Earnings Call: Q3 2010

Nov 2, 2010

Good day, ladies and gentlemen, and welcome to the Q3 Mastercard, Inc. Earnings Conference Call. My name is Jeremy, and I will be your coordinator for today. Time. All participants are in a listen only mode. We will be facilitating a question and answer session towards the end of the conference. Participants. At this time, I'd like to turn the presentation over to your host for today's call, Ms. Barbara Gasper, Head of Investor Relations. Ma'am, you may proceed. Thank you, Jeremy. Good morning, everyone, With me on the call today are Ajay Banga, our President and Chief Executive Officer and Martina Hounmoujian, our Chief Financial Officer. Following some comments from Ajay and Q3 results. We will open up the call for your questions. This morning's earnings release and the slide deck that will filings we referenced on this call can be found in the Investor Relations section of our website at mastercard.com. The earnings call will be available for 1 week through November 9, as well as posted on our website for 30 days. Finally, financial results. As set forth in more detail in today's earnings release, I need to remind everyone that today's call may include some forward looking statements about Mastercard's future performance. Actual performance could differ materially from what is suggested by our comments here today. Information about the factors that could SEC's future performance are summarized at the end of our press release as well as contained in our recent SEC filings. With that, I will now turn the call over to Ajay Banga. Ajay? Thanks, Bhagav, and good morning, everyone. Before merging, I guess, into the details of the results, I thought I would comment on some of the operational drivers from the quarter as well as some recent Sysco Business Highlights. So in this Q3, we saw net revenue growth of 4.7% on an as reported basis or 7.3 percent on a constant currency basis. GDV gross dollar volume grew 8.4 5% on a local currency basis and cross border volume grew 15.4%, continuing the momentum from the first the start of the year. Processed transaction growth was slightly positive for the quarter, and there we are tempered by the continued roll off of several U. S. And U. K. Debit portfolios. But excluding those deconversions, underlying transaction growth was 13%. These factors and cost savings are kind of put together what allowed us to deliver an operating margin of 53.6 net income growth of 14.6 percent or about 19% on a constant currency basis. Reflecting relative economic growth trends, our volume growth outside the U. S. Outpaced growth in the U. S. The Asia Pacific and Latin America regions just continue to deliver strong double digit growth driven by both domestic For Asia and Latin America to keep growing at these rates for an extended period, we really need to see consumption pick up again in the U. S. And in Europe. Now as other markets did a few years ago. And their response to the last couple of years is also therefore more muted. And During the summer holiday season, we continue to see them traveling. And as many of these countries continue to move away from a relatively high percentage of cash transactions. The shift to electronic forms of payments just continues to generate new volume for us. In the U. S, while The market is looking healthier than it did this time last year. The economy continues to show conflicting signals with Fed predicting modest improvements until the second half of next year of twenty eleven. U. S. Consumer spending Q3. This is also consistent with our U. S. Spending pulse data, where September retail sales excluding the debit portfolio roll off, continue to see growth in the mid teens. So now let me touch a little briefly on 2 regulatory developments 3rd quarter in the U. S. First, we are pleased to have reached a settlement of the U. S. Department of Justice late in Q3. The Fed's ruling and until we see it, it's impossible to predict the outcome to either Mastercard or the entire payments industry. At our recent meetings with the Fed, we have We continue to have a constructive dialogue as we work to gather a complete picture of the U. S. Payments industry. Consistent with what we believe you are hearing, we expect the first draft of the Fed's position sometime in December, and we are planning for the range of outcomes that we talked about earlier. Given our U. S. Debit share and that some level of exclusivity will go away, we see upside potential Mastercard. However, we will have to wait for the Fed's decision to determine the true nature of the impact on our business. Meanwhile, We remain focused on executing our growth strategy around the globe, and that is to grow our core debit, prepaid and processing businesses, credit, debit, prepaid and processing, both consumer and commercial, to diversify telco's government's transit operators and to build new businesses in emerging areas such as e commerce and mobile payments. So that's the grow, diversify, build sales strategy we talked about on the 15th September. We will continue to drive growth at a local level with a focus on an enhanced consumer experience. So let me take a moment to highlight a few recent news items. You probably heard about some of these on Investor Day, but I wanted to make sure that we fully reflected the news of the quarter as we speak today. So in the affluent segment, you heard us say in September that we were going to focus on Wealth Managers and Airlines to reach this important segment. And I'm pleased to say that we have signed a credit agreement with UBS Switzerland Wealth Management to launch World Mastercard. We also signed a debit agreement with Morgan Stanley Smith