All right. Kicking off with the last of our sessions. Last but not least, we have CFO of Mastercard, Ling Hai, incoming CFO. I think the first conference that you've done in your new role?
Indeed.
Welcome. We're very pleased to have you. Hopefully the first of many, and we're looking forward to the conversation here.
Thank you. Thank you for doing this with me.
Look, I think we'll have time to get into specifics of Mastercard here in a second, but maybe we can start with you. I'd love to hear a little of color about yourself for those who haven't had the pleasure of meeting you. Maybe talk about your background, your history with the company.
Sure. I have been with Mastercard for 17 years. From the very beginning, I have always known I want to be the CFO of Mastercard. No, that is not true. In fact, I grew up in Mastercard as a General Manager. My first job, I ran Greater China as a division. Then I went to London, had a global job, went to Singapore, co-headed Asia. Then went back to London, co-headed international markets, and then last year, I headed back to Singapore. So I made two round trips between London and Singapore, running a huge cluster of Mastercard's markets and divisions. I think one of the things that is really amazing is in the last 17 years, I had a front-row seat to some of the most amazing developments in our industry, including things like Apple Pay—
Right.
—tokenization, right? The sort of innovation you just would not have imagined in 2000. Also the fact that we got domestic switching in Japan, domestic license in China, and now we have again had a groundbreaking wing in the UAE in terms of becoming the domestic switch or the technology provider for the domestic switch in the UAE. So those things are all amazing, so I really am glad that I can bring that experience now to the CFO job because I understand what shapes the numbers and that sort of insight I think is going to be very helpful to this job.
So maybe we can talk about that. You have been on the job for now for about a month, and it is a different job transitioning from operational to financial. You have to come to conferences like this. You have to talk to me. You have to talk to them. What is top of mind for you, and what is your view of the role and how you will shape it?
My view of the role is I can do this in my sleep. This is a piece of cake. No. It is not true. So I am still learning the CFO job. But one of the things I would say, though, my focus is squarely on driving top-line growth. Mastercard is a growth stock. I want to make sure in terms of capital allocation, we continue to drive top-line growth. And that is through both organic growth, but also inorganic through mergers and acquisitions. If I think about the organic growth, it is really about continue to allocate more investments in the front line. Mastercard is a B2B company. We do not go to consumers directly, right? The ability to work with the banks and the issuers and acquirers, that requires engagement.
People on the ground talking to our customers and also co-create things that really are relevant, that address their pain points. That is really important. If we see the right opportunities out there in the market and we can make acquisitions to drive growth and speed to market or acquire new capabilities, we are going to do that as well. That is really important in my mind. The second order of priorities is going to be about a strong balance sheet because without a strong balance sheet, we will not be able to do the M&A work we need to do. Positive operating leverage, continue to make sure revenue growth outpaces expenses. The last thing is whatever excess capital we have will return to shareholders via buybacks and dividend.
Great. Maybe we can switch and talk a little bit about the macro environment and broader spend trends. It has been a very dynamic marketplace. You have had travel disruptions in the Middle East. You have had ebbs and flows of gas prices. Can you comment on the current landscape as you see it and any call-outs on recent spending trends?
Yeah. I think what is really interesting is the overall macro environment remains very supportive of both consumer spend and business spend. I continue to be impressed by how resilient consumers are. In the U.S., that resilience continues to shine through. People are spending their money on travel. Americans are going to box office movies like "Spider-Man" and "Odyssey." They are spending money on experiences such as dining. Entertainment, in general, is a huge category, so that is still there. The other thing that is really impressive is if you think about travel, people are still doing this, and it is across the board, and it is very broad-based, both in terms of affluent and also mass consumers. Of course, there are uncertainties, right?
