasterCard Mobile, a cardholder can use SMS to send payments to a merchant's handset, displacing cash and enabling a merchant that could never accept electronic payments before to join the MasterCard network using equipment and connectivity they already have. When you visit the mobile breakout room today, along with the PayPass-enabled smartphones that I talked about earlier, we are also demonstrating a live implementation of the MPS platform from Brazil.
Across Latin America, and Richard will talk about this soon, we have also formed a joint venture with Telefónica, Latin America's leading mobile provider, to deliver mobile money services in 12 countries using Mastercard's MPS platform. Working with partner financial institutions, this will allow us to reach 87 million Movistar customers, the vast majority of which are currently unbanked. A great example of using mobile money as an engine of financial inclusion and reaching new customers for MasterCard . As you may have seen yesterday, Airtel Money, in partnership with MasterCard and Standard Chartered Bank, announced full commercial availability of their Pay Online service in Kenya, and many other African countries are soon to follow. This service uses the Mastercard In Control technology to generate a virtual MasterCard number for any Airtel Money account, opening up the world of e-commerce to consumers who were previously locked out.
This innovative project was recognized by the GSMA as the Mobile Money Product or Service of the Year. I see this project as a great example of not only financial inclusion, but also the continued expansion of access to MasterCard e-commerce payments that we talked about earlier. As Tim said for MasterCard , the growth in our core business is strong. This is the global opportunity for emerging payments, using new devices and transforming consumer behaviors to enable better products and services. It is an incredibly exciting time in this market. We are delivering with easier and more secure e-commerce payments, intelligent smartphone applications, and integrated mobile money services. These will all serve to accelerate the movement to electronic payments and extend the reach of our network, with the end result driving growth and generating real preference for MasterCard .
With that, I would like to take the opportunity to introduce my friend and colleague Kevin Stanton to tell you a little bit more about one of our other great strategic assets, Mastercard Advisors. Thank you.
Thank you, Ed. Good morning, everybody. Today, I'm going to talk to you about one of MasterCard's most leverageable differentiators, MasterCard Advisors. I'll cover our capabilities in the form of information services, consulting services, and implementation services. I'll talk about our unique assets in the form of our data, our talent, and our worldwide market presence. I'll talk about how Advisors help MasterCard stand apart as it grows its share of electronic payments, diversifies income streams from a consumer, customer, and geographic standpoint, and it builds new income streams with new customers. The capabilities first. I'll start with information services. Information services essentially take our substantial data advantage, which I'll expound on in just a moment, and directly monetize the analytics there in the form of near real-time decision analytics.
Consulting takes that same set of analytics, applies a deep payments expertise and core consulting skills, and converts them into pragmatic, that's the watchword, pragmatic, future-focused advice. Finally, and I would say uniquely, implementation services take the same analytics, apply behavioral marketing skills across any channel, and directly acquire accounts, activate portfolios, convert cards, and run merchant promotions in market on behalf of our clients. All three of these capabilities are available on a customized or scaled basis. All three of these capabilities drive superior results that are in demand and that customers pay for. All three help MasterCard service traditional customers better, reach new customers in new places, all with increasing levels of embeddedness. All are underpinned by a substantial data advantage that starts with data sourced from a worldwide network.
To understand that, you have to understand every time you use your MasterCard to buy something, you generate a transaction message. To be sure, that transaction message does not contain a cardholder name or contact details, and in that sense is anonymous. It does contain the date, the time, the amount, and the merchant details on the transaction. Those are rich sources of insights. Foundationally, our data is transactional. That means it's actual versus observed or reported. In that sense, it stands apart from a consumer survey or something you're familiar with, a parking lot fill rate report. It comes to us real time, so it's not lagged. It's spend data. That's important because you are what you buy. Whether you like to think that or not, you are. We get it from many sources.
We have more perspective than a single merchant, financial institution, or other service provider point of view. We have the domestic and cross-border perspective that comes from 1.7 billion cards generating 160 million transactions every hour. For sure, some financial institutions and merchants will have transactional data, and some processors and networks will have multi-source data. Some payment networks have both. Only MasterCard has a sort of proprietary data advantage that's been 15 years in the making. Let me explain that to you. You have to understand that raw transaction data in and of itself has virtually no value. It takes what only MasterCard does in three ways to unlock the value there. The first thing we do is cleanse the data. That's because whenever any bank or network receives data through a network, the data will be of uneven quality. Fields will be missing.
Some of it will be incorrect. Merchant information, which comes in a free text format, will be inconsistent and confusing sometimes. A gas station might simply be called store number 21. We apply 700,000 proprietarily developed automated rules that are constantly updated and tested using artificial intelligence, some supplementary data, and sometimes sheer human sweat to cleanse the data, to supply the missing information, and most importantly, to aggregate it into meaningful store chain names. You know then that that gas station was a CITGO gas station. Because we geocode it, you'll know that that CITGO station was in Norwalk, Connecticut, for example. Could you go back one slide? The second thing we do is we warehouse the data. We've been doing it for 15 years, and our warehouse is a globally integrated warehouse. It contains 1.3 PB of data.
I had to look up petabyte when I first did this presentation. To give you some perspective, if your iPod could hold 1.3 petabytes of data, you could listen to 433 million songs. The only problem being, that's 4x the number of songs that have ever been recorded. If you have that much data and you can't get at it quickly and accurately, it doesn't do you any good. We've developed a proprietary data retrieval capacity that's state-of-the-art bar none. A large issuer that wants to pull a full year's transactions would typically take a month to do that. With this capacity, we can do it in as little as two minutes. The final step is we transform it into actionable insights in the form of reports, benchmarks, models, and forecasts, and things like that.
Those can be used by consulting or implementation services to improve the outcomes for third parties, or they can be directly monetized by information services as such. A good example of that, you may have heard of it, is Spending Pulse. Spending Pulse takes retail sales information and transforms it into insights that analyze trends and give guidance on sector performance. You'll be able to find a copy of it in the Cyber Lounge. I hope you agree it's a good example of how we can take purchase data, essentially a byproduct of our network, and at low marginal cost, convert it into new income streams. Beyond the data advantage, I don't have a demonstration room. I don't have movies. I have people. I could deck our talent, compare our talent against the quality of talent at any big-name consulting firm, data company, or marketing house easily.
Our staff has a unique focus on payments and purchase behavior across all three Advisors' disciplines. Our staff is in market, on the ground where it matters. We've learned that we provide the most value to our customers when we apply cross-market learning to in-market execution and delivery. Finally, Advisors' workforce is in-house. It's not outsourced. That allows Advisors and MasterCard to accumulate the collective intellectual property that is gleaned from information consulting and implementation projects. That IP in turn can be used by Advisors to up the ante on its delivery, but it also enriches MasterCard as a whole. It's an important part of our model. Between our data, our people, and our worldwide footprints, we have an unmatched understanding of purchase behavior across the three disciplines of information, consulting, and implementation. No single competitor can match this. Some of them will have data. They won't have our data.
Some of them, well, one of them, spans the entire spectrum. None of them have our data and span the entire spectrum. Make no mistake about it. We know we can't rest on our laurels. That's why we continuously evaluate our offering, our talent, and in particular, our data to ensure that we find opportunities to improve it, enrich it, and refine it so it's more and more valuable to us and others, so that it's more and more relevant to our current customers and new customers, and so that we essentially stay ahead of the competition. Advisors are an important factor in growing, diversifying, building new income streams from a customer perspective as well. We do that by helping to win deals that go after that 15% of payments that are already electronic.
We do it globally by providing scaled solutions in the small and regional bank segments, where we can actually provide even more value in the absence of in-house capabilities. We do it by aligning MasterCard and customer goals to jointly go after the other 85% of payments, cash and check. We do that principally with consulting and implementation services. Very importantly, we can provide direct, powerful, and easily understood value-added services to merchants by helping them understand their customers better, target them better, and reach them better. We do that with implementation services for sure, but especially with information services. In fact, information services is one of the ways MasterCard drives new income streams through new customers. Our information services business today is a good one, but its future is particularly bright. That's why we've invested in recruiting information talent and talent in new vertical markets.
We're already addressing unmet needs in those new vertical markets. The consistent theme is that our data brings a powerful new dimension to the analytical tools people use to be successful in their jobs. Advisors are absolutely a leverageable differentiator, and I'm proud of that. It's also a financial contributor. We do that directly to the fees that were paid for the services we supply. We do it indirectly by providing tangible value in the form of advisor services to win deals. We do it by providing a below-the-line complement to above-the-line activities designed to go after strategic consumer segments. We do it by providing consulting information and implementation wraparounds to aid in product sales like PayPass and In Control. Finally, we do it through the volume generated through the direct account activation, acquisition, and conversion activities of implementation services.
Now, in terms of the direct revenue mix, it's increasingly coming from outside of the U.S., even as Advisors are growing in the U.S. This is continuing, and it's particularly accelerated in places like Latin America and Asia-Pacific, where we've made some strategic bets. I thought I'd close with a couple of case studies that I consider typical. They're geographically dispersed. The first is in the U.S. Here we have a large, analytically sophisticated card issuer that engaged Advisors' information services to help improve its risk performance. The solution there was to augment their internal risk model with our proprietary transaction behavior variables. Those are essentially measurements of changes in behavior over time that can be historically linked to changes in risk profiles. The result for the client was a performance lift of 15% in both delinquency predictions and a reduction in false positives.
Just to compare that to something, you can easily monetize an offering in this space that gives you as little as a 2% to 3% lift. It's pretty powerful. Normally, our clients don't like us to name them. In this case, I'll say the European example is Bank Polska, which Tim talked about in his Sokin program. Advisors were brought in to up the ante on customer loyalty. The result was that we designed, built, implemented, and are currently running through implementation services that program. These results were achieved in a short 18 months. The exciting thing, most exciting thing to me, I think I'm surprised it wasn't the most exciting thing to Tim, was that the MasterCard Loyalty and Rewards program became the exclusive platform of its type for the program.
I think this is a great example of how Advisors' engagements, big debt engagements, we started with consulting, we went to information, and ended up with ongoing implementation. In particular, it's exciting to me because Advisors were leveraged to embed a core proposition into the infrastructure of a customer. The last one I'll cover is LAC very quickly. Here we had a large issuer that was historically a competitor loyalist. The account team for MasterCard asked us to come in through implementation services and help improve MasterCard's performance in the direct mail channel. We did. By the way, that channel was that issuer's most important and one that had been almost exclusively dedicated to a competitor. It's an ongoing engagement. What we've been engaged to do is acquire accounts through the direct mail channel on behalf of that bank.
As a result of the program, our representation of accounts acquired in that channel has gone up 167%, and it should triple our representation in the channel. I'm going to close. I see I've gotten to zeros on the clock. I'm going to close by thanking you and saying I hope I've convinced you that Advisors have some powerful tools to work with, that through those tools, we provide differentiated services that in turn differentiate Mastercard in its efforts to grow its share at the core, to diversify income streams in its traditional segments, and to build new income streams with new customers all through insights, foresights, and good old-fashioned revenue streams. With that, thank you, and over to Barbara.
We're now going to take a 20-minute break. We're running just slightly ahead of schedule. Twenty minutes from now, by my watch, is 10:30 A.M. We're going to adjourn until then. If you're participating by webcast, you can just hold on the line or reconnect, your choice. For those of you here in the ballroom, restrooms can be found just outside the door, as well as over by the elevators where you came in this morning. The beverage tables have been refreshed, so please help yourselves. We'll see you in 20 minutes. Thank you.
Thank you. We'll see you all later.
I'm very excited.
How did the wallet will open up? Like we're at.
Oh, great. That's great. Yeah, it's fun to get the geographic distribution. There are so many challenges. There are so many great things happening.
I thought I was going to give you a vote of confidence.
Yes, thank you. Oh, he did.
Oh, he did?
Yeah, because Vicky shared that with me just a couple of weeks ago. I said, let's put it in.
Now you get it?
Now you get it.
Actually, it was a wonderful feeling.
Yeah.
When I was in formal debates, my father was.
It's over. Jennifer Radnay from Regions.
In looking at the slide that's behind me for a moment, I felt a little bit cheated because it only represents four years while the region's actually been in existence for 25 years. Prior to 2007, we had some really spectacular growth rates that were taking place. After looking at the slide, I really didn't feel that bad about it because if you look from 2007 to 2008, you can see the type of growth that was available.