money here in the U. S. We've also recently signed a number of airline co brands such as Royal Jordanian Airlines and King And building on the success of the Ferrari credit card launched in Spain a few months ago, Santander is now launching a similar co branded Mastercard in Mexico. And all of these are just examples of exciting portfolios given their potential to capture affluent cross border spend. Moving to debit. In the U. S, I SUD next year in 2011, as well as implement the debit processing capabilities of our IPS platform. The United States. These are in addition to the Delta Airlines and Morgan Stanley Smith Barney deals that we also recently announced. Overseas, we've signed an exclusive premium debit agreement with Qatar Islamic Bank to convert their portfolio to Mastercard. Qatar Qatar Islamic Bank is one of the top 5 Islamic banks in the world and has a long history with one of our largest competitors. And In Germany, Barclaycard will be converting all of its co branded local scheme plus Maestro cards to Maestro only by year end. And as a result, Maestro will become the domestic brand for these cars. Far iPS platform. We're also working with Korean issuers to introduce similar Travelex Cash Passport Mastercard Cards sessions once inside the stadium. In the commercial sector, we have signed 2 new issuer agreements for Spark Data in Germany. And these are in addition to other recent deals that we have talked about with SunTrust and Chase here in the U. S. And given the pickup in business first quarter volumes, although both are up double digit. On the processing front, we signed an agreement with Itau sections in that market of Brazil. In Asia, we made a strategic investment in India based ElectroCard services that we believe will accelerate the success of both Electrocards and Mastercard's processing businesses the Q1 of 2011, Mastercard will be expanding our mobile trials by adding on a large U. S. Issuer with micro secure data functionality. Micro SD, micro secure data basically provides functionality, which enables smartphones to be used as Payment Devices in Stores. It's kind of a big step forward towards creating a digital wallet with a host of financial capabilities built to the Unlike some of the mobile tag events, which we're already doing, and we're trying to do a number of these to test the market. Also in the quarter. We signed a memorandum of understanding with China Union Pay to jointly explore opportunities starting with e commerce and first quarter payments. We entered into an agreement with Singtel from Singapore, which has a position in 8 markets in ASEAN, one of the major mobile operators in Asia to pursue mobile commerce opportunities. We've also recently agreed to work together Airtel Africa to explore and pursue business opportunities in mobile commerce in Africa. And finally, I'm of course pleased to announce that we've just recently completed our acquisition of DataCash. We are going to hit the ground running in our efforts to further penetrate e commerce Asia Pacific. So we look forward to continuing to report on our progress, not just with Data Cash, but also all the other areas I just discussed. And I'm going to turn the call over to Martina Saks for a detailed update on our financial results and operational metrics. Margina? Thanks, Ajay, and good morning, everyone. Let me begin on page 3 the deck that shows our reported results. Net revenue grew 4.7 percent over last year's Q3 to 1,400,000,000. On a constant 15.4% in cross border volumes and 8.5% in gross dollar volumes or GDV on a local currency basis. Approximately 7 percentage points of revenue growth came from pricing, including the effect of gross border rebates, SEMA agreements. The 4.1% decline in operating expenses versus last year's 3rd quarter segment. It was primarily due to lower severance as well as savings due to reduced headcount. Our operating income was $773,000,000 for the quarter and resulted in a quarterly operating margin of 53.6%, a 4.2 percentage point improvement of some foreign earnings and a lower state tax rate offset by some other discrete adjustments. We delivered net income of $518,000,000 up 14.6% over the Q3 of 2019 and up 19% on a constant currency basis. Earnings per share were 3.94 on a diluted basis. We previously mentioned that the acquisition of DataCash would have a $0.05 dilutive impact for the full year split across the 3rd and the 4th quarter. We saw $0.02 of this dilution come through in the Q3 and expect the remaining $0.03 to impact the 4th quarter. Also, we separately that there could be a potential impact of up to $0.05 from hedging transactions we entered into to protect against adverse currency movements on the transaction price. We saw a $0.03 negative impact from this Fed's hedging in the 3rd quarter. We do not expect to see any further impact from this in the 4th quarter. Segment. So on page 4, you can see that worldwide gross dollar volume or GDV was up 8.5% on local currency basis in the 3rd quarter and grew 7.8% on a U. S. Dollar converted basis to €65,000,000,000 U. S. GDV was down 1.7% and this is in line with what we have seen over the last Q1 of 2019. Across the rest of the world, GDV continued to grow a healthy 14.9% on a local the Q2. It was helped by U. S. Credit GDV growth, which was just slightly down, continuing its trend of quarter Q1 improvement. And credit GDV for the rest of the world grew 9.6% on a local currency basis. Worldwide debit GDV continued double digit growth of 12.7% on a local currency basis. In the U. S, we saw 3%. Debit growth for the rest of the world was just over 30%, driven by Asia Pacific, Middle East, Africa the 6% compared with the year ago quarter at a