Good afternoon, everyone, and let's get started with the next session of the day. I'm Ashwin Shirvaikar. I'm Citi's Head of Fintech Research, and it's my pleasure to welcome Mastercard to the stage next. And from Mastercard, we have Linda Kirkpatrick, who is President, Americas. Linda, welcome. Thank you for being part of our event.
Thanks for having me, Ashwin.
Yeah, really appreciate it. Should we jump right in?
Dive right in.
And I guess, you know, if we could start with just having you share a little bit about your background and sort of your current role at Mastercard, and just kick off that way, and then we'll get into some of the other questions.
Certainly. Well, hello, everyone. My background is very deeply rooted in payments. I've been at Mastercard for 27 years across a variety of roles, including finance for about a decade, investor relations, strategy, and supporting our customer relationships in the U.S. and Canada. My current role is head of our Americas, which is U.S., Canada, and as of January 1st, Latin America and Caribbean.
Okay. Great, great. And as a part of that role, you have operational purview, financial purview, all those things.
Operations and customer-facing relationships in those geographies.
Great.
That's right.
Great, great. Well, that will super help with all of the questions that we have listed out. But if I can, the question that's sort of been recurring through the conference for a lot of the sessions has been about Capital One and Discover, the announcement that they had. Could you kind of talk about what that means for Mastercard and the market?
Sure. Our relationship with Capital One has been a strong and important one for many, many years, both in the context of their cards business as well as their services business. That is true before the announcement, that remains true after the announcement. You've heard them say publicly, and we've talked to them right after they made their announcement, and they value the relationship that they have with us as a network. They value our services and our international acceptance and our brand, and they don't anticipate that changing. So I believe that for the long term, we will be partnering with Capital One across a variety of topics. But what I really believe is this is a very strong demonstration that competition within our markets is incredibly robust.
Mm.
Whether it's this announcement or the proliferation of alternative payment methods, buy now, pay later providers, digital wallets, digital currencies, account-to-account, real-time payments, competition has never been more robust, and that, that is clear. But with respect to Capital One, there's a lot that still remains to be decided, and concluded. I am confident that we will work with them into the long run.
Okay, okay. Got it. And appreciate you kind of weaving in some of the competition remarks in there, and what are the implications of that, obviously. But, you know, the second most popular question that we've been getting is about macro, so let me kind of go there. Give us your perspective on sort of, you know, macroeconomic environment, what you're seeing in terms of consumer spending trends, and if I can maybe add on the tweak, because you do have value-add services, of what you see from enterprise spending as well. Yeah.
Yeah. The consumer remains resilient, and consumer spending remains robust. As we look at both macro factors as well as Mastercard's own data, we see that spending is quite healthy. From a Mastercard perspective, we see that consumers continue to spend on experiences, particularly in the travel and entertainment category.
Mm.
As we look at the macro environment, we see inflation cooling, certainly across the Americas. We see that charge-offs and delinquencies are now back to pre-pandemic levels but are leveling off. We certainly see a strong consumer sentiment. Here in the U.S., we look at wage growth relative to CPI or inflation, and generally, as long as wage growth is higher than CPI, we believe consumers have purchasing power, and so far, that theory has proven. We are looking at the trends around availability of capital, consumer debt, and certainly geopolitical challenges that may exist globally. But for Mastercard, we are so diversified across geography, across merchant category, and across products, and we believe that the outlook is very positive for the future.
Right.
We're able to modulate our business aligned with what we're seeing in the broader ecosystem.
Right. Right, and just to clarify, were those more U.S.-centric comments, and if you sort of extend it out to the rest of the geographies on your purview, would they be relatively consistent?
Yes. I mean, if you look at, if you look at Brazil, for example, they, they've reached the peak of their delinquencies and charge-offs, and now they are moderating. The central bank in Brazil has already taken action, to lower rates. Certainly in the U.S., it's a little bit different. We've, you know, Powell has suggested the rate declines over the coming year, that will only serve to improve the trends that we're seeing. In Canada, we're seeing largely similar trends, although we're watching the mortgage, industry, as 2/3 of Canadians will be renewing their mortgages over, the next couple of years. So we're, we're monitoring their purchasing power there. But overall, again, the overall business, not only the Americas, but Mastercard as, as a global organization, we feel the positive outlook going forward.
