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Global Payments Inc. (NYSE:GPN)

Investor Conference

January 17, 2013 8:30 am ET

Executives

Jane Elliott

Paul R. Garcia - Chairman and Chief Executive Officer

David E. Mangum - Chief Financial officer and Senior Executive Vice President

Guido Sacchi

Sid Singh

Jeffrey S. Sloan - President

Jay Rising

Jordan E. Cohen - President

Jane M. Forbes - Vice President of Investor Relations

Morgan M. Schuessler - President of International

Chris Davies

Joan Morla

Vladimir Komlev

James R. Hicks - President of Global Payments Asia Pacific

Analysts

Jason Kupferberg - Jefferies & Company, Inc., Research Division

Glenn Fodor

David Togut - Evercore Partners Inc., Research Division

Georgios Mihalos - Crédit Suisse AG, Research Division

Bryan Keane - Deutsche Bank AG, Research Division

Steven Kwok - Keefe, Bruyette, & Woods, Inc., Research Division

Wayne Johnson - Raymond James & Associates, Inc., Research Division

Christopher Shutler - William Blair & Company L.L.C., Research Division

Gregory Smith - Sterne Agee & Leach Inc., Research Division

Christopher C. Brendler - Stifel, Nicolaus & Co., Inc., Research Division

Jane Elliott

Good morning. Welcome to Global Payments' Investor Conference. I'm Jane Elliott, and I want to thank all of you for being here today. And I also want to note on -- for all of you here, we also have a webcast. And so, thanks to all of you online.

A couple of housekeeping items before I introduce Paul Garcia. Our Safe Harbor provision is in the books in front of you. Each of you have a copy of all of the slides, including the Safe Harbor provision that's on the screen right now, which, members of our management team may make forward-looking statements today and those statements may contain risks and uncertainties, which are covered in our 10-K.

So with that, I will move on. A quick overview of our agenda in terms of housekeeping. We will have a break partway through. And I would like to point out that we have 2 panels today, one in North America and one in our international business. We will take a few questions from the floor after each panel and then there will be a general Q&A at the end. So if you just make your notes for later. And because it is webcast, we will have Heather Ross, who you probably saw when you came in through registration and Kay Sharpton, who was downstairs checking you in this morning. They each will have a mic for each side of the room since it is webcast [Operator Instructions].

With that, I'm going to introduce Paul Garcia, our Chairman and CEO. Paul?

Paul R. Garcia

Good morning, everyone. Jane, thanks so much. It's great to have you all here. So over the next 3 hours, you're going to hear from our executive management team with updates on capital deployment, technology, product and our market-by-market expansion plans. So David Mangum leads us off discussing the framework that will govern how we deploy capital, that will drive both growth and shareholder return. David will also provide details about our announcement this morning on our accelerated share repurchase, which he adroitly managed.

Next, we will hear a technology update from our CIO, Guido Sacchi. Guido joined us approximately 18 months ago and has brought a tremendous amount of talent to this crucial role. Guido has a PhD in engineering and did his postdoctoral work at MIT, but he has that rare ability to apply the most advanced, strategic thinking in practical ways, resulting in best-in-class technology platforms. Guido will share what we have built, how we intend to leverage this technology as a foundation of our partner-of-choice strategy.

After Guido, Sid Singh will present our product strategy. Sid is in charge of worldwide product, having run product for us in Asia. Sid will discuss how we are building our global product set, offering our customers the ability to accept all payments in any currency on all devices in all geographies. Sid will also discuss our mobile commerce strategy that includes pay app. Pay app is one of the ways we intend to serve the worldwide mobile commerce market and is currently in pilot in Hong Kong.

Jeff Sloan, our President, will follow and outline our plans to expand our North and South American businesses. Then Jeff will lead a panel featuring Jay Rising, our U.S. President; and Jordan Cohen, President of Canada, for a deeper dive into those markets.

At the conclusion of that, you'll have an opportunity to ask some questions of the panelists as well.

Something that will not be separately addressed today, yet remains an integral part of our growth strategy, is our business development function, which Jeff also leads. As you know, Global Payments has invested over $850 million in the last 3 years in M&A activities, and Jeff has added substantial human capital to that endeavor.

Mac Schuessler, President of International, will follow to discuss our international business and our strategy for both organic and inorganic expansion.

We are really proud of what we have built internationally. No one has the depth of coverage that Global Payments has. And I am convinced that under Mac's leadership, the best is yet to come.

Mac will then lead a panel comprised of Chris Davies, President of the U.K.; James Hicks, President of Asia-Pacific; Vladimir Komlev, President of Russia and Joan Morla, President of Comercia, which is our Spanish joint venture with la Caixa.

We will conclude with a general Q&A session. And hopefully, you'll find this to be a rewarding 3 hours.

Now, it's my pleasure to introduce David Mangum, our Senior Executive Vice President and CFO. David?

David E. Mangum

Thanks, Paul. Thanks, everyone, for joining us today. I appreciate it. It's nice to see so many familiar faces in the room again.

I'm going to walk through really a couple updates early and then talk about our capital strategy, capital plans; where and how we've been deploying capital, particularly since the last time we had this meeting, and where we'll continue to deploy it as we go forward. More specifically, we'll talk about the financial model itself, the deployment and the outlook for the company. It's all a setup for which you'll see coming forward. And we've been working hard with the plan for these 18 to 24 months to drive global distribution, improve technology, improve leverage, product and improve distribution. And that's really the theme for the day. All setup for how we make capital choices and how we expect to continue to make capital choices as we go forward.

But to start off, let's do a couple of quick updates. Two things; not just the share repurchase. A little incremental update to our commentary on the ROC process and PCI remediation from last week. We have now actually completed all of our remediation work. We were just shy of that, you recall, last week. It's been turned over to our qualified security assessor, who's in the midst of walking through and assessing those on the way to report a compliance. And we're at the moment now where the timing is out of our hands. We've done our work. And the assessor will assess, as they do, and then it will be turned over to the networks, each of which has its own process for assessing the ROC and then returning us the list of PCI-compliant companies. We do believe and continue to believe we are weeks away from returning to those lists. So incremental progress, just as we said last week.

Today's announcement is, we're serious about buying back stock. We executed an accelerated share repurchase just this week, shortly after the earnings. And what you can see there is a commitment on our part. Again, we mean business; we're intending to buy back stock. We believe we have the resources to continue to pursue the growth strategies we'll discuss today. Organic acquisition, all simultaneously committing to buying back stock. And that will be a key theme I'll walk through as we go through.

This is a pretty straightforward structure. $125 million commitment to buy back stock. We've taken delivery and retired shares representing 80% of that value, and we'll true all this up probably about the end of the May when the process completes itself. So more to come on that as we go forward, but a very straightforward structure and nice opportunity for a buyback for us right now.

With that, let's move on to the financial model and then we'll walk through the capital deployment strategy and all the other pieces.

There's a term on this slide called partner of choice. You're going to hear a lot of that today. We believe we already are the partner of choice. We've got a great business partnering and in wholesaling our product out to Isis here in the U.S., as well as our partners around the world. And when we talk about partner of choice, we mean merchants, we mean distribution partners, technology partners, networks, everyone. And these are the characteristics of an attractive partner of choice, hopefully the characteristics of an attractive investment for you guys as well as we walk through it. But these pieces are what really fuel Global Payments and its ability to grow. And we'll walk through all of those, but these inform a capital strategy that's highlighted by our desire and our plan to maintain an investment-grade profile. We do not have public debt, but we do maintain an investment-grade profile. It is the first hurdle to being a partner of choice for banks around the world, for key bank joint venture partners and it's a real hurdle. We've had overt conversations with our bank partners about this, our partners at CaxiaBank, our partners at HSBC as specific examples of that.

This has a target leverage of 2.5x EBITDA. As you guys know, we generate in the order of $0.5 billion of annualized EBITDA. Note that, that's the target. We can certainly go above that for the right transaction. We de-lever fairly quickly, as you know. So the target. This is not a hard cap and we'll walk-through what that means. You'll also see a little note there about fixed rate debt. You can expect us to see us to continue to try and actively manage the balance sheet and the cap structure as we go forward and as we mature, in this $2.5 billion Fortune 1000 company level.

Right now, we were, as of this morning's announcement, probably just a shade over 2x levered. As I said before, this target maximum is not a hard cap for the right deal, for the right transaction, for the right deployment of capital. We have every opportunity to go north of this and then de-lever and come back down. Again, on the order of $0.5 billion of annualized EBITDA. So about 2x levered for now.

Maybe what's more important and maybe more interesting, with a company that has generated on the order of $300 million or so of free cash, that liquidity allows us to have the confidence to believe we can execute on all these growth plans that we're going to discuss over the course of the day.

You can see the -- we got a close of the Asia-Pacific transaction. In the share repurchase, we still have well over $600 million of immediate access to liquidity for the right strategic opportunity.

That's all the setup for, really, the strategy. And for us, at our scale and with our reach, we believe we have the opportunity to execute all 3 of these at once; that is, as you well know exactly why, we executed some of the refinancing we did earlier this fiscal year on the way to being able to close over $600 million of acquisitions of APT, which Jeff will describe later and Jay will discuss, of the Asia transaction, which sets us up for long-term growth in Asia, while at the same investing on growth, organic growth, product delivery, product development, technology integration, digital commerce, while continuing to return cash to shareholders with a consistent dividend. And also, buybacks in a routine and regular basis.

So we'll drill down under each of those for a moment as we go through the rest of the day.

We have been very disciplined in our price acquisition. That's true since Paul spun the company a decade ago. We will continue to be.

These acquisitions, when we do look at them and pursue them, it starts with a sustainable competitive advantage and it goes through the rest of it. This is our filter. It's the exact filter -- those of you who met a couple of our directors earlier, it's the exact filter we review with the Board for each acquisition. It's been the filter that has to -- the deal has to pass this filter to get through management on the way to the Board, on the way to deploying substantial amounts of capital. And that sustainable competitive advantage can come from technology, from distribution, from the markets being served, any of those definitions. But then it has to hit these characteristics down below. These are the hurdles. Without quoting to you exactly what the hurdle rates are, these are the hurdles conceptually as they roll through any deal.

And I want to make a point here: We turn down far more deals than we execute. There are very few deals that happen in this space, in payments in general, where we don't get a look at that deal. I can tell you a couple of recent deals announced. We had every opportunity to take a look at them. And we may or may not have walked away, but we obviously did walk away at some point. So think about that whenever you see announcements and you're thinking about process and what the market's doing, what deals are out there. We stick to the filter. And if it doesn't hit these things, we're not going to do the deal. It doesn't matter what the rest of the marketing of that deal is. And again, we turned down a couple of recent deals with which you guys are familiar and we'll continue to stick to our knitting and to just do what we do well. In particular, focusing on the bottom one of these bullets, which is our ability to execute and drive real value and nail everything we promised to our Board and to you shareholders when we actually do a deal and we actually do deploy the capital.

On organic growth. I want to pull apart the pieces of our capital expenditures that really drive the organic growth and in particular, drive the investments that you'll hear Guido and Sid Singh discuss when we talk about the fundamental logical platforms we built and the product we're delivering to drive longer-term growth.

So here, you can see, in any typical year, we're spending a fair amount of capital on terminals. It's a pretty consistent amount. It's really a cost of doing business; it's a cost of sale and subcategorized as capital. In the lighter blue, you can see what's maintenance and enhancements. You're always refreshing your data, you're always doing something with servers; patching, et cetera. And then, as you guys well know, we've been through a long cycle of migrations. If you go all the way back to 2011 on the slide, you've got our United Kingdom back in migration. We all had long talks about that going back a couple of years ago, lots of migrations across Asia. And those are beginning to filter down to a very manageable level. As we sit here today, we are working on migrating our United Kingdom front end from a legacy HSBC platform to our own platform and we're working on remaining migrations into Asia, which is really our India migration, so down to a fairly manageable level. And you can see the shape of that piece of the bar chart shrinking.

And then on top of that, we've had initiatives. And as you well know -- we've talked about it a lot, we're coming through a serious bubble of capital initiatives. It started with our GSC in the early stages of this slide, morphed into the data center and technology strategy that Guido's going to discuss in detail in a few minutes. And it's been married to security since then.

All of which we believe, again, settles down -- and you can see a bit of, what I'm calling, a normalized view of CapEx, the organic CapEx required to keep running the business but keep investing the business and investing growth at the same time, and it settles into this $80 million to $90 million range. We'll always have initiatives but these outside initiatives, data centers and the security, all settling down a little bit. And on a normalized basis, $80 million to $90 million of CapEx is really a nice place to start. If you look at the percentage of revenue, the size and the manageability of that, again, to be able to do -- continue to do M&A, married to buyback, married to organic investment.

So in the area of returning capital to the shareholders, you should expect us to continue a consistent dividend, but you should not expect to see a change to that policy either direction. But you will see us continue to buy back stock.

A couple of notes. This is updated for today's announcement. So we don't have a free cash flow projection up there for '13, as you well know, but it looks like on the order of 40% or so, given what we bought back so far and what we're committing to buy. It looks a lot like 2012.

2011 is a bit of a down year on the chart, but it's a deceiving down year. The 2010 buyback actually happened and was completed in fully -- mostly executed, excuse me, in the month of May of 2010. For us, it's actually a 2011 buyback, the way we think about it. And here, you see again the maturing of the company from a capital strategy, capital structure perspective. Consistent buybacks, consistent commitment to buy back stock. There's a word on here, "committed to deploying a significant percent of free cash flow." It's a constant story; it's been on 3 different slides. We are committed to deploying a big piece of free cash flow annually for buybacks, and you saw evidence of that, obviously, this morning.

So again, '11, '12, '13, all look an awful lot alike to me when I think about this slide, as opposed to what's actually on the slide itself right now. So ignore that. Just think about the way I think about the slide. Having said that, we are continuing to be committed to deploying more. And again, today's announcement is that 2013 is updated for today's announcement.

So that's the three-pronged approach to capital deployment. We're going to spend the bulk of the next 3 hours, as Paul said, talking about what the end result of that is and what we're trying to drive in terms of sustainable long-term growth, earnings performance, cash flow performance. But I want to set for a moment what the pieces are before we launch into the rest of the day.

We operate a unique global platform, unique global distribution capabilities. We're trying to enhance those; that will be one of the key themes today. And it comes from these markets. This is the -- what I describe as the portfolio of markets we serve and we operate today. It's headlined by the bottom of the slide obviously: These incredibly attractive long-term growth markets in Russia and in Asia. In Asia, in particular, when you marry the opportunity we have in Asia currently, but more importantly, the long-term promise of India and China.

Up and down, the rest of really solid scale providers couple with Mexico brilliantly right now, and you'll hear about that as the day goes on up above.