little over 5,800,000,000. Process transactions continue to grow at double digit rates I believe the bulk of the deconversions are now behind us and that the 3rd quarter was the bottom in terms of process transaction growth. Global card growth was about 1% to just over €1,900,000,000 Mastercard Smart and Myastor branded cards. So now let's turn to Page 6 to discuss the components of revenue sales and the performance relative to last year's Q3. Domestic assessments increased 11.4% due to increased volumes and the impact of 2,009 2010 price increases. Cross border volume fees increased by 40.2%. About 2 thirds of $155,000,000 increase was due to our October 2009 pricing adjustment. The remainder was due to cross border same growth, which was up as I said before by 15.4% on a local currency basis. Transaction Fees increased 0.6%. Prior to transactions, which I said were up slightly, continued to be affected by the loss of some Sevets portfolios. And other revenues decreased 2.4%, primarily driven by lower compliance and research fees. So 9%. For the quarter, rewritten incentives grew €159,000,000 Approximately €60,000,000 of this increase was strategic rebates associated with last October's revised cross border pricing structure. And the remainder was primarily attributed to new and renewed customer agreements, including some of the deals Ajay mentioned earlier. Overall, rebates and incentives represented 26 So now let's turn to Page 7 for some detail on expenses. During the Q3, $50,000,000 Lower severance drove about half of the personnel expense decrease and we have taken some of these savings and reinvested them into the business. Therefore, overall G and A was about down by €2,000,000. The advertising and marketing expense was up 4.7% versus the Q3 of 2009 or 6.2% on a constant currency basis, primarily in support of campaigns in developing markets. And our 3rd quarter advertising and marketing spend was lower than expected as some programs got pushed out to the 4th quarter. Before getting into some thoughts for full year 2010, let me give you an update of what we're seeing for Mastercard processed volumes segments for the Q4 through October 28 this year. So our cross border volume grew 17 Latin America and the U. S. Although not a perfect proxy for GDV, total U. S. Process volume growth, which was About 2% negative for the 3rd quarter was flat in October and continues to be constrained by the roll off of 2 debit portfolios. Excluding the impact of the debit roll off, total U. S. Process volume growth was about 9% versus growth of 7% for the 2nd and the 3rd quarters. And this is certainly much healthier growth than what we saw in the Q3 of 2,000 Slide 9, when U. S. Purchase volume was actually down by 7%. U. S. Credit process volume was positive in October, slightly ahead of the growth rate that we saw in the Q3. U. S. Debit process volume growth continues to be effect of the debit roll off. And in October, total process volume growth for the rest of the world was about 18%, ahead of the 15% pace we saw in the 3rd quarter due to strength in several regions. Globally, process transaction growth was about 4%, 3rd quarter, including the impact of the 4 debit portfolio rollouts and 17% excluding that impact. The growth in both underlying usage trends. Now on Slide 9, let me outline our current view of 2010, second half of twenty ten to be somewhat lower than the 9.7% growth we saw in the first half. And this is driven by the following factors. First, the roll off of a few debit portfolios through the year end will continue to dampen our Process Transaction Growth. And our as reported growth will remain constrained at least through the first half of twenty eleven until the anniversary the bulk of the deconversions. But this will be somewhat mitigated by the impact of new business rolling on over time. Second. We continue to expect contra as a percentage of growth revenue to average 26% to 20 the change has only a modest impact to quarterly rebate and incentive levels contra as a percentage of gross revenue will still be the highest in the Q4 due to new and renewed deals and the normal seasonality of rebates and incentives. Now moving on to expenses. Overall, we continue to anticipate our total operating expenses for 20.10 to be down slightly versus 2,009 levels, Including severance charges as we reinvest in the business and key strategic initiatives. Now Turning to the individual components of operating expense. We continue to expect general and administrative expenses to down slightly from 2,009 levels, again including severance. But 4th quarter will be up more than 10 3rd quarter as a result of continued investments and including the impact of data SASH. Advertising and marketing spend should be up low single digits for the full year. And as dilutive impact on full year EPS from the DataCash acquisition of which $0.05 has already been booked in the Q3. And consistent with my comments on Investor Day, our full year 2010 tax rate will be somewhat SOA than we previously expected due to a one time benefit resulting from some of our tax outstanding efforts. We now expect that our full year tax rate could be as low as 34%. Income growth for the full year. Now remember, while all of our objectives are on a constant currency basis, to hold for the balance of the year. Now recall that the euro averaged about 1 $1.47 for the Q4 of 2019 versus its current level of about $1.39 To date, 2010 has not been without its challenges, including continued mixed signals from the U. S. Economy and the roll off of some debit portfolios. But the fundamentals of our business remains strong with solid volume growth outside the U. S. And a number of new business