All right. I think we can get started. Thanks, everybody, for joining. My name is Tien-Tsin Huang. I follow the payments and IT services sector, super excited to have Mastercard with us, Michael Miebach, CEO. I was just talking to Michael, I think we haven't had you on stage here, you know, before. I've always respected Michael a ton. He started this transition. We've seen a lot of change on the payment side from a leadership perspective. You have big shoes to fill with Ajay. We know that. You've done an amazing job in a short period. I was really excited to catch up with you. Thank you for being here.
Thank you for having me. It is exciting to come out in person. This is indeed the first time. You know, when you, when you think about when I took the role, 3 years ago, President initially and then CEO, this was 2 weeks before US lockdown. There was a lot of reasons not to be here. I'm happy I'm here now.
I know. I know. I was thinking, I remember sharing the story with you coming in at that time, not easy.
Yeah.
Here we are and things have been doing great. I thought we'd start with that, if that's okay. You've been in the seat for a couple of years now.
Yeah.
We've been through a lot of different things and themes, and we even have, you know, looming recession, that kind of thing. So-
Right.
Tell us about the journey. What are you proud of, accomplishments?
Right.
What are some areas of improvement in your mind?
Right. No need to go through the journey of the last three years on top-line events. We're all aware. When I stepped into this, the immediate ask was by our customers, by our investors, okay, how do you deal with a situation where your revenue gets immediately impacted in a rather severe fashion? Crisis response, meet our customers where they are, tweak investment appetite and expense management to appetite in the market, be agile and all of that. In a leadership transition, that removed all other priorities that might be there post our leadership transition. It was just simply let's just get on with it. I think that first year was pretty good.
In 2021, when we looked ahead, we felt there's enough line of sight to give you all a view of how we see the next three years play out. November 10, we articulated our three-year performance goals, and we took our strategy, longstanding strategy, of focusing on the core payments business and growing that and diversifying that and specified it out a bit because we needed very particular focus in post-pandemic recovery.
Focus on, you know, those priorities. We keep talking about them all the time like a mantra. That's by design. Expand in payments, extending our services, and then embracing the new network opportunities that are out there. If I take that as a scorecard, just to answer your question, is, in terms of what's going well on the core payments opportunity and card-based payments, accelerated secular shift, we were there to take advantage of it.
You've seen the wins and that's, you know, a lot in that space. That's looking good. On the new flows, where we said, where else in X payments do we need to be? Where do we want to be? We were very deliberate to call out four flows and said, "This should be a combination of target market expansion and spaces where there is somebody that's willing to pay for a problem to be resolved for them, and our tools being available and relevant to solve those problems." You know, we call it commercial POS, accounts payable, bill pay and disbursements and remittances. That scorecard, pretty good, particularly on the card-based side, tremendous momentum because nothing needed to be invented. We didn't really need to convince customers.
Some of the longer term stuff like B2B, accounts payable, that is just a longer game. I think fundamentally looking good on the scorecard side. Service has been tremendous.
Services carried the day through the initial days of COVID, but it keeps being a massive differentiator for us. It's a unique portfolio. You take all of that. I think I'm obviously biased, but I think it's a pretty decent scorecard.
Sure.
for the last two years, considering everything that is going on. In all of this, what really mattered was continuous agility. Because we thought we're through COVID and then Russia happened. We thought you're through that, then, you know, banking crisis comes along. Agility and culture matters. Last year, we spent some time to reset our culture statement, you know, with a lot of focus on speed. The headline for us on culture statement is create value, obviously, grow together. Now, that is maybe less obvious. This is co-creation with our customers, and then it's move fast. Move fast because that's what's happening right now, and then that's how we're winning with fintechs and so forth. Overall, more work to do.
always, this work never ends, but the tailwind plays in for us and remain agile because the next thing is for sure gonna happen, whatever it might be.
Yeah. No, speed matters, and it does feel like you're moving a lot quicker and the market does demand that.
Yeah, correct.
Before we get into some of the frameworks of what you just laid out, let's talk about the macro for a second. I know you have a great view of the consumer and business spending, et cetera. What can you tell us if you maybe walk around a little bit? Is there anything to learn or share in terms of health of the consumer?
