Good morning. My name is Elodie, and I will be your conference operator today. At this time, I would like to welcome everyone to the Mastercard Incorporated Q3 2026 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. Please only press star one once to queue up for a question, as pressing star one multiple times may affect your position in the queue. If you would like to withdraw your question, press star one again. Thank you. Mr. Devin Corr, Head of Investor Relations, you may now begin your conference.
Thank you, Elodie. Good morning, everyone, and thank you for joining us for our third quarter 2026 earnings call. With me today are Michael Miebach, our Chief Executive Officer, and Ling Hai, our Chief Financial Officer. Following comments from Michael and Ling Hai, the operator will announce your opportunity to get into the queue for the Q&A session. It is only then that the queue will be open for your questions. You can access our earnings release, supplemental performance data, and the slide deck that accompany this call in the investor relations section of our website, mastercard.com. Additionally, the release was furnished with the SEC earlier this morning. Our comments today regarding our financial results will be on a non-GAAP, currency-neutral basis unless otherwise noted. Both the release and the slide deck include reconciliations of non-GAAP measures to GAAP-reported amounts.
Finally, as set forth in more detail in our earnings release, I would like to remind everyone that today's call will include forward-looking statements regarding Mastercard's future performance. Actual performance could differ materially from these forward-looking statements. Information about the factors that could affect future performance are summarized at the end of our earnings release and in our recent SEC filings. A replay of the call will be posted on our website for 30 days. With that, I will now turn the call over to our Chief Executive Officer, Michael Miebach.
Thank you, Devin. Good morning, everyone, and thank you for joining us. Three quarters into the year, our performance continues to demonstrate the strength and consistency of our business. Net revenue growth was up 14% and net income up 18% in the third quarter on a year-over-year, non-GAAP, currency-neutral basis. While there continues to be economic and geopolitical uncertainty, consumers continue to spend, businesses continue to invest, and commerce continues to expand. The economy, our overall business, and our network have a resilient backdrop. At its core, our network helps people and businesses transact and participate in the economy, and our advantage here is clear: a diversified business, a trusted global network, and the ability to help our customers grow. We're building on that advantage by expanding the reach and utility of our network.
We now have more than 200 million acceptance locations and 300 million more digital access points around the world. That is unmatched. On a year-over-year basis in the first half of 2026, merchant acceptance is up 20% and growing. This includes initiatives like our Pay Local program, which expands acceptance by embedding cards into local wallets, and Tap on Phone, a smart acceptance solution. We are not only expanding how merchants accept payments, we are also finding valuable ways to get more Mastercard credentials to more people. That spans the full consumer spectrum, from premium offerings for affluent consumers and business owners to products that give people their first access to the financial system. There are huge numbers of financially underserved people around the world. Our new Essential Debit product builds on our longstanding work to help open the door to broader financial opportunities and economic resilience.
We have signed 15 Essential Debit programs this year across seven markets. These programs give our partners tools to address up to 70 million unbanked adults in those markets. This means more people have a new payment option, our cards, that offer protections and broad acceptance not offered by local payment options. We are seeing early traction across a range of partners. These credentials are now issued within Airtel's scaled mobile wallet ecosystem, launching next quarter in Nigeria, and by Financoop, which supports a large network of cooperative institutions in Ecuador. This year, we have already won 100 new affluent credit and debit programs and launched more than 25 World Legend programs. Mastercard affluent portfolios have higher engagement and higher cross-border spend. In fact, our affluent spend is growing two times faster than overall credit.
This quarter, UBS launched a super premium, invitation-only Mastercard credit product in Switzerland's highly competitive affluent market. It includes our concierge service and frequent traveler benefits. Core to our programs is making a real connection with people and offering a product that appeals to their needs. That focus on meeting new people where they are led to our new partnership and co-brand program with Beast Industries. This program spans consumer and small business creator cards. With more than 1 billion followers across social media, MrBeast is one of the most influential creators in the world. That work is not just about clicks. It is capturing the cultural power of digital communities and driving economic and social opportunity. Together, we will connect creators and their communities in new ways, bringing Mastercard scale and capabilities to the next generation as their financial lives evolve. What does all of this tell us?
Mastercard products are in demand, and that demand continues to grow. More cards and more acceptance points drive more transactions and data, strengthening the power of our network and the value we deliver. Across over 200 countries and territories, every market and region is unique. We are winning, leveraging our global capabilities and that local expertise. Let us look at a few wins from this quarter. In the Nordics, we renewed our partnerships with Handelsbanken and Swedbank, following a previously signed exclusive agreement with SEB. These wins include services like fraud detection and loyalty, strengthening our position in one of the most advanced digital payment markets. At the same time, we renewed DSGV and DZ Bank, two of Germany's largest banking organizations. Let us put that in context. These renewals deepen our relationships with two of the leading credit issuers in Europe's largest economy.
They position us to capture the substantial secular opportunity in Germany. In China, our teams on the grounds are very busy building and solidifying our position in the local market. This strong foundation for long-term growth is rooted in the growing acceptance and signing issuer deals to make Mastercard the preferred brand. This includes new programs with China's top 15 issuers. This quarter, we added to that with the new World Hilton co-brand with Bank of Communications and a consumer debit deal with Bank of China, who alone serves hundreds of millions of retail customers. Two fantastic deals to capture domestic and cross-border spend and deliver value-add services and solutions in the market. In the U.S., we secured a major win with Pinnacle Financial Partners. The newly combined bank's entire issuing portfolio will move onto our network starting in 2027.