wins. We are on track to meet our financial objectives for 2010 and want to remind overview of our 2011 to 2013 performance objectives that we communicated at our Investor Meeting in September. So that is on a constant currency basis. A net revenue compounded annual growth rate for that period of 12% to 14%, a minimum operating margin of 50% on an annual basis and an earnings per share compounded annual growth rate of 20% plus over the 2011 to 2013 period. So now let me turn the call back to Barbara to begin the Q and A session. Thanks, Martino. Before we move to the Q Q and A session. I'd like to briefly point out Appendix B in the slide deck this quarter, which reflects an update in our treatment of U. S. Versus Rest of World Revenue. We are changing the treatment of the intercompany fee that is paid from Europe to the U. S. The full year results. We're now ready to begin the Q Q and A session. And in order to get to as many people as we can during our allotted time frame, we ask the to the question. Session. Your first question will be from the line of Jason Kupferberg of UBS. Go ahead, sir. Thanks. Good morning, guys. I just wanted to ask a question on the latest U. S. Debit wins and obviously good to hear about Sovereign as well. Now I think at the analyst meeting, you guys had said that As these new wins kick in, they won't fully offset some of the runoffs you've been coping with. But can you start to give us some sense of when collectively these new Debit wins will start to kick in really at a full run rate as investors start thinking about how to model 2011? Jason, as you know, usually that takes a little bit of time. We already talked about the SunTrust deal, and we talked about that that is actually in the latter part of the 3rd quarter as well as into the 4th quarter. So we actually believe that we'll probably hit our full stride kind of midyear of next year. And I think for all of the other deals that we've been talking about, you pretty much should assume that kind of length In terms of getting the cards into the market and for people to actually activating them and then using them. So As I talked about, we'll still feel a little bit of a headwind in the 1st part of 2011, like the 1st 6 months the deconversion. But then that's going to come off in the latter part of the year. And in that latter part of the year, you'll also see the benefits from the new deals coming in. Okay. Can Can you guys just clarify quickly what percent of your U. S. Pin debit business in terms of volume is exclusive? Jason, we don't really talk about that or give any disclosure on that. Okay. Thank you, guys. And your next question will be from the line of Adam Fitch with Morgan Stanley. You may proceed. Thanks. Good morning. Ajay, given the regulatory environment and the consensus view that it's going to get more rigorous over the next couple of years, can you provide some color on your views around your use of pricing increases and its impact to growth versus more organic drivers like emerging markets, e commerce, all the things that you talked about recently? Yes, sure. Hi, Adam. I don't know that it's a result of the regulatory increases as much as general perspective on the business. We're in a growth industry in the sense that cash is still 85% of retail transactions around the world and even developed markets as we talked about at Investor Day, cash still has a fairly strong proportion of retail sales. And I believe that to be the bigger opportunity. And if you want to focus on that, and the right way to focus on that is to find consumer friendly solutions that answer their needs as to why they should no longer use cash for what they use it for today. And most of these cash transactions tend to be in the developed world for small ticket items. And that's why I'm interested in contactless, that's why I'm interested in the mobile phone and those kinds of things. In the developing Those cash transactions are not only for small ticket items, they could be because of the absence of acceptance in certain parts of the world. That's why I'm so interested in the Indian Finique identifier project, which takes acceptance to so many small cities and villages in the Indian system. To use a politically correct word for a number of these emerging markets. So a number of the central banks and the governments in these emerging markets that are actually keen to drive down the use of cash to improve the transparency of their economy and their tax revenues. So I I kind of look at all these factors coming together and I switch back to mobile phones, contactless, acceptance, promotions that explain why you should use a card or a different form factor of electronic payments as compared to in some of these markets. I don't view pricing as an end in itself. Okay, great. Just one follow-up. You've been CEO now for a couple of months. And aside from the obvious changes in your style and the way you communicate to the outside world, it's fairly difficult to gauge what else has changed at Mastercard since you took over. So can you give us some color on some of the internal changes you've driven that can give us a better understanding into Let's see. What are we doing internally? Everything from recruiting and promoting a number of people into jobs customers. We call that our business development function. So a portion of our sales force, both existing people and new people, have We've been redirected towards that, hence the effort against governments and telcos and transit operators and merchants as businesses. We've also invested some use of that data in our advisor space. We have recast that advisor business to bring it closer to our sales force in a number