Place in the region. There's no doubt in 2008, 2009, we saw the impact of the worldwide crisis, not a surprise given Mexico and some of our markets' major reliance on the U.S. I also thought what was really important is look what's happened from 2009 on. I think it's shown the resiliency of the industry in the region to come off that base that took place. We're actually now at the point that we're back to growing at levels that were pre-crisis. I guess one of the messages I'd like to get out there is, yes, we're susceptible to obviously ebbs and flows of what's happening globally. On a comparable basis, during this time, the region actually performed very, very well. Maybe in large parts because we've gone through so many crises in our past that we've learned from them from an industry perspective and from the authorities.
The region itself has actually shown a great ability to rebound and address the issues in a very proactive way in terms of taking it forward. In looking at going forward on the region, I think there's a tremendous amount of opportunity. We have a lot of things that are in our favor. The region itself has just under 600 million people. Two thirds are unbanked. Two thirds are unbanked or underbanked. Two thirds are the age of 35 or younger. That's more than in the U.S. and Europe combined. Possibly most importantly, of all the developing markets, 75% of our consumers are located in cities. That's critical because as you're looking at bringing services and technology and advanced payments to the consumers, the fact that they're urbanized allows you to have reach and capability to deliver technology that lets you go after that and formalize them.
I think, in principle, one of the things I'd like to talk about is that as going forward, and we'll talk about it in much more detail, as you see all this going on, there's a tremendous amount of interest in all sorts of constituents in going after those consumers. Ajay mentioned regulators. Regulators are looking at the cost of cash. They're looking at not that, say, Latin America is any worse than everybody else in terms of tax evasion or anything. Everyone's recognizing the cost of cash and regulators are making very many activities in terms of looking at how they can move cash, which is in our region estimated as high as 90% of transactions, to electronic. We've got our customers that are looking at how they can go out and reach those new customer segments with either new innovative products, new product types, technology.
They're looking at how they can develop acceptance to be able to offer conditions where these people spend that we can offer electronic means to support that spend. As you look at all this, we'll talk a lot more about it later. I guess one of the things I would say, the runway is long in terms of the opportunity going forward in LAC. We're working very closely across a number of ways that we'll talk about later in terms of capturing those opportunities.
Thanks, Richard. Vicky, you want to take a couple of minutes and talk about your region?
Sure. First, let me just ground the region. The region runs from Japan to South Africa, right? It is Asia-Pacific, Middle East, and Africa, which is why we've broken it down into seven divisions so that you have command and control closer to the markets and we can operate very effectively at the ground level. That is sort of the core region. I was thinking of what would describe our region, and I think the best word I come up with is diverse. The reason why I say it is because we've got the most affluent country in the world, Qatar, on one side, and then you've got some of the poorest countries in Sub-Saharan Africa on the other side. You've got some of the largest economies in the world, just like China on one side, and then you've got Mongolia on the other, very small economy.
You've got some very high-growth economies like India and China on one side, and then you've got Japan, which is growing sort of, you know, we're lucky if it grows positively. You've got very, very stable economies like Australia and New Zealand, and then we had the Arab Spring in all of the Middle East. The list goes on and on and on. It's just a really, it's also exciting, it's challenging, it's different, and every day begins with a new opportunity for a new challenge. That is how I would describe our region. On the growth, I think the growth has been really fueled by a couple of factors. One is the growing affluence in the region. I think recent statistics show that China has the second largest number of billionaires after the U.S., and really that rise has been rapid over the last decade or so.
I think the second thing is, again, a large opportunity to displace cash. Ajay mentioned that 85% of the world's transactions are in cash, and I'd say that in many of the Asian markets, that is well north of 90%, therefore giving us the opportunity to do it. Third is demographics, which go in our favor. A lot of our markets, we have more than 70% of the population is under 30. If we go by the idea that a lot of the youngsters will adopt new technology and adopt electronic education, that is good. In the meantime, we've also done well at winning some great deals. I'm going to refer back to Tim's note on prepaid. We won one of the largest prepaid deals in Australia recently, the National Australia Bank, which is because we now had the entire end-to-end product of prepaid.
We had Access Prepaid with the program management, and we could deliver all of the other products on our network very effectively to National Australia Bank. There are some effective things there. Last but not least, the currency has definitely helped. Given the fact that a lot of the local currencies have appreciated against the U.S. dollar, they've factored into some of the growth that you're seeing. We're seeing some very rapid growth in the last 18 months, and I think that that's sort of a good momentum for us to continue to build our growth story in the region. This comes with some challenges too. You have governments which are reacting sort of positively or negatively in their focus to influence payments, and that affects how we grow our business, by how the market develops in those markets.
There is a war for the right skills, talent in terms of getting the right people and the right skills to run some of the businesses. We work through those. There are some challenges around how we think about innovation in different markets and how many experiments we can run. All in all, it's a market that has tremendous momentum behind it. Some of the demographic as well as sectoral things are going in our favor, and we hope to continue this trend at least in the near future very strongly.
Okay, thanks, Vicky. Now, on this slide, we've put up here the focus areas for growth as well as the key imperatives, and they are the same for both regions. In fact, they are the same for all of our regions around the world. Depending on the region, these objectives can manifest themselves in very different ways with how some of these things need to be implemented and executed within a specific market. Starting off on that theme, Vicky, you talked about your region being diverse with the one word you'd choose. If you go back to Alfredo's slide when he talked about the different states of markets, starting with developing and then moving up to more mature, what are some of the characteristics of those kinds of markets across your region that you could describe for us?
I think in the developed markets, and let's take markets like Korea and Australia as examples of developed markets, I would say some of the factors that define developed markets in our region is one, it's a relatively high percentage of PCE that goes through, or personal consumption expenditure that goes through the card business. In fact, I believe Korea is the highest in the world with 65% of all transactions going through card, which is just significantly high compared to anywhere else. I would say the acceptance infrastructure is very well developed. You've got a very well developed infrastructure in countries like Korea and in Australia. All of them are approved electronically. Just like the U.S., it's a completely electronic and online system. I would say that the regulators have got a good system of managing the payment system very effectively.
On the other side, you've got markets like Kenya and Nigeria, which I think are defined a little differently. A very high portion of percentages of the population is unbanked. If you look at Kenya, it's probably higher than 85% of the population that's unbanked. You've got a very high percentage of youth population. You look at Nigeria, again, roughly a little bit over 80% of the population is under 30. Third is they've got some alternate payment systems that come into being to fill in a need. For example, in Kenya, you've got the Safaricom that brought in the M-Pesa system that's stocked up very frequently in the mobile payment space. I would say the acceptance system is undeveloped or largely absent in many segments. There's a huge effort that needs to take place to develop that.
The good news is that the governments in all of these markets have figured out that cash, and this is what Ajay had mentioned, the cash is expensive. It's not good for the economy. It causes all sorts of issues in the gray economy. They're working to figure out ways to electronify that in some way, pretty, pretty shortly.
Richard?
As I said, given that two thirds of the population is unbanked or, you know, relatively poorly banked and, you know, not a cash, I'm hard pressed to call any of my markets mature. In fact, if I were to twist it and talk a little bit about the sophistication of the payment systems in these markets, you really see a wide range of sophistication that will take place in a particular market versus another market or even in products in the market. I mean, everyone knows Brazil's top of mind. I think if you look at Brazil from the sophistication of payments, it's pretty impressive the types of offerings that are made available in that market.
In Brazil, with your credit card, you can go to the point of sale and the merchant will ask you, how many parcelas, how many installments do you want this transaction to be split over? The consumer at the merchant can say, do it in three equal payments, six equal payments, nine equal payments. This is a type of functionality you wouldn't find anywhere else in the world. Yet it's a function of the history of inflation in Brazil. In order to compete against checks, the card had to have that functionality. In Brazil, they have chip cards that are called combo cards. The consumer can say, I want this transaction to go against my credit line or I want this transaction to go against my savings account, my checking account. Once again, a very highly sophisticated system in terms of doing that.
They also are doing and introducing new products such as, you know, the InControl. As you look at that and the demands that we have had to face in meeting the demands of the market, one of the encouraging things is all that functionality that we just talked about, it's done on a world-class switching and processing switch system, which is what we provided in Brazil. All the transactions in Brazil that are Mastercard, Maestro, processed are processed through our switch, cleared through our switch, and settled through our switch. What this does, by learning to have that type of functionality, we're in a position to start exporting that type of know-how into other markets. Yet with all that, you know, sophistication, there's very little ATM sharing in Brazil. Right? You get these odd things that are happening.
Mexico has done a fantastic job putting debit cards out in the hands of the consumer. Yet 85% of the volume in debit in Mexico is done at the ATM. We're doing and working very hard with the Mexican marketplace to increase acceptance. It's had significant growth in the last 18, 24 months. Yet the level of terminalization in Mexico is one fifth per 1,000 people in Mexico compared to what you'll find in the U.S. Even in certain markets like Mexico, which is going chip, Mexico, which is now going to say all social benefit payments by the end of next year have to be done electronically. You see combinations of sophistication, yet in other areas you see, you know, some real, how would I say, they're not quite there yet on a lot of different things.
These are some of the interesting things that we have to do in terms of being on top of things and looking at how we can push and promote growth in these regions.
You mentioned the ATM situation in Mexico with 85% of transactions are done at an ATM, and then the transactions are done in cash. In the past, Javier, you've talked about that same thing happening in Europe where people go to the ATMs, they pull out the euros, and then they walk down the street and do their Saturday morning errands just paying with cash. Is Mexico the only place you see that in your region? Is that a common thread? Vicky, I'm going to ask you to think about the same thing in your region.
I think you'll see there's a wide range. As I mentioned, Mexico's 15%. That's probably pretty similar to a lot of the markets. We'll also have in certain markets like Venezuela where we have roughly 95% market share in debit, 40% of the volume is taking place at the POS. It's a combination of consumer education, a combination of behavior which develops over time. One of the things that we've been doing with the market is working with our issuers as far as creating programs that would do preference, that would do rewards, do activities that would cause people to use the cash and build that behavior. We've done consumer education programs that are around. This is really trying to release the opportunity that's in the existing bank segment where we have debit cards in hand.
Even more importantly, going after those other ones, how do we get products in their hands that will lead them to displacing cash and using electronic payments? This is where we're partnering with others. You've heard some reference like going out with the MNOs and the telcos and looking at how we can, using the mobile phones device, start extending our reach into getting these consumers that are using cash traditionally to start using other devices, electronic devices for payment. We're going to accompany those phones with a prepaid card. We're operating with prepaid providers that do meal vouchers, that do a lot of these governments and a lot of places promote that you offer benefits to your employees by offering them meal vouchers, you offering them gas vouchers. We're transporting and moving paper-based into card-based payments.
The other thing is the opportunities around prepaid programs and managers that are now doing prepaid. Prepaid is becoming a big part of how banks and how other players are looking at moving out. We're forming partnerships with them in order to leverage their knowledge of these consumers, their reach into these consumers in terms of being able to do more on the payment side.
Vicky?
I think you've answered a lot of the questions or a lot of the themes that we'd have in our region. I think just a couple of things to add. One is we're working a lot on acceptance in new categories. For example, things like schools and utilities, which could therefore expand the pie and therefore reduce the cash outlay in those segments, are pretty critical for us. Second, just like European markets like Germany, we've got markets like Japan highly developed. Again, you know, 85% of all payments happen in cash or checks, and that's a little more complicated. It's more of a cultural shift in behavior that takes time. We've got some momentum with the youth and the younger population. Prepaid is coming up in a big way in Japan much faster than debit to try and replace some of the cash elements there. It's a slow process.
For us, it's almost, you know, so much work to be done in developed markets as much as some of the nascent or developing markets. We're doing a lot of things around acceptance, around driving promotions, driving preferences at par, just like Richard mentioned.
We heard Ed talk about this morning the mobile initiative and how they're developing differently in various markets. You can go from an SMS text payment down the chain to a remote payment on a smartphone. That will have solutions to meet those needs whatever way the market evolves. How are you seeing that manifest itself across your region? I mean, one of the key imperatives talks specifically about mobile.
Mobile.
Vicky?
