MasterCard Aktie

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.

So 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.

So look, I think we'll have time to get the specifics of Mastercard here in a second, but maybe we can start with you. I'd love to hear a little bit of color about yourself. For those that haven't had the pleasure of meeting you, maybe talk about your background, your history of the company.

Sure. I've been with Mastercard for 17 years. From the very beginning, I have always known I want to be the CFO of Mastercard. No, that's not true. In fact, I grew up in Mastercard as a General Manager. So 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. And then went back to London, co-headed international markets. And then last year, I headed back to Singapore. So I made 2 round trips between London and Singapore, running a huge cluster of Mastercard's markets and divisions.

I think one of the things that's 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, tokenization, right? The sort of innovation you just wouldn't have imagined in 2000, and also the fact that we got domestic switching in Japan, license -- domestic license in China. And now we have, again, had a groundbreaking win 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 -- I'm 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 it's going to be very helpful to this job.

So maybe we can talk about that. I mean you've been on the job now for about a month, and it is a different job, transition 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'll shape it?

My view of the role is, I can do this in my sleep. This is a piece of cake. It's not true. So I'm learning. I'm 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 don't go to consumers directly, right? And so 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. So that's really important.

And then, of course, 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're going to do that as well. So that's really important in my mind.

Of course, the second order of priority is going to be about a strong balance sheet because without a strong balance sheet that we won't be able to do the M&A work we need to do, positive operating leverage, continue to make sure revenue growth outpaces expenses. And the last thing is whatever excess capital we have, we'll 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's been a very dynamic marketplace. You've had travel disruptions in the Middle East. You've had ebbs and flows of gas prices. Can you comment on the current landscape as you see it and any callouts on recent spending trends?

Yes. I think what's 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. I mean, in the U.S., that resilience like continues to shine through. People are spending their money on travel. Americans are going to box office movies like Spider-Man and Odyssey. They're spending money on experiences such as dining. So entertainment in general is a huge category. So that's still there.

The other thing that's really impressive is, if you think about travel, people are still doing this. And it's like across the board, and it's both -- it's very broad-based, both in terms of affluent and also mass consumers. Of course, there are uncertainties, right? I mean we still have a war in the Middle East. But I think one of the things that's really important to remember is our business model is very diversified. We are diversified across different markets. In terms of payment flows, we're diversified. But also in terms of revenue mix, we have both payments and services. So that resilience -- our resilience really comes from this diversification. So I remain very optimistic about the growth.

So one of the things maybe I want to talk a little bit about is the operating metrics that we're seeing. In the first 4 weeks of August, broadly, all the operating metrics are in line with the first 4 weeks in July that we are seeing. So that's really strong, and that's very consistent and it's very positive.

Yes. No, that's great. It 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?

Yes, absolutely. So when I think about cross-border, we broadly divide it into 2 categories. One is cross-border travel. And then the other category we call card-not-present excluding travel, right? So nontravel cross-border. So if I think about the travel category, you talked about the discrete impact, that is the Middle East, yes. 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, 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.

And the other thing that I'm seeing in travel is people continuing to travel, but they're just shifting their traveling -- travel routes a little bit. So for example, your northern neighbor here, the Canadians are not coming to the U.S. as much now, but they're going to Europe, right? 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. So even though you see some puts and takes, but overall, I think it's more of a shift in terms of cross-border travel.

And then if you think about cross-border nontravel, 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's also like -- it also includes emerging categories like my subscription to Perplexity, people putting this up on the card on file, right? And so it's a recurring spend every month. And that's a new category. So all the AI platforms consumers are adopting, that gives us additional spend.

You're also seeing digital assets in crypto, for example, right? We talked about in our earnings is one of the piece that's 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's also wallet funding. People transfer money into digital wallets like the Revolut wallet or Wise wallet. So that's also happening. So all in all, I think the growth remains very strong in both travel and cross-border nontravel.

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're positioned very well. In fact, maybe let me also add one thing. I talked about operating metrics in line, August versus July. That's the same with cross-border as well, both for cross-border travel, but also nontravel. Same idea. If you look at the first 4 weeks of August versus the first week -- 4 weeks of July, like-for-like basis remain in line, very strong.

So your question is about our position in the regions. I mean I don't want to just speak about the regions 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, right? Even in a developed market like Japan, cash as a percent of retail commerce is still like close to 50%. So that gives us additional opportunity to convert cash into digital payments. So therefore, if I think about the overarching pillar that we have in Mastercard, which is diversification, right? We do not want to hang our hat only on one branch. So 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's more digitization opportunity. So there's lots of white space markets we can continue to diversify into. So that's the first pillar of diversification.

The second pillar of diversification is really around different payment flows. Historically, Mastercard serves more P2M flows. Now we're getting into B2B commercial flows, cross-border remittances, P2P flows. So that also gives us the additional tailwind. Our network is about moving money from A to B, whether that's P2M or B2B, we're able to leverage the same network to serve different use cases.

And 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. So when I think about these 3 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.

Okay. 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. And the announcement was that Mastercard will power their local payment system. So can you unpack just what that means for the nonpayment players out there? What does it mean to operate the local switch? And could you share some more details on how that actually works?

Yes. This is actually a pretty significant development for us, even though the UAE is not a huge country, but it's 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. And 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 don't have the capabilities to do it. I actually need to partner with somebody.

So 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. So we set up a joint venture with AEP. There's a domestic mandate that all debit transactions need to run through a domestic switch. But guess what? Mastercard is the technology, is the switch -- underlying switch for the domestic solution. So in the end, we are the alternative in the context of the sovereignty agenda. And in a sense, we process almost 100%, almost 100% of the debit transaction. We will. We're 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's a sovereignty agenda, but we are completely relevant and in play in the UAE. So we actually find this playbook very, very strategically important because we will be able to replicate in other markets as well.

Great. And 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, this is like the -- we talk about services providing the flywheel effect. But I think in the first instance, we have to win the payment flows. So the core business is very important. There's this mutual dependency between the 2. I talk about services, and we actually publicly talk about how 60% of our services attached to the network. It's based on the payment flows that we process, right? So I think services strengthen the network and differentiate the network, but the network and the transactions we process provide the foundation for services. So these things are very much interlinked.

And then 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? And so 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. So again, the 2 things reinforce each other.

Yes. Okay. Another example, Mastercard innovation. Maybe we can talk about just the competitive intensity and deal economics in the market. There's been a lot of movement over the last couple of years. A lot of focus on just competitive dynamics in payments more broadly. What is your perspective on that? Has the competitive intensity increased? Has the locus of competition changed? And 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. And 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. So it's not a new phenomenon. We have always lived with it. And I think the key here is, like I said, the reason for investing in the front line is we're going to stay very close to the customers. Again, we are a B2B model. So this whole co-creation, we cannot just inventing -- 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. We always want to win for sure. But we are also very disciplined. It's not like I want to win deals at any cost, right? Deals need to be profitable. So we want to win market share in a way that's profitable. So we do have an approach where we measure our success against not just share and the volume, but also profitability.

And then 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 won't be able to do the services. But like I said, we do have services differentiation, and we use that as a lever as well. So new products, new services, use them as differentiation beyond just money or economics to win deals.

And 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, Gentech, 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 what 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 referenced value-added services several times in that answer. Maybe we could 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?

Yes. 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. And -- but it's not just the revenue growth. It's also a differentiation. I mean in services, I talked about the 60% that attached 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 like 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.

And you've made several acquisitions in cyber. Maybe we can double-click on that a little bit because that's been a big topic of conversation over the past couple of days. What are you seeing in terms of the demand environment for cyber? And 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?

Yes. Very much so strong demand, broad-based demand, and it's also end-to-end and Mastercard has been in this business for a long time. So 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, which is -- Recorded Future is in the business of providing customers with insights into the dark web, for example, compromised credentials, phone numbers, addresses, right? So we can then help customers proactively anticipate threat trends and fraud intelligence. So with the Recorded Future acquisition, we actually have developed a new product called Threat Intelligence, and it's attached to the network. It's distributed through the network and it's priced through the network. And that's a great example of saying we may have purchased the capability that's more a one-to-one sales model, which doesn't lend itself to scaling very quickly, but we're 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's an example of what we are doing with cyber.

Yes. So let's 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're going after it?

Yes. Well, first of all, I just want to let you know that we closed BVNK on August 3. It's 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's a very important asset.

People ask me what are the use cases for stablecoin. First of all, I don't think it's really a P2M use case. In P2M, it's 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, Me2Me, right? And also, I can envisage if, let's say, someday smart contracts take off. Like real estate transactions very clunky in most countries, right? There are a lot of friction. You need a lot of middlemen just because the buyers and sellers don't know each other. There's a trust issue. But if contracts truly become smart contracts and they can be executed on the blockchain, having a programmable money that can be executed condition 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're 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 don't 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. And I think that's a very significant capability we have developed. You also probably heard that we made an announcement of Open Standard, right? This is, again, a joint venture among industry players and our BVNK capability will be very, very relevant in this.

Yes. So you just talked about one of the most recent acquisitions. I'd 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?

Yes. I mean if I think about my -- again, my role as CFO, part of the capital allocation will be making acquisitions and strategic investments. So I talked about the 3 pillars of our diversification, right? So we'll continue to make acquisitions when the opportunities serve us right in terms of growing the core. So it's -- acquisitions are not just in services, which is the third pillar I talked about. It's not just in new flows, which is the second pillar. But it's 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 right relevant play. Why? Because it shortens our speed to market. So time to market can be faster. We will make acquisitions when it's 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'll continue to make acquisitions to drive the growth algorithm.

That's 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?

Yes. Well, 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. So that's really important.

But I think, again, our services capabilities create that durability as well for the core and the core business creates the durability for services. Those 2 things self reinforce each other, and that's also very important.

But 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. So the ability to work with Apple on Apple Pay, right, and 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 is 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 now Mastercard data. At the 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? So if we play this out another 10 years, 20 years, I still think that 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, we'll be able to serve in all these different verticals, whether it's in person, whether it's online, whether it's agentic. And the ability to do that right to play in all verticals, so we're truly omnichannel is also another reason that will give us the durability of growth.

Great. Well, we got a couple of 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 run rate going forward?

Yes. I think about pricing as pricing for value. Like tokenization is a great example, right? We launched tokenization a while back. We continue to drive more penetration in different markets. But 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 -- and now we can actually price for the value that we deliver to the ecosystem. And 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. So 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.

Makes sense. All right. One more here. And 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.

Yes. Look, I've been working on China -- I mean, for the entire 17 years, this has been part of my mission to get a license, domestic license. And for those of you who are familiar with China, it's not easy. It's not an easy market. And we -- it took us a long time. We got there. And we have our domestic license granted to us 2, 3 years ago. And 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. And 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 well, 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 account, and 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 4 cities. And we also launched in Chengdu as well. So that is actually really important.

And given that we now have a domestic license and we're domestically relevant, the strength now we have is not just on the issuance side and the acceptance side, but it's 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're buying a robot on JD.com, the ticket size is oftentimes much greater than what you would have in a digital wallet. So people will use credit cards. So that's something we're working on.

And then services is another realm of opportunities for us that I'm extremely optimistic about. But more fundamentally, in our business, I always have this saying: without home, there's no away. So in order to get cross-border transactions, you must first be relevant in the domestic space. So our domestic relevance is fueling the growth in outbound travel for the Chinese consumers, and we're seeing that very clearly in our data. And also without home, you're not going to have inbound acceptance either because if I have limited card acceptance. Well, when you go to Shanghai, you won't 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. So both from an outbound and inbound perspective, it is also helping us drive growth.

Great. That's a great update. Maybe we should leave it there. But thank you so much for being here. Really enjoyed the conversation.

Thank you.

Good morning. My name is Julianne, and I will be your conference operator today. At this time, I would like to welcome everyone to the Mastercard Incorporated Q2 2026 Earnings Conference Call. [Operator Instructions] Thank you.

Mr. Devin Corr, Head of Investor Relations. You may now begin your conference.

Thank you, Julianne. Good morning, everyone, and thank you for joining us for our second quarter 2026 earnings call. With me today are Michael Miebach, our Chief Executive Officer; Sachin Mehra, our Chief Financial Officer; and Ling Hai, our President of Asia Pacific, Europe, Middle East and Africa and incoming CFO effective August 3. 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 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'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 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. This is Sachin's last earnings call as CFO, and he's sitting right across the table. So before turning to our quarterly results, I'd like to take this moment to thank him and recognize him for the significant impact he's had in the role. Sachin? Thank you. And we're excited to see you carry the same focus, discipline and drive into your new role as Chief Business Officer.

At the same time, as you heard from Devin, Ling Hai is in the room today. He will assume the role of CFO, bringing his deep knowledge of our business, our products and our industry. You've seen that play out in the company's strong track record of supporting and growing with customers across Asia Pacific, Europe, Middle East and Africa. These changes as well as those across the entire leadership team reflects the strength and depth of our team. Operating as one team brings complementary experience and perspectives that sharpen focus, strengthen execution and create greater value for our customers and shareholders.

From a position of strength, this evolution will help us capture the opportunities ahead and continue realizing Mastercard's full potential, and that's priceless, of course.

With that, let's drive into this quarter's results. The second quarter 2026 was another strong quarter for Mastercard. Net revenues were above our expectations, up 12%. Adjusted net income up 16% and value-added services net revenue up 18% all year-over-year on a non-GAAP currency-neutral basis. The macro environment remains supportive. Consumers and businesses are healthy and continue to spend, supported by positive job growth, low unemployment and real purchasing power in many major economies. At the same time, we continue to monitor our geopolitical uncertainty and its potential economic impacts.

But macro is the only one part of our growth story. Our performance is driven by a clear strategy, disciplined execution and differentiated value for our customers. We remain focused on consumer payments, commercial and new payment flows and value-added services and solutions, each with significant runway and together, reinforcing Mastercard's virtual cycle. That's a good road map for today's call. So let's dive in.

Starting with the secular opportunity. There is significant runway to digitize consumer and commercial flows for many years to come. As a reminder, at our last Investor Day, we shared that only 1/3 of consumer transactions were corded, and the secular opportunity is even larger in commercial flows. We're targeting the secular opportunity in a way that drives outsized growth to Mastercard. For example, we continue to work with governments around the world to digitize disbursements and benefits programs, making it easier for consumers to access and use benefits and driving more volume to Mastercard. This includes food assistance programs in the United States, which represent $100 billion of spend each year.

Through our exclusive partnership with Evermore, we are now rolling out a new program for beneficiaries to have a simple, more secure solution. And we're also capturing incremental transactions through our exclusive partnership with Alipay Plus, embedding Mastercard credentials into their network of e-wallets. This quarter, we're expanding this partnership in Mexico with Clip, a leading fintech with a small and micro business network approaching 1 million merchants. Combining Clip's merchant network, Alipay Wallet capabilities and Mastercard's global payment capabilities is a powerful solution to digitize payments in Mexico. And as a country where more than 70% of consumer payments are cash based. Mastercard is exclusively tokenizing the stored wallet balances, enabling users to transact across Mastercard's global acceptance network.

Complementing our efforts to drive outside secular growth, we are finding new ways to power payments. Switching is critical to our virtuous cycle. More switched transactions lead to more data to fuel our services, increase our ability to distribute services over our network. We steadily increased our switching penetration now reaching 72%. The reason Mastercard's rich value proposition, especially compared to local networks. So our global acceptance reach, consumer protections, digital capabilities and security overlays.

We're also expanding our role in switching by flexing our network architecture. We're adapting to best meet the needs of the markets that we serve while ensuring we meet our long-term growth objectives and drive the virtuous cycle. That's exactly what we're doing in the United Arab Emirates. The Central Bank of the UAE through its subsidiary, Al Etihad Payments, is partnering with Mastercard to build the switching technology in the UAE for the next phase of the country's domestic payments infrastructure. And we will serve as the prime international scheme for co-batched credit cards with the domestic scheme named Jaywan. As part of this partnership, Mastercard will provide switching services behind domestic debit in Jaywan Mastercard cobatch credit transactions in the UAE. These transactions are incremental to what we process through our global switch.

Mastercard will also provide value-add services to the domestic switch, including fraud prevention and cybersecurity. Our direct relationships with ecosystem customers in the UAE continue as they do today. And that's our best-in-class technology at work locally, powering the UAE's digital economy facilitating more transactions and further scaling our services. That is another example of how we partner locally to drive collective value.

And we continue to win and expand issuing relationships across our business. In the first half of 2026, we won several hundred flips and deal expansions, which are expected to drive trillions of dollars in incremental volume to our network over the next decade. This quarter, we renewed a key partnership with JPMorgan Chase on the Chase Freedom Flex portfolio in the U.S. and in Mexico, renewed our partnership with Banamex, where we have exclusivity for nearly all portfolios, representing almost 19 million cards. We've expanded our partnership with Revolut, now supporting their affluent debit proposition, Ultra across Singapore and Australia, plus their commercial portfolio in New Zealand, all building up on our growing partnership in the U.S. and long-standing relationship globally.

We flipped through Lion Federal Credit Unions, U.S. credit and debit portfolios as well as Eurobank and higher consumer and commercial portfolios in Greece. Once complete, there's over 1 million new Mastercards across the 2. We launched new co-brands with Uber and Hilton in Mexico. And with the recent flip in Saudi National Bank's travel co-brand portfolio, we're now the exclusive partner across their credit, debit, prepaid and commercial portfolios.

I shared some wins that span commercial already, but let's dig into that a bit more. Mastercard's commercial debit and credit volumes grew at 12% in the second quarter. We continue to build on this momentum as banks and large corporates turn to Mastercard's modernized commercial payment capabilities. We've added, on average, 6 million new Mastercard small business cards to the market each quarter for the past several quarters. And we see incremental issuance from this quarter's wins, including Intuit in the United States.

Truist Bank, in the U.S., has chosen Mastercard's leading virtual card capabilities for their corporate clients invoice-based payments needs. Also, we continue to support global money movement through Mastercard Move, most recently partnering with WeChat Pay Hong Kong and Pyrimid in India. And then in the travel space, we have an exclusive partnership with Riyadh Air, Saudi Arabia's new national airline. This is an exciting global First, as consumers can use their suite of branded prepaid and credit cards to purchase tickets and build brand loyalty, while travel agents benefit from seamless virtual card payments and Riyadh Air can streamline supplier payments.

We're winning -- our geographic footprint, differentiated proposition and innovation allow us to capture more of the market. We have added over 230 million net new Mastercard into the market in the 12 months through quarter 2 of this year. That's new issuers, expanded relationships and even more payment transactions, more tokens, all of which we can also attach services to. So when you think about our virtuous cycle, it's real and at scale.

The combination of that network scale, the breadth of our data and the depth of our customer relationships with differentiated services underpin our long-term sustainable growth. Our services benefit from Mastercard's proprietary transactional data as well as open finance, loyalty and identity trends and insights. This also includes bespoke services like consulting, marketing, both key to winning carded market share and optimizing our portfolios. For example, starting this quarter, we are managing the portfolio conversions for Westpac in Australia and Yapi Kredi in Turkey following our recent wins. We're working with Santander in the U.K. to accelerate cross-border spend through targeted marketing campaigns and our work with Bancolombia will help optimize their small business and commercial portfolios, the outcome, more payments volume.

Moving to Security Solutions, a hot topic in today's environment, the proliferation of AI new frontier models amplifying new needs. We're seeing increased demand for Mastercard's robust and unique security solutions as clients navigate the ever-expanding threat landscape. Today, we have differentiated capabilities that span cybersecurity, identity and fraud. Our value suite is unmatched, and we continue to build up on it. Let me share a few examples.

We're identifying threats before they materialize, how we're bringing recorded futures market-leading intelligence capabilities to our clients globally and seeing strong engagement across sectors. This quarter, we partnered with Wipro, a global information technology and consulting company, to further scale our capabilities.

Building up on our acquisition of Recorded Future, we also launched Mastercard Threat Intelligence, specifically for payment fraud. In its first 3 quarters, Threat Intelligence has identified more than 7 million card testing transactions across 192 countries. Stopping that activity prevented an estimated $172 million in fraud linked to malicious domains. That's real value to us, our customers and, of course, our cardholders. And with strengthening security and customer experiences, Mastercard's identity solutions help customers authenticate identities for payment and nonpayment use cases.

This quarter, Rogers Communications in Canada and Delivery Hero leverage Mastercard's identity capabilities, the verified transaction authenticity, customer onboarding and more. And we continue to make commerce safer through new innovations. Mastercard Merchant Trust Services is a new suite of AI-powered capabilities to help identify fraudulent merchants. Keeping the scammers from setting up shop will reduce fraud, cut out disputes and provide greater security, the goal, real transactions for real purchases from real merchants.

Our value-added services and solutions growth engine is strong and durable. We benefit from the underlying market tailwinds in security, data and AI, personalization and more. There are also natural synergies between our value-add services and solutions and our payment network. That includes distribution. Today, about 60% of our value-add services and solutions net revenue is network linked. We're attaching services to Mastercard switch transactions as well as faster growing drivers such as tokens or card not present transactions.

And customers are using more Mastercard services, both existing and new products, we do sell through direct engagement and through distribution partners. We recently launched Mastercard Advantage Partner Program and have more than 200 partners expanding our reach. All of this drives growth and expanding yields, more customers, more services adopted by each with higher contract value. That's the virtuous cycle at work. Again, and that's powerful.

We play a central role in commerce today, and we are shaping the future of commerce and by helping our customers navigate that future. Agentic Commerce is the next evolution in payments where the importance of security, transparency and control only increase. Agentic Commerce creates a significant opportunity for Mastercard. It leads to incremental transactions and even more opportunity for our services.

The Mastercard Agent Pay, we're helping power secure and trusted agentic transactions across our global acceptance network using tokenization, 0 liability protections and unique dispute resolution capabilities. These capabilities are just a few of the reasons why we expect cards will prevail in an agentic world, both in consumer and commercial use cases. It's early days, but engagement across the globe is energizing. The rise of agentic commerce also brings about an entirely new class of payment use cases, machine-to-machine payments. This is an expansion of our addressable market and one that we are at the forefront.

We recently announced Mastercard Agent Pay for machines, which enables AI agents to purchase low-value digital services such as APIs, compute, data, content at machine speed. With on-chain permissioning and off-chain settlement, Mastercard is the only network enabling machine-to-machine payments. An ecosystem is rallying behind us. At launch, we had more than 30 industry leaders participating, including Alien and international, BBK, checkout.com, Cloudflare, Coinbase and OPX. We are a first mover in this space and one with credibility and trust to deliver.

Next is stablecoins. We believe stablecoins have great potential but to work. There are a few essential principles for it to scale, reliability, security and interoperability, and that's what Mastercard delivers. There's clear utility for stablecoins, for example, in some B2B and P2P flows, but no problem to solve in P2M. In fact, digital asset players are choosing to partner with Mastercard to unlock trusted commerce at scale, benefiting from our global acceptance network protection- and security.

We offer a wide variety of crypto co-branded propositions, and we're seeing strong traction. Our crypto cobrand volume has more than tripled over the last 2 Years. This quarter, we expanded our relationships with Bit Get and Kraken. Stablecoins are additive to our network. It's another opportunity for us to enable choice and how our customers and cardholders engage in commerce. We're also enabling our customers to participate in the emerging digital asset ecosystem through the creation of open standards. For our customers that provides direct participation, reduce dependency on third parties and the benefits of distributed economics. Open USD set to go live later this year. It's another coin that we will enable across our network.

We believe this space will evolve and with it will be nation of digital assets, including blockchains, coins and tokenized deposits, all operating in tandem and with ciat. That's an opportunity for us. We expect to close the BVK acquisition this quarter. With BVNK, Mastercard will serve as the trusted interoperable layer, enabling customers to send, receive, store and convert assets. BBMK's enterprise-grade payment orchestration capabilities, robust licensing and connectivity are highly differentiated, and they are in market today.

So in summary, we have a proven strategy and continue to deliver consistently strong results. Our confidence is backed by proof points. We are winning by capturing outsized growth with delivering differentiated value, and we are shaping the future of commerce. That is what drives sustainable growth.

Sachin, over to you, one more time.

Great. Well, thank you, Michael. Look, before I jump into the numbers, I'd like to take a moment to thank all of our investors and analysts. I truly appreciate your engagement, your thoughtful questions and the support over the past 7-plus years that I've had the privilege of serving as the CFO of this company. Mastercard is a special company with so much opportunity ahead, and I'm excited to continue driving our strategy from a different seat. I'm not going very far and our paths will cross again in a different capacity, and I look forward to it.

So now let's dive in. Turning to Page 3, which shows our financial performance for the second 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 12%, reflecting continued growth in our payment network and our value-added services and solutions with minimal impact from dispositions.

Operating expenses increased 10%, including a 1 ppt benefit from dispositions. And operating income was up 14%. Net income and EPS increased 16% and 19%, respectively, driven primarily by the strong operating income growth in the quarter. EPS was $5.04, which includes a $0.14 contribution from share repurchases. During the quarter, we repurchased $4.9 billion worth of stock and approximately $700 million of additional stock through July 27, 2026.

Now turning to Page 4, where I'll speak to the growth rates of our key volume drivers for the second quarter on a local currency basis. Worldwide gross dollar volume, or GDV, increased by 8% year-over-year. In the U.S., GDV increased by 6% with credit growth of 10% and debit growth of 1%. As a reminder, the Capital One debit portfolio migration was basically complete in Q1. Excluding the impacts from that migration, our U.S. debit GDV growth would have been 8%. Outside of the U.S., GDV increased 9% with credit growth of 9% and debit growth of 10%.

Cross-border volume increased 12% globally for the quarter, reflecting continued growth in both travel and non-travel related cross-border spending.

Turning to Page 5. Switched transactions grew 9% year-over-year in Q2. We continue to drive contactless penetration, which in Q2 stood at 80% of all in-person switched purchase transactions. This is up 5 ppt since the same period last year. And token penetration reached over 40% of all switched transactions this quarter. In addition, card growth was 5%. Globally, there are 3.7 billion Mastercard and Maestro-branded cost issued.

Turning to Slide 6 for a look into our net revenue growth rates for the second quarter discussed on a currency-neutral basis. Payment Network net revenue increased 8%, primarily driven by domestic and cross-border transaction and volume growth as well as pricing. It also includes growth in rebates and incentives.

Value-Added Services & Solutions net revenue increased 18%. This includes a minimal drag from dispositions. The increase was driven primarily by growth in our underlying drivers, strong demand for our security solutions, consumer acquisition and engagement, digital and authentication and business and market insights and pricing.

Now let's turn to Page 7 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 10%, while worldwide GDV grew 8%. The 2 ppt difference is primarily driven by pricing. Cross-border assessments increased 20%, while cross-border volumes increased 12%. The 8 ppt difference is driven primarily by pricing in international markets and mix.

Transaction processing assessments were up 12%, while switched transactions grew 9%. The 3 ppt difference is primarily due to favorable mix and pricing, partially offset by lower revenue from FX volatility. And other network assessments were $326 million this quarter.

Moving on to Page 8. You can see that on a non-GAAP currency-neutral basis, excluding special items, total adjusted operating expenses increased 10%, which includes a 1 ppt benefit from dispositions. The growth in operating expenses was primarily driven by spending to drive the execution of our strategic priorities, including initiatives to further harden our infrastructure, geographic expansion and product innovation.

Turning to Page 9. Let me comment on the operating metric trends for Q2 and the first 4 weeks of July. Switch metrics were generally in line with Q1 and underlying spend remained stable. Of note, excluding Capital One debit, on a like-for-like basis, U.S. switched volume growth was 10% or 2 ppt higher sequentially. This increase was driven by higher spend on fuel and overall strong consumer and business spending.

Moving to our cross-border metrics. Our overall cross-border volume growth remained healthy at 12% in the second quarter. Cross-border card-not-present ex travel remained strong at 20%, benefiting from increased card-not-present spend from Venezuela and the timing of large retail promotional events. And while cross-border travel was down sequentially, relative to the April metrics we discussed on our last earnings call, we saw improved growth in the quarter due to lower impacts from the developments in the Middle East and timing of holidays.

Now as we look at the first 4 weeks of July, our metrics remained relatively stable and strong. Looking specifically at card-not-present ex travel, let's focus on July compared to June. The sequential decline is primarily driven by timing, including the large retail promotional events that happened in June this year as compared to July last year and by mix of days.

Turning to Page 10. In Q2, Mastercard delivered above expectations. This strong performance was broad-based with the upside primarily driven by lower-than-anticipated impact from the challenges in the Middle East an uptick in cross-border spend out of Venezuela, where we are market leaders and strong demand for our value-added services and solutions. These results, despite an uncertain geopolitical and economic backdrop, are evidence of the resilience of our diversified business model and our continued focus on execution across both payment network and value-added services and solutions.

As Michael said, we continue to see a macroeconomic environment that is generally supportive. Around the world, economies are adapting to changing conditions with consumers and businesses continuing to demonstrate resilience. This is reflected in our underlying drivers. We continue to monitor geopolitical tensions and related energy prices, along with critical economic data like unemployment, inflation and so on. But overall, the underlying fundamentals of consumer and business spending and travel remain healthy.

As we look at the second half of the year, our base case continues to assume spending remains healthy. As noted earlier, impacts from the instability in the Middle East moderated throughout the second quarter and were less severe than we anticipated. As we look to the rest of the year, we estimate impacts from the Middle East conflict will remain at similar levels to what we saw towards the end of Q2. As you know, the environment in the Middle East remains dynamic. But remember, we are a diversified company, and that's true across payment products, geographies, spend categories and services. This, coupled with our continued execution, helps us navigate across a range of operating environments.

Now turning to our thoughts for Q3 and the remainder of the year, which include the impacts related to the acquisition of BVNK that we expect to close in Q3. As it relates to our expectations for the third 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 a minimal impact from inorganic activity and a headwind of approximately 0.5 ppt from foreign exchange, given the recent trajectory of the U.S. dollar.

From an operating expense standpoint, we expect Q3 growth to be at the low double digits range versus a year ago on a currency-neutral basis, excluding inorganic activity and special items. We anticipate a 0.5 ppt headwind from inorganic activity, while foreign exchange is forecasted to be a tailwind of approximately 0 to 0.5 ppt for the quarter.

As we look to the full year of 2026, we expect net revenue growth to be at the high end of low double digits range on a currency-neutral basis, excluding inorganic activity. Although this is the same range we shared previously, we now expect to be higher within the range than our prior expectations, largely due to our stronger first half performance. We anticipate minimal impact from inorganic activity and a tailwind of approximately 1 ppt from foreign exchange.

As it relates to operating expenses, year-over-year growth is expected to remain at the low double digits range versus a year ago on a currency-neutral basis, excluding inorganic activity and special items. We expect a minimal impact from inorganic activity and a headwind of 0.5 to 1 ppt from foreign exchange on a full year basis.

Other items to keep in mind. On other income and expense, in Q3, we expect an expense of approximately $125 million. This is higher sequentially, driven primarily by incremental interest expense related to our bond issuance in June. This excludes gains and losses on our equity investments, which are excluded from our non-GAAP metrics. And finally, we expect a non-GAAP tax rate in the range of 20% to 21% for both Q3 and Q4.

And with that, I will turn the call back over to Devin.

Thank you. Julianne, you may now open the queue for questions.

[Operator Instructions] And our first question comes from Ramsey El-Assal from Cantor Fitzgerald.

I wanted to ask you about stablecoins and agentic commerce sort of together. They're both sort of focus areas for -- you commented on it in your prepared remarks. Do you see use cases in agentic that will require stablecoins, something like micro transactions perhaps or again, traditional Mastercard credentials basically fulfill all the use cases that stablecoins can? I'm just trying to figure out whether there's a unique value proposition you're looking to solve for with stablecoins.

Right. Thank you for that question, Ramsey. So as we were laying out earlier, we're innovating around the future of payments. And these are 2 areas that will shape the future of payments, agentic commerce and stablecoins. Let me start off by talking just agentic commerce, and then we see how transactions can flow in agentic commerce. So there's your -- the consumer-oriented use cases in agentic commerce, where keyword search turns changes, and we may use agents for that. That could be an LLM, that could be a first-party agent by a large retailer. And there are transactions that are down and delegated to agents and that can happen very well through the existing card networks.

So what you need for that is that's what merchants always need, they need reach, they need particular user experiences. That's the same. That's true for consumers. So we really believe that cards will prevail in that world. This is a tremendous opportunity for us also on the services side, through tokenization, inside tokens and so forth. We talked about this many times. The card infrastructure and the card ecosystem and the Mastercard proposition within that is unique. It's unique because we have additional capabilities that we put into the Agent Pay protocol from us and 1 of them is verifiable intent, which allows you to basically challenge a transaction, say, I never wanted to buy this. And then the chargeback process can kick back in. This was innovated together with Google.

So there's some unique propositions here on the Agent Pay side, but it just basically comes back to the main point that cards can prevail there. Now if you look on the B2B side, you can see there's a range of agentic commerce transactions that can happen where you have an agent that does purchasing for a company that can very well happen on the card ecosystem very similar to what I just said on the consumer side. Amounts, speed, purposes, they will need the protections, they need the global reach, all of that can apply. And we believe that's a continued opportunity for us, particularly on the services side again.

Now there could be an entirely new range of transactions, and that is machine-to-machine payments. That is low-ticket, micro ticket transaction that happened at a very high velocity. And for that, we can see a world emerging where different kind of underlying infrastructure is required. And for that, we've put out our protocol, which is an evolution of Agent Pay, which is Agent Pay for machines. This is the only network protocol that's out there today to facilitate that.

Now the underlying infrastructure for that, we've mapped it out. You can start to see that there is a transaction that is recognized from one agent to another. These machines talking to each other. But the settlement happens in different kinds of rails. That could involve stablecoins, but it also could involve different types of settlements. We're actually quite open to that. But what it needs is the immediacy of these agents to recognize that transaction, and that is what Agent Pay for machine actually does.

So there is a connect with stablecoins. You could see that stablecoins play a role, but not the only thing. Stablecoins on the other hand, for us is a separate topic generally, but will play a role in the financial ecosystem of the future, which is why we have been investing. Our current approach on stablecoins is really facilitating that you can spend your crypto balances if you still want to or your stablecoins balances, that you purchase the same. We facilitated settlement in our networks. If that is so wanted, we facilitate money movement using stablecoins to drive immediacy, really in transparency of cost.

But it's also true that stablecoins isn't the answer to everything because you still need protections, you still need acceptance and you still need to kind of find your way into that. We expect the world of multiplicity, many coins, many chains. And all of that needs a trusted interoperable layer because people will transact across different coins and so forth. And that is what BVNK will do for us. Sachin mentioned it, we're going to -- we're expecting to close the BVNK acquisition. So that is another tremendous opportunity for us. Across the whole thing, there's still a services opportunity for us. That's a lot more than you asked for, Ramsey, but it is all very important, very, very excited about it. And the 2 topics very much for your questions, they do interlink.

Our next question comes from Sanjay Sakhrani from KBW.

Congratulations again. Sachin, I have a question for you on the acceleration you saw in cross-order from April to June and into July. I know you mentioned the impact of the Middle East conflict being lower, but it seems like a pretty sizable lift. So I'm curious if the World Cup had any play in that and factored into that? And then should we expect some moderation and obviously, anything else to call out?

Sure, Sanjay. So a couple of things to actually talk to as it relates to the trends we saw between April, May and June. Certainly, you saw a recovery in terms of cross-border travel in the Middle East. Now just to give you a little bit of color as to what we're seeing in the Middle East, broadly speaking, so we did see better spending trends as it relates to outbound from the impacted GCC countries into other parts of the globe. Hard to identify whether that's necessarily tied to the World Cup or not, but we saw trends which were starting to actually present themselves across both consumer spending and commercial spending. So for me, the way I kind of think about it is greater confidence in terms of how people are actually doing that outbound spend. That's also tied by the way to increasing capacity from flights and airlines and things of that sort. So that's important to recognize.

The other thing which has been supportive of cross-border during the quarter has been Venezuela. And I called this out in my prepared remarks. Important to understand what's going on there. I think all of you are aware that we deconsolidated our Venezuela operations in 2018, where we deconsolidated revenue and we deconsolidated volumes at that point in time, primarily due to the fact that it was a very challenged repatriation environment at that point in time. So the ability to actually get U.S. dollars from Venezuela was challenged. Well, what we've seen is actually very interesting because over the course of the first quarter and particularly going into the second quarter, there has become an increased availability of U.S. dollars in Venezuela. And what that's effectively meant is that consumers have greater access to U.S. dollars, and they're utilizing those U.S. dollars for the cross-border spending, mostly in what we call card-not-present ex travel.

So that's less about travel. That's more about card-not-present ex travel. And those U.S. -- and also just to kind of just put a bow around it, we are the market leaders as it relates to Venezuela, and it's primarily a debit market. So that's where you're seeing that spend come through. So what you're seeing is the impact of both that more, I should say, lower than April effect, which came through in May and June as it relates to outbound travel from the Middle East, but what you're also seeing is the trends from Venezuela, which have been holding up pretty well, to be honest with you.

So this is a competitive differentiator for us. We are the market leaders. And as you've seen the U.S. dollar availability come into play, you've seen that volume come through in terms of what we're seeing in card-not-present ex travel.

Our next question comes from Andrew Jeffrey from William Blair.

I wanted to add drill down perhaps a little bit, Michael, on some of the domestic switching comments you made. I think the UAE initiative, in particular, is pretty compelling. What other markets are you targeting for those kinds of solutions? And I wonder if given all of Mastercard's capabilities, Europe is potentially right despite their closed-loop initiatives for the same kind of solutions?

Great question. Important topic. So I want to take you back. I think it's slightly shorter than previous answer, I think. I'll make it -- I'll take you back to 2022 though. This was a time when we were in COVID, and we said with everything that's going on, it's important to invest in the resilience of our business. And we put a particular focus on our technology strategy. Really was the goal to allow us to run anything anywhere. So that's what we did at the time and drove modularity of our network. And that instance in the UAE is exactly that.

So we're basically running a part of the switch in the UAE and it gives us access to transactions that we didn't have before. So it's a good partnership from that perspective, upside for us, but it gives that resilience and global technology to the UAE, tremendous partnership. It's not the only partnership, though, where we have that. We have different versions of that, but always coming back to. It has to work from a technology perspective. It has to work from an economics perspective, the give and take have to work for us. But then we can get access to more transactions, which fuel our virtuous cycle, as I said before.

We've done something like this in South Africa, where we build a real-time payment switch that can actually carry anything. It can carry any ISO 2022 transaction, can carry a card transaction. So this is the kind of technology that we have or we are in the process of making available in Europe. Now Europe is a very competitive market with lots of payment choices for consumers there on the B2B side, on the card side. The digital euro is in the making. There's a lot going on in Europe. So we feel very good that we have this technology that allows us to partner in different ways.

For now, we are very well positioned with our card proposition in Europe. You know we used to be Euro card. So we have deep European roots, and we're competing very effectively today. As far as there, these local alternatives, various local gyros and so forth, a lot of co-badge partnerships, we partner with the wallets, like Swish in Sweden, like Bizim in Spain. So wide set of options right now. At this point in time, we bring the most value through our card propositions, but we have the flexibility to do what we need to do should the time come and we find better engagement.

So that's how I look at it. If you go into Asia, you see in the stand there are partnerships that we have with switches and so forth in other parts of the world. So this run anything anywhere concept is really important for us to see where the world is going, but always comes down to our economic principles, apply our services, economics and standard technology that we can use. So we don't have a 1,000 flours blue kind of landscape for us.

Our next question comes from Dan Dolev from Mizuho.

Great quarter. Congrats, Michael and Sachin. I have a question about specifically about cyber demand. So we think given what we're seeing in security software, Micos is driving very strong demand for cyber demand. Can you maybe unpack the upside to that for Mastercard because should be a pretty big catalyst in our view?

Right. So on the safety and security part of our portfolio -- great question, Dan. So you know we have gone much deeper than other market participants on the cyber side, recognizing that as the world digitizes faster. Clearly, that's an underlying growth driver for us, a tailwind for us. There is more demand. We initially started out in fraud. We're now in fraud and identity, and we're in cyber. That is the portfolio. Those are the 3 big categories.

On the cyber side, we've strengthened our proposition with the addition of Recorded Future. So that's what the portfolio is. Currently, when you think about what is occupying the minds of CEOs with occupying the minds of directors in the Board room, it is cybersecurity. And the recent discussions around frontier models, and how do you go about them? Is it more of a threat, it's actually a helpful tool for us. You identify vulnerabilities in your company's technology. It's a bit of both. And we have been engaging from day 1 on that.

So all of that put cyber into the kind of the center of the discussion. We have strong relationships with cyber and a lot of our customers really through the fraud side. So that is a natural growth path for us to engage the CECL and talk about the expanded capabilities that we have. While at the same time, the CEO talks the CISO and say, what are we doing to protect ourselves. So it all comes together in the moment, we're meeting the moment with this portfolio.

When I was talking earlier about Threat Intelligence, here, with this ever-expanding threat landscape, it is almost impossible for any company to meet every fraud risk that, that potentially is. So what you really need to know is you have to have targeted information on how you might be targeted. And what is the vector, the threat vector that applies to you the most. So you can actually focus there. That's very much what Recorded Future does today.

So if you take all of that together, I think we're in a good position here. As far as our own cybersecurity goes, of course, we have found that leveraging the latest frontier models help us accelerate identifying vulnerabilities. And we take those learnings and those best practices on how to do that and share that with our customers around the world. So that we can keep the whole ecosystem safer. So fundamentally, a strong trend for us. But let's not forget, it's not maybe that sexy, but everyday fraud. I'll give you that example on the $172 million of fraud prevented on malicious domains. All that is in powering our cybersecurity business today and it's attached to the transaction growth that we talked about all the transactions that we're going after.

This is a flywheel that is very much needed right now. Obviously, fraud and cyber risks are not a good thing, but they happen to be a part of a business that we're very good at. So we're helping our customers with that.

Our next question comes from Harshita Rawat from Bernstein.

I want to ask about your -- it's a very important region for you. If I look at purchase volume, it used to grow in the mid-teens and now the growth has decelerated a little bit. Maybe talk about the drivers there in terms of macro, competitive environment, local dynamics. And I know there's a little bit of a smaller contribution from Maestro conversions as well. And how should we think about the growth in the region.

Harshita, I just want to make sure I'm clear as to which region you're talking about. I didn't pick up. You said Europe. Okay, Europe. So look, I mean yes, okay. Look, I mean, at the end of the day, our business in Europe continues to perform exceedingly well. We are very much in the space of working very closely with our customers to deliver a ton of value, and they're seeing that come through in the nature of the partnerships, which we've got there. I'm going to take you back a few years to talk a little bit about all the wins we had in Europe and because a lot of that kind of explains the trend which you're talking about right here. Because if you look at the trend in terms of purchase volumes in Europe, right?

I mean, back in Q2 of 2024, we are growing at 16%. At that point in time, what you were seeing was the tailwind of all of these wins come through, whether it was Santander or the fact that we've got wins with NatWest or UniCredit, you name it, all of that stuff was coming through in those quarters, which was giving us a lift in terms of the share wins. Naturally, what's going to happen after that, if you're looking at comparative growth rates on a sequential basis, you're going to start to see the lapping effect of that come through. So that's certainly a factor which explains what's going on there.

And then we've been pretty clear about what kind of deals we want to win and what kind of deals we're going to actually pursue. There have been deals which we have completed for, but we've done it within the realm of what we thought made good financial sense for us. And if it didn't work out, we've actually passed on it, for example, in Lloyd's Credit. We know we've deliberately actually decided to go to a certain point in time, after which you have to kind of make a call as to whether it makes economic sense or doesn't make economic sense for the company. And that's what we did. So you're seeing that come through as well in the nature of the roll-off of those volumes very much the case.

That discipline is something we're going to adopt and have always adopted because it's really, really important for us. volume for the sake of volume is not what this company should be chasing. Profitable volume, which is going to drive higher net revenue yield is what we're going to chase. And we're going to do it in a manner, which works well for our partners to drive higher growth for our partners. So I'll just give you -- and you know this, but I'll just say this anecdotally, winning share of a portfolio which is growing at 1% helps me in the first year and then is a huge drag on growth for the years thereafter. And so if you can't really grow the portfolio, it doesn't really matter.

So that is very much the philosophy we adopt. So I know you asked the question broadly around Europe and trends, but you also asked about the competitive environment. And hopefully, that gives you a little bit of color on the mindset that we adopt in terms of how we're actually running our business.

Our next question comes from Tien-Tsin Huang from JPMorgan.

Congrats to Sachin. On the U.S. growth, quite healthy here. Just curious how broad-based that is? Any difference in the income bands to call out? Because again, that 10% ex cost Capital One is really quite strong. Just trying to get a sense of a head legs.

Yes. Sure, Tien-Tsin. Look, I mean, at the end of the day, the business continues to perform really well. The strong underlying consumer and business spending, which we are seeing in the U.S. There has been a tailwind, which has come on account of higher fuel prices. So let's recognize that. You probably have some impact coming through from the World Cup as well as it relates to the second quarter in particular. Hard to really quantify what that is just because it's like -- we can't really identify exactly what that is. But I would tell you, the underlying consumer and business spending trends continue to hold up well in the U.S.

And to your point, if I look at it, it's broad-based. We see it across credit and debit. We see it across consumer and commercial. And look, I mean, the teams are busy. They're busy with our customers, helping drive the growth of the customers, which at the end of the day is what matters, right? So because our customers grow, we bring our services assets to them, help them grow their portfolios, which is accretive from a volume standpoint, but also from a revenue standpoint. So we're certainly seeing that come through.

On your question about mass versus affluent, Tien-Tsin, I would say they're holding up well, both across mass and affluent certainly in the U.S. but across the world as well. We try and track the best we can as it relates to what we're seeing in spending patterns based on the product codes that are out in the market, which serve the different categories of customers. And when we look at that, we're seeing generally strong trends across both mass and affluent.

What you do tend to see is higher growth in the affluent side of spending. But that's kind of not a new phenomenon. That's been with us for some time now.

Our next question comes from Rayna Kumar from Oppenheimer.

I noticed you had a nice acceleration in APMEA in your payments volume, so 11% from 9% in the last quarter. Just wondering what the dynamics are there and if that type of growth is sustainable in the region going forward?

Yes, Rayna. So a couple of things to keep in mind, underlying growth continues to perform well and APMEA as the broader region is known right here. The step-up that you're seeing between Q1 and Q2 is driven by a couple of factors. Number one, there's a lapping effect. You'll remember last year in the second quarter, we had highlighted that there was some moderation in select markets in the Middle East. So you're lapping that effect come through in terms of the growth rate.

And then you've also got the impact of fuel, which is coming through in terms of trends. And that's not truly in apnea. That's true broad-based actually, the impact of higher fuel prices. But not to take away from the fact that the business continues to do well, and we continue to actually drive good growth across the portfolio there.