We still have a war in the Middle East. But I think one of the things that is really important to remember is our business model is very diversified. We are diversified across different markets. In terms of payment flows, we are diversified. But also in terms of revenue mix, we have both payments and services. That resilience, our resilience really comes from this diversification. I remain very optimistic about the growth. One of the things maybe I want to talk a little bit about is the operating metrics that we are seeing. In the first four weeks of August, broadly, all the operating metrics are in line with the first four weeks in July that we are seeing. That is really strong, and that is very consistent, and it is very positive.
Yeah. No, that's great. All sounds quite healthy. Maybe we can zoom in a little bit on the cross-border dynamics. You've seen some discrete impacts on cross-border operating metrics this year, some puts and takes on portfolios, on travel, certain countries coming online. Can you talk about the composition of your cross-border spend today and how you think about the growth drivers from here?
Yeah, absolutely. When I think about cross-border, we broadly divide it into two categories. One is cross-border travel, and then the other category we call card not present, excluding travel. So non-travel cross-border. If I think about the travel category, you talked about the discrete impact. That is the Middle East. In April, we saw negative impact, both in terms of inbound into the region, but also outbound. But overall, year to date, the impact is much less negative than we expected.
Right.
Especially the recovery on the outbound piece, I think is actually good and continues throughout the month in the second quarter and also the third quarter. The other thing that I'm seeing in travel is people continuing to travel, but they're just shifting their travel routes a little bit. For example, your northern neighbor here, the Canadians are not coming to the U.S. as much now, but they're going to Europe. During UEFA, the Europeans are coming to the U.S., but then off-season, the Europeans are traveling to Asia. So they're avoiding the Middle East, but they're coming to Asia. Even though you see some puts and takes, but overall, I think it's more of a shift in terms of cross-border travel. If you think about cross-border non-travel, the categories here is, I talked about this is something we call CNP, card not present.
It's things like the traditional e-commerce, people buying services and goods on Amazon, for example. But it also includes emerging categories like my subscription to Perplexity, people putting this on a card on file.
It is a recurring spend every month, and that is a new category. All the AI platforms consumers adopting, that gives us additional spend. You are also seeing digital assets in crypto, for example. We talked about in our earnings as one of the piece that is driving cross-border for us is spend out of Venezuela, and because all of a sudden U.S. dollar is available and consumers are using their cards to purchase crypto. There is also wallet funding. People transfer money into a digital wallet, like the Revolut wallet or Wise wallet. That is also happening. All in all, I think the growth remains very strong in both travel and cross-border non-travel.
Yeah. No, great. One of the things that you touched on, several different perspectives from different regions, echoing your history across multiple regions within the organization. If you can reflect on what you have seen from working in the region over so many years, how is Mastercard positioned across the world?
We are positioned very well. In fact, maybe let me also add one thing. I talked about operating metrics in line, August versus July. That is the same with cross-border as well.
Okay.
Both for cross-border travel, but also non-travel. Same idea. If you look at the first four weeks of August versus the first four weeks of July, like-for-like basis, remain in line, very strong.
Got it.
Your question is about our positioning in the regions. I do not want to just speak about the regions that I worked in. I think across the board globally, Mastercard has a very strong position, and let me explain to you why. First of all, in many markets, we continue to have the secular tailwind, which is cash conversion opportunities. Even in a developed market like Japan, cash as a percent of retail commerce is still close to 50%. That gives us additional opportunity to convert cash into digital payments. Therefore, if I think about the overarching pillar that we have in Mastercard, which is diversification. We do not want to hang our hat only on one branch. Diversification happens across geographies. In the regions that I worked in, you still have huge opportunities in Southeast Asia. You still have huge opportunities in Eastern Europe.
In the entire continent of Africa, there is more digitization opportunity. There is lots of wide space markets we can continue to diversify into. That is the first pillar of diversification. The second pillar of diversification is really around different payment flows. Historically, Mastercard serves more P2M flows. Now we are getting into B2B commercial flows, cross-border remittances, P2P flows. That also gives us the additional tailwind. Our network is about moving money from A to B, whether that is P2M or B2B. We are able to leverage the same network to serve different use cases. The third piece is really around services. Today, 40% of our revenue mix is in services. That gives us the diversification, but that also helps us differentiate the core payment offerings. It is how we win deals by leveraging our services capabilities and differentiate our offerings.