I mean, we are in a unique position to feel the pulse of the consumer around the world. We have a good part of the economy represented in our data. You know, the headline remains, if you just look the last numbers that we shared with you guys, the consumer is remarkably resilient. Would we have expected that 6 months ago? Well, certainly a lot of views, it keeps happening quarter after quarter.
If you look across the world, the story is remarkably similar. United States, you see solid growth, some recent moderation, you know, tax refunds, gas prices and so forth. Europe has been surprisingly outperforming. You know, the mild winter I think has helped. That is solid growth out over in Europe. That's looking good. Latin America, similar situation. Brazil is showing strength. That's a large market for us, so we love to see that. Asia, we spent a bit of time in the last earnings call on Asia talking to you about China, and there is still a cross-border recovery opportunity in China. You know, the outbound is up, you know, around 65% versus pre-crisis level. You have the inbound at under 45%.
That's tremendous opportunity. South Korea is also doing well. ASEAN is doing well. You look around, I'm leaving for the Middle East tonight, and if you look at consumer spending in the Middle East, that is strong. There isn't really dramatic difference, but there's a few unique events by different parts of the world.
You, you just referred to it, Tien-Tsin, when you referenced the banking situation. That's a particular US, particularly pronounced in the US now. We obviously had some wobbles in Europe as well, and there's a debt ceiling conversation. We have to be vigilant. That whole point about agility and reacting that I just mentioned earlier, it's not stopping. More of the same happens. We just keep our three strategic priorities in mind, but keep the expenses as flexible as possible because you never know what's gonna happen going forward.
Yeah.
That's the landscape.
Good. No, it's important. Look, stability's been happening there. We're definitely watching what's around the corner.
Right.
You know, the like I said, the pillars of Mastercard are very well known and sensible.
Happy you say that.
you know, Again, it's a tech conference, pretty big audience here.
Right.
I know I asked you the question moving away from payments a little bit, Michael.
Right.
around generative AI on the earnings call, just to mix it up a little bit.
Right.
It is a big topic. People have asked me to ask you about it. Seems like a wealth of opportunity given the data that Mastercard sees to take advantage of this theme of generative AI. How do you see it sitting in the CEO seat?
Right. You know, one might expect, oh my God, large language models are coming, so this is like a big revelation and all of that. Well, there's some novelty in that, but, you know, AI's been central for our product set and our services set for the last decade.
Okay.
Including generative AI. This isn't kind of the latest insight by anybody. We use AI for our products and services, what we expose to our customers, particularly on the fraud side, AI models that they. What do they do? For example, they figure out, is the transaction that Tidjane has just made a genuine one? How do we avoid false positives in fraud models for us and for our customers? Longstanding practice in AI. We use it internally as well as a optimization tool, as a productivity tool, for example. Everything is known in Mastercard. How do we expose that to our sales force in the best possible way? Content generation is what you would expect generative AI is used for. I'm not putting it to the side as in we've been there, done that.
It is not new. It's a muscle that has been trained. The message to our employees is, we have to lean in. We've gotta see where this is going. We have to be ahead of the curve, we continuously invest. We made a few investments in acquisitions in the AI space with Brighterion. That was a little further back. We just bought Baffin Bay, and that is a cybersecurity company that's using AI in a big way. Leaning in. One has to always remember, you know, our brand's the... our brand, the interlocking circle stands for trust. It stands for security. We're not just a tech company. We're a tech company plus. When this transaction happens, you can rely on it.
How do you, how do you ensure that in a world of AI-driven models? Explainability. Why does the model make the decision that it makes? How about biases and so forth? We engage with a set of companies, like-minded companies around to make sure that responsible AI is the focus. We raise our voice to that and to our employees. We have said, "Experiment as you like. Don't do it in production. Here's the guardrails." Positive opportunity there, and we will be there.
Well said.
We have to.
No, well said. I think, yeah, dial tone quality of payments is big, but the governance behind it is significant, so you can't.
Right. Right.
Can't mess with that. Okay, good. Thanks for sharing that. Let's get into your strategic priorities and think about payments. You mentioned wins, and I feel like I'm always asking you, Michael, about why does Mastercard win?
I love that question. I really
Well, I mean, like I said, it's.