Our next question comes from Tim Chiodo from UBS.

Great. I want to also touch on the cyber fraud and identity portion of the value-added services portfolio. There's a key underlying word or theme that I think we could maybe hit on here, which is the agnostic -- basically the products being very agnostic. From 2 ways, one is across card networks and the other is even across nonpayment use cases, many of which you alluded to earlier. I was hoping you could talk about that aspect of these services.

And a minor, minor numbers question related to this. There's been a few acquisitions and dispositions since you last gave the mix of value-added services from this category. It was around 40% before. If there's been any minor update to that mix, that would be appreciated as well.

Okay. So let me take the first part, while Sachin thinks about the mix. So, of course, the cybersecurity -- sorry, the safety security portfolio that we have, cuts across a number of dimensions. So as I said before, it started off in card fraud and then it branched out into -- from card fraud into identity, into threat intelligence, cybersecurity and large and so forth. But to your point, there is the other dimension is.

Now fraud doesn't only happen on cards, account to account scams and account takeover threats and so forth. This is all the reality, unfortunately, today. So there is a tremendous opportunity for us to engage our customers there. Now cards live in an ecosystem. And here to come to a common fraud solutions through our rules is something that's a little easier than the account to account side where this is infrastructure. But we have learned through VocaLink and our real-time payment expertise how to do this now and account-to-account payments. And that is the first step that we've done there to prevent account-to-account fraud through kind of like a consortium approach with the banks in the U.K. and that is a good first step. So that's a bit earlier on its journey, but a significant opportunity that we see going forward.

Yes. And Tim, on your question on mix, just to reiterate what Michael mentioned in his script was that approximately 60% of our VAS revenue is network linked. And if your question is, how does acquisitions and dispositions impact that? Well, the reality is a lot of the acquisitions, which are there, if they're in the security space tend to be network linked for the most part. So as we do more and we start to roll them out in the market and drive the synergistic impact of that, you might see some level of a proportionate increase in terms of the network linked revenues which are there.

But that being said, the remaining 40% also continues to grow at a healthy clip. So just to be clear, right, I mean, things we're doing from a marketing services standpoint, continues to be actually a key contributor to our BaaS growth. So it's important, right, to actually keep in perspective that, that balance of moving away from 60% is not going to change by 1 or 2 acquisitions. But there's a very deliberate and intended kind of focus to make sure we've got good balance in terms of our VAS revenues are generated.

Just add one more point on that. So take Recorded Future, for example. So this is not a necessary network delivered on a stand-alone basis, but through Mastercard Threat Intelligence actually it is. But here, the key point is when we make an acquisition, so what we bring it what we oftentimes try to do was use the network, that is one option. Sachin just talked on that. But there are the kind of products that we sell in our one-on-one engagement or through distribution partners, but they still benefit from Mastercard's unique features mostly through our data. So we bring together the data. Of their respective acquisition with our data, and that makes a huge difference in terms of -- this is not just us inserting the company and having some sales synergies, we have more structural synergies out of that. And that's generally kind of target that we are looking for.

Our next question comes from James Faucette from Morgan Stanley.

I wanted to trickle back to the open standard and that initiative? And one of the questions we've gotten a lot from investors is how we should think about the government and governance and development road map there? And what kinds of initial use cases we should anticipate and think about as that moves forward.

All right. So open standard. So living up to the name open. So here is a set of company, 140-plus companies that have come together to create a consortium that facilitates the open USD coin, which has a couple of aspects to it. It's a neutral market utility. It's with a focus on value exchange and payments. And it's a governance structure that is fairly straightforward with these companies around the table. Now obviously, not every 140 participants will have a very specific say on that. Otherwise, we wouldn't move anything forward.

So this is what is currently being played out in more detail. But broadly speaking, the focus will be on payment use cases. It will be ensuring that the economics can be distributed and everybody can participate. Those are some of the underlying unique features of that. And hence, we've seen all of the interest. For us, this is important, but it's not the only thing that we're doing.

The key point, and I said it in my prepared remarks is this will be One Coin that we will that will be enabled in our network, and we will enable other coins. We are working with the USBC today, USDG and so forth, and choice has always been a key criteria and it will be the same here in stablecoins.

So going forward, important initiative. We're happy we're part of that from the beginning, but we will engage with various other stablecoin consortia around the world, ensure choice and a balanced market.

Our last question today will come from Matthew O'Neill from Bank of America.

Congrats again, Sachin. Maybe a couple of housekeeping questions just to round out after a lot of good thematic ones. Anything to call out or point to with respect to the rebates and incentive trend as a percent of gross payments revenue through the back half of the year. Obviously, this is relatively hard to predict and sometimes lumpy. And along those lines, anything that we should prep for with respect the timing or impact of the BVNK deal closure through the back half of the year as well?

Sure. So first, on your question on rebates and incentives. For Q2, our rebates and incentives actually came in pretty much in line with what our expectations were. So that's kind of pretty much on point. As it relates to Q3, we expect that our rebates and incentives as a percentage of our payment network assessments will be slightly higher than it was in Q2.

Look, I mean, at the end of the day, like you said, it's hard to predict because it's largely based on timing of deals and deal performance and things of that sort. But all of that being said, at the end of the day, what we're most focused on is making sure that we've got a rich pipeline of deals and that we are executing on the same, which is where we are right now. We have a rich pipeline. We're executing on that pipeline. And it's in that vein that I've shared this third quarter kind of outlook for where I see the bids and incentives. As it relates to the BVNK closure, as Michael mentioned, we expect the acquisition to close in Q3. That is contemplated in what we've shared with you in our reps with our -- the materials which are posted today. So you can see the impact come through. Minimal impact from a net revenue standpoint. There's some impact from an operating expense standpoint, but all of that is contemplated and what we shared with you in Rx.

Any closing comments?

Yes. I want to chime in. Sachin got so many congratulations. So I'll do it one more time. Congratulations. Thank you for this last call and Ling Hai. Looking forward to working with you, congrats to you as well.

Well, thank you, Michael. I'm very excited about the new job, and I look forward to leading the next earnings call with you, but also my gratitude to Sachin for being such a wonderful -- and for those of you on the call for all the investors and analysts, I look forward to engaging more with all of you. Thank you.

So that leads me to do one important thing, and that is thank our employees around the world who do everything and make everything happen that we just shared with you and also to thank you for your trust and support of Mastercard. Talk to you next quarter. Thank you very much. Thank you.

This concludes today's conference call. You may now disconnect.

Well, thank you, everybody, for being here today. I'm delighted to welcome everyone to our 11th Annual Fintech Conference. We started this thing, obviously, over a decade ago. And as I was saying last night at a dinner, it feels like this is our startup, as we've built it. And I feel that every year. And it's so amazing to have such great speakers like Jorn joining us to kick off the conference.

So to be official about it, we're going to kick it off with Mastercard. Jorn Lambert is the Chief Product Officer here at Mastercard. He's traveled a long way, by the way. He didn't just come from New York. So we appreciate your time being here today, Jorn.

Delighted to be here. Thanks for having me. Quite a turnout here. So excited.

So what I thought we'd do is we start kind of at a high level, if you wouldn't mind, just walking us through kind of a tour of the scope of responsibilities that you have at Mastercard, and then we can take it from there.

Sure. So Chief Product Officer, that means that I look after our products and platforms that really ensure that consumers can buy or merchants can sell anywhere in the world. So that's the platform that runs our 170 billion transactions out there. That's our acceptance network where consumers can buy, that is our issuer solutions. We distribute our products through about 23,000 issuers out there. So first and foremost, making sure that it runs everywhere, every time, nonstop at sub-300 milliseconds everywhere in the world, right? So some big machinery there that we make sure that runs smoothly.

And secondly, making sure that we are capturing the growth opportunity out there, the cash and check displacement, the digitization growth opportunity, the geographical expansion growth opportunity. So that's continuous, finding out, sniffing out the new opportunities and growing the pie. And then lastly, I would say, looking 5, 10 years out, what are some of the shifting tectonic plates in commerce and payments. Obviously, Gentech comes into play, Stable comes into play in that. Who does Mastercard want to be as we grow up in that space and making sure that we place the right bets based on what we see in the environment. So that's kind of what I do.

Yes. No shortage of opportunities that you're going to have to drive this company.

Never a dull day.

So let's just get this one really quickly out of the way. There were some recent management announced changes. And I thought I would just give you the opportunity to maybe talk about why they occurred and the purpose for that going forward?

Yes. Indeed. So firstly, what we haven't done is we haven't changed the org. The org remains the same. We've changed some leadership positions. Actually, we moved some leaders from one area to the other. We also haven't changed the strategy, right? Our strategy remains, our org remains. And these leadership changes is just to make sure that, firstly, some of our deep bench of leaders have a different lens, have a different set of experiences within the company. But also a fresh pair of eyes on the opportunities and the problems that we're having gives us just a different dynamic and a different impetus on that.

I'm very excited about this because we have a great management team, having just these people with the wealth of knowledge that they have, look at these issues or look at these opportunities with a different set of eyes, it's just a great thing. My role hasn't changed. We need a bit of continuity as well. And there's so much going on in our space that we decided that we'll stay the course on core payments, but quite a few of the other positions, people just changed their portfolio.

Yes. Not the least of which is you happen to be responsible for some of the most dynamic changes that are taking place. So let's not upset the apple cart too much.

That's right. We really need to make sure that we capture that, and we're, I feel, at least on a great trajectory.

Yes, that's great. So let's talk about some of the guiding principles that you follow in order to determine kind of product development for Mastercard. I mean, I've heard you talk about big technology trends, geopolitical viewpoints and how they shift even consumer behaviors. But if you could elaborate on that, that would be great.

Yes. So the first thing, I mean, if you're looking at it, the first thing is to get the right inputs, right? Like to make sure you get inbound, you kind of understand what's happening out there outside of the Mastercard walls. You don't want us to kind of be too inwardly looking, and then to separate the signal from the noise. There's so much coming at us, like what's real, what's hype. And so we do that by talking to our customers, obviously, I do it, everybody in Mastercard does that, to talk about people like yourselves, investors, start-ups, VCs, but also governments, the big technology players like later this week, I'll be in the West Coast and meeting essentially all of the big AI players out there. And that gives us kind of really good input about kind of what's really going on, what's really happening out there.

And then once you have a bit of a sense of a signal, then it's what I mentioned earlier, who do we want to be when we grow up in those spaces. And that's really about figuring out what is our right to play? What is our play in this space? And in Mastercard, that very often comes down to organizing a market, right? We're in a very fragmented environment, very big value chains. If you manage to actually provide the interoperability layer, whereby different people that are unknown to each other can interoperate with trust, with security, with confidence, but at scale, I think then you have actually a real competitive edge here. And that is essentially the network effects that we have established with cards. Any consumer can buy at any merchant. They don't need to trust each other. They trust the system. They trust the brand and everything that comes with the brand. And that payment will happen. Even if the buyer ends up to be a crook, even if the merchant ends up to be a false, that actually -- people will be kept safe because of that structure.

We've done the same with tokenization. In tokenization, every issuer, every bank can provide a token to any, what we call, token requester, even if they don't have a relationship with each other. That's a secured KYC credential that is exchanged and that then transacts. It's about the technology, the governance, the trust around that. And so we'll do the same with agentic, at least that's what I'm tasked with. We will do the same with stablecoins. And so finding our right to play, finding these network effects is what's really important. And once you have that, once you have the interaction, then you can build a blend and provide further services in cyber, in security, in loyalty, in engagement. And that's where our services business comes in as well, right? So it starts with kind of getting that transaction and that interaction on our rails and then adding services on that. That's how we kind of think about things. And so far, it's been working reasonably well.

Yes, yes. So maybe we can unpack that just a little bit in terms of some large-scale trends that you have historically identified early, or not, and how you've interwoven them into Mastercard, which will ultimately lead us down the path of talking about agentic and stablecoins. But this is kind of a little bit of a walk down memory lane, so people understand the context.

And you're right to focus on technology trends, because these are the ones that are probably more disruptive. You can talk about consumer trends and this and that, but in my lifetime, and I'm older than most of the people in the room, but in my lifetime, we've seen like a big technology trend about every decade. Like in the 80s, it was the PC. You probably know that from history books. In the '90s, it was the Internet. In the 2000s, it was mobile broadband. In the 2010s, it was cloud. And in the 2020s, obviously, it's AI, right? Every decade has seen like a major, major shift, which transformed every business out there, created businesses, destroyed businesses, and transformed commerce as well.

And so if you're identifying these trends and if you're able to lock yourself into that trend in a way that you enable it, then I think you're in good shape for the next decade until the next trend comes, right? And so an example of that has been kind of mobile broadband and how people started to embrace mobile payments. And so for those who were around back then, that's kind of the mid- to late 2000s really kind of came up to maturity in 2012. But we realized that consumers will want to pay with their mobile phone. Now the problem with that though is twofold. Firstly, you need to put credentials in a phone, and then you need to make sure that this phone can communicate with the merchant.

Now back then, credentials were either in your wallet on a card or were stored on a server of Sheraton Hotels, right? That's where credentials were. We had a big problem already back then that data breaches happened in the Sheraton server, and we saw a lot of fraud coming from data breaches. And now people said, "Oh, instead of putting the credentials at a few thousand card-on-file systems, we'll put it in billions of devices. But guess what, that means billions of vulnerabilities, right? Every hacker in the world, which takes themselves seriously, will try to get to these credentials. So we need to find a way to how do you put credentials in that phone? Where do you put it? Will you put it in the SIM or in the secure element or in the TEE? And how do you secure it? And so we created tokenization, which is essentially putting a fake credential in the phone, adding some very clever elliptical curve cryptography to that, and making sure that whatever a transaction occurs, we can decode the cryptography and tie it back to the credentials to make sure it's a real credential.

Now that is not enough. That's just tech. Then we need to say, well, if you have tokens, you need to make sure that these are governed that a token which belongs to a bank goes into a device that is owned by the consumers. How does that token get governed from a liability perspective and all that, right? And so we've been able to work with the operating systems, Apple, Android, with device manufacturers like Samsung, and then later on with card-on-file systems to launch tokens in these environments to make the standards of cryptography universal and then to make sure that these phones can communicate in contactless environments like the MTA here in New York, so that consumers can use it worldwide.

It has been an amazing success, but like everything else, it kind of took years to develop the right standards, to develop the right rapport, to develop everything for this to work. And we've continued to do this kind of iteration, similar concepts as the gig economy emerged, how do you actually make sure that your Uber transaction works everywhere, is safe everywhere, can be used universally. When marketplaces emerged, how do we bring this on our rails? When the creator economy emerges, how do you actually make sure that we orchestrate the TikTokers and all that, right? And so the same again, as we're thinking about agentic commerce and blockchain, like what is our role? How do we orchestrate it so that complete unknowns can now interact and transact with trust and confidence, and it works every single time.

Yes. It's a great segue into the next question, which is really which is more important to get right, agentic commerce or your stablecoin strategy? And which one do you think will be more meaningful to Mastercard's growth trajectory as we think about the next decade?

I have no idea. I also don't necessarily think that that's -- it's of a different nature, these 2 developments. Agentic is how commerce is happening. Stablecoins is how money moves. And I think both will probably emerge in parallel and actually both will be reinforcing each other. So I don't think like should we bet here and not there or vice versa. I think these are very foundational trends that are happening, that will be part of our future, and that we are pretty confident that we can find our way to play and to add value to the ecosystem. But it's not an either/or. I think both actually result for Mastercard in net new addressable markets. And I'm very excited about that, because if it's just displacement of existing volume, that's kind of okay, that's kind of cool, but that's not really driving value for us. If it allows us to address a market that today where we can't really reach, then it's where it gets really exciting, right?

Yes. So let's dive into agentic commerce here and understand, from your perspective, what Mastercard's role is ultimately going to be? And who are some of the key partnerships that you have either forged already or when we maybe want to consider as you think about the overall ecosystem and your role in that?

Yes. Great question. So the way I see this now is there's like 2 parallel dynamics that are starting to emerge, both of which are really quite interesting, but both are a little bit unrelated, and I'll try to unpack this a little bit. The first one is that I'm convinced that consumers will increasingly turn to agents to buy things. For example, I like running, I need a pair of new shoes. Perhaps last year or the year before, I would browse a number of shoe shops, ASICS and SAUCONY and HOKA and all that, and I would, after 1.5 hours, find the right shoes for me. Now I'm probably going to do a prompt. I say, I want long distance, overpronating, size 10.5, not over $200 shoes. And then Gemini, ChatGPT will provide me with 3 choices.

There's a high chance that from there, I will transact, from that environment. Why? Because it's easier, right? Going from my discovery then to a website is kind of laborious and people like the path of least resistance, but also that agent might actually add more value. Gemini, for example, will ask, well, if I can find these shoes over the next 2 weeks with a 25% discount, do you want me to buy them? Do you need them right away? Maybe you want to wait 2 weeks for a deal. I'm always open for a deal. So I'll say to Gemini, yes, please do. If you find it before the end of the month for $150, please buy, right? That's real value added and consumers will do that. Will it be every e-commerce? No, it will be maybe 20%, 25%, 30% of e-commerce, which will move there, but a portion of e-commerce will move there.

Now that, for us, is actually a very fundamental change. Over the last decades, the actors in e-commerce have been either the consumer, which initiated a transaction. I, on the ASICS site, buy my shoes, or it's the merchant that initiates. Netflix pushes a transaction for me and it's a merchant-initiated transaction. Now we have an agent initiating a transaction. And the consumer is not authenticated at the merchant property. The consumer is authenticated at the agent property. So you can imagine all the things that can go wrong, right? You could have a rogue consumer trying things, you could have a rogue agent doing things. You can have the merchant delivering the wrong shoes. You can have all sorts of stuff that is not really that helpful.

And so we created -- for that first pattern, we've created what we call Agent Pay, which is a set of services that allows that transaction to happen in an orderly way, in a transparent way, in a secure way, and in such a way that if I get the wrong shoes in the mail, I have recourse. It has essentially 4 things, right? It has a way to ensure that only legitimate agents have access to Agent Pay, and we keep out the malicious bots. It has a way to ensure that every entity in that value chain, the merchant, the issuer, the acquirer knows that this is an agentic transaction and actually knows which agent has initiated it.

We do that through agentic tokens. It has a way to authenticate the consumer when the consumer is at the agent site and to cryptographically inform all the other actors that it has been authenticated, and it has a way to capture the intent, the actual order I made, so that when something goes wrong, I can go back to my order and I say, well, this is what I ordered, either the agent was wrong or the merchant was wrong, but I need recourse, right? So we've put that in place. We work with Microsoft. We work with OpenAI. We work with Google. And essentially, that system or that set of services has now been widely adopted and is, I think, the standard in which agentic commerce -- consumer-driven agentic commerce will happen.

I feel very good about that. It's a little slow, not because of the payment side, but because the long pole in the tent on agentic commerce is how merchants ensure that their catalogs are readable by the agents. And so that is a process that is ongoing. But I feel, over the next couple of years, a good part and a meaningful part of e-commerce is going to move to that. That's the first dynamic. It's exciting. It's not necessarily net new for us. It's more of a movement of volume into that channel, whereby we are able to add more services.

What is actually more interesting is that we are already seeing a whole set of entities, kids in a dorm room or companies, who are developing agentic services, services through agents that are to be consumed by other agents. So people want to monetize all the good work they do. They create a service, they display it on agentic marketplaces for other agents to buy.

Think, for example, I have a flower shop. I said, stand up my new flower shop. And now I want a website. I mean, I know about flowers, I don't know about websites. And so I'm going to ask Claude. Claude, just build me a website, please. And then Claude can autonomously go and buy a domain name, go and contract with Lovable to create the pages, goes and contracts with Mastercard Gateway to get me a hosted checkout pages, goes and finds a number of images from an image library and buys these image libraries. And in a few seconds, Claude will have made maybe 30 different transactions -- or 5 different transactions, whatever, chain transactions, probably micro transactions in order to kind of set up my flower website.

Those are agent-to-agent or machine-to-machine services. Brand-new addressable market for us, really complex to set up because suddenly, you need to have the permissioning of all that. You need to have the transaction, that extreme machine velocity, right, sub-5 millisecond velocity, and then you need to settle that between parties that don't know each other. That's a great problem for us to solve, right? That is exactly what we like to do. And tomorrow, actually, we'll have a bit of an unveil. So this is a scoop for this audience. Tomorrow, we'll have an unveil of our machine-to-machine payment system, which is not just a protocol. There's more protocol than transactions out there. It's a protocol as well as a set of services around that as well as a settlement guarantee in order to make that happen.

Will that happen overnight? No, nothing in payment happens overnight. But will this be a very meaningful part of how agentic commerce will emerge? I am very, very strongly convinced of that. I mean, the example I gave is one example, but a TripAdvisor will want to monetize their data when agents are going to collect my next trip to Madeira. That will be an agent-to-agent type of transaction framework. The new generation of SaaS services will probably be agent-to-agent transactions. And so I think if you can organize this, I think we'll have a very big runway. So that, to me, is kind of, let's say, consumer-initiated, traditional e-commerce moving to agentic commerce is interesting. A new machine-to-machine is actually even more interesting in the sense that if it emerges, it will be a brand-new addressable market.

Yes. So that's interesting, the last point, because we hear this all the time, cannibalistic transactions relative to incremental opportunities. And so one of the other things that I've heard you speak about is just the nature of how transactions can be broken up into multiple transactions. So in addition to agent-to-agent, maybe speak about the other part of incrementality around incremental transactions.

Yes. So going back to my shoe example. What is likely to happen is I find my shoes, my ASICS shoes. And the agent might say, well, actually, you may need some socks as well. Would you like some socks or would you like a hat or whatever I need to go running. And in the previous world, I would buy my socks and my hat at the same merchant because otherwise, I need to kind of bother to kind of find other merchants. Here, the agent may say, well, actually, there's a good deal of socks at Under Armour or whatever it is, right? And suddenly, what is one basket becomes 3, 4, 5 transactions, because the agent is able to find these transactions at different merchants. I, as a consumer, don't really care. I actually view this as one basket. But for Mastercard, we'll see the splicing of that single transaction into multiple transactions coming back.

What's equally interesting for us, of course, is that we add a lot more value to those transactions. It's natively tokenized. It's natively authenticated. We natively have that recourse through a product called Ethoca, so that the consumer can view their transactions. And so these transactions are higher quality because of the services that we added on, right? So to us, it's not just cannibalizing, it is splicing of transactions. It is adding more services. It is higher quality transactions with higher approval rates. And so there's a lot of goodness in that, but it is a movement of addressable market from one place to the other as opposed to the other pattern, which I think is net new.

Fantastic. So let's pivot a little bit to stablecoins. Similar question. What do you think is Mastercard's role, through your lens, competitive necessity, threat, mutually beneficial? How do you think about it?

Yes. So very excited about that. Some of you may have noticed that we made an acquisition, a big one. That gives a sense that we are excited about that. Let me first say that -- many people are asking me, "Oh my God, you guys are nervous about stablecoins eating your lunch". Honestly, not very nervous about that. And I think it's a bit of a misunderstanding to think that, that could even be the case, right? Stablecoins is a great way to move money. 24/7, borderless way to move money, very efficient, very effective. Cards don't move money.

If you, with your card, go to a shop and you buy flowers, no money is moved. Cards is a messaging layer. You actually exchange credentials and information between the consumer and the merchants. The money gets moved today, the money get moved on ACH behind that. We turn these messages into payment instruction in the back, and that's what happens on FedNow or on VocaLink in the U.K. So it's not the same layer in the stack. We are actually moving the money, or we have actually announced yesterday that we're moving the money, or we're able to move the money on stablecoins instead of ACH. So we can make card payments more efficient by using stablecoins. If we move the money with USDC or USDT or whatever, suddenly, the merchants could be moved faster. We can move the money over the weekend. We can reduce counterparty risk, we can reduce liquidity risk. So it makes card payments better. It doesn't replace it, because it sits at a different layer of the stack.

And then people say, "okay, sure, I get that, Jorn, but aren't the wallets going to replace the messaging layer?" And you know what, just about every crypto wallet, I think actually every crypto wallet is adding cards to the wallet, not because they are going to replace it, it is because they want these cards, so that the wallet becomes more useful to the consumer, right? It's not because you have the wallet that you can solve the merchant side, right? And these people happen to want to have a business model, too. Cards give them a business model. So not only does it not compete, we actually believe these wallets -- it's a bit like the new neobanks. It's another way for us to bring our products in the hands of consumers. And so we see really quite nice growth from crypto wallets out there like a Gemini here in the U.S. or like a MetaMask that distribute our products. So I wanted to put to bed, the thing is like, no, we don't think it is cannibalistic to our current P2M and person-to-merchant business.

So why are we excited? Well, we're excited because it can really add value in places where cards are not present or not very present. Today, that's in, for example, cross-border remittances. It's not a big business for Mastercard. It's not carded, but we think that it's a business where there's a lot of friction and stablecoins can resolve a lot of the friction by moving money from point to point instantly from anywhere in the world to anywhere in the world overnight -- not overnight, instantly, including in the weekends.

Similarly, disbursements, right? An Airbnb that needs to pay the landlord in Portugal, that's laborious today. With stablecoins, you can do that very fast. Think about payroll, international payroll, or think about TikTokers, digital nomads, a lot of traffic here on disbursement that's very laborious to do, very hard to do. Stablecoins can add tremendous value. Not a big business for us today, new addressable SAM for us. And similarly, accounts payable or accounts receivables that happens cross-border by companies, very, very large business, very high friction. We can actually fluidify that.

Now if you look a little bit further, I personally have a high degree of conviction that many capital market flows will move on chain because of the 24/7, the efficient liquidity, the atomic settlement, the immutability. I have a high conviction that portion of the second dynamic of agentic will move to stablecoins because of the need for micro transactions, high velocity. And so there's a lot of addressable markets out there that haven't quite emerged yet, but that we believe will emerge. And then there's all those that we haven't seen yet, but that will come as well, right? So we're very excited about the space. We think it will be part of our future.

And then the question comes back to what we said before, well, what do we want to be when we grow up? Do we want to be a chain? Do we want to be a coin? Do we want to be a wallet? And we decided, no, no, we want to be the interoperability layer. You're moving towards a space whereby you need to interoperate the fiat world with the on-chain world. And the on-chain world is actually 20 chains, not one chain, many, many chains, many, many coins. distributed to many, many distributors. And so you have a gigantic spaghetti of an interoperability problem. That's where we like to play.

Now for us to play, we need the licenses to play. It's a whole different licensing regime. We need the connectivity on chain and in fiat world. We need the technology. We need people who know the space. And so we decided to make that acquisition of the best company who has all of these things. They have the best licensing coverage. They have the best technology. They have connectivity in all of the biggest fiat currency systems, and they have a great team. And so we think with them, once we close, which hopefully is going to be in the next couple of months, we can really build the ecosystem that will power all these use cases and be the ones that are providing the same kind of interoperability structure as that we currently do in the fiat world. So hard to say how quickly, hard to say how big. But as you can hopefully sense from my own enthusiasm, we think this is going to be, together with agentic, a major trend for the next decade that will power a lot of new benefits for consumers and businesses.

Yes. I mean I think rarely have we seen 2 like massive forces happening at the same time for your company. I mean, there have been many opportunities around the world. You talked about mobile and you talked about tokenization as part of that. But like both of these happening at the same time seems rare.

Yes. No, it's rare and they're very profound. I mean, a new way of moving money doesn't come along often, actually comes along maybe every 50 years, right? And so making sure that you're inserting yourself in there in the place where you can truly add value is really important for us. And so that's why we actually have that conviction and made that acquisition. Agentic is the same. And it's a fundamental rewiring on how consumers and businesses will transact. The last time people were rewired was in the early 1990s when the e-commerce pattern was set. Remember, every e-commerce is the same thing. You search for your product, you fill a cart, you press on the cart, you get a checkout page, you check out. That's how all the e-commerce works. That's being completely rewired and it's going to be rewired for a while, not for the next 3 years, but probably decades. I think inserting ourselves into that new pattern early on in a way that we can add value to all parties in the chain is what we need to do, and hopefully, we are able to.

Can we just talk a minute about how agentic commerce and stablecoins kind of change the threat vector that you're having to protect, not just Mastercard itself, but out there for your merchant clients and relationships and your financial institutions. Like how does the threat vector change these 2 happening in the space?

Yes, it's a great question and frankly one that I worry about a lot, right, because we're very excited about the technology, but the bad guys have access to the same technology. The bad guys are very well funded, as you may have noticed, with other people's money. So making sure that we are very thoughtful into that whole process to keep things safe and to make sure that when something goes wrong, there is recourse is very foundational in our thinking. We do that, obviously, with technology. Again, tokenization is essential.

And by the way, I mentioned earlier on kind of elliptical curve cryptography and all that. Our cryptography over the last now 14 years of billions and billions of transactions has never been compromised, right? So this is very solid stuff. Where we see compromises is where tokenization has not been adopted yet. And that's why we're driving it very hard to go to 100% adoption of tokenization. But these new things are natively tokenized, right? We have to because we can't leave any daylight in for any bad actors to come in. But the technology itself is not enough. You then need to assume that something somewhere might go wrong and then you need to have the consumer protections. And that's the case in agentic. It's very much the case in stablecoins.

Stablecoins is scary, right? The on-chain world is a bit scary. It's hard to do. So we need to do a lot of work around the UX, but it's scary around, okay, well, can I trust the counterparty here? People say, "oh, it's cool, it's final", but final means final. You don't get your money back, right? So what recourse do I have in stablecoins. And so we're building this into our design to make sure that actually counterparty assurance is there. We will have a stamp, so that if I transact with you, I know that you are a KYC non-sanctioned individual and I can transact with you. And we'll make sure if something goes wrong, you have a layer on top of that, so that I have recourse.

Extremely important, because if we get this wrong, this whole house of cards will come crashing down, right? People will say, I don't touch this with a barge pole. This is scary, this is bad, and the benefits don't outweigh the risks that I have, right? So extremely important that we do that right. That's actually the reason why when I go to the West Coast, people pick up the phone, or people open the doors, like an OpenAI, Gemini or Google, Microsoft want to talk to us, because they know that we're at a quite precarious point. We need to make sure that people can trust these new technologies, they can trust not to send the picture of a cat, but with your money. And so that whole construct is extremely important, and that's why we're really proud to be part of it, but also feel the weight of responsibility to get this right.

Yes, completely. So let's change course a little bit and talk about nationalistic schemes. It's still a question that comes up quite a bit with the idea here that we know they're not new, right? They've been around for a long time. As you get outside of the United States and you look around the rest of the world, there's a lot of these. But they have become more digitally sophisticated. They have consumer front ends that people are using, and they have a lot of local market data. So what has been the response in your view? And kind of how do you think about opportunities and threats going forward with that?

Yes. So it's a great question. And look, we've been around for 60 years, and we've been competing for 60 years against all sorts of players. And that's a great thing, right? The better our competitors become, the more we have to be on our toes and we need to get better, too. And you're right, some of these APMs are pretty good. They're pretty sophisticated. They're pretty nice. They're pretty effective. And that puts the bar higher for us to make sure that we continue to innovate, we continue to earn the right to play, earn the trust of our parties. And so that's what we're very focused on. Sometimes the angle is financial inclusion. And so we have then created what we call Essential Debit, like a low-cost debit solution to compete. Sometimes it is more of a kind of policy decision. But by the by, we welcome the competition because it forces us to be on our toes.

Now that said, they have their issues, too, right? So they're essentially all domestic only, and therefore, they can't serve their consumers when consumers travel. They very often have limited acceptance. They may be in store, but not online or vice versa. They may be online, but not in store. So they can't really offer the full gamut of consumer needs. Possibly more importantly, as these scale and as the threat vectors start to kind of be more prominent, especially around scams and authenticated fraud, I think what we'll find is that scammers will go through the easiest targets and will start targeting these more and more. And so the conversation we have with these players is actually a constructive one. Yes, we compete. But in many cases, we can join up. We can join up for acceptance. We can join up for technologies like tokenization. We can join up for fraud protection or fraud detection, because that is a kind of collective problem that we all have.

What you'd actually now find -- like a couple of years ago, you would find big fraud attacks to be very pointed, like they hit in one country in a very big way. Today, they're no longer doing that. What they do is that they hit all across the world, in the Philippines, in Argentina, in the U.S., and in Norway at much lower levels, so that they get undetected.

If you have a system just in Argentina or just in the Philippines, you actually don't know what's going on. You might see a little bit, you say this is kind of okay. We sitting globally, we have our, what we call, eye in the sky. We kind of see all these patterns across the world. We say, "Oh, well, there's this fraud vector happening, let's shut it down". And then we communicate across all of the countries. This is the kind of conversations that we need to have and are having with these APMs. So in the end, yes, we compete, we cooperate. It's just the nature of the beast when you're in 200 countries in the world, and you have the opportunity to add services in different ways.

Yes. How do you think agentic commerce will play into that? It seems like that actually would play in your favor would be my guess.

Well, so especially if you think of kind of a sovereignty agenda, in principle, okay, if a country in, let's say, France wants to have a French solution, and there's really not much we can do about that, right? However, the French want to service their consumers as well. They want to make sure that there's economic growth. They want to make sure that their consumers have access to the latest and greatest in terms of agentic and this and that. They want to make sure that the consumers are kept safe from that fraud vector that I told you about. And scale providers really have a benefit there, right?

I am not sure that the local French or the local Malawi system will really integrate with OpenAI the way we can integrate it with OpenAI. And yet these consumers will need that access to these services. So I do agree that especially if you look at the big technology trends, scale players like ourselves have an advantage and gives us an additional reason to engage with local countries, to engage with local governments, to provide those benefits to the consumers and the citizens there, and to provide economic growth, which at the end is really important to these governments, right?

Yes. Well, it leads me to another thought. So has it become more challenging for Mastercard to operate in the kind of evolving geopolitical environment that we've had over the past several years relative to years past? Or are you finding that navigating that is no different?

Well, so let me first maybe make the distinction between what we view as our secular growth versus the cyclical growth. So what is great about our business is that we have been benefiting from a secular growth from cash and checks on to cards, but also from inefficient electronic payments like closed-loop transit onto open-loop transit, from inefficient bill pay onto open loop bill pay. And so that secular trend, the digitalization has been very healthy, very positive and continues, and has a long runway.

And so we see, even in times like these, where, frankly, there's a lot of difficulty in many respects, and I'll not kind of go into details on that, our secular growth is very robust, and we feel very bullish about that. But then within that, you have indeed some cyclical trends. And some of that is conflict, some of that may be some sovereignty agendas here and there, some of that might be just short-term inflation, energy prices, what have you. These are usually relatively short-lived. And given that we are so geographically diversified and given that we're diversified from a payments use case and from a vertical use case, those impacts are quite dulled in our overall perspective, right?

Now you may argue, okay, well, this geopolitical thing is not a cyclical thing. It might actually be here to stay. And so as a result, we actually have made investments to be able to operate differently in a number of geographies where we need to. And honestly, we are a guest in most countries, right? We are an American headquartered company, and therefore, everywhere else, we're a guest. We need to service the needs of those consumers, the agendas of these governments, the priorities of these governments. And that may mean that we need to put our infrastructure on soil. We've done that in South Africa. We've done that in India.

That may mean that we need to put our data on soil. We have done that in India. We've done that in China. It is just the nature of operating as a global company. We've done that for 60 years. We continue to do that. Sometimes it's a little bit more onerous or a little bit more involved, but it's just the nature of our business. And is it harder? I think that there is a like tweak perhaps in our capital allocation, but it's not something that is foreign to us is what I would say.

Yes. Well, we're out of time. So Jorn, thank you so much for that discussion. We're going to keep that transcript as a primer for a lot of things to discuss in the future. And thank you so much for your continued partnership with us.

Well, thank you. And it looks like you have a great day ahead with lots of interesting discussions to come.

Thank you very much.

Okay. Great. Everybody, good morning. Thanks for joining us for our chat with Johan Gerber from Mastercard. Now in EVP of Network and Real-Time Payments, that's been a month, formerly in security, which is the largest piece of the VAS business, which we're really excited about to dig into. I think everyone just said security and kind of glosses over for a second and not really knows what's beyond it, but really looking forward to getting into some detail.

First things first, though, a bunch of management changes announced yesterday. We wrote a note on it thinking it was -- it just really shows the depth and breadth of the management team, no exits, no new hires either, just kind of shuffling around. That's usually the sign of a great management team. And so we're very favorable on it. I love it.

We'll miss Sachin as the CFO because he was terrific, but looking forward to meeting Ling and getting in there. But I don't know if you want to comment on that. We were very favorable. Like we didn't think it was anything negative at all.

Well, first of all, thanks for having us here today. We're excited to talk about this as well. This is such a big part of our portfolio, especially of our value-added services. Security now is about 40% -- sorry, value-added services is about 40% of the company's net revenue.

Security solutions is a really big part of that. But on the management changes, to your point, it shows the depth in the bench that we have. And my role is actually a very good example of that, too. I just moved from running security solutions to running our real-time payments and network products.

And Ann Johnson is joining us from Microsoft as the previous Deputy CISO, who will now take over. So that rotation, that ability to have people who understand the breadth of our company to look at problems in different ways, I think that's a real area of strength that we can bring and then you bring new talent in from time to time to just help upskill and help us accelerate more.

So I think we are -- from a company point of view, that the staff are very excited. We all know these folks. We know what they bring, and they bring a very strong rigor into these disciplines.

That's good color. Congratulations from one great company to another one. So let's talk about VAS a little bit. It's obviously around 40%-ish of total revenue, as you mentioned, growing healthy. Maybe just give a broad overview of where security sits within the portfolio and just maybe just give a couple of bullet points on the rest just to level-set for everyone, and then we can really dive into security.

So if you look at our VAS portfolio, and let me actually just take a step back, to your point, it's about 40% of our net revenue of the company, which is a big deal. And we've had a very strong history of growth in that -- outperforming the rest of the company being that value -- additional value accelerator and revenue accelerator. So it is a really strategic part of what we want to do.

The security solutions portfolio is a big part of that, the largest part of our VAS portfolio. But let me just quickly talk through how do we get to these things. You should think about our VAS portfolio as a highly curated set of solutions and categories that we've been working on, and they have a couple of really important aspects to them.

We talked a lot about the virtuous cycle about how through VAS, we want to increase the value of the Mastercard portfolio. So we win more portfolios, you increase the number of transactions, you increase the data and you get that virtuous cycle flowing. So that's -- everything that we do within VAS is strategically positioned to drive that virtuous cycle to start with.

Then look at them as well from a point where we only create these VAS services where we know there's real customer need. The customer need is important. There's a big TAM. It's big enough for us to go in and that we can really scale. And then we have some structural tailwinds that will help us accelerate the growth. So these are some of the fundamental building blocks in terms of how we choose what goes into the portfolio.

And if you look at the portfolio itself -- we've got customer acquisition and engagement, which is about how do we get more customers onto our banks' portfolios, how do the acquirers get more merchants, how the issuers get more cardholders. As you can understand, that's a core part of how we help our customers grow, which is another important part of this. A lot of what we do here is to really help drive our customer strategy.

We are a facilitator of growth and just playing a very key critical role in that. And that's a really important part of why we believe we want to be relevant at all times is to help that accelerate that growth. So we've got customer acquisition and engagement. Then we've got what we call our BMI services, which are business management and analytics area.

This is where our advisers group sit. This is where we do a lot of data analytics with our customer. A lot of customization work happens here. We will go in there. We will look at our customers' data. We'll analyze it. We'll help them to define their strategies. We'll help them with anything from how do you build an agent to create a new strategy in the business. This is also a very important part of our acceleration and personalization of our services.

You've got technology and then you've got the humans to kind of help make that work. And so that cycle itself then turns into how do I generate sales for my people that are in there. And so you can see how this is also in part is technology plus people in the BMI team that we have there. Then you've got the security solutions, and we'll talk about that in a lot more detail as we go through the rest of the conversation.

We also have a range of other services where we have our digital solutions like tokenization, authentication, our gateway solutions that we have in there. And then lastly, we have our real-time payments components as well and all the services that we do around those areas as well. So that's a little bit of the portfolio of our VAS services that we have in total.

A really broad array. So let's -- you said that security was the biggest piece. So let's talk about that for a little bit. I think most people think of security and payments, especially when Mastercard involves tokenization. -- and don't really know what else to talk about after that, right? So I put down my Mastercard card, whether it's online or physical point of sale. I assume it's secure. There's a token, I see the chip, everything is good. Most people outside of payments wouldn't understand like what else is involved. So maybe we get into that a little bit and maybe just give a broad description of what security is, and then we can really dig.

This is where I can camp out for a whole day. You know that. This is my -- but let's talk about...

Who is going to get us off the stage.

He will get us off the stage.

He's bigger than us.

That's easily true. So if you look at our security solutions, maybe let me just start there. In addition to what I said earlier, this virtuous cycle, where we see more transactions as we win more portfolios and that enhances -- you've got that organic growth that we drive that's helping us in our security solutions.

There are also other 2 sources of growth for us in security. There's the constant evolution of technology. Agentic is a great example. These things need to be secure. They need new technology. They need new types of data. They need new solutions in there. And then you've got the frauds that are changing.

The criminals are changing their ways in which they attack as well. So you've got 2 sources of growth in addition to the organic growth that we want through that virtuous cycle. This is why this is such a big opportunity for us. The TAM is growing, and it's very relevant to the success of the service.

The ultimate goal of security solutions is how do we help our customers to sustainably grow their portfolios, execute against their strategies in a sustainable way. We're not out there to just say, "Hey, we want to reduce fraud to an absolute 0. We want to be mindful, how do you balance all of these things to create the best set of growth with the right amount of risk.

And if you think about our portfolios, we have thousands of customers and thousands of portfolios. Every one of those portfolios have different risk appetite. So within these opportunities, there are a lot of customization that needs to happen. And that's where our advisers team comes in, how do we help customers use all of our security solutions. Let's go a little bit deeper into under the hood.

Can I just stop you right there for a second because I think it's important. People understand what you said on a macro level. But coming from an operating background, take me into the room of you sitting across the table from an issuer and they say, "Hey, we want to grow our program, Mastercard help me, right? So you're -- go put your old hat on, you're the security guys. Your turn comes up in the meeting to speak. Like what exactly are you speaking to a bank about? How you can help them grow?

Great example. So let's take -- we're sitting with a bank who is about to launch a new portfolio. We look at what are the strategic objectives of this portfolio. You want to go after the super affluent, you want to go after the mass market, you want to go after your subprime, whatever the strategy, you want to go after business customers, you want to go after a specific type of segment of the market.

Then we look at -- so if that's your target market, what is your strategy? Do you want to create the best experience? Do you want to create the lowest cost? So all of these business strategies from our customers gets in goes into the box. And then we will say, okay, now let's look at our tools. We've got fraud scoring. We've got things to help you do better authentication, better account opening.

How do we curate a set of solutions very specific towards that portfolio's vision and strategy that you want to execute against. And that's where we play. And a great example is we recently sat with a customer who's launching an affluent portfolio and said, these customers have to have the best experience at places like dining, travel and so forth.

And then in our fraud solutions, we will make sure that we curate very specific rules where for another transaction, I might say if the score -- if the fraud risk is above x, I'm going to decline. But for these categories in this portfolio, I'm going to say, don't decline. Maybe just send them a text message. And so these are very practical. They go down into a lot of detail, but that's kind of to the level of detail that we can go into with our customers. And that's why you're part of their growth strategy. You're not just somebody that comes to supply a piece of tech and then walk away. You're in there, and that's where that virtuous cycle is so important.

We measure ourselves then does the portfolio perform in the right way. Not necessarily the product -- the product has to perform. Otherwise, the portfolio will not perform. But the bigger picture is the Mastercard business that benefits from this.

We used to call it a sleeve when we were building our software, but it's not really a sleeve. It's more of like an instance specific for that issuer. So they will have almost like a dashboard and you're adjusting the dials on the back end and saying, for these transactions, this is what we're going to do, here's how we're going to do multifactor authentication, if necessary and all that. And for that specific initiative for that particular issuer, that will be the program that we're running.

Correct. And then from time to time, we'll go in there and we'll evaluate. Is it performing? Is it doing what it's doing? And do we need to put tweaks in there. And so we offer a range. Some of our customers are highly sophisticated. They can do a lot of this themselves. Some of our customers are like, please help us and do this on behalf. And so we've got a range of where we do from pure -- we provide to the solution and we provide advice to we'll actually actively help you manage this and continuously evaluate the performance of this. So that's why this is so deeply ingrained into the strategy of the broader Mastercard portfolio.

And all that is within the security.

That's all within the security. Now you can extend that the same way to our customer acquisition and engagement as well. As we launch that portfolio, how do -- and this is where it's actually a great -- the life cycle. When we launch a new portfolio with the customer, the first question is how do we get consumers to adopt this new brand.

Our customer acquisition and engagement team gets in there and say, how do we design loyalty? How do we design the traction, where do we target? Is it social media? What kind of methods do we use to advertise this? How do we onboard these things?

Our identity solution sits there. How do we make sure that your account opening and onboarding onto these accounts are as effective and flawless and seamless as possible. And then once they start using their cards, how do we make sure that, that experience is rock solid in terms of don't decline them when they're trying to book an Uber for $20 or try to get to the airport and they're late. And then ultimately, at the end, what happens if something goes wrong? So we've got a whole suite of dispute solutions.

And we should talk about Ethoca a little bit as a company that we acquired about 10 years ago. just growing phenomenal. They are there to say, how do we handle the -- when something goes wrong. First of all, how do I make sure that the digital receipt is in my banking app to avoid an unnecessary call into how do I manage my subscriptions instead of when I can't get hold of the company where I want to cancel or change my subscription.

So these are literally throughout the life cycle of account launches, but also the transaction life cycles as well. And that's why this is not an abstract that sits outside. It is deeply ingrained into the broader strategy of the company and our portfolios.

You said there are 2 growth vectors really driving security, right? One is on new technology like agentic. Let's really dive into that a little bit. Today, I make a transaction, I authenticate it, maybe I get a text, if it doesn't -- it's not really sure it's me or whatever. How do things change with agnetic when you have an agent standing in front of the ultimate authenticator?

No I think it's -- so we're looking at this as a great opportunity, of course, in terms of the new business models this will create for companies, for start-ups to create agents. And so this is just the white space in terms of what this will do and how this will transform the way in which we as consumers communicate with each other, consume products, do commerce is fantastic.

But if you look at the security around this, there's a whole chain of evidence that we need to pertain. I'm an old cop, so I talk about these things as well. But if you think about the parties in an agentic transaction, you've got the human's agent. Then you've got perhaps the merchant or the merchants and/or the merchant's agent that's in there as well. And of course, you've got us.