When I think about these three pillars, I am very optimistic. Mastercard, in this very competitive environment, we have the capabilities, the right toolkit, but also the right mindset of our people to continue to win the hearts and minds of our customers.
Yeah. One thing that came up on the earnings call that I thought was really interesting, warranted a little bit more discussion, was the announcement with the Central Bank of the UAE. The announcement was that Mastercard will power their local payment system. Can you unpack just what that means for the non-payment—
Yeah.
—cards out there? What does it mean to operate the local switch? Could you share with more details on how that actually works?
Yeah. This is actually a pretty significant development for us, even though the UAE is not a huge country. It is a very important country and market now in the Middle East. Investors ask me about the sovereignty issue, right? You see this across the board everywhere in the world. I think the UAE example is one of the playbooks now we have developed to tackle the sovereignty issue. This is when a sovereign nation state says, "I need to have my own payment alternative, but I do not have the capabilities to do it. I actually need to partner with somebody." In the UAE, Mastercard has become the technology provider for the domestic switch. There is a domestic brand called Jaywan, so we co-brand with Jaywan. There is an entity owned by the Central Bank called AEP. We set up a joint venture with AEP.
There is a domestic mandate that all debit transactions need to run through a domestic switch. Guess what? Mastercard is the technology, is the underlying switch for the domestic solution. In the end, we are the alternative in the context of the sovereignty agenda. In a sense, we process almost 100% of the debit transaction. We will. We are still implementing this in the UAE. So we will be processing almost 100% of the debit transactions. We will be able to apply services such as cybersecurity. So yes, there is a sovereignty agenda, but we are completely relevant and in play in the UAE. So we actually find this playbook very strategically important because we will be able to replicate in other markets as well.
Great. Maybe just as a quick follow-up, how will this show up in the business? Is this value-added service or payments?
I think it's both. In fact, we talk about services providing the flywheel effect. I think in the first instance, we have to win the payment flows.
Yeah. So the core business is very important. There's this mutual independency between the two. I talk about services, and we actually publicly talk about how 60% of our services attach to the network. It's based on the payment flows that we process, right? I think services strengthen the network and differentiates the network, but the network and the transactions we process provide the foundation for services. So these things are very much interlinked. The other thing is, I always say, yes, we're in the business of payments, but payments are not just about moving money from A to B. Oftentimes, it's about what happens if there's a dispute. What happens if the transaction needs to get reversed, when something goes wrong, when there's fraud, right?
Our business model has this franchise model, which is like the secret sauce of the business model because it establishes a whole set of rules and paradigm around building this trust or instilling this trust into the ecosystem. So we will continue to leverage that, and the services play a huge role in terms of consumer protection, cybersecurity. Again, the two things reinforce each other.
Yeah. Okay. Another example of Mastercard innovation. Maybe we can talk about just the competitive intensity and deal economics in the market. There has been a lot of movement over the last couple of years, a lot of focus on just competitive dynamics and payments more broadly. What is your perspective on that? Has the competitive intensity increased? Has the locus of competition changed? How would you tie that back to deal economics or rebates and incentives when we think about incremental volume?
We have always dealt with competition. I say whenever I see competition, I get excited because I think competition indeed makes us better. It makes us more innovative because we have to differentiate. It is not a new phenomenon. We have always lived with it. I think the key in here is, like I said, the reason for investing in the front line is we have got to stay very close to the customers. Again, we are a B2B model. This whole co-creation, we cannot just be inventing our own widgets in the ivory tower. This ability to discover problems together with our customers, co-create solutions, I think is very critical. Yeah. We always want to win, for sure. We are also very disciplined. It is not like I want to win deals at any cost. Deals need to be profitable.