So true, solid, impressive long-term growth potential for all of these markets going forward, which should allow us to drive, and will allow us to drive, consistent and attractive earnings growth, cash flow growth, particularly when married to consistent buybacks and targeted M&A that matches our filter and meets our hurdles.

What you'll hear today are the key initiatives, market by market, that will drive the organic piece, as well as the inorganic piece of this. So we're going to set aside buybacks and formal capital deployment and balance sheet management for the rest of the day and talk about how we're creating leverage, how we're expanding distribution, what we should expect -- what you should expect to see over the coming years. All of these, really, a conscious investment strategy that started on the order of 2 years ago. We're using a house metaphor for today; we've been building the building blocks for the house. You'll hear Guido Sacchi come up in a moment. He came here 18 months ago, long before we knew we had a data intrusion, to begin building out the physical and logical infrastructure that would drive this company for the next 10 years. Again, long before that. We've had to now marry -- and it's actually going to turn out to be a brilliant success, what would've been a longer-term security plan to a very short-term security plan for mediation purposes, marry that to an existing technology strategy; and come out stronger for that as we come out the far end of this remediation process. On top of that, we lay our product innovation, new product core platform products that Sid Singh will discuss, married to innovative products, m-commerce, digital commerce, social commerce, leverage. All designed then to be distributed in a variety of ways that Jeff and Mac and their teams will discuss a little bit later, driving this partner-of-choice strategy that you'll hear thematically over the course of the day.

So with that, I'm going to turn the stage over to Guido Sacchi, who's going to talk about the bottom of this house, the foundation of it. And we're going to go from bottom up over the course of the day and we'll look forward to seeing you guys again in Q&A later in the day. Thank you.

Guido Sacchi

Thank you, David, and thank you, everybody, for being here with us today. I am thrilled to have about 20 minutes with the opportunity to tell you what I believe is a very compelling story.

You're going to hear a couple of themes recurring not only through my presentation, but through my colleagues' slides. The main theme here for the next 15 to 20 minutes is our successes in building an industry-leading technology platform that we can use to scale and leverage efficiently and drive our growth around the world.

When I started about 18 months ago, Executive Management and the Board gave me very precise directions in terms of the business objectives that my team and I needed to accomplish.

Improve performance. And that, by the way, talks to both technology and operational objectives and financial objectives in terms of cost efficiencies. Reduce operational risk. And now, especially that we have completed our remediation work on security, that has been a success and we can say that we are stronger and better for it. Increase our growth capacity. We have done a lot of work there, we have expanded capacity in our transaction processing environments across our platforms. We have -- we are very well-positioned to enable growth for the next 10 years.

Refresh our asset base. I am very fortunate to have had some capital investments over the last 18 months dedicated to this and the results are very tangible and again, sustain all of the other objectives. But we are here today with a highly refreshed asset base that again can be used to drive growth.

It is also very important to remember that this plan was in place before starting the remediation work, before discovering the security incident and before all the work we've done on security. And obviously, we needed to read and react, respond to that. But by and large, our plan is still what it was. We have been very focused and very disciplined in executing that plan and actually, some of the parts of those plan -- of that plan needed to be accelerated because of the remediation work.

So I'm extremely proud of what my team has accomplished and I am very comfortable in telling you today that we are in a great position, having largely built that foundation that we're talking about today, where we can build upon and deliver product innovation and better customer experiences.

The agenda is pretty straightforward. We're going to talk about, in some detail, about our recent progress. We're going to give you an update on security and then we're going to talk about what can you expect, what can we all expect moving forward.

So let's start with the accomplishment over the last 18 months, more focused on technology and our platforms. We have been very focused on execution. I believe that, especially in our industry, execution is a scarce commodity and being disciplined in that is the key to achieve a lot of good things, and we've done that. I'm going to go through some detail about our optimized network and data centers, talk about our enhanced, the front-end platforms; front-end is our authorization platforms. Our consolidated back-end system, our settlement system, and how did this all come together to create a truly solid foundation to enable growth. So let's look at each of these items in detail and discover how all of this contributes to the building of an industry-leading technology platform.

So let's talk in some detail about what we have accomplished over the last 18 months. We have completed the build-out of 2 new state-of-the-art data centers. Some advantages from that are, we have a lot of room for growth, we have removed a lot of the environmental constraints to growth due to our data center and infrastructure footprint. We have put a lot of good stuff inside those data centers. We are now designing and deploying what we call high availability architectures. These are platforms that are designed to provide very high service levels and sustain very high levels of transaction processing. We have also created geographic diversity and improved our disaster recovery capability and decreased risk that way.

On the cost efficiency side, among other things, we have executed a multi-year managed services agreement with a leading outsourcing firm that allows us to enjoy more fixed cost moving forward so that the scalability and what we can leverage out of the technology platform is increased.

I am very proud of the work that we have done across the world on our local and wide-area networks. We have deployed state-of-the-art technologies to simplify our network around the world and in the process, actually increased performance. We actually have, in our new data center, we have 10x the bandwidth that we used to have and we have also reduced cost. When you go through this kind of exercises through the use of technologies such as virtualization and MTLS, you actually reduce the cost of running and operating your networks around the world.

We have implemented a state-of-the-art Security Operations Center. This is essentially a team that looks at deploying advanced analytical capabilities to all of the security events that happen across our network. Just to give you an idea of the scale, this SOC, the Security Operations Center, analyzes billions of alerts every month. That doesn't mean there's anything bad in it, it just means that we are looking very carefully for what might happen on our network and we are now have very solid way of doing that with very advanced analytical capabilities.

Another thing that I'm very proud of, we have successfully rationalized our front-end platform strategy. I know that over some years, I guess, you have asked a lot of questions about G2 and about the future of our front-end strategy. We are going to go through some detail about that. But let me tell you, I'm very comfortable in terms of both -- of where we are, both in terms of performance and the strategic options that we have to leverage our front-end platforms.

In terms of execution, the last feather in the cap has been that we have converted Malaysia onto G2, which is our platform of choice on the front-end side.

Last but not least, we have recruited top-notch talent. This is very difficult to do, because a lot of skill sets in advanced network architectural engineering in security -- those areas have become very, very competitive.

We are fortunate that we've been able to attract and retain top-notch talent to Global Payments and to my team. So we have restructured a number of teams with new infusion of senior talent to allow us once again to continue to evolve our strategies and more importantly, execute on our objectives.

Some details on our data centers. We have relocated our primary processing facility and we have also built out a secondary processing facility, again, to obtain geographic diversification, improve disaster recovery and have overall a better footprint for our technology platform.

We have made extensive use of virtualization across our infrastructure, storage, network, server infrastructure, which by the way, have seen good capital investment that allowed us to refresh all of those assets. Storage, for example, most of our storage is essentially brand new and allows us to accommodate growth capacity for the next 5 to 10 years.

Virtualization and other techniques also allow us to be much more efficient both in terms of cost and in terms of service level. Just to give you a nugget of an example, provisioning environment, it used to take us more than a week; it now just takes a few hours.

We were live already with mission-critical applications in both facilities. We have new transaction-processing environment that are now operating as we speak in the new facilities. And we have started the process of retiring the existing facilities. We have already shut down a few small ones. And over the course of the next 12 or so months, we're going to continue to retire existing facilities, thus reaching even increased level of efficiencies and cost control.

What are the advantages that we think we are getting out of all this? We have highly available infrastructure with room for growth. We have done a lot of work to reduce our operational risk: Data replication, disaster recovery, driving cost efficiency through the use of partners and managed services on a fixed cost contract and we have increased our transaction per second by 2.5x. So one example of that is that during the recent holiday peak, we actually had a number of record days across the world, but especially in the U.S. and other parts, and we have seen a record transaction per second, which is one of the measures that we use to understand how we're doing on capacity and processing power. The peak last year was about 400 transactions per second in the U.S. This year, we have seen peak in the mid-500s. And we went through it, by the way, without breaking a sweat.

Let's talk about the authorization systems. So we have now 3 strategic regional or super regional platforms. The north host is the one that we use to process all of our Canadian volumes and we are in the middle of a migration of our U.K. volumes that are going to be consolidated early this calendar years onto the north host. The north host has also seen a complete refresh in terms of its asset base, so it's operating on completely new machines.

We have G2; that continues to be our platform of choice. G2 is processing for all of Asia-Pacific. As I said earlier, we have just moved Malaysia onto the platform and large customers in the U.S. are not only operating on G2, but we're bringing more of them onto the G2 platform. So we continue to drive the growth of that platform as our platform of choice.

The next challenge for G2 is going to be to migrate the India front ends from the HSBC systems, and so that's going to happen over the course of this calendar year. Very, very comfortable with where G2 is today.

We have the East platform that processes volumes in the U.S. That continues to be a high-volume transaction processing platform. We have made investments in it, also refreshing. It's asset-based, we have improved and increased capacity there by, as I said, a factor of about 2.5 through high availability architectures in our new data centers.

So the takeaway from this is that we are very happy both from an operational standpoint and a strategic standpoint in terms of where our authorization platforms are and what strategic options they offer us to enable our growth.

We continue to enjoy the advantages of a consolidated worldwide settlement system, or back-end system. We can leverage back office support functions, we can promote sophisticated pricing functionality and we drive lower and sustainable operating costs.

Also we can centralize all the support from our GSC, our Global Service Center in the Philippines, and net-net, we enjoy and continue to deliver a strong position to layer on acquisitions, as well as sustain organic growth.

So this is a nice picture that we are using as a metaphor for what we're doing. So we have built a very solid foundation based on the fundamentals: service availability, security. Obviously, we continue to evolve that. In this business, you sort of need to run just to stay still. But we also are going to provide more balance and focus, especially from my team, on product innovation, sophisticated data analytics and positive customer experiences. I believe that, that's going to be increasingly the differentiator in our marketplace, and this delivery of compelling customer experience is what we are focused on right now. We have the remediation work behind us and we can truly, truly focus on driving growth. All of this to enable the partner of choice strategy, as you've heard about from David and you're going to hear about more as we move forward throughout the day.

So what's the result of all this work? We can enable any payment on any device, anywhere. We call this our any, any, any strategy. We have created scalability for growth on a leverageable global platform. We can confidently enable product innovation, and we really want to stay focused on our customer experience. That is my personal commitment to our customers, that we really want to deliver increasingly compelling customer experiences.

We cannot forget that all of this drives on efficiency. We want to continue to drive increasingly lower marginal cost of transactions and we have the infrastructure in place to actually do that.

So let's talk briefly about an update on our security efforts. We have completed our remediation effort. We have submitted the material for approval to our qualified security assessor or QSA. They started their final walk-through early last week, so they are already in the middle of their final walk-through.

The process needs to work its way through and so we are now awaiting the report of compliance and their return to the network's list of compliant providers.

One thing that I want to say is, the card networks and our partners have been incredibly supportive and helpful throughout the process. This has actually, in my assessment, contributed to actually stronger relationship with the card brands and they have been providing us with a lot of advice and being with us every step of the way as we went through the remediation effort.

Security is always going to evolve. I mean, we live in a world where cyber security is at the forefront of any decent technology and business strategy. So we will continuously upgrade our core security. We will always evolve it, and we just need to do that. All of us need to do that, as probably everybody here knows very well.

We're actually deploying some very sophisticated capabilities in counterintelligence and threat management. It is also important in this connected world to optimize network and partner relationships. I talked about the card brands, I talked about -- a little bit about our bank partners, but other people in the ecosystem and in the payment systems see different things. It's very important to be plugged into that network and take advantage of a more global effort to fight cyber terrorists.

One very nice experience for me has actually been working with law enforcement agencies, which, by the way, do an incredible job of protecting us from cyber security threats. We, actually, now are in almost constant communication with them to get first alerts or to ask us for our advice into how we're dealing with certain things that we might be looking at on the horizon, or if we are seeing anything that they are looking at. So the law enforcement agencies, it -- that is very important to have that positive relationship with them and with other partners.

So we continue to leverage partnerships through managed services to manage cost, but also it's important, once again, to understand that getting access to sophisticated partners that are experts and industry-leading in cyber security is very important in our connected world.

We will continue to look at automations, especially on the administrative side of security and, in general, for governance risk and compliance. As you well know, the regulatory body of work is ever increasing, and so just the administrative work of keeping up with regulations and industry practices around the world is due for automation. And so we're going to use that to manage our costs as we evolve our security strategy.

Finally, what can we expect moving forward? This is a very fancy slide that we are going to use again as a metaphor, but my job and the job of my team is especially, as David said, to build out that foundation, build out that core so that we can confidently grow in scale for the next 5 to 10 years.

Next, you're going to hear Sid Singh talk about what specifically we are doing in terms of product innovation and how we are enabling conflict distribution channels to fulfill our vision of being a partner of choice across the world.

So in summary, we have made tremendous progress in strengthening and improving our technology platforms. We have built a very solid foundation that we can build on. We have completed our remediation work and we are well on our way to implement our security transformation initiatives. And we will continue to enhance the platform. We have multiple initiatives underway. Again, you're going to hear from Sid in a minute. But we really do believe that at the end of the day, we have built a very solid and scalable technology platform to drive our growth.

So if you go back to the scorecard, we have successfully, over the last 18 months, continued to execute our plans to improve performance, reduce operational risk, increase our growth capacity and again, we sit here today with a highly refreshed asset base that positions us very well for the next 5 to 10 years.

So thank you very much. That concludes my presentation, and I'm pleased to introduce Sid Singh, our worldwide leader for product development. Sid?

Sid Singh

Thank you, Guido, and a very warm welcome to all of you. I'm Sid Singh, and I look after product strategy and development. I'm very fortunate and honored to lead a team of highly talented and passionate payment product professionals. And as you heard from Guido about some of the investments we are undertaking in the core foundational infrastructure, I'm here to talk about how we're leveraging these very investments into building innovative solutions for our customers and competitive differentiation for Global Payments.

I'll first start with, what is our product development philosophy? Now in addition to traditional retail channels that have been available to our customers, we've seen a significant proliferation of digital channels: Internet, mobile and social. And as a result, this is changing our customers' ability to attract and engage with their consumers. And we are very focused on helping our customers sell better and as a result, develop products that facilitate multi-channel commerce.

Secondly, we are also very focused on leveraging the global platforms and all the migrations that Guido and team are leading, which allows us to launch products quicker to market, and also reduce overall delivery costs.

Last but not the least, and in continuation of what you heard from Paul and David, we are very focused on developing solutions that position Global as a partner of choice. And I'll give you a few examples of what I mean by that in this presentation.

So let's go a little bit deeper into our product strategy. And I want to talk to you about a couple of points here. As I just said, we're very focused on being someone that is easy to do business with.

At the same time, there is a lot of complexity and fiction that has been introduced into the world of payments over the past few decades. And Global, as a member of that ecosystem, has to contend with some of that complexity.

As a result, we've come out with a product innovation layer that helps us achieve both the objectives: Be a good partner and hide the complexity. And before I dive into some of the specific initiatives, I want to talk to you about what I mean by the product innovation layer.