This includes consumer credit, debit, small business, and commercial cards. Finally, moving to India. With a large domestic scheme, this is one of the world's most competitive markets. This quarter, we signed an important small business deal with HDFC Bank. It is India's largest private sector bank with nearly 10,000 branches, over 100 million customers. This deal includes value-add services and solutions and is expected to add 3 million cards to the Mastercard network. Beyond small business, we see a sizable opportunity across commercial payments, including invoice payments. Our work in invoice payments helps transform dated, cumbersome accounts payable processes into automated digital workflows with virtual cards. We focus on bringing more virtual cards to market and embed them directly into tools businesses already use. Tungsten Automation is adding Mastercard's virtual card technology into its automated accounts payable offerings.
A leader in intelligent document processing, Tungsten serves more than 25,000 customers. This will enable their enterprise customers to generate virtual cards seamlessly, and with that, accelerate supplier payments, reducing cost, friction, and risk. That is tangible value. We have seen those results play out. For example, a large U.S. retailer consolidated more than $100 million in supplier payments using Mastercard virtual cards through our partner Coupa. This one decision reduced the number of suppliers that needed to be onboarded, saving an estimated $35 million in onboarding costs. That is valuable savings for just one of their many clients, and Coupa is one of many partners working with us on improving B2B supplier payments. There is similar value in the travel vertical, where today we partner with eight out of the 10 largest players to capture the secular opportunities.
After that, our expanded relationship with Checkout.com in the UAE, and you have another channel to bring Mastercard virtual cards to travel businesses at scale. The aggregate of our travel-related wins from just this quarter is expected to generate more than $20 billion in incremental spend on our network over the lives of the agreements. These wins reflect our differentiated capabilities that address specific customer needs, but also create opportunities to deliver more value through value-added services and solutions. Many of our services directly support growth in our payment network. Our analytics, marketing, loyalty, and consulting services help clients acquire, engage, and retain customers while building healthier portfolios and driving more payment activity. For example, through our strategic partnership with Qatar National Bank Group, we are deploying these capabilities across QNB's presence in more than 28 countries to strengthen customer relationships and drive growth.
American Airlines has one of the industry's largest airline credit card programs. We are supporting customer acquisition for its refreshed premium offering, the Citi AAdvantage Executive World Legend Mastercard. These capabilities, powered by our data, can deliver meaningful results. Across Mastercard marketing services campaigns on a global basis, our clients see an average incremental spend growth of 8 percentage points over the measurement period. As commerce becomes more digital and AI changes elements of payments, our security solutions are becoming more relevant. As a reminder, security solutions include fraud, identity, and cybersecurity. Our portfolio is carefully designed to help our partners protect the ecosystem, and we see demand across the board. This quarter, we added our extended fraud and identity wins with Standard Bank, Monzo, and Starling Bank.
Starling, for example, extended its use of Fraud Rule Manager, helping it respond faster to emerging attacks, reduce false declines, and protect the customer experience at scale. Within cybersecurity, we continue to scale one-to-one platform sales, but even more so new network products like our newly launched Digital Risk Protection. This capability helps organizations identify vulnerabilities in their own digital environments. After only a few months in market, it now serves nearly 800 enterprise customers. Additionally, our enhanced third-party risk offering brings together RiskRecon and Recorded Future capabilities in one solution. It helps identify, prioritize, and respond to risks before they become business disruptions. AI is not only changing the demand for our security solutions, it's also changing how commerce happens. The foundation I described earlier, broad participation, global acceptance, and trusted capabilities, positions us to help shape the next evolution of commerce.
That includes agentic commerce, where a buyer uses AI agents to discover, select, and purchase a product or service. There are two forms, machine-to-machine and traditional e-commerce. Combined, they create significant opportunity for Mastercard, from more transactions to new B2B carded payments as businesses utilize agents. Eventually, an entirely new addressable market of micro-transactions, all the while creating more opportunity for our services from fraud to longer-term potential in insight and loyalty. Consumers are already beginning to use agents to discover and purchase products. We expect that trend to build as holiday shopping ramps up and to continue well beyond the season. It is still early days, and the numbers are not yet significant in the grand scheme. As the AI agentic assistants have emerged, agentic transactions are ramping up at impressive weekly growth rates. We're now seeing the early stages of consumer adoption.
For this type of agentic commerce to function at scale, we need four things. Trust in the payment, the agent, the ecosystem, and ubiquitous reach. Mastercard has built capabilities for each of these four. For trust in the payment, tokenization is embedded in Agent Pay and backed by the franchise rules everyone expects today. For trust in the agent, Agent Pay ensures agents are verified and authorized by the buyer and that the merchant and issuer are aware. For trust in the ecosystem, we bring transparency and continuity through the payment flow. Verifiable Intent captures the buyer intent, and our recently launched Agentic Trust Intelligence solution helps banks and merchants evaluate transactions initiated by any AI agent. That allows these transactions to occur wherever Mastercard is accepted. That is the unparalleled and growing reach I talked about earlier.