We want to win market share in a way that is profitable. We do have an approach where we measure our success against not just share and volume, but also profitability. The other thing I would say is, yes, deal economics is important, and sometimes we do have to go a little deeper in terms of price and economics to win a major deal because otherwise you will not be able to do the services. Like I said, we do have services differentiation, and we use that as a lever as well. New products, new services, use them as differentiation beyond just money or economics to win deals.
Has what clients are looking for in those deals changed over the last several years?
Well, I think that one thing that remains the same is customers like Mastercard, they're looking to grow their business. They want growth. They want better service to their consumers. So that's a commonality that hasn't changed. What probably has changed is on specific products or solutions, right? So it used to be debit and credit will carry the day, and now people are talking about stablecoins, agentic commerce, what that means for them. So there are things that have not changed, but there are also innovations and solutions that are different, and that's expected of Mastercard, and we have to continue to step up and come to the table with the right play.
Great. So you've referenced value-added services several times in that answer. Maybe we can talk about the growth algorithm in this business. It's continued to be a very strong driver. It's a very large percentage of revenue now. How do you think about the growth of that bucket over time, and what are the certain pieces of that portfolio that are really carrying a lot of that strength?
Yeah. Well, services constitute almost 40% of our net revenue now. When I joined Mastercard 17 years ago, it was a small percentage. So yes, it has grown. But it's not just the revenue growth, it's also a differentiation. I mean, in services, I talked about the 60% that attach to the network, but we also have another 40% that's data and insights and consulting advisory services, right? And merchant loyalty, for example. But those things are also really important because, for example, advisory and consulting, that's what enables our team to be living and breathing with the customers every day and discover their problems before an RFP even comes out. So it's a differentiation even in our deal approach as well. So, very important for our growth algorithm. I would also say today with AI, that will also give Mastercard continued tailwind in terms of driving more growth.
Now, here I'm talking about sustainable growth, right? Long-term sustainable growth and optimize the mix as well. But why do I talk about AI as a way to create that sustainable momentum? It is because you're going to see more fraud, you're going to see more scam. Bad actors will leverage AI. There will be more sophistication in fraud and cybersecurity. So our customers expect Mastercard to continue to stay ahead and come up with new cybersecurity solutions. And by the way, when I say cybersecurity, it's cyber, but it's also identity, it is also fraud prevention, it's also scam prevention. It's the end-to-end security solutions that I'm thinking when I say cyber. So we need to continue to innovate, and that's the space that's going to give us continued momentum. And we will do this also through both organic growth, but also acquisition as well.
You have made several acquisitions in cyber. Maybe we can double-click on that a little bit because that has been a big topic of conversation over the past couple of days. What are you seeing in terms of the demand environment for cyber? If you could comment just on the specific cyber solutions that Mastercard has. Are you seeing broad-based demand across the portfolio? Is it specific products that are resonating the most right now?
Yeah. Very much so. Strong demand, broad-based demand, and it is also end to end, and Mastercard has been in this business for a long time. Therefore, again, like I said, cyber is identity, cyber is fraud, cyber is also cybersecurity capabilities. The best example I can give you is the Recorded Future. Recorded Future is in the business of providing customers with insights into the dark web, for example, compromised credentials, phone numbers, addresses. So we can then help customers proactively anticipate threat trends and fraud intelligence. With the Recorded Future acquisition, we actually have developed a new product called Threat Intelligence, and it is attached to the network, it is distributed through the network, and it is priced through the network.
That is a great example of saying we may have purchased the capability that is more a one-to-one sales model, which does not lend itself to scaling very quickly. But we are able to leverage the capabilities and create a new product that is distributed through the network, that is priced through the network, that creates much better scale more quickly. So that is an example of what we are doing with cyber.