I'll start by giving a couple of examples. Not too long ago, third-party application developers, a very important aspect of our payments ecosystem, would be given a 165-page integration document that would take them a significant amount of time to go through. And last year, we actually launched an API available through our developer portal, which has significantly cut down their integration efforts to days and literally, hours. As a result, we have accumulated hundreds of innovative applications that have embedded our transaction processing and our payments into them over the past 12 to 15 months.

Not very dissimilar from what the smartphone industry has done. And as all of you use apps built on the platforms that Apple and Google have provided, similarly, we are also externalizing and promoting access to our payment platforms.

Another example is our customer setup API. It's a very simple, straightforward API, but was very complicated for us to build. But now having built it, we can cut down the amount of time it takes for a merchant to get set up across all of our platforms, across all of our databases to literally near real-time. And that is a testament to our partnership with Intuit in the U.K.

So these services, when put together and offered to our external customers, help them actually move away from all the complexity that we have to deal with on our side, and that's a big aspect of our product development strategy.

So moving on to specific ongoing initiatives within the world of product at Global, we categorize them as following: Core and Digital.

The core solutions are essentially transaction-processing products and information products that help our customers manage their business better, and fraud and risk solutions that improve the overall integrity of the payment ecosystem. I will talk to you about a couple of products that demonstrate our core product strategy in action.

On this slide, you can see Dynamic Currency Conversion and Installment Payment Plan. We call them DCC and IPP. Here, you can see a worldwide implementation of 2 highly successful and profitable solutions. We were one of the first ones to identify the market need and were the early mover to launch them and, leveraging our global platforms, able to execute these solutions across more than 13 markets.

Let's just dive into these products and explain why are they so profitable and why do we care about them.

DCC. In this example, you see our latest market to go live: Canada. In this example, you see a merchant converting the currency of the purchase into the home currency of the cardholder. The consumers love it because they get choice and convenience. Our merchants love it because we share a portion of the FX revenue with them; a win-win situation.

And that same concept of win-win also applies onto IPP or Installment Payment Plan. On this slide, you see our latest implementation in the Spanish market. In this example, you're actually witnessing a real-time point-of-sale purchase, large ticket amount, being broken into smaller, equal monthly installments. And we actually partnered with some of the leading card issuers such as HSBC and la Caixa to bring the solution to our merchants.

Our merchants love this because they're able to sell more and Global is the only one that can bring these millions of cardholders to our merchant locations.

In addition to these 2 products, we are also significantly investing into our other core product suite. We just launched, actually in 3 markets, our first business intelligence customer facing platform. That also lays the foundation for future data analytics, as Guido just talked about.

In fact, Global generates a lot of data points and one of the use cases that we've identified to leverage all the data we generate is retention.

Actually, in one market, we are now using more than 200 data points to score how likely the merchant is going to stay with us. Thereby, driving our retention programs.

Additionally, we're also planning to launch EMV in the U.S. market, as you're all aware; the mandate came in last year. And it's a case of design globally and launch locally.

We already have the functionality and we've launched it this year along with the mandate timelines. Lastly, we're also improving and investing our charge back, our analytics programs so that we can differentiate Global Payments' service and offer more value to our merchants.

Now I will shift gears and move into digital commerce. We talked about some of the channels and how significantly they're proliferating. Here is some statistics to show you, and these should be not of any surprise. We have more than 2 billion people accessing the Internet today, more than 5 billion mobile subscribers and close to 1 billion social media users across the planet. And all of these different trends are transcending into commerce transactions.

As you can see, e-commerce spends have been secularly improving and mobile payments have also become an important growth area.

And Global actually has specific initiatives across all of the 3 channels. And I will talk to you first about e-commerce or Internet.

We recently launched a product which is a patent-pending payment solution that significantly simplifies our merchants' ability to accept payments online. In fact, it's been launched in 2 markets. And the solution involves Global providing a replication of the merchants' checkout page in real-time such that the consumers never realize that they're not on the merchant's page anymore.

It not only solves PCI complexity for our merchants, but also decreases the dropout on the checkout pages. It's an example of what we are doing different from competition to strengthen our position in e-commerce.

In fact, this product also lays the foundation for other e-commerce solutions that we plan to launch and go deeper into the value chain, which I'll talk to you about in a few minutes.

The next focus area within digital is mobile. And mobile means a lot of different things to a lot of different people. For us, at Global, we've looked at 3 strategic areas within mobile. Firstly, mobile as POS, which is essentially converting a smartphone into a card-accepting device. And as you can see on the slide, we not only have our own solution pay app but also supporting other partners worldwide.

We are also very keen on facilitating mobile at the POS, which is a mobile wallet or a closed-loop wallet transacting at our worldwide merchant locations.

Thirdly, we want to enable mobile checkouts, mobile loyalty, mobile offers, et cetera. And I'll quickly dive into some of these.

But let me start by sharing with you what our vision is for mobile as POS. I'm pleased to introduce Global's pay app solution in this category. It just went live in Hong Kong. In fact, we also have a variant, an EMV Chip & PIN-enabled variant effort in the U.K. market.

The key element here is that while we continue to distribute this product to our existing distribution channels and perhaps, new distribution channels, we're not positioning ourselves against Square. Let me be very clear; because we are actually taking a partnership-based approach. The whole product is actually more than just an app and a hardware dongle. In fact, it's an ecosystem of automated customer underwriting, near real-time merchant setups, centralized support through our GSC in the Philippines and custom branding.

So what that means is that in this slide, you can see a couple of partners who can white label our platform and they can choose from a product menu, the options that make the most sense for them. Our partnership with Intuit in the U.K. is a testament, again, to this ecosystem that we have created.

Secondly, we're not a consumer company, so we will not be launching our wallet anytime soon. But we do want to accept all the major wallets. And as you can see on the slide, whether it's a Google wallet or an Isis wallet transacting through a Near Field Communication or NFC at our merchant locations, we support that today. All of our processing platforms, POS terminals, support the latest NFC protocols. In fact, we have more than 250,000 POS installations supporting NFC today.

We're also -- we've also signed a partnership with Visa to support their wallet on a global basis, V.me. A similar partnership was signed with Discover to support PayPal's wallet at our U.S. merchant locations.

And in the future, if MCX, or any other such major wallet comes to market, we will support it as long as we get the economic opportunity to do so.

Let me spend a few minutes on why we're excited about our partnership with Discover and launching PayPal, and you'll hear about this from Jay as well and Jeff that PayPal has 50 million active wallet users in the U.S. market, and we believe this will add significant value to our existing merchant base. And we plan to open up our network within this calendar year.

So in summary, from a digital commerce roadmap perspective, we have launched a lot of products. We're also in the process of introducing more services as we go deeper into the value chain. You've heard about e-commerce; now we're taking that to the next level. We plan to introduce shortly a solution that helps smaller customers get online with website building, website hosting and all the other tools they need to get -- to establish an online presence.

Now taking that to the next level, we also want our merchants to establish a Facebook storefront presence so that all the "likes" can be converted into real commerce transactions.

Overall, and as David mentioned, we want to support any payment, any channel, any device around the world in any currency, which will help us establish new distribution channels and leverage our multinational footprint.

With that, I would like to introduce Jeff Sloan.

Jeffrey S. Sloan

Thanks, Sid. I'm very pleased to be here today and to update you all on our Americas businesses. First, a little bit of background for me. I'm responsible for our U.S., Canadian, Latin and South American businesses, which today is primarily Brazil. I also manage our worldwide customer care, risk and underwriting, corporate development, marketing and communications efforts.

Now let's talk a little bit about the progress we've made over the last 2.5 years since our last Investor Day.

There really are 2 elements to our Americas business the way we think about it today. The first is a strong stable base in the Americas; and you can see this on this slide. We coupled that with another axis, which is, targeted markets for investable growth. And I'm going to talk about each one of those today.

First, let's discuss the base for a moment. We really go to market in 2 ways in the Americas. First, we have a national footprint and presence geographically, and by way of distribution, in Canada. What that means is, we are in all of the relevant geographic markets in Canada and all of the relevant vertical markets on a direct basis.

Second, we go to market primarily in the United States today on a vertical markets basis. The reason for that is we are able, in the United States, to target those vertical markets, which we'll talk more about today, that have better than market rates of revenue growth and margin, where we feel that we have a sustained competitive advantage. And we'll talk more about each of those in a few minutes.

Having discussed our base business, let me just give you a few thoughts around the market environment that is facilitating our growth. And I think, if you think about the way Guido and Paul and David and Sid described our business, these trends really support our any, any, any thesis the way Guido had summarized it.

So let me highlight some elements of the current market environment. First, Sid just described the nature of the mobile commerce or m-commerce market in his presentation. What I would tell you is that my view is that the social and cultural trend today in the Americas provide ample room for growth for us in m-commerce over the coming years. I don't have to look any further than 2 of my teenagers to see how they use their phones today to interact with their friends. That is the market that we need to capitalize on today to provide for the future.

Second, recent rule changes from the networks in terms of network evolution in the form of aggregation rules and what we call PSPs or Payment Service Provider rules, help us at Global Payments worldwide to process more volumes in a PayPal-like fashion. So to use Sid's words, that makes it easier to do business with us wherever you would may be, including, in particular, in the Americas.

Third, EMV. We've already discussed EMV quite a bit today. EMV, as Sid alluded to, is a mandate from the networks that will be effective in its first pass on April 1, 2013, with a liability shift date in October of 2015.

We think that EMV in our environment provides us with a competitive advantage for 2 reasons. First, we have extensive experience with EMV around the world. Given our worldwide footprint, which I think is very distinctive to Global Payments, there is no one else out there who has more EMV implementations in more markets than Global Payments does today.

So our ability to take that know-how and most recent implementation of EMV into Canada, and capitalize that in the Americas, especially in the United States, is very important.

Second, I believe our experience with EMV in other markets will allow us to capture share in the U.S. market as we use EMV as a competitive means of differentiation for us to offer more value-added services to our merchant base.

In addition to our stable base, we are investing very substantially today in the Americas in growth through diversification. If you took a snapshot look of our business in the Americas 5 years ago, you would have primarily seen 2 channels in our Americas business, a direct business and a partnering business.

Today, we have augmented our direct and partnering business with investments in integrated solutions, including APT, which I'll discuss in more detail; e-commerce, including our partnership with Visa CyberSource in the card-not-present space; and m-commerce, which we all just described. Let me spend a few minutes talking about each one of these in more detail.

First, in integrated solutions. Our investment in integrated solutions did not start with APT. It actually started quite some time ago with Greater Giving. So for those of you who don't know what Greater Giving is, Greater Giving is our non-profit VAR business based here in the United States in Portland, Oregon. It's been very successful for us; it's a key differentiator for us versus our competitors. And we have used that as a building block prior to APT to expand our VAR business outside of Greater Giving in the United States. And by the way, we use that building block to also expand our VAR business in Canada and in other markets.

APT, therefore, can be seen as a logical complement to what we started building with Greater Giving and our own internal VAR business. Sid also rightly described how that dovetails with our open API innovation layer and strategy.

Second, in e-commerce, we are very pleased with our acquisition and partnership with CyberSource Visa just under a year ago today. I'll talk more about that in a few slides, but it's hard to think of a better partner to go to market with globally for card-not-present business than Visa CyberSource.

Finally, Sid described our m-commerce initiatives. We believe, as you can see on this page, that mobile should be for us a $200 billion opportunity in terms of volume worldwide over a period of time.

The difference between the 670 and the 210 is we backed out the pure consumer-to-consumer business, which is generally not our focal point globally. But I would -- what I would tell you, though, is we should think about that $200 billion of volume as a 9-figure revenue

$200 billion of volume as a 9-figure revenue opportunity for us worldwide over a period of time.

Let me now turn our discussion towards growth. You've seen it before. David talked about the drivers -- growth in the Americas, and those are really the first 3 elements on this slide. I'm going to spend time discussing numbers 4, 5 and 6, which are expanding distribution, stability in Canada and geographic expansion; first, in Brazil, and then second, more generally, in Latin and South America.

The first initiative for expanding distribution that I want to focus on is our integrated solutions efforts, and in particular, APT, which is the transaction that we announced in August of 2012 and closed in October. There are 5 legs to the APT's tool. The first one is to own and control more of the payments value chain. This is a business that is core to us today. If we like it a little, we should like it a lot and do more of it. We were able to expand our economics dramatically in terms of capturing those spreads at SME merchants through the transaction.

Second, if you think about what I said about a moment ago, as the U.S. being primarily a tale of vertical markets, APT brought us an additional 30 vertical markets in the U.S., where we did not have a sizable presence prior to the transaction.

Third, those vertical markets and their technology allow us to minimize commoditization and mitigate any distant remediation risk. What APT and our VAR and Greater Giving businesses sell is service. What customers come to APT for is a value-added service that seamlessly integrates, for example, into a dentist office. So a dentist can use your credit card, when you're making a payment for deductible and coinsurance. At the same time, they're scheduling your next visit. At the same time, they're talking about follow ups. At the same time, they're doing their own time and attendance for their own employees and the indication provisioning.

As a result of that technology and of sale as a service, APT necessarily -- and you've seen this in our business and other VAR businesses -- results in lower attrition and higher retention of customers. And that's true for APT, and that's true for other models in that service sphere.

And then lastly, as David rightly mentioned in the criteria that we use for acquisitions, we are not looking to acquire assets that aren't additive to our rate of revenue and earnings growth. And APT certainly meets those criteria.

Let me also provide a quick snapshot on APT today by way of some metrics. Today, APT with us has over 30,000 active merchants, all in the United States, over 1,000 VAR partners, which is up from when we announced the transactions. And we process them today, a nearly $9 billion run rate on volume at APT. And I'll just echo what David and Paul said in our earnings call: We're very pleased with the performance in the handfuls of months that we've owned the company.

So how big is the integrated services market? It's obviously something that we spend a lot of time thinking about in the context of our own business, as well as in the context of the APT acquisition. So here is a snapshot, just in the United States, just of the top 5 current verticals that APT is in. And remember, they're in 30. So this is just the top 5.

First, if you just look at their top 5 vertical markets on the slide in the aggregate, this is a pool of roughly 1.5 million merchants. That's not a surprise. Medical and dental is a big category, and so is automotive, but 1.5 million merchants in the very first pool for APT. Today, we and APT have less than 1% of that total market, and we have less than 10% of the addressable clients within the existing VAR partners in that market. So there's ample room for growth.

So if you make various assumptions about how quickly we capture a share in those existing vertical markets that APT is already in, we believe, in the U.S. alone, that this is more than $1 billion annual revenue opportunity, and that's without expanding the APT business model to other markets, including in particular, in Canada, which I'm going to discuss in a moment.