Mobile, yeah. You know, at one stage, it's the most exciting opportunity that I think will define our industry in very different ways. On other days, I wake up getting a little concerned. Are we investing smartly enough? Are we investing smartly? Are we ahead of all the 250,000 experiments that are going on all over the world by different people? What we've worked together with Ed's team is saying, let's work on three different types of mobile payments in the region to ensure we are capturing the right elements across them. The first one, of course, is where we can leverage our PayPass technology to directly move from contactless cards to mobile. The technology is there. All of the acceptance terminals exist. Therefore, that move should be the easiest move. A great example of that is going to be Australia, where we're going to implement it.
We will take it on to Singapore, Hong Kong, and Dubai, where we can replicate that model very effectively. Second is, again, I think Tim spoke about it briefly and Ed spoke about it, which is both the prepaid and the virtual card. We're working currently, and I think Ed spoke about the deal with Bharti Airtel, where Bharti and Standard Chartered, the bank and the telco, have gone live in Africa with a product that both has money on your prepaid as well as in a virtual card, and you can transfer money from the prepaid onto your airtime. Really trying to make your mobile a lot more effective in the networked MasterCard world. We see that as a rapid expansion across markets, along with a mobile wallet where NFC is not as well developed. The third is a mobile payment solution.
This is the joint venture we have with Smart Hub. The reason that is very special is because I think we do three things on that, which, as I believe, we are ahead of the market and it's something our competitors can't replicate at this point in time. One is we do software solutions for the payments. That is one aspect of it. Secondly, we have the hardware platform from Smart Hub that can actually go and process and can manage those transactions very well. Third, it's fully connected to an open-loop MasterCard world. That's pretty powerful. We're looking at deploying that both in Egypt and taking that to India. One of the places where it's already live is actually Brazil.
Yeah. I guess I get to thank him for that because actually I think we're a little bit ahead of you on the deployments. Similar to what Vicky had said was that we kind of looked at mobile and we kind of bifurcated between, you know, offering mobile banking, which is to already bank customers, and looking at our distribution, obviously being through our traditional means, our financial institutions. That was actually what we're doing in Brazil, which is a mobile banking application that we're doing in concert with Vivo and Itaú and a couple of our customers there. Not to repeat or anything he said, but it's really a mobile banking application. The thing is that as you look at Latin America and you look at the penetration of mobile, there are right now as many mobile devices in Latin America as there are people.
They've got a much higher ability to penetrate the market, the mobile carriers, than our current financial institutions are doing. 90% of their customers, once again, are doing what they call prepaid mobile, which means it's not a, you know, you prepay on the mobile, you use it for a month or you use it for minutes and then you renew it. We looked at that as being, once again, another major opportunity because the MNOs have that reach into that customer base. They have that touch. That's the reason we did the joint venture with Telefónica. Telefónica has 87 million customers in 12 markets. That's not even including Brazil because Brazil at that point we couldn't discuss because they didn't have the franchise there.
Our belief is that leveraging their reach, their technical platform, and by the way, I think it's really important to note when we formed the joint venture, we hadn't decided what was going to be the mobile platform that we were going to use. You were saying that you felt that the Smart Hub and the MPS was, you know, it was world class. An independent decision was made by an independent party to use MPS as being the platform for the JV. What we're seeing is in combination, not in just mobile banking, but in mobile payments, what you've done in the Philippines and formed that venture is actually being exported into LAC. For us, we're seeing a tremendous amount of interest. What's interesting on the Telefónica JV, basically you have two major players in mobile in Latin America.
If in those 12 markets, if Telefónica isn't the number one player, it's the number two player. We're looking at aligning, as I said, working and creating those types of partnerships that allow us to go after those unbanked and capture those opportunities.
Thanks, Richard. In Ajay's opening comments, he talked about governments and regulators as one of the key influences that we're interacting with. Richard, you even touched on this in your opening comments. I don't know if there's anything else you want to add to what you've already said about.
I think, yeah, regulatory interest in the industry is obviously rising throughout Latin America. It's no surprise we're becoming a bigger part of the payments environment. The kind of the way that, you know, we've looked at it over time is that they have a tremendous opportunity to accelerate the growth of a market or also to, you know, slow down the growth of the market depending upon the decisions they make. We have actually, in many cases, benefited from the actions of the regulators. I think it was two years ago, we were meeting in another place where everyone was talking about that the regulators were breaking up the acquiring in Brazil.
Actually, that created a tremendous opportunity for us because our ability to move fast and forward in terms of signing up new acquirers, in terms of offering switching and processing services, actually allowed us to be extremely well positioned to where we actually have more acquirers in the market in Brazil right now than the competition. There are other things, though, that we've noted that learning from that experience, we said, let's be more proactive in our engagement with the regulators. They're still learning a lot about the business and they're looking for input. If you take all of our five major markets, we have proactive conversations with the regulators around switching, market build, interchange. All of that is being done in a very open and dynamic environment. As I said, you know, if done well, I think it's actually very opportunistic for us.
I think there's still a tremendous amount of learning that they're seeking. Through their education, we're actually, I think, positioning ourselves quite well to take some advantages for growing.
Vicky?
I would echo a lot of the stuff Richard had said. Actually, the big difference I think that has happened over the last two years in the way we've operated with regulators is that Ajay has moved that from being a regulator, sort of a regulator division responsibility to now being a business manager responsibility. If you're a country manager, if you're a region head, it is your responsibility to be proactive with the regulator, to basically have productive conversations with them and do it constantly. That's sort of our mandate. I think that has changed.
If I can give you the example of India, where we worked with the regulator and looked at them more as a customer in addition to doing all the good stuff that Richard spoke about, we're now working with them to implement actually the biometric verification of the 600 million people that Ajay spoke about in the identification scheme there. On the other hand, in China, we said we'll go together with the government as the JV partner and really figure out how we can help them work with our internet gateway and create an opportunity for them to be a complete partner. I would say that has been really the fundamental shift in the last 18 to 24 months.
We all know that with opportunities sometimes come some challenges. In closing, maybe what I'll ask you is first a question that many people in this room often ask: what keeps you up at night? How do you balance the opportunities and the challenges in your region? Vicky, you want to start with that?
Sure. Let me actually highlight two. I think the first challenge I'd really talk about is people. How do you get the right skilled people in your business working fundamentally in a changing industry to stay ahead? There are probably three things or three types of people that I'd refer to. One is location-based. Are they located in the right places in the market? For example, if you have a hub of people who look at the chip technology and they're based all around Brussels and Europe, because that's frankly where it started, is it time to now move them into Asia and Latin America? We're doing some of that to ensure that they're closer to the market. Secondly is feet on street. How do you get the right salespeople, product people, people who do compliance, legal in your business? We're working through that.
We've gone on a good recruitment drive. We're looking at training our people well in terms of training them up for bigger jobs. We're trying to create an environment where people can grow and learn. I think that is a steady process that's happening. The third one, which I think is the most challenging, is really how do you fill in the skill gaps. There are lots of places around mobile and e-commerce where there are not that many skilled people with the right background to come and help you. How do you fill in that gap? Frankly, some of the acquisitions we have done have been actually a big help. Things like DataCash, things like Access Prepaid help fill in the gap there.
We've got incubation in the MasterCard Labs that really helps develop the sort of people, even though they may not have the right experience to come and do it. We've also recruited people from some of the vendors in the mobile space and from some of the competitors who had specific skills to fill in the gaps. Ongoing process, but I would say that's a challenge that does keep me awake at night. I would say the second challenge that keeps me awake at night, and I briefly spoke about it, is innovation. When I get up, I think, are we doing enough? Are we doing it smartly? Are our people geared up to communicate that effectively to our customers? Do our customers know how to deploy it at a consumer level well enough? Is the experience really seamless?
When we say money remittance, can it be as easy as Western Union? I'd say those are the two things that keep me awake.
Vicky?
I sleep like a baby at night. I wake up every two hours crying. Obviously, building on what Vicky said, the people aspect, the innovation aspect, I think one of the big challenges that we're facing is you're trying to address growth in a very high growth-changing market. How are you placing your bets on where you're going to bet, where you're going to place your resources, how you're going to execute? I would guess if I were to say what are the five things that we're focusing on in terms of being able to be successful, one is do we have the right partners for today and tomorrow? As you look at so much of our business, it's really still very much a push business out into capturing customers. Do we have the right partners in terms of capturing those customers? Let's see if we can do this.
The second thing is, as he mentioned, do we have the right products? Do we have the right solutions? Do we have the things that allow our customers to differentiate themselves and capture those growth opportunities? Third thing is what are we doing at the local market level in terms of dealing with all of the constituents that are important to driving the business infrastructure for it? Be the regulators. Are we bringing the right technology to the market? Are we providing the consumer the appropriate education in terms of driving their understanding of what payments mean and how it can impact their lives in a positive way? The other thing is the consumer itself. We're moving farther out on the value chain to really drive consumer preference for our product. That's at the card and at the merchant level.
You do that, you combine it with the fact that you really have to build a strong team that can do that and do it at the local level. That's what keeps me up at night. How are we doing against those five things? How are we doing against my partners? How are we doing against products? How are we doing against my technology, my markets, the consumer, and getting the right people?
Bob, I forgot to mention my biggest challenge is how do we continue to beat Latin America? Other than that, you better start.
All right. Okay. Thank you. Thank you both, Richard and Vicky. Hopefully this discussion has helped you all understand a lot more of the aspects that we're facing in both of these two regions. At this point, we're going to go from maybe regions that we haven't talked about quite as much to the next region, which you all know and love well. That's the U.S. region. I want to turn the program over to Chris McWilton.
Thank you, Barbara.
Good morning, everyone. Thanks again for joining us and your support. As you're probably aware, the U.S. remains the company's largest revenue-producing region, although Richard and Vicky are doing their best to change that as they can. I think, like many global companies, getting growth in the U.S. has been very difficult over the past several years. When we stood here last year, we thought that the worst of the economic conditions were going to be behind us, that the unemployment rate would gradually trend downward. We'd see some improvement in the housing markets. We'd see some increased consumer confidence. We thought that 2011 would be fairly clear sailing. Today, we know that that really isn't the case. The economic headwinds remain. We have lingering unemployment around the 9% level. We have housing remaining a significant drag on the economy.
I saw a statistic the other day that 12% of the homes in the United States today are either three months behind in payments or in foreclosure, which is pretty staggering. In the state of Florida, that's 20%. There are concentrations of that problem. Despite that, despite these tough economic periods and a period of unprecedented regulation of our financial institution customers, our U.S. business has been very resilient and has actually grown. I'm happy to say this year, we're actually growing faster than the marketplace. We're actually starting to see some tailwinds develop despite the economic woes that continue. Consumer credit card losses have begun to moderate. In June, they fell to 6.3%, which is getting close to the historical norm over a long-term cycle of about 6%.
If you've checked your mail lately or gone online, you've seen that financial institution customers have re-energized their acquisitions of new accounts. We're seeing new account initiation where a year ago, two years ago, they were really in a bunker mentality, shrinking lines, closing accounts. Consumers are spending. Despite the gloom and doom and the reports of poor consumer confidence, consumers are spending. Our Spending Pulse report for August showed that even despite Irene coming up and disrupting a lot of retail spend that the last weekend of August and the debt debate in Washington sort of weighing on the minds of consumers about our government's capability of stimulating the economy, our Spending Pulse report saw nearly double-digit revenue growth. Finally, and a little ironically, we have more regulation, but we have clarity on regulation. Last year when we stood up here, there was a lot of speculation.
What is Durbin going to say? How is it going to say it? What is it going to say about interchange? Is it going to be $0.21? Is it going to be $0.42? Where is it going to end up? Now we have it. Nobody likes it, but we know what it is. Our customers know what it is. Other players in the payment systems know what it is. We're at least able to go forward with a foundation of certainty. What I'd like to do this morning is cover some of the strong business performance we've had in the first half of the year and the deal momentum, which we touched on a little bit earlier, but I'll share some more details on our deals. I'll touch on how we are in the U.S. strategically positioned in the mobile space. You heard Ed talk about that earlier on.