At the same time, we are helping merchants ready themselves and be more discoverable to agents with our new Agent Connect solution. Many partners are putting all of this into practice. For example, Shopify, through Shop Pay, is using Agent Pay and our network tokens to make agentic payments more secure and seamless by preserving the integrity of the consumer's credential end-to-end. Shop Pay is already available on multiple agentic platforms with more to follow. With OpenAI this quarter, we signed a broad strategic partnership that includes the use of Agent Pay and goes well beyond. Our agreement establishes collaboration across payments, joint services growth, and AI transformation. We cannot forget the other technology that is part of virtually every conversation, digital assets and stablecoins. Our customers and partners are continually thinking about how they might use the technology in their offerings.
To be useful, digital assets need to work with existing financial and commercial services. That means enabling customers to connect digital asset capabilities with the accounts, payment systems, and money movement experiences already in use. That is why we acquired BVNK. Through BVNK, we are expanding the infrastructure that connects stablecoins with traditional payment and money movement experiences. Financial institutions and fintechs today struggle to offer both fiat and stablecoin accounts, creating the risk of customer deposits moving to competing stablecoin accounts. Our first combined Mastercard BVNK product is the Mastercard Global Money Platform, enables financial institutions and fintechs to offer accounts where customers can hold, convert, send, and receive across fiat currencies and stablecoins. Mastercard Move is also integrated, bringing its 17 billion endpoints to the platform. This enables businesses to pay out stablecoin balances directly into recipients' local bank accounts.
Nuvei and Marqeta will be among the first customers to integrate the platform, with more partners to be announced soon. All of this is complementary to our existing stablecoin offerings such as crypto co-brands and stablecoin settlement. Stepping back, the quarter demonstrates the breadth and consistency of our strategy. We are expanding the reach and utility of our network, solidifying differentiation. We continue to win important relationships and deepen those relationships with differentiated services, growing payments, and protecting the ecosystem. We are extending our trusted capabilities into agentic commerce and digital assets. We are executing and delivering today while investing and solidifying our position for the future. With that, I will turn it over for the very first time to Ling Hai.
Thank you, Michael. Turning to page three, which shows our financial performance for the third quarter on a currency-neutral basis, excluding where applicable, special items and the impact of gains and losses on our equity investments. Net revenue was up 14%, reflecting continued growth in our payment network and our value-added services and solutions, with minimum impact from acquisitions and dispositions. These revenues were above our expectations, primarily due to the continued strength of our business and the timing of both services projects and payment network deals. Operating expenses increased 12%, including a one PPT increase from acquisitions and dispositions. Operating income was up 15%. Net income and EPS increased 18% and 21% respectively, driven primarily by the strong operating income growth in the quarter. EPS was $5.31, which includes a $0.16 contribution from share repurchases.
During the quarter, we repurchased $3 billion worth of stock and $648 million of additional stock through October 26th of this year. Turning to page four, I'll speak to the growth rates of our key volume drivers for the third quarter on a local currency basis. Worldwide gross dollar volume, or GDV, increased by 7% year-over-year. In the U.S., GDV increased 6%, with credit growth of 10% and debit growth of 1%, which includes the impacts of the Capital One debit migration. Outside of the U.S., GDV increased 8%, with credit growth of 6% and debit growth of 10%. Cross-border volume increased 11% globally for the quarter, reflecting continued growth in both travel and non-travel related cross-border spending. Turning to page five, switched transactions grew 9% year-over-year in Q3.
We continued to drive contactless penetration, which in Q3 stood at 81% of all in-person switched purchase transactions. This is up five PPT since the same period last year. In addition, card growth was 5%. Globally, there are now 3.8 billion Mastercard and Maestro-branded cards issued. Turning to slide six for a look into our net revenue growth rates for the third quarter, discussed on a currency-neutral basis. Payment network net revenue increased 11%, primarily driven by domestic and cross-border transaction volume growth as well as pricing. It also includes growth in rebates and incentives. Value-added services and solutions net revenue increased 19%. This includes a minimum impact from acquisitions and dispositions and now reflects the contributions from BVNK.
Excluding these impacts, the increase was driven primarily by growth in our underlying drivers, strong demand across consumer acquisition and engagement, business and marketing insights, security solutions, as well as digital and authentication, and finally, pricing. Let's turn to page seven to discuss key metrics related to the payment network. Again, all growth rates are described on a currency-neutral basis unless otherwise noted. Looking quickly at each key metric. Domestic assessments were up 13%, while worldwide GDV grew 7%. The six PPT difference is primarily driven by pricing and mix. Cross-border assessments increased 16%, while cross-border volumes increased 11%. The five PPT difference is driven primarily by pricing in international markets and mix. Transaction processing assessments were up 14%, while switched transactions grew 9%. The five PPT difference is primarily related to pricing and a favorable mix, partially offset by lower revenue from FX volatility.
Other network assessments were $285 million this quarter. Moving on to page eight. You can see that on a non-GAAP currency neutral basis, excluding special items, total adjusted operating expenses increased 12%, including a one PPT increase from acquisitions and dispositions. The growth in operating expenses was primarily driven by spending to drive the execution of our strategic priorities, including product innovation, geographic expansion, and continued investments in our technology. Turning to page nine, let me comment on the operating metric trends for Q3 and the first three weeks of October. Starting with Q3, switched volume and transaction metrics are generally in line with Q2 and remained strong. Of note, the sequential increase in the U.S. switched volume was primarily due to recent commercial wins. Looking at cross-border.