of the regions portfolio management. We can do that with our advisor sales force. Similarly, we've created Mastercard Labs as a way of driving innovation. I think the earlier conversation we had about mobile phones and e commerce and those kinds of biometrics in India for payments requires the the reliability of our clearing authorization and settlement system to find a way to take some thoughtful risks on investing in ideas. Out of Fed ideas, 8 will probably not do well. And I'm going to have to learn how to cut the cord to those 8 fast and smart, but invest in the other 2. And There's a lot of things going on here, Adam. I just gave you a few examples of channels and products and innovation and the kind of people that are focused on it. There's also a great interest that I have in my own way of looking at business, where I believe that Businesses earned at the client's office and with their customers. And so I'm determined to be out there meeting my clients, meeting regulators, as a part of the way they grow commerce in their country rather than a foreign company that merely exists to be able to facilitate its own profitability. I think there's a lot of what I just said has a lot of stuff buried in it, but This is something you'll see unfolding over the next couple of years. I want to make real meaning of the slogan, heart of commerce, not just and your next question will be from the line of Sanjay Sakhrani with KBW. You may proceed. Thank you. Good morning. Just had a quick question on rest of world debit volumes. Those have looked strong for some time now, and I was wondering how much of that was organic versus new customer acquisitions? And then just one accounting clarification question on for Martina. The 26% to 27% rebate guidance for the year. Does that that basically assumes the accounting change happens in the Q4 and not for the 1st 3 quarters, right? Segment. Thank you. Yes. Sanjay, for your last question, you're absolutely right. It just happens in the 4th quarter, we are The Contour revenue related to the cross border rebates into the gross revenues, net revenue will not And it will all be in that 26% to 27% range. From a rest of world debit point As you know, it's been growing very nicely and there is a mix in there in terms of that people are actually utilizing our cards to do those kind of transactions as well as we did have some business wins in there as we talked a little earlier about. Sanjay, on that debit front, if you look at the data that's in our press release, you'll see Q3 'nine, rest of the world 27% up, Q3 10% rest of the world, 30% up, 9 months is 25% in 2009%, 31% in 2010. And I guess that's where your question is coming from. It's a little different regions of the world. It's trying to get a deeper understanding of how quickly debit is being embraced by consumers in different part of the world, if that's where your 6th such bank in Germany, where Maestro only is now on their debit card. So in Europe, it's about winning space in the competitive space because debit is already pretty well established, although I still look on Europe as a growth area because of the amount Cash still used there. So that's Europe. Asia and Latin America, I would say debit is less established as a way of life for consumers, but it's fashion side there as well. If you look at purchase growth, you'll begin to see what I'm talking about. Okay. Thank you. Session. And your next question will be from the line of David Hochstin with Buckingham Research. You may proceed, sir. I wonder if you could Give us some sense of your expectations for China. I mean, the MoU and I guess maybe negotiations by our government to help open up China. I mean, how realistic is it to expect that China could become a bigger and bigger So David, China is already a relatively attractive business for us. But the way I think the business we do well today in China, which is a cross border business both for Chinese traveling overseas and for people traveling into China focus is 1 on the e commerce space, but 2 on that cross border space. And in fact, as Walt said on Investor Day, out of the 5 core brands that came out in China in the last, I don't know, 9, 10 months, roughly, I might be wrong by a month or 2 here or there, but roughly that number, we won all of them. And best part to do with our relationship with CUP and how we're working together as partners. Now do I think that, that will lead some dramatic opening up of the Chinese market where the domestic sector will become open to companies like us and our competitors. I don't know. That's the Chinese government has to sort through in terms of their willingness to open that sector. There's so much going on in governmental space between our government here and the Chinese government that I don't know how to handicap where that will come out. But My approach to that is we'll see what happens. Let's keep the partnership going. Let's build on what we are good at. Let's make sure that it grows even faster. Let me make an even more segmental position in that space. And as the partnership develops, let's see what where that goes. I just don't know how to handicap it any other way. Okay. And I guess the revenue guidance doesn't really assume a lot of domestic business for the next 2, 3 years? No, it does not. But it does assume We keep doing well on this cross border and e commerce space and that this partnership with CUP remains a solid good partnership. Okay, thanks. And next you have a question from the line of Tiansin Huang with JPMorgan. Go ahead. Hi, thanks. The quarter is pretty clean, but I'll ask about the rebates and incentives. I'm curious if the cost to win Finjan renew clients have changed at