Who doesn't like winning? There's a good set of answers to that.
Yeah.
first of all, we put focus to try to win what matters to win and not to win everything, because the world is very large in payment. You could go into all sorts of directions. it's very focused wins that we have.
Selective wins.
Exactly. Exactly. You know, some of the recent examples, I think I gave you actually that answer when you asked the question, last time, is it just is still so top of mind, and it happened right here in Boston, Citizens.
Yep.
The Citizens win is a bit of a reflection of our strategy. Earlier, we had talked about payment services, new networks. The proposition here that we made is we have a multi-rail offering on the payment side. We have a unique set of services, and we have an open banking asset that is particularly geared to banking connectivity and banking solutions in the United States. That is a truly unique portfolio. You gotta have the right solutions, but that still isn't the answer. Solution selling is great, but you have to do it at the speed of your customer. you know, where are they going? What do they want to do?
What I've heard more recently, particularly out of the fintech community, but increasingly so out of financial services, out of banks and so forth, is there's all this complexity and all this choice that you bring. We love simplicity. Coming down to simplifying down the solutions in the context of the customer, driving for their customer outcome. The Dynamic Yield acquisition, it's about personalization in the end. We can say to the customer, we can guarantee a certain outcome to you. Right kind of set of solutions, working at the speed of the customer and making things fairly simple to them because our business is not necessarily their business. They have a different thing in mind, and we are an enabler.
I think that, all of that together, in the end, focusing on the customer outcome and not having a financially oriented cost optimization conversation is the key.
How about serving fintechs? You know, serving fintech is different than serving traditional banks. You mentioned-
Right.
Citizens. It does feel like you've had some good wins on the fintech side. Apple Card is a good example.
That's a pretty good example, yes.
-of one. What's the differentiation there, Michael?
Right. You know, they. These are two different segments but go around the house. Government, different segment yet again, retail and commerce and so forth. There's a set of segments we have defined, and they all have somewhat different characteristics on what they're looking for. Back to what I just said on products and services, they do need different types of services. Fintech, what was particularly important on fintech is they come to us oftentimes for a path to scale.
Particularly the smaller ones, they come to us for that reason. Neobanks, they wanna, you know, have a multi-geography expansion strategy. Pick a few ones of those in Europe, like an N26 or so, they're now cutting across the continent.
Take a Neobank, one of the largest neobanks in the world, they wanna grow up beyond Brazil.
Yeah.
which they are actively doing. Path to scale and speed matters to these people. I think that is some of the one of the key differentiators here. This sounds like we help them get better, but yet a really important part about working with fintechs is small and big is they make us better as well. Because their focus on consumer experience is much, much elevated versus what we traditionally have been doing as an industry. Look at the Apple Card experience. I mean, this is digital first. It's amazing. It's a digital first program now for us around the world. So this goes both ways, and it's a very important part of our customer relationships. Not uniquely better, but an important element. Been a tremendous growth driver.
That's where a lot of the growth in payments comes, and they elevate the whole ecosystem as well.
When you think about acceptance solutions that are created by these folks, et cetera. I love banks, I love fintechs, I have to love them all.
Sure.
I do that.
You know, driving acceptance, you mentioned it there, Michael. So it feels like every year we're talking a bigger and bigger acceptance number.
Right.
both in developing as well as developed worlds. Is there more expansion opportunity from an acceptance standpoint?
We could have sat here five years ago and had exactly this dialogue. I think I knew you by then, five years ago. I was just in the product role.
We were around about somewhere in 50 million acceptance point at that time.
It feels like a huge number. Nothing, there is no other payment, no other industry really that has that kind of reach in payment other than the networks. Would I have guessed it's 100 million 5 years later? No. It is, and we just announced that. As you know, in the last Earnings Call, it's 102 million acceptance points. There is this aspect of the value of the open loop system. The larger it gets, the more people see benefit in it. Therefore, the answer is very clearly yes. There's a demand for ubiquity and scale, predictable experiences to consumers go to as many places as you can, and there's a similar reliable experience. That's really the value proposition.