Our partner of choice strategy, which you've heard a lot about today, has enabled us to participate in other markets by capitalizing on our people, our services and our worldwide footprint. A key reason, I believe, for example, that we were successful in purchasing Visa CyberSource's card-not-present portfolio in the United States was the quality and depth of our relationship with both CyberSource and Visa, because they were currently a customer at the time of the transaction. And we have been very pleased with their performance to date.

Today, in partnership with CyberSource and Visa, we now have 11,000 card-not-present merchants in the U.S. through that relationship that we owned. That is up 22% from last year -- when we announced the transaction, it was about 9,000 that we disclosed, and that's in less than a year. That's pretty good -- a pretty good record in less than 12 months.

Second, and from a strategy point of view, we are even more pleased that we were able to extend that relationship beyond just the United States into other markets, including importantly Europe, Asia and Canada. So we've been able to take what was primarily a U.S. deal and make it a worldwide deal, leveraging our unique footprint.

And that's a very good segue into Canada. Let me say first that Canada is a very important part of Global Payments, and we would not be where we are today as a company without our relationships in Canada with CIBC, HSBC, National Bank of Canada, and with that, our Canadian colleagues. And Jordan, of course, is here today.

Our business in Canada, as I've said in our last number of calls, is a balance. It's a balance between transaction growth, and we've been growing, we believe, faster than market in Canada, as we've been disclosing; new sales, just a function of those transactions; new product introductions in BCC, for example, as Sid alluded to; and we balance that against spread diminution, primarily in our SME portfolio and a weaker macro-economic climate.

In the last 2 quarters of fiscal 2013, the rate of decline has slowed. We are doing a better job of managing it, but we're not perfect, and we have to continue to work on it, but it is a very important part of our story, our history and our future.

In addition, in Canada, we have aggressively managed headcount, both absolutely, by number, as well as aggressively expanded transitions into other markets, like the GSC in Manila, and also further consolidation into our North American footprint. For example, our Canadian headcount has gone from about 500 FTEs, down to 300 over the last 3 years. That's not all net reductions; that includes move-ins to Manila and to Owings Mills.

Lastly, I want to touch on new markets; another important driver for growth for us in the Americas. The most obvious topic, of course, is Brazil. We're very pleased with our progress in Brazil. As we announced last week, we have received licensing authority from Visa and MasterCard to enter the market as an acquirer in Brazil. I want to be clear though, this is a de novo entry into the market, which is not something that we typically do. For us to get a step-like function and to have a meaningful impact on financial results, we are going to have to find JV partners and acquisition candidates in the market to have the kind of impact that we want to have on our business globally in Brazil.

In summary, to facilitate our any, any, any strategy, we have 2 axes of growth in the Americas. First, is a strong, stable base. And second are areas for investment that provide growth for today and in the future.

And with that, I want to introduce Jordan Cohen and Jay Rising and ask them to come up here on stage with me.

We're going to have our first panel conversation. Let me just talk a little about the format. I will be asking Jordan -- Jordan's on my immediate left and Jay to Jordan's left -- a number of questions about our businesses in the Americas. And then, time permitting, we'll probably have the opportunity for 1 or 2 questions from the audience.

Let me just give you Jordan's background and then Jay's. Jordan, as I mentioned before, is the President of Global Payments Canada. Jordan has extensive payments industry experience, over 20 years with us in Canada and also with CIBC, prior to us. Jordan is currently the Chairman of the MasterCard Advisory Board in Canada.

To Jordan's left is Jay Rising. Jay has been with us as the president of the U.S. business for approximately 2 years. Prior to joining Global, Jay has an extensive history in the transaction processing industry, including at Hewitt Associates. He was the Head of National Sales at ADP, and he also spent 14 years at American Express.

So with that, let me ask you guys a few questions.

Question-and-Answer Session

Jeffrey S. Sloan

And Jay, let's start with you. Jay, can you describe the payments market in the United States, with a particular focus on maturity of the market, competition, penetration rates and the like?

Jay Rising

Sure. I'd be happy to. The U.S. market is complex. On one hand, it's generally mature and penetrated, but on the other hand, I still see significant opportunity for segmentation, for inflection points and for technical innovation that allow us to achieve the growth trajectory that David talked about in his earlier presentation. And I'll walk you through that a little bit. But first of all, today, the U.S. market is, as you know, roughly 35% credit or sig debit, roughly 55% PIN debit and 10% other. And that's our share, and that's roughly the share of the industry as well too. Our competition, you know today as well, too, is First Data, Bank of America, Vantiv, Heartland and Elavon, and they all have varying different ways to go-to-market, as do we, which I will talk about. We are technically #6 in the U.S. market in terms of processing volume, which again, you all know. But I would add to that the caveat that the way I look at the market is based upon specific markets where we choose to compete, and I will talk more about that in a minute. But in those particular situations, our competitive standing is in fact, much higher. And you will see that as a recurring theme when I talk about our strategy, that we will have disciplined execution in chosen markets based upon the appeal of the growth trajectory and the spread and the retention. I think it's an important part our execution is to be disciplined. We, today, go to market, as you know, through ISOs, through direct referrals with bank partners, with vertical markets that Jeff mentioned as well, too. We also go through them with APT, our new acquisition as well, that I'll talk just a little bit about to try to add some color to what Jeff said. And we're happy with all of them, but there's still more we can do that I'll talk a little bit about, because I think it's still a dynamic market. In terms of going forward, the reason I feel comfortable with David's growth trajectory is I see 3 underlying drivers of growth in the U.S. market. The first, obviously, is GDP. The second is the continual secular shift from cash to card. And the third, I think, is a chance for us to execute better and gain share in our chosen markets. And that's, obviously, the crux of the way I look at the market right now is, how can we attack our chosen market successfully and execute better than our competitors? And quite frankly, if you look at Jeff's presentation, the things that I'd zero in on the U.S. and what I think are driving the competitive landscape and what will drive our strategy going forward, 2 key elements of it: Leveraging technology and expanding and controlling more of our distribution. I think those are the key drivers of the U.S. landscape going forward. And they're also the key components of our strategy going forward. Obviously, underlying that is a product strategy and the infrastructure and the scalability. But in terms of how we plan to go to market in the U.S., and how I plan to address the landscape, it's technology and it's basically expanding and controlling more of our distribution. And I would say that APT is, in fact, an important part of that strategy. It was a very strategic acquisition; I'm very grateful for the company for helping us with that. But you should look at it as a real enabling technology that's a manifestation of our core strategy. We are focused on making technology a core competency of us. We're focused on being faster to market with it. We're focused on technology that prevent us from being disintermediated as the market changes and evolves. And this is a tremendous asset for us as we go forward that we have tremendous plans for, beyond all the things that Jeff talked about in terms of verticals and all the rest of the things. And we will control more of the economics of the distribution channel. We will control more of the economics of the distribution channel. I think that's an important point of how we are trying to go-to-market in the U.S. So that's our core strategy, I think. I think technology distribution will be key drivers. APT is our enabling point for the next couple of years, as I see it. And I think growth will continue to be a function for us of GDP, of share, secular share shift and executing better against technology and distribution.

Jeffrey S. Sloan

Thanks, Jay. Jordan, you want to add color from Canada?

Jordan E. Cohen

Sure, Jeff. The first thing I would start out by saying about the Canadian market is that it's a mature market, clearly. Issuers have done a good job saturating the market with credit cards and debit cards; Canadians all carry both. In fact, Canadian debit card usage on a per capita basis is among the highest in the world. And that manifests itself in our market, with debit card transactions being 60% of the overall and credit card transactions being 40% overall. The next thing I would say about the market is that it's highly concentrated. At the top 4 to 5 acquirers, control approaching 90% of the market. We're in a very good place in Canada. From a share perspective, we are #2/#3. We have a good, solid footprint. We have very profitable portfolio, we have good scale in our market. But the market is a concentrated one. Clearly, the market could also be characterized as undergoing significant price competition. And as Jeff was saying, that price competition is coming more recently in the context of a bit of a sluggish economy. So the point that we're trying to accomplish is one of balance. Balancing those 2 factors and offset them to the best degree that we can, by way of keeping our sales pipeline as robust as possible, and it is very strong; introducing new products, as Sid pointed out, like DCC, into the market; looking for ongoing operating efficiencies by way of our GSC, Global Service Center in Manila, and also tactical pricing projects from time to time. The next element of the market that I would care to point out is that we're seeing increasing government intervention. That manifests itself in Canada by way of a regulation called the Code of Conduct, which really focuses on transparency in terms of pricing, and it's quite prescriptive in terms of the way that statements are presented to an acquirer's merchant customers. The Code of Conduct also dictates certain contractual provisions between acquirers and their customers. In terms of a little bit of forward-looking, in terms of the transaction growth that we see, we believe the market will continue to grow at the low single-digits range. And we also feel quite comfortable that we will be able to grow slightly ahead of the market. That would be a snapshot of the Canadian market.

Jeffrey S. Sloan

Thanks, Jordan. Maybe you could expand on some of those latter points and give us your view about the nature of the Canadian environment over time and why that may or may not be evident in other markets like the U.S. as those markets mature as well?

Jordan E. Cohen

Well, I think there are a number of unique elements in Canada that create it as a market onto itself, and that don't necessarily make Canada a predictor of any other market; especially, the U.S. market. The first thing I'd like to point out, in a very unique feature of the Canadian market, is that in 2008, interchanges were completely rebuilt both by Visa and by MasterCard. Previous to that, we have a very simplified interchange structure that had in fact been in place since the 1960s, and had stood up largely intact until 2008 -- 2009, when Visa and MasterCard completely rewrote it. Clearly, this was a point in time in the market where pricing was reset, because the new interchanges, which were far more complex than the old ones -- they bore no resemblance, one to the other -- pricing was reset, and since that time, since 2009, I think the market has seen a spread contraction. That's one highly unique feature to the Canadian market. Secondly, as it relates to the U.S. market, historically, the spreads in Canada have been far more attractive than those here in the U.S. At this point in time, as we speak, those spreads across all segments of the business have largely converged, so the markets, to some degree, mirror each other by way of spread. And lastly, I'd point out that, as I mentioned before, the government has really intervened substantially more than it's ever had in the last few years by way of the Code of Conduct, which I had just pointed out a few minutes ago. And that is another unique feature specific to Canada that is not necessarily predictive of any other market, especially the U.S. market.

Jeffrey S. Sloan

Thanks, Jordan. Jay, do you want to add any commentary?

Jay Rising

I think that's very well said. And I would agree with it, based upon my experience. The U.S. has been highly competitive, with a high number of competitors for quite a long time. The sort of delta that Jordan was talking about, I don't foresee happening in the U.S. We all know that the U.S. government did have a legislative impact through Durbin, although we think that is behind us. We don't see any future legislative vehicles going through Congress at this point in time to change what's happening on that front either. So I would agree with Jordan's comments; it's not transferred, but we've been competitive with a lot of competitors for quite a while.

Jeffrey S. Sloan

Thanks, Jay. Next, I want to touch a little bit on one of your comments, Jay, about the importance and the impact of newer technologies, especially in the U.S. market, and how those might create opportunities for our business in the U.S. And why don't we start with you, Jay, on that.

Jay Rising

Yes, I'd be happy to. Very excited to do it. Obviously, you've heard Sid's update on, generally, what we're doing with the product. What I can do is shed a little bit of light on how we're going to go to market with some of these technologies that we're working on. First and foremost, obviously, is mobility. And that takes many flavors. It's not simply synonymous with the micro market, and we look at it as a bigger enabling technology for us to both -- yes, it can attract new markets, but it also can open up the secular shift from cash to cards. We think that's important as well, too. We're going to go to market both directly, but also through the white labeling that Sid talked about. We think that's a really attractive vehicle for us in the States is to go to a white label program with corporate partners. So that'll be a big part of what we do. And also, we enable our mobile solutions through our ISOs as well. One thing I would mention about mobility, that sometimes is a lot that really excites me is, again, going back to our vertical strategy. We just are talking and finalizing the mobility strategy for our gaming business. It wouldn't be something that'd be on your radar screen normally, but the use of mobile technology in gaming, whether it'd be mobile cash advances or mobile gaming on a property site, or at some point in time whatever happens legislatively with Internet gambling, all those sorts of things are ways in which mobile technology can be labeled in our -- or launched in our vertical markets that excite us a great deal. So we will leverage that, we'll go to market in a couple of different ways, but we're excited about that. The other, we talked about very -- at a fairly high level, but integrated solutions, I don't want to lose sight of that. I think what that gives us, it basically gives us insulation from potential technical disintermediation. It increases stickiness, it increases our core competency, it makes us much more nimble on how we go to market and who we go to market with, again, consistent with our partner of choice. We are not trying to bet on technology, we're trying to leverage technology with partners, with our core competency being processing transactions. We also talked a little about PayPal. And I think that's an important one for us as well too, because even if the market shifts to alternative payments, we are still relatively agnostic to that, right? They will still process through our pipes and our rails. We will enable our point-of-sale. So that's good for us. It drives more transactions. We will be early movers on making sure we're able to accommodate the PayPal initiatives or other alternative payments as they crop up as well, too. And the last thing, briefly, is EMV. I think, based on my experience, having been in the technical transaction processing business, that EMV has the potential to be somewhat of a transaction -- of an inflection point. I wouldn't call it like Y2K was in the payroll business, but certainly, to some degree, it's going to be an inflection point that the smart companies are going to be ready to take advantage of. And we think that'll be us, based upon our experience around the world and in Canada, specifically. So those are 4 elements, Jeff: mobility, integrated solutions, PayPal, and I think EMV, are technical areas that we tend to want to capitalize on.

Jeffrey S. Sloan

Thanks, Jay. Jordan?

Jordan E. Cohen

Sure. Technology, clearly, will be a large driver for Canada. We're long past EMV in our market. We look forward to sharing our knowledge and expertise with our U.S. colleagues as they go through their EMV migration. Our next emphasis in Canada is contactless and NFC, and we're very well positioned in that area. Upwards of 40% of our point-of-sale interfaces in Canada, or Global Payments' point-of-sale interfaces, are NFC capable, and I think we're very well-positioned to take advantage of that emerging opportunity. I also think that m-commerce will be a very big and exciting factor in Canada for 2 reasons. Number one, the pie grows, and that's good for everyone. Just as importantly, I think m-commerce will give Visa and MasterCard an opportunity to more fully participate in the debit offering in Canada, which I think would be good news. Lastly, we believe very strongly in Canada on a technology-enabled distribution. We have a very strong VAR channel in our market, and we're very bullish on the APT acquisition. We look forward to integrating APT's product offering into our own product set and distributing it by way of our sales force nationally located coast-to-coast. So, clearly, technology will be a big driver for Canada going forward.

Jeffrey S. Sloan

Thank you, Jordan. We have a few minutes to take maybe 1 or 2 questions from the audience for Jay and Jordan. [Operator Instructions] Yes, sir?