all. And if you're seeing clients change their preferences between upfront rebates versus ongoing fee relief? Hi, Tien Tsin, it's Ajay. I'll start off and Martina can add on. But have I seen a change as these renewals are going on? Not really in the last I wouldn't say anything in the last 3 months, but I've been here a year and a half now. And I'd say my general impression is each of these value you bring from different products you place with them, in control, EMS, fraud solutions, advisors, all comes into what I call an integrated pricing opportunity along with an integrated solution that we're trying and propose to these to our issuer floor clients. I think that if you look out in the future, I think that that trend of tough negotiations will only increase because that's Every business has got pressure on its margins. I think our job is to really find ways to 1, grow the overall size of the pie, hence my focus on cash 2, to grow my share because I happen to be a lower share in some markets than some of my bigger competitors and 3, to Find intelligent ways to package solutions, which allow me some pricing space. And that's kind of where I'm trying to work my way through this. But It is the reality that everybody's got tough negotiations. I've we've got a lady we hired here who does our purchasing contract for us. Trust me, try I'm negotiating with her. And you will see she's on your case. And that's true of every company. That's Good overview. I guess I'll ask, well, just as a follow-up, just I'm curious if there's a change between the upfront rebates versus But my real follow-up question was more around the DOJ settlement. Obviously, that was a good outcome. I know it's not going to change your rules much, but There's any way that this settlement could change the outlook for the merchant litigation case. If we can get an update on that as well, that'd be great. Thanks so much. So you had 2 portions there, right? The first portion was about the DOJ settlement and whether I think the discounting will change. I Don't actually know that for sure. I can speculate that there will be, in certain cases, the probability Some more discounting for the usage of cash. But to tell you the truth, the total volume of our business that I think will impacted by that discounting still remains very, very small in my mind. And so while the settlement basically ended up in right place with, let's say, nearly a clarification of the way we were conducting our business. Having had the experience of having conducted That way for a while. I don't know that it's going to change a great deal with the settlement. You know what I mean? That's where I'm coming from. And so I don't feel I'm staring circumstances are still a very strong tailwind even in the United States to go away from cash. And I think Tailwind in addition to our experience of having already had this kind of practical rule in the market before the DOJ settlement. So That's kind of a long answer to a simple question, but it's a complex topic, right? And the second part, the MDL case. The MDL case, nothing new has happened between, let's say, earnings between the September Investor Day and today. The court heard these oral arguments back in November 2009. They have not ruled on those motions. There Fed's mediation court recommended mediation going on right now. That mediation is confidential. It's tough for me to tell you where that's going to end up because I will be Violating that confidentiality. Do I see some progress in it? Yes. But do I see that going to a place where I can be confident that I see light the At the end of the tunnel, not yet. So that's kind of where we are with the MDL. Will the DOJ settlement impact the MDL litigation case? I don't know yet, right? I don't know how to handicap these kinds of things. I would rather not venture into that space and Deal with it as it comes along. Okay. Very good. Appreciate it. Thank you. SunTrust. Your next question is from the line of Andrew Jeffrey with SunTrust. Go ahead. Hi, thanks for taking the questions. You've obviously got some momentum in U. S. Debit, which is encouraging. Ajay, do you think that I know we don't know specifically what the Fed is going to say about exclusivity. But do you think just from a competitive standpoint, given 3rd year sort of distant second historical share in U. S. Debit that as customers look at or potential customers look at what could happened to be in terms of its exclusive business. So that's factoring into their decisions now to go with Mastercard because it isn't So much of an issue where maybe they figure the volume is going to be heading your way regardless. Or would you cite more your answer to Tien Tsin as being sort of the key differentiator that Mastercard brings to the table as you take share in the U. S. I understand what you're saying, Andrew. Here's the thing, the clarity around where the financial reform bill was going in this whole exclusivity idea that came into the bill really happened A couple of months ago if you think back to time. It feels like a lifetime, but it's only a few months ago. A lot of the debit wins we're talking about in reality is work that's been going SunTrust took a year to go from initial conversations to real success. Sovereign Bank has been going on from a couple of months since I joined the SaaS. Sovereign Bank has been going on from a couple of months since I joined the company. I can recall discussions at our executive committee around Sovereign Bank. I I remember Delta being a discussion from around the time I joined the company. So I would say to you, some of the wins we've got are Good old hard work around what we bring to the party, what our capabilities