Mastercard Incorporated

good morning my name is Audra and I will be your conference operator today at this time I would like to welcome everyone to the MasterCard Inc Q2 2023 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 1 once to queue up for a question as pressing star 1 multiple times may affect your position in the queue. If you would like to withdraw your question, press star 1 again. Thank you. Mr. Devin Kaur, Head of Investor Relations, you may begin your conference.

Thank you, Audra. Good morning, everyone, and thank you for joining us for our first quarter 2023 earnings call. With me today are Michael Meebak, our Chief Executive Officer, and Sachin Mehra, our Chief Financial Officer. Following comments from Michael and Sachin, the operator will announce your opportunity to get into the queue for the Q&A session. It is only then that the queue will open for questions. You can access our earnings release, supplemental performance data, and the slide deck that accompanied 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'd 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 this call we posted on our website for 30 days. With that, I will now turn the call over to our Chief Executive Officer, Michael Meebak.

Thank you, Devin. Good morning, everyone. So starting with the big picture, our momentum continued into the second quarter with net revenue up 15% and operating income up 16%, both versus a year ago on a non-GAAP currency neutral basis. Once again, demonstrating the strong fundamentals of our business. Consumer spending has remained resilient, with spend on experiences and travel remaining a focus. On a macroeconomic front, we continue to monitor a number of factors. First, the overall labor market remains strong, including wage growth, and consumers continue to be supported by credit and savings. These are key factors of consumer spending. Second, the efforts of central banks to curb inflation are showing signs of progress. Despite this, inflation remains elevated and we are in a period of tight monetary policy across many countries. Economic growth will continue to vary country by country and sector by sector. Looking at our switched volume trends, domestic volume growth remains healthy. We continue to see strength in T&E with some recent moderation in both inflation and spend in select international markets. Cross-border travel continues to show strength, reaching 154% of 2019 levels in the second quarter. We remain well positioned to capitalize on this trend with our travel-oriented portfolios and our initiatives in areas like loyalty and marketing. Cross-border card not present X-travel continues to hold up well. for monitoring the environment closely and are ready to adjust investment levels as appropriate while maintaining focus on our key strategic priorities. As a reminder, these priorities are, one, expanding in payments, two, extending our services, and three, embracing new networks. First, we're expanding in payments by continuing to win deals with a diverse set of customers, powering growth and acceptance, capturing a prioritized set of new payment flows, and exploring new ways to ensure payment choice by leveraging multiple alternatives, including card rails, ACH, blockchain, and open banking. Back to the top of this list, we are winning deals across the globe through a combination of our innovative products, differentiated services, and our solution-selling approach. I'll share a few examples from each region. Let's start in Europe, where we announced a significant win with Unicredit across all card products. We expanded our partnership and put in place a first-of-its-kind single-card multi-market strategy spanning 13 banks, 12 markets, and 20 million cards. Unicredit selected MasterCard due to our innovative digital capabilities, shared focus on sustainability, and proven ability to support their clients' needs. In Germany, the previously announced conversion of approximately 10 million of Deutsche Bank's credit and debit cards to MasterCard has now started. These wins build on a prior success in the UK, where there are now 16 million NetWest debit MasterCards live in market. When combined with the Santander and First Direct migrations, approximately 27 million debit cards have now shifted to MasterCard across the three portfolios in the UK. Turning to North America, MasterCard will partner with Fiserv's money network for all U.S. state and federal government benefit and wage disbursement debit programs. Up north, Coast Capital, Canada's largest federal credit union, will be converting their consumer and small business portfolios to MasterCard. The partnership highlights our shared commitment to local communities with issuance through Collabria Financial Services. In addition, we have a new agreement with Tim Hortons, the largest quick service restaurant brand in Canada. Tim Hortons will launch a new MasterCard credit card and will be using a broad set of MasterCard's digital analytics and fraud services and technologies. Our relationship with Santander in Latin America continues to grow. In Mexico, we established a long-term exclusive deal with OpenBank, their new digital bank. We also renewed the Fiesta Rewards co-brand credit card, Santander's key offering within their consumer portfolio. In Brazil, we will be Santander's exclusive partner across their commercial portfolio. And we've expanded our partnership with fast-growing Secredi, one of Brazil's largest credit unions. In Asia Pacific, we've extended our relationship with Standard Chartered Bank, which will enable us to grow our consumer credit presence across key markets in the region. We've also expanded our partnership with HSBC through the launch of the Travel One card in Singapore, Malaysia, and Vietnam. TravelOne will provide instant in-app rewards redemption powered by the MasterCard Rewards System. With all of these cards, people do need a place to use them. We continue to power growth and acceptance by establishing new partnerships and scaling new technologies. This quarter, we announced partnerships with both Alipay and WeChat Pay to enable international travelers to easily link any MasterCard credit or debit card to Alipay and WeChat Pay digital wallets. The partnership allows visitors to make payments with tens of millions of QR code merchants across China. I just returned from China where I saw firsthand how this is helping international travelers shop and pay in more places in a simple way. It's like paying like a local. And this will be valuable as inbound cross-border travel to China improves from approximately 50% of 2019 levels in the second quarter. In the online environment, we are scaling our click-to-pay capability to enhance the guest checkout experience. Click-to-pay transactions grew over 70% year-over-year in the second quarter, and the technology is now live in 30 markets. In the quarter, we added Chile, Bahrain, and Slovakia. And NetWest Group became the first bank in the UK to go live with click-to-pay push provisioning for cardholders. Shifting to new payment flows, we are making tangible progress in this area. In commercial point of sale, we've extended our partnership with Brex to support the international expansion of their commercial portfolios. We expanded our relationship with MyPOS, continuing to drive new merchant acceptance across more than 30 European markets, while