We need to make sure when the agent is -- or somebody -- when the agent receives a request, the agent needs to know this is a real human. This is not an account that was opened with a synthetic identity. So I need to verify that the consumer is real.

The consumer when they're interacting with the agent needs to know, I'm dealing with a real legitimate agent. When the agent wants to buy something from a merchant, they need to know that merchant is real. Because think about this, how easy is it for a criminal to start a business, register it and advertise to any agents out there and say, I've got the cheapest pair of shoes or I've got the cheapest travel. So there's a lot of work that we now need to build in to say there's integrity in this flow. And it's not just the agent. It's not just the consumer, it's everybody in that chain. We need to verify. And so we're looking at how do we digitally reinforce the trust and the integrity of the chain of data flow across these areas. And then if something goes wrong, how do you clean it up? -- because we've got this -- and you might have read about this, we talked about verifiable intent, where when the consumer asks the agent to do something, that request, that instruction gets encrypted and signed with the cryptographic key, and we call that verifiable intent.

If something goes wrong, that thing can get unlocked and be shown to the consumer again and say, this is what you ask the agent. This is what we see what happened. Can we do this? And our Ethoca is the solution that actually will deliver that from the place where you talk to the agent to where you're in your banking app and say, I don't recognize this transaction. This is not what I asked.

We'll say, well, let's show you what you ask and let's show you what happened here. And then so this is how -- and this is why this opens up so much opportunity on new technology evolution that we really have to secure that entire chain.

I got to tell you, if I ever get asked the question from an investor, why is Mastercard not going to be displaced by agentic? I want to take that 90 seconds and just play that because I think you summarized it really well. No one sees the entire end-to-end transaction from the consumer to the merchant end more than a network. So the fact that you can authenticate it every step along the way makes sense for your...

I know we're going into a whole lot of detail here, but I'm glad we did -- we are because if you're a merchant, who has -- who's doing a lot of sales by an agent and you have to deal with the consumer disputing a higher than a normal amount, even 1% or 2% of your sales, the amount of churn that you have to put in there. So these things are designed not just to safeguard and secure, but to make the operations flow with the least cost as possible.

And that's why I will keep coming back on these things are facilitators of growth. If you look at the -- I call this the equation of growth. But if you have utility, you can have growth. If you have utility plus trust, you've got a growth acceleration. And that trust is the component that we want to put in the middle here. And it's trust to say, I can trust this all the way through. And if something goes wrong, there's a well-defined path to resolve it.

I jumped the gun and went out of order here. We didn't -- I want to talk about the major components of security. So if someone said, for the security sleeve within VAS, what are the subbullets? You handle what? Which revenue drivers were that?

So we've got a couple of line items there. And let me just take a quick step. I know we talked about the 2 drivers of growth. The other area that I think is important for us to recognize is our customers around the globe are fighting an enemy that is extremely well resourced.

If you read the data out there, and it's hard for me to verify if the data is actually 100% correct. But even if it's not, cybercrime and fraud is one of the largest industries out there. If you read the documents, they will say it's as big as the third largest economy in the world. That's how well funded the cyber world is.

The other piece you have is as a financial industry, we are being attacked by criminals because that's where the money is. So some -- anybody with a financial gain wants to go after the banks. But then you're also a place where if any nation state or anybody with some ideological problem wants to disrupt, they want to disrupt the economy, the flow of funds, the flow of commerce.

So you're a target on both criminals as well as folks with other intent. So the issue is real. These folks don't respect borders. It's global. And so what we bring as a global company is that global view. And that's why you will hear me talk about data, our global connectivity and how we can then curate that data, very specific to come back to the strategies of what you want to do with this portfolio.

Now let's talk about the components of security. We've got a couple of them. Identity is a big chunk. And the reason I will always go back to curate fit for purpose. We talk about I want to open up and launch a new portfolio. I need to onboard those customers, opening up accounts, identity plays a really big role there.

And we also have a component of authentication where I've opened the account, so I know you're real. Now you want to come back and you want to use your Mastercard credential, how do I make sure you still are who you say you are. So you've got account opening identity, you've got authentication identity. Then -- so that's all within -- there's a whole bunch of other stuff in identity, passkeys and biometrics and so forth as well.

The second one is our fraud and financial crimes, which is a very large portfolio. If you think about this, 175 billion transactions across our network last year. Each one of those transactions get assessed for the risk of that being fraudulent. We call that our fraud score and a product that we use there is called Decision Intelligence.

We just launched Decision Intelligence Pro, which uses a bit of really interesting AI, and we'll talk about that a little bit later about the performance. We also do financial crime for scams. So in the card world, we do -- we help the requester, which is the consumer or the merchant who wants to get paid and the issuer of the card. So we help merchants and we help the banks who issue the card.

In the real-time payments world, we help the sender and the receiver to score this for scams and the likeliness of this being a money laundering transaction. So you've got fraud scores across these transactions multiple times. That's on our fraud side. We do a whole a whole group of solutions in that one.

And then we have our cyber world, which is just a massive growing TAM. And with agentic and with the technology evolution, that's becoming more prevalent than ever with the growing TAM that's in there. This is where the agentic piece comes in. This is where our Recorded Future acquisition comes in. So those are the big elements of the big areas of security solutions, the big buckets of solutions.

So Devin, I'm not going to ask what you make in each. But what is the -- something that also comes up with investors is how do you guys make money on this? So is it per transaction for some of these services? I'm assuming also some of it is more like a SaaS for this particular feature on your portfolio. We'll charge you x for this service, but this will be these other services could be per transaction. So is that a fair -- I'm looking at Devin for those of you not in the room. Is that a fair question to ask just kind of what the mix is between those 2 types of revenue, not the absolute revenue?

Yes, I can share with you a little bit. So there are a couple of -- so diversification is the name of the game here, just like in the investment world. We have several of our services that are linked to the transaction. So per transaction, there's value that you can measure and you assess a fee for that.

We have some of our solutions, which are by account. So we monitor the risk or the behavior of an account, and therefore, you pay by x number of accounts or active accounts is another way. And then some of them are related to the transaction amount, so what we call volume-based pricing. So -- and some of them are more static single year fees or quarter fees, subscription fees perhaps is a better way to do that. So -- but most of them are event-based because the event base is where when the organic growth comes in that you benefit from that organic growth and the rise in that. So those are the categories of how we typically price.

And would you say historically, if I look back 10 years ago before VAS was really a thing, maybe 12 years ago, whatever the number is, these weren't necessarily differentiated revenue items. They were just part of what you do, right?

Now your technology has gotten better, your data has gotten better, your ability to analyze has gotten much better. And now you can start charging for these things because you are adding value to your end user, whether it's an issuer or a merchant. Is that the right way to think about it? 100% just incremental?

It's 100% right. And so if you look about how we quantify value, there's the value of the actual solution itself, which is, am I detecting the right number of fraud? Am I within target of what I told the customer that this is what you can expect. And then there is how does this play into my bigger Mastercard portfolio.

One of the biggest KPIs for us in the effectiveness of our fraud solutions is can this actually help to approve more transactions? -- which is sometimes counterintuitive, which is like you guys are catching the fraud guys, you decline, but you're measuring yourself around approval.

It is finding the right transactions to decline versus the wrong ones. And that what we call false positives is a really, really big deal. So if you think about what we've done with our DI Pro, we just launched a new DI Pro, which is our transaction scoring solution. 20% increase in fraud detection, 80% reduction in false positives.

So if you think about the equation here, the value of fraud, let's say, the total cost of fraud is, I don't know, $30 billion. The total amount of transactions gets approved are billions. So if I can increase that billions number with a very small percentage, the financial value to my customer is huge. And so our focus is really to help our customers make more money without letting risk run out of control. And that's where a lot of our -- and this is where many folks think we compete with a lot of our fraud providers out there. We're actually working very closely with them because our ultimate goal is better business.

That's a great segue into my next question around competition. Our channel checks recently said on the VAS portfolio, in Europe, specifically, not so much in other places, the networks aren't the only game in town anymore. There's other people out there that are kind of doing things. Some issuers are trying to diversify a little bit.

There's pros and cons of diversifying versus uniform, obviously, with consolidating services with a single vendor. Talk about your right to win out there on the competitive side. No one can compete with your data, right? That's obvious. But who are you competing against, would you say? And are you seeing any kind of competition around the edges?

Yes. So on the payment side, of course, we compete very strongly with the other payment brands out there. But when it comes to our fraud and security solutions, we don't truly have a lot of direct competitors. The vast majority of the time, they're actually our partners. And it's not just on the issuing side of the equation on the bank side where they issue the card, most of those banks will have their own internal fraud systems.

Now those fraud systems are designed to really have a deep understanding of that bank's portfolio behavior. What Mastercard bring is this broad network experience. And we talked about the risks of being global, the criminals don't respect borders. We see fraud patterns happening in Japan that's on its way to the U.S. Things are happening in the U.S. that's on its way to Brazil way before their systems can see them. And so in that way, we typically augment rather than try to replace. And so you've got 1 plus 1 is 3 in this case. And then our teams will go in and say, let's help you with your fraud solution and we'll combine these scores.

In addition to that, if you think about the data, recorded future for us, massive in terms of the data differentiation. Nobody else has this data that we have, not even in the cyber space and not in the payment space. We've got the world's largest independent -- Recorded Future is the world's largest independent cyber threat intelligence company. So they collect data around everything cyber threat related. We use a vast number of sources. So we basically understand everything the criminals are doing out there.

We're monitoring things like the dark web. For instance, if somebody hacks into one of the providers that you used your card and they steal your card and they offer it for sale there, Recorded Future will actually grab that card number. We'll load it onto our network. And when somebody tries to transact, we're going to stop them. So these are some of the things that they do. So if you've got that data together with our view of all the fraud that happens, all the disputes that we see customers bring in, nobody has the richness of that diversity of data.

And if you think about an agentic world, -- we've got a lot of agents out there. Data is the one thing that truly differentiates in how you then leverage multiple types of AI models to then create value for your customers. And if I think about that place, we have not only the differentiated data, but we have the distribution network in terms of our network, our cards.

If you think about we've got 175 billion transactions. Given how many cards do we have? 4 billion, just 3.8 billion cards. You say 4 billion. I'm just under 4 billion. We have well over 150 million merchants out there. This is where the differentiation sits. That's a distribution network then with this data. And that's why we are so excited about the longevity of growth opportunity for us in this space.

As you're talking, I'm just thinking about all of the defensibility you have with your model, right? The data being king, right? That's the new oil, I guess, to say. Do you -- would you ever give a third-party access to your transaction data even in a generic form? I'm a third party. Would I ever be able to say to an issuer to a merchant, we have access to Mastercard's data because we have a partnership with them. Do you give that information out? Or is that just contained within your wallet?

I'll tell you in the security space, we are religious about that stuff. That doesn't happen. It is a true differentiator. It is the thing that -- now we will often take external data and bring it into our systems to augment first. So we will buy, we'll go and partner with other companies. We will take the curated output of our data, and we'll sell that to people. And for instance, a big chunk is our partnerships. We talked about a little bit in the competition side. We will send our score to a fraud provider that provides fraud scores to merchants and acquirers. And so they can use it, but the raw data, that's the key differentiator that we want to keep.

The other thing that I think is important from a competition point of view all of our fraud, I say all of them, the vast majority of them are what we call rail agnostic. So they will work across card rails, RTP rails, other types of rails, we talk stable coins, we'll probably get into that point as well as well, but your more digital rails as well as brand agnostic.

For instance, Cap One is a good example. They use our Ethoca solution across all of their networks, across all of their solutions. And so these are areas where we go in there to really help our customers. And that's where the competition is then we can work with the other vendors that are there. If there's value, we'll do this. And sometimes we compete, but those are really the more minor areas of competition.

We touched on cybersecurity briefly. Did we touch everything you wanted to talk about there? Because I think, again, we could talk about that for hours.

We can talk about that for hours. We'll probably come back into the fold. But I think the role for cybersecurity, of course, for our portfolio, maybe there's one thing I'll add is there's also now a big role that Mastercard can play in how we help governments.

Knowing the threat intelligence that's out there, we are becoming a bigger and bigger partner to governments out there to help them understand what are the cyber threats that they need to look at from an economic point of view. So there's -- the expansion of that cybersecurity brings for us is it looks at the entire digital ecosystem.

We are partnering with all the big AI players out there, platforms out there. The insights that we bring on cybersecurity for things like crypto for -- we've got a product called the Crypto Secure, which is looking at the counterparty risk. And it's not just the risk of are you doing your proper compliance, but how secure are you from a cyber point of view. We can assess cyber vulnerabilities.

One of the things we are doing right now is on the cyber side is we're combining our RiskRecon. RiskRecon is another company we acquired, which does cyber risk assessment and third-party risk assessment. So basically, we will go and from an outside in, we can tell you your cybersecurity posture is scores at an A level or an A level and you've got a certain score.

That capability, together with the intelligence that Recorded Future brings now allows me not only to understand my vulnerabilities, but how do I prioritize them. If you think about the frontier models that have just come out, Mythos being one of them, our CISOs are overwhelmed.

All of a sudden, I went from managing x number of vulnerabilities to 4x, sometimes 10x that. Where do I start? Because my resources are still the same. Where do I start to fix things and patch things up? You bring our solutions together and Recorded Future can say, well, we're seeing these being exploited in other places of the world.

So you need to prioritize them first. And so this is where we just become a real true partner. Now this is broader than our card business, but this is the digital ecosystem within which we operate. And that's where I think that expansion of the TAM and the right we now have to play in that area is helping us will grow as well.

That's great. We have to talk about AI. You've heard about AI. That's kind of just out there. Let's talk about AI, not only what you're using for traditional transactions, but how you're using AI to fight AI-driven fraud as well. I think there's 2 different topics there.

I'll tell you, it's fascinating. If you just take a step back, the frontier models have demonstrated to us that in the past, if a cybercriminal wants to break into something, they will do some reconnaissance. -- they will plan their attack, they'll pick their tools. They'll execute, they'll take the learnings and there's a whole cycle.

AI collapses all of those cycles into one continuous stream of events. And so if you think about that component, then you would argue for a human to be in the loop or on the loop is actually a constraint. It's no longer a help. So getting into the more autonomous way of attacking or defending has become -- it's going to become an imperative.

In my mind, there's just no 2 ways about it. And so one of the things that Recorded Future just launched a couple of months ago is our autonomous threat hunting agents, where we have one of the world's largest malware sandbox -- so people from all across the world, if they find malware, they will send it into our sandbox. We unpack the malware. We understand the signatures and then we put those signatures into our agents, and they go and they find if any of these signatures are present in your company.

Now we've automated that with agents so that instead of a cybersecurity person has to understand this, write all the specific code to then go and hunt for these things, all of that is automated. And so this automation will continue to grow. So it's a really big part of this.

In one of our products that Ann runs is called SafetyNet. SafetyNet is designed to look for major breaches that maybe one of our customers gets attacked, the bank gets breached and there's an ATM run. You cannot have a human in the loop to see if there's an attack to say, should I start declining. This has to be automated.

So we have AI to identify the risk. And then we've got AI to understand how do I remediate this I'll call the human, but somebody needs to start taking action because otherwise, it will be a whole bunch of money. So it is a big focus for us and also a big area of growth. This will continue. We've only just started scratching the surface in terms of the problem and the solution set that's coming there.

I know you mentioned Ann coming in from Microsoft, obviously, tons of experience there to bring.

Deputy CISO, deep knowledge of cyber. So you can see there's a big area of growth, just big investment in Recorded Future. We're combining our cyber assets. The fraud and those things, of course, we've got very strong leadership under Ann is going to continue to drive that. Scams is going to grow, but cyber is a big area for growth for us.

And the data, again, the data and then the platforms through which the data can be leveraged. And Recorded Future will have competitors. But when you take Recorded Future plus Mastercard's fraud data plus our attack data that we get from our own CISO, you create a differentiated data set that honestly, nobody can compete with.

Can you sell this outside of the payments ecosystem?

We actually -- we actively do. So Recorded Future, in fact, I think the vast majority of their customers are actually nonfinancial institutions right now. So we sell to health care, manufacturing, automotive, investments, entertainment. So there's a whole bunch of categories out there.

Okay. So let's switch gears to your new role, which you're a month into on network and RTP. What's your initial reaction to what you've seen there and the capabilities and where things are going? We have to talk about UKPI that was just announced yesterday, Money 20/20 in Europe. That's live now supposedly according to the press release, but press releases are always a little cagey. Talk about what your initial reactions are to what you guys have there and where you think the opportunities are for growth.

So a big part of my new remit is thinking through how do we leverage our assets that we have. We've acquired Vocalink. We made some other acquisitions in the Nordics. We've got a number of assets in the real-time payments, bill payment disbursements category. And we also have our traditional Mastercard network. And we're just modernizing this in what we call our real-time stream, where we just enhanced the -- we will start clearing in real time, settle much faster. There's a whole bunch of new things that we're doing there. We can help domestic markets do.

How do we bring these assets together to really solve for what the customers really want, which is they want choice for their consumers. Central banks want to have control over what they do. They want to have resiliency. And then payment that actually payment options that works for how they want to drive their economy.

And that's, in essence, really where I'm spending most of my time right now on the whiteboard, figuring out how do we use these assets. And it's just -- we've got the switching platforms that we can put in. And then we've got services. So we're already rolling out services on the RTP network for Vocalink, where we do our consumer fraud risk, the scams that I explained earlier.

How do we bring tokenization into the world of RTP? So there's a whole bunch of things where we can start thinking through we have our switching networks, and we can build a value proposition. And the notion here will be very similar, how do we create opportunities for the central banks to actually build applications on top of the foundational stuff, which we know to do really, really well.

With regards to UKPI, again, it's competition. There's a need in the market. The banks are stepping up. The regulator is pushing this. We own -- we operate Vocalink in that market. So for us, -- in the U.K. So Vocalink is the RTP switch network over there. So this for us is basically just equal there. So we'll see those transactions will run over the switch networks.

But the competition is there, and we will go in and say, look, are there better ways for us to help them do this? Can we augment what they do? Can we do better? So we're not in the position of where we want to fight everything. We really want to see how do we help these -- there's a reason why these regulators are driving this. How do we then come in and understand those reasons, bring our assets together and say, let's help you grow on this. That will really be the approach that we want to take.

Is there anything that the regulators have created, which would give UKPI an advantage? Are they mandating anything for banks to automatically connect or do anything like that, which gives them maybe a competitive advantage?

I don't know yet. But we've seen this happen in other markets. For instance, Brazil and other places, we've seen the regulators mandate these things. But even there, there are always opportunities for us to then go and work with those banks because those payments today don't have dispute resolutions. They don't have protection for consumers if something goes wrong on the transaction.

When those transactions are going into the agentic world, they're going to face exactly the same challenges that we face with card. They're going to need solutions. They're going to need tech, they're going to need data to make that work. And so that's why we're staying very close to these things, and we are there to actually help we want to really help economies grow.

And that's why we don't necessarily see all of this as just bad competition, but actually as opportunities, maybe we need to think harder about some of these things and how we accelerate even further. But for us, these are opportunities and white space to help grow.

I think you just kind of summarize why all the management changes could be so positive, right? Your background as a former Cop that you said in security, and now you're looking at this. You just bring a different perspective to a whole new world that you know about, but now you're going to become an expert in again.

I'd be remiss if I didn't ask you with the BVNK acquisition still pending, hopefully, that closes soon for you guys. You will have traditional rails. You'll have the alternative rails with Mastercard Move and all the stuff that you're looking at RTP. And then you're going to have a new toy to play with in BVNK with stablecoin infrastructure and rails. How do you envision sometime down the line? I'm not going to give years down the line. How do you picture all of these rails kind of seaming together and integrating together to do something.

It feels like bowl of spaghetti, right? If you think about all of this. And that's actually where I think Mastercard is so good because what -- if you think about what we do today in running a global interoperable payments ecosystem that spans across real-time payments, card payments, bill payments, P2P, P2M, that's where we feel comfortable.

We can help define the rules of the road. We can help put the technology in place and the pipes and then layer on services on top of this. That's where we're good. So we see this as an opportunity for us. If you think about BVNK, we've done a lot already in the P2M space with regards to getting access to crypto.

How do I use my crypto to buy something? How do I actually use my card credentials to get access to digital assets, I can buy them. So the consumer piece there are a number of solutions already there. What BVNK will bring for us is this expansion beyond P2M.

How do we start looking at broader person to merchant. Person to merchant sorry, yes, person to merchant, how do I -- instead of just using these things to pay, what are the other types of opportunities out there? And that's where this is going to be really exciting for us to see how this builds. And you can see a lot of use cases being developed in those areas. That's where I think we're going to spend. That's why this is so exciting. This brings another rail that has a strong growth. And ultimately, the interoperability, how I use what we call a world for multi-money is really the way we think about it.

You can start a transaction on a U.S. dollar, it goes through a stable coin through a different country and end up in a whole different other currency. This world of managing interoperability between how I pay, how I want to get paid and then make sure that the messages flow and then the money actually moves themselves -- that's where the exciting part is.

And that's the complexity that we want to try and take out of the equation so that businesses can build their business models on top of that. That's why this asset for us is going to be so important. And again, if you look at us versus the broader suite of competitors out there, even with local APMs, alternative payment mechanisms, we provide a global interoperability that none of them can, but this is where we can partner. We don't always have to fight about these things. If your credential in this country doesn't work and you go cross-border, it's a credential that work. And for the consumer, we can make these things seamless. That's ultimately where I think the value will be, and that's where a lot of our focus will be.

I think the most exciting thing about what you guys are doing as a network is how you can start on one rail, it can seamlessly move to another, back to another to facilitate faster, more conversion -- faster transactions, easier settlement, lower cost for the merchant, more conversion. You're going to have an opportunity to play with all these different things and...

Exactly. And that is exciting. We talked about agentic commerce in the past, but there's a whole new suite of potential transactions that will generate between agent-to-agent payments. How that's going to flow? There's still a world out there that a lot of it is unknown, but we've got the assets and we've got the security layers on top of it. So that's why I think we are well positioned, I feel, and to not just compete but to win in this space as well.

I think that's a great way to sum it up. We actually finished right on time. So thank you very much. We could talk to you for a long time. Good luck in your new role, and thanks for spending some time with us this morning.

Thank you.

Appreciate it. Thank you.

Good afternoon, everyone. I am Harshita Rawat, the senior analyst covering U.S. payments at Bernstein. I am delighted to be here with -- today -- with me today, Michael Miebach, Mastercard's CEO.

Hello, Harshita. Thanks for having me.

Michael, there's so much to talk about as we were chatting earlier. Let's get the macro question out of the way first.

There's always a starter.

So let's talk about the overall consumer spending environment. What are you seeing in terms of spending trends, both domestically and in cross-border?

Good. So we have a good lens on consumer spending by the nature of what we do globally, all the card categories, which is not all of consumer spending, but it gives us a pretty good view of what's going on. What we've seen is continued growth in consumer spending. That's the first thing to say throughout the first quarter. We gave you in our last earnings call an outlook into the April data as well.

And the growth in consumer spending has continued into May, the first 2 weeks as well, where we saw stable to slightly better consumer spending. So that's fundamentally the good news and the trend that we're seeing. We drag it down a little bit. We see that coming through in consumers adjusting to higher prices driven by energy, elevated energy prices. They're adjusting between discretionary and nondiscretionary spending. That's good. As long as it's on cards, that's great for us, which is a good chunk of the consumer spending. We're seeing it in the U.S. holding true as a healthy growth in the U.S., also internationally, just a little bit lower, but continued growing at a healthy clip. So that's true.

And if we zoom out and ask ourselves, why is that? I mean we're reading the headlines on conflicts and this that and the other pressuring the consumer, but it's still fundamentally true that unemployment has been relatively low. It's also true that wage growth has kept up with inflation in a relatively good balance so that net-net spending capacity is intact. It's also true that general equity markets are doing fine. The wealth effect is still there. So all of that just points to basically a supportive environment for consumer spending. So that's fundamentally a good thing for us. So don't have to worry about that part of the business as that's a big fuel of how we grow.

Fantastic. Michael, let's talk about agentic commerce. It's early, but things are moving quickly. Tell us about how you think agentic commerce may evolve, both in consumer payments, but also a new category of commerce around agent-to-agent micro transactions?

So agentic commerce, it is early days. I think what's happening is, you see AI-enabled ways of commerce starting so people are changing their ways on how they discover products, how they find out what they really want to buy. And then there are ways for them to check out in different ways than they might have done in the past. It could be on the chatbot of their choice. So that is a journey that is happening, but it's happening very slowly. Example of, one, my wife tried the other day to search for something on ChatGPT. It was a good result, good recommendation and I tried to check out. And that is just not as convenient as the reality is today when you go on to a marketplace and you check out very seamlessly.

So what is true, though, is that over the past year, the ecosystem has been getting ready for consumer behavior to change. So what have we done as an ecosystem, a broader payments ecosystem. So a set of protocols were established to enable the merchants to make their product catalog available so that an agent can actually discover the product. So then the consumer can find them. Without discoverability, it doesn't work. So commerce protocols were established and the payment players established payment protocols so you can stick the 2 together that from finding the product, you can check out the same way you are used to.

One of the complexities in all of this is to recognize that there's an additional party in the payment ecosystem, which is the agent. I think we should assume that this whole thing evolves in a way that, first, we see agent-assisted commerce happening and eventually it could be autonomous, which is the second part of your question, we can come to that. So various protocols were put out, Mastercard, we put out Agent Pay, which is basically a trust layer in agentic commerce that establishes that everything you're used to today in terms of protections, liability if something goes wrong, a path to disputes, authorizing the agent as the agent is actually a real agent versus a rogue agent, et cetera, et cetera.

So that is done. We've also gone and we've enabled all issuers globally, and we're rolling this out with merchants. A key part of the merchant rollout is you have to make it easy, particularly for small merchants. Where the big opportunity in all of this is that a small business can start to compete with a large business because they're suddenly discoverable. Because the agent will discover them in different ways than that happens today. So it might go to a few marketplaces, then it's a level playing field for everybody. So if that implementation is too difficult, that will be a real problem. So we have a low code to no-code implementation, which is a big differentiator to other parties in the ecosystem. All of that is ready.

Now it just takes a little bit of time and people do play around like my wife did and next time it's going to be better and so forth. All of this takes a bunch of partnerships and big partners to come together, Microsoft, OpenAI, Google and so forth, and that is happening. Now that's on the consumer side. So you look at the world of B2B, tremendous opportunity. I mean that's a huge upside as well because you can -- it's not hard to imagine that you can -- somebody will go to their Chief Procurement Officer and say, "Why don't you get a bunch of agents that are going to help us procure what we need as a company?"

And then if you imagine, there's a set of agents on the company side and then you have vendors that also use agents, and you can see a completely automated part of procurement for certain aspects, digital content, for example, I buy advertising space. Those are things that could be easily automated. And this is where you could say, "Well, there might be a whole new set of transactions that hadn't even happened before." So tremendous TAM expansion could emerge out of that, which is why we think that getting ready for that side of the equation is particularly important. Cards can go a long way for that because we're used to high-frequency, low-ticket transactions, take transit.

But we should also -- which we always do, we look around 2 corners as a company. If this is high-frequency instant micro transactions that are at the fraction of a dollar, our stablecoin capability may just be about the right thing to go after those additional transactions, while our basic card proposition works for all the consumer things we've just talked about and for bigger, more regular B2B transactions. So this could happen. Our announced BVNK acquisition might just be the tool set for that. Currently, we do this with third parties. We could do it today, but then we will do it in-house and natively. So I'm excited. So bottom line of the whole thing, agentic is a tremendous opportunity. It just takes a little bit of time.

And you talked about how it could accelerate B2B, create kind of new TAM. And I think also on the consumer side, in a way, the complexity of a transaction goes up a lot. And there was obviously a whole host of questions around like who actually authenticated the transaction, whether you had an intent to that transaction. And I know you launched verifiable intent also earlier this year. So can you maybe talk about -- I think you talked about Agent Pay, but can you talk about like the whole suite of capabilities and the additional value you're bringing on the transaction?

So first of all, by enabling all the parties, as I just talked to issuers, merchants, so we're bringing that value initially to get everybody ready with a set of protocols and standards so you can play together. So that's how you unlock a space generally. That is what we've done in cards, what we've done with our account-to-account is a franchise, basically a whole concept that everybody can go by. And then you go ahead and say, "All right, what are the things that we know a consumer or a business will expect and that will not change?" Ease, trust and what happens if something goes wrong, as simple as that.

So that is true today, and that was true yesterday and today in forms of payment, it will be true in agentic. So we have to enable that. Tokenization is a big part of that. So every transaction in agentic will be tokenized. That's the way how the information moves from the person that's authenticating an agent, that's giving instruction to an agent, then for the agent to pass on the information and be recognized by the next party, which would be the bank and so forth. So all of that is tokenized. In the current world of payment, about half of our online transactions are tokenized. So tremendous opportunity for us. At the same time, tremendous value that we bring to that ecosystem with tokenization. So that's a big part.

But then you come and say that transaction happens. So imagine the following. You buy a pair of running shoes and you check out on your chatbot and at your doorstep, appear 10 pairs of running shoes. And you're like surprised, okay, like I never asked that. How do you prove that? How do you get to a point to prove it so that a return can be initiated and so forth. So that was a piece that was unresolved in that ecosystem. That's a piece that's perfectly bog-standard today when you pay with your Mastercard through chargebacks and disputes that is enabled.

So we went out and said, okay, let's talk to a partner that's really close to the commerce ecosystem to figure out a standard that we can work on together and enable that missing piece in the ecosystem that is when we got together with Google to have verifiable intent, which is basically an undisputable record of what the agent was instructed to do and what the agent then did. And is that the same thing? It can be automated, passed on as an information token, so to say, to facilitate the whole transaction.

So a lot of technology in the background, but essentially enabling the exact same experience that the Mastercard promises today, 0 liability. Merchant, you will be paid and to consumer, if something went wrong, it's not your fault. So that is, I think, a big unlock, and it should reduce the hurdles for consumers to really go about that. That is a lot of value that we bring from the start of the transaction even before the transaction on the standard setting, authentication, tokenization, dispute, all elements of it. And then you can layer a lot of -- a set of services on top of it.

How do we improve the identity of the person that's making the transaction if it was you. So there's identity solutions that we can bring to the table to say that is another piece of value that we bring. Another big piece is we have over 500 million consumers in our loyalty data that sits on our systems. That's all permissioned personally identifiable data. So with the right kind of permissions, you can create an insight token that enables the agent to make an even better recommendation by leveraging loyalty information.

So that is how you can layer on value after value. So I'm super excited about agentic from -- it's like a growth opportunity. It's a transaction expansion opportunity because baskets will spread around all these SMEs that might be discovered. The most fundamental thing is if it drives a better experience, it's generally good a tailwind for commerce.

And trust identity dispute becomes even more important as services in the agentic world and the e-commerce world and this is what you....

Exactly. So -- good thinking ahead on our identity solutions. This will be another way to deploy them. Right.

And Michael, there is a perception that stablecoins can be more suited to be the money layer on this new Internet, this agentic Internet as opposed to cards. You can do both. How are you viewing this?

Right. So I'm not sure where all these perceptions exist. It's not my perception for sure. I think we have to zoom out a little bit and look at what the card proposition brings that I just talked about, what stablecoins bring. I gave you an example earlier why different types of transactions might need different solutions, which is why we always expand our payment capabilities. But fundamentally, I think the starting of comparing that stablecoin might be whatever, the cheaper answer or something like that.

I think these are kind of misconceptions. They're really different things, very different things, but they're also similar things in the way how we look at it. Stablecoin is another rail. We have card rails, we have account-to-account rails. We have stablecoins as a rail. It could be seen as another currency. So we have it as part of our offering, but say, the cards ecosystem brings a lot of value for a lot of transactions in agentic, the consumer piece being one of them. And there will be these emerging use cases where stablecoin will matter. So that's how I look at it.

Fundamentally, it's all expensive, and we have all of these capabilities. So if that weightage changes in 20 years from now, that's fine. But we want to be there today because if our customers want that, we want to offer that capability. But for now, I really think it's going to -- it's something that might happen on high frequency, very low value kind of transactions. But choice, whatever it is, it's just something for us to have on our radar.

There's a broader conversation we had about stablecoins in general. So aside from agentic, so where is that technology helpful? And you look in the B2B and the cross-border space, there's tremendous applicability of that. Again, for P2M, cards is great, but we love stablecoins for a whole host of reasons we can talk more about.

So let's talk about that. So you recently announced BVNK acquisition. You have a very healthy growth in your crypto co-brand card program. There is clear potential for stablecoin, especially when paired with cards to improve a lot of flows. And there -- you also talked about the opportunity in B2B. This is an opportunity for Mastercard. That's why you made the BVNK acquisition. Why do you think -- what do you think is misunderstood by some with regards to Mastercard and stablecoin?

So before we come to misunderstandings, it's like your perception question earlier, let's just talk about this in more general terms. So this is -- stablecoins, underlying digital assets, even crypto, blockchain-based technology is fundamentally helpful technology. So it facilitates transactions between 2 parties that don't know each other. So we like it from that perspective. We want to offer it as a payment choice to our customers. And we see applicability in a set of particular use cases where this kind of technology is particularly useful.

B2B, imagine programmability, which is an aspect of blockchain-based technology. Programmable payments in B2B is, let's say, you have something to do with international trade transactions, say, if these 10 conditions are fulfilled, I'm going to make -- release this payment. You can't really do this in a card payment today and you don't want to because you just buy whatever you're buying, it's just a once-and-done transaction, but you could do that in a B2B context. In cross-border payments, you have illiquid corridors where somebody wants to be preferred to be paid in dollars and you do that, okay, I've sent a dollar stablecoin, and it's a payout where you don't have an immediate value exchange of goods or services or something like that. That's why a stablecoin payment could be a very sensible thing.

So we see these emerging use cases, B2B, cross-border, me-to-me kind of payments, and that's an opportunity on the upside. We feel it was -- we have to offer that to be a relevant payment partner to our customers. We have a lot of the related or needed capabilities, send, receive, store, convert today through partners. and we decided we want to have it in-house because it's going to be bigger over time. Not in the card-based use cases, which are great for B2B payments, VCNs and so forth, that's not taking away from that. But in these emerging, we want to go after that volume as well because we can apply services after all.

So okay, so let's find a company that can help us in a world of stablecoins. And if I just describe that world for a moment, we're going to have more chains. We're going to have more stable coins. We're going to have more denomination. So you see this world of multiplicity. If you're a company and you're buying from me and we have a payment flow in between and you have a stable coin of your choice and I have a stablecoin of my choice. So how is this payment going to flow? Because that I want to be paid like this. And I said, I want to pay like that.

So who needs to sit in the middle? Somebody that can facilitate, send, receive, store, convert and manage the interoperability conundrum of this world. That's what BVNK does. And they have the best licensing regime and the best talent to do that. It's the best technology established, and we said, we do all of this today, somewhat okay through partners, but this needs to be a key Mastercard capability. We're going to go after them, and we took a close look. And today, this transaction is announced and not closed. It's going to happen this year as we expect. But I can tell you that the demand we get from our customers on that today is outstanding.

Obviously, no gun jumping and all these kind of things. But the interest is there,"Hey, when can we start talking to you guys about that?" So we're starting those conversations. So this is, I think, a tremendous opportunity. So the misunderstanding part in your question. It might just come from the fact that there are some enthusiasts and say, well, cheap -- stablecoins are a much cheaper opportunity. But I think beware what you compare because if you're comparing, I'm getting money from A to B, it might be a similar price.

The next thing is an FX layer. FX doesn't go away. It happens on either one of these payments. The second thing is -- that is to be considered is security. So security costs something. We invest billions of dollars in security. So what -- how do you ensure the cybersecurity, fraud identity -- all of those things we have just talked about on card payments. So you layer all of that up and you start to compare the price with the end kind of the resulting economic position for the user of that payment solution after fraud, after everything, is the price then competitive?

Is the value that we bring to that transaction worth the additional cost, and we can prove that very easily and customers that we work with that want our services because they know they are protected and it's a better experience and the acceptance is there and everything that comes along with it. So I think that's where the misunderstanding lies. It's an easy comparison on a base level, but that's not how reality works. So we make sure that this is understood and it's not nebulous, but we really point to an outcome.

And you also provide on-ramps and off-ramps right, like with stablecoin it is just...

We do that. That's where most of the volume is today. That's exciting. But we're creating a future here for other use cases and other payment volumes for us to go after because there, we can apply all of our services that we lay on top of that.

So Michael, let's switch gears and talk about the core of Mastercard, consumer payments more in detail. You have historically globally in the U.S. and Europe grown several percentage points faster than PCE. That delta in some markets around the world, not every market has narrowed versus historical levels. How do you see Mastercard's consumer volume growth prospects relative to addressable spend growth?

I think there's a tremendous opportunity. So you might expect me to say that, but there is. If you really break it down, there is a tremendous opportunity. I think the first is we have to understand what is PCE a proxy for. PCE is a proxy for all of consumer spending. Not all of consumer spending is card-based. So that's the first thing to say. Obviously, that distorts the picture a little bit. But that difference is also pointing to that the pieces that are not card-based are actually an opportunity for growth for us.

So take insurance or health care. Those are verticals we have talked about in our earnings that we're very busy in putting cards acceptance in place and get the growth up there. That's not something that we historically focused on because we're very busy with everyday P2M kind of volumes. And now we're doing such a good job that now it's starting to be really worthwhile for us to look at the next vertical and repeat some of the goodness that we have driven in P2M kind of categories. And let me start to kind of take a little -- put that argument aside and say, what are we seeing in terms of growth opportunities?

So in our last Investor Day, we laid out a $1.5 trillion transaction opportunities. So PCE does not measure transactions. It really is a volume-driven focus, but the transaction opportunity is huge. One of the best examples is when you think about transit. Here in New York, MTA, the number of transactions where people start to tap themselves through. This used to be a metro card once a month. And now it's like every time you go and you pay, this is happening around the world in hundreds and hundreds of transit systems, one such example. We have previously talked about new business models where you went to -- you used to go to a restaurant. Now if you do Uber, it turns 1 transaction into 3 transactions.

So there's all this multiplicity that's happening on the transaction side, and we -- with great methodology and precision, we go after all of these transactions, which is why we laid out that goal. Across the management team, people are primed for that. Our focus area, even our compensation is focused on driving transactions because that's an opportunity for us to attach more services and so forth. So that's a broader picture of that. From a geographic point of view, if you look at the United States, everything that I just said is true.

If you look outside of the United States, you find quite a number of markets, very large markets, developed markets where just the simple cash and check opportunity is still alive and well. The U.S. is a bit further along. If you go into Europe, my home country, Germany, you're somewhere in the 40s on digitization. That's tremendous cash opportunity. You look further south into Italy and Spain. So these are very large economies where we just do what we have done in the last 10 years in just going after the transaction opportunity and turning cash and checks into digitized payments. There's an adjacent opportunity in some of these markets where you have domestic systems.

That's not -- we put it in the category of secular growth because it's not fully digitized. These are systems that don't have tokenization, various other things. So it's a tremendous source of growth of transaction growth for us that, again, fuels our model. You look further into Asia, Southeast Asia, Japan, another huge third largest economy in the world, not very digitized, tremendous upside. Again, they're about around the 40% mark. Mexico and Latin America, Colombia, the fifth largest economy there. Again, tremendous potential.

So you take all of that. I think this narrowing part, come back to the proxy piece, let's not -- let's understand the transaction opportunity works a little differently, and we have laser-sharp focus on verticals, card underpenetrated verticals and geography where there is a lot of growth potential. The reality is, bottom line is more transactions are in cash and check today, still despite all of our efforts that we can turn into digital transactions and apply our model.

And this transaction growth, I think people often miss that, right? Because you are getting into more everyday spend. There's also kind of processing penetration, which has grown from Mastercard, which also adds to the growth rate there. I want to also ask about payments nationalism in the consumer payments context.

Right. sovereignty.

We have seen this growing desire for countries to control their payments infrastructure or to at least have it locally. There have been some renewed discussions in Europe, as you very well know. I know this is not something new to you, and you've worked through this in the past, but maybe share your perspectives on nationalism around payments and how are you engaging?

So, we are in payments because it matters. So payments matter to governments for the same reason. So it's pretty close to national critical infrastructure, electricity, water. So we like that. That's a good thing. We matter -- truly what we do matters to countries. There is a significant degree of alignment between what governments want out of their payment infrastructure and what we want out of it. So alignment on resilience matters in payment systems.

So now, how would you translate that to the question that you have? It's never good to just have one payment system, just simply from a resilience perspective. Inclusion matters. Inclusion is long-term market growth for us. The more people you pull in the digital economy, the better it is for our long-term growth. Governments want financial inclusion for economic participation. So there's alignment there. Cybersecurity, everybody wants to protect their citizens and their businesses, particularly small businesses, which are always the weakest link in the chain. For them, it's very hard to predict against cyber risk. That is our business, that matters to us.

So there is alignment. So when we have a conversation with the government how to participate in a country's digitization journey and building their digital commerce environment, we're generally a welcome partner. Where sovereignty comes in is when countries decide, I don't want you to be my only solution that comes right back to the resilience topic, that's fine for us. So the ways we find as long as we can compete, we're very happy with that. But we also partner with local solutions. Take cybersecurity and take acceptance. There are certain solutions where we make our services available as long as we can compete. And that is a 1 plus 1 a 3 solution generally. So I think that's been serving as a good model.

I think it's also important for us to show up locally, so to say, as a true global best practice kind of partner to serve -- to help with all of these priorities that these governments have that I just talked about, like cybersecurity, resilience and so forth. At the same time, to recognize local needs and requirements, including the resilience part. So what we do is we just announced October last year with Europe, you talked about Europe. that we're going to set up 3 new data centers. That gives more resilience because more technology is on soil, let's say, the undersea cable is cut or whatever happens. So supply chains are fractured as we've seen in COVID.

These are kind of things that drive more resilience. It's also resilience from our own perspective because we always like to have a backup of a backup with current conflicts in the Middle East, we see that. That has served us very well. While some of the cloud companies suffered from that, we had the right kind of setup. So this kind of recognition of local needs is important. Our technology is flexible enough to do that. So in the end, we find the right balance between compete, partner and invest. And therefore, we continue that journey. We've been on the sovereignty journey for like around 12 years or so. Something that I spend time on that I think a lot about, but I think our approach works really quite well.

And Michael, very quickly on China. It's been almost 2 years...

Quickly on China. It almost feels like it is mutually...

There's so much to cover. It's been almost 2 years since you launched domestic processing in China. How are things progressing? You also recently accompanied President Trump on his visit to the country.

Right. So we negotiated -- it was a long process to get the license in China. It's a domestic license. We've had a longstanding cross-border business in China. And now we are live in China since May 2024 with a domestic license. That is a really important point because the combination of both allows us as a large -- very large global player, the only one with the domestic license there is to put products into the Chinese citizens' hands that are available for dual use. So here's a Mastercard in your hand that you can use in China, use it as a QR acceptance point through your Chinese app or through the card itself or now through Apple Pay. At the same time, you can travel with it and use it externally.

That sounds super normal for all of us, but that's not -- that was not normal in China. It's now a unique solution that we bring. And people who travel, Chinese people who travel, they value that. So it's really given us a very good start. We are winning our fair share -- more than our fair share of the market since we went live, but we're also building an ecosystem. This is a massive economy, second largest economy in the world. So we're working with all the Chinese banks. We're working with the acceptance players and the Chinese digital players through our joint venture partner to build everything that's needed, issuance and acceptance and good value proposition.

So there's a whole number of programs that we put out. So it's very encouraging. The Chinese government and the U.S. government is why we were part of that delegation sees that both as a very helpful point to connect the Chinese economy with the global economy to also make sure that Western payment standards are available in China and the Chinese people that are used to QR standard can pay elsewhere. So it's good connectivity. It makes sense from every party's perspective and long-term significant opportunity, which is why we called it out our Investor Day as a significant part of our growth algorithm going forward. So very happy with what we see, but it's a longer-term thing. And of course, we need to keep geopolitics in mind all time.

Another significant part of your growth algorithm is value-added services, not long term, it's happening now. And we were talking about this earlier. Historically, for investors, it was easier to forecast Mastercard's revenue growth. All you needed was a card...

Our investors are so clever, they can forecast a lot of things. Surely.

And now value-added services are 40% of your revenue and growing meaningfully faster than the rest of your business. So maybe help us understand what is driving the growth of your value-added services? And what is driving your conviction behind that growth?

Right. So I want to start off with -- it's probably the most frequent question I get. And I always love talking about it because I see there's a tremendous growth opportunity here, and I'm happy to always find another angle as I laid it out to make it even more tangible. So the first thing is to start off with what we call the virtuous cycle of growth of Mastercard. So we go and we go after all this payment volume, as we have just discussed for the last 30 minutes. That fuels our data set, a very unique and rich data set, high-frequency global data set that fuels our services.

We choose services that benefit from that data set because it's such a unique differentiator versus other services providers. If you start to look in the world of cybersecurity services, we have competitors outside of payment, but they don't have the payment data. So that differentiates us. In loyalty, we have a lot of transaction data. There's loyalty specialist companies out there, but they don't have the data estate that we have, again, that differentiates us.

So more transactions, better services. Now better services drives more differentiation of our payments because our payment will be smarter and safer than the next competitor's payment, particularly when you compare it to, say, domestic schemes and things like that. So they can -- just cannot do what we can do. That retain -- helps us retain more payment portfolios and win more payment portfolios, which means more data and the whole cycle keeps going. So that's a fundamental basis of our virtuous cycle and our strategy.

Now in service itself, -- how do we go to market? How is this a sustainable piece of growth, not in the short term, but in the long -- in the medium to the long run. So the first thing to say is the power of our distribution model through the network. 60% of our services by design are distributed through the network. And we put those services out alongside the transaction before the transaction, during the transaction, after the transaction.

Earlier, we talked about identity solutions. We talked about transaction fraud solutions that come along with the transaction. Tokenization services that's come along with the transaction that carry the transaction. And then post transaction, you have things like disputes and others. And then you have consulting and marketing services around it and loyalty. It's kind of like the set of concentric circles. But with the transaction at the center, 60%. So if you're a SaaS company, you have to say, sell every widget by every widget. That's not what this services portfolio is about. It's designed that way. It's designed to be network distributed in its majority, and that will drive a big part of longevity.

The next thing is within those kind of network distributed solutions, there's a lot of choices to be made on what we put into that portfolio. It's very carefully curated. We focus on things that we believe have long-term underlying secular trends, cybersecurity. In our world, in our data, more digital world by the day, there will be more data. There will be more cyber risks coming along with that as people go after that data, fraudsters and scammers go after that data. So that's a long-term trend. Think about an AI-enabled world and AI-driven scams and frauds, it's just going to be more of that.