Okay. Okay, well, that's good to, that's good to hear. So as we sort of get more into sort of the Mastercard algo, if you will, start talking maybe a little bit more about, you know, runway and penetration and what remains from the perspective of, you know, P2P merchant space, and so on and so forth, if you could kind of comment on, on that.
Yeah. We believe the opportunity, the secular shift in the P2M space is still quite significant and quite robust, not only here in the U.S., but around the globe. Certainly, as we think about the digitization of cash and check, you know, within the U.S., there's opportunity. Outside the U.S., in markets like Colombia, Mexico, Peru, where, you know, the percentage of cards is less than 25% of overall PCE, you can see that the runway for growth is quite significant. And then add to that the opportunity to penetrate new merchant segments like rent, utilities, telco, where the penetration of cash and check is still quite large. Add to that new business models, where you're taking one transaction and perhaps slicing them into multiple transactions, subscription services, marketplace transactions, buy now, pay later.
You all know our revenue model is premised on number of transactions as well as volume. We also know that our network is quite scalable, so the opportunity for us to take on more transactions in these new business models is robust. And then you look at new use cases, where new flows become available. I ordered Uber Eats last night. I paid Uber Eats for my dinner through my card. Uber Eats then had to pay the restaurant and the driver. Mastercard sits at the center of those flows. One transaction can become three or four, leveraging Mastercard Send. So new business models, new verticals, new use cases present even greater opportunity for secular shift from cash and check to digital forms of payment, including in the U.S.
Yeah.
You add to that our work to transform acceptance at the point of sale. Think about contactless and what that's done to electronify payments that were previously cash. 65% of our in-person switched transactions are now contactless. That unlocks tremendous opportunity, particularly in spaces like transit, where we're live with contactless in 25 cities across the U.S. and Canada, and that's growing. You think about tokenization, the opportunity to create a digitized transaction to enable any connected device to be a commerce device-
Mm-hmm.
-which is improving authorizations by 3-6 percentage points. That's huge. You also think about Tap-to-Phone, where you have the opportunity to accept payments. While we have doubled acceptance locations to well over 100 million globally, Tap-to-Phone presents an even greater opportunity to accept payments. So you see these digitization opportunities in new business models, new use cases, new verticals, and new acceptance channels present an ongoing, robust opportunity for secular shift.
Okay, and so if I kind of break down some aspects of your answer there and kind of go, there are some geographies, and instead of using words like developed and less developed, I'll say, penetrated and less penetrated. But there are markets where from a card perspective, card and wallet perspective, whether it's physical or digital, there is a penetration opportunity. And then there's an acceptance point opportunity, but then there's all these other... So when you think of it that way, is there a way to rank order, you know, what excites you most with those? You know, how you're approaching that, you know, that continued... I mean, you know, it's kind of pretty clear that the runway is there, but is there a rank ordering of priorities?
The digitization, the secular shift around digitization of cash and check is absolutely still number one. Across the globe, this presents tremendous opportunity. I'd say next on the list would be new flows-
Yeah
... and the opportunity to, digitize not just the P2M space, but the B2B space. So as many of you know, you know, corporate payments, as they exist today, are still largely done in a cash and check type of environment, and the opportunity in commercial, commercial B2B space, which we look at across two vectors. The first is commercial point of sale.
Mm.
This is an area where we don't need to create new models or new ecosystems. We're leveraging our card rails for different types of flows-
Mm-hmm
T&E cards, fleet cards, purchasing cards. This is a space where at the end of 2023, our total gross dollar volume in commercial credit and debit products is 13% of the overall volume, and was growing at 13%, which is actually growing greater than the overall core. So it presents continued tremendous market opportunity to digitize-
Mm-hmm.
to create efficiency
Yeah.
and to get into flows like B2B that, you know, we wouldn't otherwise. The second element of commercial is, of course, accounts payable. and this is the area of VCN, or virtual card numbers, and this is where, you know, we are, Mastercard is the leader in the VCN space, and the opportunity here is quite clear. When businesses are paying their suppliers, the opportunity to put that in a, in a carded space is still very much untapped. So we see our role as enabling suppliers with acceptance for VCN and enabling buyers with the ability to put VCN capabilities into their platforms. So in this space, we've done deals with the likes of Coupa, SAP, Oracle, who are enablers of this, these B2B flows. and we see, you know, continued tremendous opportunity here.