Yeah. Let us pivot and talk a little bit about the crypto and stablecoin ecosystem. Mastercard recently closed on the BVNK acquisition, which brings a lot of new stablecoin capabilities to the company. Now that that acquisition is closed, can you remind us of the opportunity that you see in the digital asset space and how you are going after it?
Yeah. Well, first of all, I just want to let you know that we closed BVNK on August 3. It is the same date when I became CFO of Mastercard. So this date will be in my memory forever. Not that I have anything to do with BVNK, but it is a very important asset. People ask me, what are the use cases for stablecoin? First of all, I do not think it is really a P2M use case. In P2M, it is probably a solution looking for a problem, but stablecoins, I think, do address certain relevant use cases, such as B2B payments, cross-border remittances, P2P, me to me, right? I can also envisage if, let us say, someday smart contracts take off. Real estate transactions, very clunky in most countries, right? There are a lot of frictions.
You need a lot of middlemen just because the buyers and sellers do not know each other. There is a trust issue. But if contracts truly become smart contracts, and they can be executed on the blockchain, having programmable money that can be executed conditional upon the execution of the contract, I do see value in that. We do hear customers, i.e., the banks, talk about tokenized deposits or tokenized assets in general. Then I think stablecoin will become a good media of exchange in this world. So for that reason, Mastercard is at the table. We are embracing stablecoin. It may just be a percent of the payment flows, but we want to be there. So what is BVNK then? It creates that interoperability play. It is an orchestration layer in the first instance.
It gives us the ability to provide a white label wallet. We do not go to consumers directly. Again, this is through our customers, but a wallet that helps store and convert and receive and send stablecoin assets. So we now truly have an interoperability play in the payment flows, whether this is among different stablecoins, among different blockchains, or whether this is interoperability between digital assets, stablecoins, or fiat currencies. I think that is a very significant capability we have developed. You also probably heard we made an announcement of open standard, right? This is again, a joint venture among industry players, and our BVNK capability will be very relevant in this.
You just talked about one of the most recent acquisitions. I would like to get your take maybe on M&A more broadly. Can you share your views on M&A and give us a sense if Mastercard will continue to be acquisitive as you have been in the past?
If I think about, again, my role as CFO, part of the capital allocation will be making acquisitions and strategic investments. I talked about the three pillars of our diversification, right? We will continue to make acquisitions when the opportunities serve us right in terms of growing the core. It is acquisitions and not just in services, which is the third pillar I talked about. It is not just in new flows, which is the second pillar, but it is also in the first pillar, which is our core payment business. Because in some of the nascent markets or emerging markets, that may be the relevant play. Why? Because it shortens our speed to market. So time to market can be faster. We will make acquisitions when it is about capabilities, like BVNK is a great example of buying capabilities.
It could also be about getting the right talent into the company. So for the right opportunities, we will continue to make acquisitions to drive the growth algorithm.
Great. All right. As you look at Mastercard's business today, can you comment just how you think about the durability of growth and the composition of revenues? How do you expect growth will trend from here, and then how do you think the mix of revenues will evolve?
Yeah. I have a lot of confidence in the durability of our revenue growth precisely because of the things I just talked about. It's the diversified nature of the business model, right? What makes the growth durable is because we're diversified. Sometimes in certain years you may have puts and takes in terms of cross-border flows, or you may have puts and takes between core revenue and the services, but on average, we'll continue to deliver consistent growth. That's really important. I think, again, our services capabilities create that durability as well for the core, and the core business creates the durability for services. Those two things self-reinforce each other.
That's also very important. More importantly, I think, again, I talked about Apple Pay. Our ability to really spot the right trend and capitalize on them and create the right innovation to embrace those opportunities remains very critical. The ability to work with Apple on Apple Pay, right? Now it is about working with all the AI platforms to think through what agentic commerce could mean, right? I think in the future, not everything's going to be agentic. Just like today, after 30 years of growth and development, e-commerce, and I'm talking about market-level data, this is not Mastercard data. At a market level, globally, after 30 years, e-commerce is not even 50% of overall retail commerce. It's not even 30%, it's 20%, right?