First, lower yielding intra-Europe volumes were down sequentially from Q2 to Q3, driven by the impacts related to a new customs fee in the E.U., timing of large retail promotional events, and lower crypto purchases in the quarter compared to last year. These impacts on intra-Europe cross-border were the primary reasons for the decline in card not present ex-travel sequentially. Growth in higher yielding other cross-border remained stable and slightly higher quarter-over-quarter. As we look to the first three weeks of October, spend remained strong with metrics generally in line. A few points to note. In the U.S., switched volume improved sequentially as we begin to see the lapping of the Capital One debit migration, the lift from recent commercial wins, and higher spend on gas.
As a reminder, the Capital One debit migration began towards the end of Q3 last year and continued through Q1 2026. Looking at cross-border, the sequential impacts remain predominantly intra-Europe. Growth in cross-border card not present ex-travel continued to see the impacts from two of the areas I noted earlier, notably the customs fee and a tougher comp due to higher spend on crypto purchases last year. The slight deceleration in cross-border travel was due to timing of holidays. Overall, underlying spend remains strong and consumers and businesses are spending. Turning to page 10, I wanted to share our thoughts for the remainder of the year. As mentioned, consumer and commercial spend was healthy in Q3 and so far into Q4. Our business fundamentals are strong, and we continue to deliver solid growth across both our payment network and value-added services and solutions.
These results reflect our winning strategy, strength of our innovations, diversification of our business, and our relentless commitment to serving our customers. This is all underpinned by a supportive macroeconomic environment with balanced labor markets, strong household balance sheets, and continued wage growth. To date, consumers and businesses have demonstrated resilience. There is heightened geopolitical uncertainty, which has persisted for some time, driving energy prices higher and putting more focus on monetary policy around the world. We will continue to monitor the situation just as we always do. Our outlook on growth for the remainder of the year continues to remain positive. Turning to our expectations. For the full year 2026, we expect net revenue growth to remain at the high end of low double digits range on a currency-neutral basis, excluding inorganic activity.
As a reminder, in Q2 earnings, we told you that our expectations were higher in the range compared to earlier in the year. Our full year remains in line with these expectations. We anticipate minimal impact from acquisitions and dispositions and a tailwind of approximately 1 PPT from foreign exchange. We also expect full-year operating expenses growth to remain in line with previous expectations at a low double digits range versus a year ago on a currency-neutral basis, excluding inorganic activity. We expect a minimal impact from acquisitions and dispositions and a headwind of 0.5-1 PPT from foreign exchange on a full year basis. As it relates to our expectations for the fourth quarter of 2026, year-over-year net revenue growth is expected to be at the high end of low double digits range on a currency-neutral basis, excluding inorganic activity.
We expect minimum impact from acquisitions and dispositions and a headwind of approximately one PPT from foreign exchange, primarily driven by the strengthening of the U.S. dollar over the past quarter. From an operating expense standpoint, we expect Q4 growth to be at the high end of low double digits range versus a year ago, again, on a currency-neutral basis, excluding inorganic activity. We anticipate a one PPT drag from acquisitions and dispositions, while foreign exchange is forecasted to be a tailwind of approximately 0.5 PPT for the quarter. On other income and expense, in Q4, we expect an expense of approximately $115 million. This excludes gains and losses on our equity investments, which are excluded from our non-GAAP metrics. Finally, we expect a non-GAAP tax rate in the range of 20%-21% for both the full year and Q4.
With that, I will turn the call back over to Devin.
Thank you. Elodie, you may now open the line for questions.
At this time, I would like to remind everyone in order to ask a question, press star and then the number one on your telephone keypad. Please only press star one once to queue up for a question as pressing it multiple times may affect your position in the queue. We will pause just a moment to compile the Q&A roster. Your first question is from the line of Harshita Rawat with Bernstein. Please go ahead.
Hi. Good morning. Michael, I want to ask about agentic commerce. A lot has been happening here, and it feels like there's a lot of patchwork of checkout options ranging from single-use virtual cards to wallets. My question is how important it is for you that Mastercard Agentic Tokens are being used as opposed to wallets or virtual cards. I know you have your own probability-based risk signals with Agent Pay now as well. How can you drive adoption for Mastercard Agent Pay? I know you talked about Shopify, OpenAI as well. Thanks.
Thanks, Harshita. Morning, everyone. This is an important question. Agentic commerce, first of all, we think is the next evolution of digital commerce. It went through a year and a bit, in terms of getting the ecosystem ready. There's Agent Pay out there. There are the solutions out there. You just listed an additional set of checkout ways that are out there. The ecosystem's kind of balancing out. When you think about what matters, what I said in my prepared remarks is the trust in the payment is key.
The trust in the agent is key. The trust in the ecosystem is key, and generally, reach is key. If we think that matters to merchants, that matters to consumers, altogether, I think this is the direction that the ecosystem is going into. It's also true, though, that not everybody's ready at the same time. There's a lot of patchwork going on right now, and I wouldn't call that solutions. It's kind of patching towards what is the golden goal here, and the golden goal I just listed. You have a protected transaction that works in the same way as consumers are used to and merchants are used to.
One of the things that need to happen before this to really take off is consumers need to feel comfortable. Use of Agent Pay and having registered agent is a key thing. The other thing is merchants need to be actually discoverable because then the other side of the transaction isn't really working. That's a piece that is slightly behind the first one. If everybody uses Agent Pay, that doesn't mean that every merchant is still discoverable. By the way, there are other solutions out there similar to Agent Pay, but it's not virtual cards. On the merchant's discoverable side, how do I get my product catalog as a merchant into an agentic experience that a consumer is choosing? That's the key thing. Our Agent Connect solution helps to bridge that one. We're kind of ready to take off.