Okay. Okay. And then when you kind of go past commercial and start talking about, say, disbursements, then you talk about remittances, and there's more and more and more. So maybe talk a little bit about the opportunity in disbursements and remittances as well.
Yeah. Similar to B2B, there's a large addressable TAM in this space.
Yeah.
We, in 2023, saw disbursements and remittances transactions increase by 30%. We've enabled remittances endpoints across 10 billion, 10 billion endpoints across the globe, and this is really an opportunity for us to connect, particularly cross-border payments, where, you know, that's a space that's quite lucrative for us. New use cases like push to card, new use cases like payments to gig workers, my Uber Eats example, content creators, and payments to card for their salaries. So the leveraging Mastercard Send, leveraging, Mastercard cross-border capabilities, we believe this is another area where we can not only provide the service itself, but also add value-added services on top to create a more streamlined, you know, exchange of value and exchange of, of, payments-
Right.
-between endpoints.
Yep. Yep. Does, you know, value-add services, are they more penetrated in the Americas, particularly U.S., as opposed to other geographies, or do you find a more even distribution?
We've, we've talked about the fact that value-added services and solutions are more than 1/3 of our revenue today-
Yeah
... on a global basis. Virtually every new contract that we're signing with a customer embeds some form of services, whether that be our data and analytics, whether that be our cyber intelligence tools, whether that be loyalty and personalization capabilities. Services is a important part of our three-pillar strategy. It is the second pillar of our three-pillar strategy, and it's growing faster than the core. It's helped us differentiate with our customers, and it's helped us win, new, net new business, as well as renew existing business that we have.
Okay, okay. So maybe shifting gears a bit, talk about regulation, which, you know, obviously an important topic. You know, can you speak to the role sort of Mastercard plays with some of these new regulations, maybe speak to the impact of Reg II, as well?
Yes, I'll start by saying interchange-
Yeah
... is a balancing mechanism across the ecosystem, and when interchange is artificially capped or reduced, it's harmful to consumers, full stop. It limits the industry's ability to invest in things like innovation, fraud protection, and consumer benefits and rewards that consumers find so valuable, and that's not conjecture. That's based on fact. When 10 years ago, debit here in the U.S. was regulated and capped, the outcome of that was harmful for consumers. The elimination of rewards on debit products, the elimination of free checking, the reduction of innovation in the space were all outputs that were quite clear and documented. So overall, we believe that interchange regulation, artificial caps, you know, creates imbalance in the ecosystem, and, it's just ultimately harmful to consumers. Now, how does that translate to debit, further debit regulation?
The Fed has come out and said that they plan to regulate debit down even further. For many reasons, we believe this is harmful. And we also believe Mastercard plays an important role in educating our regulators on the importance of electronic payments and the value that they bring to commerce and to the economy as a whole. And so what we're focused on is really explaining in more detail the total cost of servicing an account, which is much more than the processing of a debit transaction, but it's actually the customer service that's required, the cost of customer service, the cost of fraud, the cost of ensuring Zero Liability . These are largely undervalued, and need to be considered with respect to regulation of debit. And so these are all points that we'll be highlighting in our comment letter to the Fed.
We believe that debit provides a real utility to consumers. All of these protections make debit a very viable product, not just here in the U.S., by the way, but globally. The opportunity to benefit from acceptance, to be protected from fraud, to know that when you're leveraging this, this product, you're leveraging across safe and secure rails. These are huge consumer benefits that cannot be discounted.
Right.
In the space of Reg II, you mentioned, this is an effort to enable two unaffiliated debit networks in every debit card not present transaction. Our ecosystem is ready for this. We're enabled. As we mentioned on our fourth quarter call, we have not seen a material impact of Reg II on our business. But here again, Reg II presents challenges to consumers in particular. Why? Because a merchant may decide to route a transaction down a network based on cost rather than security, and whenever that decision is made based on cost versus security, it can be harmful to the consumer that, frankly, is none the wiser in that example.
So, here as well, we believe this, Reg II has the potential to be harmful to consumers, and while we will, of course, follow the regulation, we actually believe that our services and our ability to drive a safer environment, an environment with higher authentication, greater tokenization, will ultimately prevail.