You have to have the tools to enable that. One is, would people like more ways to pay? In a simple and safe way, yes. How do we create that? Contactless, that's a really important one. On the contactless side, we're now I think like 58% of all switched in-person transactions are contactless. Even Germany-
has now accelerated rapidly around contactless. Take things like Tap on Phone. It's probably the first setting I'm sitting in in a long time where there's no phone on the table.
Yeah.
If there were one here, I would have pointed to it and said, "This could be an acceptance device." Tap on Phone started off as a certification and all of that. Today, this is reaching a point where on Android you have some of the largest players like Stripe engaging on it. You have Apple with Tap to iPhone, which is now coming to life. We took that whole proposition and put it into our Cloud Commerce, cloud-enabled solution, which is now accelerating the whole thing. Imagine where this could go. Any phone in this room could be an acceptance device. Then you go forward, and you take this into, you know, with tokenization technology, any device could be a connected device and enabling commerce. There's just technology there's demand there, and I think it's a tremendous opportunity for continued growth.
Yeah. No, agreed. given all this-Acceptance and-
Right
... a lot of payment credentials out there, Michael, I can't not ask you around regulation as well. What's happening there in the US? Nash, I'll let you, let you answer. We get a lot of questions on Reg II.
Right? This leveling of the playing field within online debit, which seems like a big opportunity for Mastercard. Love to hear your thoughts. Again, sitting in your seat, sitting across the table from regulators, what are you hearing?
The first thing to say is that at least from my perspective, from our perspective, payments has never been more competitive than it is today. If you look at in terms of locals, local systems, local payment schemes, government-owned systems, it's a plethora of offerings out there. Some of the differences between these two come to reach. Some of them are international, many more are domestic. With that landscape, you're also seeing, and this is enhanced through COVID, where the payment industry kept the world going, a lot more government interest. Government interest oftentimes comes with regulation. We have the whole post-pandemic recovery aspect, inflation, and so forth.
Regulators are looking at the payment industry as well and saying, "This is yet another lever that I can look at in my toolset on how I steer my economy." There's interest, there's focus. We welcome competition, regulation that creates for a level playing field and welcomes competition is generally a good thing. It's also actually a helpful thing for newer technologies. Think about blockchain-based technology. With regulation, it would probably scale faster than in a world where it's unclear where regulation is going. We're positively disposed. Reg II very specifically, I mean what it does is two unaffiliated networks on a card-not-present transaction. Okay, July, is the... We will be ready, no question. Compliance is always important and is non-negotiable.
If you look at that and say is it the opportunity is a risk, I don't have a crystal ball here to see where this is gonna go. The focus on cybersecurity has been our strategy for the longest time. We have a really unique portfolio. We're investing in the latest technology always. Not every other competitor has been doing this.
Yeah
... out there. This matters particularly for online transaction safety and security. This is where this regulation is hitting. We should be very well positioned. Well, our team is looking at it as an opportunity. We gotta play it and see where it goes.
I mean, there's been so many waves of changes and threats. There's a lot of talk about disintermediation, right? During the pandemic with crypto.
Buy now, pay later
Buy now, pay later, exactly, was a big theme. Crypto has definitely faded, almost a bad word to talk about now these days. Of course, we've overcome that. We do get questions beyond regulation, right? Around Pay by Bank. You mentioned open banking. I know FedNow in the US gets a lot of attention with that coming.
With real-time payments. Same question. How do you see Pay by Bank, FedNow?
Right.
How does that disrupt or potentially enhance things? I know fraud is very difficult. It seems like opportunity, again, for Mastercard.
Right.
I'd love to hear your thoughts on it.
Yeah. When it comes to alternative payment solutions of all kinds, they could be a competitive threat. They could disintermediate us, if we were just to sit there and do nothing.
Emerging technologies though, we spend a lot of energy in trying to decipher for our customers and our partners what is a relevant solution that solves a problem, let's say, of small business. What do we have to invest in so that we have the right kind of solution set for our customers? We spend a lot of energy in evolving. If you look at the diversification of the Mastercard business over the years, it proves that. You know, we're not just about card payments, because if we were, we would've probably been disintermediated by now.
Right.