It is in everybody's best interest to use Agent Pay and equivalent. We are not supporting solutions that take a one-time VCNs out there as you're fronting a transaction. That fundamentally breaks a transaction that is important from a consumer perspective. They made a choice. It's important from a rewards perspective, from a control perspective, and so forth. I think we're at this turning point where everybody is pushing in the same direction. We are very clear that fully tokenized all the way through agentic pay or an equivalent is the way to go. If we get this all right, it will truly be the next evolution of digital commerce.
Thank you.
Next question, please.
Your next question is from the line of Tien-Tsin Huang with JPMorgan. Please go ahead.
Hi, thank you. Great results here. Ling Hai, welcome to the call. I wanted to ask on just the outperformance and growth for the quarter and the two points of acceleration in revenue growth. It seemed pretty broad-based, but just want to maybe just give us a little bit more detail on that, anything that was more one time in nature, et cetera.
Thank you, Tien-Tsin Huang, for the question. Yes, if I look at the overall performance in Q3, it really speaks to the strength of the business, and it is very much broad based, especially in value-added services and solutions. I do want to point out, as you probably heard in my prepared remarks, there is also a little bit timing of services projects and also the signing of deals moving from Q4 to Q3. So that really means it is a revenue benefit for Q3. You will see a similar offset in Q4. But overall, we continue to see strength. The underlying business is very strong. Consumers and businesses are spending. The overall environment remains very supportive. Consumer sentiment is positive. So all those things are very good. But we also know there is uncertainty, there is puts and takes. But overall, Q3 is very strong and we are very, very glad about the accomplishment.
Thank you.
Your next question is from the line of Adam Frisch with Evercore ISI. Please go ahead.
Hi. Thanks for taking my question. Cross-border is still a little bit, still obviously strong, but I know there were some portfolio changes in recent quarters. Should we expect some modest acceleration there as you move forward and lap the comps, or are there some underlying trends that are having a larger effect? Michael, just a clarification. If there's a processor that is using a virtual card to facilitate agentic transactions, so if I put my Mastercard in this particular wallet and they use a virtual card to facilitate the transaction, are you not supporting that scenario? Thanks, guys.
Thanks, Adam. Let me take the first part of the question first. First off the bat, I would say when you look at cross-border volume at 11%, that is very strong. Not to also minimize the revenue side, cross-border assessment is 16% growth, so that's very strong performance. If we break it out a little bit, as you heard me talk about if you look at the cross-border card not present excluding travel, you're seeing a Q2 20% going to 15%, but 15% is also very strong, and I provided the explanations for why we are seeing a little bit of a downward trend in terms of the volume. Mostly it's intra, which is lower yielding. The other cross-border volume, which is the inter volume, remains very healthy, very resilient. As I have always said, we benefit from our diversification.
You can have impacts hitting in one segment, one geography, but we can handle that because we're diversified and also benefit from upticks in other areas. A great example this year is we saw some negative impact out of the Middle East, the GCC countries. We then see this benefit in terms of outbound from Venezuela, right? In terms of where cross-border travel stands, I alluded to the fact that, yes, the Middle East conflict continues to have an impact. As we look at the balance of the year, as we've told you before, we are expecting a level that's similar to the end of Q2, and that's what we see in Q3.
I think about the Middle East conflict, I think about the share shifts you mentioned, both are discrete and do not represent any fundamental change to our proposition. I think the underlying spend remains strong and we're very focused on driving cross-border travel. We have those services that's called Optimization Travel Rewards. We'll continue to do that.
What is important to note is that we will continue to be focused on giving our consumers the right propositions for cross-border, whether it is travel or non-travel.
Adam, to your clarification question on the agentic. Let me be very clear. What we are not supporting is VCN as a solution in between. That is not the consumer scenario that you asked. You said, "If you put your card somewhere into an agent as an agent-first solution or whatever it is," consumers do what they do, and it is their choice, and we try to give them many choices to choose Mastercard. A VCN is a processor decision that is a bridge to get ready for a fully tokenized transaction all the way through for a period of time. We are cognizant that this ecosystem needs to get there, no question about it, but that is not a long-term solution that we will support.
Thank you, guys.
Your next question is from the line of Andrew Schmidt with KeyBanc Capital Markets. Please go ahead.
Thank you very much. Hi, Michael. Hi, Ling. Good morning. Maybe we could just touch on the competitive environment in developing markets like India and Brazil, where there are entrenched A2A systems. The HDFC deal sort of piqued my interest, but there's been some interesting developments there. UPI pricing has increased. It seems like the markets might be broadening out a little bit. If you could just talk about positioning, any changes there, that would be helpful. Thank you so much.
All right. Thank you for your question. Let me just frame up the payment ecosystem to start with. Super competitive, and there is nothing new there. It has been competitive for some time. You have these wide ranges of competitors that are coming in, into payments and seeing the potential that we are seeing. If I go through some categories, before I find my way all the way to India, digital players, wallets, buy now, pay later providers have come in and, in the end, found a way to partner because we provide scale and protections and so forth. That is one angle on how we partner with new entrants. Stablecoin has been another kind of shift in the ecosystem. We have integrated that into our system to make datas available because we believe in consumer choice.