also migrating their small business debit portfolio to MasterCard. And we've established an exclusive partnership with Australian lender GrowFinance to introduce credit cards to their small business customers later this year. In B2B Accounts Payable, we remain the market leaders in virtual card. We continue to drive growth by tapping into new use cases. For example, we established an exclusive partnership with Easy Transfer and Greater China. This competitive flip leverages our virtual card capabilities to support cross-border tuition payments for international students. We're also making it easy for buyers and suppliers to integrate virtual cards into the technology platforms they already use. Building on our prior announcements with SAP and Coupa, we've recently partnered with GEP to integrate our virtual card technology into their Payables platform. And on the supplier side, we launched MasterCard Receivables Manager with Billtrust. The solution streamlines the processing of virtual card transactions for suppliers and automates the integration of reconciliation data into accounts receivable systems. This is a great solution And it builds on partnerships with companies like Boost Payment Solutions, who have been working closely with Mastercard to expand and optimize commercial acceptance. And finally, in new flows, we continue to deploy our disbursement and remittances capabilities in new ways and across new geographies. In the US, we partner with top sports gaming processor Interchex, who will make Mastercard sends available to gaming operators for payouts. CareemPay, one of the largest digital wallets in UAE, will use Send to top up their wallets using MasterCard. And on the cross-border front, we've partnered with Al Fardan Exchange in Qatar to facilitate remittance services and support cross-border travel. Our work in real-time ACH continues to support these new flows. Our historical approach has been to expand our infrastructure reach into new markets. Going forward, we will be focusing on delivering and scaling in the markets we already are serving. while building applications and services in these key locations in line with our overall strategic and financial objectives. In blockchain, we're introducing the Mastercard Multi-Token Network, MTN. MTN is a set of foundational capabilities designed to make transactions within digital asset and blockchain ecosystems all secure, scalable, and interoperable. We believe in the potential of blockchain technologies. However, regulated money such as bank deposits and CVDCs need to be part of the solution, and they should interoperate with traditional systems. We can help with that. MTN is the natural evolution of the work we have already done in this space. The initial sandbox will kick off in the UK this summer. Now turning to services. Our services inform decision-making of our customers. They help them create stronger connections and greater loyalties. Payments and services reinforce each other, multiplying our impact and the value we deliver to all our partners. Our services help drive many of the wins I mentioned earlier. Still here are a few additional examples. We recently launched our consumer fraud risk solution, which leverages our latest AI capabilities and the unique network view of real-time payments I just mentioned to help banks predict and prevent payment scams. AI is a foundational technology used across our business, and it has been a game changer in helping identify such fraud patterns. We've partnered with nine UK banks, including Barclays, Lloyds Bank, Halifax, Bank of Scotland, Netwest, Monzo, and TSB to stop scam payments before funds leave a victim's account. TSB, one of the first banks to adopt the solution, indicated that it has already dramatically increased its fraud detection since deploying the capability. We're combining our loyalty, consulting, analytics, and identity services in different ways to help our customers capitalize on the travel recovery. This quarter, we extended our broad-based partnership with Expedia Group. Together, we will combine MasterCard's loyalty solution with Expedia's extensive travel supply to enable MasterCard cardholders to book travel using loyalty points. We also partnered with Thomas Cook in India to issue prepaid cards for international travel. The proposition includes cardholder access to over 450 cross-border travel offers through Mastercard Travel Rewards. And earlier this month, I met with our partners at Deutsche Bank, Lufthansa, and Frankfurt. We resigned our longstanding partnerships with Lufthansa Group for its Miles & More loyalty program and welcomed Deutsche Bank as the new issuing partner. In this enhanced relationship, you'll see a combination of our loyalty solutions, personalization capabilities, and digital user experiences help The partnership take off to the next level using AirlineSpeak. We're also leveraging our personalization and test and learn capabilities to help our partners across the ecosystem enhance the customer experience and improve acquisition and conversion rates. For example, we combine Dynamic Yields personalization capabilities with our marketing services to drive digital customer acquisition for Echobank in Nigeria. In addition, HP Inc. has partnered with us to deploy personalized back content for their consumers across Canada and Europe. And on the merchant side, we are working with 7-Eleven in Australia, using our test and learn capabilities to support the rollout of new store concepts and evolve its food and beverage offerings. Our third strategic priority area is embracing new networks with a focus on open banking and digital identity. We continue to make progress in open banking and establish a series of new and expanded collaborations this quarter, including ones with Freddie Mac, Algon, based out of France, and DAPI in the UAE. These entities will leverage our smart and consumer permission data to drive increased financial inclusion and make digital interactions simpler and safer. Turning to digital identity, we're driving adoption across several new verticals, including travel, ticketing, retail, and financial institutions. Travel provider FlightHub is using our identity solutions to help travelers book their new next adventure. Sports teams across the U.S., including the New Jersey Devils, use these solutions to enable fans to buy tickets while reducing fraud on ticketing platforms. Major League Baseball used our new detect technology to ensure that all-star votes were authentic for this year's all-star game. In retail, we partnered with IKEA, who is using Ikata to help reduce friction and fraud. And financial institutions like Greenwood, a digital banking platform for Black and Latinx communities, are using our capabilities to authenticate consumers in real time, making financial empowerment a reality for more people. So in summary, we delivered another strong quarter of revenue and earnings growth supported by resilient consumer spending, particularly in travel and experiences. Our strong deal momentum continues with new wins and expanded relationships powered by our services, across a range of partners, including Unicredit, Fiserv, Tim Hortons, Brex, and many more. Our differentiated capabilities, diversified business model, and focused strategy positions us well to capitalize on this significant opportunity ahead. Sachin, over to you.