Jason Kupferberg - Jefferies & Company, Inc., Research Division

Jason Kupferberg from Jefferies. I had a question just about interchange rates in the U.S. With, obviously, EMV coming relatively soon; NFC, or some form of mobile payments likely coming at some point in the future, do you think that will have an impact on U.S. interchange rates? Obviously, I'm thinking more on the credit side, given that debit's already been taken care of by the government. But -- and how will this -- will this impact distinctions between card-present and card-not-present rates? Do you think there'll be future new interchange categories, for example, for mobile transactions? Any thoughts around that?

Jeffrey S. Sloan

Yes, Jason. I'll start, and I'll ask Jay to comment. So the question, for those who couldn't hear, was around interchange trend likely in the U.S. in the coming years, as EMV rolls out initially in April and then a couple of years from now. I'll give you my opinion, which is -- I think Paul said this in previous presentations -- the rates of interchange in the United States on a comparative basis versus other markets are high. So I think, looking at a crystal ball, you would say, there's very little impetus for rates to go up from an interchange point of view, in all likelihood, we're going to look like the rest of the world over time, which has materially lower rates than we do. Now, there's a number of ways to get there. We've seen what's happened on signature debit and PIN debit, for example, in terms of legislation. We've also seen what's happened in other markets where regulators have tried to influence pure credit rates. I don't think -- to follow-up on Jay's point, I don't think there's likely to be direct regulation a la Durbin of pure credit card rates. So I don't think that's likely to be a governmental action. We've seen some relief, albeit temporarily, in the format of the settlement, where there's low interchange for 9 months or whatever the period of time is. I don't think, though, to get to the root of your question -- well, I think interchange will come down over time, which is, by the way, good for Global Payments -- I don't think that's going to be tied to EMV, in my opinion, for a few reasons. First, EMV is a multi-phased implementation. So if you look at the timetable, Jason, for EMV, part of it is now and part of it is 2.5 years from now, assuming that those dates are not amended over time. Second, the law of unintended consequences around these things, and you saw this with Durbin in PIN debit -- it's very hard to tie down one part of the ecosystem and not have cascading effects on the rest of it. That's actually very difficult to do. I think some merchants will argue that everything's more safe and secure now, so why are they paying the kind of rates they're paying for interchange? Some of that though, I think, is offset by some of the initial savings that they're supposed to be seeing from reduced fraud through authentication, through, for example, EMV and other -- and the milestones. So I don't think that EMV itself is going to lead to a large change in interchange rates, but those rates will come down. And if you want to comment, we'll come back to you in a second, Jay. Jordan, did you see interchange rates vary substantially in Canada with EMV implementation a number of years ago?

Jordan E. Cohen

There were incentives in place that went away when liability shift occurred. That was kind of the key kind of carrot-and-stick approach that was used -- effectively, I might add in the Canadian market.

Jeffrey S. Sloan

And by the way, there's no incentive on the table now for the networks, as you know, for EMV implementation in the United States. Jay, do you want to add anything?

Jay Rising

No. I think -- you and I talk about this regularly. And that's the point; I've seen nothing to refute that. It will not be EMV driven, per se.

Jeffrey S. Sloan

Okay. We have time for maybe one more question. Jay, you want to pick? At the back maybe, this time.

Glenn Fodor

Glenn Fodor from Autonomous Research. Question for anybody up there who wants to take it. When you think about your current merchant base and the folks you acquire for and service on the offline environment, what kind of penetration rate do you have with these same merchants for their e-commerce business and things that you're doing in mobile and anything that's sort of new and emerging technology. What's the penetration right now? I imagine it's pretty low. But where do you think you could take it? And how should we think about that; how that could impact yields on your business overall? Second part of my question is, you let out a very good story about how your platform is rejiggered and ready to accommodate all these new technologies. As investors, how confident can we be that we're not going to hear in, say, 9 months from now, "We need another technology refresh to accommodate things that we didn't anticipate before. So that's another weight on margins or $20 million investment." So how confident can we be that we are definitely past all the investment stage?

Jeffrey S. Sloan

Okay. So just to summarize it. The question was really 2 pieces. The first was, talk about the overlap between the business you're doing today with merchants with card-not-present off-line, as well as with mobile initiatives and everything else, and how does that look in terms of penetration and opportunities for growth? And the second element was, how confident are you on the technology and the product side that you have the tools that you need? I would say, the second question we should defer that for the group discussion toward the end of this, because I think David's input, in particular, is going to be important on the product and technology side. But I think the first part is kind of fair game for the panel up here. Jordan, why don't you just talk a little bit about your experience in Canada and on that first piece?

Jordan E. Cohen

I'll start by saying that I do see upside in our business in totality in e-commerce. I think we've made good headway over the last few years, and I think we have some good upside there going forward. I would say that the existing customers for us are the easiest customers to sign for e-commerce. Because #1, we know them. We can adjudicate credit more easily. We've demystified the whole nature of the relationship. We know what they do, we know what they sell, we know who they are. So in our market, from big-box national and supernational retailers right down to mom and pops, we do a very good job, I think, in penetrating our existing -- our existing customers. I think the opportunity for us in Canada is where we do not have, necessarily, an existing relationship with them, and that's where we're making the headway, and that's where our focus will continue to be.

Jeffrey S. Sloan

I think that's -- we're just about out of time for the panel. There'll be another panel session at the end with Paul, David, Mac and me. We could take up the second question there.

Jane M. Forbes

Yes. We're going to take a quick break to try to catch us up. So please be back in the room at 10:25 sharp, and then we'll hear from the international group and then a larger Q&A at the end.

[Break]

Jane M. Forbes

Okay, guys. If everybody could take their seats, we'll get started in a couple of minutes.

Okay, everybody. We're going to get started to try to keep us somewhat on schedule here. Welcome back to Global Payments' Investor Conference for those of you online. And the next topic is our international business. I'd like to introduce Mac Schuessler. Mac, I've had the pleasure of working with Mac for the last 7 years, and Mac recently took over our international businesses. Prior to that, Mac ran our operations center, and also had responsibilities for all of our human resources, marketing and a handful of other things.

So with that, I want to introduce Mac Schuessler. Mac?

Morgan M. Schuessler

Thank you, Jane. Good morning. So this morning, I'd like to cover a couple of things. One is, I'm going to talk about sort of the current footprint, and what I see as the key trends and what we see as the key trends in the industry that make it a very attractive industry to be a part of. Secondly, I'm going to talk about some of the key drivers of growth and how we're taking advantage of those across all of the international markets where we do business. I'm also going to do a deep dive -- a little bit more detail around Asia Pacific in the framework of how we think about those markets to give you some additional color. And then, finally, we'll end with a panel discussion with each of the regional presidents who actually manage these businesses day to day. And we'll let you -- I'll ask them some questions, and just like Jeff's format, we'll open up the floor to questions as well.

So this is the international footprint that I'm responsible for, it's both Europe and Asia. And what I love about this business is, as you can see, it's highly profitable across all the markets. We have strong market share, and the long-term outlook for revenue, we feel, is very strong in each of the markets, anywhere from mid to high single digits, all the way to the mid-teens and even higher in Asia and Russia. For those of you that are sort of new to our company, I want to walk you through when we acquired each of these businesses.

So in 2006, with the JV in Asia with HSBC, which we recently just bought the other portion late last year, and that provides us tremendous opportunity to continue to grow in that market. In 2008, we did the U.K. JV, also with HSBC, and we have since purchased that entire portfolio as well. And then in 2009, we made the Russian acquisition. In 2010, we did a Spanish joint venture that we currently have with la Caixa Bank.

The 6 trends that we see across the world that we think make this a great industry to be a part of: One that we talked about throughout the morning are new technologies. And I don't want to spend a lot of time on that, but I do want to give you a little bit more color on Intuit. We met with those guys this week to talk about, how do we keep growing that outlook globally? If you think about Intuit's business, they actually want to make the financial lives of their customers easier, and that's part of their mission. So they have these portfolio of products, and now they're tucking in payments. And if you think about their average customer, it's about $0.5 million in revenue and 5 to 10 employees. So what you have are these smaller merchants and smaller businesses that are now being brought into the payments ecosystem; it just makes the pipe bigger. And that's happening globally. And we think mobile technologies are what will enable that.

I'm going to skip to the third one around the bank's partnering appetite. I've had a couple of questions already around, what do you think about future deals? What I would say is, I've spent a lot of time in Asia. And, again, I'm very excited about the purchase of the other portion of the JV because what I see with some of the emerging markets in Asia is, they're looking at this business much like the West did years ago. And if you think about how this business was built in Global Payments, it was a decade ago that CIBC decided, "This isn't a business that we want within the bank; we want to run this as a separate business." It's the same thing with HSBC in both the U.K. and Asia. And more recently, if you look at la Caixa, this is something that was not a standalone P&L and they said, "Let's separate this so we can be more competitive, be more innovative." Because this is a game not only of leverage of infrastructure but also innovation; how do you have the best products and the best service to add more incremental revenue? I'm seeing the same thing in Asia. As we travel, James and I, throughout the region, we're finding Asian bankers are thinking the same thing. There's some mature markets where they're saying, "This is a leverage; it's a scale game," and we have very active conversations across Asia today.

I'm going to talk a little bit about the emerging middle and upper class on the next page, but I also want to talk about merchant globalization, because this is where Global Payments is uniquely positioned with our footprint and our capabilities. Being new to the job, it's important to me to spend some time talking to some of our big key customers, like the PayPals, like the Mangos. And one of them that I spent some time with -- I spent the day with, both Joan and I, who runs bank for us, is INDITEX. Have you guys heard of INDITEX? Their main brand is ZARA. And INDITEX reminds me sort of, of what Apple is to technology, ZARA is to fashion retailing. When we were actually touring the design center, the logistics center, we bumped into the founder. He's the third wealthiest man in the world; Ortega is worth over $50 billion. It's fascinating how they run their business. They're one of the only fashion houses that designs not only a summer collection but a winter collection at the exact same time. And why, would you ask, that they would do that? Because they have 6,000 stores. Some of those are in North America -- in the northern hemisphere, but some of those are in the southern hemisphere. And what I can promise you, and what they believe, is someone in Sao Paulo doesn't want to wear what we wore last year. They don't consider themselves just in the fashion business. They describe that they're in the perishable goods business. So that when they spot a fashion trend, they want it in the stores within a month. So it is a phenomenal company, and I've tried to spend a lot of time with companies like that.

Three observations that I've noticed and that we're going to work hard to continue to deliver that these customers are interested in. One is, they don't want good service. They want self-service. Right? So don't misunderstand. When they call, they want to call; they go, "Well, [indiscernible]." But they generally don't want to have to call. So the investments that Guido is making, the product development that Sid's doing, to put as much as we can online, is what our customers are looking for. And they're looking for it across multiple markets, so they're not interfacing into 50 different systems.

Secondly, one thing I want to understand about these big global accounts is, do they just want to negotiate you down to one really low price that's coming out of one major market? And what we're finding is, they don't want one price, they want a market price. So they want to understand -- they know that our cost of doing business in one country may be different than another, and they know just like themselves, their real estate costs are different, that labor costs are different.

The third thing is, they really want a partner that could help them access growth markets: Russia, China, India. They want players that -- because they don't want to have to spend a lot of time around infrastructure, payments logistics, those types of things. They want to be able to put a store in, move quickly with a partner that has a physical presence in the market. And that's a unique advantage for Global Payments. So the exciting piece on the merchant globalization piece: Merchants are now growing globally. I used to work in American Express. We kept talking about people globalizing their businesses. It's happening today, it's happening in the retail space and that's where we have a significant strength.

Next, I want to talk a little bit about the trend of the emerging middle and upper class throughout the globe. BCG estimates that by 2020, there will be 1 billion middle-class consumers in China and India combined; 1 billion. If you look at the right-hand side of this slide, this is a study by McKinsey. It shows the top 600 cities in the world generate 60% of the GDP. And as we all know, right now, the card business is concentrated in the large metropolitan areas. The interesting part about this slide is over the next 13 years, there's going to be a turnover on who composes those 600 cities. 136 of those cities will be new cities. And of those, 100 will be from China, 13 will be from India and 8 from Latin America. So you'll see a major growth in the metropolitan middle upper classes in these emerging markets.

So let's talk about the growth drivers for Global Payments. I'm really going to focus on the 3 at the bottom, which are the ones that, I think, we're highly, highly focused on, and I think I want to provide you more color on. The first is around JVs and acquisitions. We're extremely focused on how do we expand not only in markets that we do business in today, like India and China and Europe, where we can find significant deals that allow us to add additional scale. But also, there are markets that we want to participate in today and that we're going to be actively going through, like Thailand and Indonesia, that have great, great economic trends, great growth markets and also have a wonderful secular trend of conversion from cash to card. We also -- and I'll talk a little bit more in detail about Asia. The mature markets are interesting, too, because we are now a global player that has the leverage of technology and operations so we can go into these mature markets as well with great advantage.

Expanding distribution. So beyond the big transformational deals that can make a big difference in a region, it's also day in and day out, what each of these guys do, is they try and find additional distribution in the markets where we have business today. So at the end of 2011, we had about 8,000 referral branches in the international group that referred us business. In 2013, we now have 10,600.

Let me describe 2 of those in a little bit of detail so you can sort of understand, what are these types of deals and how do they work? So Paul and James and I were in Mumbai and met with Uday Kotak, who actually is the principal at a very sizable financial services firm. He's -- I'm thinking he's worth about $4 billion and one of the new billionaires in India. He's very excited about the fact he can now partner -- because, again, we bought the other part of the JV -- he can now partner with a global player to provide great innovative products to his small merchants. That one deal alone has over 300 bank branches that we can get business from in India.

Another example is Banca Civica, which Paul talked about on the last analyst call. We are so fortunate to have a partner like la Caixa in Spain. It's one of the most sound financial institutions in that market. And as many of you know, that market is going through a great deal of transition as far as the weaker players. La Caixa is in a position where they're able to take advantage of that and assume and take over those assets so they can grow their market share. That has a trickle-down effect into Comercia so that we're able to grow our market share as well. Banca Civica is an example where we've added hundreds of branches to our network and franchise because of la Caixa's strong position in the market. We'll continue to focus on these types of deals to grow organic revenue in each market.

Everybody has talked a lot about partner of choice, so I want to just sort of give an international perspective. There are 2 great examples that I think some of the new deals like Intuit, I really aspire them to look like what's been done with PayPal and look like what's been done with UnionPay. So for PayPal today, we process hundreds of millions of transactions for their online business outside of the U.S. and up to 26 currencies in any given day. And the reason they've selected us and we've done so well is because there are very few companies that can do that.