Okay. Maybe switching gears again, I guess, talk about real-time payments, and, that's, that's a broad question, real-time payments, faster payments, and we, you know, earlier today, we had a very interesting discussion with TCH, on, on, on the topic, RTP, for example. Could you walk us through how you think of, first of all, broadly speaking, real-time payments as a concept, right? You know, and, and that's not just real-time for authorization, but also settlement, and so on and so forth. And then the interrelationship, RTP, versus Mastercard.
I'll start by saying that our strategy is grounded in the spirit of choice, meaning we believe that ultimately, consumers and small businesses and large businesses will decide how they want to pay and be paid. And so on that principle and premise, we've created, very deliberately, investment, both organically and inorganically, to provide choice to consumers and businesses. And so while cards remains very robust and remains a preferred method, there are other modes of payments, like real-time payments, open banking, account to account, that may be the choice for the future. And so Mastercard is prepared to work with our customers and partners based on however they want to engage with us, and real-time payments is no exception. We made an investment in VocaLink several years ago.
We also made an investment in Nets, in the Nordics, and this real-time payments infrastructure is powering 13 markets around the globe, everywhere from Peru to Thailand to right here in the U.S. You mentioned TCH.
Yeah.
Our real-time payments technology is powering the TCH solution here in the U.S. We announced, on our fourth quarter call that we renewed our agreement with TCH. They're a longtime, strong partner. The opportunity there is quite robust. It works well, and the opportunity for us here, again, not only to provide the rails for real-time payments, but to apply services on top of real-time payments, also presents an opportunity for growth. So the way we look at it is we have the assets and the capabilities, and we're very happy to support that, however our customers want to engage with Mastercard.
Right. Right, right. Are there, are there applications or use cases that are more suitable to, you know, one way of doing, you know, real-time payments or faster payments versus another way? You know, as you, as you kinda look at it from the customer's perspective, what's, you know, are there applications that, you know... It, it really makes sense to flow on card networks. There are applications that make sense to do ACH. Can you talk about that maybe a little?
There's a utility for real-time payments across multiple vectors. I'd say, you know, the cross-border-
Yeah
... opportunity, particularly with small and medium-sized banks-
Yeah
... is an area of great interest for them because they can use our rails to help enable-
Yeah
... RTP in a very seamless way. So that's one example where I feel, you know, there's a utility, and it makes sense for, you know, banks to engage here.
Yeah. Yeah. Okay, got it. Got it. With regards to, and you'd mentioned this in one of the earlier answers, value-add services, so could you maybe talk a little bit more, more broadly about, about value-add services? And, you know, you mentioned it comes up as a part of every contract, right? So talk about like, you know, and you have a range of these, and that range keeps growing, right? So, if you can kind of go through again, so a little bit of a rank order, but what's more popular? Why is it more popular? What use cases are people looking for, you know, the specific, you know, near-term needs and so on and so forth? If you could give us that inside look at value-added services.
Value-added services, again, a very important and strategic part of our strategy, as an organization. This is how we differentiate with our customers in the space of data, cyber, and loyalty. And while these areas are ancillary to payments, they're very connected to the core as well. So if you are managing a payments business, you need the most robust safety and security tools to protect it. If you are managing payments and flows, you need data and analytics to ensure that you're thinking about new acquisition, you're thinking about segmentation, you're thinking about testing and learning new ways of managing your business. So we believe services allow us to work holistically with our customers across the totality of their business, not just in the space of cards.
When you're thinking about if you're a bank, if you're a merchant partner, if you're a government, the opportunity to work with one partner across multiple vectors is very attractive. And that's what's helping us differentiate and win in the marketplace. Many of the flip opportunities and conversion opportunities you've heard us talk about over the past several years have been grounded in a great brand, great people, you know, a great opportunity to partner on the network, but very much so around services. So this is truly a core part of how we're leveraging the power of the network to differentiate us with our customer base. And if I think about wins like Citizens, Webster Bank, BOKF, in the regulated debit space, where these types of actions happen infrequently, and, you know, they're big decisions for these banks.
They looked at Mastercard as a full-service provider of capabilities that could support, again, the entirety or the totality of their business beyond cards. So it really is. It's a growing space. It's growing faster than the core. It's more than 1/3 of our revenue, and it's a key part of our strategy going forward.