are and what for example, SunTrust case. We have publicly gone out and said that the reason we won their business was because of the capabilities that Pfizer's Mastercard Advisors brought to the party in terms of portfolio management. And I think those are the kind of things that are helping us. Now going forward, If anything, I'd like to see a little tailwind in that as we get some clarity around the exclusivity. I just don't know what that clarity will be. So I don't know how to predict where it will go. Does that help? Yes, it does help. Thank you. And then rest of world debit, again, great share gains there. Is that just market share and platform? Or is there anything you could elaborate on No, rest of the world, debit is just there are 2 or 3 things going on. One is we're learning on debit as we go along as a company, and we're trying to make real progress in Asia and Latin America with a number of our clients there. We have got segmented offers in debit. We're actually bringing our entire marketing might to the debit table. And in Australia, We went through a exercise of really understanding what youth in Australia were looking for from their debit circumstance. And we found that music, youth and debit given us enormous gains in Australia. So it's really hard work country by country on the debit space. I'd I'd say in Europe, it's a little different. In Europe, it's about making sure that we start getting some benefit from SEPA. And SEPA is a long haul, so don't This doesn't change in 1 month or 6 months, but over the course of 2 or 3 years, as Harvey has said at Investor Day, we think that Saba gives us a real chance to see more transactions as well as see more of them on Maestro only cards or Mastercard only debit cards your next question will be from the line of Craig Maurer with CLSA. You may proceed. Thanks and good morning. I wanted to ask a follow-up on Europe We've heard a lot of good new account conversions to Mastercard or Maestro only, and we don't get to see all that detailed information in terms of your major competitor over there. So one, I was hoping you can comment on perceived market share, if that's changed at all? And 2, if you can comment on perhaps the discussions with the banks in Europe and their attitude toward going to a Mastercard only solution versus what was trying to be pushed by the EC in terms of a pan European system, if you'd call it. Thanks. So Two parts to that, right? The first part is about perception of market share. And I'd say that my general impression from the last year and a half of Traveling in Europe is that we're seen as being the real player on debit and that we are seen as picking up some momentum business over time is that it takes time to change it upwards or downwards. The debit losses in the U. S. That are rolling off right now are the result roll on over the course of a year and 1.5 years. So I'd say nothing would have changed that dramatically in the course of this year. The aspect of banks constant dialogue with European banks. And I'd say to first of all say how a European bank is thinking about it will probably be a misnomer because each The proof of the pudding will be in the eating, right? And we've got real answers in the Netherlands, whereas progress in a number of these markets and even in Belgium as well as in other markets of Continental Europe. So I'd say to you that Once it's done and I saw the first transaction work in by my own eyes, my thumb actually in India when I was there, you can begin to understand that, that That will then be available to every market, including every country in Europe across on our system. If some other country in Europe decides second banks. Some of the others on the other hand would still go differently. And it's a constant effort. And that's why SEPA in Europe is not a Turn on a dime kind of thing. It's a 2, 3, 4 year effort. Okay. And just a follow-up on Itau Unibanco. Was the win of the switching there, was Fed driven by the change in rules around settlement clearing? Not really. We've been talking to Itau for a and give them many more value added products for their portfolio. It's more to do with that conversation than anything else. Okay. Thank you. Phone call. Thank you very much. And your next question will be from the line of Tim Willi with Wells Fargo. Go ahead. Thank you. You have mentioned a couple of different times on this call the role of Mastercard Advisors. Is there could you just sort of frame for us any kind of improvement that clients see in a portfolio, whether that be debit or credit, U. S. Or Rest of the World, just sort of a sense for the relative uptake and utilization improvements that people see When they utilize advisors, when they utilize the research and rethink, how to improve their card portfolio, are we talking sort of 10% kind of utilization rates, 20%, 30%. Any way to frame that and think about that uplift? Hi, Tim. I don't think I can give you that. That's really something you've got to ask the banks. It's their private data, and I would be making a big mistake site by passing back to you. But I will tell you this, where I was coming from an adviser. Some of the bigger banks around the world in the U. S. And elsewhere, they clearly portfolios right from more efficient acquisition of clients to utilization, to portfolio management, to bankruptcy to charge off prediction to loyalty schemes and so on. Others on the other hand don't have those resources. Those are the ones we focus on much more. Having said that, even in the bigger ones, when they do them information, they do it based Just the ones that are already in their portfolio, which may give them a somewhat unipolar view of what to do with