UnionPay. UnionPay, what we've done is we've opened up all of our markets outside of the U.S -- I'm sorry, outside of China so that the international traveler, all this growth and wealth that's been created in China can now go through our network, not necessarily in China, but through our other markets, because we've opened up China UnionPay. For example, I was in Sochi, Russia with Vladimir. We were touring the 2014 Olympic site. So there will be travelers now that go to the Olympics in Sochi, and when they want to get on the ski lift to go up to ski, they actually can use their UnionPay card. So we're capturing the wealth that's being created in China and we're now capturing in our networks outside of that country by opening up Spain, Russia, China and the rest of the world.

This partnership has other benefits as well, as we talk about, how do we take advantage of buying the other half of the JV? China UnionPay, I don't know if you're familiar with it, created a new organization called UnionPay International. And this is their international division it's sort of member-based, much like Visa and MasterCard used to be. Well, there are many members, founding members. I went to the ceremony in Shanghai, I can't remember now; maybe a month ago. And it's great. We're a founding member. There's only one North American company that's a member of the governing body. It's Global Payments. And what that does is, it gives us access to the key executives at banks throughout that region so that we can prospect and we can try and enter into conversations around deals. We also have a similar relationship with Visa where we have exposure to some of the key banks throughout the region. So this partner of choice has sort of collateral benefits as well, as we try and do business development across the region.

All right. So I want to give you a little bit more color on Asia, because we report Asia, right, like it's one business. Well, it's 11 markets, and they are all very different. So we think about it really as 3 types of markets, okay? So there's the developed markets. And we like them all equally; they're just different. They're the developed markets. And these are markets that tend to have relatively stable, developed, mature economies, and they're already pretty far along the adoption curve of moving from cash to cards. Examples of these markets are Hong Kong, Taiwan and Singapore. And this is a significant part of our business in Asia. The opportunities in these markets is immediate because these are the markets where it's becoming clear, just like it has in the West, that this is a scale business. And there are people in these markets that approach us and say, "Would it make sense, now that you can partner with other institutions, to combine businesses and create leverage and scale and also use our innovative ability to port products from market to market to market that add incremental revenue?" And so these are markets, we think, there's immediate opportunities to do those types of deals.

Then there are growth markets. Growth markets are markets that are really fast-growing markets from a GDP perspective or sort of economic perspective and are a little bit more immature on the adoption curve of cards and electronic payments. Examples of those are markets we're already in, like the Philippines and Malaysia. And examples we're looking at or evaluating are places like Thailand and Indonesia. The strategy with these markets are, first, make sure you're participating in the best ones; which we've got some great markets like that. Even Russia is a market like that. Then make sure that we have very strong self-productivity and customer service so that we're capturing that organic growth within that market. So we're very, very focused on that. And then looking for the additional distribution channels, like I talked about earlier, like Kotak and those types of deals.

The third type of market are what we call investment markets, and there are 2. They are these huge economies everybody wants to do business in. It's India and China. And they're just massive in size. They have great growth rates, but they're unique because both of those markets are complex for completely different reasons. In India, they're much more immature on the adoption curve of electronic payments, and it's moving slower than some of the other developing markets. And in China, they've actually moved pretty quickly towards card payments. But it's highly regulated, and it's a closed market that we've done a good job, I believe, as a company, opening up province by province by province. And while all it's slow -- it feels like it's slow -- we're moving faster than anyone else. And our strategy there is to continue to invest in infrastructure of the sales force, continue to look for partners where we can partner when it's -- the timing's right, so that when these markets do change and they do open up or the adoption curve accelerates, we'll have the first-mover advantage.

So in closing, today, we're very focused on leveraging this profitable footprint to partner across the globe and to grow with our global merchants. In the future, we will expand into new geographies and continue to invest in new products and deals that allow us to take advantage of the organic growth rates globally and the secular growth rates.

So with that, I'm going to now ask my colleagues to join me on the stage for a panel discussion. I do want to introduce -- Rodney Farmer is with us today, and he actually runs the business in Prague. He's not part of the panel because we are focused on -- going to discuss the direct businesses, and he runs an indirect business out of the Czech Republic. So thank you, Rodney, for joining us.

So I want to introduce this team collectively because this is one of the greatest assets the company has. This group collectively has nearly 70 years of payments experience. And what's even more important is each of these individuals came to Global Payments through a deal, and most of them were previous bankers in a previous life. So this is the best testimonial. When we go meet with other banks and say, "Why is it a good idea to look at your acquiring business differently and partner with Global Payments," these guys can sit down and say, "I've been there. Here is why we made that decision, and here is why it's better." And that is a unique asset that Global Payments has.

So I'll start with Chris Davies, who runs our business in the U.K. We have James Hicks, who runs our business in Asia. He actually came over with the acquisition of the Canadian business, and then he went to run the business in Prague. And he's now been in Asia for about 2 years. Okay. And then we have Vladimir Komlev, who is in Russia. And we have Joan Morla, who is in Spain.

Morgan M. Schuessler

All right. So I will ask each of you the question. Can you -- to start out, each of you have very, very different markets. Can you just give us an overview of the payments markets in your region, sort of the competitors, the adoption rates? What does it look like today? And how do you think that will change over time? So Chris, why don't we start with you?

Chris Davies

The U.K. market is a mature market, as well we know. It's certainly one of the most mature markets in Europe. It's about a 70% penetration rate [indiscernible] about 70-30, with 70% debit cards, 30% credit cards. [indiscernible] services. We've got about 20% market share. So we're in a perfect position. So we're small enough to be able to care about our customers, but we're big enough to be able to deliver on everything we promise. And the market is continuing to grow. I think we're seeing about mid single-digit growth in the market, generally. And we believe with our premium product offering, we can exceed that by 1 or 2 percentage points. We have -- obviously we've part of Europe, and we have a great symbiotic relationship with Europe and lots of activity going on in Europe around SEPA. Yes, I can probably guarantee that SEPA will allow CME [ph] in terms of the political developments that are taking place. But it is grinding on, and it will bring benefits to the payments infrastructure ecosystem in Europe, which we will benefit from. I think we will see [indiscernible] a lower -- an impact on reducing interchange over time, which we can take advantage of, and opening up markets across Europe, which we can also take advantage of. That will be continuing to grow over the medium term. And I'd also expect to see quite a lot of growth in services and in non-retail in terms of card acceptance that traditionally have not necessarily been the case. And I'll talk a little bit more about that later, Mac.

Morgan M. Schuessler

Great. Joan, do you want to tell us about Spain?

Joan Morla

Let me give you a flavor about our market in Spain. Spain is -- the card penetration in Spain is still just 17%. So this is a huge opportunity for us. We have a market share of 24% and far away of our competitors. We have mainly 6, 7 competitors in Spain. But the second on price is at least 10 points less than we are. And, as you know, we have a deep financial consolidation in Spain. We are coming from a situation of 70, 80 banks and saving banks 2 years ago. And now we are roughly a dozen of these players. And our partner in Spain, la Caixa, is the leading bank in Spain and is very active on this consolidation. And now we have a distribution channel of more than 6,000 branches, and these are very efficient channels. Right? And this is very helpful. And another thing that I would like to highlight to you is that we are very focused in providing new services to our merchants. And we are importing best practices from all their Global Payments markets and trying to provide the most appealing portfolio of services of our merchants. And finally, we think that we will expand the market in mid single digits next year.

Morgan M. Schuessler

Great. Vladimir?

Vladimir Komlev

What can I say about Russia? On the market, we have a card penetration of less than 5%; actually, 2%, 3% at the maximum. There is no other way for the company like Global Payments; is to grow. And grow in all possible directions. I think Global Payments has an excellent position on such an attractive market. We are #2 on the Russian market after the huge -- giant Russian, state-owned, SpareBank. And with just a few competitors; the rest of the acquiring market is highly fragmented. There are hundreds, hundreds of acquirers on the market. We have full country coverage, and we are present in all of the regions across Russia, which is a huge territory. And we are present physically in all the cities with a population of above 0.5 million people. Our partners, bank partners, have more than 1,400 referral branches who refer customers to us also from the whole country. And if we speak about these partners, these are Société Générale, Rosbank; this is Alfa-Bank, this is UniCredit, this is Intel [ph] and these are just a few of those who refer customers to us for our partner banks. The growth on the market overall is pretty impressive, and it is anticipated to be 25% to 35% in the oncoming years in payments processing and in payments segment. And also, I can say that some verticals are still totally undeveloped in terms of accepting electronic payments and card payments such as governmental payments, such as education, medical services. And this only adds up to a potential for extremely good growth in the future.

Morgan M. Schuessler

Great. James, you've got one of the more complicated markets. So can you walk us through yours?

James R. Hicks

Sure. Happy to. So in Asia, as Mac referenced, we're in 11 markets and territories there. They're all different in requirements, complexity, culture, languages. I live in Hong Kong. To give you an example, for those of you who don't know it, my children learned Mandarin and simplified Chinese. I hear Cantonese. And when I talk to our Taiwanese colleagues, they write in traditional [indiscernible], like Mandarin, traditional Chinese. So it gives you an example of how complex the market is, just in that perspective. As Mac said, we look at it in 3 different ways: there's the developed and mature markets. Hong Kong, Singapore and Taiwan would be the most mature markets there. We're one of the largest players in Hong Kong. Most people in those markets have cards; they use them. Living in Hong Kong, I can pretty much use some form of card in some way for almost everything I want to purchase. Then you get into the growth markets or the emerging markets; places like Malaysia, Philippines, Sri Lanka, et cetera. These are smaller markets that are growing in card penetration, lower penetration today but growing over time and growing middle class, growing usage. Sri Lanka, we're the largest player in Sri Lanka. It's a great example. It's a beautiful, beautiful place, not much infrastructure; they are building it out. The government has set a target of 5-year plan for tourism to drive tourism up to more than 2.6 million visitors a year by 2016. My last visit, you could see in Colombo areas where major hotel chains are looking to build because there's not many major brands in Colombo. So it's a good example of growth that we like to see and are experiencing benefits from in the emerging markets. And then as Mac said, there's the investment or the very -- I would call them very unique markets. India, obviously, a very unique place to do business. As our leader there, Dipti, likes to remind me, it's not only a country, it's a continent: Different languages, dialects, North, South, East, West. There is very low card penetration today. The brands and the issuers are working to get more of that in market. There's some regulatory challenges and those are evolving. But on the upside, there is increasing usage. There is new schemes coming into place like RuPay, which is trying to be developed in India. And over time, we see long-term growth opportunities there. And then China, obviously, a very dynamic place, rapidly growing card usage there. To give you some perspective, many years ago in Canada, we started talking to China UnionPay, and I remember being shocked in a good way at the time back 5 or 6 years ago when they said they had 800 million cards in usage, in circulation. Now they have over 3 billion in circulation, and that's pretty much all mainland Chinese cardholders. So lots of increase there. They're trying to get lots more card usage there. It is a highly regulated market. As Mac said, it's very controlled. And -- but we've, I think -- and we're very proud of the work we've done there. Not only were we the first to enter, thanks to Paul's work and everyone else in Beijing, but we're now in 5 of the provinces in China; we're continuing to do hard work to expand that. And we think we're very, very well-positioned there. From a competition perspective, similar to what you said, Mac, this is a market where pretty much all of our competition today is banks. It's local banks we're offering, acquiring along with other services that they do. And this isn't terribly surprising because as was referenced, if you think back a couple of decades to the United States, you think back to 10 to 15 years ago in Canada, you think back 8 years ago in the U.K., et cetera, et cetera, this was all bank-owned. Our industry activity is bank-owned. And as it evolves and grows, you see those partnership deals starting to occur. So we think we're very well-positioned for that, frankly, because -- for a number of reasons. The first is, there is no one else who has the geographic coverage we have, bar none. Absolutely no one can do what we can do in that market, and that's very appealing to the bank partners. Our local experience, our first-mover advantages is quite significant because unlike some other players who may want to enter that market, we've been in India for many, many years. We've been in China for many years, we've been in Hong Kong, et cetera. And, again, it's very, very appealing to some of these players. They don't want to have to teach someone about those markets. We have an incredibly successful track record of partnerships, both internationally, in North America and in Asia. So that's very appealing when we are talking to potential partners both on referrals and bank deals. They've seen us being successful in other markets. And finally -- it goes to Guido's point earlier, and we'll talk a little bit later maybe about this, but from a capability perspective, we already have in market G2 back-end systems and GSC in Manila, in the Philippines. And, again, this is very, very appealing to the opportunity. So I do believe we're starting to get to an inflection point. As Mac said, more and more banks are starting to look at this. And as the market evolves, I think we're well-positioned.

Morgan M. Schuessler

Great. So could each of you now talk a little bit about the macro environment? Each of you are in very, very different economies from -- economies that are contracting or growing. Could you give us some color around the macro environment market, how it's impacting your business and how you're responding to that in the way that you operate your business? So why don't we start with you, James?

James R. Hicks

Sure, sure. Well, there's no question. I think we're all aware that in Asia, over the last 9 to 12 months, there has been a cooling down, mostly driven by China, but India has slowed down as well. And we've seen this, we've seen some average ticket declines in the past 6 months. Average tickets, it has improved -- the slowing -- the decrease in average ticket has improved a little bit over the last quarter. Let me use Hong Kong as an example. GDP growth there is very slow, as you may be familiar with. It's very -- it's an economy driven by a lot of retail sales across the border in mainland Chinese, international travelers. And we have a lot of the high-end retailers in that marketplace. We have a lot of the hotels in that marketplace. And so we have seen some impact from that slowdown; no question about it. One of the card schemes in Hong Kong mentioned to us, it's not that there's all that many less mainland Chinese coming across the border, but instead of buying 10 Rolexes, they're buying 5. So we're seeing some manifestation of that in the region. Having said that, what we're really focused on, as you've heard, is partnerships. That is a key strength. If you go back to the U.S., Canada, Europe, et cetera, it's a key strength, the partnerships, and we're really focused on that. Paul has mentioned this before, and it's absolutely true. HSBC is an absolutely fabulous partner. They are great. I mean, when I came to Hong Kong, it is quite startling to have your currency with a brand of HSBC. The money that you use in Hong Kong, they're one of the banks that issue it. So fabulous. Having said that, we were precluded from doing deals in other regions, either legally or practically speaking. And the deal that we've done is tremendously exciting because it is opening up opportunities for us around the region. So we look at that as driving of more and more conversations with banks that we can benefit from the scale. They are our referral partners, we think; they're banks that don't have portfolios, like the Kotaks of the world, who want to have this service. So we are ideally positioned because we are bank-agnostic to a certain degree. So we are very excited about that. And then, we haven't really touched base too much on it, but we are learning and leveraging what we've done in other parts of the world, like the U.S. and Canada, et cetera, on technology by leveraging bar partners as well. And, again, I think we're very, very well-positioned. This is something that really hasn't been done in Asia before, but we're uniquely positioned, thanks to the learnings and the relationships we have elsewhere around the world.