I'll focus a little bit on the U.S. efforts, our efforts to diversify our business into new kinds of customers and new acceptance channels, and how we're aligning, we feel very well, against U.S. consumer trends and behaviors. In the first half of 2011, the U.S. delivered double-digit revenue growth. This is something we strive for and we're quite proud of given the market challenges here in the U.S. I frequently hear the U.S. referred to as a developed market and then there's an implication with that that sort of naturally follows. What that means is it's either slow growth or no growth. When I hear that, I think of a couple of things. First is I think of all the high-growth industries that have been incubated here in the U.S.
over the past five to seven years, some of which have been industry-transforming that don't work without electronic forms of payment. The one that comes to top of mind is iTunes. iTunes, which revolutionized the music world, changed the dynamics of how music is distributed to consumers, can't work without electronic forms of payment. Apple is a U.S. company. iTunes was rolled out in the United States. We think of Netflix and Redbox, which transformed the way people view entertainment at home. Again, can't take place without electronic forms of commerce. Amazon, a U.S.-based company, largest e-commerce retailer in the world, also revolutionizing the way people read with distribution of electronic books. If any of you have teenage children and have checked your credit or debit account statements lately, there's this mysterious thing called Xbox Live, which appears. I quite haven't figured out how they bill for that.
That is one of the great mysteries of life. It doesn't work without electronic forms of payment. If you think of Expedia and Priceline, again, they don't work without electronic forms of payment. They revolutionized and transformed the way consumers purchase flights and hotels and book their vacations. Still, large swaths of the U.S. are still dominated by cash and check. Areas like rent, insurance, this is the time insurance bills tend to come out. Both the payment of premium and then the claims reimbursement coming back from the insurance company are all done with paper. Massive amounts of flow. Even college tuition, again, a big deal this time of the year, again, done mostly with cash and check. We're working, our commerce development group is working with many non-financial institution customers on breaking open those acceptance channels and new payment streams.
On the deal front, we've had significant improvements in our debit position. Last year, we announced our debit wins and flips from Visa for SunTrust, Capital One, and Sovereign Bank, which Tim mentioned a little bit earlier on. You will also be hearing very shortly in the marketplace about another Visa signature debit flip to MasterCard . Unfortunately, we're unable to identify that institution today because they have not informed their customers. They will be doing that shortly and you will be hearing about that as evidence of continued momentum in that space. Our consumer credit business has also returned to growth. With Citibank, we launched the American Airlines World Elite Card. We're working with issuers like Citibank and Silicon Valley Bank on providing EMV solutions to their high-travel international customers.
On the prepaid front, you heard earlier Tim mention the Family and EasyPay prepaid programs with Walmart, the nation's largest retailer, which complements the prepaid payroll program they have for their many associates. We haven't forgotten the 14,000 community banks and credit unions in this country that have weathered the storm. We focused our marketing efforts on these institutions to help further diversify our revenue base away from the large mega banks in the country. You heard Ed talk about mobile and Vicky and Richard about the specific things that are going on with mobile in their region. I think in the U.S., we are really at the center of the major mobile payment initiatives.
As you know, we're a founding partner of the Google Wallet, which we're going to be piloting here in New York City in the next coming days and also then rolling that out to San Francisco. We're a player in the evolution of ISIS to an open platform mobile payment solution. We think mobile will take time to develop and roll out. We feel the pace of mobile development in the U.S. will largely be driven by acceptance. I think Android phones and open platform phones are coming. Smartphones are coming. The real key is to build out the acceptance network. At the heart of mobile payments, acceptance is our PayPass technology, which is, as you know, a fast, convenient way to pay for everyday purchases. We continue to see progress on acceptance with PayPass, with customers including Subway, Foot Locker, Office Max, and Walgreens.
I think you're going to have a chance to test this technology in our demo rooms shortly after we're done here. Look forward to that. No discussion of the U.S. would be complete without Durbin. I imagine there's going to be a lot of Durbin questions when we get done. I'll touch base on that briefly. I did cover a lot of our strategy around Durbin, our thinking around Durbin when we did our second quarter earnings call. I will keep it a little bit briefer than I normally would. We've continued to believe we have a superior PIN debit proposition in Maestro. It's global. It's interoperable. It's fast. We will pursue with issuers opportunities to get our Maestro capabilities on the back of cards. We'll do that with and get routing with issuers, acquirers, merchants, and others in a strategic, surgical way.
We're not going to go out and buy every piece of PIN debit business that is out there. I'll reiterate that volume growth will exceed revenue growth in the PIN debit market. Economics in this space are very, very thin. You have to remember that our PIN network is built out. Again, it's global. It's established. The cost of putting an incremental transaction across the PIN network is insignificant. Any revenue we do get will be high margin and it will be profitable. Therefore, we're going to pursue it. We're going to pursue it thoughtfully. I'm now going to touch on the priorities for the U.S. region, starting with debit. I think two or three years ago, there was real concern about the viability of MasterCard's debit program in the U.S. after our largest debit customer, Washington Mutual, failed.
Since then, we've had a very focused and aggressive mission to beat Visa in debit. I think we've succeeded. We are now the fastest growing debit program in the industry. You can see by this chart on the right-hand side, our growth rates versus Visa, the lines crossed in the first quarter of 2011. Starting with the third quarter last year, as I said, we've had a steady increase in the growth and performance of our portfolio. We are doing this not only with portfolio flips, like I mentioned, but with providing new products and services to our existing debit customers through In Control technology and the new Duo credit debit card combo technology that Fifth Third Bank announced just a few weeks ago. Prepaid also remains a priority for us, although some of the economics of Durbin have been impacted, prepaid, excuse me, have been affected by Durbin.
There remain 60 million unbanked and underbanked individuals in the U.S. that can benefit from electronic payments that are provided by our prepaid products. We focus on prepaid in three high-growth segments. First, the public sector. We're seeing strong interest in tax refund programs. We'll be announcing two new income tax refund programs in the next several weeks. Tim mentioned the success of our Direct Express program with Comerica, which has led the Treasury Department to announce the discontinuance of paper checks in the Social Security program. In the corporate space, we're focused very much on the payroll area in institutions like Walmart, Sam's Club, Walmart's being our biggest. In the consumer reloadable space, we continue to work hard with Western Union and Green Dot to expand our distribution of cards through their networks.
Commercial has really been a bright spot for us in 2011 from a volume perspective and a revenue perspective. In the large market space, we have our Smart Data Suite, which provides insight to corporations on how their travel and entertainment dollars are spent. We think it's world-class. We've added Starwood Hotels and Hyatt to our base of 13,000 e-folio customers. We launched Price Assure this year, which enables a Mastercard cardholder who uses their card to purchase airline tickets to make sure those prices do not drop and provide a method that they can make sure they're getting the best price available when they get on the plane. In credit, we're decking additional resources against the affluent and international travelers who generate a disproportionate percentage of PCE. We've supported issuers by streamlining previously distinct product categories, making their lives easier to issue new products and roll out new programs.
With refreshed World and World Elite products, affluent customers get superior benefits, rewards, and select merchant partners get access to those affluent cardholders as well. We've combined the merchant proposition with the proposition to our financial institution customers. We talked about our Priceless New York campaign. You get unique dining experiences, shopping experiences, entertainment. It'll be rolled out to other high destination business and tourist markets in the U.S. and abroad. Our goal here is simple. We want New York City, which appears to be the destination for all, to be the place you absolutely can't be without having a MasterCard and using it. From an acceptance standpoint, we've looked at all the verticals of acceptance. We're focusing on those areas of acceptance which provide the highest revenue yield. A great example of this is the restaurant business, which is a $350 billion business in the U.S. It's highly fragmented.
To us, it generates very high yields on our volume. We teamed up, as you might have heard, with Stand Up to Cancer this year to make a charitable contribution every time a MasterCard cardholder uses their card to make a purchase at an eating establishment. Our transaction volume was so strong that we met our $4 million contribution a week early. More importantly, we actually saw our restaurant sales, the category sales, outpace the market in the period this program was initiated and operated. I think that's a great example of moving beyond marketing, moving beyond just brand awareness, but moving to brand preference and getting it to motivate people to pull out their MasterCard and to use it at the point of sale. On top of that, we feel good as a company about supporting Stand Up to Cancer, which is a great cause.
From an alignment perspective, I think we're very well aligned against consumer behavior and preferences. While consumer confidence is low, consumers are spending. There's no doubt about it. They may be spending more thoughtfully. They may be spending more on necessities, particularly those that have been impacted by inflation and other cost pressures like fuel and food. Perhaps they're spending more online than in the shopping malls themselves, but they're still spending. We think with our package of debit, credit, both commercial and consumer, and prepaid, we're very well aligned against their behaviors and their needs. In closing, because I think you all want to hear Martina speak since she's got the numbers, I think if you look back and if you were to replay my talk from last year, our strategy really has not changed that much. The priorities I discussed are not new to the U.S. market.
We've been in a very difficult economic climate and a difficult regulatory climate, and that's required us to be flexible and adaptive. We've stayed the course. I think the results speak for themselves in the first half of 2011. I'm confident with all of the resources and assets we have here and the great talent, we're going to continue that into the future. With that, thank you. I'll turn it over to Martina.
Okay. Good morning, everybody. Yes, and I do have all the numbers, and I believe you have all the numbers since 8:00 A.M. this morning. There is a lot of, not a lot of new news for you. I want to thank you, first of all, for joining us here in New York, as well as all of those who are able to join us on the webcast. Hopefully you found this morning's session helpful with our Senior Management team. You heard first, obviously, from Ajay about our strategic ambitions and perspectives. Our product and services leads took a lot of those themes and tried to show you in real life what we're doing. Of course, you heard from our three regions in terms of how they are using those developments and perspectives and really putting it out into the market.
Now, I'd like to put it all together from a business driver point of view, as well as what that means for our financial performance. What we're going to do is we're going to go first through some July and August data, the business drivers. I'm going to talk a little bit more about our 2011 outlook. I'm going to touch on our capital structure strategy, as well as liquidity considerations. We're going to close off and talk a bit about the long-term opportunity and financial performance targets for MasterCard . With that, let's just start in the business drivers. This is the data for July and August. Looking first at worldwide volumes, the quarterly volumes that you're seeing here are those volumes, the GDV volumes that you're seeing on our quarterly earnings calls.
The July and the August numbers are actually processed volumes, which is pretty much our best intra-quarter measure of quarterly GDV. As you can see, over the past year or so, volume growth has increased from high single digits into the mid-teens. The increase has actually continued into the third quarter, pretty much driven by the positive impact of the U.S. wins versus the losses, as well as the underlying strength of the businesses in every one of our regions. Processed volume for July and August was 16.7%. As you can see, about 1.1 percentage points higher than what we saw in the second quarter of 15.6%. You see the processed numbers on every one of the charts, but I have to call it out in this little black box. Let's break this apart and first go into the U.S. Starting with U.S. credit, our U.S.
credit volume is growing steadily. Despite the mix that we're really seeing in the economy, as well as the low consumer confidence, you can see, as Chris was saying, that people are still spending. We are particularly noticing that with the affluent population, that they continue to spend on items such as luxury goods. You can also see some impact from an inflation point of view, on such categories as food and gas. Overall, credit spending growth is now 6.5% on a processed volume basis. You can see that in the black box, with consumer credit growth being slightly positive and commercial credit growth actually being in the mid-teens. Now, let's turn to U.S. debit. Here, over the last several quarters, we have seen U.S. debit volume increasing to 15.1% in the second quarter of 2011, as the net impact of our debit wins versus the losses actually turned positive.
Debit growth in the July and August period, you can see, is 20.1% on a processed basis. That's actually significantly higher than the numbers that we saw in the second quarter. That's the 16.8% here on the chart as a result of our recent wins. If we remove all the portfolio wins and losses, so kind of go to a steady state basis, same store sales, our underlying debit GDV is growing in the 10% range. Let's go to the rest of the world. As you know, two-thirds of our GDV really comes from the markets outside of the United States. We continue to see double-digit growth in all regions, with the highest growth actually in Asia-Pacific, Middle East, Africa, and Latin America. I guess that's why we had these two guys up here. Emerging economies like China and Brazil are particularly contributing to this growth here.
In terms of processed transactions, you see the growth over the last four quarters, and it has been steadily increasing and continued actually into the July and August period with a growth of over 20%. The U.S. has actually seen double-digit growth as the impact of the new business, such as the SunTrust win, as well as the Sovereign win, is overtaking the diminishing impact of prior debit losses. Outside of the U.S., processed transactions is actually growing over 30% in the July and August period. This number is higher than our second quarter number, driven primarily by Europe and Brazil due to the processing wins that we had in the Netherlands, as well as with Itaú in Brazil. Finally, this is the final chart on our business drivers.