We partner with governments and central banks around the world, and we do that on financial inclusion. We do that on protecting their economies. There are so many ways on how we are engaged in these 220 countries and territories around the world. You mentioned India in particular. India is a somewhat unique situation, but not totally unique. You could draw some comparison to Brazil as well, where there are two large economies that had one particular issue that was not solved by the private sector, and that was financial inclusion with very large population sets where people do not have access. I talked about this in my prepared remarks, that we as the private sector and Mastercard in particular, is very focused on financial inclusion. So we are driving that.
It is true that in India, one of the most competitive and dynamic payments markets in the world, the Indian government has led the setup of UPI, which is a tremendous system and has brought a lot of people into the financial ecosystem, which is generally fantastic. This has grown to considerable scale, but if we go by reports, there are reports that are saying that the government is considering, the kind of owners of UPI are considering to have some additional fees in there that will, presumably, I cannot talk for them, but is really the interest of taking this amazing ecosystem that they have built and continue to fund it in a way that works for all parties as it continues to grow. So that is a decision that we fundamentally welcome.
We continue to engage in India very effectively with the government, with the private sector. We have, meanwhile, spent the time to strengthen our debit proposition, which competes in the market. Fundamentally, I see what UPI has done is bringing a funnel of people into the digital ecosystem that will grow. They will graduate to different sets of products, which will include debit and then eventually credit. There is so much opportunity in India as well as in Brazil, where we essentially pursue the same strategy. So it's partner and compete. It's a market where we are open to compete. Same for Brazil, and that is kind of the key aspect for that. Overall, I think no news on the India front. But the HDFC deal is news. So, winning with the largest private sector bank in India is fundamentally something we're very excited about. We continue to lean in.
Thank you very much.
Your next question is from Darrin Peller with Wolfe Research. Please go ahead.
Hey, guys. Thanks. Nice job. Just maybe when we look at VAS, and again, I know there was some one-time or near-term items, but the overall strength is consistent. Maybe just touch again on the key drivers. Honing in a little bit on cyber and what you're seeing there. I know Recorded Future has had some really good success with a lot of governments that are maybe even incremental to just payments offerings.
Can you help us expand on what that could mean for the overall business going forward? Then, just a quick question on the puts and takes for Q4. If you don't mind, if you could quickly just give us a sense. We know comps get a little bit easier, the Capital One conversion has started, and pricing continues to be strong for our checks for fourth quarter. What are the puts and takes on guide for Q4? Thanks again, guys.
Okay. Let me start with the color on the financials first. Darrin, you're absolutely right. Broad-based strength in value-added services. If I think about where the strength and the durability come from, I think about the following. First of all, as we have told you, 60% of our services are network linked. So the drivers themselves create the tailwind. So that ability to have payment volume where we can then apply services, and the services then create the differentiation, that's the flywheel effect, and we're very proud of this business model. Secondly, if I look at services, just if I think about existing services, there's room for further penetrating our existing customer base. Right? So we have a very disciplined approach in terms of cross-sell, up-sell, in terms of looking at our customer base and where the penetration gap is.
The third one I would say is, you mentioned it. There's room for new services in cyber, in a new world of agentic or the evolution towards that. By the way, I don't think agentic is going to be the only mode of commerce. It is going to be multimodal. Therefore, we have to be versatile and cut across all these different modes, whether it's in-person transactions, online, and agentic down the road. They can all coexist, and that speaks to the versatility of the network, and our services can apply across the board. Cyber is a big issue. AI will create more vulnerabilities, and therefore, we will need to come up with the best solutions to help our customers and consumers, customers safeguard the network and their systems, and the consumers to safeguard their payments as well.
Fundamentally, those are the things that are driving. Before I hand over to Michael, you also asked about the Q4 guidance and the puts and takes. I would say, again, I talked about the timing of revenue. You see a little bit acceleration, and services play a big role because we accelerated a lot of the services projects in Q3, and therefore, accordingly, you are going to see an offset in Q4. Michael, please.
Yeah. You gave a very holistic answer. I just want to remind everybody. This situation where AI is not only driving productivity upside and is fueling new products for us, but it is also unfortunately, a tool in the hand of fraudsters and scammers and so forth. That is a situation that is fairly new. What is not new is that we stepped into the security market like a decade ago. We are very deeply invested in this space. This has been a significant contributor to our growth rate for that past decade. Overall, that business was initially fraud related, then we expanded into identity, and now we are in cybersecurity in a significant way, and I talked about that in my prepared remarks.
I do not want to take too much credit, but our investment in Recorded Future kind of looked ahead and said, in this kind of a world where the threats are coming from all sides, it is so critical for us to provide threat intelligence to people because nobody can really defend themselves against all these risks. If you knew with higher probability where your risk is going to be, particularly on the payment side and the fraud sides, what are compromised cards, et cetera. This has been a long arc for us, and it just meets the moment. But that business has been growing very fast all the time. We are not expecting a significant kind of jump from one day to the other. All of this is kind of playing out at the right time and as predicted and expected for us.
Great. Thanks, guys.
Your next question is from the line of Will Nance with Goldman Sachs. Please go ahead.
Hey, thank you for taking the question. I heard some of the commentary on some of the intra-Europe volumes. I was just wondering if you could kind of take a step back holistically about what you're seeing around the European consumer. Peeling back some of the noise, there's been a lot of focus on energy shocks. When you take out some of the discrete impacts, how are you kind of feeling about the trajectory of consumer spending there? Appreciate you taking the question.