Yep, yep. So many of the ones you mentioned, your data, cyber, analytics, so on, it's grounded in data. AI comes up, right? So talk to us about, you know, what you're doing with AI, including GenAI. But you guys have been doing AI for years and years and years, and GenAI, obviously, the new term on the block, so to speak. But talk to us about, you know, what you're doing with AI and how that helps.
We have been using AI for well over a decade in our fraud tools to help create better efficacy and to create smarter fraud capabilities. We've also been using it in our personalization tools. We've also been leveraging it with customers to support their operations and their servicing, and of course, we've been leveraging it internally to make us more efficient as a company. Now, in the space of GenAI, we've launched two products that embed GenAI capabilities. One is Shopping Muse, we call it, and this helps retailers to deliver a service to their customers to contextualize, in the card-not-present environment, what an in-person retail experience might look like. So helps them to, you know, really support their sales efforts in an online environment. So that's one.
Second, we have a GenAI solution for small businesses, which takes the power of our current small business capabilities and couples it with new data-
Mm
... to help small businesses manage their day-to-day, including the opportunity to interact with a virtual mentor.
Mm.
These are just some examples of how we're leveraging GenAI. The opportunity to enhance experiences certainly is very big for the future. I will say that, you know, good AI is responsible AI, so we have an AI governance process that we've implemented within the organization, that's grounded in inclusivity and transparency, and that is the foundation through which we will be building our GenAI strategy going forward.
Got it, got it. Okay. Going back to one other topic that you mentioned, you know, the number of wins that you've had, and every earnings call, there's a list that comes out, you know, U.S., Canada, Latin America, beyond as well, but let's focus on these geographies. Could you maybe go through, you know, some detail on the wins, kinda help us understand the factors that make you successful, and, maybe just kinda looking forward, what are you most excited about as well with regards to these kinds of wins continuing?
We're very proud of our wins across the globe. We have been very successful at both renewing business with existing customers, as well as converting business from the competition across every market. We've also been the clear leader with net new agreements in the marketplace, and this is in the space of the fintech community, particularly pronounced in Latin America. But certainly with conversions and flips, I mentioned the regulated debit flips in the U.S. With respect to renewals, in Canada, we just renewed a very important agreement with WestJet and President's Choice Financial.
We also, in the space of new agreements, in Latin America, I'm delighted to announce, for the first time today, that we signed an agreement with Banco Bradesco, one of the largest banks in Brazil, in the space of credit, commercial, and of course, services.
Wow!
So that's a net new agreement for us in that market that we're just thrilled about that partnership. I was in Brazil last week, and I am so impressed with the vibrancy of the market, with the innovative spirit with which the experts in that market are approaching the payment space. 20 million people in São Paulo alone, the opportunity to convert cash and check is still quite robust. You saw in our fourth quarter numbers, Latin America grew by 22% in our gross, in gross dollar volume. And the runway is quite long there. So Banco Bradesco will be the next example of how we're expanding specifically in Brazil. And then in the space of net new agreements, Tim Hortons a great example in Canada of a non-traditional partner who's looking to expand in financial services.
The pay-by-bank agreement that we signed with Chase last year to expand payments in categories that are largely uncarded today. You know, these are just some examples of where we have, in the core and in services and in net new flows, been able to really turn up the dial, across the globe and specifically in Americas. In terms of what I'm most excited about, it absolutely still is the secular opportunity to convert cash and check. It absolutely still is the opportunity in the B2B space, particularly in markets around the globe, outside the U.S. And then the opportunity to penetrate new use cases and new flows like the ones I talked about earlier.
Yep. Yep. I think you've set something abuzz with the Banco Bradesco, but just to sort of, you know, close out this great conversation, super useful, you know, any closing remarks that you wanna leave, leave the audience with, it would be, would be fantastic. So-
I just, you know, as those of you who've been following the payment space for a long time, like I have, I have never been more excited about the opportunity in payments, and in particular about the role that we play in such a multidimensional, innovative, and robust space. And I, you know, it's clear that while competition is fierce, competition makes us better. And I think the best is yet to come.
The best is yet to come is always a great note to end on. Thank you very much.
Thank you, Ashwin.
Great. Thank you.
Thank you for having me.