We see that cross-border volume has been in the high teens for the past three quarters, and this trend pretty much continued into the July and August period. Although the cross-border volume, as you know, is strongly influenced by travel within Europe, the high growth is actually supported by double-digit growth in every region. More specifically to Europe, cross-border growth is in the high teens. Despite the sovereign debt issues and the reduced consumer confidence, we're still seeing, or we still saw, Europeans taking their annual vacation, albeit with a tendency to stay a bit closer to home. Let me wrap this into our 2011 financial outlook. Ajay already covered our first half performance versus our longer-term performance targets. Let me talk about our expectations for the full year of 2011, which remains pretty much in line with what we have said on our August earnings call.
First of all, we continue to expect that second half net revenue growth will be slightly higher than the first half. Keep in mind that the deconversions will have a diminishing impact on the second half. In addition to that, we had Access Prepaid acquisition close to mid-April, and therefore it will contribute fully to the third and to the fourth quarter. Finally, the DataCash acquisition actually anniversaries in October. With regard to foreign exchange, and I know the euro is whipping around, so I just pick a time here. If the euro and the real rates at the end of August hold for the balance of the year, we expect a full year net tailwind of about 2%- 3% to revenue growth.
We remain committed to our target of a minimum 50% annual operating margin and continue to expect for 2011 only a small operating margin expansion relative to 2010. Operating expenses continue to include investments in strategic areas. You heard quite a bit of that here. These also include the operating expenses of the two acquisitions that I just referenced. These will contribute more to the growth of operating expenses than they will contribute to the growth of net revenue. Therefore, they will actually result and continue to expect to result in a $0.04- $0.06 dilution impact on EPS for the full year. We expect that the proportion of the annual A&M spent by quarter to be similar to the pattern that you saw in 2009, as well as in 2010.
Finally, the 2011 full year tax rate could be slightly lower than the 33% due to the currently expected impact on some of the tax planning initiatives that we have going on around the world. I just would like to spend a little bit of time on capital structure strategy, as well as our liquidity position. First of all, you all know the guiding principles are obviously to maintain a strong balance sheet, liquidity, and credit rating. We are doing this in order to enable the long-term growth of our business. If we have after that excess cash, we're endeavoring to give it back to our shareholder. We believe it's very important for us to be maintaining a strong balance sheet and a very good credit profile, given that we are a financial counterparty in the market to many, many financial institutions.
In this regard, we made actually some good progress, as you can see by the recent upgrade that we got from S&P in our credit rating to A-. Clearly, in today's age especially, having a strong financial profile does provide us with the flexibility to play offense at the time when good growth opportunities become available. Finally, given the strong cash flow that our business is producing, we may still have excess cash after pursuing our growth strategy. In such instances, we would target a return of excess cash to shareholders. To this date, you have seen us having our focus being more on share repurchases, as this provides more flexibility to the business at this point in time. Let's talk a little bit about liquidity profile here. You can see it on this chart.
When you work from left to right, you see that the total liquidity position at the end of the second quarter of 2011, between cash, other liquid assets, as well as a fully available credit facility, is about $6.4 billion. When we determine our excess cash, we look at our largest potential uses of cash, which may arise actually due to a technical failure of a settlement position by a customer. What we do is we size the exposure by taking our single largest settlement position for our largest customer. We add a little bit of working capital needs to it. We estimate that number today to be about $3 billion, as you can see on the chart. With respect to our share repurchase program during the July and the August period, we repurchased another $77 million worth of shares. That leaves about $882 million of remaining share repurchase authorization.
When you add all of this up, our excess liquidity is approximately $2.5 billion. Allow me to close with our view on our longer-term financial objectives, which are linked to the strong growth opportunities for MasterCard . Ajay gave you a great view on the three growth drivers. I basically copied his chart and added a few more things in here. First, Mastercard will continue to capitalize on the growth of personal consumption expenditure. We know personal consumption expenditure can be impacted by the economic cycle in many markets and by each country, etc.
As Richard and Vicky actually explained, when you just look at Asia, Africa, and Latin America, and at their proportion of PCE, of total world's PCE, and look at the changes with the high growth in demographics, as well as the rising middle class, it provides a great opportunity, especially as more than 60% of our revenues are actually outside of the U.S. in those markets. MasterCard is just ideally placed to be taking advantage of this macroeconomic trend. Secondly, talking about the second circle here, the growth of electronic payments just continues to outpace any other form of payment.
When you look at the expansion of acceptance footprint, for instance, through innovations like PayPass or the public sector use of electronic payments, or what's happening in the e-commerce world or in the mobile world, these are all factors that help us work down the percentage from 85% of global transactions being done by cash and check to more transactions being done actually by electronic forms. Finally, you go all the way to the middle here, we believe that Mastercard will grow faster than market. Obviously, we have to execute on agreements and win deals with issuers and other partners. In particular, our advanced partnerships with partners such as Telefonica or China UnionPay in China are key. The expansion into non-traditional customers such as governments is very important.
Touching on Kevin's presentation, for example, we believe that the value created by our Advisors services clearly differentiates us when we're working with our customers. Last but not least, building innovation solutions will help us strengthen the core product offering, such as the tools In Control and Smart Data that Tim has referenced, or the new technology deployment in the e-commerce and the mobile space. Let's go a little bit deeper into PCE and the secular trend growth and how Mastercard's ability to grow remains significant. The main competitor really remains cash. You've heard the 85% of global transactions being done in cash and check. Here, I'm going to put it more into a volume metric. As of 2010, 56% of the world's PCE is still conducted in cash and check.
A lot of room to be converting these volumes, especially as all over the world, the appetite for electronic forms of payment is just tremendous, be it in the store, be it online, or be it via the mobile channel. Overall, we assume that PCE will grow at about 6% on an annual compound basis between 2010 and 2015. That's pretty much what it had done over the last five years. Over time, the PCE rates will change. As I said before, they will vary significantly from country to country. When you take it together and average it over a five-year period, we assume that these nominal rates are directionally right. Obviously, rates would have to be revised in the case of significant changes to worldwide economic projections, such as a worldwide recession, changes in the inflation rate, etc.
From a card purchase volume, which represents, as you can see on the chart, about 30% of PCE in 2010, that will grow at a pretty healthy pace and is expected to grow at about 10%- 12% per annum until 2015. Again, that's fairly similar to what we have seen over the last five years. Remember just one, these numbers are personal consumption expenditures, and therefore they actually exclude government spending as well as business spending, some of which is also spent on cards and other electronic forms and really provide an opportunity for us. With the underlying PCE growth of 6% and the card volume growth of 10%- 12%, you get to what we call the secular trend of cash and check to electronic forms of payments, which is around 4%- 6%, depending on which year you're looking at it.
Let me put this in a little bit of a different context. Here you can see PCE growth of 6% and then the secular growth trend of around 4%- 6% over the next five years. I tried to put it in context of our expected revenue growth for the longer term. We adjust the expected 10%- 12% interest-free purchase volume growth for the next five years for Mastercard's mix of business. Compared to the overall market, we're actually smaller on debit and higher on credit. When we adjust for that, the 10%- 12% goes down by about one percentage point to 9%, 11% growth. In addition to that, you see in the green box our strategic investments, of which you've heard quite a bit from all the other presenters, and those will help us achieve revenue growth in the low to mid-teens over the next five years.
This excludes, by the way, any future merger and acquisition activity, and it also only includes minimal pricing changes. Let me spend just a little bit of time on the strategic investments. I know you've heard it now from a number of people, and hopefully they made my job a little bit easier to actually articulate some of the things that we're spending money at and how we're really trying to make sure that we do this in a very responsible way and that we really gate in terms of what we can perform on the top line and what we then invest in the business in order to continue to have this kind of growth potential going forward. As you know, we are using the Grow, Diversify, and Build Execution roadmap in order to make sure that we deliver on our strategy.
Here you see first where Tim has been spending quite a bit of his time on the growth part of the business. I'm a debit commercial and repeat, even though you had it in diversify, but you know that's fine. It's really an important focus that we are growing our base businesses and that we continue to do that. In addition to that, the revenue we're trying to add to the revenue from our existing card base by capturing a larger share of the value chain, as evidenced by our recent processing wins. Secondly, you can see we're seeking diversification of our customers as well as in geographies, and we're having quite a bit of investment in there in order to build these solid relationships with governments, with telcos, with merchants, et cetera, around the world.
In addition to investing in countries around the world, in particular where we can move the needle quite significantly in markets such as Brazil and Russia. Finally, you heard a lot from Ed about building new businesses in the e-commerce, in the mobile spaces, as well as from Kevin in the information space. Now, with our strategy and the industry expectation as a backdrop, let me take you through our longer-term performance objectives for 2011-2013, which remain unchanged. Based on our current PCE estimates, the secular growth trend in our strategic investments, we expect to achieve a net revenue compounded annual growth rate in the 12%- 14% range over the 2011-2013 period. With respect to the operating margin, we expect to achieve a minimum of 50% margin on an annual basis. We'll carefully manage costs by making the right investment decisions for our businesses.
We are focused on the total return for our shareholders and expect an earnings per share compounded annual growth rate of 20%+ over this period, the 2011-2013 period. All of these objectives, as many of you know, are on a constant currency basis. They exclude future merger and acquisition activity, but they do include our more recent acquisitions, DataCash, as well as Access Prepaid. They also include a reduction in the annual effective tax rate to about 32% over the three-year period. Thank you for listening, and let me hand over to Barbara for the Q&A session.
Thank you, Martina. Not only are we outgrowing our meeting room space, but we've kind of outgrown the stage space for Q&A. We were trying to get all the speakers up here on the stage for the Q&A, and we just couldn't logistically get it to work. At this point, I'm going to ask Martina and Ajay to come up and join me on stage, but remind you that our speakers are still all mic'd, and we also have a handheld mic to pass up here between the front rows. The Q&A session is really open now, and questions can be directed to anybody on the management team. For those of you who are here in the room, we ask that you wait for a mic before you ask your question, and please remember to state your name and your affiliation.
For those of you who are on the webcast, remember we do have the capability to take questions from you. We've actually already gotten one, so please feel free to fire those away, and they'll forward them up to me, and I'll intersperse them in with the questions from the floor. In order to allow for as many questions as possible, we ask you that you please keep your question and one very brief follow-up. With that, let's start here in the room. Jim, you want to?
Good morning. Jason Kupferberg from Jefferies. My first question is just on mobile payments in the U.S. specifically, and looking forward to testing out Google Wallet and product demo. I wanted to get your perspective on how are some of those trials going so far on the East Coast and the West Coast with Google, any statistics you can share with us? With Google now buying Motorola's mobile device business, how does that change the opportunity set, theoretically increasing it over time?
Ed, do you want to take that?
Ed McLaughlin? Your mic should still be live, Ed, or did you take it off? OK, sorry. Will you turn the handheld mic on, please? Why don't you tap it? Is it working?
OK, there we are. Yeah. Ed McLaughlin, addressing the mobile question. In the U.S., we've had good technical success with the pilots. They have not put any tracking statistics out there on that end, but it's something that we've been watching very, very closely. The handsets are working extraordinarily well. I think what you'll see across time is as we roll this out, it gets integrated more and more to the graph application, and then you'll see other services, such as guests and services, becoming online soon. We really think next year you're going to see a broad spread of those types of services. As far as the Google acquisition of Motorola and things like that, I think that's a great element of their business. I think you're getting hands dirty in more places as well. We'll help the wallets that we're working on.
I'm going to bring it back to what's best for credit. We're the paying sandwich. We've always been a safe place for competitors like Exchange, and Exchange, and Bank of America to use our products. We'll look to enable all the players in the mobile space. As I talked about earlier, it's really our community to own these systems to provide a networking platform and capabilities like JPath that they've known years. I think they'll continue to see strong growth as we go in this.
Joanne, you want to hand the mic back? Somebody back there? Yeah. Who had their hand up? Just hand them a mic.
Thank you. Bob Napoli with William Blair. Just a question on the prepaid business. There was some pricing move on the interchange side out of Visa, and I wondered if you were planning on following that. Under your growth, you're just looking at in your book here and Tim Murphy's section, you show 16% growth in prepaid, which seems to me like you've lost some market share in prepaid. I understand you have a number of initiatives going on with Walmart and others. Is the industry just growing at that pace, or did you just share?
I'm just hanging on to your parking question, but I'll tell you what I'm saying. I think I can go to the doctor a little bit later.