Thank you, Will. I'll take this one. Of course, before this job, I also oversaw Europe. It's a very important market for Mastercard, very sizable. I would say if I take a look at the macro environment right now, the European consumers are very resilient. That's probably the best description. The other thing that I would say is, I see in our own business, in the payment business, we see a lot of innovation. That innovation comes from our customers, whether the banks, the fintechs, the digital players, but also our teams on the ground. That is going to be a very important driver in terms of our growth. To your specific question about intra-Europe, I talk about the reasons, right? Nothing structural. It's more about timing and comparisons. I think overall, we see the market being stable and consistent right now.
We've got some share shifts, but we'll continue to win deals in this market as well. We're seeing tremendous success in value-added services and solutions. Europe is probably a standout on this front. That's also very important for us to achieve that sustainability.
If I can add one point, I think it is important to remind us, when we look across Europe, very evolved economies, but it is still also true that at the same time, you still have a significant secular opportunity, as I mentioned in my prepared remarks earlier. DSGV and SEB are just two big wins that are going to help us eat into that secular opportunity in parts of rural Germany, for example. It is not just about spend, it is also about the secular opportunity and the tools that Ling Hai referred to are going to help us to go after that in many different ways, including our real-time payment position in Europe and our services and our card propositions.
Your next question is from the line of Timothy Chiodo with UBS. Please go ahead.
Great. Thank you. I also want to touch on some of the mechanics around agentic commerce. So appreciating that we are moving past the one-time use virtual card at some point and moving more towards the long-term of agentic network tokens. Specifically, I would like to dig into some of the steps for merchant readiness. You mentioned earlier some of the discoverability aspect, and I totally appreciate that. But I want to focus a little bit more on the ability to accept a network token and some of the work that is being done by either merchant acquirers or the merchants themselves to be ready for that. And whether or not the standard website can be that acceptance tool or if separate endpoints might be needed in certain cases. Any of that mechanic and the progress being made there would be much appreciated. Thank you.
Right. Tim, this is a wide spectrum, on kind of where merchants are on that. Take a small business that just has moved from a physical-only business to having some sort of digital component of their business. They are going to need all the help they can get to set that up. And you take a large merchant, they are going to probably consider a first merchant, or first agentic agent experience themselves and putting their own agent out there. And everything in between. So the community of PSPs and ISVs and processors are going to be absolutely critical to cater to all of that.
With our solutions, Agentic Pay, Agent Connect, et cetera, what we're solving for is that, the individual merchant will not have to go with one solution for one partner and with some other solution for some other partner, because we're going to be that interface that deals with a lot of that. That's kind of where we are. There's a lot of details and nitty-gritties in that. Our Chief Digital Officer, Jorn, loves talking about this in all the detail that you want, but currently that is the situation. We are covering the base that we can cover as a network, and we're engaging the processor community to ensure that things like VCNs are only a bridge, because that's not a good long-term solution.
But some of these issues that you highlighted, Tim, need to be addressed because otherwise it's not going to take off, and we believe it will take off.
Thank you.
Your next question is from the line of Sanjay Sakhrani with KBW. Please go ahead.
Thank you. Good morning. I guess, Michael, it's been three months since the BVNK acquisition, and the stablecoin ecosystem continues to evolve. I know there's a lot also happening with agentic as well. I'm just curious what your observations are with BVNK. Do you think the opportunity is moving forward? Any learnings? Obviously, any other types of deals you might do in the space? Thank you.
Right. Thanks, Sanjay. Always good to hear your voice. BVNK, it closed between the last call and this call. That's the first big piece. We're very happy that it closed. We're getting really strong out of the gate from day one. The joint new product that I referred to in my prepared remarks, the Global Money account is out there. That takes our capabilities on the Mastercard side, our global reach, and it takes the stablecoin capabilities of send, receive, store, convert, and puts it all together to enable our customers to choose between fiat and stablecoins on the other side for our customers' customers as well. So tremendous product, very good, great in demand. This is really good. This just came at the perfect time on where the ecosystem is going.
BVNK, if I just go a step back and say, what are they doing for us? What is, in its simplest form, the reason for them to join us? Here it is, it's really providing that choice between and all these capabilities. Send, receive, convert, and store. That's very much it. There are some other reasons for choosing BVNK and not choosing to build this our own. One is they have the full licensing footprint that is needed, and then have a very established compliance function. If you do all the send and receive that you want, we want to sure that it's totally fully compliant, very visible, easily managed too for our customers, and that we're very reliable taking that responsibility on. That's a piece. The other is really the native talent in the digital asset space. We now have a set of colleagues.
We just had our global leadership meeting and they were there. You just see a very different mindset coming into Mastercard, which is excellent. All those, so new product is out, different mindset is in, compliance is ready, and we're out in the market and we're seeing great demand. As this is very straightforward for our customers to say, "All right.
I want to somehow. Let's take a bank. I have really no conversation with a bank CEO where this topic doesn't come up. What should I be doing in a digital asset space? Obviously, there's a bunch of banks who are very clear what they want to do, but there are many others who are not very clear, and they're asking us the question. Our crypto consulting team comes in, and of course, with BVNK, we can now not only offer consulting, but also cover a set of solutions. People come in, and it's kind of an on-behalf service that BVNK provides, along with the money move capabilities that they have. It's not just about stablecoins.