So that looks like very risky. For us, it's actually an opportunity because that's what we do, and it will drive part of our services portfolio. So a combination of network distribution and underlying trends, need for data and dealing with cyber data-related risks, that makes a really solid portfolio. The next thing then is even when you then go and look at the other 40% of our services that are not network distribution and then you say, what kind of products are those?

A good chunk of those are still enabled by the data. They're just not distributed through the network in the same way, and they're kind of on top of the transaction. They're like an opt-in or something like that, that we do that doesn't come necessarily straight with the transaction. And that's still a very advantaged go-to-market. So you kind of waterfall that whole thing, and you're starting with straight on the transaction, opt in. And then you take our consulting services, which we are the furthest out, a good chunk of that used to be human delivered.

So we're one of -- we're probably the largest payment-related consulting company in the world. We're not just consulting. We're consulting on payments. And yet again, you have a link to our transaction, you have a link to that data, and we help our customers use that data in a better way. So it's always going back to the heart of our differentiation, our data and the fact that we have this network that can put that out there and collect that data. So all of this together is a very durable model. We still look to obviously bolt on into the next piece. And Recorded Future is a great example of that.

It said, so if we have a differentiated proposition, which we do today in cybersecurity, which I'm very excited about, there's too many risks in the world, but it's good for us to help resolve -- address them, said, okay, what's the next thing that companies worry about? What is their concern? In a world of these cybersecurity risks, you cannot outspend against every risk. It's impossible because the risk -- the threat vectors come from all angles.

So if you had a partner like Recorded Future, like Mastercard with Recorded Future, they would tell you your risk is the highest in this area. because there's a set of threats that are occurring that we see from whatever this particular threat actor, this particular consortium and here, you should raise your defenses vis-a-vis trying to raise them across the board. That is what Recorded Future does. They have data sources that literally nobody else has from the dark web and to every data source there is.

And now we put that together with the data estate that I just talked about, which gives an amazing capability to predict where the next fraud piece is and say to a bank, this is where your next threat vector is. And in particular, this card number has been seen in the dark web, you should ask extra questions and put your security level up, reduces cost, increases efficiency of the fraud solutions and so forth. So very, very powerful durability because we keep extending, but we always keep in mind the starting point that differentiates us vis-a-vis just selling widgets and being a services company.

And it's fascinating. I think in the early days of e-commerce and up until now, cybersecurity is a great example where trust and fraud, I guess, the inverse of each other, they were such a big area for you to focus on. And I think that also drove a lot of your...

That has -- if you -- we do a lot of brand analysis and what does our brand stand for, the 2 interlocking circles. Trust is the word that is most often quoted because when you see -- when you hear our Sonic brand or when you hear the interlocking circles, we say, okay, I don't have to worry about that transaction. It works in the furthest corner of the world. And with all these new risks emerging, that still gives us a lot of applicability to prove that point every day in different ways and better ways.

I would be much safer with an agent with a Mastercard.

I hope you do. I hope you do. Is there anything else?

Let's talk about tokenization, a foundational layer for growing payments use cases and services enabled by Mastercard. Maybe talk about what your tokens do for you with respect to enhancing the network and your opportunity to deliver more value-added services?

Right. So tokenization most fundamentally takes -- the payment credential, the 16-digit card number and puts it into a onetime use token. And that facilitates the transaction in the most secure way. Should that ever be hacked, then you can't do anything with it because it was only for onetime use. So that was a simple idea. It goes back to over a decade ago when we created that. And it's been a facilitator for us to -- particularly on the online payment space, where we've seen more fraud to roll that out.

Today, I mentioned it earlier, about half of our online transactions are now tokenized. And we started rolling that out and sharing with our partners around the world, this is a better way to do things. And we wanted to find a way to critical mass around that, so which we now have with half of our transactions. So then we can go ahead and say we can tag on a set of additional services around the basic token capability. There could be token authentication. You could go ahead into life cycle management, say, for example, a card, like when your card credential runs out, the card expires.

You have a token, then automatically that can be updated to say, here's a new -- this is the refreshed card number, and that's all behind the scenes and technology that is updated. So these are the set of services that you can imagine. It's a new vehicle to distribute services. It is a very powerful tool. We started to -- once we reach critical mass, we started to price for the value that we provide. And the value that we provide in the simplest terms is higher throughput. So the approval rates go up 3% to 6% because it's safer transactions. Security is increased and fraud goes down.

So that's very quantifiable value. We were very excited to go out and have these conversations with our customers, and then we're also charging for that. And then you can see as we lay on other token-driven services on top of that, you can quantify that value and start to see that as part of just how we continue to grow because we invest in this foundational technology. We rolled it out and it drives a better digital commerce ecosystem. Earlier, we talked about agentic. And in this case, tokenization is the center of all of that. So with agentic rising, you will see a world where the growth rate of tokenization is going to continue to increase because that is -- everything by definition is tokenized there. So that is one reason we're excited about that.

But you can also see, as I touched on that, is if there were additional tokens that carry other information than just the payment credential, it could be your preferences out of your loyalty program, say, here's a tokenized set of information on what Harshita likes and what she doesn't like so that the agent can provide a better recommendation inside tokens. Yet again, that could be the next layer and the next layer. So our product people are very excited and very busy to find more layers of value that we can deliver through tokenization as another angle. And that's part of our services portfolio.

Michael, we have about 6 minutes left, and we haven't talked about commercial and new flows. This is such a big opportunity for you. And over the past year, you've had more focus on segments that there's a more proven product market fit. Historically, commercial had also been such a hard addressable market to go after because of the heterogeneous flows. Tell us about how you see the opportunity, what you're doing and how has the thinking evolved?

Right. So in our Investor Day, if I recall correctly, we had about $80 trillion laid out as the kind of addressable market there. It's a humongous opportunity. it's pretty clear that this market is ripe for better solutions. So it's fragmented as you -- heterogeneous, I think, is what you called it just now. All commercial entities are on increasing pressure for profitability. Everybody is focusing on streamlining their processes, put out better products. So we're just at a situation where I feel there's an unlock. You see people that are used to slick easy digital experiences in their personal life and they look at a green screen at their job.

So that kind of doesn't line up. So there's a lot more momentum in this space than we've ever seen before. But it's still heterogeneous. I think that's also true. So we're finding easy ways to create points of aggregation and finding parts of the commercial ecosystem where there's just a clear alignment between payers and payees on the need to really disrupt this and make it easier. So travel was a good example.

So we really got into the world of travel and online travel agencies where we said, okay, so you both have a pressure point between airline and hotel payments and how you do all of that in a much simpler way, much more aggregated, all this data that needs to be reconciled. Very good. We do that through our VCNs where we are the leader in VCNs and said, so what else can we do? Said we need flexible economics so that payers and payees can agree on that. So Mastercard rate manager is an example of that. You always need to make sure that the supplier and the buyer side that their respective issues are addressed.

So all of that very systematically that we have done for that particular vertical. We're now doing this in other verticals, in rental, for example, in health care, in insurance and just rolling that out. I think that's a better approach than going across the whole world, what does commercial even mean. So it's industry by industry and we're looking for other aggregation points. ERP systems are a good example of that. We're now in 10-plus of the leading ERP systems where we just recognize their existing services, and we plug our services that make payments easier right into that.

So many points of unlock have now been put together. I feel this is a tremendous growth opportunity for us. Some of these is not even about new products. It's simply distribution, take small business. So just more and more governments, more and more banks, therefore, more and more countries are focused on enabling their small business sector in a better way. And if you have a fit-for-purpose SME proposition, we're launching these programs left, right and center all day. So this is just -- it's really gaining a lot of momentum.

From a growth perspective, as far as we can see, we're outpacing the market. So I see the momentum coming. I'm impatient though. I want to see more, and I will see it quicker, and I'm pretty convinced with our team that we're on the right track there. So those $80 trillion, if you break -- it looks very huge. So we're really breaking it down very specifically, say, by vertical, by geography and say, here is a big focus for us.

And as you alluded to earlier, agentic commerce has some of the best product market fit in B2B and potentially accelerate the digitization.

Exactly.

So Michael, we have about 2 minutes left. We have talked about a number of growth opportunities for Mastercard. What is your vision regarding how Mastercard as a business will evolve 5 years from now?

Right. So the vision that I see is, we laid out a very clear strategy across our consumer payment opportunity, which we just spent a lot of time, the commercial payment opportunity and the set of services truly differentiate that. That is a strategy that is set to last the years to come. I'm excited about that strategy. It works. When I look at the underlying product set, our go-to-market, our distribution capabilities, our data advantage, I'm very excited about how we roll that strategy out, and we see it in our numbers and how we continue to put good prints out there and are there for our customers.

I'm excited about our team that is behind that strategy that we -- that I work with every day. So I think we're a truly differentiated player. What I'm particularly excited about is our continued constructive paranoia of looking around the next 2 corners to see what else is coming so that we had the right kind of sentiment and drive to go after BVNK at the right time. This is right for us to come that we were there on day 1 with Agent Pay that we found Verifiable Intent.

So we're really shaping the industry. We're not following the industry. We're shaping the industry, and then we adjust our strategy where needed, but that is, I think, the thing that really sets us apart. We do this in emerging market. We do it in value -- in developed markets. And from that perspective, I think we're going to have a long and exciting future, and we lean in every day.

And this is what you did as, I think, as a Chief Product Officer 10 years ago for value-added services?

There might have been a reason that I'm in the seat today, yes. Exactly.

On that great note, Michael. Thank you so much.

Thank you, Harshita. Thank you very much.

Okay. Thanks, everybody, for joining. This is Tien-Tsin Huang. I follow the payments sector here at JPMorgan and always excited to have Mastercard with us. Super grateful to get Sachin Mehra, the CFO, with us. We'll do a fireside chat. Devin Corr is here as well from the IR team. So thank you for being here, both of you.

Thank you, Tien-Tsin. Thanks for having us. I always enjoy being here at your conference.

No, it's always fun. I always enjoy the conversation. It's easy. You make it easy, Sachin. So we'll have a quick 30 minutes, I'm sure, to go through the topics of the day.

But let's kick it off. Of course, we just had the quarter recently, and we talked a lot about a lot of uncertainty out there in the market, heightened uncertainty, I think, is the term you used. Can you give us just a sense of what the health of the consumer looks like today on the ground? You have such a great insight into what the consumer is doing and how would you describe it today?

Sure. Happy to do that. So look, I mean, as we mentioned at the earnings call and as I look at even trends post earnings, the consumer continues to be in actually pretty good shape. And what we're seeing from a consumer strength standpoint is holding up nicely. That's true, largely being driven by the fact that as I look across the globe, unemployment rates are still very much within the range of all-time lows. So that's certainly a contributing factor. Wage growth is something which we're tracking closely, and that continues to do well as well. There are a little bit of a headwind which we see coming through on account of higher inflation, primarily driven by higher energy prices.

So when you actually peel back what's going on from an inflation standpoint, you're certainly seeing higher energy prices come through in the nature of the headline inflation number. But then on other categories of spend, you're actually seeing some level of disinflation, which is taking place. So there are offsets taking place there as well. All of that being said, when I take low unemployment rates, the fact that wage growth is still at pretty healthy rates as well as the wealth effect, i.e., the fact that equity markets continue to do well, all of that's translating into a healthy consumer as we see it.

So much so that when I look at our own metrics, and we've shared with you metrics as it relates to what we saw through the week ending April 28. And then I've seen what's kind of gone on through the first 2 weeks of May. I would tell you, by and large, across our metrics, we're seeing stable to slightly better trends across the metrics. Now that includes some of the adjustment, which takes place from a timing standpoint. And the timing is something I flagged as part of the earnings call, which took place in April, i.e., we had seen some headwinds from a timing standpoint. In our first 4 weeks of April, you see a reversal of that come through. But by and large, good strong trends from a consumer health standpoint.

Okay. Good. I know that's always important and glad for the update there. Just thinking about -- I know going into the quarter, there was a lot of concern around the geopolitical tension, the conflict that's happening in the Middle East, et cetera. So I have to ask you here, Sachin, just thinking about that, the conflict here in the Middle East, what are the implications for Mastercard? You cited some exposure there. Any update on how that's playing out and any surprise there?

Yes. Look, I mean, I'll go back to the comments I just made from a driver trend standpoint, right? I'd mentioned at the time of the earnings call that the impact of the conflict in the Middle East was primarily showing up across 2 vectors. One was in our cross-border travel metrics, specific to what you're seeing in the nature of inbound into the impacted countries, let's call it, the GCC and Israel, right, outbound from those countries and travel through those countries. Because remember, a lot of those countries actually happen to be transit hubs as well. So there's travel which takes place. Even though my end destination may not be the GCC country in question, there was previously travel going on, which was taking place through that.

Now some of that actually is being changed in the nature of travel routing, which is taking place through other countries, right? But the reality is the impact of the conflict is very much there, as you saw in our metrics for the first 4 weeks of April. But I wouldn't say that what I'm observing right now from a trend standpoint is outside of our expectations from what I shared with you 2 weeks ago as part of the earnings, right? So there's the impact of the conflict on that.

But beyond that, what you also see is it goes back to my comment around higher energy prices, oil prices. What that's translating into is a higher nominal value of spend taking place on gas prices, right? So you can have a little bit of an offset coming through on that. Again, it's a little bit of a give and get. But on the travel side, you're certainly seeing that impact come through on cross-border.

Yes. So with all of these puts and takes, Sachin, as you're putting together the full year guide, what really matters? What would you emphasize to us? I know that mix is changing? You got some pricing dynamics as well? How would you summarize it for us?

So here's how I'd summarize it. It's very much in line with what I shared with you 2 weeks ago. We -- when we shared with you our full year guide 2 weeks ago, that was very consistent with what we shared with you at the start of the year, right? So we kind of held our full year guide at what we call the high end of low double digits on a currency-neutral basis, excluding the impact of inorganic activity, right? And that's what we had kind of shared with you.

The reason there are these puts and takes is obviously for the reasons we've talked about, which is the conflict. But remember, we had a very solid first quarter. We have an assumption, which we shared with you when we gave you that guide for the full year, which was around the impacts of the conflict being most pronounced in Q2, and then there being a progressive recovery in Q3 and Q4, right? But the most important message I'd like to leave you with is we are an incredibly diversified business.

I know people are hyper-focused on cross-border travel. The reality is we have a lot of levers in our business, and you've seen this through COVID and you've seen this post-COVID. The business tends to grow depending on which levers are actually in favor or not. So for example, as a company, we have 40% of our revenues coming from services. Our services capabilities continue to be in very strong demand, right? You saw the performance for our value-added services and solutions in the first quarter.

Everything I'm hearing from our customer base, from our sales teams is that continues to be in very strong demand, right? So holistically, I feel pretty good about where we are from a guide standpoint. Obviously, I have no idea what happens from whether the impact of the conflict gets worse or better between now and the end of the year. But based on the assumptions I've shared with you, I feel very good about the diversified nature of our business lending to what we've shared from a guide standpoint.

The other point I'll share with you is we've shared -- you've seen our first quarter performance. You've seen our guidance for the second quarter. What that naturally implies is that you will see an uptick in terms of what our performance will be in the second half of the year, just because that's just simple math would suggest that to be the case. And I would say, if you went back to last year, you saw that we had tailwinds from FX volatility, which were most pronounced in the second quarter, which creates for a tougher comp this year in the second quarter, already reflected in the guidance I shared with you, just to be clear, right? But you also had tailwinds on FX volatility in Q1 of last year and Q3 of last year. In Q4, that was pretty normalized.

So my point to you is from a cadence standpoint, as you're thinking about Q3 and Q4, think about the acceleration in the second half being more back-end loaded into Q4 is the other piece I'd share with you.

Okay. No, thanks for going through that. I know, It's annoying probably to focus in on some of the things.

No. It's okay.

But the diversity of the business, of course, is what matters most, and there's been a lot of cycles, and we've seen that. But I do think before we get into some of the other -- the services and some of the other -- the growth pieces, Sachin, this -- the balance of trade, the competitiveness of the network business, we've been getting a lot of questions on that. Same question there. How would you characterize the competitive environment today? Have you seen any changes in terms of how deals are coming together?

Short answer is no. We operate in a competitive environment. We've always operated in a competitive environment. I haven't seen a remarkable change in terms of either to the upside or the downside as it relates to the competitive environment. I suspect part of the reason you're asking that question, and getting that question is around rebates and incentives and what you see in the nature of rebates and incentives.

And you've got to remember, at the end of the day, rebates and incentives are part of what is the playbook, to drive net revenue yield accretion. And I think this is really, really important for all of us to understand, right? The idea is for the right kinds of portfolios, which have the right growth potential, which where we have the ability to deliver services, we want to pay rebates and incentives to bring that volume onto the system. When you bring that volume onto the system, you have the ability to grow the portfolio at a faster pace, deliver more services to drive that net revenue yield accretion I was just talking about.

So anybody who's tracking our net revenue yield accretion will see that we have been growing net revenue yield, notwithstanding the fact that rebates and incentives are growing faster than where volumes are growing. And I think that's really, really important to understand because we cannot miss the larger plot. The larger plot being we've got to drive overall net revenue growth, including services revenue growth. And services revenue growth is highly enabled by what we do on the payment network and winning the right kind of volume there. That's kind of point number one, I'd say, from a competitive environment standpoint.

The second point I'd make is rebates and incentives tend to fluctuate quarter-to-quarter. And I say that it's a function of what the pipeline of deals is. It's a function of how volumes are coming on to the system. It's a function of what we estimate volume assumptions to be for our customers. So oftentimes, what will happen is, remember, we have fixed incentives and we have variable incentives. Fixed incentives are amortized on a straight-line basis over the life of the deal. Variable incentives are incentives, which are accrued based on what our estimates are of what volumes come on.

So at any given time, we'll make estimates on volumes and we'll accrue these incentives from a variable standpoint. But every quarter, we true-up that to reflect actual performance. So for example, last year, right, there was a true-up to the positive on rebates and incentives.

Let's pick a quarter in the first quarter or the second quarter, it's going to create for a tougher comp in any one given quarter. So I wouldn't -- I would suggest that you don't hyper focus on rebates and incentives in any one given quarter, but rather take a view on the bigger picture, the bigger picture being, are we doing the right thing in terms of driving net revenue yield accretion, which is what we're very focused on.

Right. That's the punchline. Net revenue yield is up, even ex services, I think it's up. So you're getting the performance I think you want. But look, I had to ask the question. Thinking about then growth algorithm, I know we obsess over volume growth, and you went through a lot of the volume dynamics already. Would you encourage us to look at it maybe a little bit differently from a growth algorithm standpoint? Are there new forces of growth that are coming in that are maybe more important, whether it be to yield or to net revenue or gross revenue?

So I think the pillars of growth that we've outlined for you as an investment community, and for which we are executing on are still very sound. We've got to continue to do that, which is continue to drive growth in our consumer payments, in our commercial new payment flows in our value-added services and solutions, got to drive that secular shift, which is the digitization of flows. I think, the interesting things which we are working on today, which don't necessarily manifest themselves in meaningful revenue contribution today are around the new and different we're doing in the stablecoin space or let me broaden that out and call it the digital asset space and what we're doing in agentic payments.

And literally, this is Mastercard's playbook, and it has been Mastercard's playbook for a while. We'll execute on everything we're talking about in terms of the here and now, but we're also investing in what is going to be drivers of growth for decades to come. And that's what we're doing right now.

So to answer your question, we've got to be able to deliver on the opportunity we see today, which is around consumer payments, commercial and the value-added services and solutions, which we've got in our portfolio, but continue to invest in the new and different, which we see. For us, there's a very important role we can play in digital assets. There's a very important role we can play in agentic payments that we're actually very focused on to deliver that long-term growth.

So you mentioned agentic, so I'll ask on that. It's a perfect tech conference type question. It does feel like it's an extension of e-commerce in a lot of ways. And we've written about that you've built a foundation around tokenization. So we do think Mastercard will, for sure, participate. But how do you see it evolving within the ecosystem? I know there's a lot of debate around protocols. You're playing a role in that, Sachin. But what should we be tracking to see how this takes off given it is early?

So look, we -- first, I'm going to actually comment with the following, which is we're not going to pick winners and losers. We're going to let consumers decide what is their preferred method of actually shopping. So if they want to use agents going forward, we want to be the preferred payment rails if that's what consumers decide to do. That's kind of the starting point. That's the philosophy we as a company have adopted for decades now. So that's kind of point number one.

Point number two is, as we think about agentic payments, there as you talked about protocols, right, you have to think about this as there's the commerce layer and then there's the payments layer. So there are protocols around the commerce layer. This is where -- this requires protocols to be established between the folks who are developing the agents with the merchant community, right, in order to get access to the merchant catalog. And then there's the payments layer and the payments protocols, which is what we define as a network. And there has to be interoperability between the protocols we define in the payments layer with that in the commerce layer, which is exactly what we've been doing. So now our issuers are fully enabled for agentic payments across the globe.

What do we do? We establish trust. Why are agentic payments -- why is trust a necessity in agentic payments? It is because as a consumer and as a merchant, we need to have payments which are well authenticated, point number one. Number two, where the intent of the consumer is well recorded, which is where we have put out there, the verifiable intent product to allow for that intent to be recorded, and for a registration process for agents in order for that shopping experience to take place in a safe and secure manner.

Now you asked the question as to how we see this evolving. I would argue that, that's entirely going to be determined by consumers, but our view is you will first see human-assisted agentic payments before you will see autonomous agentic payments. So I see this as a multistep process as opposed to all of a sudden a consumer waking up in the morning and saying, I no longer want to actually be involved in purchasing what I really need. I'm going to let some agent make that happen for me.

I think what will happen is the search and discover process folks will leverage the agents for as they have been and will continue to do. And then as it relates to closing a commerce transaction, I think human beings will be involved initially to delegate the authority after they see the shopping basket to the agent to make that final transaction happen. Over time, that will move into more of an autonomous environment, which is why that trust layer is really, really important. And this is why we're very focused on delivering on exactly that.

The second piece I'd mention is how -- people will oftentimes ask the question on agentic payments. Is this just a dollar of volume moving from what would have been traditional e-commerce into what is an agentic payment, right? And the reality is, yes, there will be some amount of that. There will be what would have been an e-commerce transaction, which would have gone over card rails, which will go into agentic payments, which will also go over card rails. But what it does do is it creates 2 new -- 3 new opportunities.

Number one, it creates for the potential for multiplication of transactions. And the reason it does is, because agents will not necessarily be emotionally attached to shopping from the same merchant. They will look to find what is the most optimal answer. And so you might end up buying shoes from one merchant and socks from another merchant and a hat from a third merchant, if there's an agent which is doing that transaction, compared to a human being who might buy all 3 from the same merchant, which might result in one transaction. And remember, Mastercard earns revenue, both on basis points on volume and cents per transaction. So more transactions result in more revenue from Mastercard. So that's number one.

Number two, you have the ability to derive greater amounts of revenue from delivering more services because as you move away from the more physical interaction, which takes place between 2 human beings when a commerce transaction takes place to now what is transactions purely taking place between agents, there's a greater need for established trust. There's a greater need for preventing fraud, things of that sort. So greater ability for us to deliver more services to generate revenue.

And the third piece is around tokenization, which you talked about, Tien-Tsin, which is every agentic transaction will be a tokenized transaction. So we will have a real opportunity there as well.

Yes. And I feel very good that with tokenization and network tokens being deployed that you'll play a role there. So that's the external view on AI and agentic commerce. So thanks for going through that. What about leveraging AI internally, right, at Mastercard? You and I haven't talked about that at length. And I got to share, we did some benchmarking, Sachin, I don't know if you saw that, but when we scored all of our coverage companies across gross profit or net revenue per employee, Mastercard scored very highly already. So naturally a very productive base already. But what else can be done from an AI standpoint sitting in your seat as CFO or if you're dealing with Michael, what are his priorities on AI?

So look, hyper-focused on doing it the right way. And doing it the right way is important because you want to do AI, not for the sake of doing AI, but because you actually truly believe you can deliver productivity gains and good returns on investment. And here's what I'd tell you as it relates to Mastercard is doing a bunch of work, leveraging AI around the cost side of the equation. It's certainly happening on the coding side with our engineers. As you know, we do a bunch of work from an engineering standpoint. We're leveraging AI for coding. But we're also using it for call center operations. We're using it in the finance operation, for example, for forecasting and things of that sort. So there are going to be use cases which are there.

But I got to be candid with you. Right now, all of that's only resulting in the following answer when you ask the question, which is, yes, Sachin, we are making investments in AI, where we see a lot of benefit. It's resulting in productivity gains. And I say, translate productivity gains in terms of what is my return on investment, and that is something which still needs to be done.

So said differently, what people are saying as in the employee base is bringing out is, we can do more with less, but we can't quite quantify for you what more with less looks like, okay? This is important because as a CFO, if I'm sitting in the seat, I am, I want to see a return on investment as well as opposed to someone just telling me, I would have normally come and asked you in theory for more people, but now I'm not going to ask you for more people because I'm leveraging AI.

So I see the value of this. That's why we're investing in it. But I think we've got to take the next click forward. And I don't think Mastercard is unique in this. I've spoken to a bunch of my peers across the finance community. Most of us are in the same place, which is it's around -- we're seeing the productivity gains. We haven't quite seen the delivery in terms of lower cost come to the bottom line quite yet, right? So that's kind of point number one. That's on the cost side.

But let's not forget, we have been in the AI space delivering revenue for the better part of a decade, right? We have about 1/3 of our value-added services and solutions products, right, leverage AI, both predictive and generative AI. And that's really important because at the end of the day, remember, we talk about the growth on value-added services and solutions. Well, that's been enabled by our investments in AI initially in predictive AI, now in generative AI, which is really paying rich dividends, I would argue. And frankly, for a company like Mastercard, I want to lean in both on the cost side and the revenue side, but I'm hyper-focused on making sure we're doing the right kind of investments for AI to deliver the right kind of products and capabilities to generate that growth on the revenue side of the equation.

Okay. Good. Makes a lot of sense, thoughtful. So let's pivot a little bit to digital assets and stablecoin. You asked about it. I mean a lot has changed, obviously, since Michael was here last year, we talked about it. You guys made an acquisition with BVNK. What's the thesis on buying that versus building something organically? Have your views changed on stablecoin in the last 6 months or so?

So look, I think for stablecoins, we see this as a net incremental opportunity, particularly as it relates to B2B flows, P2P flows and me-to-me. And me-to-me is basically me loading my digital wallet. So our view is that there will be consumers, again, who will want a certain portion of their assets, which will be in some sort of digital asset, whether it's stablecoins or otherwise. However, there is going to be a proliferation of digital assets. You might see tokenized deposits as in tokenized bank deposits, you might see the likes of USDC, USDT and more stablecoins to come.

What that effectively means is you're going to need a central clearing authority from an interoperability standpoint, because not everybody is going to be vested in the same digital asset. You might want to send me USDC. I might want to receive USDT. Somebody needs to actually play the role from an interoperability standpoint, and this is where BVNK comes into play.

What BVNK does, and again, this acquisition still remains to be closed. We are expecting for that to happen before the end of the year. It has 4 main capabilities. It has what we call send, receive, store and convert. And it's exactly what they sound like, your ability to send stablecoins/digital assets, your ability to receive stablecoins, digital assets, your ability to convert from one stablecoin to the other stablecoin, and your ability to store. And we believe that with these capabilities and as there's greater proliferation of digital assets, this is going to be a very interesting new addressable market for us to go into. Their revenue model is actually quite akin to that of what we do as a payment network. It's basis points on the volume, which is either sent, received, converted or stored, and that's super important. Initially, I see this taking place in the cross-border B2B space, but I certainly see opportunities around P2P and me-to-me as well with BVNK.

But B2B is probably the most imminent and measurable one.

It's probably the most imminent. I would argue that I think as time goes along and you start to see remittances take place beyond what is there right now where a business is remitting funds to another business, you will see consumer remittances as well taking place. So if I'm looking to send money back home to India, and I want to send it using stablecoins, right, BVNK can play a big role in that, and that would be a P2P transaction, where Sachin is sending it to his brother, dad, whoever, right, the proceeds. I could do it in fiat. I do it in fiat, right? But I could do it in stablecoins as well, and BVNK can play a role in that.

Okay. Good. So let's talk about value-added services and solutions or VASS, as we all call it. I mean a lot of what we've talked about fits within VASS. I think Mastercard was very early, culturally, I think, in embracing value-added services and solutions with some of the things you did earlier with Orbiscom, et cetera. So my question is more just as that's evolved and it's gotten quite large, Sachin, how durable is that growth? That's a very common investor question. How would you address the durability of that? And where are the biggest sources of growth today coming from within VASS?

Okay. So I think it's important to actually first step back and think about VASS as not being divorced from the payment network. Because at the end of the day, what we do in our value-added services and solutions, the basic raw material is the data we derive from our payment network. So the more that we can do to drive more volume into the system and get more data, the greater we are enabling ourselves to actually be successful on the VASS side of the equation. They're very closely linked. And then in turn, our ability to deliver value-added services and solutions powers the payment network, because our customers who are delivering these value-added services and solutions appreciate what we bring to them and hence, move more payment volume to us.

So I need to frame it that way, because your question around sustainability is a function of what your belief is around our ability to drive sustained growth on the payment network. Approximately 60%, we had mentioned at our last Investor Day, approximately 60% of our VASS revenues are network-linked. And by that, I mean linked to the payment network. Now what that effectively means is as you see volumes and transactions grow, card-not-present transactions grow on the payment network, we have attached value-added services and solutions to those transactions. So you see a natural tailwind come through from that. So that's kind of lever number one to drive growth.

Lever number two is increasing the number of value-added services, which are attached to each transaction. We have very successfully done that both organically and inorganically over the past decade or so. And we will continue to do more and more of that because we think there's a greater, greater need for it for our customers. That's what we hear from our customers, and we'll continue to do that, right.

Lever number three is around driving deeper penetration across our existing customer base. So it doesn't mean every customer buys every solution that we've got, even if it's attached to the payment network, right? And we will continue to do that as well.

Lever number 4, and this is all to your question around sustainability of growth, right, is around what we do from a consulting and marketing services practice standpoint. This is the 40%, call it, which is not network-linked, but still reliant on the network for the data we get from the network, right? Really important, because what it does do is it allows us to help sell what are those network-linked services, so that you have that consulting engagement, which goes in there and says, by the way, you have a fraud problem, let me help you out with a fraud solution, which happens to be a network-linked solution, right? So you got to do that as well as part of the journey.

And then the last piece from a growth algorithm standpoint for VASS is around expanding our addressable market. And the best example I can give you, and the most recent example I can give you is the recent acquisition we did of a company called Recorded Future, which is in the threat intelligence space. completely new addressable market, something Mastercard has not participated in, but has huge synergistic value with what we've got in the nature of data across our payment network. So it's all of these building blocks, which are helping us drive for value.

We talked about tokenization earlier. Tokenization is another big contributor to our value-added services and solutions growth. So just as a reference point, approximately 40% of all our transactions are currently tokenized. That's the good news. The even better news is that means 60% are not tokenized, which means there's tremendous runway, which still remains to drive greater amount of tokenization to deliver services around that tokenization, which is what we charge for, right, and drive greater revenue growth. So we see sufficient number of levers here to see how we can drive that sustained growth from a value-added services and solutions standpoint.

Okay. Good. So I have to ask, what does this mean for margins then, Sachin? I mean tokenization, we're bullish on as well, penetration story, high incremental margins. Compare that to, say, the consulting business that you mentioned, which is different margin profile. Is there tension there in balancing revenue growth and the margins that we've come to expect from Mastercard?

Well, look, I mean, I think the biggest disservice we can do to our long-term investors is to actually take a shortsighted view around costs to impinge on our growth to drive longer-term revenues for this company. So let me just kind of frame this whole question around margins around that, right? We've got to continue to invest in the business to realize the opportunities, which we've just talked about.

So on your specific question, I think it'd be shortsighted for us not to grow our consulting and marketing services practice. If what that does is enables greater growth of the payment network and enables greater growth of what would be our network-linked revenues. We've got to do it. We've got to do it smartly, and that's what we're going to do. Does it come with higher incremental costs relative to what might be a tokenized transaction, for example? Sure, it does.

But for us to actually just say, I'm only going to chase because I've got an artificial threshold, which I've said as it relates to what I want to deliver from a margin standpoint, I think would be very shortsighted for us as a company.

Buybacks. So there's a little bit of a step-up in buyback on the -- in the last quarter. I think you talked about a greater appetite to take advantage of the share price being where it is. Is this a change? Is this just opportunistic and structural? I'm just trying to better understand the thinking around buybacks versus M&A.

So our capital allocation priorities have not changed from what we've shared with you in the past. We continue to actually prioritize maintaining a strong balance sheet. The first call of capital will be towards reinvesting in the business to realize the growth opportunities. That will be both organic and inorganic, right? And then to the extent there's money to be returned thereafter, that will be returned back to the shareholders with a bias towards buybacks. Certainly, we do dividends as well, but with a bias towards buybacks.

But we've always said that we'll be opportunistic. And the first quarter would be a prime example of what opportunistic looks like. We continue to have tremendous confidence in the long-term potential for the business. We continue to believe that, this is a great time to be opportunistic and exercise greater amount of buybacks, which is exactly what we did as part of the first quarter here. So I mean, all I'll say is we'll continue to be opportunistic going forward.

Thinking about M&A, though, same thing around being opportunistic. I mean you've done BVNK. You mentioned Recorded Future. It does feel like there's a little bit more consolidation going on in the space and valuations, I think, are still all over the place. There are some inconsistencies.

I think we'll be active on the M&A front. We will continue to stay active, Tien-Tsin. I mean that -- it's all strategy led. If it makes sense for us to build it, we'll build it. If it's better for us to buy it, that's what we'll do. In the instance of BVNK, I would tell you, building what BVNK has built will take a long, long, long time. There is licenses you've got to get in different jurisdictions. There's the technology they bring. It's about the connectivity they've got with the ecosystem with the other digital asset providers who are out there. I think that's really important to realize that time to market and being there quickly and being there first is important, in which case we won't be shy to acquire companies.

And there's been some dispositions, too, though, right, Sachin. So as you're thinking about the portfolio, is that a more active place to think about maybe more dispositions?

Again, we've got to be prudent and good stewards of capital. To the extent we do acquisitions, there are some which are successful and there are others which are not necessarily paying off the way we would like for them to pay off. In those instances, I think the right thing to do for us would be to actually exit those, which don't necessarily make a lot of strategic sense for us, and that's where the disposition piece will come. We'll continue to do that. We just got to be very, very, very prudent in terms of how we're managing the capital of this company, right, which is what we've always done and we'll continue to do going forward.

Yes. But fair to say that you're leaning mostly into the VASS category in terms of content addition?

Yes. Look, I mean, you say that VASS is a definition which is -- it's what I call a creative definition, right? BVNK, somebody has told me it's infrastructure, right? And I say, all right, well, you can call it what you want. The reality is at the end of the day. And I say it's a creative definition only, because a lot of what we've done in VASS historically used to be part of the payment network, right? And so I think you've got to kind of just think about what we're doing. Yes, we've been very acquisitive on the -- what we now call VASS. We'll continue to do that, but we'll also do stuff beyond VASS is, I guess, my point, where it will make sense.

Okay. Good. So we'll close it out, just to get your final thoughts. We talked a lot about a lot of different things. I'm sure you've been doing meetings here and coming into the conference. What would you underline, Sachin? I mean, what do you think the opportunities may be misunderstood or underappreciated?

Yes. Look, I mean, here's what I'd say. I'd say we're executing. The strategy is sound. I continue to believe that for those who are patient investors, this is a -- it's a great space. It's one where we're very well positioned. And I continue to believe that -- I can't tell you whether it's underappreciated or not. What I can tell you is that we continue to see tremendous growth opportunities, and we're capitalizing on that. And you're seeing that in the numbers.

The funny thing about everything we talk about is every quarter, we print numbers. They happen to be better than what people expect and we've expected, right? But then there's this -- but all of this can go wrong kind of thing. And the reality is, yes, but Mastercard has lived in the world of everything can go wrong for the better part of a decade and some, and it actually demonstrated good performance thereafter.

So I continue to believe we have to keep our head down, continue to focus, continue to drive, pick up the opportunities, but maintain a healthy level of paranoia. I will not tell you that this company is complacent. I will tell you this company has got a healthy level of paranoia, which is understand what's going on in the ecosystem around you and make sure you're leaning in as opposed to turning your back to what's happening in there. Whether it's stablecoins, whether it's agentic payments, you name it. This has been part of the culture of this company, and we'll continue to do that going forward.

The company is active. There's no doubt about that. Thank you for the update, Sachin. I always enjoy the conversation.

Thank you. Appreciate it.

Yes. Thank you.

Good morning. My name is Julianne, and I will be your conference operator today. At this time, I would like to welcome everyone to the Mastercard Inc. Q1 2026 Earnings Conference Call. [Operator Instructions] Mr. Devin Corr, Head of Investor Relations, you may begin your conference.

Thank you, Julianne. Good morning, everyone, and thank you for joining us for our first quarter 2026 earnings call. With me today are Michael Miebach, 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 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 facts 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 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. We are a quarter into the new year. Much has happened but so much opportunity lies ahead. You've seen the release this morning so let's get into the highlights. Building on 2025 momentum, '26 is off to an excellent start. Net revenue growth was up 12% and net income up 15% in the first quarter on a year-over-year non-GAAP currency-neutral basis. Looking at the macro picture, the economic foundation remains generally supportive with healthy underlying consumer and business spending. However, the backdrop remains uncertain, driven by geopolitical tensions, which has put some pressure on cross-border travel. .

Overall, labor markets continue to be balanced and wages are still outpacing inflation in most major markets. As we've done consistently, we are monitoring the situation in the Middle East and the global economy, and we will adjust as needed. Quarter 1 results were supported by the healthy spending I noted, and of course, our team's strong execution. But above all, this quarter continues to reflect the strength and resilience of our network. We have built and diversified our network over decades, navigating and innovating through every cycle. It's a foundation spanning 4 pillars: one, unparalleled global reach, we have hundreds of millions of acceptance locations and digital access points across 150 currencies.

The last 5 years alone, we have grown acceptance locations maybe 70%. Mastercard powers payments when and where you need us. That scale brings participants into a single network where the more activity that flows through it, the more data is available and the more valuable it becomes for everyone, that drives the ability to capture and extend the secular opportunity; two, our franchise rules. Our franchise helps our network operate with consistency. The rules bring trust and protection for all participants, ensuring transactions are secure, merchants are paid, disputes can be resolved and people have 0 liability to unauthorized transactions. That trust allows global acceptance at scale; three, best-in-class technology. We invest to make payments faster and simpler. Core card network upgrades are already delivering faster transaction flow and near real-time settlement.

These capabilities are live in South Africa today already driving new wins and incremental switching. And we look to extend into other markets over time. And remember, our payments infrastructure goes well beyond cards, including a counter account and we're now further embedding digital assets. Fourth, our differentiated value-added services and solutions, powered by data from our networks and AI, we have curated unique services that make the network secure, drive more payments and help our customers make smarter decisions. And many of these services are tied to and brought to market through the network. That's our virtuous cycle, strengthening the franchise and improving outcomes for customers. It's that strong foundation that uniquely positions us to power and protect tomorrow's digital economy even as innovations emerge and the macro environment changes.

It's our differentiated services powered by our data and how we approach partnerships that underscore why customers continue to choose Mastercard. So let's take a moment on recent key innovations, agentic e-commerce and stablecoins. On agentic, the ecosystem continues to evolve. Our payment solutions are ready and we are engaged shaping what comes next with key players, including Google, Microsoft, OpenAI and other partners across the ecosystem. We're deepening our partnership with OpenAI, reinforcing their use of Mastercard Agent Pay, working to enable agent-to-agent payments and collaborating to embed our services across their solutions while using their tools as an enterprise customer.

I'm also happy to share that nearly all Mastercards around the world are now enabled for Mastercard Agent pay. And we continue to develop our agent-related services. In quarter 1, we launched verifiable intent, a tamper-resistant record of what a user authorized when an AI agent acts on their behalf. In fact, the FIDO Alliance is now using it as a foundation for setting security standards in this space. And earlier this month, we announced a partnership with Craftsman, a leading blockchain infrastructure platform. Craftsman will integrate Mastercard Agent Pay and verifiable intent to enable secure Mastercard transactions AI agents in its ecosystem. This will initially launch on the Open Claw platform with plans to expand.

There's a lot of moving pieces. But as agent-driven comms gains traction, our network is there with tokenized credentials powering the payments, bringing the security and trust and reach that everyone is looking for. It's very clear there is even more incremental opportunity in transactions and in services over time. On to stable coins, another rail to complement and expand our network. We leverage our existing card rails to make it easier for people to spend their digital asset holdings with cards. In quarter 1, we saw spend growth continue at a healthy clip across our crypto co-brands as cardholders gain access to our acceptance, protection and so on. This quarter, OK X, a leading global crypto exchange is expanding its Mastercard crypto card program into Europe. And remember, we also enable purchases of digital assets using Mastercard, and we allow stablecoin settlement, and we integrated stablecoins into Mastercard move, but we also see a broader need to connect stablecoin rails to fee out rails. This digital asset scale, complexity grows, the need for interoperable, reliable and trusted infrastructure grows.

That is why we are excited about our planned acquisition of BVNK. We do not see a change in how consumers pay. Cards continue to deliver a seamless experience. But given the speed, 24/7 availability and programmability, we see clear potential for stable coin technology, especially when paired with our network and use cases like payouts -- me-to-me and cross-border B2B payments. BVNK has leading technology that serves us as an important enabler to send, receive, convert and hold stable coins. They also directly address the interoperability challenge in digital assets. They bring together liquidity providers, stablecoin issuers, market makers and more. BVNK also holds important hard-to-get licenses and offers critical compliance and regulatory tooling. So when you bring together the strength of our network, and you add continuous innovation, including most recently in agentic commerce and digital assets, you see continued leadership in payments. And that fuels the virtuous cycle across our 3 strategic pillars: Consumer Payments, commercial flows and value-add services and solutions. Let's take them one by one.

Turning to the first pillar, consumer payments. I'll start with 2 exciting portfolio wins that reinforce the enduring value of Mastercard across the globe. One was CIB in Egypt. Our partnership will expand meaningfully with new markets and services. This includes the conversion of an affluent portfolio and the expected issuance over 5 million new Masters over the term of the deal. The second is a renewal and expansion of our partnership with Westpac, one of the largest banks in Australia putting Mastercard in the hands of more Westpac customers than ever before. We also continue to see strong momentum in the affluent space as issuers look to differentiate and deepen relationships with high-spend customers. Since launching World Legend last year, U.S. World Legend cards has demonstrated higher overall spend and more than 3x higher cross-border spend on an average monthly basis compared to the U.S. World Elite portfolio.

Two growing value propositions that ring true to the segments they were designed for. Still early days in bringing World Legend cards to market but very encouraging. Our affluent value proposition, including the new globally connected Mastercard collection is resonating around the globe. In North America, our new World Legend has been launched by Rogers Bank with Safra National Bank to launch in the coming months. And Mastercard will now be the network of choice on the new United Airlines Canada co-brand program. In Latin America, Bancolombia and -- in Brazil are also launching new World Legend portfolios and we are excited to partner with Aeromexico in bringing their whole brand to Mastercard.

And in Asia, HSBC Hong Kong is launching a set of affluent products, including World Legend. And in Indonesia, Bank Mandiri is launching a new private banking card in the super affluent segment. These card wins reinforce the importance of offering payment choice. We continue to scale Mastercard One credential a single Mastercard credential linked to multiple funding sources such as credit, debit and installments. We're launching with SoFI, it's SoFI Smart Card. And through partnership with Fiserv and Blossom Mastercard One credential will be more easily accessible to community banks and credit unions. Now turning to the second pillar, commercial and new payment flows. We continue to deliver value by building on our strengths. In the U.S. alone, small business fuel nearly half of GDP.

We're proud to say that the U.S. Amazon small business co-brand card issued by U.S. Bank, will move to Mastercard. That is very exciting. These partners are value in Mastercard's differentiated SME offerings, including easy savings, analytics tools and our overall partnership approach. There's so much potential in commercial, and we are doubling down in segments where we already lead. Fleet and distribution continue to be long-standing strength for Mastercard, especially in the U.S., where we are the partner of choice for most of the industry's largest sweet players.

This quarter, we added multiple new U.S. partners in this segment, including free, which enables card-based invoice payments for wholesale food distributors. And we are extending our capabilities outside of the U.S., where our expertise in the space helps secure ride, a European digital fleet and in-car payment system operator, converting its close-loop free program to open loop Mastercard. On B2B travel flows, issuers continue to select Mastercard for seamless B2B travel payments using virtual cards, for their online travel agency customers. While external events might drive slower growth in the short term, we have long-term conviction in the space and continue to pursue it given the sizable opportunity. This quarter, we signed high note in the U.S., Travelsoft and Juniper in Europe; and Bulla in Brazil, further securing commercial travel as an area of strength.

At the same time, Mastercard move continues to scale, power financial institutions with the ability to offer near real-time money movement with transparency and with access to our more than 17 billion endpoints. This quarter, we extended our connections with Bank of Shanghai supporting SME trade, international tuition and remittances into and out of China. We will now further penetrate U.S. insurance disbursement flows with a renewed agreement with One Inc. and recently introduced an AP Mastercard move will now power Mastercard Global Commerce Suites for small business. This solution helps bank support small business cross-border money movement needs by bringing together payments with collections and expense management in one solution.

Turning to value-add services and solutions. Demand remains high and we continue to drive strong growth. VAS is built on our data curated into differentiated products and ever alongside our payment network. The combined proprietary global real-time transaction data with petabytes of permission data from our services and solutions. That scale and quality of our data power smarter insights, stronger for tools and better outcomes for customers, especially in an AI-driven world. In March, we announced a new foundational generative AI model, leveraging capabilities from NVIDIA. Trained on our vast data sets that will help anticipate behaviors being the scope of traditional models, spotting unusual activity, predicting where a cardholder may spend next and signaling shifts in consumer behavior. These insights can then be embedded across our products or power new use cases. This early-stage work is very exciting. It's not just about the future. Our services are already helping customers solve real needs today, including with many solutions that are unique to us.

You've seen how Mastercard has modernized dispute resolution over the years. That innovation continues to provide value and trust to our customers. Dispute resolution includes our unique network tools powered by Ethoca that help connect issuers and merchants post transactions. Collectively, Ethoca products grew around 25 plan year-over-year last quarter. Checkout.com will embed Ethoca alerts into their global digital experience enable merchants to enroll directly in precharge-back dispute resolutions. This is also a great example of one-to-many distribution. Inflation customers as consumer clarity enhances merchant details and cables receipt visibility, curbing friendly fraud, which third-party research estimates, cost issuers and merchants in the U.S. over $100 billion annually.