We're not. That's been a long journey. When you look very specifically at some of buy now, pay later, we took the idea and said, "This is a great idea." Is my son actually gonna use a credit card? I don't know. He's 17, so he might wanna pay in a different way. That's fair enough. What is difficult is that this, you know, that experience is not repetitive and predictable because it only happens at, whatever, 15 large merchants, and then for the rest it's something else. We build it into the network. You all know that, and that is now out there as Mastercard Installments. That was one way to deal with that. FedNow, this is a, in the end, it's a push payment system.
It's getting money from A to B, where you don't rely on the wire system. That's fundamentally a good thing and very common in most countries and not here. That's that is fundamentally good. The proposition that Mastercard Debit brings, to make such payments, it comes along with disputes resolutions, with liability shift and so forth. The technology to get money from A to B isn't a proposition as such. It's an element. Here we come along and say it is the technology, it's the franchise that comes with it. It's the safety, security, and all of that together. We will compete.
At the same time, we have a stated multi-rail strategy for years. If you look what you can do with account to account flows, Pay by Bank, the Pay by Bank solution that we have put out there with Chase is a good example. This is target market expansions. It's flows that are not carded, where we're using our open banking technology to say, we solve a problem for a bunch of smaller billers that are trying to bill their customers and don't know if there's a balance on the account. There's ways to make money out of that, which I think will scale. In the end, the fundamental underlying point is, businesses/merchants, as we call them, will wanna have reach, and consumers want something that's predictable and safe. The two have to go hand in hand.
If you have a piece of technology that only gets reach, but it's not a good experience, for the consumer that matches with what other alternatives they have, it's gonna be hard to scale it. We'll see where it goes. We lean into real-time payments anyway and, find the right, the solutions that we believe actually will scale.
Yeah. There's a lot of opportunities to scale, right, beyond person to merchant type flows. I think you led with it, Michael.
Right.
You're going into commercial and, you know, remittances. There's a whole host of different new flows. Can you just... B2B. Bill pay. You know, when I think of Mastercard with RPPS, there's a lot of things that you did early, right, to go into these areas.
Right.
which are now becoming more mainstream, maybe I should say that. I'm curious, you know...
Right.
Again, same question. How are you prioritizing that? What should we be watching?
Right.
in these new flows?
You initially, when in 2017, we said, "Okay, there's a massive volume of flows beyond cards.
Yeah.
It was an outrageously large number, $235 trillion. We said, "Okay, fine. How do you eat an elephant?
Yeah.
One bite at a time. We called out very specifically these four flows. Let me just call out, take two of them.
Please.
Just talk a little bit about that. Commercial POS, that's a set of flows that are happening between commercial entities, sometimes between consumers and commercial entities. You can go after them through different tools. We have the whole tool set in our multi-rail strategy. A good chunk is cards. We don't have to go and invent something. Just simply focus and adjusting our solutions across T&E, fleet card, purchasing cards, VCNs, small business cards, you name it.
There's a full menu on it. This is a tremendous growth opportunity. We gave you a number in the last earnings call, 21% year-over-year. It's there. With consumers experiencing a very, you know, a much increased digital experiences in their life, the world is getting more digital for everybody as they go, and go to their job, and suddenly that is not digital. It's kind of like, why? There's appetite for these kind of solutions as well as all of our lives are changing. That's a tremendous opportunity. Disbursement and remittances is another one. We bought Transfast a few years back.
Right.
It's been a tremendous asset. This is a fast-growing space. Here again, you know, I think we have a unique set, we have a unique reach in terms of cards, bank accounts, and mobile wallets. We don't need to invent anything either, and the demand is there. These are two sets of flows that we have not traditionally been in. This is not P2M stuff, but we have what it takes, and the numbers show it.
Yeah. You know.
The account to account part, where you go beyond cards, that's a little bit of a longer play. The B2B accounts payable, that's a two-sided network you have to build. It took us kind of like 30 years to build the P2M two-sided network. That will take a little longer. Do I have conviction that there is, you know, problems to solve, and we have a good set of assets for that? Absolutely. We will keep at that.
Yeah, no. I mean, I think I always joke. I think I wrote a paper for my boss around B2B payments 22 years ago.
Yeah.
The numbers were.
Were you largely right?
Well, I think we can basically copy and paste it and still say it's, you know, big opportunity. Still relatively under-penetrated, it does feel like it's moving with some momentum now.
Right.