Do it.
Yeah, I'm very good at parking questions.
I think you need to—can you turn Chris McWilton's mic on, please?
Number three, I think. There you go. From an interchange perspective, we don't necessarily follow Visa. That's not our intention to follow Visa. It's one of the factors that we consider when we set interchange rates. I know they announced some things a few weeks ago. We announced a few things a few weeks ago, and there are some disconnects. We're watching what happens in the marketplace. The nice part about interchange is if we do find a disconnect, that we find our products or acceptance disadvantaged because of interchange, it doesn't require a lot to change that. We can do it with fairly short notice. We think we're in the right place. We think our products are well positioned. We think acceptance is well positioned, both pre and post-Durbin. I'm pretty comfortable where we ended up.
Sure. I'll take the second part of that question. In terms of prepaid growth, in the first half of 2011, there was some impact on a couple of programs, just very specific one-time only impact that might have impacted that number. A little bit lower than the long-term growth rate that I quoted later that you would have seen. From a share perspective, we feel very good that we're on our plan in terms of growing shares globally. I think the momentum that we've been able to talk about in the U.S., we call it sector wins, which are clearly coming our way in a majority way and others. I feel very good about where we're doing, what Christie seems we're doing with some of our prepaid program partners. With the first quarter impact in there, a little bit embedded, but not a large impact.
Thanks. John Neff, Akre Capital. Two questions. I guess one unrelated follow-up may be a better way to put it. Could you maybe describe why the commercial growth opportunity is so untapped? At least to me, it seems somewhat counterintuitive given that businesses aren't typically paying each other with cash. If you could elaborate on why that's such an untapped opportunity. The second follow-up there is, can you talk about the settlement collateral exposure in Europe? Are you doing anything differently in terms of how you're thinking about or managing that risk? Thank you.
OK, so both.
OK.
First of all, on the settlement exposure, as you know, we make pretty robust disclosures in our Q and K, so I'm glad. We have actually a great group under our Treasury group who is monitoring this exposure on a daily and actually, to some extent, on an hourly basis. Obviously, given that some of the things that are going on in the world, we'd love to talk about Europe a little bit and Greece. We have to always keep on the forefront of managing this kind of exposure. From time to time, you have to make some changes. Let me just give you an example of Greece, for instance, where we did have some exposure.
Over time, we had to move our footprint in such a way that we still encourage the business so that the business can do what it needs to do, but at the same time, that could protect ourselves. One way, and it's just because of the specifics of that particular market, it's not in every market like that. When you look at the issuing and the acquiring entities, there's actually a relatively large overlap. You can actually, from an agreement point of view, make sure that you have your issuing exposure and your acquiring exposure residing from entity to entity and therefore really reducing our exposure. We feel relatively comfortable about the exposure that we have to Greece.
We are taking these kinds of things into the market space and really look at what is going on with the financial institution, how healthy they are, what kind of problems they have, what kind of infrastructure, for instance, we have, and try to protect ourselves the best way possible. One could be collateral. Others could be structural changes, like what I just talked about, Greece. With that, let me hand over to you, Chris.
Sure. I'll comment on the commercial growth. I think I'd answer your question in two ways. One is, as you look globally, one of the reasons commercial is still an untapped opportunity is because it's a somewhat more complicated space for banks to enter. It's not just a payment. It's also about information, data reporting, analysis, and so on. We need to work with financial institutions to enter the space more aggressively with that set of tools, the payment plus the information and plus the analysis. That's a little bit of a bigger bill. If you think about Latin America, you think about Asia, big opportunities in commercial there to do just that. I think Vicky would agree, right, that institutions in those countries are waking up to commercial, but it's still an opportunity to be built out. In more mature markets, the teeny space is pretty well penetrating.
I've mentioned in my presentation procurement. I think procurement is still room to grow because historically it has been, frankly, there's a lot of procedures built up in companies around paper-based payments. It's not been the natural or the first place to look. Now that we've gotten card payments into a variety of other categories, it's sort of the next frontier. There are clearly places where we can use cards to solve procurement pain points. We think we can do that by investing in acceptance. You can't use your card if it's not accepted for payment by a vendor. That is the work that's in front of us to do. I'd tell you those two things. One of the reasons why commercial remains still a go-forward opportunity around the world.
OK. Back in the back?
Yeah. Craig Moore with CLSA. First, a question about your MOU with China UnionPay. That was signed to facilitate or recently expanded to facilitate cross-border payment and online transactions. How do you expect that to ramp up? Is it as easy as flipping a switch for those customers within CUP? How long is that process? Secondly, on mobile, talking about open systems. How do you get a closed system like Apple to participate with you when they've been so, we've heard internally with banks, so restrictive on how they might handle the venture?
Sure. Vicky would be on the China UnionPay questions.
Yeah,
I can give you a mic.
No, I believe I have a mic.
Can you turn to Vicky's on?
Thank you. Is it working?
Yeah.
OK, let me answer the China UnionPay question. The China UnionPay question, I think what we immediately hear was the activity that's up and running. The JV on the internet gateway is up and running in terms of moving towards production. We've already done the trial. We're moving towards production. Anywhere in the next six months or so, we should be up for production. The MOU, which I just signed while he was visiting China, is a little more expansive. You mentioned whether it be cross-border or not, it's essentially looking at not domestic processing. That's not the area the MOU encompasses, but it encompasses trying to help them with acceptance overseas so that we can get their acceptance in China. That is work in progress. That is what the MOU is about.
It's also an MOU to ensure that whatever chip standards they use in China, that becomes interoperable overseas. They started with the feeling that they need to have a chip which is solely China-based, quickly realizing that it's not probably advantageous to have a chip system that's not interoperable with Visa, MasterCard, American Express, and so on. There are a couple of other things. Those are the two or three main factors. Does that help?
The other thing I'd add to that is that the whole theme with China UnionPay, the MOU with them, is not just about acceptance per se, but getting revenue from that acceptance. For example, their incentive to improve the acceptance of MasterCard in China, outside of the traditional algorithm, it is better than acceptance. They're the biggest acquirer of choices. We get them to be incented through revenue. We do that.
In return, we get incentive if we help them accept us outside. It's kind of like getting to understand how we can both do this in a way that looks for the bigger picture as against competing only once again inside that most innermost incentive circle where we think that they're both enemies of each other. That's not the approach. Yes, I'd like to get the domestic processing business in China to know our work. I find that to be a very unfortunate situation for just a little bit. In the meantime, there's a partnership we build on the cross-border business and the e-commerce gateway business. That's the way we're going to move, kind of pragmatically on the ground with them. Your second question was on mobile, right? Mr. McLaughlin, take that.
Certainly. The specific question, I believe, was on Apple. I would open by echoing Chris's comment. Apple is an incredibly important merchant for MasterCard. Every iTunes transaction is fundamentally an openable payment transaction. They've benefited greatly in how they serve their customers by taking advantage of the existing payment systems that are out there. I don't think anyone can speak to Apple's strategic direction. I would assume from everything we've seen from them, they'll look to continue to deliver great consumer experiences onto their handset. With that focus on the consumer experience, I would only expect they'd look to leverage the payment products and capabilities their consumers already have. I think it's really a question of what's going to be best for them as they go forward. I think working with the open system is absolutely the right engineering decision.
I mean, one thing I'd add about mobile is when I said that earlier, to me, the whole mobile space is a revolving ecosystem. I think that while e-commerce for starting has to get to 78% of the user adoption, I doubt mobile will take that long. It would take too. It will take some multiple years to get there. During that period, the whole mobile payment space may evolve on three dimensions. As I talked about it in the article, one dimension is the NFT-enabled, not just payment, but information, couponing, all that jazz, some of which you'll see outside of us. The second dimension is built around SMS-based money movement. That's where mobile payments really play their role. It works really well in a developing country where telemarketing and infrastructure is a challenge. It could work equally well for P2P movement of money in a developed market.
The third aspect is fully enabled mobile commerce, which really requires phone technology to one day reach the point where it has tools to navigate as your computer. I think we'll get there one day. We just aren't there yet. In those three dimensions, there are going to be players who will see the value of working in a way that creates the right ecosystem, involving the right players. There are others who will attempt at some point in time to go on their own stride. My belief finally is the payment system will only take full advantage of this whole process, the results. I believe that passionately. I believe that anyone who's tried to control this system will make a fiction point coming for consumers or merchants or banks or somebody who holds back the power of what the device will do over the next 10 to 15 years.
Yes, there'll be opportunities. There's M-Pesa in Kenya that went down on its own for a while. They are thinking about how to take that to the next level. They're working at a point of time which now is working with us. They will, I just have sense, we'll go and discover in the marketing time. It's not to bring it with everybody. I don't know where Apple will go yet. We're talking to every player in the game. We're talking to hardware manufacturers. We're talking to M&O. We're talking to the likes of the Googles that are conduits into those hardware manufacturers. There's nobody who we're not in conversation with. As far as I'm concerned, that's the big fight. We're getting into creating and helping that ecosystem to evolve. It's not going to be easy.
I actually believe that hardware manufacturers and MNOs are going to have some kind of a group fight over the next few years on who controls the secure element that goes into that talk. The mobile network operators are saying that they could control it with their over-the-air provisioning service. They could control the asset. The hardware guys think it's them. And it's them itself. You know, it's a thing of the world. It's like Richard the baby who wakes up every day. I know that kind of story. If that's what's going to happen, it's going to happen with these guys as well. Don't be some time that you spend on me. I'm not going to stand and watch from the outside. We'll participate in helping it happen. I'm going to take some knocks along the way and some pain. That's what we're going to do with mobile payments.
OK.
Oh, you got it? Mic?
Yes. Jim's going to move over. Chris?
Hi. Thanks, Barbara. This is Chris Brenner from Stifel Nicolaus. My first question is the process of transaction growth. I just want to focus a little bit on the rest of the world figure. Is any of that outstanding growth 20%+ ? I think you also mentioned a 30% number, too, if you could clarify which is the right number.
What I said is that worldwide it was 20% of processed transaction growth, right? I said that when you look at the sub slice, that means when you look actually at the world outside of the U.S., all of the non-U.S. countries, we are seeing actually a 30% growth, a 30%+ growth rate in the June and July period. That is higher than what we saw in the prior quarters. What we are seeing is that some of the wins that we had, and I gave two examples, the processing win we had in the Netherlands, where we are now really processing the majority of the debit business, as well as what we were able to do with Kirimu in Brazil, where we are also now processing pretty much 100% of the volume, they really benefit in these kinds of numbers.
OK. That was kind of the root of my question. Is SEPA any part of the class? You had a nice SEPA presentation, and we haven't heard from Javier.
Absolutely. We cannot have Javier.
Javier Perez just died.
He died. I'll set up one follow-up too.
You have one follow-up too? Let's do Javier.
Javier Perez is a real button, playing no cash ready.
Thank you for that question. I wish I couldn't wait. As I recall very well, as I tell you every year, you know we're always struggling with the question of, but you're always waiting for a big explosion of SEPA. I keep on telling you that SEPA is happening. You've seen the numbers. I think that the proof is in the numbers. You see, she just told you what are we doing outside the U.S. Now, that's only the beginning. We've only talked about one country. There are many others. There are many things we're grouped at. This is a full country, the Netherlands, as Martina was suggesting. There's a bunch of stuff that we're doing around SEPA that doesn't necessarily move the whole country, but it moves segments. For example, a particular problem, namely corporate cards, or a Mastercard holding product.
There are things we're doing that will lead Mastercard Europe to continue to capitalize on the SEPA opportunity. Are you going to see it done in a year or two? No. Are you going to continue to see the trend towards MasterCard processing more and more transactions in SEPA Europe? Absolutely.
They're in favor of the revolution, not a revolution there. If you look at the Netherlands and the breakthrough, it took us the better part of three to four years of work to actually reach the point where the majority of debit transactions in the Netherlands are processed well. There's not a big passage in the other markets. In fact, the second quarter earnings call, I actually returned a number that said that SEPA processing compared to the prior year is up in enormous amounts. I run by the number, but it was in excess of 40%, 48% or something. Greg will check with you. It's up across the street with me. Netherlands is one example, just because it's a big lump. You're stuck in Germany, stuck in France, what's going on instead. SEPA is very much happening.
I just got the hand signal from the back. It is over 40.