Elsewhere, Westpac and Capitec will now leverage some of these network agnostic services as well as subscription management capabilities from MENA. Cybersecurity is mission-critical. And the stakes keep rising. As you know, we acquired Recorded Future in 2024 a leader in this space. Last year, we launched Mastercard Threat Intelligence, bringing Mastercard and recorded future capabilities together. In a short period of time, more than 500 customers are already engaged using the product, partners have taken down malicious domains responsible for the payment card -- impacting over 10,000 e-commerce sites. That's tangible value. In Open Finance, we power use cases from account opening and smarter lending to simple account-to-account payments and better cash flow visibility for small businesses.

We continue to see traction across all. In health care, Optum Financial initially deployed our account opening verification services for HSA accounts, and they are now expanding into additional account types. Webster Bank's HSA Bank elected Mastercard Open Finance to support both identity verification and account linking, making onboarding increasingly seamless for its members. And that brings me to consulting and marketing services. offerings we have been growing for many years, built around payments expertise and fueled by our unique data to solve customer problems.

We're enabling highly targeted insight-driven actions that generate measurable ROI. This is evident. Nearly 3/4 of our customers from 2024 returned to use these services again last year and increased their usage by more than 20% year-over-year. In fact, many customers embed these services within customer business agreements. DCBA linked services directly support growth, drive payment volume, increased customer acquisition and so on. Separately, this quarter, Intesa Sanpaolo expanded its services partnership with us to boost card penetration and usage, combining advanced analytics and portfolio optimization with always on marketing across both Intesa and its digital bank Easy Bank.

Now that's a lot to fit into 1 quarter, but all these examples reinforce how we continue to execute and deliver on a proven strategy. We are a strong global network, deeply leveraging proprietary data extended through innovation, scale through partnership, diversified through our products and services. Thank you for your continued trust and partnership. And with that, I'll turn it over to Sachin.

Great. Thanks, Michael. Turning to Page 3, which shows our financial performance for the first 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 12%, reflecting continued growth in our payment network and our value-added services and solutions. Operating expenses increased 9% and operating income was up 13%. Net income and EPS increased 15% and 18%, respectively, driven primarily by the strong operating income growth in the quarter. EPS was $4.60 which uses a $0.10 contribution from share repurchases.

During the quarter, we repurchased $4 billion worth of stock and an additional $1.7 billion through April 27, 2026. This quarter, we accelerated the pace of our share buybacks given current valuation levels and our strong conviction in our long-term growth potential. Now turning to Page 4, where I'll speak to the growth rates of our key volume drivers for the first quarter on a local currency basis. Worldwide gross dollar volume, our GD increased by 7% year-over-year. In the U.S., GDV increased by 4% with credit growth of 8% and debit growth of 1%.

Excluding the impacts from the migration of the Capital One debit portfolio, our U.S. debit GDV growth would have been 7%. The migration of the debit portfolio is now basically complete. Outside of the U.S., volume increased 9% with credit growth of 9% and debit growth of 8%. Overall, cross-border volume increased 13% globally for the quarter, reflecting continued growth in both travel and non-travel related cross-border spending. As one would expect, starting in March, we began to see some impact on cross-border travel from the conflict and the Middle East.

Turning now to Page 5. Switched transactions grew 9% year-over-year in Q1. Excluding the impacts from the migration of the Capital One debit portfolio, our Switch transaction growth would have been 10%. We continue to drive contactless penetration, which in Q1 stood at 78% of all in-person with Switch purchase transactions. This is up 5 ppt since the same period last year. In addition, card growth was 5%. Globally, there are 3.7 billion Mastercard and Maestro-branded cards issued. Turning to Slide 6 for a look into our net revenue growth rates for the first quarter discussed on a currency-neutral basis. Payment Network net revenue increased 8% primarily driven by domestic and cross-border transaction and volume growth. It also includes growth in rebates and incentives. Value-Added Services & Solutions net revenue increased 18%, primarily driven by growth in our underlying drivers, strong demand across security solutions, digital and authentication, business and market insights and consumer acquisition and engagement and pricing.

Now let's turn to Page 7 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 6%, while worldwide GDV grew 7%. The difference is primarily driven by mix, partially offset by pricing. Cross-border assessments increased 18%, while cross-border volumes increased 13%. The 5 ppt difference is driven primarily by pricing in international markets. Transaction processing assessments were up 15%, while Switch transactions grew 9%. The 6 ppt difference is primarily due to favorable mix and pricing, slightly offset by lower revenue from FX volatility. Other network assessments were $277 million this quarter.

Moving on to Page 8. You can see that on a non-GAAP currency-neutral basis, excluding special items, total adjusted operating expenses increased 9%. The growth in operating expenses was primarily driven by increased spending to support various strategic initiatives, including investing in our infrastructure, geographic expansion and enhancing and delivering our products and services as well as the increase in foreign exchange activity-related expenses within the quarter.

Turning now to Page 9. Let me comment on the operating metric trends for Q1 and the first 4 weeks of April. As we look across Q1 and April, growth rates of our operating metrics were impacted by timing of holidays, namely Ramadan and Easter. March would have seen the benefits from the timing, while February and April saw a negative impact. Looking at the Q1 operating metrics on a sequential basis. Switch metrics were generally in line with Q4 and underlying spend remains stable. Of note, U.S. Switch volume was flat sequentially as the strength in consumer and business spend offset the impact from the migration of Capital One's debit portfolio in the quarter. Excluding Capital One, on a like-for-like basis, U.S. Switch volume growth was over 1 ppt higher in Q1 as compared to Q4. Now on to Switch transactions. Excluding the migration of the Capital One debit growth -- sorry, excluding the migration of Capital One debit, growth was generally in line with Q4.

Moving to our cross-border metrics. Our overall cross-border volume remains healthy with growth at 13% in the first quarter. Cross-border card not present ex travel grew at 18% and remained strong. And the sequential decline in cross-border travel was due primarily to the conflict in the Middle East and portfolio shifts. Now looking specifically at cross-border travel for the first 4 weeks of April, the sequential decline from Q1 is due to an acceleration of the impact of the conflict, the portfolio shifts and the negative impact from the timing I just mentioned. None of these factors relate to any fundamental change and underlying consumer and business spend remains healthy. Turning to Page 10. I wanted to share our thoughts for the remainder of the year. We delivered another solid quarter, fueled by the strength of our payment network and value-added services capabilities.

Despite elevated geopolitical risks, the macro economy has remained largely supportive with healthy underlying consumer spending and the fundamentals of our business remain strong. With that said, we are operating in a period of heightened uncertainty, magnified by the ongoing conflict in the Middle East. Since the outbreak of the conflict at the end of February, we have seen restrictions on travel and a reduction in the world's energy supply. And as I noted earlier, we are seeing impacts from that in our cross-border travel metrics. But let's take a step back. We are a global company, and we are heavily diversified across geographies, products, consumer segments, services and so on. This diversification reduces concentration risk while enabling us to deliver consistently on solid top line and bottom line growth.

So while the conflict in the Middle East is a headwind, our global diversified business positions us well to sustain growth, both in the short and long term. We are confident in our strategy, delivering value to our customers and partners across the globe and innovating to power the next wave of digital payments. As we look at Q2 and the full year, our base case assumes underlying consumer spending remains healthy outside of the impact of the conflict in the Middle East. We assume the conflict ends in Q2 and the related headwinds will be largest in Q2 and then progressively recover as we move through the second half of the year. As it relates to our expectations for the second quarter of 2026, year-over-year net revenue growth is expected to be at the low end of low double digits range on a currency-neutral basis, excluding inorganic activity.

This includes our current estimates for the impacts from the conflict in the Middle East, without which we would have expected Q2 growth to be generally in line with the first quarter on a currency-neutral basis. We expect minimal impact from a disposition that we anticipate to close within the quarter and a tailwind of approximately 1 to 2 ppt from foreign exchange. From an operating expense standpoint, we expect Q2 growth to be at the low end of low double digits range versus a year ago, again, on a currency-neutral basis, excluding inorganic activity. We anticipate a 0 to 1 ppt benefit from the disposition while foreign exchange is forecasted to be a headwind of approximately 0 to 1 ppt for the quarter. On other income and expense, in Q2, we expect an expense of approximately $150 million. This excludes gains and losses on our equity investments, which are excluded from our non-GAAP metrics.

This higher sequential expense is primarily driven by the following: first, Q1 came in better than expected, aided by a few onetime items. We do not expect these to repeat in the second quarter. Second, we expect lower cash balances and higher debt levels in the second quarter. Cash balances tend to be seasonally lower in the second quarter. And as I noted earlier, we have accelerated the pace of our share repurchases. And lastly, a onetime unfavorable impact from the disposition I mentioned earlier. As it relates to our expectations for the full year 2026, net revenue growth remains at the high end of a low double-digit range on a currency-neutral basis, excluding inorganic activity. We anticipate minimal impact from the planned disposition and a tailwind of approximately 1.5 ppt from foreign exchange.

From an operating expense standpoint, we expect growth to be at the low double digits range versus a year ago on a currency-neutral basis, excluding inorganic activity. We expect a 0.5 to 1 ppt tailwind from the disposition and a headwind of 0.5 to 1 ppt from foreign exchange on a full year basis. And finally, we expect a non-GAAP tax rate in the range of 20% to 21% for both Q2 and the full year. As a reminder, the Q1 tax rate was lower primarily due to discrete tax benefits including those related to share-based payments. And with that, I will turn the call back over to Devin.

Thank you. Julianne, you may now open up for questions.

[Operator Instructions] Our first question comes from Will Nance from Goldman Sachs.

Michael, I wanted to ask on the VAS strategy and the growth you've been putting up there. I think there's been a focus on how you differentiate yourself with the strategy. And I think historically, Mastercard has been very forward leaning on embracing new networks and things like A2A payments. Can you talk about the evolution of that strategy maybe in the context of the planned divestiture and how some of these types of activities fit into the broader strategy around VAS?

Right. Well, great question. So we've always believed in consumer choice when it comes to payments and business choice when it comes to payments. So it's clear that cards is a great answer for P2M, but it's not the answer for everything so a set of dedicated use cases and a lot of volume out there for us to go after to apply our service. So that was originally the idea to go into a what we called at the time, a multi-rail proposition account to account. So you know that history, acquisition of VocaLink and so forth and various other real-time payments assets around the world, and then we exported the stack to run about 12 subsystems around the world right now. So that strategy still holds. There is no question about that because real time is very much in focus. A lot of governments choose real-time payment systems to go and facilitate payments of all types across their respective markets, where a known and respected partner in this space. So strategy hasn't changed. We're really evolving is to ensure that we find more and more services that we can apply to these payments.

So the franchise rules are different in that space than they are in a card space. But something like cybersecurity is particularly in focus as the counter account fraud and account scams are rising, our counter account protect solution, as being an excellent example of how we found a way where we can rally a market and drive value for us and for the market. So cybersecurity is in focus. Generally, this gives us a seat at the table with government in the current world where more countries are inward looking for more resilient infrastructure that puts us also in a very unique position. So strategy continues where we said we're not looking in to grow a lot more new geographies because we're in the markets that we want to be at. United States, U.K., Thailand, Philippines, large economies where this business runs at scale and very profitably for us.

And Will, it's Sachin, very quickly, I just want to clarify because you alluded to the disposition, the disposition I referred to in my commentary relates to Session M, which is our loyalty business, which is 1 of the acquisitions we had done a few years ago, and that's the sale which was announced, I guess, a couple of months ago. So that's what I was referring to in...

And I glanced over that other market rumor because we don't comment on market rumors.

Our next question comes from Sanjay Sakhrani from KBW.

Sachin, I want to talk about the assumptions on the -- for the outlook on the war ending in 2Q. I'm just curious if you could just elaborate on the assumptions you're making on cross-border. I assume that's sort of where the biggest impact is. And then so where the offsets are that are helping you sort of raise the guidance because I'm sure some other things are outperforming and offsetting it. And then just one follow-up on the portfolio shift point you made. Does that impact cross-border for a year now going forward? I'm just curious if you could just elaborate on that.

Sure. So Sanjay, first, I'll kind of kick off by saying we have taken what we believe to be our best estimate as it relates to our base case as it relates to the conflict ending in Q2 because we had to predicate this on some assumption, and that's what we shared with you right here. So let's just start with that piece of it. The impact is most pronounced and assumed to be most pronounced in cross-border travel. That is a correct statement on your part.

The second point I'd make there is that the impact would be in our assumptions, most pronounced in the second quarter. And while there will be some impact in Q3 and Q4, we expect that there will be a gradual recovery or progressive recovery, which will take place in Q3 and Q4 based on the assumption that the conflict ends in Q2. So that's kind of 2 things I want to kind of just mention. You also asked a Part 1b question to that, which was what are the offsets. So I think what you're asking is our full year guide, which by the way, on a currency-neutral basis is basically unchanged, right? The increase you're seeing in the full year guide is primarily being driven by a change in FX assumptions for the year. So on a currency-neutral basis, it's unchanged to what I shared a quarter ago. Anyway, notwithstanding the fact -- look, we started the year strong. Consumer spending is healthy. We're executing on our strategy. We had a first quarter which -- where we outperformed our own expectations. So we're off to good start in the year.

That obviously provides a little bit of a buffer relative to 3 months ago versus today, notwithstanding the fact that there are other things which have moved around such as impact of the conflict, which is kind of offsetting that as well. So that's kind of component number one, which we've got to keep in mind. The other piece I'd mention is that, look, I mean, as you go through the year, a few things to keep in mind. I think you know this already, Sanjay, is that in Q2 of last year, we had the highest levels of FX volatility. So that creates the biggest headwind in Q2 of this year, right? We have some headwind from FX volatility in Q3, but it's less than what was there in Q2 so that's something to keep in mind.

And then in Q4, we had more normalized levels of FX volatility. So the headwind kind of dissipates as you go across the end of the year. So that's kind of the second point. The last point I'd make is that from a value-added services and solutions standpoint, which represents roughly 40% of the revenues of the company, but the business continues to perform. We delivered 18% currency-neutral growth in the first quarter, another solid quarter and we're seeing strong demand for those capabilities. So that's something which, again, as I think about the rest of the year, we'll have to keep on executing, and that's kind of based in the assumptions and the guidance that I've shared with you.

I can just add one point on that. I think it's a great question, important question. What happens here with the cross-border side is a general shift in spending patterns. So our customers are coming to us and say, "Well, what do you see in your data?" How is spending shifting. Where else is it going? Where do we meet our customers and their customers in terms of solutions that they need. This is something that we took to a science back in COVID because at that time, recovery insights were kind of a key thing. So we now have kind of like crisis insights. Within 24 hours, we had a website up for our customers in the Middle East to say here's shifting spending patterns. Take a look at it, let's work on it together. So this is an opportunity for us to lean in and drive forward, and that will be a compensating factor.

And Sanjay, I know you asked the question also as part of your question, 1C was the impact of portfolio shifts. Yes. And you're right. I mean the impact of portfolio shows will stay with us for quarters. Again, every portfolio is a different migration schedule, but that kind of factors in there. You are seeing a more pronounced impact on travel because some of the portfolios were more travel heavy. So that's something to kind of keep in mind. .

Our next question comes from Harshita Rawat from Bernstein.

I want to ask about Switch transaction growth, Sachin, Michael. Historically, it used to grow kind of in the low double-digit to low teens range. More recently, the growth has decelerated a little bit to 9%. I know there's 1 ppt of Cap One debit in there. But maybe talk about some of the other drivers within that Switch transaction growth and some deceleration versus history. And then as we think about the high end of low double digit, medium-term revenue objective, maybe talk about the growing importance of valuated services in that algorithm and remind us about kind of your conviction in the sustained strong growth of that.

Sure. So on your question on Switch transactions, I think you kind of got the first part, which I shared in my prepared remarks, which is adjusted for the Capital One migration, we grew at about 10%. But I think your question was a little bit beyond the fact that it's 10%, you said we were growing at higher rates previously. I think one of the bigger factors that influences Switch transaction growth is the mix of our portfolio. And so I'll give you a real life example, right? So back in the days when we were operating in Russia, before we suspended our operations in Russia, right? We had significantly higher growth in Switch transactions. .

And at that point in time, when we suspended operations, one of the things which I called out was that recognized that this market is a low average ticket size market. And so the fact that we no longer do business there, impacts us which transaction growth rates because average ticket size kind of plays a part, point number one. And then if you just extend that logic through to different parts of the globe, depending on where we're seeing more and less growth than what the average ticket size is that influences what our Switch transaction growth is. And the reason I say this is because mixes in geography are going to impact where our Switch transaction growth is. But fundamentally, what's going on in terms of the imperative for the business to continue to focus on driving Switch transaction remains.

Case in point, for the longest time, we were not switching transactions in Japan. We're now switching to transactions in Japan. We were previously not switching transactions in a meaningful way in Mexico, that's something which has actually started to happen. So you know that as a matter of fact that the company is very focused on driving greater switch transaction growth for all the reasons we've kind of mentioned in the past, which is it not only generates revenue, it provides data. When you get data, you can deliver value-added services and solutions, which drives incremental revenue. So really important.

And just as another metric point so that you're aware. In our most recent quarter, our proportion of switch transactions is now north of 70%. So the reality is we are executing on the Switch transaction strategy. We continue to remain very focused and believe that's an important area especially in light of what we shared with you at Investor Day 1.5 years ago when we talked about the sizable opportunity, which remains from a secular standpoint, in terms of Switch transactions, which still remain to be -- or other transactions, which still remain to be digitized, very much a focus area for us.

Yes. So you mentioned the 70%. In 2020, it was 60%. So that's a very sizable increase. And we just think for a moment where it's coming from. It's coming a lot from -- we are -- I mentioned it earlier, lot of countries are looking to have their own payment systems. There's many domestic schemes out there. But it turns out that digital capabilities are really hard to do and they're really hard to scale. So that's part of our strategy, and that's how we're winning volume. It's a better proposition from a safety security perspective, tokenization, those are all things that we can bring to those countries, and that is what the biggest driver is so this is one of the key metrics for our company and our people to bring across the value that we bring there. and then compete against these domestic schemes.

So a significant driver, and it has a lot of other digital capabilities. When we talk click to pay when we talk contactless, various other things that are just really hard to do for these kind of systems. So that brings switching on to us, and that's the -- that's fueling the services opportunity in turn.

Our next question comes from Adam Frisch from Evercore ISI.

A quick clarification and then a question, getting a bunch of questions from investors us. If the word will go longer or near-term impact would deem more destructive, what's the calculus on how that might impact your outlook, if at all? And then my question is on stablecoin and a shout out to Devin and Johan for a terrific call explaining the rest all for the BVNK deal a few weeks ago. Do you feel like the mounting challenges with getting the Clarity Act passed in D.C. delays the time frame for the industry in general? Or is there enough motion to keep the momentum going and having BVNK's capabilities helps you shape the trajectory a little bit more.

So Adam, on the first question, I'm really not going to go into multiple scenarios of how the work plays out, right? I kind of shared with us -- with you what the base case is and what the impact is. I also shared with you in my prepared remarks what the impact would have been had it not been for the war or rather the conflict occurring in Q2, where I said, basically, had it not been for the conflict, our growth rate in Q2 would have been generally in line with what we had in Q1. So look, the reality is things will move.

We do understand that the conflict is something which is outside of our control, like Michael mentioned, it's not like we're sitting on our hands. We're working with our customers to try and find opportunities where we could be helpful to them and even in this environment. And if it's useful, maybe I can just size for you, really for the impacted countries, which is -- let's take the GCC in Israel, right? From a cross-border volume standpoint, right, GCC and Israel represent roughly of our cross-border volumes. And so -- and this is both inbound and outbound. You have to take both into consideration. Because, I mean, we have impact from an issuing and an acquiring standpoint. So it's important for you to just get a general size of what we're talking about here.

Good. So coming to the other -- or the actual question versus a clarification. So Stablecoins, BVNK, Clarity Act, a lot going on. So first of all, I just want to go back to what I said when I shared our excitement about the BVNK acquisition. So fundamentally, what we see is that stable coins and tokenized deposits are actually not just stable coins here to stay. They're going to be an important part of the financial ecosystem, the financial fabric going forward. So we believe that tokenized Money will occupy a meaningful part of the money movement in the future. And the use cases I talked about the B2B, global payers, B2B, Me-to-Me, that's like funding my own wallet and all the are going to be use cases that will be there.

So we have some regulatory clarity. We had with the Genius Act. There is such regulation in other markets. So it's not holding us back. We see it in the volumes that is happening. I talk about healthy clip in crypto. Now this extends into stablecoin -- already. There are use cases. So we're moving forward on that, which is why the timing of BVNK was important because it feels -- it's this unlocked moment at this time. Now we also think that when this world is growing at a higher speed, let's assume the Clarity Act is coming through, and then we'll be even more momentum on this, we're going to face a world that is a world of multiplicity. So it's going to be more coins. It's going to be more change. It's going to be more non-dollar-denominated coins out there, et cetera, et cetera.

So that will bring about a future where interoperability and trust and licensing and who clients' needs are super critical. And that is where BVNK is a leader. And that is in my customer conversations, everybody is asking, what are you doing? How can we work together? What do I do first. We talk about BVNK, well, it's not closed yet, so I should say that. But we're very excited about it because we already see the demand. Everybody is trying to figure this out regardless of Clarity Act yes or no. Now on the Clarity Act, it would establish a clear regulatory framework for digital assets. That would be good, can be sitting here and speculating when it happens, but it doesn't hold us back. We believe that BVNK puts us in a position in-house natively to drive that interoperability and trust layer in that digital assets world, stable coins, tokenized bank deposits, et cetera. So very exciting, and it truly sets us apart.

Our next question comes from Tien-Tsin Huang from JPMorgan.

Just wanted to ask on the agentic side if that's okay in Mastercard Agent Pay, Michael, you talked about some of the partners and some activity on the ground. But can you just give us a little bit more detail on volumes or any surprises with respect to actual activity or actual demand. And I'm curious if you were to maybe talk about it in the context of who's pushing the hardest across all the players in the 4-party model. What are you listening to for clues on how to invest harder, et cetera?

Right. So on agentic so this all kind of really got into motion in April last year, just about a year ago. This is kind of what we started to get out there with Agent Pay, other protocols where there -- this is when Google and others, Microsoft started to put out protocols that are commerce-oriented protocols. So that was a push for those players, LLM players, people getting in seeing a tremendous opportunity for them. And then the payment world, us with Agent Pay, we got and say, "Well, we got to facilitate those transactions." And we want to deliver everything that people are generally used to from us in a regular transaction. So that's what Agent Pay does, leveraging our tokenization capabilities. So we pushed equally hard. .

In terms of where volumes are, we're still at early stage. So that is also true because a few things were not quite in place yet. So the question of what goes wrong, I talked earlier about disputes. What goes wrong in an agent transaction, how do you prove that? So the significance of verifiable intent cannot be underestimated. That is a really important step. We worked on this together with Google. That is now a standard. So again, part of the urgency needs to be we got to be in there with the trust that we bring and make sure that the standards are there. And that's what we're doing with great urgency and that is where our urgency lies. And then we're ready to see when the volume comes, where do we see some of the upside, new use cases spreading baskets on the consumer side, transaction opportunity, of course, there could be more services opportunities inside Tokens and Elite will be such an example. So all of this is happening. And then I haven't even started to talk about agents in the B2B space.

So you heard us talk about Agent Suite, which we started to launch where we're going to get into the business of building agents with our customers in the B2B space, et cetera. So early stage on B2B earlier than on the consumer side, but I would think this is a much bigger opportunity and it fits right into our focus on commercial payments. So early-stage ecosystem building, covering your basis, that's what we're doing.

Our next question comes from Darrin Peller from Wolfe Research.

Just first a quick follow-up, Sachin, just when you think about the way to normalize cross-border for the effects of Ramadan and Easter shifting or any other normalization just to give us a sense of what you see as sustainable given the portfolio shifts. I'm curious if you could help us quantify that. Michael, I want to ask about Mastercard Threat Intelligence more broadly, we're all hearing about instances of fraud picking up around AI on payments. Are you seeing that inflection in demand really pick up pace for your value-added services and offerings around cyber and fraud. I mean clearly, that could be a nice boost sustainably for VAS.

So Darrin, I'll go first on your clarifying question. And I'm going to actually say with the cross-border travel metric, and I'm going to actually speak to the growth rate for Q1 compared to the first 4 weeks of April, right? Because that 8% number that you see there going down to 2% growth is driven by primarily 3 things. Number one, conflict, number two, portfolio shifts, number three, the timing of Easter, right, and Ramadan. These are the 3 factors. And I kind of laid them out in order of significance as well, right? But don't assume that the conflict is the biggest and then the other 2 are insignificant. It's kind of generally, directionally, the 3 of them are the key contributors to what you're seeing there. I think the more important thing, honestly, Darrin, out here is that by this very definition, what you're seeing. Let's take each one of them individually.

Conflict out of our control, don't expect for that to stay with us over the long term. So fundamentally, nothing challenges the cross-border value prop as it stands. Number two, as it relates to the portfolio shifts. Look, we're very clear in our mind in terms of what our approach on portfolio wins and losses are. We want to win the right kinds of portfolios. We already maintain that. We've always maintained that, and we will continue to be very disciplined on that. So you're going to see wins, which you've seen more of -- and on occasion, you'll see things which will actually move away from us, which is part of what's going on from a portfolio ship standpoint. And I won't spend a lot of time on timing because timing of Ramadan and Easter is what it is, right? The week over week, you're going to see movements and changes on that. So that's what I'm going to share with you there.

And every one of these calls, we talk about wins and losses and shifts. So if you just think about what I said earlier, Aeromexico, United Airlines, Canada, for travel agency wins. So there is a lot going on in the space. We've historically been focused and continue to see it as a strength and we'll lean in on that, but not always at all prices. Good. So on the safety security piece and Recorded Future, and the rising stakes in the world in an AI-powered world, that's absolutely true. We hear this everywhere. We see it everywhere. And it's not that new. It's just rising. So when we looked at Recorded Future and said our historic position in being a leader in fraud management and payment fraud management expanded to a multilayer strategy with risk recall where we looked at general cybersecurity stance of smaller businesses. That was a big part of our business. So we're not just fraud any longer. We're already talking to the -- companies. And then AI has been around for some time now. 2023 was really where it started to really accelerate.

So bought Recorded Future in 2024, that was already with a perspective on, we got to look at broader threat vectors because companies -- our customers in our space, in the payment space, for them, it's very hard to defend. You cannot really outspend against all threat vectors. So we needed to have reliable information that we could give them that says, well, here's where your biggest risk is. This is where you really need to invest. And that's what Recorded Future has brought to us. And you can imagine -- right now, this is such a differentiated activity for us. Now in a world of geopolitical tensions and so forth, you can also see that a lot of governments are focused on this space. asymmetrical warfare, state actors, all of that is going on and recorded future puts Mastercard in a very unique position to be a trusted partner to provide those kind of insights. So when I look at the customer set of Recorded Future, it includes the intelligence community, government entities as well as private sector companies and so forth. So this has just been the perfect acquisition at the right time.

And when we brought together our data set on the Mastercard side, that's Recorded Future as Threat Intelligence, that's a real synergy because then you have even more powerful data -- so how is it going? We closed in December 2024. We all got running last year and there is significant demand. So that continues. We put out a bunch of products. I mentioned Mastercard Threat Intelligence earlier, but there's others malware intelligence, autonomous threat operations, et cetera. So it is just the right thing at the right time. And we do expect that Security Solutions is going to be a continued significant growth driver for us. Yes, exactly that.

Our next question comes from Andrew Schmidt from KeyBanc.

Michael, appreciate the comments, Michael, on the selective deals. But if you just comment on whether the competitive intensity for deals has changed at all or whether that's relatively stable? And then Sachin, if you have any comments around how we should think about rebates and incentives trending this year or in subsequent years, that would be great. .

Right. So selective is maybe a great word, but also -- we want to win deals. So that's our mindset. That is fueling transactions that's helping us getting after the cyclical opportunity, drive our Vasco, the virtuous cycle. So that is the mindset to start with. And that has been the mindset for years. So when it comes to competitive intensity around that because others might have the same mindset, I think that hasn't dramatically changed. I think our ability to provide value that has dramatically changed. So if you look at our services portfolio today and the kind of bells and whistles that we put on our Mastercard payment, that is a lot of value that we can bring and that we can have considered as we engage customers on what kind of value exchange works for these deals, and that's why we continue to win.

So nothing dramatic I see on that front. So just being leaning in. But you say it's not every market where you would say, do I want to -- if I have a relevant market share and I'm well positioned in the market, then I might have a different consideration as if this is a new geography and I really want to grow my business. So we also make these kind of judgments as we grow our global presence.

Yes. And just picking up on Michael's comments, look, I mean, at the end of the day, we have a rich pipeline. Our teams are super active in terms of winning the right kinds of deals, and we will continue to stay focused on that. The impact, obviously, will come through in terms of what you see on rebates and incentives. But again, we look at rebate and incentives, but we also look at overall net revenue yield for the company. And you can see the net revenue yield for the company is increasing. More specifically on your question on rebate and incentives, what I'll share with you is in the second quarter, we expect for rebates and incentives as a percentage of our payment network assessments to be slightly lower sequentially as compared to the first quarter. .

Our next question comes from Matthew O'Neill from Bank of America.

Just curious, if you take a step back from a high level, how does Mastercard think about a stable coin transaction versus a local currency transaction from an economic contribution standpoint, in a future with a lot more stable coin utilization, is Mastercard kind of economically agnostic? Are there opportunities for accretion or the opposite?

Right. So let me start on that. So generally, when you see where are most of the volumes today, there's a lot of on and off ramp opportunities. So we have these co-brand programs. And in that, you basically have card economics. So that's just as straightforward. So now in this space going forward, where we drive interoperability layers and so far, as you can see, it just start to build out a whole set of new services and additional opportunities. So we see the space driving more value for us going forward. But for now, it's that volume, that is the most pressing need. How do I get on to in stablecoins. I have an offering at the other end of the transaction. So we got to be at all those spaces and invest to do that. So that's how I see it.

Overall, I think it is a significant net new growth opportunity for us, which is why we felt we are going to deepen our capabilities through the acquisition. So we want to drive all of that value. It would be central network that facilitates that value exchange over those digital assets.

And the economics on the acquisition, right, once it's complete, I mean the value prop, which is coming through there, which is Michael talked about send. Basically, it was about convert, send, receive and store, right? That are these different attributes which come with the acquisition. The revenue model on that is basis points on volume. So you were asking us to how you generate revenue, that's kind of the mechanism and that's all an addressable market, which we don't participate in today. That's the accretive part of what Michael is alluding to.

Our next question comes from Bryan Bergin from TD Cowen.

May I ask on yield. Can you just dig in on the key drivers in the TPA spread uptick? And any important considerations on pricing changes as you move through the -- of the year.

Look, again, from a pricing standpoint, a lot of what we do is, again, predicated on the value we deliver in the market. And so I use what I would tell you from a pricing standpoint, all of our planned pricing is already contemplated in the guidance that I've shared with you. And I kind of give you a little bit of color as to what the cadence by quarter looks like as well. without giving you specific numbers for Q3 and Q4. But the reality is all of that already contemplates what kind of value we plan to deliver and for which we plan to actually have pricing. So that's close share. .

Our last question comes from Jason Kupferberg from Wells Fargo.

Michael, in your prepared remarks, you mentioned how much growth we've seen in acceptance points. in recent years, and I think some of that will continue to come from geographic penetration. But can we get an update on how you guys are thinking about the most fertile new categories of acceptance over the coming years just as you continue to grow the network. And then, Sachin, just can you clarify on the vast growth currency neutral that you were actually steady on an organic basis year-over-year? Because I think you lapped Recorded Future? .

Right. So acceptance, you saw the growth. So that is very significant. And it follows a very clear plan. So we are looking at going after domestic schemes. We are going after a closed loop. We're going after underpenetrated verticals. Those are all aspects how we're finding new volume and creating new acceptance. And this is not limited to the consumer side. This is also happening in the B2B side. One of the things I should say is underpenetrated verticals, very interesting. So insurance, housing, our programs with built just finding -- making sure that it's understood that cards can solve needs that are out there in spaces that we haven't historically been in. VCN is another such example. So driving VCN acceptance, which we continue to do. So underpenetrated verticals, I think, is a significant opportunity for us. And then it's the bread and butter business of just driving acceptance every day, small business, for example.

And Jason, on your question on VAS growth. So in Q1, we had approximately 18% growth in our VAS revenues. And that has no impact from acquisitions. In other words, there's no incremental impact coming through. if you're looking at it sequentially compared to Q4. In Q4 of last year, we had about 22% VAS growth and that had about 3 points of an acquisition impact in there. .

Thank you. Any closing comments, Michael?

Yes. So it brings us to the end of the call. We overran a bit today, but there was a lot to cover. We appreciate your questions and your interest and your support. All of this work that we just discussed today is only possible because of the work of our teams around the world. The first quarter gave us some pause to really worry about the safety of our people in the Middle East, in Israel and GCC and that is hopefully coming to a conclusion soon. But it is that work that is so critical. So thank you very much, and we'll speak to you in the quarter.

This concludes the conference call. You may now disconnect.

Good morning. My name is Julianne, and I will be your conference operator today. At this time, I would like to welcome everyone to the Mastercard acquisition of BVNK Conference Call. [Operator Instructions]

Mr. Devin Corr, Head of Investor Relations, you may begin your conference.

Thank you, Julianne. Hello, everyone, and thank you for joining us today for a call to discuss the details around our agreement to acquire BVNK, which we announced earlier this morning. With me today is Jorn Lambert, our Chief Product Officer. Following some comments from Jorn, the operator will announce your opportunity to get into the queue for a Q&A session. It is only then that the queue will open for questions. I would like to emphasize that the purpose of this call is to discuss our announced acquisition and how it fits into our overall strategy and to address any related questions you may have. So we would ask that you limit your questions to these matters.

Finally, I would like to remind everyone that today's call may 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 in our recent SEC filings. A replay of this call will be posted on our website for 30 days.

With that, I will now turn the call over to our Chief Product Officer, Jorn Lambert.

Thank you, Devin. Hello, and thanks to all for joining us today. I'm very excited that today, Mastercard announced a definitive agreement to acquire BVNK, a market leader in stablecoin payments orchestration and execution. BVNK operates B2B2C and enables businesses to send, receive, convert and hold digital currency for payment use cases such as business payments, global payouts, P2P and M2M. For decades, Mastercard has brought trust, ubiquity and security to payments. As technology evolves, we expand consumer choice and we innovate alongside our existing and new partners in the ecosystem to unlock value for their end customers. Digital currencies and tokenized deposits are no exception.

This acquisition, once closed, will advance our digital currency strategy while opening up incremental opportunities. The addition of BVNK to the Mastercard network would bring more optionality and end-to-end capabilities to meet the needs of our customers and partners for the years ahead, all aligned with our current strategy and focus on driving long-term growth. Let's start with a bit of context. With increased regulatory clarity in multiple geographies, digital currencies, including stablecoins, have moved beyond their origins of crypto trading instruments. They are now a way to move value alongside established methods such as cards, bank transfers and real-time payments. Stablecoins have actually existed for over 10 years, but we now see a marked step change in 3 areas: more use cases, more regulation and more participation.

First, the adoption of digital currencies is growing across different use cases such as B2B, global payouts, P2P and M2M or wallet funding. And Boston Consulting Group, for example, noted over 50% growth in stablecoin payments use cases in 2025, standing at over [ EUR ] 350 billion. At a functional level, digital currencies offer distinct attributes, 24/7 availability, borderless transfers, programmability, immutability, speed. Put simply, they function as a globally accessible borderless real-time settlement system. It is another option to settle funds just like ACH is already today. So let's dive a little deeper in the use cases that can benefit from that function. On the B2B side, there are compelling use cases where speed, transparency and predictability matter most.

We see opportunities in cross-border B2B payments, especially for small and medium enterprises, looking to optimize collections, cash flow and treasury operations, reduce FX risks and overall improve transaction speed and traceability. It's another rail for businesses to move money with the right levels of trust and compliance. Think of a flower exporter in Ecuador that needs to collect receivables from all across the world or the shipping company who needs to optimize liquidity across regions. We also see opportunities in global payout flows such as payroll and payouts to gig workers, creators and freelancers in dozens of countries. It's a fast-growing and complex operation that can be streamlined using stablecoin.

Thirdly, P2P flows. This can be cross-border remittances where stablecoin can offer another choice and can improve speed. Think of a worker in the U.S. who wants to send stablecoin each month to her parents in the Philippines, but this can also include paying a friend locally who wants digital currency or what we call a M2M transaction, where I use fiat to fund a digital currency wallet. And for all these use cases, there is applicability in both domestic and cross-border environments. These areas alone have a massive addressable market. BVNK, combined with our network solutions like cards and Mastercard Move, become another tool to unlock that TAM.

Beyond these opportunities right in front of us, though, new TAMs are emerging through use cases, including account funding for buying and selling of tokenized assets like tokenized treasuries or money market funds, for prediction markets, for crypto trading and DeFi for store of value purposes or even areas like treasury and liquidity management for businesses. We're in the very early innings of this space. To be clear, we do not see a change in how consumers pay for goods and services. Cards work exceptionally well. Physical or mobile card credentials offer a frictionless and predictable user experience in-store and online, unparalleled worldwide acceptance and consumer reach, robust consumer protections and very strong security and fraud protection. There is no consumer problem to be solved here.

As a matter of fact, crypto and stablecoin wallet providers all over the world are equipping their customers with card credentials to give more utility to their wallets. Their customers benefit from a simple and secure experience anywhere in the world and all participants benefit from the network. The second discontinuity or the second step change besides the growing use cases is that regulatory frameworks for stablecoins are rapidly developing, bringing greater clarity around issuing, custody, compliance and consumer protections. This is giving the financial industry the confidence to participate directly. We expect that in time, almost every financial institution and fintech will provide digital currency services to their customers, be it with stablecoins or tokenized deposits.

Several FIs are already on that journey. Others are building stablecoin consortia. That is a game changer for this industry. It also puts a strong light on rigorous compliance standards and practices. And the third step change as more participants enter the market is that the level of fragmentation multiplies. Indeed, we see increasing issuing of stablecoins and tokenized deposits in multiple currencies across multiple chains through many intermediaries. We believe this complexity will only increase. And as a result, there will be increased need for trusted interoperability that seamlessly connects across fiat and tokenized systems, a role we play successfully in cards today. Businesses and consumers require a secure, compliant and predictable user experience and instant conversion between currency formats and payment types.

In summary, increased participation, more use cases, developing regulation and fragmentation are slowly moving digital currencies from the periphery of payments into more mainstream financial services. More and more, the evolution of the stablecoin ecosystem looks like landscapes Mastercard delivers unique value to regulated, fragmented and global ecosystems in need of connectivity and interoperability. This is core to what we already do in payments and where our reach and acceptance positions us well to deliver value. Now with that landscape set, let's talk specifically about BVNK. As I said earlier, BVNK is a stablecoin payments orchestrator that sits directly in the flow of funds, addressing multiple payment use cases.

BVNK supports business and fintechs through 4 products: send, receive, store and convert. Send is about paying suppliers, partners, employees and customers in digital currencies from a fiat balance or separate digital currency balance. Receive enables the receipt of payments in digital currencies from customers or partners. Store is the capability to hold funds in digital currency-linked accounts or wallets and convert is about moving between currency or currency formats, be it fiat to stablecoin or stablecoin to stablecoin or stablecoin to tokenized deposits using one platform.

Convert and store are naturally linked to send and receive. Through this solution set, BVNK abstracts the complexity of blockchain payments. They initiate, route and settle payments. Its modern API-driven platform integrates easily in existing platforms across the ecosystem, enabling customers to address -- to access liquidity providers, stablecoin issuers and multiple chains through a single connection without having to build or maintain this infrastructure themselves. While send, receive, store and convert may sound simple, delivering them at scale across multiple geographies is tremendously complex and often involves stitching together solutions from many players and connectivity with the financial institution.

The way these products are set up makes them highly versatile to cater for existing and yet to emerge use cases. Crucially, BVNK embeds licensing, compliance and regulatory tooling directly into its offering. The authorization to operate in key markets around the world is a unique competitive advantage. This allows customers to operate within regulatory frameworks without taking the associated operational and regulatory burden on themselves. And then finally, the licensing and the technical platform enables a wallet as-a-service offering. Customers can begin offering stablecoin services without having to build or operate the underlying technical or regulatory infrastructure themselves.

So by combining payment orchestration, compliance enablement and wallet services, BVNK significantly reduces the time to market, an increasingly important advantage we see for banks and other regulated financial institutions. So now let's talk a little bit about how it all comes together. The question is not whether stablecoin rails are better than fiat rails, but how both can be combined in a single offering and distributed at scale. Mastercard adds immediate global scale, rules, credibility and distribution. We partner with tens of thousands of fintechs and financial institutions and provide the trust, reliability and reach required to make digital currency-based solutions combined with existing payment methods, a powerful proposition. Let's have a look at how BVNK and Mastercard plug in together. It's about payments, services and settlement.

On payments, we plan to make it seamless to move from fiat to digital currencies and vice versa by connecting and vertically integrating the Mastercard and BVNK stacks. Senders and receivers do not need to switch to a new ecosystem or wonder what rails or instruments their counterparty supports. Think again about the flower exporter in Ecuador, I mentioned earlier. When the flower shop pays by sending stablecoin, both parties have visibility on when the payment occurs, very different to today. The exporter has payment certainty and access to the funds immediately.

We can help send, receive as well as convert or the worker in the U.S. sending money to her parents in the Philippines. BVNK plus Mastercard could help her convert fiat U.S. dollar to stablecoin, move the funds quickly and help her parents receive and convert from stablecoin to Philippine pesos or else, her parents could store it in a wallet that gets set up for future use to which we link a card. Or even if I live in New York and I want to pay a friend who only wants Tether for my share of our vacation rental or I want to fund my own digital currency wallet to enable polymarket or crypto trading, we can now offer that conversion from fiat U.S. dollar to the stablecoin and in the [ M2M ] example, allow you to hold the coin in order to facilitate the trade.

Remember, these counterparties may want to use their existing provider on different chains with different stablecoins and different currencies. And our role as payment orchestrator is to enable this and move value seamlessly. Also, this will enable us to offer new services, including playing a new role in offering wallet as a service to Mastercard customers, a low-lift way for them to enter the space. And obviously, the wallets would come with an embedded card. Over time, financial institutions may look for their own technology stack on their own licensing. And also there, BVNK has a rich infrastructure services offering. And then third, we will look to offer more settlement optionality, leveraging BVNK for our card settlement cycles, combining Mastercard's proven settlement processes and operating discipline with new stablecoin to fiat connectivity and faster settlement process.

While most of the attention or headline today is on stablecoins, we believe that tokenized deposits could play a significant role in the future, especially for our financial institution. We imagine stablecoins and tokenized deposits will coexist and BVNK plus Mastercard is an orchestration player and a network at scale that enables interoperability between these forms of tokenized currencies. This will take time to develop. It is arguably even more nascent than stablecoin for payments, but we see it as a true growth opportunity and one that can scale. And we will adapt and pivot as the landscape takes shape and morphs. This is a journey, and we are well equipped with all the right tools.

So the strategic fit is clear and the opportunity to continue to innovate in payments is exciting. Commercialization, however, is equally important. And to that end, one of the biggest growth drivers in this business is simply volume, digital currency volume, including stablecoins and tokenized deposits that is converted, sent and/or received. There is value BVNK and Mastercard will be able to drive across all these areas, and we can monetize that, especially in a more fragmented world. On top of that, there are new opportunities such as for our value-added services and solutions, including our safety and security solutions and more.

Essentially, with BVNK, we add tools for our customers to address a large and growing secular TAM as well as expand Mastercard's TAM. This spans B2B, global payouts, P2P and M2M flows and flows that were otherwise not addressable like conversion between fiat and stablecoin, crypto trading and transacting in tokenized real-world assets. All of this equates to incremental value for our customers, the global payments ecosystem and for our investors. Now this space is still in its early innings, and it will take a whole ecosystem to develop it. This is why beyond this acquisition, we have brought together a vibrant network of partners in our crypto partner program, and we will continue to focus on empowering our customers and our partners to innovate and scale on an open network.

We look forward to closing the transaction and bringing our technologies together to allow for seamless interoperability across digital assets and fiat currencies for our customers and their end consumers and businesses across the world. We continue to put Mastercard at the center of payments and add to our addressable market. We continue to innovate, enhance our capabilities and offer choice to our customers, which allows us to serve them better so that we can all grow together over the long term.

And with that, I will pass the call back to Devin.

Thank you, Jorn. Very clear. Julianne, with that, you can please open the call for questions.

[Operator Instructions] Our first question comes from Sanjay Sakhrani from KBW.

I guess just maybe a couple of questions for me. What was sort of the decision-making process to buy versus sort of build this capability, understanding that BVNK has made substantial progress in sort of consolidating a lot of the different currencies and such. But then separately, I wanted to understand sort of what you guys would do with the store feature because that would sort of get you closer to the consumer, correct? And that's something that you guys have shied away from? Just trying to understand that.

Yes. Thank you. Great questions. So clearly, for every new endeavor that we pursue, we are looking at build, partner, buy. In this specific case, this is a quite complex ecosystem with quite complex technology. BVNK has spent the last 7 years building not just the technology, but also obtaining licenses in multiple geographies, developing the connectivity with liquidity players, with financial institutions, even with ACHs and global clearing platforms. And so for us, to build would actually require quite a bit of time. And we felt that an acquisition in this case will bring us much faster to market and will enable us to serve our customers better.

So that's kind of what was essentially the rationale. BVNK comes with a group of very, very talented people with deep understanding and deep connectivity in that market. And again, I think it's very difficult for that to build organically fast. On the second point, BVNK is a B2B2C business. So they distribute, including the wallet as a Service via intermediaries. An example of that is, for example, Remitly, whereby when a consumer remits money from one side of the globe to another, Remitly would spin up a wallet for that receiver, and that is a technology provided by BVNK. So it is not direct to the consumer, but via intermediaries. And we expect that, that function, we would continue to distribute as well through banks, through fintechs and others.

Our next question comes from Ramsey El-Assal from Cantor Fitzgerald.

Given the debate around stablecoin yield payments and the Clarity Act, it seems like banks feel a little uneasy about stablecoins. I guess will BVNK and your overall stablecoin strategy provide banks with opportunities to participate in stablecoin economy? Or is there a risk of channel conflict?