their book. And so those are the 2 prospects of advisers that I'm trying to put forward as a competitive edge when our sales force goes to speak to everybody credit unions to large banks in the U. S. As well as overseas. But I'm sorry, I'm not at liberty to give you a sense of the improvement in a bank's numbers. That will be inappropriate of me. Okay. Thank you. Operator, I think we've got time for one more question. Okay. Not a problem. And at this time, I will bring forth the line of Rod Bourgeois with Bernstein. Yes, guys. I just wanted to inquire as we compete in a under the Durbin Regulation. Is Mastercard planning to gain debit market share by competing more aggressively on price or by using non price ways to get your brand on more debit cards and also to attract merchants routing decisions. So can you give us some perspective on how the debit market share gains will be achieved and the balance of strategy from pricing versus non price factors. Thanks. Bernard, Thanks. It's first of all, it's early days. I'm not going to go very far down that road because I cannot till I get some clarity on what combination of both those things. Even to get merchants to give preferred routing will require a combination of value added products that they in turn perceive fees as important to them as well as some pricing benefits. Nothing will everybody is negotiating tough, as I said, these days So it's a combination of both. I don't know whether it will be more weighted to one or the other. The way I look at my life right now is Fed. All I've got here is the possibility of upside. I don't have that business. I'm trying to look at where that business could be positioned with me over a period of time. I the All right. So Ajay, on that topic, I mean, the banks Looking at lowered interchange in their debit portfolio. Yes. So as existing contracts come up for renewal, Are you expecting more intense sort of pricing concession requests in these upcoming renewals since banks are looking at lower debit interchange, maybe they're going to ask for some pricing concessions across both the debit and sort of credit portfolios on the network fee side. Is that something that you're anticipating? Or is that being It's a good question. I'd say to you that if you look at the volume of impact on their revenue line that has come number will be, but different banks have already begun to estimate, as you know, what that number could be. We're talking a very large number of dollars. If you were to setup. All the issuer processing fees I would make from banks of that size and scope, you're talking about even if they were to negotiate back with me the When the cows come home, you're talking of a very small difference in that number of revenue that they've lost. What I saw in Australia, when it happened in Australia, and I was at Citibank those days, on the other side of the sense was that the impact had to be made up with many 6 things. One being how you look at your checking account fees, which as you can see is already beginning to happen. In fact, right now, we're getting fees on bank accounts that go to different elements of the feature functionality of a checking account. They happen with what you do with debit and how you price those. They'll happen with how you price different services that you give. So I You may get a pricing on ACH debit store bank account, which today aren't priced that way, which in a number of countries are priced by the way. If in this country, they would tell you and some of them have been publicly quoted to say they already have really good pricing from the networks. And I therefore, I'm little less worried about that. I'm much more interested in providing them with more opportunities for thinking through how to make sub revenue as the next couple of years unfold. I really believe that that's my role as their partner. So but bottom line, there's some worry that pricing will need to be more aggressive in upcoming renewals, but it's still not clear to We'll need to be more aggressive in upcoming renewals, but it's still not clear to what extent? Bottom line, there's less worry than you think that I have on what Got it. And then finally, if I can just ask real quick, there's various arguments that 2 Signature brands should be required on debit cards under the Thurman amendment. And I know from a Mastercard standpoint that might be a nice feature if the Fed rules that way. What's your best argument that 2 signature brands should be required on all debit cards. No comment. Cannot discuss that right now. And this is waiting for the For Ajei is going to go to his closing comments. I just want to reflect on one thing that we had up in our disclosure this morning. As About 3,600,000,000. And you will recall that our Board of Directors had approved a $1,000,000,000 share repurchase financial results. As I stated at the investor community meeting, there may be times, whether because of earnings or other corporate activities that we're not able to those share repurchases. With that, let me hand over to Ajay. So let me leave you with a few closing thoughts. And as Martina said, we're on track to meet our 20 10 financial objectives. And we remain optimistic for the future to the longer term financial performance that we first outlined at this recent investor meeting in September. I believe that we are at the heart of a growth sector. And while we recognize that the industry is changing, sales affluent debit prepaid commercial mobile e commerce. I think all I can say is I look forward to these contributing next year today's call. Ladies and gentlemen, this does conclude the presentation and you may now disconnect. Have yourselves a wonderful day.