A quick follow-up on that. Last week, you said it's a lot of shutter sea. You said transactions have been processed by Mastercard in Europe 3.4% in 2006, 6.9% in 2009. Any idea if that number is today? Are you gaining share? Are you the network that is winning the majority of SEPA business? My follow-up question was one.
One follow-up.
Go for it.
U.S. domestic banks testing around debit fees. That came as a surprise. We had anything they would try to discourage debit usage. Are you seeing any impact? Had any conversations with them? It seems widely unpopular, over the mistakes. If there's any comment that you have around Durbin-related debit fees. Thank you.
I'll go with the short answer to your question. Are each Mastercard capitalizing on the SEP A opportunity better than others? The answer is yes, if we are.
Javier, can you pass the mic to Chris, please?
Oh, Jim's got one.
Oh, Jim's got one.
We're seeing lots of different things in response to the Durbin Amendment impact on retail banking. It's not just on the debit cards themselves, but banks are looking across the entire spectrum of their pricing for retail bank services. In some cases, they might be applying a fee to access a card or have a card for a month, a $3 a month fee. They may be thinking about their ATM fees. They're thinking about minimum balance requirements for maintaining deposit relationships. They're thinking about charging for paper statements. It depends on where you're going and how big a hole these institutions have from the Durbin Amendment and how abruptly they're pursuing revenue replacement opportunities. I have a sense of an overwhelming desire to discourage the use of debit cards. I think consumers like debit cards. They like the convenience of them.
They tend to play in the consumer preference not to get overly offended in credit. Merchants, they don't like the cost, but they like the convenience of them. I don't see a groundswell of either discontinuing debit or discouraging its use.
OK. Over here, David.
Thank you, David Koning, Evercore Partners. On October 1, once the debit interchange cuts go through in the U.S., what do you see as a sustainable growth rate for U.S. debit processed transaction growth? I will just follow up.
Yeah, you're like, I almost got to sit down, almost.
Oh, that's all right. Clear.
I can't predict what the sustainable debit growth rate will be once the interchange rates go into effect. That would be speculative. Like I said, I think debit continues to be a very valid consumer proposition. Banks are starting to think through how they're going to replace the revenue around debit. I don't see a huge discontinuity of the debit experience in the U.S. caused by the reduction in interchange rates. I think whatever happens will happen. Banks will figure out how to either replace the revenue through debit products themselves, other sources of retail bank services, or they'll cut costs one way or another. They will get there. I just don't see it as being a precipice on October 1.
My follow-up question is on April 1 of next year, when the network non-exclusivity rules go into effect, what do you expect to happen in terms of your own debit volume growth? You've highlighted you have competitive advantages there. Do you expect to gain significant share from Visa on April 1 of next year, or do you expect this to be sort of a slow process?
Right now, we're in the throes of a lot of negotiations with institutions around getting on the card as a Maestro proposition. As you know, we have a very small position in PIN debit in the U.S. today. It's 8%, roughly. Visa, I think, is in the 30%, 35% range. There are a number of other regional PIN debit networks out there. There's a fairly intense competition to get on the back of the card. I feel confident that we have upside here. We are not in a position, fortunately, of having to defend a large incumbency position in PIN debit. Because of that, we can be selective. We can do things that make sense rationally from an economic standpoint. We can pitch our superior product proposition, and we can get share in a way that's thoughtful.
I think we will get more, but we're going to do it in a way where, like I said, we're not going to buy all that business just to pound our chests at the end of the day and say we got massive share in a fairly thin economic-type business.
David, I just want to add something to your first question. When you actually look at the overall Mastercard business, and yes, you are focusing on one slice of the business, which is U.S. debit, unless you really think that the consumer is going back to using cash or check, you know, there are undoubtedly products out there that we are having in the market and that Chris's team is working actively with the banks in order to give choice. The growth will show up somewhere. It might not be in debit. It might be in prepaid. It might be in credit. It might be in combo products. It might be somewhere. As long as you have the belief that people know and like the convenience of using an electronic means to process their transactions and not go back to cash, we'll be winning out somewhere.
I think there's going to be some very interesting things that will come out. I have stuff to predict to the point that your question is very predictive, and I'm not going to get an answer on the prediction. I'll get an answer on the printing process. To take, for example, the fact that even on signature debits, consumers are allowed to be trained over time to use their signature debit card and then press credit on the screen and then sign that, because by doing that, they were eligible for rewards on their debit card. Since that kind of stuff actually helps to push the user to debit while giving you the feeling of a debit or a credit card reward program, you're going to see those things drop off pretty quickly. They already have by a number of banks. More are going to do that.
I think that kind of change will happen. Will that drive a great deal of differentiation of getting away from debit altogether to something else? I don't know the answer to that yet. You have to believe it'll have some of that. Dual cards, combo cards, credit cards, prepaid cards, and even the debit business itself, there's going to be some interesting shifts in this over the next couple of years. It won't happen the 1st of April. At least I hope it doesn't. Otherwise, that's an unfortunate date choice. If it happens somewhere near the time, it will happen. There will be a change. A lot of the push that happened on debit over the last 10 or 12 years was not just consumers suddenly waking up to the idea of saying that they would use a debit card that's safer.
There was also a lot of work done in the banking system to help debit cards get out there. When earlier ATM cards used to be issued when you opened an account, the amount of energy that went into teaching branch people not to give an ATM card or to give a debit card because it adds to potential unlocking revenue for the retail banking business in a big bank, which is always not acceptable from the credit card business in that guise. Don't underestimate that change and that drive and what that may happen over the next couple of years. I don't know the answer to that. It will happen. Something will change in that space.
OK, we have a question in the back, please.
Thanks. It's Darrin Peller from Barclays. You know, when looking back on 2008 and 2009, you can see trends. We could see the trends in transaction growth on credit card and debit. Credit had some hiccups, obviously. Debit was a little more resilient. Then cross-border, obviously a big driver of your revenue yield, also came down. Now, is there anything in either MasterCard structure or mix, or maybe even if you can comment, Ajay, on the environment that you think is materially different going today and what we may be going into versus 2008 and 2009?
You're kind of making a good estimate for next year's numbers. I get the question. I don't know if you did some digital earnings, but that's very useful stuff. Here's the issue. I don't know how to predict the dropout of Asia next year any better than you do. I don't know how to predict that. I can tell you this. I've been saying this in earnings call after earnings call. The retail consumption spend in the U.S. is heavier than the newspapers write about it. I said this to Sarah earlier. It's unfortunate that there are 10% unemployment in this country, muscle maintenance. Those 10% are in really deep shock. I think as a humane society, we need to think about them and care for them. There's 90% that's employed and gainfully employed and doing very well, including a bunch of you on the Zoom.
People are going on the consumption pattern. How has that changed over the past three years? Two years back, we probably were thinking a little bit about some of the things we were spending money on. The fear of a faintness has reduced dramatically in the American population over the last year. It's changed in the way you feel about how you spend. Then e-spend, their cycled spending pulse for orders shows 9.3% for the retail spend, August or August variety. Now, take out gas, and normally it comes down to 7.5%, not very different from what the newspapers reported yesterday. The newspaper headline says flat growth. It's flat. It's flat over July. It's not flat over last year at all. How can we all forget that as a society and as an economy and as leadership?
There's a whole dichotomy going on in our country here today that I find fascinating to listen to the talking heads on television and to listen to political leadership and newspapers. I'm kind of trying to reconcile that myself. Am I worried about that continuing into next year? Or is it that matter now I'm worried about Latin America and Asia and Europe and then Asia next year? Yes, I'm worried because ultimately it's a globally interconnected world. That's why my target for next year's revenue growth is not the same as what we're delivering in the first half. We're sticking to a number of between 12% and 14% cumulative average growth in revenue, even though it's 16% in the first half of the first quarter of the data.
That's the reason why I don't know how to predict some of these, but I'm going to try to make sure that the picture of getting to this number for three years is real.
Thanks. Just a quick follow-up on the debit side. Chris, I think you mentioned earlier there was another issue that has recently flipped from Visa over to Mastercard on the debit side. That comes on the heels of multiple others in the past year. Is there anything you can give us more color on what actually are the drivers of this one now? Maybe some of the others as well.
Just a slight technical question. They're going to flip. They haven't actually announced it to their customer base, so we were unable to discuss that today. To be honest with you, I think a large portion of success in our debit flips has been the things that Kevin and his team have been able to do from an advisor standpoint. I think excellence in executing a debit flip that started with SunTrust had a contagion of confidence with other potential banks considering a flip.
On the first point, Kevin's team is able to go in and talk to retail banks about how they can segment their debit portfolio, how they can activate a bigger percentage of debit cards that are in the hands of their consumers, which categories of merchants they're not seeing spend on in their debit portfolios that others in their region, in their territory might be, and really having intelligent conversations about how you turn that portfolio into a larger profit engine. On the second point, one of the things that keeps CEOs awake at night and CIOs awake at night is a bad conversion. The last thing you want when you're fighting all the regulation, all the cost pressure, you're fighting for market share is to issue a bunch of cards that don't work. There's disruption of consumer experience. They go to the store, they swipe, and it doesn't work.
It's a complicated process, but something we've developed a real core competency in. SunTrust has been a great reference point for us in terms of flawless execution, making it happen, making it happen seamlessly, and getting uplift on the economics. That's one to Cap One. It went to Sovereign Bank. Like I said, you'll hear another one in a couple of weeks. I think those are the two major reasons.
I'm actually getting it done faster than even I expected.
If I expected.
The second one is that it has to do with the news getting out. It's a little bit of both.
Yeah, thanks.
I actually just follow on to that question, just trying to pinpoint it down to price. I think we've heard Visa here. They've said in the past that if they lose a deal, especially on debit, that it's got to be unprofitable because they can match any price and they can retain that. How would you respond to that, Ajay or Chris?
I let Chris and John out there a few times earlier. I predicted a deal with SunTrust where they won't look on things. If you actually listen to the SunTrust folks and their public statements, they will tell you why they switched. They switched for reasons of exactly what Advisors wrote. Expertise and insight. It's publicly quoted. I have newly already told you the event of that transaction. You know the truth from the ad and all I am. I don't know how I'm going to tell you that what you're hearing is not quite what I believe. I'm sure that there'll be that last year that somehow and it happens that the price from my competitor that tried to get us to use Visa somewhere else to be able to get the information was fair to me.
Very often, that's because each of us have approached deals in two very different ways. Our way of looking at our deals and our ability to extract revenue from that transaction may have looked different. Neither of us or all of us weren't listening to the game of trying to give the game away. I think maintaining a consistency of saying with a 50% plus operating margin is a pretty fair commitment. It means that I'm not spending the money when I have more than 50%. I've done it four or three quarters. I just want you to get off the table the aspects of changing the whole power of data quality or the even of margin improvement every year when I see 85% of transactions sitting around with cash in a chair and the enormous opportunity to lose strategic stuff to go there.
It's a long answer to a simple question, but the simple answer is I don't have any idea where they are getting that comment from. I don't know what they think.
They're very correct.
I'm glad to hear that. Yeah, I'm glad to hear that, Banga. I appreciate that. Just a real quick follow-up. I just want to help extract a couple of data points from Martina. First, can we get an idea on a % of revenue from Mastercard that comes from Europe, either absolute or in relation to volumes? The second one is maybe it's for Chris. Just thinking about your Mastercard debit portfolio today, how much of it does not have a Maestro bug attached to it and actually have an unaffiliated network already on the card? I ask because it's really, I think you talked about it before, right? It's a two-stage battle. One is to get on the card, and the second one is to get the routing decision. Trying to get some sense on that.
Let me just do the first one. First of all, you obviously know that we don't do revenues like that. In order to be helpful, you can use GDV and transactions a little bit as your guidepost, OK? Obviously, outside of the U.S., the second largest contributor to our revenue is Europe. That's very clear. Then you have between Asia-Pacific and Latin America, and then you have Canada. That's all I can tell you. You can look a little bit at our GDV numbers, and you can try triangulating the numbers.
Yeah. Second part, Bangs. We have a very small piece of our debit portfolio today that has an exclusive Maestro mark on the back of the cards. Visa has a much bigger proportion of that. That's why I think they're more vulnerable from the Durbin exclusivity rule than we are. We have a very small percentage of the PIN marks on the back of our debit cards. I think we've gone public. We've said Citibank is the biggest debit card portfolio that is exclusive to Mastercard. The rest, it's fairly limited.