Morgan M. Schuessler

Great. Chris, how about the U.K.?

Chris Davies

Yes. We're making an assumption that the U.K. will -- economic conditions will remain broadly the same for the immediate future. I think, as you know, pretty flat GDP growth in the U.K. generally, are low. You may not know but the South East of London continues to grow very strongly; the rest of the country left out. So there are areas of growth within the U.K., although overall, it's fairly flat. And we're going to see some growth sectors in the U.K. as well, similar to what we've mentioned earlier on. But -- and we see great growth in government spend, with a lot of pressure on local governments and central government to reduce costs, and using electronic payments is a great way of doing that. We're very well-positioned through a relationship we have with The Co-operative Bank, who harbors sort of go-to bankers for the regional councils in the U.K. And also, in education, where we are doing some great deals in the university sector. They're becoming much more commercial in their outlook, and we've signed up many, many new universities over the last few months. And we've recently done a deal with the Post Office, the British Post Office. And, again, the Post Office is being used as a vehicle by the government to drive down costs and utilize the branch network of the post office, and they're very well-positioned with our recent deal. We see continued growth in e-commerce. Typically, we're still seeing growth in e-commerce in the U.K. of between 18% and 20%, and we relaunched our e-commerce -- domestic e-commerce platform called Global Iris at the back end of last year. And they're probably migrating our merchants onto that platform, which will give us an opportunity to grow in terms of functionality and best-in-class offerings. And then commerce; we've referenced a couple of times our relationship with Intuit. Just to give you an example of that, Intuit are using -- are white-labeling, in effect, Global Payments. They've added their own software plumped into it [ph] as well. So a great partnership with them. But the great advantage of it; we recently -- hopefully, we're going to launch to the market as a whole very soon, but through pilots, we're seeing merchants on-boarding that's going through identification, verification of their ID, risk analysis and getting on board literally within seconds. So from end-to-end, it takes literally seconds for those merchants to on-board. Nobody else is doing that in the market at the moment. And our -- and with this partner of choice, our perspective in that market is to utilize the partnerships we have, rather than going to market directly to utilize their distribution systems and their brand to grow in that sector. And we'll continue to execute our plan both in our traditional sales channels and through the normal -- the new channels, Mac.

Morgan M. Schuessler

Great. Joan? Spain?

Joan Morla

Yes. As you know, we have a challenging economy in Spain. We have a high unemployment, and the personal consumption is still decreasing. But we have, too, some good news personally as the Spanish government reformed their labor law. And now it's easier for companies to hire and fire people or we have a stronger financial system. So that -- we think that will help to -- to help our banks to give more credit to the economy, and that, of course, will be good for us. And as often is happening in this kind of situation, this is providing us new opportunities for our business. As I mentioned before, our partner in Spain is being very active on the consolidation process, and we are adding more and more banks in our distribution channel. It is very efficient for us to sell our services through this channel. Additionally, our customers, the merchants, are more interested than ever in having new services to help them to sell more or having a more profitable business. For example, now, we are very, very pushing and very keen to deliver new services, like the new IPP we are launching now. That is very well-received by our merchants because they really think this is a very good tool to help them to sell more. Or we are enhancing -- we are importing best practices from other countries like Hong Kong or U.K. about DCC, and we are sharing more revenue with them, with our merchants. So -- or on micropayment; we would like to highlight, too, that area. Micropayment is a very unpenetrated segment in Spain. And with these new services, we are helping these merchants to sell more and in a more efficient way. So.

Morgan M. Schuessler

Okay. Vladimir, what about Russia?

Vladimir Komlev

Sure. Well, about Russia, I can say one thing. The key factor for stability and growth, for substantial growth in the country is stable economic situation. The country is -- well, I can say, dependent on the overall global situation. And though internally stability is insured currently, and this is real, real key factor for substantial growth. So current inflation is totally under control by the central bank and the government. And unemployment is pretty modest at around 6%, 7% level. So -- and we are definitely benefiting from continuous strong shift from cash to cards. And for that, we have a very strong support from government and from central bank, have lots of initiative now underway in pipeline to really make this happen because this -- these are several obvious reasons like taxes, transparency, money-laundering issues, all these could be resolved through this shift from cash, which is very -- still very often like a black and gray cash in the country to electronic fully transferring means of payment. There are several payment -- well, not several, 2 payment councils in the country that have devoted and dedicated to resolving existing problems, and we're the members of both. The market overall is -- well, is rather specific. With really hundreds and hundreds of active acquirers on the market, there is only 1 non-bank professional acquirer, and this is Global Payments Russia. And here I have to -- I can't but not speak about again the partner of choice for those banks who would like to develop referral partnership relationships, and we really are becoming the partner of choice for those, being not a bank. So -- and, well, the example with last year's acquisition of a portfolio from one of the biggest #3 acquirer on the market, Alfa-Bank -- just one example, we have lots of others in the pipeline who really -- banks start feeling that just doing acquiring is not the target of their life; it's something that they were doing probably without associating it with real benefits. And they start to reevaluate what they're doing. And they start looking for professional partners, and here is Global Payments. So -- oh, probably that's more or less all about macroeconomic situation and the major trends on the market that I can...

Morgan M. Schuessler

Great. So we've talked a lot this morning about technology; the different technology initiatives at Global's from a corporate perspective and within the market. But it'll probably be interesting to hear from each of you, what do you think the technology opportunities are locally in the markets that you operate? And how do you think that, that will drive growth? And just -- so this is a final question: Beyond this technology, what are the other opportunities and strategies you see? So we'll start with James.

James R. Hicks

Sure. Well, there's multiple technology opportunities in the region, and let me touch on a couple of them. As Guido referenced, we spent a number of time -- a number of -- a lot of time and effort to migrate platforms off of HSBC over the past few years. We've recently completed the Malaysia front-end. We've taken Taiwan off of the HSBC to local provider. We've done Malaysia back-end, et cetera, et cetera. And this is a huge opportunity for a couple reasons. The first is, it drives customer service benefits. No question about it; we can take these off of those platforms, put them in the GSE; customers who are in the Philippines and Singapore can get a similar type of experience in local language. We can provide better regional experience. So, we have customers today -- thinking about the context of solutions, if they certify with us in Hong Kong and they want to enter Singapore, that's a relatively straightforward thing for us because they're both on G2. So that's a huge opportunity for us. And finally, it gives us some internal benefits to charge back management, those types of things and, frankly, pricing capabilities, where we can start to have more flexibility and more levers to pull on pricing that we otherwise couldn't have. So that infrastructure that Guido is working on and that Sid is working on is tremendously important to us. The HSBC deal is also obviously tremendously important, and the key point there is obviously the referral relationships and building out distribution. But there are technology and product opportunities. As Sid referenced, we've been very, very successful with installment payment plans in Asia. HSBC is a great partner, but they are not in some markets issuing showing cards or they are not a very large issuing some card -- issuer in some markets. So we see this opportunity as well to drive up product synergies with bank partners. The mobile, we're very, very excited about the pilot that we've launched last week in Hong Kong. We're the first large acquirer to have a multi-platform iOS, Android solution for Visa and MasterCard. We're very, very excited about that. And partially, as you've heard and it's both in the market and both by Global, where it's focused on making the pie bigger, and that's going to be good for all of us. But in Hong Kong and Asia and I'm sure other markets, it's not only about that, it's also about us enabling our enterprise-sized merchants and our larger merchants to have seamless checkout on the floor as well as at the checkout in their stores, and that's important as well.

And finally on the e-commerce side, as Jeff alluded to at the outset, we're very privileged to have CyberSource as a partner. We've also got a referral deal with them in Asia. We're in the final leg of enhancing our connectivity to them. And with things like China UnionPay. So in China, as you may know, with the leadership change, one of the things they've focused on is changing that economy from an infrastructure economy to a consumption economy; so that's huge opportunities for us both in China, but as Mac referenced around the region, as Chinese cardholders use those cards outside the market. We are in the final leg in Taiwan of enabling the China UnionPay online solution called UPOP. So we're looking forward to getting that done fairly rapidly. And then we will look to add that to all the other markets around China as well. So we've got a lot of things going on in the e-commerce side.

Morgan M. Schuessler

Great. Chris, can you give us an overview of the U.K.?

Chris Davies

Yes, sure. We're shortly -- I think as Guido mentioned earlier on, shortly to completely update on all our systems to Global Payments, so that completes a fairly long program of migrations. That's going to be within the next month or so, which takes advantage, then, of the cost efficiencies that we've talked about already. And we're not forgetting -- we've talked a lot about mobile and it's fantastic; we've got a lot of good stuff there. But we're not forgetting our traditional customers. We have the best-in-class terminal solutions and point-of-sale solutions in the U.K. We are growing that with the second-largest NFC terminal provider in the U.K. We are first-to-market for the new contactless solution that MasterCard are offering through PayPass 3 [ph], which allows not only low-value contactless transactions but also high-value contactless transactions with the addition of a PIN on top of a pass and go [ph]. Also, was able offer everything to everybody to the same solutions. So we're going to offer China UnionPay, Discover, Diners, AmEx, DCC, tax-free shopping; all the solutions in one terminal. And also Integrated Solutions. We're going to be looking at APT but we also have our own existing Integrated Solutions that we're rolling out in the U.K. market. And I've already talked a lot about mPOS solutions, which we are first-to-market with. We want to leverage that relationship with China UnionPay as well. We have -- over 50,000 of our merchants can accept China UnionPay. But also many of those merchants are not card-acquiring merchants of ours, but other brands. So we're already going back through those merchants now, talking to them about [indiscernible] Visa, MasterCard and the other programs from the China UnionPay web product that we already have. We will continue to roll that and pass to our partners and it provides new distribution channels for us, as I said. And we will grow and expand our DCC and our tax-free shopping.

Finally, we're going to expand our international acquiring market. This is the Global e-commerce solution that underpins the PayPal relationship we have. But we also have 50 other merchants on that platform, and we're going to grow both geographically with the existing partners and we're going to grow our functionality with existing and new partners. And finally, I think it's just fair to say that we have a fantastic team in the U.K. They're very proud to work for Global Payments. We are changing our brand this year from HSBC to Global Payments to reinforce the pride we have about that. And I have a very excited and very -- very energetic team ready to deliver on that consumer market.

Morgan M. Schuessler

Great, thank you. Joan?

Joan Morla

Thank you. I will give you 3 clear examples on how we are already using technology to strengthen our business in Spain. First one is contactless. We have, as Jordan said, in his company in Canada, and Chris in the U.K., we have a very great position in Spain with contactless. We already have 15,000 POS's and 15 contactless cards in Mobile NPC. And our partner in Spain already has put on the market almost 1.5 million cards. So we already have more than 50%, 70% of the market share on contactless in Spain. And what's happening is that cardholders are using 12% more of their cards using contactless or NPC Mobile than previously. So obviously, this is great for us and for a country like ours that card averages 17% of the total consumption. So contactless is proving that it's one of these fields where technology is really helping the business and our customers and merchants. Secondly, we are already monetizing the richest information we have. That will become more and more strategic for us. A month ago, we launched -- in conjunction with our partner, la Caixa, we launched a new service we call Premiate [ph] , which is a portal where our merchants can put their offers and depending on the behavior and preferences of the cardholders, la Caixa is sending these offers to their 13 million customers in Spain. So our merchants are just delighted to a service like that where we can provide them new sales and new customers. And we launch it 1 month ago. And the first 2 weeks, with -- in the first city, and in first 2 weeks, we recruited 400 new merchants that are already delivering these offers through this portal. We expect that we will spread this new service around along 2013. And lastly, as Mike mentioned, we have a great relationship with bigger Spanish companies like Inditex, ZARA and Mango and others. And we have a great opportunity to expand our business with them, not just in Spain but in many, many countries where they are. And this is one of the things that this company, like our company, Global Payments, can deliver to them. So we expect a great opportunity on this field as well. Thank you.

Morgan M. Schuessler

Okay. Thanks. Vladimir?

Vladimir Komlev

And like my colleagues from other countries, in Russia, our business has 2 principal business lines. One is our core Global Payments business, which is merchant acquiring; we call it direct business, because we have contracts with the merchants. And the second line is indirect third-party processing for the banks, who issue cards. And we are the processor for their platforms, which they use to issue cards; they use our platform for that. So -- and we have 150, more than 150 banks, who are using our platform to issue their cards, who connect their ATMs to our host. And this is technology in itself but said that, I would like also to add that based on this big number of the banks, we also build local Russian ATM clearing system, which is called Joint Settlement System, which really enables lots of banks to clear their transactions locally and benefit from that in many ways. And it's not only about cash. It's also about mobile top-ups, it's also about utility payments -- all done on the same ATM; it's also about person-to-person money transfers and payments, so -- and lots of other functionality that we implemented in support for these big amount of the banks -- big number of the banks. Certainly, the same basis of customers, of these bank customers, are the very good -- it's a very good partnership for further direct business development. They are our referral partners for merchant acquiring for our direct business. And on the direct business side, on the merchant acquiring, I can say that as a country, the card penetration is low. Technologically, the country and businesses are much more advanced than economically, I would say. All the technologies that my colleagues talked before are also available on the market. And we, as an acquirer, we also provide to our customers NFC and contactless solutions on our POS. We provide China UnionPay and we really, as Mike mentioned before, we have penetration in lots of attractive tourist locations like next Winter Olympics venue in Sochi, where we are -- where they acquire for many, many locations there. So -- and the product that we offer through one POS device, it's quite a vast number of products like Standard Visa/MasterCard acquiring, basic thing, this is China UnionPay, this is B2B special cards and transactions, this is mobile top-ups online on the POS terminal, this is a gift and loyalty programs; and we have lots of these solutions integrated with the cash registers of our customers. So we're also a preferred partner for CyberSource on the Russian market. Actually, we're the only acquirer partner for CyberSource, for e-commerce business for CyberSource in Russia. And we have lots of other products in our pipeline to be launched this year and next year like the same IPP product.

Morgan M. Schuessler

Okay, great. Thank you. So with that, we'll open the floor to 1 or 2 questions.

David Togut - Evercore Partners Inc., Research Division

David Togut with Evercore Partners. I have 2 questions. The first is on competition, the second is on pricing. First on competition, I noticed you didn't mention First Data, which has a large presence in merchant acquiring overseas. So I'm curious whether you do compete at all against First Data, and what you see as your competitive advantage versus them internationally? And the second related question really is on pricing. What are the year-over-year unit price trends that you're seeing in your business and what do you expect going forward?

Morgan M. Schuessler

So let me start and then I'll let my colleagues answer. So I think we're going to limit you to 1 question because we've got 2 on the floor. So we'll answer the first one. And then if David wants to enter pricing later in the day, I will just kind of defer that to the finance guy. But the first question around First Data, when I've dealt with the big accounts, the global accounts, it's not a name that comes up frequently on a global conversation. And I'll just quickly run through the guys and let you get them -- they can give you perspective on sort of their competitive framework. Chris?