So our expectation -- so firstly, we think of the space as digital currencies, not just stablecoins, meaning currencies that are made available on chain to do on-chain operations. That can take the shape of a stablecoin, which is fully backed. That can take the shape of a tokenized deposit that is backed by the bank's balance sheet. The underlying technology to make this happen and the need to interoperate between the fiat world and the on-chain world is the same. And so we really believe that the market will evolve with the coexistence of these instruments and with our capabilities to be the oil in that machine, let's say.

As far as the Clarity Act is concerned, we'll see what pans out. Regardless of the outcome of that, we expect that many banks will look to offer digital currency services to their consumers. Some will do that in the form of a stablecoin. And indeed, in the U.S., for example, you have multiple consortia of banks that are already looking to issue stablecoin. You have a number of banks that are already issuing stablecoin. And in some cases, it will be in the form of digital -- of tokenized deposits. Again, we are a little bit indifferent to what the form is concerned. But the evolution over time, over the next couple of years towards more use cases for on-chain payments, we believe in strongly.

Our next question comes from Bryan Bergin from TD Cowen.

Aside from the benefits of clearly the orchestration and the infrastructure layer that you talked about as the settlement layer, can you just talk more in detail about the incremental monetization opportunities this could allow for in your future portfolio on both the consumer and the commercial side? I'm curious, talk about where you think on the consumer side, you might be able to start with incremental monetization activity sooner? And then where in the commercial portfolio, I'm thinking about treasury type use cases, where might you be most excited about there?

Yes. So the -- so as I mentioned, the BVNK has 4 products: send, receive, convert and store. In any type of operation that we talk about, the on and off-ramp or the conversion between one stablecoin to another, one or multiple of these products are being used. And whenever these products are being used, there is an opportunity to price for that. And so that's where we see, obviously, the opportunity. Then it's a matter about which use cases will get more traction, which use cases are emerging. And today, indeed, the use cases that have most traction today already is the payouts, the disbursements, paying a gig worker, paying a contractor. BVNK, for example, partners with Deel in order for this salary payouts.

Remittances is a big one, and I mentioned Remitly as an example. And then indeed, B2B collection or B2B accounts payable and receivable. That one, I think we also believe has significant upside as it provides traceability and speed and FX certainty for players to work with. In addition to that, as we will link those products within our Mastercard Move, we believe that we have an opportunity to move deeper into these kind of flows, including with FX. BVNK currently does not perform FX services, but that is clearly an opportunity for us to increase our monetization opportunity.

Our next question comes from Harshita Rawat from Bernstein.

So two quick ones. So one, I think building upon like Ramsey's question, does this create channel conflict with some of your fintech peers, some of whom have made kind of similar acquisitions? And then second, BVNK had a close partnership with one of your large network peers. How do you think about that?

Yes. Well, so great question, Harshita. So this market is in the very, very early innings. We believe that like with the fiat market, you have many intermediaries, you have a large value chain, you have swim lanes within that value chain. And occasionally, the swim lanes don't overlap, but it's not a zero-sum game. It's not because when they overlap, one loses, one doesn't. As a whole, we can lift the tide for all boats. And I think this is very much the case here in this space where there's so much still to discover, so much still to unpack and to grow. So I do think whereas there might be areas whereby swim lanes overlap, I think by the by, we offer the platform for everybody to grow, everybody to innovate and to deliver value to the customers. And that includes those who have made investments in some of that. We are partnering across many areas, and we don't think that will change.

You may have seen in the last couple of months whereby ICE and other capital market players are moving to the digital asset space. Imagine the size of that market and all that will need interoperability between fiat and the digital asset space. So I think the opportunity is still so vast and still so unknown that we don't worry too much about that. I think we can grow altogether. In terms of -- what was the second question? I think it was -- okay.

Yes?

It was about the close partnership that BVNK had with one of your large peers.

Yes, yes. So look, I mean, yes, they had a distribution agreement with Visa. We don't know to what extent that will be continuing. It was a very small part of their overall picture. It's not something that we worry too much about at this point.

Our next question comes from Will Nance from Goldman Sachs.

I wanted to ask maybe on some of the use cases that you outlined. Obviously, most of them focused on kind of the new flow opportunities beyond consumer payments. And historically, the company has talked about these kind of disparate pools of payments being incredibly large, but historically, they haven't been nearly as monetized as the consumer payment ecosystem.

So like, one, I'm wondering if you could just speak to kind of monetization for the flows that BVNK looks at. But maybe more importantly, when we think about all of those pools of payments, whether it's remittances, B2B, cross-border, how do you think about sizing what percentage of some of these opportunities stablecoins makes sense for or is a better rail for relative to some of the traditional fiat rails that you and the industry have traditionally used to process these payments?

Yes. So firstly, you're absolutely right. We think of this as accelerating our ability to address the TAM of certain flows that we have already identified like the cross-border remittances, the disbursements, the B2B payments. And we think in these -- especially in higher friction use cases where speed and traceability and convertibility is important. This gives us additional tools to go after those flows in addition to what we already have. I don't think it ends there. I think like I mentioned, it is -- there's still emerging pockets of TAM and SAM that are very early, but that we can see the first shoots of that may also be a quite meaningful addition to what we're looking at already today.

Our next question comes from Andrew Schmidt from KeyBanc.

Congrats on this acquisition. Maybe just a high-level question on financial profile and monetization model, just to get that out of the way. And then just when we think about just folding this into the go-to-market effort, obviously, BVNK has both FI and PSP focus. Maybe talk about just what you're going to emphasize and how you balance those constituents in the ecosystem.

Yes. So on the -- I think we already kind of discussed the monetization model with their four products with the opportunity to earn money every time that one of the four, multiple of the four is being used in any transaction. And then in addition to that, we would add our services, so our ability to get into FX, but also ability to apply the Mastercard services. As we know, it's including the security services, the multilayer security services that we have. In terms of the second question?

Can you repeat that again, Andrew?

Sure. Yes. Just the go-to-market push across how you fold this in, in terms of commercialization efforts across both PSPs and FIs.

Yes. No, great point. So increasingly, BVNK has moved into servicing fintechs over the last couple of years. They initially started with some of the trading firms, but very much so it's now on the fintech side. We think that fintechs and financial institutions are where our growth is expected to come from. That is where we believe the scale opportunities lie. And so over the next couple of years as -- pretty much almost all of financial institutions will start moving into that space, and we want to be ready to support them. So fintechs probably early and then mainstream financial institutions are coming on board rapidly.

Our next question comes from Timothy Chiodo from UBS.

Also echo the comment that certainly has a new flows aspect or angle here in many of those use cases. And you mentioned Mastercard Move. I was hoping you could talk a little bit about how those two will kind of come together, meaning the mechanics of overlaying Mastercard Move over some of the capabilities of BVNK.

Yes. Yes. So that is indeed a great point and a very kind of short-term opportunity in our view. So today, Move has billions of endpoints, and we can terminate movements that is originated in the U.S. in a bank account, let's say, in the Philippines. What we can't do today is terminate that in a crypto wallet in crypto assets or originate from a crypto wallet from crypto assets. And so by connecting Move and the BVNK infrastructure, we will be able to do that. So any crypto wallet out there or any wallet out there with any stablecoins will be able to send these stablecoins any type of stablecoin on any type of chain and then terminate into any of the termination points that Move has or vice versa from any fiat rail into a crypto wallet.

So that is really a great initial opportunity. But as I mentioned earlier, to us, this is not just about that. To us, this is about an ecosystem that will continue to evolve in a very fragmented way with dozens of chains, dozens, if not hundreds of coins in different currencies with thousands of intermediaries that all have to interoperate. That is exactly the kind of role that we want to play that we have been playing in the fiat world for decades. And that's really where we see the scaling beyond perhaps the more tactical use cases.

Our next question comes from Jason Kupferberg from Wells Fargo.

Really interesting deal here. We've seen that BVNK's volume run rate, I think, is now $25 billion plus. So curious how fast that's growing? And just anything you can help us with in terms of rough revenue sizing or profitability of the business? And then maybe if you can just clarify on the revenue model. Is it nearly 100% of the revenues are transaction-based? Or are there any license or SaaS type fees in there?

Yes, Jason, thanks for the question. I mean right now, the deal hasn't closed. We're pretty excited about the announcement. So we haven't disclosed any of those financial projections over time. Once the deal closes and we get through all regulatory, et cetera, we will look to disclose financials like we do any acquisitions over the next 12 months. But until then, we have not gone into those level of details. So more to come on that over time.

As far as -- sorry, as far as your question on the monetization, the same thing we have to the level of detail, but Jorn did touch on how predominantly, this is volume-based, i.e., digital currency, stablecoin, et cetera. So bps on conversion and receive, et cetera.

Our next question comes from Bryan Keane from Citi.

Just wanted to follow up any details you can give us on the structure of the deal? Like how did you think about valuation here? Was it based on volume or revenues? And then on the $300 million in contingent payments, is that volume or revenue or retention? Just any color on what those contingencies are?

Thanks, Bryan. Obviously, we're not going to send our acquisition model out externally. But I think when you think about this, right, as we look at the stand-alone on its own and most importantly, how we think about the synergies, right, as BVNK comes and couples with the overall Mastercard, how we bring this to our customers, how we really scale these solutions and even more than that, how this -- the market becomes more fragmented, et cetera, as Jorn walked into. So obviously, for us, it is -- we really see a lot of value in bringing these two assets together and more tools to our network, and that all plays into the financial projections as we think about the acquisition itself.

And anything just on those contingencies...

Sorry, yes. So as I mentioned, the announced acquisition is around $1.8 billion with around $300 million of contingent payments. Each deal is structured differently. And within that, there's going to be certain commitments we want to deliver. Obviously, within that, it's on Mastercard and BVNK working together and we really see that long-term opportunity. So we can't get into specifics, but it's about us continuing to deliver on the agreements we made.

Our next question comes from James Faucette from Morgan Stanley.

I wanted to ask what your sense is right now in terms of some of the regulatory questions, development and some of the use cases and how you are planning to help facilitate and move those forward in a lot of markets. I guess I'm thinking about cases where people are using stablecoins maybe that have some questions about whether that falls inside or outside things like capital flow controls. And just trying to think about how Mastercard can take advantage of its presence and that -- its presence and relationships to move a lot of those regulations into the future.

Yes. I think it's a great point. There are some -- I mean, this is an emerging space with emerging regulation and in some markets, more mature than others. I think what is -- what we actually view as a competitive advantage for this space is a very high degree of compliance with both regulations and with AML and OFAC standards. It is a competitive advantage in the sense that we want to serve banks, regulated banks that have a very, very high degree of scrutiny around that.

And so as we go to banks and as we demonstrate the fact that we are very close to regulations, that we are very compliant and frankly, BVNK itself has great tooling and great discipline around that, we think we can be the trusted partner for those banks. At the same time, like you said, as a partner that is present in all these countries, we can engage and are engaged with different regulators in order to advance the agenda and bring greater regulatory clarity as a whole. And this, what we find is a productive dialogue with many countries.

Our next question comes from Adam Frisch from Evercore ISI.

Congrats on a really interesting deal. I think to date and probably for the near future, the stacks and traditional payment rails like Mastercard, whether it's all different types of traditional rails and stablecoin have been relatively distinct and separate. And so I'd love for you to dive in. You touched on this a little bit, but maybe get into a little bit more detail about how you see the two stacks maybe becoming more and more interoperable over time? And could we see a credit card transaction today eventually settle over stablecoin rails to facilitate faster, cheaper back end?

Could that ignite kind of additional services for you guys over time? So I'd love for you to address that aspect of it in a little bit more detail? And do you think this deal kind of mitigates some of the concern that some people may have that Mastercard is going to be disintermediated by the stablecoin ecosystem in the future?

Yes. Great question. Thank you for that. And you're right. The two have been viewed as quite separate. And the reason for that is because the card rail or the card network is essentially a messaging network or a -- think of it a front end, a UX, whereby consumers get a card or a digital credential, a merchants get a terminal or virtual terminal and that facilitates the exchange of information, credential information, payload information between two parties. Once that exchange of information has been done, then you need to settle. Today, the card network settles on fiat rails on ACH rails. And that is why sometimes that takes a little while. If you do a cross-border transfer, you need to settle in two different countries and need to use correspondent rails in order to move the funds.

And so settlement happens 1 or 2 days after the messaging layer after the card transaction has happened. Where the two can come together is where we can say actually with stablecoins, we can accelerate that settlement, so we can actually move money much faster. The messaging layer doesn't change. The consumer and the merchants still need to interact with each other through a UX, still need to have rules of the road in order to provide protections. We still need the reach and the highly standardized way in which these two players interact, but you can actually move the funds faster by plugging in stablecoin back.

We have started doing this actually. We already have a number of stablecoin currencies enabled in the network. We're already moving funds, and that obviously reduces trapped liquidity, that reduces the collateral requirements that customers have. And so we see significant benefits to accelerate settlements even for the card network. But where the misnomer often goes is that it actually doesn't impact the messaging layer between consumers and merchants. And that's why we remain really quite confident about this being a net additive deal for the network and not a replacement.

I think we're out of time, but maybe we can squeeze in one last question.

Our last question will come from Craig Maurer from FT Partners.

I was wondering if there are any additional capabilities that Mastercard might need to add to support this ecosystem over time, whether that's a stronger digital identity capability or something else that would be needed by the ecosystem to create confidence in the transaction.

Yes. So look, we've been very thoughtful about this acquisition kind of both in terms of timing and in terms of the capabilities that we felt we need at this point in order to take full advantage of the step change in the space. Does that mean that we have all assets? Does that mean that we will never need something else? Obviously not. And we will continue to look to build, to partner and potentially to buy as we feel other gaps still exist. But once we close, I do believe the capabilities of BVNK and the talent that is there that will help us develop new capabilities is really quite impressive and will allow us to take great strides in the space.

That's a perfect way to end. Thank you. Thank you, Jorn. Thank you, everyone. Please reach out if there's any further questions.

This concludes today's conference call. You may now disconnect.

All right. Why don't we jump in, everybody? Thank you again for joining us. Again, I'm Darrin Peller, Payments Processors and IT Services Analyst at Wolfe Research. Really happy to have Mastercard with us. We have Linda, who's the President of the Americas, and I've known -- we've known each other for, we're just saying, many, many years since IPO. But Linda, thanks for being with us. It's great to have you.

Yes. Thanks for having me.

Devin, thanks for joining us as well. And why don't we just jump in? I mean, it's a crazy world out there. So you guys have a better picture of the world than most. What are you seeing? Macroeconomic environment is interesting, and what does that mean for Mastercard? What are the trends you're seeing from a consumer standpoint? Just start there, if you don't mind?

Sure. So from a consumer perspective, as we've said in the past, we're continuing to see the resilience of the consumer. We're continuing to see healthy consumer spend, amidst a backdrop that might be more volatile. And when you look at the consumer and their purchasing power, it's very much a function of wage growth. And wage growth has been exceeding inflation. And so that's empowered the consumer and created more purchasing power for the consumer.

On the business side, we've seen also continued spend, healthy supply chains, relatively low cost of capital, continued investment, that's bode well for businesses. And so generally continuing to see a very stable and healthy consumer. And when you think about the diversity of our business model across geography, across product, across different lines of business and merchant category, that diversity helps in periods of fluctuation.

So we are monitoring the macro environment very closely. We continue to stay vigilant, but that diversity in our model makes us very confident that we can manage the dynamics in the broader market.

Just to dive in for one more minute, and then we'll go into some other questions, but we're seeing a lot of spike in gas prices. And so there's always the debate between how much of your spend is on gas versus the impact on demand. Maybe just a quick comment on that for a moment, how much does that really help or hurt you guys? And then more broadly speaking, you're obviously seeing other factors in the market, whether it's tax refund season. Just anything else you can give us a little bit more in terms of recent trends?

Again, the diversity of our model across merchant category really smooths out any spikes or peaks in any one category like gas, like travel, like grocery. So we do monitor and manage discretionary versus nondiscretionary. We look at spending across different products, but the reality is that at the end of the day, given that diversity, the spikes, the intermittent spikes really smooth out.

Okay. So for you guys, it's been stable.

It has.

That's great. That's great. Okay. When we think about this environment, and I mentioned this in my opening remarks this morning, I mean, the regulatory landscape has been one of focus for investors, especially after earlier this year when President Trump was posting about CCCA and rate cap potential, maybe just help us understand what you're seeing from that standpoint. U.S. regulatory environment, its implications on the business. If you could specifically hit on CCCA, we still get asked a lot of questions of whether that's a real risk. So what are your thoughts there?

The -- so we're a company that does business in 220 countries and territories. And so we're very familiar with working with those governments with central banks, with regulators and policymakers, and we work -- we think globally, we act locally, and we have a lot of experience navigating the regulatory arena.

As I think about the regulatory space, there's 2 themes that tend to come up more often than not, and one is competition and other is cost. From the perspective of competition, someone who's been in payments for decades, I can tell you that the competitive market has never been more robust than it is today. There have never been more ways for consumers and small businesses to pay and be paid.

When you think about digital currencies, digital wallets, account-to-account, ACH, there's a plethora of options, and so competition is quite healthy. When you think about cost and the intersection of the payments ecosystem across consumers that use their products, merchants who accept them, there's real value that exists in the ecosystem. If you're a consumer you benefit from protection against fraud, 0 liability, increased purchasing power.

If you're a merchant, you also benefit from increased fraud protection as well as you're not subject to chargeback and delinquency. And so there's real value that exists in the ecosystem. And when we explain that in our advocacy efforts to regulators and policymakers, they understand that. And they understand that the market and the system works. Now with respect to CCCA, again, the premise there is really around competition.

The reality is that CCCA takes choice away from consumers and really puts it in the hand of a third party who could run a transaction down a network that's not the safest, but actually the cheapest. And from our perspective, that removing choice is a bad thing, our whole mantra as a global payments company is you need to provide choice. And so that really -- that message resonates when we speak to policymakers and we'll continue along the path of educating and navigating vigorously.

Right. I mean, any sense of where we are in that whole risk or potential for that...

No, CCCA has been around for years. It really hasn't had much traction at all. I don't see that changing anytime soon.

Yes. I think we feel the same way. Let's move to another topic. And just in Europe, I mean, in a similar manner, regulatory has been a topic of discussion there for years as well. And there's been a lot of discussion around payment sovereignty, right? So just help us understand. I mean, there's been discussion over reduced reliance on U.S.-based companies. How are you thinking about that as a risk? Or do you see any realistic momentum on that front?

Again, as a global company, operating in 220 countries and territories, we have a lot of experience working across different markets and geographies, and we're a partner to governments across the globe. So we work with governments to drive financial inclusion efforts to support their fraud and safety and security efforts and to really support their disbursements.

And so the governments see the value in the payments ecosystem and in the products and services that we deliver, and from our perspective, we see very healthy and productive conversations across various markets.

Now the reality is, as we have a very flexible network architecture that allows us to serve different roles to different markets around the globe, you also know if you follow us that 40% of our revenues is generated from services and 40% of our services are not network-linked. And so there's an opportunity for us to continue to work with governments across many different capacities, including across services.

Right. I've heard, actually, both you and I think even Visa talk about working with incremental networks that are popping up, and knew that governments are pushing to help them actually get going, in your interest to work as a partner in that way. Speaking of just overall competition, and you're bringing up how competitive the space is, Capital One's acquisition of Discover probably underscores that to some degree, right? You're going to see another company that was a competitor with another balance sheet even behind it, right?

Just talk a little more about how Mastercard is positioned to handle this competitive environment? And what does it mean for rebates and incentives going forward? It's always been a topic of conversation to see that grow and yet your net yield still goes up pretty nicely, but I'm curious of your thoughts.

Yes. So we have a long and strong relationship with Capital One for many, many years. We've both been very public about continuing that relationship for the long term. We were very excited to announce the renewal and extension of our consumer and commercial credit business with them last quarter. And of course, Capital One is a big consumer of our services. In fact, we just signed an ethic, a clarity agreement with them to enhance that partnership. We also have several co-brands, including Union Plus, Bass Pro Shops, REI, BJ's Wholesale Club. So the relationship is deep including on the marketing side, we just had the Arnold Palmer Invitational and the BRIT Awards where we're partnering across a large transfer of our credit business with them.

So very strong relationship, and I expect that to continue. They've made some acquisitions, as you've referenced, we have very good relationships with Brex, we've been with them since 2018. We've supported their international expansion. They use our services as well. I believe once they're under Capital One, the acceleration in their growth will amplify and we'll be right there with them. So we're very excited about that.

With respect to rebates and incentives, I think you hit on it. We are very diligent and judicious with rebates and incentives. We don't try to win every deal. We try to win the deals that really matter to us that are tied to our strategy around growing cross-border, digital-first relationships, services rich relationships, and so we're very methodical and surgical. And when you look at net revenue yield, it has been going up for the past several years, and that's the measure we hold ourselves.

Do we expect that, I assume to continue. Capital One, just one more quick follow-up on that. I mean, the renewal or the signing you just did in the last quarter you announced that basically is a testament to saying you guys are committed to each other on a lot of the products you're in not necessarily everything, debit obviously moved, but otherwise quite a bit.

We're very committed to advancing our relationship with them. And again, they've been vocal about the same with us. So expect that to continue.

Okay. Good. You've won a lot of different new businesses, and you announced quite a few of them every quarter, just what's driving that? I mean, is it VAS? Is it some of the offerings you're giving on the payment side? Maybe help us understand that.

Well, as I said, the competitive market in payments is so robust. And we are very pleased to be winning on so many fronts. We announced last quarter that we had won hundreds of deals both in our core payments space as well as across services, and we diversified the type of customer with whom we're working. It's not just banks, it's not just merchants, but it's governments, it's fintech. It's CPG companies. So we're really pleased with the diversity of what we're selling and to whom we're selling, which has been great.

Why are we winning? We're not necessarily winning on price, we're winning on value. And again, if you look at the depth and breadth of the services that we provide across data, analytics, safety and security, loyalty, open banking. We can work with our customers as an enterprise partner outside of payments and inside payments. And if you're a large bank or a large merchant, you value the fact that you can work with one partner to support multiple lines of business within the institution.

And the insights that we provide, the innovation we bring, the way we fast track innovation conversations and so consumer problems on behalf of these customers, it's really valued. We were very pleased to announce last quarter the renewal of our relationship with American Airlines, with Apple, which, of course, is now with Chase, which we're very excited about. In Latin America, the extension of our Nubank business into the U.S., also the renewal of our Scotiabank business.

In Canada, we announced a big services deal with Rogers Communication as well as a big affluent program with Rogers Bank. And I'm very pleased to announce today we just signed an agreement with Aeromexico. It's a new co-brand that's launching in a market, a great example of where it aligns with our strategy and our sweet spot of cross-border travel -- it integrates services. Aeromexico is the largest airline in a market that matters a lot to us, both domestically and internationally. So it's a great example of where winning with a winner makes sense for our business.

That's great. Stablecoin is still a topic that's discussed as a potential risk for the ecosystem by some investors. It was a hotter topic, I'd say, last summer, but even still, it's coming up more and more now even in concert with AI. And so maybe help us understand your view of it, either as a risk or maybe even as an opportunity.

I see stablecoin as not a competitor, but as an enabler as an enhancer of the business. So we see it, again, as a company that focuses on choice. Stablecoin is another form of choice that if consumers and businesses choose to pay or be paid, it can transact -- they can transact across our network using stablecoin.

If you think about how Mastercard plays in this space today, you can use a Mastercard to buy stablecoin. You can leverage stablecoin rewards at the point of sale where Mastercard is accepted. We've embedded stablecoin into Mastercard Move, which consumers and businesses use to send money cross-border. And we have a variety of solutions on the services side to support safety and security and wallet opening on behalf -- and consulting on behalf of customers. So we've been in and around the business for a while.

Again, another form of choice and another way in which we'll see how it plays out. I don't think anybody really knows at this point, what the utility is of stablecoin when you think about its ability to scale in and of itself, stablecoin can't scale without interoperability, without fraud and protection tools, without transparency, without governance. And these are all the things that Mastercard as a network player and as an ecosystem convener does each and every day. This really plays to our strengths. So we feel we have a big opportunity and a big role to play with stablecoin.

I mean, have you seen any real progress or momentum in the industry around it? Anything changed in the last 9 months that's caused any concern for you from your perspective or...

We haven't seen a big pickup at this stage. Again, all of the levers I discussed around interoperability, transparency, governance, I think that all needs to align before we see any momentum.

Let's talk about AI. I mean, especially as it pertains to, let's call it, agentic commerce, but also really the potential for you to utilize it internally beyond just the agentic. So help us understand exactly where you're positioned around it. There was some perceived risks or thoughts of concern that it could route volume different ways, maybe even a stablecoin, as I mentioned, right? But on the other hand, I think most investors are constructive thinking it could really drive more volume, and your services should be utilized for it, right, in terms of tokenization and value-add, fraud. What are your thoughts?

So the headline around AI is that we see it as an enabler of transactions and new experiences that we're well positioned to capitalize on at Mastercard. I'll talk about it in two contexts. The first Mastercard as a leader in AI and the second Mastercard's role in proliferating agentic commerce. So when we think about Mastercard's role as a leader in AI, I think about all the ways in which we've been using it for decades. 1/3 of our services has AI embedded in one way shape or form. We use AI to inform our fraud tools. We use AI to create more personalized experiences in our loyalty tools. We use AI internally to be more efficient across coding, consulting, budgeting, and at the end of the day, we all know that AI models are only as rich and robust as the data that is input into those models. And so when you look across the $10 trillion of volume that we process, the 210 billion switch transactions that we have, we are very well positioned to fuel those models and to benefit from those models going forward as part of our services business.

So that's Mastercard's role in -- as an AI leader. In terms of Mastercard's role driving agentic commerce, again, here we sit at the very center. In order for agentic commerce to proliferate, you need tokenization to flourish. You need to identify who an agent is. You need to let an issuer know that an agent -- an agentic transaction is taking place. We need to give a consumer comfort that they can deputize an autonomous agent to make a purchase on their behalf.

All of that requires franchise rules, safety and security tools, access to network tokenization. And this is where Agent Pay comes into play. And so we've very much sat at the center of that. We believe that while cards will continue to benefit in an agentic environment, we will certainly evolve as the market evolves, and we're very well positioned to take advantage of the growth.

Yes. I mean, we saw Stripe talk about how they're utilizing our tokens publicly. We saw OpenAI talk about not doing as much in-house really leveraging you guys on the ecosystem more broadly. I don't know if you can take a guess, but what kind of time line are we -- are you expecting for agentic to really take hold and actually impact the market?

I think really consumers will decide, consumers and businesses will decide how quickly agentic will take hold. Again, here, we're in early innings. Things are not moving at a fast pace as we see it today. But I think the message here is we're poised and ready if they do, and we're part of the ecosystem and building that ecosystem, not sitting on the sidelines, but playing right to our strengths in terms of what we do well as a network.

Right. Linda, I mean, you've grown well, obviously, already. But where does the next leg of growth come from? Especially you operate some slightly more mature markets in North America, but also may be less mature markets in Latin America. So help us understand your outlook and the trajectory for growth for the Americas.

When you think about our growth algorithm as a company, we've talked about the fact that this includes PCE growth, secular shift, share shift, services growth. And so the growth is coming from those areas. What I'd say on secular shift, we talked about the $11 trillion of opportunity here to take cash and check and digitize. And that's happening across all markets, not just developing ones. So I look at the U.S. Full year 2025, grew at 6% GDV growth. Latin America grew at 15%. That's well above PCE. So that is evidence that the secular opportunity is alive and well across developed and developing markets. I look in LAC at markets like Bolivia, Peru, Colombia, where the dominant form of payment is still cash and check, and I get very excited about that secular opportunity. When I look across markets in the U.S. or in Canada, I look at new verticals, new customers, new buying centers and the opportunity to turn on acceptance where acceptance doesn't exist today, insurance, transit, rent, these are still ripe verticals for growth.

And then, of course, services. There's tremendous opportunity in services. It's already growing at high double digits. And we see at 40% of our revenue today, we see opportunity for growth there, particularly in the agentic and the AI use cases that we talked about.

Yes. On that note, I mean, services, to your point, has been extremely strong for a pretty long time, 40% plus of your business. In your markets, where do you see the most attractive services opportunity?

From a services perspective, almost every deal we're signing across our markets, embed services in one way, shape or form. Again, our services are very diverse. Some of our services appeal to some customers more than others. Fraud, safety and security appeals to all. Data and analytics, everybody can benefit from. Loyalty and experiences, the merchant community finds particular value in. I mentioned the Rogers Bank example. We have many other examples across Costco and Walmart and American Airlines, all of whom have their own services and they're using ours to complement their own to be, again, that enterprise partner across payments and beyond.

Okay. We're almost out of time. So I'll ask one more, and then anyone in the audience if you have 1 or 2 questions, guys, feel free. When we think about the next few years, what are you most excited about for the Americas? What do you see for the franchise when you think of the Americas for the next 3 years?

I've been in the business for 3 decades, and I have never been more excited about the opportunity to grow at Mastercard. We sit at the center of a business model and an industry that's in high growth. We've got tailwinds with respect to how consumers want to transact, and we have forces like agentic commerce and digitization and tokenization that's fueling our growth. So I'm -- I've never been more enthusiastic about the opportunity in front of us. And as a company that operates globally, truly globally, we're very well positioned. So I'm really excited.

Guys, any questions from the audience? I'm happy to take a couple. I think, we have about 6, 7 minutes.

Just curious on the -- you made a move for Africa from sort of card-present to card-not-present, and that created a number of security challenges. And now we're looking at going from sort of human-present to human-not-present. And I'm trying to think about like, is the primary responsibility for that going to rest with Mastercard, another party in the transaction? And how do you even do it? Like, I'm pretty sure I could get on my browser today and have an agent complete a full web form. I don't know how you would possibly know that it is not a human. So I don't know if you just -- anything you can shed light on there would be great.

So when you think about agentic or autonomous transactions taking place in the network today, to participate in Mastercard's ecosystem, Agent Pay is essentially giving agents access to network tokens. In return for that access, they need to identify. They need to be transparent in terms of who they are, how they're transacting, in which form and give visibility to the issuing community who can decide whether to authorize that transaction based on their own fraud models. And so Mastercard has a very important role to play here because we're facilitating that transparency. We're facilitating the fraud and safety and security, we're leveraging our data and analytics to infuse more intelligence into the transaction.

And so we do sit at the center of that. Consumers -- our brand is synonymous with trust. So if they're using a Mastercard product, we do believe it is our responsibility and our role to apply our services and apply our technology in a way that makes all parties comfortable. Think about a 4-party model today, adding a fifth party requires industry collaboration, partnerships, transparency, and that's where we're showing up.

Will it be the issuer that is one finally responsible to say, hey, your agent wants to use this transaction? Are you okay with it?

It's always the issuer's ultimate decision whether to approve a transaction or not, yes, we're giving them that transparency and data to help them make that decision.

Any other question?

Maybe as a related question, could you please speak to the importance of Mastercard being the one to issue the network token, and what exact data rights or incremental data, does that allow Mastercard to leverage that other players in the value chain maybe don't have access to or are trying to get access to?

When you think about network tokens, they are -- what is the token at its core? It's taking a static pan and turning it into a dynamic number that changes every time it's used and makes it less penetrable to fraudsters. And so look, as AI proliferates, this becomes even more important to let in good volume and keep out bad actors. And so the value of a network token is that it's interoperable. Everyone is operating by the same standards. There's transparency and security that sits behind it, and our issuers are leveraging it today.

So at the end -- by the end of last year, all U.S. banks cards are actually capable of conducting an agentic transaction if the consumer business so desires to do that. So the market is ready for it and issuers have the capability to approve, and again, with our network tokens in the same way, network tokens help to drive digital transactions in wallets, network tokens can support agentic transactions, in an autonomous world where consumers -- our businesses want to deputize an agent.

You know what, maybe we'll take one more, and then we'll wrap it up.

A follow-on to the last one, Linda. Do you see the network token to be tied? Do you see the network token being tied into reputation and to chargeback or dispute rules. So if you know that the agent has been registered that you know that at least it's not a malicious agent.

Part of the value we bring is in adjudication and chargeback capabilities for both the merchant and the issuer. And so those rules -- those franchise ecosystem rules that apply today in the digital world, card-present, card-not-present, will also need applicability in an agentic environment, and that's part of the value we will be bringing as well.

That's great. Linda. Thank you very much.

Thank you, Darrin.

Great questions, everybody. Guys, we have the next up is the CEO and CFO of FIS in about 9 minutes.

Welcome, everybody. Thanks for joining us this morning here early on Day 3 of the Morgan Stanley TMT Conference for 2026. Very pleased today to have Mastercard joining us. My name is James Faucette. I'm the senior fintech analyst here at Morgan Stanley, and I'm very pleased to have Raj Seshadri, chief Commercial Payments Officer for Morgan Stanley (sic) [ Mastercard ].

Before we get started with Raj, I do have an important disclosure to read. Please see the Morgan Stanley research disclosure website at morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales rep.

Raj, thank you very much for joining us. We really appreciate it.

Thank you, James. Thank you for including Mastercard and me in your conversations.

Yes. Well, Mastercard is obviously a critical part of every tech conversation. Somehow people have to figure out how to get paid, right, and to move the associated money. So let's start with the macro environment. Maybe it would be helpful to understand how you're viewing the macro environment? What are you seeing of late, particularly in terms of consumer behavior and spend trends, et cetera?

That's a great question, James. Now let's set aside the last few days, we'll come back to that. But what we've seen is -- despite all the geopolitical tensions, what we're seeing is a relatively supportive macroeconomic environment for consumers and for businesses. And it's been true for a while. The consumers are benefiting globally from balanced labor markets, wage growth that is above inflation. And so they want purchasing power, they're able to spend more, and we see that in our transactions.

And then similarly, for businesses, given all the shifts and the uncertainties they're facing, they're very focused on optimizing working capital, managing cash flow, digitizing payments and modernizing a lot of their processes and infrastructure. And so that we see coming through as commercial payments and money movement. And so across consumer and businesses, it's been quite stable. And in terms of whether it's the last few days or historically, we are -- we obviously monitor macroeconomics and geopolitical changes constantly, hourly, daily and we're very agile and we adapt. And the strength of Mastercard, as you know, having seen us in various other crises, including COVID, including Russia-Ukraine, et cetera, is that we have an amazing business model. It is truly diversified. We have many businesses in consumer, many businesses in commercial and money movement, many businesses in services. We operate in 200 -- over 200 countries and territories. And so what you see is the level of diversification and a level of resilience in our business model. So we're very confident that we can navigate any situation.

Well, that's great to hear. And I think, in particular, today, I'm excited to be able to talk about the commercial part of the business for Mastercard and the opportunity. Clearly, the area of commercial and new payments flows is huge. Like I don't know how you guys assess it, but we typically assess it to be about 10 -- roughly 10x the volumes of what you see in the consumer spending environment, so massive, massive volumes.

Maybe you can spend a few minutes outlining how you think about the addressable opportunity? And what needs to happen for that to really become unlocked? Are we hitting an inflection point or an adoption point that really can move the needle?

Yes, that's a great question. At Investor Day in late 2024, I described the size of the addressable market as there's about $100 trillion of commercial payments and money movement to go after, right? It's enormous, and it's all secular shift. A lot of it is secular shift. And if you break that down, there's about $80 trillion in commercial payments. Of that $80 trillion, only $3 trillion is carded. And of course, we duke it out in terms of market share, but that $77 trillion that we can go after, and it's a great place to go after it because when you think about AP processes and AR processes, receivables and payables, et cetera, they're very manual, they're very antiquated today. There's an opportunity to modernize them, digitize them, have the -- and even, in many cases, the payment modality is like cash, a check or ACH. And even when it's real time, the data doesn't travel with the payment. And so there's lots of reconciliation issues.

And so it's a huge opportunity. And then the -- when you look at money movement, which is the other $20 trillion, I think our penetration is under 2%. And so -- and our rails, we've got the most extensive network now, and our rails power a lot of use cases that are out there. It's Mastercard Move inside, and lots of opportunity there to grow. And that was -- I think I said that in late 2024. Fast forward to 2025, we saw acceleration in the space. So in commercial card, it, to date, represents about 13% of our total GDV. And in 2025, it grew at 11% very consistently across the year. If you look at money movement, our transaction growth rate was 35%, again, very consistent volume growth in both commercial card and money movement.

And what's even more exciting is, when you look at the revenue that it generates across commercial card and money movement, the revenue growth is about 2x that of the volume growth, of the GDV growth. And that's because of the mix in this business. There's a lot more cross-border, lot more corridors where we sit. So we switched today in about 70% of markets globally. That's up from 60% in 2020. But in commercial, that rate is even higher because of the corridors that it's concentrated in. And then there is -- we have flexible interchange. We have virtual cards. We have data capabilities where the data can move with the payment. And all of that has contributed to the exciting numbers in 2025.

And your question about an inflection point, and this is not going to be like a cliff. This is a graduate accelerating growth, but one that will be there for many years to come, given the size of the secular opportunity. And there're lots of reasons why things are accelerating now. So one, we were just talking about macroeconomics and geopolitics. In this environment, the businesses are very focused on reducing expenses, digitizing, reducing -- optimizing their working capital, reducing ups and downs in their cash flow. That plays to our strength. Add to that, a lot of employees and leaders are very focused. Generationally, there's a shift in the workplace. And there's this consumerization of commercial going on. So in our personal lives, we're used to wonderful embedded, seamless, secure payment experiences that just enhance the experience of whatever we're doing, whether it's shopping or -- and that is coming into commercial.

A lot of these rather antiquated workflows are becoming more consumer like, and that's helping. And what's facilitating that is, frankly, the maturity of the technology environment. There're lots of applications now that businesses small and big have adopted for things like procurement and purchasing, for things like accounts payables and receivables and for expense management. And that process -- those technologies and the digitization that they bring, make it easier for us to then embed the payments. And so it's a very exciting time, and it's a good time to be in commercial payments and money movement.

So maybe I can ask you a little bit of a challenging question as part of that. So if we're starting to see this acceleration, what would be the key things that you would say had kind of been impediment in the past? Because I think for all of us that have followed payments closely, I think the logic has always made sense, but what we all trip up on is like why hasn't it happened more rapidly?

Yes. So let me talk a little bit about our differentiation and why it is happening now, right, which is the flip side of it, it that we're overcoming a lot of the impediments as we speak and you can sort of see that momentum growing. So some of the factors -- we have differentiated products, right? So as you see this digitization and modernization, we have a proprietary virtual card engine. It's rated #1 by Juniper. And the result is that we can actually build features and functionality that have coupled the data to the payment, and we can deploy it into many different platforms, technologies, apps, solutions. And so that's one example of our product capabilities. And that today is -- it is quite advanced and it's a growing differentiation.

Couple that with services, right? Mastercard, we have this great flywheel where services enhance the value of payments, that payments grew and then that provides the data for services to do even more. And so services in this space, there's a lot of opportunities, and we've deployed a lot of these services. They address the impediments that are there, so things like safety and security, data reconciliation, automating compliance, a lot of that are services that we're deploying in. In addition to that, what helps is the ubiquity of our network. In the card network, we reach hundreds and millions of acceptance locations, wallets, point-of-sale purchase, digital and physical points, et cetera. And then in our money movement network, we now have -- like I said a minute ago, we have the most extensive money movement network. We can reach 17 billion endpoints, which includes deposit accounts and cards and wallets.

And so that network helps because you can turn on lots of solutions at scale. And then I'd point to our strength of partnership. So there's a lot of power in partnerships. And so we partner very closely with our customers and partners to bring solutions to bear. We're also increasingly bringing several ecosystem players together to create solutions where everyone benefits and the payment modernizes as does the process and the data. So very exciting there. And that's feeding frankly, into our growth algorithm. Our growth algorithm is very simple. It's share shift, secular shift and services, right?

And so the way it's feeding in is -- let's take share shift. I think in the Investor Day conversation, I said it grew -- our market share grew by 4 percentage points from 2019 to 2023. It continues to grow, right? It's quite exciting. So examples are we flipped the Wells Fargo's small business portfolio. We just renewed our relationship with WEX. We're launching the Coupa Mastercard. So share shift continues. Add to that secular shift, which is really exciting, and the small business space is a ton of cash and check. So going after issuance and acceptance there is really accelerating. In the corporate solutions space, I was just talking about AP and AR processes, very exciting. There's also stuff between large corporations and small businesses, and that's even more exciting, right? So I'll give you an example. Let's take L'Oreal in Mexico, right? They're a CPG distributing into beauty salons, right? So we're digitizing the inventory flow and the payments that go with it. So L'Oreal, with the fintech, Clara, is issuing cards to the beauty salon.

What that does is, the beauty salon can now pay for inventory using the card. They have access to working capital, which means their inventory levels are more consistent, right? And for L'Oreal, that means that they get -- we solve the acceptance problem. They accept the payments. And so they accept the card payment. And what that does is for both the manufacturer/distributor as well as for the small business, it's greater flow of inventory, greater sales, greater revenue. And then for the manufacturer/distributor, you get less return costs because we ship inventory out and the small business can't pay for it. What happens is then you've got to ship it back, right? And so it saves expenses. And so we're seeing this kind of inventory management solution take off.

I gave you L'Oreal as an example, but we're seeing it in all kinds of CPG categories, in pharmaceutical categories into pharmacies and clinics. We're seeing it in tech distribution through buying centers. So that's really exciting. So that's our secular shift.

And then the last thing is services, I was just talking about services a minute ago. There is so many services that we can think of across security and data reconciliation and marketing, et cetera, that we can deploy into commercial and money movement. So that growth algorithm has been quite robust and is -- and you can sort of see -- you asked about impediments, these are overcoming a lot of the impediments that existed historically in this space.

Yes. No. And to your point, is like if you can start to put together, and one of the strengths of the Mastercard network and the way that it functions today is like being able to tie like you're saying the reconciliation of transaction to the actual amounts or helping with working capital and inventory balancing, et cetera, is a lot of opportunity.

Lots of opportunity, and it's growing well, and there's a lot of runway.

So wanted to -- one topic that has emerged of late is particularly around all things agentic and agentic commerce, et cetera. And I think a lot of times, we think about, at least as consumers, the consumer experience, but there's also a lot that can happen behind the scenes. And we've seen that with the rise of some agent to agent transactions. There have been introduction of specific protocols to help address some of those kinds of exchanges. What kind of role does Mastercard can play, do you envision? And where do you think that Mastercard needs to be in, in that kind of environment?

We've been in the space of AI for 2 decades now in data, right, for 2 decades now. We have quality data at scale, which means you can deploy all kinds of AI against it. And that includes traditional AI, machine learning, et cetera, as well as gen AI and now agentic AI. So this is a space that we know very well, and we're working with all aspects of it. And working with every partner you can think of, right? We partner with all of them. Partnership is our strength.

So let me -- you mentioned agentic commerce to start with, right? And we've talked about Agent Pay. Agent Pay is not just for consumers, it's also for small businesses and commercial enterprises when they shop. And so we're working on making sure that all of our cards work in that agentic environment to support Agent Pay. By the way, there're not -- agentic transactions, there are not that many of them, but we are ready should it grow. And what we're ready with is the ability to recognize an agent from, let's say, a malicious bot. The ability to authenticate the consumer or the business who's shopping because they're not at the merchant site, to be able to tokenize the transaction and have that agent token travel with the transaction through all its different steps so that you can trace it with transparency, with the ability to capture the purchase intent from the small business or the consumer or the corporate so that -- which is really important for disputes, charge backs, et cetera. So all of that, that we talk about in consumer is also true for commercial.

And then in addition to that, in commercial, if you think about, we were just talking about invoice payments and the digitization of invoice payments through technology applications in procurement, in ERP, in expense management, et cetera. In all of these places, actually, these are more closed environments with data quality that is high, right? And so there's an ability to deploy agents even more here, whether it's a agent to help somebody in procurement, onboard a supplier or to prompt the treasurer as to what the optimal payment method is based on cost, speed, working capital requirements, et cetera. So you see a lot of agentic applications there. And we're working with a number of our partners where we have very rich data, we have very advanced AI capabilities. And so we're working with many of them to develop these. It's very early days, though. I thought underscore how early it is, and we'll have to see how this plays out.

Got it. So I wanted to touch on invoice-based payments, and you just kind of mentioned that in the context of some of the agentic work that you can do. But what are the initiatives specifically that Mastercard, if we were to kind of try to make a list of the things that Mastercard is -- can deliver and enable particularly around invoice-based payments. Because I always feel like when I think about it very simply, Morgan Stanley. We have a huge department just to reconcile invoices and payments that go out. And that's part of our own kind of fraud prevention. But like what are the roles that Mastercard can help somebody like a Morgan Stanley improve efficiency around invoice payments?

Yes. So it's interesting. I talked about $80 trillion in commercial payments, right, and the opportunity size, with $3 trillion carded. I'm going to first break that down for you. There's $17 trillion in point-of-sale payments, $1 trillion carded, and there's a lot of low-hanging fruits there. We should talk about that.

Yes, we'll come back to that for sure.

And invoice payments, there is about $63 trillion in invoice payments, $2 trillion carded. So even more opportunity there, to your point, right? And some of that opportunity is very near term and some of it will come with modernization of AP and AR processes. So a very good question that you ask. So when you think about invoice payments, it's a little different from a point-of-sale payment because you have a buyer and seller that are known parties to each other. They contractually bound. They have payment terms that are negotiated. And both sides are aware of them, right?

And those payment terms are often tied not just to price, but also to working capital. And so it is -- so when you think about AR and AP, it is different because of the buyer and seller dynamics here. And in that context, I was just talking about our virtual card capability. The ability to have virtual cards with controls, with data and flexible pricing, flexible interchange that can match the contractual terms that a buyer and seller have agreed to are all benefits to -- and the technology adoption that is there in corporates are all benefits to being able to drive invoice payments further.

And so we think about this in 2 ways. We think about it horizontally and vertically, okay? So horizontally, the way we -- horizontally means across all the different verticals that exist out there. The way we think about it is, given that we have these really data-rich virtual card capabilities and we have flexible pricing, we're embedding it into all these platforms, into expense management platforms, ERPs, into procurement platforms. And we have a model by which it's -- we have -- we call it Commercial Express. So Mastercard, our virtual card engine, is connected into all of these platforms. There are a dozen -- it's rapidly growing number of platforms that we connected to, all the big ones, SAP, GEP, Coupa, you name it, right? And then the other side, we have an issuer who can connect to us through one connection and then be able to issue virtual cards in any of these platforms, right?