They want to choose for my customer that is a buyer in the U.S. and is importing from somewhere in Asia, what is the best way to send this money? They might choose stablecoins, or they might just choose something else. We have all the rails together. It comes at the perfect moment. BVNK bringing everything that we're looking for, but it's early days, huh? We just closed in August, so we're two months in. Integration goes well. That's a non-issue. We're ready to go.
Your next question is from the line of Trevor Williams with FT Partners. Please go ahead.
Great. Thanks very much. I wanted to ask on pricing. I think it was called out as a driver across pretty much every revenue line in the quarter. It would just be helpful to hear how sustainable you think this level of contribution from pricing is. Then just to clarify on the VAS growth in Q3, I know M&A was not material to total company growth, but how much of an impact BVNK had on the VAS growth rate in Q3 would be helpful. Thank you very much.
Trevor, thank you. First of all, regarding pricing. As we have told you before, we price for value. We will always look for opportunities to price because we deliver value. Token pricing is probably a good example for me to illustrate this point. I feel, like I said before, from a VAS perspective, especially, you have more room for penetration. You have new functionalities you can build, especially in the world of agentic. As you see, we are using MDES as the platform to enhance our token for the agentic world. Of course, there will be new use cases. I think that ability for us to further penetrate existing customers, create new use cases, and penetrate new verticals is there, and we will price for the value we deliver. That is going to be the first point.
Our pricing in Q3 has a component of previous pricing, but also some new pricing. We will expect some lapping of the pricing as we head into Q4, but again, we will continue to look for opportunities. You asked about VAS and impact from M&A. I would say as far as BVNK is concerned, the impact is really minimal. It is a revenue-generating enterprise already, but it is off a small base.
Your next question is from Fahed Kunwar with Rothschild & Co Redburn. Please go ahead.
Hi, both. Thanks for taking the questions. Could I just get an update on incentives? I think you talked about it last quarter being broadly stable. Sorry, slightly higher, and it came in pretty stable. Was there any deal timings affecting incentives? Can we expect any of the Q3 impact you thought would happen going into Q4? Any sense of how large the renewal cycle is for Mastercard going into 2027? Thank you.
Thank you, Fahed Kunwar, for the question. Let me take this one. Well, look, I have a tendency to call this a contra, but it's rebates and incentives. Well, this contra revenue is a reflection of our solid deal momentum. In fact, if that goes down, sometimes I worry about it. That's one thing to keep in mind, because the deals are what drive our business growth. We have not given guidance for 2026, so I'm not going to do that. As a reminder, though, we use rebates and incentives to drive volume and transaction onto the network. I'm just going to reiterate my flywheel point. You get the volume, then we deliver services on the volume, and then the services in turn become the differentiation that will drive even more volume. We'll continue to do that.
We have been winning deals with new customers and expanding our customers in terms of our deal base. But we've been very disciplined. We've been very disciplined in terms of what deals we want to win, what deals we want to walk away. We're not just going to win every deal. We're not going to do that. We don't want to do that. We're going to win deals that gives us a higher growth momentum that's accretive to the growth trajectory. We're going to win deals that are additive to the cross-border flows, and we're going to win deals that will allow us to deliver services as well. The punchline is we'll use R&I as a tool to drive the growth momentum and the growth algorithm.
Now, at the end of the day, I also want to remind everybody, we measure ourselves on driving net revenue growth and expanding overall net revenue yield. R&I, in my mind, is an input, but the ultimate measurement should be net revenue yield. I also want to maybe take this moment to mention that for Q4, we would expect our rebates and incentives as a percent of gross assessments to be higher than Q3.
Your last question will be from Dan Dolev with Mizuho. Please go ahead.
Hey, guys. Thank you so much for squeezing me in. I just had a question. I know you're not giving any formal guidance for 2027, but maybe, given the strong exit rates that you've highlighted, anything that we should keep in mind, especially as we're lapping things in 2026? I think it would be very useful for investors, any puts and takes on the growth and what we should expect. And congrats again on great results.
Yeah. Okay. Dan, very nice to talk to you, but let me take this one as well. I also maybe want to quickly clarify, when I talk about guidance previously in my answer, I'm talking specifically about rebates and incentives. It's not so much 2026 versus 2027. It is rebates and incentives, which we don't guide. But for 2027, I guess, Dan, maybe the first answer is we're going to give our formal guidance in our next quarter's release, so please stay tuned. We'll get into the detailed discussion. Now, remember, there are so many puts and takes in our business throughout the year, and there are just so many different factors at play. Sometimes it's really hard to say, hard to predict. The macro environment can play a role. Wins and losses can play a role. Demand for our VAS can play a role.
We have to continue to develop new things and drive new penetration. FX volatility, that's another factor. And just so many other things. The other thing I would say, yes, you're right, some of the headwinds can become tailwinds, but some of the tailwinds can also become headwinds because they're lapping. So there's all those things. All I can say is we have a very strong business model. We have a very diversified business model. We are optimistic about the future, but do stay tuned for 2027.
Thank you very much. Michael, have any closing comments?
Thank you.
Yeah. Dan, thanks for the question. That's a great question to end the call on. Thank you again for all of your questions and all your support in the past quarter. We look to talk to you over the coming quarter as we engage. All of these strong results, not possible without the amazing team at Mastercard. I want to thank all of our colleagues around the world who make this happen every day. I want to close this first call with Ling Hai. Thank you very much, and we'll speak to you next quarter. Thank you. Bye-bye.
Thank you all.
This concludes today's call. Thank you for attending, and you may now disconnect.