-because of better software and Mastercard working with a lot of different, you know, providers. It does feel like learning from this whole software theme, which is my. I know we're getting out of time here. I wanna make sure we hit this. Learning from a lot of these software companies that are going after payments, Michael.
Right.
Services.
Value-added services. Expanding ARPU, in the words of software-
Right.
is becoming more important.
Right.
Now you're disclosing value-added services specifically.
Right. Correct. Correct.
You know, for Mastercard. For those that are less close to Mastercard, this does feel very important in terms of.
It's hugely important.
an opportunity to monetize, whether it be the data or the transactions or the scale or the relationships with banks, non-banks, merchants, you name it. Just tell us a little bit more, why is Mastercard be a winner on this whole value-added services initiative?
Right. First of all, how do services matter for us? Revenue growth enhancement. This is separate revenue pool.
Right.
It's diversification of revenues. Separate pools, so they come from a different source. Not all of them are transaction related.
It's a diversification game for us. You know, compared to other providers in a similar, you know, similar space like ours, unique service set helps us get into the payment transaction, because we make them safer in a better way, we make them smarter and so forth. It's all interlinked. Services matter for payments and vice versa. From a growth perspective and how this matters into compared to SaaS companies and other service companies, if you just look at the competitive landscape, they're like, who's out there that is competing versus us and how we are positioned? We're positioned very uniquely, right, between payments and value-add services. We're neither nor. We have the data that makes our services enhanced from day one. Then you look at the various players in, on the services side.
You have loyalty companies, you have managed services companies, you have consulting companies. We do all of that.
We provide that to our customer set as a package solution as I mentioned earlier. The go-to-markets, we're getting better to take all of that into platform-based solutions. It's much easier for us to deploy that through cloud enablement, service enablement, different type of connections that are not relying solely on payments. In the end, with this strategy, we can sell services to payments companies, and we can sell payments to services companies. It's a segment diversification strategy at the same time. What do we have? Two big areas, cyber.
Whole range of cyber solutions from prevention, detection, identification technology. I could go through the whole menu, but I will not do that now. It's just a large menu. On the data insight side, we've got loyalty solutions. We have data analytic solutions, consulting, marketing services, and as of late, personalization. Personalization particularly an interesting one if you have combination of services and payments. In the end, what our customers want to do is offer to you the right kind of payment offer and purchasing opportunity at the right channel. How do you do that?
Right.
Personalization is the way to take all of this technology and to deliver it to you at the same point. That is the services for us. It's very unique, it doesn't really play on the competitive landscape of the services side or the payments side. I think we're pretty much a unique player there and it's been a tremendous story. More to invest, you will see us investing in that continuously.
Yeah. Lots going on, obviously, within payments in the macro world. You're dealing with the new
initiative that we can hold you accountable for because you share the data, which is great.
Right.
Thank you for that. We'll end on this in the last minute or so. What would you rank as most exciting for you from a technology perspective, Michael?
Right. I think this point about personalization, it points to a world where we are gonna see a lot more social and immersed commerce happening. This will be entirely new environments. Straight out of your chat, you will buy something and the offer will come.
I find that personally very exciting, that comes along with the physical and digital world merging into one as well. That whole space of smarter experiences that people will want to use and businesses will want to use, there's so much technology in there, but it's not just technology. There's trust questions in that as well. That's a big one. I think the whole point, the whole space of blockchain-based technology is gonna be very interesting. This is helping to connect people that don't know each other in businesses. It's trust enhancing. The crypto winter hasn't helped.
Yeah.
I think we were gonna find a way through that with government providing better guardrails. That is for sure exciting. We touched on AI, it's a more fundamental technology. What will AI do? Generative AI in combination with 5G, 6G, cloud, edge computing. Back to the first point about intelligent experiences, you can deliver them anywhere, any which way you like through that foundational technology. That's a little bit of the triangle on the technology side that I personally find very exciting and our chief innovation officer gets really worked up about.
Yeah. Man, I appreciate you taking a product first view on-
Right.
on all of this, Michael. Well, thank you for the time. Always enjoy chatting with you.
Yeah.
I know you're very, very busy. You have a lot of international travel coming up ahead. Safe travels to you as well.
Thank you.
Thank you.
Thanks, Vijay.