So now when you go into an AR or AP department, let's say, at Morgan Stanley, then in the platform that is being used, whatever your native platform is for procurement of ERP, your bank that is providing the payments, the virtual card to you, can easily be invoked in order to pay a purchase order or to pay an invoice in the platform and our virtual cards then are deployed to facilitate it. So these are some of the horizontal solutions. We're also working on the acceptance side with things like Mastercard Receivables Manager in order to drive reconciliation for a supplier, working with acquirers to drive greater acceptance. So that's like the horizontal play.

And then we have the vertical plays because there are some -- in this space, there are industry specific idiosyncrasies, right? And so take travel. We are the leader in travel. But having said that, there's a lot more room to grow in travel, right? So of course, we work and partner with all the Tier 1 OTAs, with the Tier 2 and Tier 3 OTAs. There are regional travel opportunities. There are vertical-specific travel opportunities, so lots of growth there. Then there are other verticals that we're going after, things like health care or B2B marketplaces. There are a ton of these vertical-specific opportunities where again, our product capabilities can easily be deployed into the vertical environment. So we can bring that scale, but tailored to the particular needs of a vertical. So that's how we're going after invoice payments.

And this is a space where, like I said, there's $63 trillion, think about that, huge secular shift opportunity. But having said that -- and $2 trillion carded. And we see growing momentum, great acceleration, but this is not going to be a [ 1, 0 ], you flip the light on, right? So it's a transformation that is gathering momentum, gathering speed, and we will see that continue, and it will be something that feeds the Mastercard business for many, many, many years to come. The secular shift here is incredibly enormous.

So let's go back to something you mentioned, commercial point of sale. It seems like there's also a lot of opportunities there and maybe share some details about the -- how you think about the commercial point of sale, and how do you go to market to try to capture as much as you can?

Yes. So in a commercial point of sale is -- in some ways, is very simple. We know a lot about this. It's our bread and butter in consumer, right? So it's just whether it's a digital or physical point of sale, instead of tapping a consumer card, you're now -- or using a consumer card, you're now using a SME card or a corporate card or a purchasing card, right? So the -- that is the main difference. And when we think about the point-of-sale opportunity, like I said, the $17 trillion, only $1 trillion is carded, a huge chunk of the -- I think about half the cash and check opportunity is in the SME space. So this is very linked to the SME opportunity.

And the way we're going after it is by thinking about, first, issuance. We've accelerated issuance. In 2025, our issuance grew by about 10% in SME, which is pretty substantial. And we're growing that both with our traditional issuers, so folks like Carrefour in Spain, but also with alternate distribution, which is places where small businesses come to access services where we can then provide the card to the small business. So examples are like Zaggle in India in ocean services, or RTS for trucking in the U.S., or Instacart. We can provide cards to the small businesses with an FI or fintech partner through these places where the small businesses gather for what they do. And so we call that alternate distribution. So it's really between traditional and alternate distribution, our issues has grown tremendously. 10% in 1 year is pretty substantial.

In addition to that, we're also looking at value propositions. So I've talked before about things like easy savings that continues to grow. And then we have many other things now that are live. So for example, we have the business builder card for entrepreneurs, which is live with 10 banks in the U.S., and this is to help an entrepreneur grow their business. And we have the middle market card. Middle market companies are notoriously underserved because stuff from small business doesn't work for them and stuff from the corporate world doesn't work for them. They're kind of trapped in the middle. And so we have a middle market offering that we've developed with -- and launched with Citizens First and then we're expanding it to other issuers and banks across the U.S. and around the globe.

Fleet, lots of trucking companies, shipping companies that are in the SME space. And when you think about them, what we're doing is working on creating open loop capabilities and converting closed loops to open loops with our partners, WEX, CorPay, Voyager, et cetera. And what's key here is a product differentiation because here, even more than in any other space, data matters, safety and security matters. The ability to provide an open loop card means that trucker can now put their food, their hotel, et cetera, not just the fuel on the card. And virtual cards matter. And so this really plays to our strength. So lots of value proposition development.

And I'd say the other dimension to the point-of-sale opportunity focusing on SMEs, which is, like I said, a huge portion of it is acceptance. And here, we work on acceptance across consumer and commercial together because we drive acceptance together. And a portion of that is SME acceptance. And I'll give you an example from this space. We're bundling issuance and acceptance across issuers and acquirers. So what that means is you can actually take the data and underwrite the point-of-sale acceptance, digital or physical, better, and you can underwrite the issuance, the card, better. And it's an environment where the acceptance and the issuance coming together is a benefit to the small business. And effectively, what you're doing is digitizing the small business, including them into the financial economy, helping them digitize their businesses, move into the world of cards. And so that's working well as well. Quite excited about this space.

Yes. No, it's -- I think all those facets are obviously very compelling. I want to move to probably one of the areas where we get the most amount of inbound investor questions over the last year or so, and that's disbursements and remittances. And would love to hear how you feel like Mastercard fits there? You recently shared that Mastercard Move has kind of the greatest endpoint reaching the industry. Love for you to elaborate on that.

And then I'll just interject as well. All -- one of the biggest questions we get is like, what's the role of stablecoin or that kind of solution for disbursement and remittance is, and the role you see Mastercard playing there?

Sure. Let me start with disbursements and remittances and we'll come back to stablecoins. Both are quite exciting spaces and they're interlinked. So yes, we have probably the -- we do have the greatest, largest reach network for money movement. It's a $20 trillion addressable market. Like I said, the penetration of digitized data with solutions is very low. Our penetration is under 2%. So it's a huge secular shift opportunity for us. We have 17 billion endpoints now across accounts, cards, wallets. We recently added GCash in the Philippines. We added bank accounts in Bangladesh and the network continues to grow. We operate in over, I think, 155 currencies and 200 countries. So this is truly global, right? It's truly cross-border and global -- domestic and cross-border. And it includes stablecoins, right? We also -- we believe in providing choice. And so whether it's a small business or a consumer or a government, they can choose the currency they want, which includes stablecoins. So it's quite extensive.

Now the way this network works is Mastercard Move is -- you don't often see Mastercard Move directly. It's a B2B business. So there're lots of use cases that you probably are already using and incorporating into your life, and it rides on the Mastercard Move rails, right? So it's a B2B business, and we work with our Middleby partners while they work with the end consumers and small businesses. And so use cases, there are lots of use cases. So let's start in the P2P space because you were interested in remittance and disbursements, right?

Let's start in the P2P space. So domestic P2P use cases, there're many of them, things like wallet top-ups or tipping or splitting builds, right? Lots of P2P use cases. We're working with Samsung on tap -- phone-to-phone tap and transfer. P2P cross-border use cases, this is where remittances come in, family support, self-to-self savings and transfers, we call it [indiscernible] for our transfers, where you might have an account in one country, but you're living in another country, and you're moving money around. So a lot in cross-border P2P.

And then when you get to, what I call B2P, business or government to an individual, there too, domestically, there's a lot. There are disbursements from governments. There are disbursements from companies, refunds, faster refunds, benefits that you might provide, the lots of things that companies pay out to consumers and governments pay out to consumers. So all of that we're able to support. And then cross-border, it's actually quite interesting. There're lost a cross-border use cases, things like paying a gig economy worker, a creator who lives in another country, or a content provider that's somewhere else, a lot of gig economy use cases.

So there are a ton of these use cases. And this is a space where we work very closely both with companies and with governments in order to facilitate these payments on our rails. And there's a lot of growth geographically as well. So I'll give you an example, China. We have a license there, as you know. That, of course, helps our consumer business and our commercial business. And in the money movement space, we already do a lot of outbound transfers and that's growing in many different use cases. And then inbound, we can reach China UnionPay. We can reach a variety of different wallets into China, so we can also do inbound. And so that's a good example of a geography with a ton of potential. So this space has a lot of potential.

Right. So -- and stablecoins, what's the role for Mastercard in that?

Yes, stablecoins, it's interesting. Mastercard, when it comes to blockchain, we've been participating in blockchain for about a decade now. Lots of different use cases and applications and stablecoins, when there's more clarity, it's easier to participate in this space, more clarity in terms of regulation and what you need to comply with. So it's quite exciting to see it growing. It's still small. It's still volumes are small. But we do everything from on-ramps and off-ramps, being able to buy stablecoins, being able to use stablecoins. We have about 130 co-brand programs across the globe.

The consumer -- but they're also in small business, by the way. They're increasingly in small business. We settle in stablecoins. And then in our cross-boarder services business, in Mastercard Move, we -- as I was saying a minute ago, we were able to support stablecoins for any use case that a consumer or a small business might want to use. And so these use cases are -- they're a little esoteric because there're many use cases that satisfy the fiat currency. But to the extent there's a need for stablecoin, we have the ability to use stablecoin there.

We also have services. So we have things like Crypto Credential and Crypto Secure. Crypto Credential identifies a user or a platform, which is really important in this space, and Crypto Secure provides security services on the transaction, very important in the space. And we have a multi-token network, which, when you think about it, especially for tokenized deposits, as these islands of tokenized deposit ecosystems develop, we can provide the interoperability between them. We can facilitate on-chain commerce. We can bridge off-chain to on-chain. So there's a lot going on in there across the board. And it's quite exciting. But it is still in the nascent stages.

Nascent. Got it. And then quickly, you mentioned a few minutes ago your partners. And within this space, you recently announced a partnership with CorPay. Just quick few details on that towards the end of our conversation.

Sure. When you think about CorPay and MasterCard in the money movement space, Mastercard, we work with just about every financial institution on the globe. And we have great capabilities for smaller and mid-ticket transfers. If you think about CorPay, they work very closely with corporates and they have mid- to large ticket transfers. And so it's very complementary, the 2 capabilities. And what we've been able to do with it is to create end-to-end solutions for financial institutions, combining what CorPay has and what Mastercard has. And that is going really well. We announced our first deal that we signed together, Capital Bank in Mexico, where the corporates had worked with the bank and now pay using our combined capability, and small businesses that the bank can now drive collections in multi-currencies, right, in U.S. dollars, euro, other currencies using this capability.

So that's very exciting. In addition to that, we also -- CorPay is now using 22 of our corridors globally, the Mastercard Move corridors, to extend their reach. And this is all in the money movement space. We're also very deep partners in the commercial payment space, in the corporate payments space, using virtual cards and account payable processes and fleet, et cetera. So that partnership is also quite deep. And I come back to one of our strengths is the power of partnerships, and the CorPay, MasterCard partnership is a great illustrating of that.

So last 45 seconds, Raj, what are you most excited for, for 2026? What should we be watching from our vantage points?

So what I'm very excited about is the space. There's gathering momentum, accelerating solutions getting adopted across the board, and that's very exciting to see. And you'll see that coming through in our financial results like you saw in 2025. And so that's something to watch. And as we do this, we continue to innovate, right? We continue to innovate across all of our product suite, including virtual cards. We talked about agentic AI. We talked about stablecoin, lots of innovation. And so what you'll see -- it's not just 2026, but I would say you'll see continuing acceleration in this space in 2026 and for many, many years to come. This is a massive secular shift opportunity. And it's very nice to have Mastercard be at the center of this, driving the modernization of commercial payments and money movement in the space and driving digitization and data-rich payments. So you will see a lot of secular shift in the years to come.

That's great. Raj, we're going to have to leave it there, but thank you very much for joining us today. I appreciate it so much.

Thank you, James. Thank you very much.

Good morning. My name is Julianne, and I will be your conference operator today. At this time, I would like to welcome everyone to the Mastercard Incorporated Q4 and Full Year 2025 Earnings Conference Call. [Operator Instructions]

Mr. Devin Corr, Head of Investor Relations, you may begin your conference.

Thank you, Julianne. Good morning, everyone, and thank you for joining us for our Fourth Quarter 2025 Earnings Call. With me today are Michael Miebach, 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 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 this 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. There was a lot of activity to close out 2025, and it's been a fast-paced start to the new year. And that's birth, let's jump right in.

My headline for you today, we continue to deliver and 2025 was another very strong year. For the fourth quarter, net revenues were up 15% overall, with value-added services and solutions net revenue up 22% versus a year ago on a non-GAAP currency-neutral basis.

Our consistently solid performance is driven by several factors. First, we are focused. Our strategy is clear, and we're executing against it. We're making strong progress against each of our strategic pillars and benefiting from the virtuous cycle across our payment network and services offerings. Second, we're innovative and agile. We spared the payments evolution. At the same time, environments shift, customer needs, technology, regulation, so we adapt and we prioritize ensuring we have the right capabilities and skill sets. Recently, we completed a strategic review of our business. This will result in reductions in some areas and roles but lead to further investment and increased focus in others. And finally, we're diversified and differentiated. Our business extends across geographies, spend categories and payment adjacencies. The diversification of our business means we benefit from a wide range of growth drivers, which make us more resilient.

As we enter 2026, geopolitical and macroeconomic uncertainty persists. We will continue to monitor and work to navigate just as we have successfully done in the past. But for now, we remain optimistic and confident in our execution and the fundamentals of our business.

Looking back at 2025, we won hundreds of new issuing deals and expansions globally. This doesn't just happen. It is the result of our dedicated sales force, technology and differentiated value we deliver to our customers. I will share a few highlights from this past quarter.

In the U.S. and Canada, we extended our long-standing partnership with Capital One, where we renewed our partnership in credit, and we will be the network for a large portion of newly acquired credit accounts. And across their business, Capital One will continue to use several of Mastercard's services. In Turkey, [ Yapi Kredi ] will migrate nearly 10 million cards across their consumer credit, debit and affluent portfolios to Mastercard. Our consulting and marketing services will be used to support the end-to-end portfolio conversion.

In Latin America, Scotiabank chose Mastercard as their network partner in Mexico, Chile and Uruguay. Why? They see Mastercard security, loyalty and analytics offerings is key to fueling their growth. It's built up on our strong relationship with the bank in Peru and the Caribbean markets. In South Africa, a modernized real-time payment switch is a key factor of signing exclusive deals with several players in the market, including [ Nedbank ] and Standard Bank. These wins position us to increase our share in the market by multiple points. And we continue to win in affluent, so important. We have secured more than 60 new affluent programs in 2025 across the world. Our drumbeat of wins continued this quarter with new deals secured with [ PicPay ], [indiscernible], [ Cisprime ] in Brazil and [ Nedbank ] in South Africa, which I just mentioned.

We're seeing the same momentum in co-brands with leading merchants and digital players. Earlier this month, it was announced that Mastercard will continue to be the exclusive network for the Apple Card, which will transition to JPMorgan shape as the issuer in approximately 24 months. We supported the launch of this industry-leading co-brand nearly 7 years ago, and we are excited to support its continued success. We won the Walmart and [ Sam's ] Club co-brands in Mexico in partnership with [ InvexBanko ], where renewed our partnership with Barclays, supporting its U.S. co-branded card programs and its [ Tesco Bank ] card programs in the U.K. And we partnered with Amazon and Emirates Islamic to launch the Amazon Credit Card in the UAE.

As I've said, we remain focused on driving long-term growth across each of our strategic pillars. In consumer payments, this quarter was about continued innovation and focus on driving incremental growth. Our drumbeat of wins I just mentioned, shows that Mastercard is preferred over alternative networks. Banks chose Mastercard because of our global acceptance, our consumer protections, strong security and digital capabilities. It's also about our dedicated teams and our commitment to driving mutual growth. We work with our existing customers to optimize their portfolios by using our advanced analytics and AI capabilities. We help clients activate their cardholders, drive top-of-wallet behavior and increase approval rates, and it works. We're driving more transactions of our network and in key categories, I think digital or cross-border.

In looking at digital commerce alone, we've seen approval rates increase by 270 basis points in the last 5 years. Now think about what that means when applied to Mastercard's global payment network, last year alone, we switched more than 175 billion transactions. That's a lot of potential to further optimize. We now switch more than 70% of all Mastercard transactions globally, an increase of 10% since 2020. More switched transactions result in more data and more opportunity to sell services and so on. All of which allows us to help our partners drive top and bottom line growth, enable seamless and secure experiences for our cardholders. This is the virtuous cycle in motion.

The payments industry continues to evolve. Stable coins and the agentic commerce bring new choices to pay and get paid, and we are leaning in, just as we have with neobanks, digital wallets and installments and so on. For us, stable coins and agentic commerce are emerging opportunities, ones where Mastercard has a natural role to play. We have been active in the digital asset space for over a decade. Most use cases for crypto and stable coin today are for trading and the like. For us, it is another currency we can support within our network. And we've made good traction in enabling the purchase of these assets facilitating transactions and supporting stable coin for settlement over our network. Trust, interoperability and global acceptance are key in all payments. That's where we come in.

This quarter, we have supported co-brand partners such as Meta [ mask ] as they scale across geographies. We partnered with [ COBRA ] and partners to extend their offerings to new customer types. Gemini brings their success in the digital asset space to launch the first business-focused stable coin co-brand. And we continue to expand our settlement capabilities, now working with Ripple.

Moving on to agentic commerce, where AI-powered agents assist or act on behalf of consumers throughout their commerce journeys. For us, agentic commerce represents another avenue to enable payment choice the same trust that we always deliver. It's early days, but we are ready. You remember, last year, we launched Mastercard Agent Pay, a framework designed to foster trust in agentic transactions. We have now enabled our U.S. issuers to participate in Agent Pay, and we are working to enable our global issuer base by the end of the first quarter. As more agents come on board, there will be more opportunities for consumers to experience a truly seamless commerce experience. We're actively working with ecosystem participants to adopt agentic commerce across all regions. I'll share a few highlights from this quarter. In Asia, we're partnering with Anthem on card-based tokenized payment solutions for agentic payments.

In the U.K., we're consulting clients such as [ Lloyds ] Banking Group, [ Elavon ] and Santander on agentic commerce innovations. And in the UAE, we're piloting agentic payments with the leading retail and entertainment group [indiscernible]. And with banks, merchants and digital players, we continue to position them for success in this new era of commerce, whether it be through consulting, security, data-driven insights or new loyalty programs we are there.

Moving to commercial and new payment flows. One of our 3 strategic priorities. In 2025, our commercial credit and debit volumes represented 13% of our total GDV and grew 11% year-over-year on a local currency basis. That's a clear reinforcement that our differentiated value propositions and broad-based partnerships are driving meaningful results. In commercial point-of-sale and invoice-based payment flows, our offerings are designed to meet corporate demand for more efficient, data-rich and secure transactions. We continue to expand usage of our virtual cards by needing transactions to be initiated within B2B and T&E platforms. Mastercard's Commercial Express program simplifies the integration and onboarding. This quarter embers a leading T&E platform and [ BMO ] and Huntington Bank were the latest issues to participate.

Differentiated solutions benefit our customers and that has translated into significant wins. This quarter, we renewed our global partnership with [ WEX ] and extended our partnership with Barclays in the U.K. and across Europe. Also, we partnered with [ Coupa ], a leading business spend management platform to launch the [ Cooper ] Mastercard. Together, we are enabling virtual card payments across the entire customer base, which spends millions of buyers and suppliers globally.

There's much more than winning share. We're actively working to capture the sizable secular opportunity. Small businesses represent more than half of the cash and check opportunity in commercial point of sale that we outlined at our Investor Day. Given the broad-based diversity of the small business segment, we are working across banks and nonbank partners to serve this segment. It benefits our partners, Mastercard in the overall economy. This quarter, we extended our partnerships with Intesa Sao Paulo to drive greater small business issuance in Italy. We're partnering with L'Oreal to issue small business cards across Latin America, our first market launch is a co-brand covered [ Clara ] for salon owners in Mexico. This is a prime example of how we are using a vertical approach to partner with large-scale players to capture untapped payment flows.

Growth through differentiated value and broad-based partnership continues for Mastercard Move, our disbursements and remittances capability. Now with more than 17 billion endpoints available Mastercard Move is positioned to be the money movement platform with the greatest reach in the industry. Mastercard Move recipients have the option to receive funds across a variety of end points. Including, but not limited to, bank accounts, debit cards and digital wallets and cash if we want to. We continue to expand our network reach just recently by enabling bank account deposits in Bangladesh. By expanding digital wallets and endpoints in the Philippines through our partnership with GCash and in China through our partnership with [ Tenpay Global for Weixin Pay ] and with stable coin wallets through our partnership with [ Sons ].

Our expanded reach and endpoint options are resonating with customers. This quarter, we partnered with [ Banco Ripple ], a subsidiary of the [ Ripple ] Corporation, one of the largest retail companies in South America to offer Mastercard cross-border services to their customers in Chile and Peru. We also partnered with Capital Bank, a leading neobank in Mexico, which is leveraging Mastercard and core pay cross-border payment solutions. Our Mastercard Move capability has demonstrated consistently strong transaction growth. In quarter 4, 2025 and full year 2025, we saw transaction growth exceeding 35% versus a year ago. Our extensive reach and market adoption position us well going forward.

Turning to value-add services and solutions. We delivered strong performance in 2025 with full year net revenue growth of 21% or 18% excluding acquisitions year-over-year on a currency-neutral basis. This growth was broad-based with consistently strong growth across regions and product groups. Our performance is a clear demonstration of our growth algorithm in action that step through that. We have curated a suite of value-add services and capabilities in large and fast-growing addressable markets such as digital security and data-driven insights. Mastercard's proprietary data and AI capabilities, combined with our payment network, which provides us a real competitive advantage. Simply put, we provide unique intelligence at scale. There's a natural tailwind to services from payments and at our Investor Day at the end of 2024, we noted that 60% of our value-added services and solutions net revenues were network linked.

This simply means value-added services and solutions revenues benefit from transaction growth. And also higher growth drivers such as tokenization, for example, fraud scores and took an authentication fall into this category. And we are actively working to further penetrate our customers and markets just like the Mastercard Threat Intelligence offering we launched last quarter, which has already started scaling across our payment network.

In addition to networking offerings, we also provide our customers with consulting, marketing and platform-based offerings. These nonnetwork services enable us to sell to new buying centers at retail banks, they also extend our reach across a more diversified customer base, including governments, merchants, digital players and more. This quarter, we supported Costco in Canada and their omnichannel growth strategy using Mastercard's marketing and consulting services. That's meaningful strategic value. Innovation remains core to our long-term growth. We have through a long-standing history of success in launching and scaling innovations.

Way back in 2013, we architected the industry standard for tokenization to enable trusted digital transactions, a critical need of customers and partners at that time and still true today. In fact, as of quarter 4, we have tokenized nearly 40% of all transactions. And we continue to see adoption in both card present and card not present use cases. And with this growth, we're seeing higher transactional approval rates enabling further services growth. Our innovations continue to deliver real value to our customers and continue to drive financial benefit today. We're adding to that innovation.

Now with the launch of Mastercard Credit Intelligence. By using Mastercard's proprietary network data, identity and open finance capabilities, we can deliver faster credit assessments. For individuals and entrepreneurs, this could mean greater access to credit, from banks is greater insights than formed their lending strategies. And that fuels a healthy inclusive digital economy, live in market and seeing adoption across a variety of customer types. In addition, we've launched Mastercard Agent Suite evolving our consulting practice from AI strategy to now include asset-led engagements. We will design and deploy AI agents within customer environment to drive operational excellence, enhance end customer experience. In addition to directly engaging with customers, we're scaling our services through distribution partners, one to many, including FIS, WPP and [ Comcast ] advertising will be added this quarter.

So with that, I will wrap it up. In summary, we delivered a very strong fourth quarter and a full year 2025. Our performance is a direct reflection of our growth strategy, deliberate diversification and focused execution. We're at the forefront of innovation, and we're remaining differentiated versus the competition. This helps us be an agile, trusted value partner, especially as markets evolve. The strong momentum moving into 2026 and remain confident in our continued growth.

Sachin, over to you.

Thanks, Michael. So turning to Page 3, which shows our financial performance for the fourth 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 15%, reflecting continued growth in our payment network and our value-added services and solutions. Acquisitions contributed 1 ppt to this growth. Before discussing expenses, I am pleased to share that in late December, the company secured various new multiyear government grants related to investments in select geographies. These grants benefit both operating expenses and other income and expense. We expect to realize the operating expense benefit primarily in 2025 and 2026, while the other income and expense benefit will extend multiple years beyond 2026.

The Q4 2025 impact reflects the full year value of the 2025 grants with operating expenses growth improving by around 5.5 ppt and other income and expense benefiting by approximately $135 million in the quarter. These positively impacted each of the following metrics that I will discuss on this page.

Operating expenses increased 12%, including a 5 ppt increase from acquisitions and operating income was up 17%, which includes a 1 ppt headwind from acquisitions. Net income and EPS increased 17% and 20%, respectively, driven primarily by the strong operating income growth and a positive discrete tax item, which primarily benefited the effective tax rate. EPS was $4.76, which includes a $0.10 contribution from share repurchases. During the quarter, we repurchased $3.6 billion worth of stock and an additional $715 million through January 26, 2026.

Now turning to Page 4. Let's first look at some of our key volume drivers for the fourth quarter on a local currency basis. Worldwide gross dollar volume or GDV increased by 7% year-over-year. In the U.S., GDV increased by 4% with credit growth of 6% and debit growth of 2%. The growth of our debit portfolio was impacted by the Capital One debit migration, which continued through Q4. Outside of the U.S., volume increased 9% with credit growth of 9% and debit growth of 9%. Overall, cross-border volume increased 14% globally for the quarter, reflecting continued growth in both travel and non-travel related cross-border spending.

Turning to Page 5. Switch transactions grew 10% year-over-year in Q4. We continue to drive contactless penetration, which in Q4 stood at 77% of all in-person switched purchase transactions. This is up 5 ppt since the same period last year. In addition, card growth was 6%. Globally, there are 3.7 billion Mastercard and Maestro-branded cards issued.

Turning now to Slide 6 for a look into our net revenue growth rates for the fourth quarter discussed on a currency-neutral basis. Payment Network net revenue increased 9% primarily driven by domestic and cross-border transaction and volume growth. It also includes growth in rebates and incentives. Value-added Services & Solutions net revenue increased 22%. Acquisitions contributed approximately 3 ppt to this growth. The remaining 19% increase was primarily driven by growth in our underlying drivers, strong demand across digital and authentication, security solutions, consumer acquisition and engagement and business and market insights as well as pricing.

As we reflect on Value-added Services and Solutions growth for the full year 2025, we continue to see strong broad-based growth, as Michael mentioned earlier. Looking at our organic growth rates, both AP, EMEA and the Americas delivered high teens growth. And we also saw at least high-teens growth across all the services product areas apart from other solutions.

Now let's turn to Page 7 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 8%, while worldwide GDV grew 7%. The difference is primarily driven by pricing, offset by mix. Cross-border assessments increased 17%, while cross-border volumes increased 14%. The 3 ppt difference is driven primarily by pricing in international markets, partially offset by mix. Transaction processing assessments were up 14%, while switched transactions grew 10%. The 4 ppt difference is primarily due to favorable mix and pricing, partially offset by a decline in revenue from FX volatility. Towards the end of Q4 and month-to-date January, we saw FX volatility well below historical norms. Other network assessments were $272 million this quarter.

Moving on to Page 8. You can see that on a non-GAAP currency-neutral basis, excluding special items, total adjusted operating expenses increased 12%, which includes a 5 ppt impact from acquisitions. Excluding acquisitions, the growth of total adjusted operating expenses was primarily driven by increased spending to support various strategic initiatives, including investing in our infrastructure, geographic expansion and enhancing and delivering our products and services. This was partially offset by the benefit of the government grants I described earlier.

Turning to Page 9, let me comment on the operating metric trends, starting with Q4 and looking at the metrics on a sequential basis. U.S. switched volume growth declined primarily due to the migration of the Capital One debit portfolio. Worldwide less U.S. switched volume saw a slight deceleration driven primarily by tough comps, including the lapping of portfolio wins in Europe. Switch transactions were in line with Q3. Cross-border volume remained strong. Of note, we saw a sequential decline in cross-border card not present ex travel primarily driven by tougher comps from the lapping of share wins in Europe and higher growth from crypto purchases a year ago.

As we look to the first 3 weeks of January, our metrics continue to remain strong, generally in line with the fourth quarter. Of note, U.S. switch volume was flat sequentially as the Capital One debit roll-off was mostly offset by easier comps due to weather impacts in the prior year. We saw a decline in cross-border travel volumes, primarily due to weather-related impacts in Europe this year. Cross-border card not present ex travel continued to be impacted by higher growth from crypto purchases a year ago. Overall, we continue to see healthy consumer and business spending.

Turning to Page 10. I wanted to share our thoughts on fiscal year 2026. As Michael said, we delivered very strong results in 2025 across all facets of our business despite an uncertain backdrop. The fundamentals of our business remain strong. The macroeconomic environment remains supportive with balanced job markets across the globe, underpinning healthy consumer and business spending. That said, there continues to be ongoing geopolitical and economic uncertainty. We maintain a disciplined capital planning approach and have levers to pull if needed.

But most importantly, we are focused on the execution of our strategy, positioning ourselves for long-term growth and remaining innovative and differentiated. Coupled with our diversified business model, this creates resiliency, helps us navigate diverse environments just as we have done in the past. We remain positive about the growth outlook and our base case for 2026 continues to reflect healthy consumer spending.

As it relates to our expectations for the full year 2026, we expect net revenues to grow at the high end of a low double-digits range on a currency-neutral basis, excluding inorganic activity. We estimate a tailwind of approximately 1 to 1.5 ppt from foreign exchange. From a net revenue perspective, we expect currency-neutral growth in the first half of the year to be lower than in the second half. This is driven by tougher comps in the first half, primarily due to elevated revenue growth from FX volatility in 2025. From an operating expense standpoint, we expect growth to be at the low end of a low double-digit range versus a year ago on a currency-neutral basis, excluding inorganic activity and special items. We expect a headwind of 0.5 to 1 ppt from foreign exchange on a full year basis.

Now turning to the first quarter of 2026. Year-over-year net revenue growth is expected to be at the low end of a low double-digit range on a currency-neutral basis, excluding inorganic activity. We estimate a tailwind of approximately 3.5 to 4 ppt from foreign exchange for the quarter. From an operating expense standpoint, we expect Q1 growth to be in the high end of high single-digit range versus a year ago, again, on a currency-neutral basis, excluding inorganic activity and special items. Foreign exchange is forecasted to be a headwind of approximately 2.5 ppt for the quarter.

Separately, as Michael mentioned, based on the recent strategic review of our business, we expect to record a onetime restructuring charge in Q1 of approximately $200 million. This will be recorded as a special item and is excluded from our non-GAAP metrics. These actions will impact approximately 4% of our full-time employees globally. We expect these actions will free up capacity to further invest in our strategic priorities and best position us to continue to execute on our growth algorithm. Other items to keep in mind, on other income and expenses, in Q1, we expect an expense of approximately $50 million, including the benefit from the government grants previously discussed. 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% to 21% for the full year and approximately 19% to 20% for Q1. A lower forecasted tax rate for Q1 as compared to the balance of the year is consistent with prior years due to expected discrete tax benefits related to share-based payments in the first quarter.

And with that, I will turn the call back over to Devin.

Thank you, Sachin. Thank you, Michael. Julianne, you may now open the line for questions.

[Operator Instructions] Our first question comes from Will Nance from Goldman Sachs.

I wanted to start on the Capital One renegotiation. Congratulations on announcing that. Maybe if you could just provide a little bit more detail. I think Cap One has talked about wanting to move volumes over to the Discover Network over time, but at the same time, has talked about a lot of investments on the acceptance side. So can you talk about just negotiation as it relates to your existing Capital One cards outstanding. Are you expecting your share of Capital One credit volumes to remain stable as a function of the renegotiation? And if you could just maybe talk about how long the extension was for. I appreciate any details you can share.

Yes. Thanks for the question. So no surprise. We're excited about these recent news that we announced earlier. So extending our credit portfolio agreement with them is important, but also we should not overlook the aspect of Capital One as the great partner that they are to use more of our services across their whole business. It's a strong signal in my view, at least at this -- the Mastercard network is valued. This is important to consider. We continue to invest in this network. We continue to invest in our acceptance. We know this is hard to build. And that is really what matters when it comes to affluent portfolios, when it comes to business portfolios and so forth.

So the partnership will continue, but we will continue to invest to ensure that we have a truly differentiated proposition as a partner for Capital One.

Our next question comes from Sanjay Sakhrani from KBW.

I just have a question on the CCCA. It's obviously back in the news flow. I'm just curious how you guys are thinking about the implications to yourselves and the industry and sort of the probability that it may or may not get through.

And then just a quick clarification on the Capital One question. I'm just curious, it talks about sort of new account. Is there any volume migrating to Mastercard from Capital One? I just wanted some more clarity there.

Good. Let's start with the first topic. CCCA. Sanjay, as you said, it's back in the news and yes, it's been back in the news. But yes, it's been ongoing for a long time. So this was first introduced in 2023. And if you take it down to the facts, little progress has been made. A lot of discussions there around that, but also what clearly has emerged is that it's a very united opposition to this proposed bill as the benefits of the bill are yet to be proven while the risks are pretty clear. That aspect is about taking consumer choice away from consumers, they can really take -- pay the way they want to pay, that choice moves to merchants. This has been discussed in the context of affordability, but there is no particular consideration in this bill to actually pass on any savings.

There's a big topic that is often overlooked, and that is the potential risk to cybersecurity. This is a race to the bottom for the cheapest network option, but not the safest. Those are all things that haven't really changed since 2023. But the opposition based on focused on these points has intensified. So the industry is very aligned. We're engaging with regulators at every point to educate and ensure that this is fully understood. So it's also important to understand that the payments ecosystem is highly competitive.

Now this -- the Credit Card Competition Act isn't really about competition. It's about lowering cost without considering all the points I just said. So there is competition. It's working. It's a highly effective ecosystem. So that is our perspective on it. That hasn't changed.

On the probability of this going through, I mean, we shouldn't be speculating here. A few moves were made over the last couple of weeks, which haven't succeeded. And I think we attribute that to a continued discussion on the risk associated with this particular regulation.

And then, Sanjay, your question around Capital One, it's like Michael said in his prepared remarks, right? We're really excited about the new agreement, which we struck with them as it relates to new credit issuance. And that's the extent of what we'll share with you publicly as it relates to the interactions. But suffice it to say, the reality is the customer sees real value with what Mastercard brings. That's the reason we are actually doing what we are doing in the nature of the credit agreement, and they're seeing that across the payment network as well as all value-added services and solutions.

Our next question comes from Adam Frisch from Evercore ISI.

Thanks, guys, and thanks for restoring some order in the marketplace as it relates to your stock this morning. I want to address the -- go back to D.C. for a second. We wrote earlier this week that CCCA is all but dead for now at least. But would love your views on the topic around a 10% rate cap on credit, which seems like it's a back burner for now, but it's only a tweet away from being reignited. So would love your perspective on how you describe the conversations going on between the industry and the administration to address the affordability issue as it relates to our space?

And then if you could also provide some insight around your conversations with issuers and other relevant players in the ecosystem about ways to address the President's concerns without creating a broader crisis in the industry.

Good. Yes. I appreciate your first comment actually on the order. So the rate cap that's -- it's a really important conversation around affordability. And we shared that, that should be addressed. But when you think about the rate cap in particular, here is a proposal that comes with a whole range of consequences as you think through how that would -- something like this would be impacted. And the consequence that comes to mind first is what does this mean to credit access for a lot of the most vulnerable people that may not have access to credit any [indiscernible] should rate like this be passed.

So this is an important topic to be understood to your question about our conversations with the banks, with the issuers, the card issuers. We don't set rates, but obviously, we have a shared interest in making sure that the overall credit ecosystem does work and provides credit access. So we're sharing data. We're helping to compute what the impact must be. And then it is really understanding from our bank partners where they are going to go. Is it going to be different products? What is there today? How does this is education? What kind of 0% introductory rates are out there today? Low interest rate products and so forth. So it's a broad conversation that's going on across the industry leaning in on the topic of affordability and options around that.

So I think overall, a constructive dialogue that was sparked we have yet to see as said, it doesn't affect us directly as we don't set rates, but we're actively engaged as an industry custodian.

Do you see the administration and the industry having more constructive talks about feasible alternatives here as opposed to a blanket...

There's a live. Yes, there is a live dialogue here. I think everybody realizes an important topic.

I think we need to move to the next question.

Our next question comes from Ramsey El-Assal from Cantor Fitzgerald.

Michael, could you give us a view on the health of the consumer. It's a very noisy kind of media, political environment with a lot of mixed signals on the other hand, it seems like the underlying spend volumes are really hanging in quite solidly across the board. What are you guys seeing out there? Any changing patterns, anything interesting to call out?

Right. It's a great question. When you look back over 2025 over the whole year, and we just take a soft data like headline consumer confidence data that comes out. On one hand, consumers fill in surveys. At the same time, their spend behavior hasn't actually changed. So that's a pattern that just continues. We see just taking 2025, it hasn't changed quarter-on-quarter. We see a truly savvy and intentional consumer. So what the digital economy brings to consumers has come almost back to the affordability topic, is an ability to figure out what's the best deal. What do you want to spend on? Where can you use your rewards to avail something that otherwise you might not do at this time.

So it's a savvy and intentional consumer. They're using their loyalty programs, their data to kind of spend on what they want to spend on anyway. So that has been a continuous trend. There is a question on how the consumer was affected or not by some of the tariff changes that we've seen last year. And that doesn't show up in our data either. So it's not coming through. somewhere across the ecosystem between importers and big brands. It's all been adjusted in a way that it hasn't really affected consumer spending, at least we cannot tell that.

There's a conversation on how does the whole spend pattern change when you look across higher income bands and lower income bands and what we see across the board in the light of a job market that is supporting paychecks and people are spending those paychecks and there was effect on the other hand. So there are different types of supporting kind of factors around that support overall affluent spend as well as lower income spend. So that hasn't really changed.

And Sachin talked about it earlier, the first 3 weeks into January, we see this continue. Now if you zoom out and you look across the world, these patterns are different by region here and there, but the aggregate top line is that consumer spending remains healthy, is the same.

Our next question comes from Craig Maurer from FT Partners.

First, there's been quite a bit of FX volatility in the past week, which makes a nominal guide a bit of a moving target. Can you talk about the sensitivity of the overall business to FX rate moves these days? And when you set the FX rates for the guidance? And secondly, VASS grew regardless of how I look at it. VASS growth accelerated significantly in '25 versus the growth in the rest of the business. And so I'm curious if this is a trend that we should expect to continue in terms of the relationship between vast revenue growth and however we look at it, whether it's purchase volume or process transaction growth or whatever metric you prefer.

Sure, Craig. So let me just take both questions here, which is from an FX volatility standpoint, I'll be humble enough to tell you, I have no idea where FX volatility is going to be tomorrow as it's going to be in the remaining part of this year.

So what we do is we take our best estimates of what we think it's going to be. We look at long-term averages, we kind of look at what the general environment is. And on the basis of that, we build in our best estimates. In quarters in which we see outsized benefit come from FX volatility. We call it out as we did in the first and second quarter of last year, right? And in other quarters where we see record low levels of FX volatility we'll call it out as well as I did today.

So look, I mean, the reality is super hard to predict, right? And the impact to our business, as you can see, is the fact that I'm calling it out means it does have an impact on our business. in particular, in the transaction processing assessments line, right? So that's kind of important for people to know where it kind of sits from an overall perspective.

The more important thing here, though, is Mastercard is actually delivering some incremental value to our customers, which is why we actually generate the revenue associated with whether it's good volatility or bad volatility. The reality is we're delivering currency conversion services, which means that our customers are seeing value in terms of what we're doing and allows us to actually participate in that volatility to the extent it's high or then the detrimental impact of that volatility to the extent it's low. So that's kind of point number one.

On VASS growth, super pleased with the results. The company continues to be very focused. It's an important part of our various strategic pillars. You can see that the growth rates are healthy. I'll go back to what Michael said in his prepared remarks, right? Our business in terms of how we actually operate our VASS portfolio is very tightly intertwined with what's going on in the payment network. Let's stop there, right? The payment network brings volume into the system, it brings data enables the creation of our solutions, and that allows the virtual cycle to keep going.

As it relates to the growth, we continue to remain very encouraged about the growth prospects from a VASS standpoint. We shared with you previously what the building blocks of that growth are. Let's start with the fact that if there's underlying growth in drivers driven by what we're doing in the payment network, there's an attach rate, which is related to that, which actually helps growth take place. In our Investor Day, we talked about how 60% of our -- approximately 60% of our VASS revenues are network linked. So if you see the network, the payment network growing and the underlying drivers growing, you're going to see that the growth of that comes through.

Second, we are in the business of actually really increasing the attach rate to the extent there are new solutions we're putting out of the market. Doesn't mean that every new solution that we put into the market is necessarily network linked, but those which are allow us the opportunity to continue that growth algorithm. Third, we're increasing the penetration of these solutions with our customers globally.

So the color I gave you in my prepared remarks today about the fact that our VASS growth is broad-based gives me confidence that this is not episodic in one particular region. We kind of talked about how across AP, EMEA and Americas, we're seeing good growth from a VASS standpoint. As also across the various elements of our services portfolio, we're seeing good growth. So that's kind of pretty comforting to me to see that we are actually executing across that VASS growth algorithm in a meaningful manner.

And the last point I'll make is enabling this growth has been the constant look we do from an innovation standpoint organically, and we've done a bunch of new innovation, which we've announced, but also what we're doing to expand our addressable market. And examples of that would be things like Recorded Future, which takes us into new and different and fast-growing spaces like Card Intelligence.

So if I to bring all of this together for you, I'd say good solid growth in VASS in 2025, and we continue remain encouraged about the prospects from a growth standpoint, from a VASS standpoint going forward.

Yes. I'm going to add a point here. This is -- what's really important here is the differentiation. Because when you look at the competitive landscape in services, there's specialist companies out there that focus on cybersecurity. There's loyalty companies out there. There's really not a company out there like us. So it puts us in a very differentiated position here. We have the payment data as Sachin laid out, and we can build a set of services that are truly unique. It's a very curated set of services. We keep getting the questions from you now and then what is actually in services. But if you think about it from the perspective of cybersecurity solutions, data insight solutions, those are all the types of services that ground it in fundamental growth drivers and needs of the growing digital economy.

So differentiated underlying growth drivers, everything that Sachin just said, and all of this is powered by a significantly changing distribution network that we're using by selling these services through many others other than our payment partners.

Our next question comes from Tien-Tsin Huang from JPMorgan.

Appreciate it. Great growth here. I wanted to ask about Capital One a little differently. You mentioned I think, Michael, you mentioned hundreds of issuing wins in '25. I'm curious for this year in '26, any updated call outs on timing and impact on, let's say, the KPIs from all these conversions or renewals in '26. How does the renewal pipeline in general look? And any call outs on pricing or competitive intensity, that kind of thing?

Tien-Tsin, it's Sachin. I might take the question. Look, I mean, again, from a overall customer engagement standpoint and a deal pipeline standpoint, I'd say coming into 2026 is I'd put it in the realm of pretty normal for what we see at this time of the year compared to prior year. So active pipeline, lots of great engagement taking place with numerous customers. Nothing unusual to call out there in terms of the pipeline of deals.

As it relates to the competitive environment, we're in a competitive space. There's no question about it. And what we're also very clear about is that in a competitive space, you've got to differentiate. And differentiation is going to be driven by what we can do at the payment network level through our digital capabilities, but also what we can bring in the nature of value-added services and solutions. So this virtuous cycle piece kind of comes into play again. And we're seeing ourselves actually be able to participate and actually grow in such an environment, which is very encouraging.

So I think it's a competitive environment. We have very, what I would call, formidable competitors out there, but I feel very good about our ability to compete given our suite of services and solutions as well as our payment network capabilities that are out there. So at net, here's what I shared with you, which is feel encouraged about the bustness of the pipeline, and we'll keep doing what we're supposed to do in terms of actually driving with our customers to deliver value to them.

The last point I'll make is I don't expect and I certainly hope that we don't win all deals. We want to win the right kind of deals. We've set this in the past, and we will be very focused on doing that, which is making sure that we want to win those deals which are fast growing, which are cross-border heavy, which are ones where we can bring our services to bear to actually drive incremental growth for the issuer. That's really important because if we can't drive incremental growth for the issuer, the whole idea of being able to take it -- take the deal from the other network is kind of redundant from an issuer standpoint. So we really got to push on that, which is the way we kind of go about doing what we do.

It's a really important question, Tien-Tsin. So when you look across I was just looking back at my prepared remarks, 16 minutes, and you see all the wins in there. So the pipeline is healthy. But it sounds like maybe it's broad stroke. We are very focused based on what Sachin just said, the focus on affluent, for example, on cross-border and really high octane kind of partnerships that help our customers, but also us really important.

And then as I called it out, it's not just about share, it's about secular opportunities. So winds in the secular opportunity context are just as important when I think about small business, when I think about B2B and so forth. So full on, really full on. That's the plan for 26, but not for everything, as Sachin just said.

Yes. That's very good detail there. Just forgive me for asking one other clarification question. Just if you look similar to '25, can we infer that the rebate incentive outlook is also similar?

Yes. Here's what I'd share with you. I'm not going to give you a full year rebate guidance. But what I will share with you is that in Q1, we expect our cloudfare as a percentage of payment network assessments to be flat to slightly down sequentially compared to Q4, very much in line with what you've seen in the past.

That's what he really wanted to know.

Our next question comes from Darrin Peller from Wolfe Research.

Just following up on guidance for a minute. When you look at the trajectory of it, obviously starting off, and then calling for maybe a slight acceleration of our progresses to the high end of low double digits from the low and low double digits. So maybe just give us -- just remind us the puts and takes as your progresses and then more importantly, just the inputs. What are you assuming the consumer does and spend volumes do both cross-border domestically? What are your thoughts on the potential for more stimulus is that embedded in your guide? Any more color on that would be great.

Sure, Darrin. So our base case, which is the basis of the guidance that we've shared with you is that consumer and business spending remains healthy. That's kind of our going in position because that's what we've seen, right? And like Michael said earlier, there are different numbers as it relates to the soft data from a sentiment standpoint and then there's the hot data. And that's what we kind of see. We've kind of triangulated around the best we can. And it's our base case assumes a strong consumer. So that's kind of the starting point of where we are from a driver standpoint. That contemplates the dialogue around a fairly healthy tax refund season, et cetera, et cetera. All of that's taken into consideration, again, recognize there's the U.S., and then we're a global business as well. We've got 70% of our business roughly coming from overseas markets.

So I think it's important to kind of think about in that whole context. Now I think you're asking the question as it relates to the cadence between the first half and the second half, which is something I shared. The -- I've given you full year guidance, and I've kind of said that we expect the growth in the first half to be lower than in the second half, and that's primarily driven by the fact that you've got tougher comps from an FX volatility standpoint. We called this out last year where we talked about first quarter, second quarter of last year, higher FX volatility. I called out how we're seeing lower FX volatility coming out of Q4 and into the first 3 weeks of January, something to keep in mind. And the reality is that's really what primarily explains the difference in cadence, which is there between the first half and the second half.

Our next question comes from Trevor Williams from Jefferies.