If we play this out another 10 years, 20 years, I still think you're going to have a mix of different commerce. You have physical in-person commerce. You're going to have online commerce. You have agentic commerce. I think the secret ingredient of the network credential is we'll be able to serve. Mastercard credential will be able to serve in all these different verticals, whether it's in person, whether it's online, whether it's agentic. The ability to do that right to play in all verticals, so we're truly omni-channel, is also another reason that will give us the durability of growth.
Great. We got a couple minutes left here. I want to squeeze a few more in. One is on pricing. I was wondering if you could share your thoughts on how Mastercard approaches pricing and how you think about the runway going forward.
Yeah. I think about pricing as pricing for value. Tokenization is a great example, right? We launched tokenization a while back. We continue to drive more penetration in different markets. Then, in this emerging agentic world, I think tokenization becomes so important in terms of protecting consumers and ensuring the integrity of the payment network. So, now we can actually price for the value that we deliver to the ecosystem. There are many, many other examples like that. Cybersecurity is also such an example. Someday we will deliver even more merchant-specific services. I talked about loyalty, and we'll price for those as well. I think the ability to deliver value in the first instance is what gives us the runway to price, to drive more economics from the network.
That makes sense. All right, one more here. If I can take advantage of the experience you have in some of your prior roles, I'd be remiss if I didn't ask you for an update on the opportunity in China and the state of Mastercard's various initiatives there.
Yeah. Look, I've been working on China for the entire 17 years. This has been part of my mission to get a license, domestic license. For those of you who are familiar with China, it's not easy. It's not an easy market. It took us a long time. We got there. We have our domestic license granted to us two, three years ago. In terms of revenue numbers, it's still probably going to be a medium-term opportunity. But if I look at what we're doing in China, it gives me tremendous optimism. We're working really hard with all the Chinese banks across the board on issuance, driving different products. It's not just credit products, but also debit, right? People think China is very saturated in terms of debit because the country has billions of debit cards already. But, guess what?
Because we are a global player, we have global acceptance. We have better global acceptance than the domestic players. We're able to even issue additional new programs in the debit space as well. So that's very exciting. We drive acceptance, right? We're starting from almost ground zero in terms of acceptance. What gives me a lot of confidence is also if you now go to Shanghai or Beijing or Guangzhou or Shenzhen, you can actually use your card, your international card, and tap and go into a subway station, right? You do not need to have Alipay or WeChat Pay, a card. You don't need to buy a transit card either. Open loop, tap and go in the transit systems in China now is a reality in these four cities. We also launched in Chengdu as well. So that is actually really important.
Given that we now have a domestic license and we are domestically relevant, the strength now we have is not just on the issuance side and the acceptance side, but it is also our ability to work with all the digital players in China, including Alipay, WeChat Pay, including Meituan and JD.com because now we are domestically relevant. You may say, "Hey, look, in China, everybody uses Alipay. Why would they use a card?" They do. If you are buying a robot on JD.com, the ticket size oftentimes is much greater than what you would have in a digital wallet. People will use credit cards. That is something we are working on. Services is another realm of opportunities for us that I am extremely optimistic about. More fundamentally, in our business, I always have this thing, without home, there is no away.
In order to get cross-border transactions, you must first be relevant in the domestic space. Our domestic relevance is fueling the growth in outbound travel for the Chinese consumers, and we are seeing that very clearly in our data. Also without home, you are not going to have inbound acceptance either because if I have limited card acceptance, Will, when you go to Shanghai, you will not be able to use your U.S.-issued card. Now with the development of our domestic acceptance, foreign visitors can use their Mastercard in China as well. Both from the outbound and inbound perspective, it is also helping us drive growth.
Right. That is a great update. Maybe we should leave it there, but thank you so much for being here. Really enjoyed the conversation.
Thank you.