I'll go with another question. Somebody asked me recently, it's a large international with the most uncertainty. It's a large portion that's not exclusive. Let me put it this way. It's a larger than large. Let me help you with the exact answer.
OK. Before we go to the next question here, I did promise people on the phone. I'm going to throw in one question that we got from the webcast that says.
It is actually something distinguished.
We have multiple questions from the webcast.
I always worry about webcasts and nobody's listening.
Can you talk about how you compete in the affluent area, particularly versus American Express and their strong rewards program? Tim, can you?
Sure. It's a great question. I think there's a couple of ways we need to go after the affluent and target AMEX. The first thing we have to recognize is that the four-party model that we operate in is a real source of extraordinary strength. The first thing we can do and are doing is leveraging our issuer partnerships. Issuers have wealth management programs, for example, where they're providing services to affluent consumers. We've had a lot of success working with issuers on branding MasterCard wealth management-focused card-based programs. In fact, last time I recall, Ameriprise and AMEX spun off the MasterCard branding program. I think we have a good shot and we know how to do that. The other thing that we need to do and are doing is focusing on co-brand partnerships. We've had some very strong success in markets around the world with co-brand.
I talked to you last year in this room about how airlines were a focus for us. We continue to see some nice progress there. Javier's team in Italy has launched an Alitalia co-brand with MasterCard that was previously exclusively AMEX. We're now in that space. Wealth management co-brands are two key places. The critical thing for us is to make sure we're raising our game in terms of the services that we provide. I talked about competitive differentiated features. I talked about things like Price Assure. Frankly, I think the work that Alfredo is doing with Priceless Cities, a unique MasterCard scope for 180 markets around the world, can give us some differentiation too. A variety of levers we're pulling to get at that space.
The other thing that you could add to that is in the U.S., there is a very position that I'm in. Occupy has done an outstanding job over the years. Here's not the case maybe in the U.S., and just going to Europe, a 60% higher revenue than the U.S. If you talk to good in Brazil today, the black cards in Brazil are busted, and that's the reality. Is it as easy for us to do this in the U.S.? I think it will be a hard slog. In the U.S., our effort is good to get to a level below that level because there there's a number of customers there that actually have a fair amount of opportunity to what we can achieve and do. A large part of the sales team and Alfredo's team work is oriented towards that space. That World Elite stuff to be resolved.
It's not talking about getting somebody on the price of selling stuff. It's not aimed at getting someone booking that nobody else could get. That's an important element for a certain kind of customer. This is way down further where you can get access to being able to visit the locker rooms and the entry changes. Even if you're not looking at a booking room, you know what I mean? That thing is different every time again. I mean, it's a fine, funny difference in the U.S. It's a little easier outside of the U.S. rather than over the U.S.
OK. We're out of time. We're going to take one more question. Management is going to be around, so you'll have plenty of opportunities to ask your questions. I know the mic's been passed to somebody in the back.
Hey, Neeraj Chandra from Tiger Global. Just had a couple of quick macro questions to follow up on. Firstly, I guess.
Yeah, I'm here.
Firstly, one of the things that I was sort of surprised by was the resilience of credit growth here in the U.S. You gave some commentary on that. Are you seeing that as pretty broad-based, or is that primarily driven by the affluent investor? How do you think that kind of plays out? The second question I had goes back to 2008 and 2009. As I look at Mastercard in particular, I just took a test back then, I guess. It's impossible to know what happened to volume. At that point in time, you did have a pretty significant pricing opportunity and cost management opportunity. Perhaps that was offset by specific customer weakness and maybe an inflated base.
As you look at today's set of circumstances, we don't know what happens to the macro, but the things that are more directly in your control, how do you feel you are positioned versus how you were positioned back then?
OK. I think the first one, we're quite pleased as well that the credit growth held up as well as it did. I think we need to remember that there's two components to credit growth that we report. We don't break them out separately, but there's commercial credit growth, and then there's consumer credit growth. As I mentioned in my remarks, commercial was really a strong part of our success in the first half of 2011. I think business came back spending before the consumer came back spending. You're starting to see people go out and visit customers more. You're seeing increased attendance at trade shows and events and dining. If you wander around New York City, you see a lot more business lunches and dinners transpiring. I think that was helping to buoy our credit numbers in a lot of ways. The rest was principally affluent.
The folks that had survived the layoffs and the loss of income continued to spend with a fair amount of confidence. It was both factors, but I think commercial probably a bigger factor.
As you go through the credit chart, Chris had stated something or the other when he spoke about credit after the debit one. You could see the Visa consumer credit growth is actually committed well. It's our commercial credit growth that is allowing us for our total credit growth to still be below Visa, but to be better than what it would have been if it was only consumer. Martina referenced consumer credit in the recent past saying slightly positive than commercial credit for the team. I'd try to stay in the same in circles going on. Part of the reason that the consumer credit is behaving the way it is for us versus some of our competitors is that some of our main clients, it's a mix of our clients. They're kind of coming out of the cycle at different levels.
Interestingly, the rest of the consumer clients are behaving at a relatively low level now, compared to what they used to be at a lower time. The appetite for them seems to be recovering and telling them, I don't know where that's going to go in terms of affluent versus middle-to-third consumer clients. Right now, it's really aimed at the affluent. The amount of saling going out with the affluent space or what is usually described as affluent is amazingly high compared to what it really is. The second part, how do I manage my P&L given what may happen in terms of uncertainty? It could be that revenue growth next year could be lower than what you're seeing is entirely possible. At the end of the day, it's a leave when I have that essentially in my expense.
My AMA expenses are relatively flexible if I have enough time to think through. I can't change the bill in three weeks. They're actually very open to the way issuers of the program or merchants that win programs. Over a period of time, they're relatively flexible. A lot of the investments you're seeing in the strategic areas, frankly, if the U.S. consumer goes into a deal spin, I suspect there'll be a lot of energy being demoted by every guy and his grandfather right now in the move of spin might be a little lower. That will help to reduce the investment that goes into that space. Very unlikely that the appetite to spend in these new things will continue if the revenue pattern of the strategy sort of goes that way as compared to the 6%, 7%, 8% retail growth you'll see in this year over the prior.
There's a seamless legal design there that's giving me some confidence on the way our expenses are constructed today when we have to manage our ways from this crisis. I told you what Martina was telling me. It wasn't holding on revenue, compound annual growth rate at 50% on the minimum margin and then the 20% WTF over the next three years, CAGR. I'm always reminded to say compound annual growth rate. I'm done talking about that. That's a joke.
OK.
You know that?
Yes. Thank you very much. Now, before I turn the podium back over to Ajay, just stay there. I just want to spend two seconds talking about this afternoon's session. We've created an opportunity for you to experience firsthand some of the features, functions, and platforms that we're working on to drive value and position ourselves well in the future. Lunch will also be outside. You can grab a box lunch. As I said, management will be around to answer your questions. You got the brochure that outlines what's going on this afternoon. We've got two rooms down here on the 17th floor. There are two sessions with Mike Mancisi on the network after lunch. Check your agenda to get the exact times. The MasterCard Labs room also has some really great new innovations from the stuff that they're working on, much of which is not in the market yet.
Upstairs on the 18th floor, we've got a mobile room. We've got a prepaid room. The people from Access Prepaid are going to be there. Remember, they're one of the largest distributors of chip-enabled prepaid travel cards. I believe they're handing out samples. There's an enticement to get you upstairs. The thing that we're really most excited and proud about is this year's product experience. Each participant here in New York can exchange that little coupon that you had tucked in your name tag for a mobile phone, which is on loan. You've got to return it when you leave. It's loaded with several apps, including the current beta version of the Google Wallet. The wallet has been preloaded with a Citi credit card for your use here at the venue to purchase things like movie tickets, drinks from a vending machine, or even make a donation to charity.
The phone's been set up to allow you to experience this firsthand with the innovative product features that are outlined in this brochure and that will be coming to the market soon. As they say, a picture is worth 1,000 words. Now we've got a short video. I ask you to pay attention to this video because it's going to step you through how this Google Wallet on your phone is going to work. Can we run the video, please?
Hi. I'm Ed McLaughlin. I'd like to take a moment to welcome you to the experience portion of our investor day. This afternoon, you'll have a chance to talk with Mastercard experts about our network systems, prepaid programs, some of the things we're doing in mobile, and the innovations we're working on in MasterCard Lab. To make the experience a little bit more interactive, today we've also offered you the opportunity to use the technologies that we'll be talking about. In your welcome package, you'll find a ticket. That ticket could be used to borrow a Nexus S handset. On the handset, we've loaded a number of MasterCard applications that you'll be able to use as you go through the interactive experience. Let's take a look at some of the applications on the phone. We'll start with the Google Wallet.
The Google Wallet allows you to keep offers, loyalty cards, and of course, make payments using PayPass. Embedded in every Google Wallet is a Mastercard prepaid card. For today's experience, what we've also done is added a Citi Platinum Select credit account that you can use to make payments at terminals we've set up throughout the experience area. It'll give you a chance firsthand to see what it's like to tap your phone and make a payment. As a secure application, the phone is password protected. The PIN to get into the wallet today is 2468. In case you forget that, we've also included it on the back of the phone. Another handy application is the PayPass locator. With the PayPass locator, you can see where you can use PayPass to shop. We'll show you where you can use it in today's experience.
You can also see all of the PayPass locations around here. Enter your zip code or an airport code to see everywhere in the U.S. that PayPass is accepted today. It's a really handy way to see where you can use PayPass. One of my favorite applications is MasterCard In Control. With In Control, you can personalize the alerts you get on spending against your account. For today's demonstration, what we've done is set up a few alerts for you. You can receive an alert if you make a spend in certain geographies, like an international transaction, or if you've exceeded a budget you've set up for yourself, or even if you're spending in a certain category.
The other great thing about InCControl is because it's running in the Mastercard network, you get the same alerts to your phone, whether you tap the phone using PayPass, whether you're shopping online, or even if you use the physical card you have against your account. In Control brings all of that together, so you'll always know precisely what's happening. We've also included one of our newest apps, Priceless Cities. With Priceless Cities, MasterCard cardholders can browse, purchase, and redeem offers and experiences right in their hometown. For today's demonstration, we're featuring Priceless New York, which gives you a chance whether it's to purchase Yankee tickets or get a sleepover at the Bronx Zoo to take advantage of unique experiences available only to MasterCard cardholders.
Priceless Cities will also work in all of the international Priceless Cities that we have, allowing people to browse and redeem offers whether they're home or away. We've also included a demonstration application for MasterCard Labs called Quicker. This will give you the opportunity to experience firsthand some of the innovations and inventions that MasterCard Labs is working on. Using the exact same Citibank card that we used earlier, what you'll be able to do is experience all sorts of new ways to pay, whether it's using QR codes or NFC or voice or audio or gesture recognition. What you'll be able to do is experience new ways of accessing and using MasterCard payments accounts. Make sure you check out the MasterCard Labs room and see what the Quicker application can do. Please remember, you will have to return the phones when you're finished using them.
We do hope you take advantage of the experience this afternoon so you can see firsthand some of the current and future applications that we're working on.
Now, don't worry. We are going to continue to run this video on a loop out in the lobby. If you forget something, you can go back and refer to it. Our product folks can also provide us assistance. We've actually brought in a couple of our technical folks as well who will be available and floating around. Hopefully you will find that this will be a great two hours well spent, and you'll get an opportunity to experience firsthand what we're doing. With that, I'm going to turn the program back to Ajay for some closing comments.
Ed looks pretty cool. He's actually wearing the same tie. Oh, what a cheap guy. He's got an alternative occupation if this gig doesn't work out, right? That's my general assumption here. OK. Let's go through the quick summary. There's actually very little to summarize. I remain convinced that those two concentric circles, growing the pie, as well as focusing on what we're doing inside that pie, are actually what this is all about. It's about using our technology, using this innovation. You're going to see some of it using our people, our insights, our expertise to make sure our role and our franchise grows with it. The grow, diversify, build is the way we go about doing it. In the meantime, those commitments stand to what we're trying to do for these three years, those revenue commitments, operating margin, and EPS commitments that Martina laid out.
Thank you all once again. Thank you for your faith and your support and your questions and your participation. I'm sure you're going to have a good time. We'll be hanging around circulating with you. See you again soon. Thank you.