Sachin, I think you called out pricing as a driver across every revenue line this quarter. So just how should we think about the durability of what we're seeing come through across each of the line items on cross-border, which has been -- seen a nice pricing tailwind over the course of the year. And then in terms of magnitude, what you're building into the guide for '26 for pricing relative to '25.

Yes, I think it's a board to actually understand how we go about thinking about what we do and what we call pricing as well, right? It's kind of very much a function of what is the nature of products and solutions and services that we have delivered, whether they're brand new in nature and/or they are modifications or improvements in terms of delivering incremental value to our customers, which comes into play. So there is the impact of what we've done last year. And not everything starts on January 1, so there's the lapping effect of that, which comes through in the following year.

And then what do we see in the nature of pipeline of new capabilities that will deliver incremental value to our customer that we were priced for, that we built into our forecast. Trevor, I'm not going to get more specific than that as it relates to how much of that there is, just because at the end of the day, a lot of this is a function of our ability to be able to deliver everything we've got in the nature of the pipeline in terms of new capabilities and new value, which will actually ultimately result in how much we generate in the nature of pricing.

Our next question comes from Harshita Rawat from Bernstein.

I want to follow up on your recent announcements in agentic, including the suite you just announced. It's early in this area, lots of experimentation happening, but maybe help us frame the different thesis of the capabilities here. The identity trust layer and other platforms for custom AI agents. So there's so much fragmentation competing protocols. I know you're partnering with Google and OpenAI among others. So as a frame is and talk about why you believe the [indiscernible] Mastercard not only growing but in agentic era, but also thriving with respect to the trust, governance, personalization and other services you can provide.

Thank you, Harshita. This is a great question. What an exciting space. It might be one of those use cases, AI-driven use cases that meet our reality much faster than other AI use cases out there. So I think agentic commerce is going to come fast. So this whole idea of a consumer using an agent to drive -- have a better commerce journey, I think that just resonates with people. You get better quality insights, you get better recommendations.

So from that perspective, that's just kind of the starting headline. And hence, when you then build out from that. We've been at this for over 8 months now with Agent Pay launching that as our framework around recognizing agents, ensuring identity and then bringing all the protections of payments into the world of agentic commerce. So those are all consumer protections and user experience journeys that are understood by consumers. Also by our partners, take Google, for example. So this isn't new and which gives me great confidence because it's understood and it comes -- it can be delivered at scale. We are a really important partner in this whole journey.

So there's new entrants, LLM companies that haven't been really in the commerce space contrary to somebody like Google maybe. So yet again, that puts it on us to engage with these partners. From the outset, we ensured as we do in other emerging payment spaces that the standards are set, we put our protocols, other protocols. There's a question on how do these protocols all interact with each other. Well, it's the focus on consumer protection, safety, security and cyber and registering agents and making sure they're real and all of that, that is really driving this. And these protocols generally reinforce each other.

So from that perspective, we feel we are very centered here. The cards ecosystem brings a lot of value and that is understood and it will bring it into this space. So then you kind of ask yourself and say, well, from here on, what's different then? Well, new relationships are being built. And of course, we're stepping forward with a differentiated set of solutions that we can offer. We just talked about services earlier that that's an opportunity. You can start to see that there is a transaction opportunity in all of this because a basket might be spread over many merchants. So that's another opportunity.

You'd also see that certain application of services, for example, tokenization gets -- see a very different path than it might see without agentic commerce. So these are all aspects that make me very excited about this. We're leaning across the ecosystem. Everybody wants to talk about this. If we take a step back right now, it's also true, it's early days. But everything that I just said is true, and we're leaning for that. It's hard to predict on when and how this is going to scale to what degree, but the trade is leaving the station and we're right in front of it.

Our next question comes from Bryan Keane from Citi.

Congrats on the solid results. Sachin, I was just going to ask, when there's geopolitical risks, investors are always trying to figure out what the impact would be to Mastercard. And you talked about levers and mitigation efforts that you guys use. Could you just talk a little bit about some of the things that you could do or pull or things you've done in the past when political things have popped up to kind of mitigate downside the top line and bottom line?

Yes. So it's a very important topic. We are probably one of the most global businesses in 20 countries and territories. So as I said in my prepared remarks, we're monitoring geopolitics all the time. We have, through the past years, and we're doing so today. It's really important for us to understand that this is not just about geopolitics. If you look at our business model, we're aligned in terms of our interest with banks around the world. We're aligned with merchants and companies around the world. We are -- our focus on driving an increase of digital economy aligns us with broader populations and NGOs and so forth.

So it's not just about the politics when you look at the geopolitical landscape, and we're engaging with all partners. An important aspect of this si, we don't do the same thing everywhere. This is not an off-the-shelf kind of solution that Mastercard brings. We always strive to understand the local needs, the local considerations. Of course, it's very different in Africa, which is why we partnered with [ MTN ]. It's very different in the UAE versus Europe. We just announced in October last year that we're bringing 3 additional data centers into Europe, $250 million of investments on the ground to drive better resilience and competitiveness for Europe. So these are all aspects that we can do today because we've invested in our technology. We continue to invest in our technology.

So some of the comments that Sachin earlier made about reprioritization and where we take charges because that is what we need to fuel that we have that flexibility to engage with the country on their path and be a true partner for that. At the same time, we bring global best practice and global cybersecurity solutions, and that sets us apart to navigate that world very actively. This will only work with a strong public policy and engagement process and spending time with governments and understand where they want to go, and that is what we do because we're in offices with 125 offices around the world to really stay very close to the local needs.

Yes. And I guess, Bryan, you asked what kind of levers do we have in uncertain environments to the extent we need to pull levers. I think the headline I would first say is that we will not do anything which will impair our ability to grow over the long term. I think that's super important. But all of that being said, there are several levers we've got. We've got levers which we executed in the past in terms of taking a look at where are we expanding our dollars? Are they in favor with our customers? Are there things which are going to deliver returns in the near term, medium term or long term, and we will pull those levers. This could be across all our expense line items, everything from personnel to our A&M spend, to our T&E pro fees, you name it, right, at the end of the day.

And also remember, we do have a component of our revenues, which come with cost of goods sold. And so if to the extent you're asking what kind of levers are there because revenues start to actually decline, revenues coming down has a natural effect of bringing cost of goods sold down as well. So sufficient levers, we'll never be complacent around this, but I do want to leave you with one thought, which is we do care about investing for the long term, and that's something we will continue to do through up and down cycles because the set of opportunities in front of us is so big that we shouldn't lose sight of that.

Thank you very much. Michael, any closing comments?

Yes, yes. So we just spent the past hour talking about our diversified global business and how we're winning in the market. None of this is possible, of course, with our colleagues around the world, the dedicated teams. I mentioned it twice earlier in my remarks and we're proud about the work that's being done for our customers. We're also grateful for your support. So thank you for the dialogue and the great questions. We're going to speak to you in a quarter from now. Thank you very much.

Thanks, everyone.

Thank you.

This concludes today's conference call. You may now disconnect.

All right. Good morning, everyone. Welcome to day 2 of the UBS Global Technology and AI Conference. As far as the payments companies go, we're happy to kick off the second day here with Mastercard.

Joining us on stage, we have Craig Vosburg. You're probably very familiar with Craig at this point. He's been at the company now for 20 years, been at many investor conferences. I think the investment community has gotten to know Craig. His role currently is Chief Services Officer. As I mentioned, 20 years at the company, previously as Chief Product Officer, also has been President of North America, amongst many other leadership roles. So currently, overseeing the Value-Added Services business. For context, for those of you may be less familiar with Mastercard, that business makes up approaching 40% of revenue, is growing in the high teens, meaning the business is contributing roughly 700 basis points to revenue growth for Mastercard.

So with that, Craig, we want to thank you and also Head of Investor Relations, Devin Corr, for being here with us in Arizona.

Thank you. Great to be here.

Excellent. All right. Well, we gave a little bit about your role and time at Mastercard. If you don't just -- if you don't mind, just maybe elaborating a little bit more around that role and then we'll get into macro.

Sure. So our services organization, as you mentioned, it's an important part of the company structure. Our strategy for growth really revolves around three core areas: growing consumer payments, growing our business in commercial and new payments flows and then Value-Added Services and Solutions, which complement both of those areas and are important drivers for growth.

We have a wide array of services that sit within that portfolio. And the services are very much aligned with that strategic objective of driving growth in payments and enabling some diversification in our revenue through capturing new revenue opportunities.

The services business is really built on the back of data. That data originated initially with our payments transaction data but has expanded quite significantly over the years to include lots of other forms of data, and we use that to build out a curated suite of services in a number of key areas, near in adjacencies to payments, things like security solutions, where we help our customers manage fraud and mitigate the impact of fraud; identity management; cybersecurity solutions and resiliency solutions. We do work around consumer acquisition and engagement to help our customers acquire new customers and maximize the lifetime value of those customers with marketing services, loyalty solutions, personalization capabilities.

We have a range of business and market insights, helping our customers manage their operations more effectively, maximize their portfolio value more effectively, undertaking custom analytics, credit risk analytics, consulting. There's a range of things related to processing, our gateway solutions, authentication and digital solutions. This is where our tokenization capabilities sit, for example.

And then finally, there's a second S to this value-added services and solutions based on how we report. That includes a range of other solutions related to real-time payments, open banking, bill payments, cross-border payment services. So that's sort of the full 30,000-foot view of what's in there and look forward to going deeper on some parts of that.

All right. Great. Well, we'll definitely do that this morning. Before we get into more on the business, we'll talk a little bit about macro. Obviously, Mastercard has a great view of what's going on in the economy. So as we close out the year here, it would be helpful to understand how Mastercard is viewing and/or seeing the economy? And maybe you can talk a little bit about the health of the consumer.

Yes. Generally, we continue to see sort of the headline news is consistent with what we've reported in our last earnings call and in some subsequent updates with healthy spending across consumers and businesses. Interestingly, there's sort of a divergence, I think, between the soft and the hard data. We all read the headlines and some of the survey results around consumer sentiment seem increasingly gloomy.

But what we see in the hard data continues to be very supportive of consistent spend metrics. We see balanced labor markets. We see hourly wage growth that continues to outpace inflation. And with that, we see healthy spending metrics across both mass and affluent segments in our portfolio. And we've seen that continue, as we've shared previously, through October and into the first 2 weeks of November, where we've seen spending metrics across all of our key drivers remain generally in line. And so we're encouraged by that.

We see recent updates just over the weekend of what appears to be a pretty strong start to the holiday shopping season, our own Mastercard Economics Institute has released some early figures on that. That is not -- I need to emphasize, not based on Mastercard's portfolio data, that's based on estimates across all tender types, but showing a healthy start with Black Friday spending up roughly 4% year-over-year. And so hopefully, that continues, and we see a strong holiday season.

One thing I do want to note just related to the macro is that based on our most recent estimates for FX and business mix, we are now estimating a net revenue tailwind of approximately 3 ppt for Q4, which is below previous estimates.

All right. That's very helpful. All right. We got macro out of the way. Let's move on to -- you mentioned a little bit earlier, kind of alluded to this relationship between payments and services. Maybe talk a little bit about that virtuous cycle and how it works in practice.

Yes, it's a really important part of the business and the model. The three areas that I mentioned before, consumer payments, commercial new payments flows and services are all incredibly interdependent and tightly linked. Our business obviously starts with payments. It started with payments now almost 60 years ago. And the business continues to be anchored around payments as a whole.

But we recognized 2 decades or more ago that one of the interesting aspects of being a scale payments player is that payments generate massive amounts of data. And with that, we began investing that long ago, really in curating the data, in cleansing the data, in categorizing data, in using that data to train algorithms and models to help strengthen the quality and caliber of the payments products themselves, whether that was to understand consumer propensities for spending, propensities around life cycle events, potential for attrition, et cetera, insights around fraud and risk management, et cetera.

And so the payments transaction data becomes the fuel really for driving greater insights around where and how the payments propositions can be made more valuable. We, in turn, use those to engage with our partners to win more market share, to drive increased payment volume. And not just win portfolios, but increase the value of those by driving deeper engagement, higher spending, lower losses related to fraud, et cetera, so that the value of those portfolios increases.

And so you can see how that becomes a self-reinforcing cycle that is -- has been advantageous for us in helping us grow our business. We've gained market share in all of our payments products globally over the last handful of years.

And I would add too, it's not just that, like over the years, we have identified opportunities to inject new data elements into that cycle. So for example, injecting data related to identity management or device identities or compromised data credentials that -- or payment credentials that you might see on the dark web. That is an input that's not directly from the payments data, but we use that to strengthen the quality of the payments insights in our payments products.

And similarly, there are some areas where we can take offshoots of that and extend it into new adjacencies, for example, taking payments-related behaviors and using them to help advertisers create audiences they can target with advertising content. But it all really starts with the payment transaction data and that cycle that helps us continue to drive growth.

All right. Great. Well, that's a nice segue into the next topic, which is the growth. So we in our research, and I think investors, when we think about the growth of the Value-Added Services business, it's at massive scale, again, high teens guide over the 3-year for the medium-term guide. So we break it down into the transaction-related component and the nontransaction-related component.

I think investors have maybe an easier time, and we have an easier time getting our heads around the transaction component where we think about it growing with your transactions, a little bit of incremental attach, maybe a little bit of pricing and then a little bit more challenging on the nontransaction-related components. But overall, if you could just help us think more about the forward growth of Value-Added Services.

Sure. I think it starts even pulling back a little bit from the transaction versus nontransaction. It starts with the fact that the areas that our services are anchored in are areas that we think benefit from long-term macro tailwinds. It's digitization, it's the growth in e-commerce, it's the opportunities that technology presents to increasingly personalize interactions with consumers and businesses, it's the risks the technology presents with respect to increased levels of fraud or cybersecurity threats.

And so there's sort of long-term runways for growth that are the areas that we've targeted. A number of those, as you pointed out, are directly linked to the growth in payments volume, coming back to that virtuous cycle, the extent to which we can attach services to payments transactions or if it's not attached directly to a payments transaction distributed through our network, where we're able to make these services available to our customers at scale on a global basis relatively quickly, gives us a really solid foundation. And as we've shared previously, 60% of our services revenue is linked to the network. And so that we would expect to see grow with growth in the network itself.

Beyond that, though, there is a range of other areas where we have opportunities for growth in as much as we're engaging with these partners, tens of thousands of partners that we work with across the globe, financial institutions, acquirers, big tech companies, big merchants, et cetera, who have a need for the kinds of services we offer.

And so the relationship around payments is an entry point, but an entry point from which we can expand to engage with those partners in new buying centers. And so not just their cards team, but the broader payments team; not just the payments team, but the consumer banking team; not just consumer banking, but wholesale banking, around commercial opportunities and commercial payments transactions and not just payments, getting -- engaging with the marketing team around digital channel management, customer acquisition, loyalty solutions, engaging with the risk and fraud team or the CISO around cybersecurity solutions.

So there's a wide range of opportunities to expand those relationships within the accounts where we have managed relationships. And then for a number of these services, their SaaS platforms that are -- they're network agnostic, they're relevant in applications that go beyond the Mastercard transaction, and we're actively selling those directly in the marketplace to customers of all shapes and sizes across industry sectors. Again, with the benefit of the -- we think, a nice tailwind related to the ongoing digitization of commerce.

Great. Well, that's another perfect segue into the go-to-market approach for these services. Maybe you could talk a little bit about that strategy and approach.

Sure. There's a couple of components to that. As you would imagine, it sort of starts with the network, given the reach that we have with the network and the scale at which the network operates. 160 billion transactions last year running across our network. That gives us an opportunity to attach services to a number of those transactions, and we continually look for opportunities to attach more and more services across the transaction flow as well, as I mentioned earlier, just use it as a channel for distribution of services, whether it is directly connected to a transaction or not.

We do that not just with our cards network, but with the other tech platforms that we operate in Mastercard. We have real-time payments capabilities, we have a Payments Gateway, we have Mastercard Move, we have created a blockchain-enabled vehicle for transmission of value with the multi-token network. All of these represent opportunities to embed services in those tech platforms that are operating with significant scale. So that's one important means of going to market.

Secondly, we have a sales force. Our account teams that are based in our regions around the world, engage with our managed accounts. Each of those managed-account teams is supported by a services sales specialist who can represent our entire portfolio of services in engaging with that customer. And those sales specialists are supported by product specialists for those areas that have a deeper level of technical knowledge required in order to engage with the buyer, a CISO, for example, ahead of fraud, where our capabilities are very deep, but the conversations get pretty deep. And so therefore, we need both a deep level of product -- of domain knowledge as well as, in many cases, technical sales support in order to sell those.

So we have that sales force engaged in one-to-one selling with our managed accounts. We have, for the SaaS platform, as I mentioned, a number of quota-carrying salespeople who are out in the market, knocking on doors, signing up new customers and new logos across a range of capabilities, cyber, personalization, dispute resolution capabilities, et cetera.

And then finally, we -- given, as I mentioned earlier, a number of these services are network agnostic and not dependent upon being connected to a Mastercard transaction, we're distributing them through B2B channel partners who can incorporate our services and make them available through their own tech platforms to their customer base and making our APIs available to the developer community through our Mastercard developer's site so that they can ingest our services into solutions they may be building.

All right. We're going to move on to innovation. So many new recent announcements from Mastercard in terms of new product launches, innovation. Maybe talk about some of those recent announcements and then more holistically, how Mastercard thinks about its innovation.

Sure. Innovation, obviously, an important part of making sure we can continue to grow. Some of our growth is fueled by acquisitions, but organic innovation is a really important element of the growth algorithm. And I'll start with the second part of your question first, how do we think about it.

It's grounded first in demand we see in the marketplace. We have the benefit of having engagement with tens of thousands of customers in every market around the globe in a diverse set of segments and categories. And so we use that to generate ideas and opportunities around where and how there's demand. Demand that we qualify as being potentially sizable and high growth and areas where we think we have assets, technology, data, capabilities, expertise, something that gives us a proprietary positioning and advantage and a right to win in the space.

And you've seen that translate into a number of announcements around new product releases over the course of the last handful of months. I'll mention a few. On-demand decisioning, something we released. This is very much incorporated into our network capability and functionality, where we're empowering our customers to develop and implement their own decisioning criteria and their own decisioning rules for transactions, their transactions that are running on our network, including the ability to turn a decline into and approve, which you might imagine for a VIP portfolio, an ultra-high net worth portfolio, you never want one of those customers getting a decline.

We've introduced Mastercard Threat Intelligence, which is a nice example of leveraging the capability we acquired through Recorded Future, taking data that we see on the dark web that's circulating around stolen identities, stolen credentials, fraudulent merchant websites that we see being established to test the use of stolen credentials and are incorporating that back into our network insights to help our issuers and merchants understand and identify situations where compromised credentials may be at use and use that to reduce incidence of fraud.

We've introduced the Merchant Cloud recently to help our merchant partners gain quicker access to things like our gateway, our fraud solutions, to position them to participate in agentic commerce. We'll introduce actually this week -- later this week, a little bit of a spoiler alert, a new suite of capabilities around helping lenders underwrite more effectively using a variety of data inputs to improve underwriting decisions, both for consumers and small businesses.

And we launched Mastercard Commerce Media in October, which we're excited about, building again on an existing capability we had around offers, card-linked offers, a business that we've owned and operated for more than a decade, and have proven the ability to generate high levels of conversion for merchants who are extending offers through those cards.

We're extending that across a couple of dimensions to enable more content beyond offers, but also digital ads to be served up to consumers who opt in, and we're starting with a base of 500 million consumers who have opted in to this service and 25,000 merchants who are using it to advertise and promote offers, expand the content, expand the publishing channels to go beyond cards into other bank-owned channels, digital wallet, merchant-owned channels to leverage, again, the data and insights around consumer behavior, an ability to attribute an advertisement or an offer to an actual sale to enhance the returns that advertisers get on their ad spend.

So that's just a few. There's more coming, but we're pretty excited about the innovation pipeline. Again, it all kind of comes back to these capabilities we have to build on, the data, the tech platforms, the global reach, the expertise of our people, the breadth of customer relationships we have around the world.

That's a good long list and thank you for that preview there. New release there. The one minor follow-up and you kind of hit on it a little bit, on agentic commerce. Often, the question we get from investors is, is there a greater opportunity to attach value-added services within an agentic-commerce world?

The short answer, we think is yes. I would -- we're excited about agentic commerce, and we think we have a very important role to play in enabling agentic commerce.

I would draw some parallels, I think, to what you can maybe think of as eras in the evolution of commerce. And we moved from a predominantly face-to-face environment many years ago, which had a certain set of characteristics and growth opportunities. And there's obviously still lots of face-to-face commerce that takes place with a certain -- a portfolio of services that are relevant to that. We moved into an era of e-commerce, which brought on a new era of growth in commerce, the evolution of new business models, the creation of new opportunities, but with that, some new risks. That created an opportunity for more services, particularly things around identity management, fraud solutions, cyber security and the ability to engage with consumers on a more personalized basis through the technology.

Agentic, we view as another era that's coming that will create similar kinds of opportunities. Our starting point on agentic is Mastercard Agent Pay, which is really built around establishing a level of trust and confidence for consumers and businesses alike in a fast-moving world of agentic commerce. But that's all about establishing -- really extends our token requestor framework to be able to establish a relationship with agents and distinguish known from unknown agents. And for known agents who register with us that will get access to our network tools with things like tokenization.

There is increased capability around consumer authentication and as much as we need to understand, did a consumer actually authorize an agent to act on their behalf and was it that consumer who is connected to those credentials making -- and so there's an authentication challenge there.

And there's an information requirement, data requirements that need to accompany a transaction so that we can establish an audit trail that aligns consumer intent with what the agent was instructed to do, with what the agent then carried out with the merchant and how the merchant actually fulfilled those instructions. So in the event of a dispute, there is a means of resolving that dispute.

Just that baseline of establishing Mastercard Agent Pay, I talked about tokenization, I talked about authentication, I talked about fraud management and fraud solutions, dispute resolution, those are all services that will be incorporated into that framework. And as the framework evolves, there's even greater opportunities to personalize the experience for consumers, to add insights to inform the agent, provide more insights into an individual consumers' preferences, behaviors, patterns that can help deliver a better result back to the consumer that the agent is executing on their behalf, both through the use of anonymized data that is aligned with all of our data usage rules and in some instances, based on consented data where the consumer is asking for more of their data to be shared in order to get a better result back.

So all those things around personalization, engagement, loyalty as well as a huge opportunity, we think, just on the consulting front, where banks, merchants, everyone across the ecosystem is working to figure out what this means for them. And we have a lot of insights to offer and tools and technology to help take advantage of the opportunities it presents.

Excellent. Let's see if we can squeeze in one, maybe two more. But this last one here or second to last one is around differentiation. So the services landscape, it's pretty broad. The list of competitors is ever growing. Can you talk a little bit about how Mastercard stands out and is differentiated?

Yes. I think it comes down to a couple of things. One, the data, again, I keep harping on the data, but the data is a differentiator for us, both in terms of its size and scale as well as the breadth and the extent to which we've invested in curating that data over now a period of 2 decades. But it's not just payments data, it's device data, it's identity data, it's open banking data, it's gateway transaction data, it's data from the dark web, its data from Mastercard Move transactions, it's a wide range of data.

And so that's a really important foundation. Combined with the synergies that, that data has with our payments products where we can use that to create real economic value across the ecosystem more effectively on the back of those payments products and the synergies that exist across different services.

And that, we think, gives us a very differentiated position regardless of who the competition is, whether that's another payments network. Other payments networks have lots of data. We have, we think, a broader array of data and a longer history of working with and using that data to the benefit of our customers. When we look at different specialist players in certain areas in cyber, in loyalty and consulting, they don't have the breadth of capabilities that we have nor the ability typically to attach a payments product with that, that delivers measurable economic value. And so we feel pretty strong about the differentiation there.

Sometimes the question comes up, gee, are there other players in the payments ecosystem that you're competing with on this? And the interesting thing about a services business that's so data-driven as ours is, is the data -- it's not an all or nothing proposition, right? It's about finding where and how the capabilities we have, the data that we have, the expertise we have is complementary to something that someone else in the ecosystem has.

So we work, for example, with lots of acquirers. Acquirers develop services of their own. They have a certain lens through which they see the ecosystem. We have a slightly different lens. And so the combinatory power of those things brings value to them as well as to us. And so we're not competing with them. Typically, we're finding opportunities where we can cooperate and collaborate.

Excellent. Well, in the little bit of time we have left, maybe this is a great way just to close things out. At the Investor Day, I think the company did a great job of breaking down the various components of the Value-Added Services business. But in any business, there's always portions that are growing faster or slower. Can you just talk a little bit about anything that just jumps off the page at you in terms of growth going forward or opportunities within the broader VAS and S business?

Yes. I think I like -- we like the lanes that we're in, in the services business. And as we shared at Investor Day, they are all large addressable market opportunities. They are all areas that have an ability to service a significant amount of that TAM today. And so the serviceable part of that is $165 billion roughly based on capabilities we have today. Our penetration of that is low single digits. And so there's a lot of opportunity for us to continue to grow into the spaces that we're in.

And so for me, the exciting part is it's about the innovation that will help us develop new capabilities to migrate more of that TAM into SAM and sell effectively into that. It's about opportunities to do some fill-in acquisitions here and there to build out our capabilities. And importantly, to really scale our distribution. And I think there's a real growth opportunity to scale distribution in ways that go beyond leveraging our own network and working more with other tech platforms, other B2B channel partners to be able to continue growing at the rate that we're growing. So excited about what the future holds.

That's a great way to close it out. I want to thank you again, Craig. I want to thank you, Devin, for making the trip here to Arizona. On behalf of our whole team in UBS, we really appreciate you being a big part of our conference.

Thank you. Appreciate it.

We're excited to have Mastercard and CFO, Sachin Mehra, who will go through our fireside chat questions. I'm Bryan Keane. I head up the U.S. research side for fintech here at Citi and we're excited to have you Sachin. So thanks for being here.

Thanks for having me, Bryan.

I guess, Given the fact that Mastercard sees so much of volume and see so much a consumer, we have to start there. Can you just share with us what you're seeing in terms of the macro environment any recent consumer spending trends that you're seeing?

Sure. So first, good morning, everyone, and thank you for being here. Look, to your question on macro trends, as we mentioned in our last earnings call, we continue to see pretty healthy trends as it relates to both consumer spending as well as business spending. And you can see that in the key metrics we've shared with you as part of our Q3 earnings call, where all of our key metrics are growing at a healthy clip with a consistent trend.

And you saw that through the third quarter. You saw that through the first four weeks of October that we actually shared some metrics when adjusted for the rolloff of the Capital One debit portfolio. And I guess what I'll say is as I look at the data for the first two weeks of November, those trends very much continue to be intact. So the consumer is still healthy. We continue to see good spending taking place as it relates to our business overall.

And then when I think about the consumer, and I think about affluent versus mass, just like we mentioned on the earnings call, both affluent and mass show pretty consistent and good trends as it relates to how they're spending. So all in all, I would say good and healthy consumer spending trends. Obviously, we're tracking very closely as it relates to what's going on from a geopolitical standpoint, what's going on from a trade policy standpoint, what's going on of overall macroeconomic standpoint, and we'll continue to be vigilant, but so far, so good.

There's extra concern and some data that's showing up that lower demographic may be showing some signs of weakness. Are you seeing any of that?

No, it's just like I said, right? Like I said, the data we saw through Q3 as well as the first four weeks of October shows us -- and again, I'll caveat and say, we don't get to see income levels for consumers, right? What we get to see is what kind of products they're using and what kind of average spend they've got on the product. And when we compare the trends from a trend standpoint, they're holding up pretty well, both across affluent and mass market.

Got it. Let's talk about some of the hot trends. Obviously, agentic commerce is generating a few headlines and stablecoins, of course. So Mastercard has been active on the agentic commerce front with the launch of Agent Pay. Can you just describe for us Agent Pay and what your strategy is and differentiation for Mastercard?

Sure. So look, I mean, we're excited about the work we are doing in the agentic space, particularly as it relates to Agent Pay. If you just step back and you think about where the world is going from a commerce standpoint, right, there used to be an environment in which many, many years ago that there was primarily face-to-face transactions, which took place. That still exists, but then there was a migration of volume which took place to the e-commerce environment, where there was actual commerce occurring by individuals in that e-commerce environment. And the theory now is that we will go into an environment where individuals will delegate authority to agents to close that commerce transaction. We believe we have a very important role to play there, and that's about establishing trust in the ecosystem.

And establishing trust means making sure that the consumers feel like they have a safe and secure environment to pay in that the merchants feel like it's legitimate transactions which are coming down the pike. And everyone in the ecosystem feels like we can bring the power of the network to these agentic payments as it happens.

So more specifically, the role we play would be one of basically creating registration for agents to make sure that there's legitimacy to the agents which are out there. It's around authenticating consumers, having given authority for the purchase transaction to take place. It's about bringing our fraud capabilities and our fraud management environment, which we've been investing very heavily in as a company to those agentic payments to provide that level of trust, which we need to provide. And last but not the least, it is about bringing our franchise rules which is around dispute resolution, which is around making sure that consumers get the same protections in an agentive payment environment as they do in an e-commerce environment today.

And we're doing all of this while working with ecosystem partners which means working with our issuing banks, working with the agent creators, working with the merchant community who cares deeply about ensuring that the agents which are out there or will likely be out there shopping are legit agents as opposed to some rogue bots, which are out there shopping on their websites. So there's a very important part we're going to play in terms of establishing trust.

A few other thoughts on this. Number one is we are already live with Agent Pay with a few issuers here in the U.S. We've already conducted our first Agent Pay transaction. We have been on record stating that we will be live with all our U.S. issuers yet this year on a agentic payments. In other words, making them ready to go from agentic payment standpoint, and the plan is to roll out across the rest of the globe in 2026 as part of this journey.

I oftentimes get asked the question as it relates to agentic payments as to, "Well, is this the new thing of the future?" Well, the reality is consumers will ultimately decide whether they want to delegate authority to agents to actually crystalize -- close out that commerce transaction. What's really important for us is to make that choice available to consumers. That's how we have always been a company which leans into trends, and we want to be the payment rails over which -- if consumers elect to go there, then we want to be the payment rails that they use to go down that path.

To your point about what's the opportunity for Mastercard and how we can kind of differentiate ourselves. Look, we've been investing for decades now on a full range of assets across our services portfolio. Everything from our safety and security capabilities, our tokenization capabilities, which is a very important part of establishing trust in the Agent Pay experience. Our loyalty platforms, we believe we can bring some real value to agentic payments by bringing those services to bear as part of the journey of the rollout. We also view agentic payments as potentially being incremental from a transaction standpoint.

And just to bring this home, the way we think about it is, today, as an individual, when you go into an e-commerce website to do shopping, you tend -- let's say I'm going to buy a pair of shoes. I go, I buy a pair of shoes, I oftentimes get offered a whole bunch of other stuff that the merchant wants to sell me. And I might decide, "Okay, you know what, I'm going to also buy socks and I'm going to buy a hat, and I'm going to buy a T-shirt". Well, guess what, in the agenetic payment world, what likely will happen is the agent will buy the shoes, where the shoes are best served to be bought from, we'll buy the hat from another merchant where they're best served to be bought from.

So what that does is what moves away is what today might be one transaction for $200, which is taking place at an e-commerce website will likely transition to that same $200 being spent over multiple transactions. And as you know, our revenue model, we make basis points in volume, and we make sense for transaction. So more the number of transactions, the greater the opportunity is there, in addition to being able to deliver more services. So we're excited about this trend. Again, the consumer will decide as to what the pace of adoption is going to be.

What about on yield? Is there any change in yields for the economics of these transactions?

Again, it will come down. Ultimately, the yield is a combination of what you earn on the payment leg, which we expect to be no different than what would be normally an e-commerce kind of transaction. And then it's how successful are we in terms of delivering incremental services, which tend to be what acts as the incremental element to drive higher yields. And we think there's tremendous potential from a delivery or services standpoint.

And part of the reason is as you move away from that face-to-face engagement to one more level to move where a consumer is not really closing the transaction, but an agent is, there's a greater need for establishing trust, putting out security solutions, which are there, providing insights. All of these things are services we've been investing in for some time, which gives us opportunities from a yield standpoint going forward.

Yes. The other one would be stablecoins. How do you think about some of the risks and opportunities posed by stablecoins? That was obviously a big craze during the summer here, but still, there's still a lot of interest on stablecoins and what might the implications be for Mastercard?

Yes. Look, I mean, I think stablecoins are very exciting. It's something we've been leaning into for some time now. We see it clearly as an incremental opportunity for Mastercard we see it across and we're realizing that opportunity today. So this is not a theoretical it will come in the future kind of thing. The way we're realizing that opportunity today is through what we call the on-ramp and the off-ramp. And let me just spend two minutes explaining what the on-ramp and the off-ramp is.

The on-ramp is when individuals use their Mastercard credentials to purchase stablecoins and crypto. So they're using Mastercard cards to purchase stablecoins and crypto. That's incremental volume and incremental transactions from Mastercard, and that's definitely accretive from a revenue standpoint. That's kind of point number one. In fact, in our Q3 earnings call, we talked about how Q3 year-to-date, we have seen 25% year-over-year growth in terms of these on-ramp kind of volumes there.

And then again, then there's the off-ramp piece and the off-ramp piece is around partnering with stablecoin providers to launch co-brand programs. And we have approximately 130 such program which are live in the market and are growing at a healthy clip. And the purpose here is to give you as a consumer who has stranded cash sitting in your stablecoin wallet which you wish to use the ability to use it everywhere Mastercard is accepted. And we're seeing good traction. And that's again, incremental volume for MasterCard.

So as I think about the stablecoin space, we certainly will play a part on on-ramp and off-ramp but we'll do more. For example, with MasterCard Move, which is our ability to actually send money back and forth, both across borders as well as domestically, we're enabling MasterCard Move to allow for stablecoin settlements because what we think about as stablecoins is it's one more currency in which we want to allow settlement to take place.

So great opportunity. It's something we see us participating in on a going-forward basis. And I think as we see the world evolve, what we're starting to see is more and more banks, financial institutions, fintechs are expressing an interest to issue stablecoins. And as that proliferation of different stablecoins takes place, there's a greater and greater need for interoperability and the orchestration layer, which is what we as a network do. So we feel like there's a real opportunity for us to participate in this ecosystem on a going forward basis.

Got it. I have to ask about Capital One. I know you guys don't typically dive into any one particular deal. But since it's come up quite a bit, I was hoping you could just talk us through the cadence of the Capital One debit migration to Discover and the impact on the financials?

Okay, sure. So a couple of thoughts. First, Capital One is a great partner. And everything we've heard in terms of our dialogues with them continues to be one of an excellent partnership on a going-forward basis. I'll start there. Number two, they are one amongst many issuers who we deal with. So we have a fairly diversified portfolio.

But since you're asking the question as it relates to the implications, it's like I said on the Q3 earnings call, the conversion of the Capital One debit portfolio is underway. It's something which started in Q3. We expect that conversion to carry on through Q4 of this year and into the early part of next year. So that's kind of the way it's going to play out.

As it relates to the revenue impact, what I shared at the Q3 earnings call was that as you lose volume, you tend to lose revenue so is the volume, which is the normal thing which would happen. But I also did mention that there are certain contractual obligations which are due to us, which will act as a partial offset through 2026 to that lost revenue, which is there.

So really, I mean, the way I kind of think about this is the debit portfolio will roll off, that's well understood. That's already comprehended and everything I shared in terms of our thoughts for 2025 in terms of our net revenue growth, et cetera. But the more important thing I would say is that the partnership continues to be strong. And on credit, we continue to be doing a lot of good work with Capital One, and we expect that will be the case going forward.

Yes. I was going to ask a couple of those things. On '26, you have those contractual obligations, kind of term fees, that's the way I think about it at least, but maybe that's not the right term. But you have that offsetting that? And then will there be a little bit of a bigger headwind in fiscal year '27 once those roll off?

Yes. But I mean math would suggest to the extent you've got lost revenue happening in 2026 associated with the roll-off of cards, which has been partially offset by these contractual obligations. You don't have the benefit of those contractual obligations, '27. So if you're doing a year-over-year compare, that would be the case.

Yes. But it's not going to be material?

Look, I mean, in the context of Mastercard, the loss of the debit portfolio is a very small portion of the total Mastercard in the first place. In fact, one of the things I shared with you at one of our earnings calls was in 2025, we expected the net revenue impact to be not material, right? And then when I think about this on a going forward basis, I think there's publicly available information as it relates to what the size of the debit portfolio is. And I think you can very well do the math as to what the impact is. Again, it's a partial offset from the contractual obligations in '26.

Right. What are your expectations like credit portfolio? We keep hearing mixed things that they like to move the credit portfolio. I don't know how you guys think about that.

It's, again, like I said, I mean, everything we're having in nature of dialogues with them shows a very strong cadence of dialogues on credit. We continue to be partnering with them on that. And nothing I've heard would suggest that, that changes.

Got it. I know it's not massively material, but the whole that Capital One creates. There's always wins and losses in every portfolio. I'm just thinking on the flip side. Is there anything in '26 or '27 that might be coming in to help fill some of the Capital One hole?

Well, I mean, if there's stuff coming in, it would be what we've been -- we've already announced that I would share with you. The reality is our teams are active. They continue to have a very strong pipeline, and we continue to engage with several partners in different ways. So I kind of view this as business as usual independent of whether the loss was there or not there of the debit portfolio, we'd be out there trying to win new business, and that's what we'll continue to do going forward.

Okay. Great. At your Investor Day in November of '24, you guys outlined three strategic priorities. It was the consumer payments, commercial and new payment flows and value-added services. Starting with the consumer payments piece. You guys have obviously done a great job of driving the secular shift from cash to electronic over the years. There's some concern that maybe we're running out of runway there. Maybe you can just help discuss the opportunity remains in the consumer payments and how you're going after it?

Sure. It's again, as we mentioned at Investor Day last year in November, right, we continue to see tremendous opportunity from a runway standpoint. And I'm not talking about a couple of years' worth of opportunity on the secular trends, which is what you're alluding to is -- what is the secular opportunity, which remains in terms of converting cash and check to electronic forms of payment. We see tremendous opportunity given our global footprint in terms of tapping into that. And we see that across volume as in the dollar value of spend as well as the number of transactions. In fact, I would tell you the penetration rate on the number of transactions, which have been digitized is lower than that of volume. And so our focus is to continue to tap into that volume opportunity but also accelerate on the number of transactions, which remain to be digitized. And we're doing that in a whole host of ways.

So for example, let's take something like transit. We've been leaning in heavily to create what were previously closed-loop transit environments to open-loop transit environments. Specific examples would be think about the London tube system. Historically, that used to be where a consumer went and used their Oyster card. So what they would do is they would use their credit, debit card to buy 20 pounds worth of an Oyster card, right? Then you use your Oyster card to do 10 rides. What that would mean is it was one card transaction for 20 pounds, just simplistically said. When they've gone open loop, which they have, right, now a consumer can use their Mastercard credentials every time they go through. That is still 20 pounds being spent, but it's 10 transactions. So that's a great example of how we're penetrating into that transaction opportunity. And there are many such examples which are there.

So that's one area I would tell you from a secular trend standpoint. There are many countries across the globe where cash is still the predominant way of being -- of how consumers transact. You go to a developed market like Japan. In Japan, there's a ton of cash, which still continues to be there. We're super focused on driving there, right? Germany, the other country where there's a bunch of cash. So we see tremendous opportunity. And even in the U.S., people oftentimes will say, well, the U.S. opportunity is kind of halved. The reality is the U.S. continues to grow at a very healthy clip, and we're tapping into areas such as rent, areas such as utilities, which historically have been challenged from an acceptance standpoint, we're making good headway there to actually get digital forms of payment. And our card credentials as being the method for payment there. So I'm very encouraged with the opportunity in consumer payments.

And while we're on the topic of consumer payments, what I'll mention to you is our company remains very focused on also optimizing what is currently on guard rails. And by that, I mean the following. If, for example, with all our analytics, we are able to identify that there's a certain portfolio, there's a certain strata of cards where the average spend per card is lower than what the benchmark is, we'll work hard with the issuing bank in question to get them up to snuff.

So the exciting thing is winning a new portfolio. That's what everybody talks about. To me, that's really interesting. But what's really interesting is what do you do with that portfolio after you win it? And this is where optimization comes in. How can you get the issuer's portfolio to outperform what market benchmarks are? This is where we use our services to drive hard on the consumer side.

For example, on cross-border, people ask, how is it that you guys are growing cross-border at such a healthy clip? Well, it takes a lot of effort. It's -- yes, it's winning the right portfolio, it's winning fast-growing portfolios, but it's also about helping ourselves grow those portfolios at a rapid pace by getting our loyalty platforms in place to work with merchants to make Mastercard the preferred payment mechanism on that. All of this lends to that consumer payments opportunity, right?

Last thing I'll mention is around tokenization, right? As you know, we've seen significant progress in terms of adoption of tokenization across the ecosystem. We talked about how in Q1, roughly 35% of our transactions are tokenized, we have mentioned that, that's the case. That's a pretty good kind of space to be in because tokenization means more volume going over our system means safer and secure volumes going around our systems. And very importantly, what tokenization does, and we've seen this, is tokenization tends to improve approval rates anywhere between 300 and 600 basis points. Higher approval rates mean more volume going over the system. So a ton of work going on in the consumer payment space, I remain super excited about the potential over the long term on that.

Yes. We had a merchant dinner last night. And one of the things they talked about the most is approval rates of rates like how did they get the transaction done is one of the most -- you don't think about that, but that's the most important thing to them. And obviously, tokenization can help spur that option for them.

I want to turn to the commercial business. I think that was the second strategic priority. Obviously, large untapped opportunity. It's kind of been dangling out there for a while. Can you maybe explain the strategy there? And what might be different to help unlock that opportunity now?

Yes. Look, I mean, I think the commercial opportunity is -- it's not only sizable, but it's actually exciting in terms of delivering in the here and now. So let's kind of put some metrics out there, which might be helpful to kind of just frame the opportunity.

Last year at Investor Day, we had shared with you that the addressable market in commercial is approximately $80 trillion as we see it. That is broken up into about $17 trillion of that addressable market at what we call the commercial point of sale and $63 trillion in invoice payments just to kind of frame what's there. Of that $17 trillion, which is in commercial point of sale, roughly $1 trillion as an industry has been carded so far. So there's this tremendous runway. And if I -- the best analogy I'd give you is this probably is what consumer payments look like a few decades ago. And then our invoice payments, what we've seen is $63 trillion, roughly $2 trillion of that is carded so far.

The here and now is around commercial point of sale, and that's what we're realizing today. And that's around our SME proposition. That's around our T&E propositions, that's around our P-card propositions. So in 2024, at the end of 2024, commercial volumes stood at about 13% of our overall GDV, which is our overall volumes as a company. It grew at about 11%. It grew faster than the market for Mastercard. So we're tapping into it by winning on market share. We're tapping into it by opening up new acceptance verticals to tap into that secular opportunity. And the way we're going about doing it is open up new acceptance get cards in the hands of the small business owners and very importantly, drive differentiation by bringing our platforms to bear to serve the specific needs of what the commercial opportunity is going after.

So for example, A small business owner might not care so much about a cashback proposition. A consumer might care about a cashback proposition. A small business owner might care more about are you giving me an expense reporting solution, which is what we deliver as part of our small business proposition. Small business owner might care about, "Hey, by the way, when I go and I use my card when I go for business travel and I rent a car, can I get an always-on discount at the car rental company?" we bring that through our Easy Savings platform. You drive differentiation in that way. And so we work with our issuers, we work with the acceptance universe to drive that. And I continue to see tremendous opportunity in that commercial point of sale in the here and now.

On invoice payments, we're tapping into it with our virtual cloud capabilities. It is growing at a very healthy clip. The opportunity is sizable. But the problem statement there is also one which will take time to solve. So this is not something where overnight, we're going to suddenly see an inflection curve, which comes in where suddenly you're going to see tons of people move on to virtual card payments. It's going to require building blocks. It's going to require us to work on a vertical-by-vertical basis like we've done in travel, like we've done in transportation, like we've done in logistics, like we've done in media. We're going to keep banging away at this because we think there's tremendous opportunity with them.

Which is why, going back to your first question, Bryan, I continue to see for the company, tremendous opportunity on the secular trends across both consumer and commercial. And it's not about, "Oh, it's all going to get realized in the next three years". This is building blocks for decades to come.

Yes. No, that's great. VASS has obviously been a big grower for you guys. I think it's now over 40% of revenue of the combined. Can you talk about the algorithm for services inside VASS and can it continue to grow at the rates it's growing at?

Sure. So look, I mean, VASS was no coincidence. It was a very deliberate part of what we took on as a company to go after because we identified that we have a unique asset in the nature of the data we have, which we can bring to bear. And this happened more than a decade ago when we started to lean in heavily on our value-added services and solutions.

You're right. VASS represents approximately 40% of the revenues of the company. It is very fast growing. And our strategy around VASS is it's a fast-growing revenue source. We want to continue to make it stay that way. Number two, it provides us diversification in terms of our revenue stream. So it provides greater resilience in up and down cycles. And we've seen that in COVID, where when payment volumes fell during COVID, VASS actually held up pretty nicely. So that's really important. And last but not the least, VASS provides differentiation. And differentiation is important because in order to win in payments, you've got to have unique services to drive differentiation. And that's how we win share to a large part.

So now coming to what are the -- what's the growth algorithm around VASS, right? We mentioned at our Investor Day last year that approximately 60% of VASS revenues is network linked. So it's tied to that underlying growth of the network. So back to your question around the secular trends, if you buy that the secular opportunity continues to exist from Mastercard, you're going to see the benefit of that come through in VASS growth, right, because 60% is network link.

On that building block, right, we've got -- so how we've kind of structured it as you've got the underlying payment transaction, you've got VASS, which is attached to that payment transaction, which writes that curve up. We're driving deeper penetration of our existing VASS solutions with our existing customer base, and there's more to go there. At the same time, what we're doing is -- we're building new VASS solutions, which we're attaching to the transaction. So you get the benefit of the number of services per transaction is increasing while the number of transactions are increasing. So that kind of lends to that growth algorithm which I was talking about, right?

And last but not the least, it's around expanding the addressable market we're going after. And by that, I mean, is a great example is actually a company we acquired last year called Recorded Future. Recorded Future is the world's largest threat intelligence company. Mastercard historically never participated in the addressable market associated with threat intelligence. With the acquisition of Recorded Future, we have opened up a new addressable market which actually contributes to that growth algorithm, which we're talking about from a VASS standpoint. And I'm happy to go into more detail about Recorded Future if that's of interest. But those are the building blocks, which have been driving the excellent growth we've been seeing around our value-added services.