Chris Davies

We've seen First Data in the U.K. I mean, First Data are in the U.K. I suspect -- I think they have about 4% or 5% market share; they have 2 brands in the U.K. -- about 4% or 5% market share. But we don't see them as a major competitor in the U.K. market.

Morgan M. Schuessler

James?

James R. Hicks

In Asia, we brush up against them occasionally; they did a similar type of deal, as you may know, some years ago, but they really have retrenched, actually, to be quite honest with you. So we see a little bit of them in Hong Kong and Singapore, but to be open with you, not so much. Honestly, it's mostly the local bank competitors that we run up against.

Morgan M. Schuessler

Vladimir?

Vladimir Komlev

If we talk about First Data business, simple question. They're not in Russia. They had several attempts to enter but finally they, for certain reasons, decided not to. All the competition inside the country is, I would say local. There are no international players like Elavon or anybody else. So Global Payments is the only international real acquirer who is a player on the market.

Morgan M. Schuessler

Great. Joan?

Joan Morla

First Data, I don't think they are in Spain. If they are, they are very small, but I don't think they are. And personally, well, we -- or, the legacy competitors are always Spanish banks and recently, Santander made an agreement with Elavon. And so -- and we think this is good for us, because this is putting more common sense to the market and it has rationalized the market. So they are tracking our evolution with Global Payments. And we hope more will come to do more especially to our market; I think it will be good for our market.

Morgan M. Schuessler

Okay. Great. So, I said 2 questions, so we've got one more in the back. Is that okay?

Georgios Mihalos - Crédit Suisse AG, Research Division

George Mihalos from Credit Suisse. A question specific to the U.K. I think you guys had mentioned a long-term outlook of mid-to-high single-digit topline growth. And right now, you're looking at sort of flattish GDP growth. Maybe help bridge that gap for us. How do you guys think about pricing, growth from new verticals, the shift to plastic; kind of help us to think along those buckets.

Morgan M. Schuessler

Okay. So the question is about -- I don't know if everybody heard the question; it's a question about the U.K., and how do you get to mid-to-high single-digits growth in the U.K., given the maturity of the market and the GDP growth. So Chris, I'll let you respond.

Chris Davies

Yes. So first of all, I still feel that we're under-penetrated in terms of market share. So there's opportunity for market share as we execute our sales strategy. I think there's still a legacy of our time when we were bank acquirer, so we have some room to make up on that. There is growth in the market as I said, through our new verticals: Government, education, social services; generally speaking, there's lots of opportunities there. Pricing, I think, will remain competitive; always is. I really don't see any material contraction on pricing in the near future, but it will remain competitive, of course. But generally speaking, I think it's about executing our strategy that we've set out today, and I think we will do that very successfully. Our competitors are actually going through a lot of change in terms of their own platform. So they're probably a couple years behind us at least. So I'd see it as, certainly our 2 major competitors have platform work to do, and that gives us opportunities, I think, in the market as well as they go through the change.

Morgan M. Schuessler

Okay. Great. Thank you, Chris. So with that, I'm going to invite Paul back up to stage to make some remarks and then kick off the final panel with the team. Thanks, guys.

Paul R. Garcia

Okay. Well, I hope we fulfilled our promise of giving you some exposure to people you don't get to see and talk to very often. And I just wanted to say, kind of self-servingly, that I'm very, very proud of our team. I think every one of you did a terrific job and they gave you a sense for the depth of knowledge, the passion, the opportunity and how we're going to execute on all of that.

So let me just summarize very quickly and then we're going to have a panel discussion and we're going to go overtime and because we kind of gypped you on that. So we're going to do -- we're going to give you some extra time to do that. So number one, we're going to continue to capitalize on our international footprint. I think Mac put it very eloquently: Nobody has the position we have. Period. End of story. And we intend to expand upon that. Grow the Americas. Jeff did a great job, along with his guys, of talking about how we're going to deliver that growth. And a lot of new product and exciting opportunities that Sid talked about. And we -- you probably got a sense for some of the things we're doing, you didn't think we were doing. And they're actually up and running and producing revenue around the world. Guido, a number of you came up to me and said, "Well, I don't know where you've got Guido from, but he's a very smart guy." I echo that. He's a very smart guy and we're very glad to have him and he's built us the most solid foundation that we're going to build this on. And we're very excited about focusing on that next chapter. And then David very eloquently went through our capital deployment. You've said to us in the past, "You could be more -- you could be clearer about what you intend to do on deploying capital." Well, I think we were as clear as we could be. You can count on us to do exactly that year in and year out.

So thank you, so much to all of you for being here and for my team and, please, David and Jeffrey and Mac, join me up here.

Bryan Keane - Deutsche Bank AG, Research Division

I can get started. It's Bryan Keane over at Deutsche Bank.

Paul R. Garcia

Actually Bryan, before we do your question, we should probably do the 2 spillover questions from the earlier sessions; some of my colleagues dodged the questions and left them for me to address, apparently. I'll do my best with that. Let's start with Glenn Fodor, I think, who was asking how confident are we in the technology investment levels and not repeating the step function investments you've seen flow-through this year's income statement, fiscal '13. We're highly confident that the pure technology investment; the data center infrastructure, the network infrastructure -- what I call the physical and logical foundation of the house metaphor we've used -- that, that is going to roll through '13 and then normalize as we go into '14. You saw in most of the presentations we were speaking in the past tense relative to that investment. That doesn't mean there isn't more going on, on an ongoing basis; you saw that in the capital chart. But the core, sort of investment data center to get the network infrastructure up and running is largely behind us as we speak. There is one investment about which all of you know already, which will come in the '14 income statement, which is the incremental investment and security. And that's an expense investment. I don't have a size for that yet. We're just, as you know, coming out of the remediation process. We've now got to operationalize and make sure we build out the proper target operating model. It will include some new hires; it will include the spillover effect of new tools and new techniques that we've installed to better secure the enterprise. So more to come on that. But to answer Glenn's question directly, on the technology investment infrastructure, we're using the past tense. Now, we're going to settle that back down to more normalized typical growth rates and running with inflation and things like that as we operate technology and the question becomes, what about security? So that's the first dodged question by my colleagues earlier. And then the second one that Mac so artfully dodged from David Togut a moment ago about pricing across the markets for the panel.

Unknown Executive

He may have dodged that one, but he certainly nailed the first one; I have to say that. So thanks for that softball, David. That was great.

Paul R. Garcia

On that one, if you go -- the markets are each distinct in how the pricing trends are sort of flowing right now. And you heard Chris say, and he would know far better than I, pricing is quite stable in United Kingdom. If I had in front of me sort of a graph of what spread with pricing has done the last 8, 10 quarters, it looks very stable. Just as it looks quite stable, by the way, in the United States at this stage. If you go across to Asia -- Asia is not one market; it's 11 markets, but pricing, as an overall comment, is actually quite stable in Asia as well. The macro there manifests itself in average ticket and transactional issues given the secular adoption nature of the markets there. So that's really what we watch when we watch Asia for trends. If you go to Russia, if I showed you the same graph for Russia on pricing, you'd see pricing sort of across the board. It varies with a different form of secular adoption; they have less than 5% adoption. A lot of it depends on which merchant we bring live and where the transactions occur as Vladimir builds out that business. And at times you'll see a momentary pricing decline. It's really transitory as we board a new merchant, maybe a new large merchant. But all-in, the market -- we're right in this wonderful adoption curve, so pricing is not the first metric we're watching as Vladimir grabs land and builds market share quarter-after-quarter, month-after-month. And then the final one is Spain, and Spain may be the most interesting of all. There, given the value and the strength of the partnership with la Caixa, we actually see -- pricing is actually where macro manifests itself, which is sort of odd to say. It's not necessarily transactions, it's not necessarily volume, or even in some cases, average ticket. Because of the nature of our competitors, they're mostly banks still, at this stage, awaiting Joan's point of Santander and some of these others being a little more commercial, you can actually see a bank trying to pursue other bank-based business by dropping price, and we have to compete alongside that. We do that very effectively, then we add that to our higher service levels and our incremental products, innovative products, to drive still the great growth married to that partnership with la Caixa. So different answer for each of the markets kind of across the world. But really, for us, in terms of how we manage it, relatively stable, and something we're predicting fairly accurately around the world. That was Bryan Keane, I think, next.

Bryan Keane - Deutsche Bank AG, Research Division

I just had a question. Obviously the longterm revenue growth potential by market is a great one. But can you give us some color on what that looks like on an EBIT basis? And maybe, David, talk a little about kind of where that market maybe has been and then where is it going, so you can just give us a feel on trajectory. Because Global Payments never has a problem with topline, it's usually about what the EBIT is. So that most important driver.

David E. Mangum

I think that's right. Everybody is hearing these questions, or do we need to repeat them? I think it's -- heads nodding; excellent. So if you roll down that slide -- actually we'll go from the bottom up. In each of the markets of Russia and the early-stage markets of Asia, we have the opportunity to grow EBIT faster than revenue in sort of the traditional model you expect in a scale business. The same is true as you roll up that slide towards Spain and the United Kingdom, mid-to-high single-digit revenue growth, should we get slightly higher EBIT growth with the opportunity for continued margin expansion on a pure scale basis in Russia and across Asia and, incrementally, in the other markets of Spain and the U.K. The days of sort of the arithmetic expansion of margins coming out of the big United Kingdom reprices and migrations, I don't think there are a lot of those, but there's still room for margin expansion in each of those markets and those pulling up the whole of our international. In the Czech Republic, we have an indirect model that's challenged. That core market is indeed growing. Our customers are banks, which makes it a little challenging to drive our revenue growth there. So that I look for more stability than anything else; that's what we're shooting for. As you well know, as you move to the Americas, our aspiration for Canada is stability as well. We're obviously not reporting stability right now, hence the long-term nature and the outlook of the nature of that slide. So really the trick of this is the Americas. It's a stable Canada, in which case, a lot of the pieces come together quite nicely in terms of the financial model. And then at the U.S. business, it inherently grows its EBIT or EBITDA a little slower than revenue -- that's the dichotomy of the juxtaposition you were discussing earlier, Brian, given the high-growth nature of the ISOs with a much lower incremental margin. I don't think that trend is going to suddenly stop as we go forward into '14. However, we have the ability and the tools now to actually grow EBIT in North America. It will be at a lower rate in the U.S., -- excuse me. It will be at a lower rate than the revenue growth. Again, because of the nature of the channels themselves. And we also have, if you think about margins, some more tools now to actually offset, as we head into '14, some of the inevitable margin declines that come with the ISO accounting. Again, the keys to the Americas are executing APT, driving a stable Canada and then marrying that to the growth initiatives that Jay and Jeff talked about earlier. But those are how the pieces sort of flow together in terms of the financial model.

Steven Kwok - Keefe, Bruyette, & Woods, Inc., Research Division

This is Steven Kwok from KBW. Just had a quick question around the road map on Brazil. If you could drill down a little bit deeper on that front. And then also in terms of kind of looking out into the future, how much of your revenue do you think Brazil, China and India can make up as part of the overall picture?

Jeffrey S. Sloan

Okay. Well, I'll start -- this is Jeff. I'll start on Brazil and then David and team can talk about some of the worldwide implications in the financial results. So on Brazil, we are very happy with where we are and the progress we've made to date in Brazil. But I think, as I mentioned in the presentation, it is a startup and a de novo entry for us. So one thing just add on to David's comments, you'll also see the Americas continue the Brazil investment this year in the fiscal '13, which also ties into how we report our results. So my expectations for Brazil are to finish our certification process beyond the licensing with the networks and our service provider by the end of this fiscal year, by the end of May of 2013 and being piloted and live thereafter. We already have signed sponsorship and referral agreement with our financial institution in Brazil, and we expect to have them and other bank referral sources also providing us referrals as we go live and operational in Brazil. But as I mentioned in my comments, the only way to make Brazil impactful from an EBITDA or revenue point of view, given the size of our overall company with $0.5 billion of EBITDA, is we are going to need step-like functions in that market. And those really need to come through, not just de novo and referrals; they're really going to have to come through JV opportunities or acquisition opportunities. In the case of the acquisition of Redecard by Itau, which closed this past year, that has certainly led to far more conversations with us, with financial institutions in Brazil, about whether we can partner with them in a JV fashion. So I think that market is really evolving in our direction. But until we do that, it's going to be hard to see a meaningful impact on our financial results because of the size of the rest of Global Payments. We also will be bringing customers from outside Brazil, VAR partners and the like, multinationals and potentially ISOs into that market to help us develop that market. But those will all be incremental to the base case as I described it.

Paul R. Garcia

Let me follow up to the second part of Steven's question. Firstly, let me just point out the obvious, that nobody has the BRIC signature we have. No processor that I'm aware of is in Brazil, Russia, India and China with either an opportunity for expansion or actual market share. So that's something we're very proud about. We think India and China can be significant. It's terribly insignificant now. We do more business in Hong Kong than we do in India and China combined. So that just gives you a sense. So the opportunities in those markets are enormous. James talked about we're in 5 regions with aspirations for the whole country. We have a unique, unique relationship with CUP; they are a tremendous partner, helping us drive market share. India; Mac and I have had a number of appointments and, quite frankly, we're heading over there again next week. And there's some big opportunities for some new partnerships, we talked about Kotak Bank is one of them, and we think that'll pay some more near-term benefits as well. But the opportunity in those markets are enormous; meaningful, big percentage of Global Payments' future growth.

Wayne Johnson - Raymond James & Associates, Inc., Research Division

Paul, Wayne Johnson from Raymond James. Two questions. On China -- and maybe I missed this, but do you guys have a sales rep goal? How many sales reps are in China? Where do you want it to be over the next few years? Is that the right metric? Is this going to be resold through other financial institutions in the provinces you're approved in? And I have a follow-up on a different topic.

Paul R. Garcia

So the question was, do we have a -- do we have a numeric number we could share in the number of salespeople that we can put in China? China can absorb a lot of salespeople. In fact, we will be adding meaningfully to our Chinese footprint in terms of salespeople. The good news is, the return on that investment is pretty quick, because they have not dissimilar metrics to a U.S.-based salesperson with significant compensation. So return on that investment is pretty immediate. But yet we also are -- because we are a public company, and you hold us to quarter-by-quarter objectives, we're also interested in anything that could have a -- what we consider a dramatic impact on margins. So we are very circumspective about that. But I would expect additional investments. You could put, Wayne, a lot of people there. We're going to do probably be less than a lot of people, but we're clearly adding. Now, we're going to leverage -- thanks for that; we're going to leverage other opportunities to -- pay app is one. I mean, the excitement about pay app -- and the reason we call it pay app is, as Sid said, it's not about the dongle. Right? Dongle shmongle. It's about -- you can quote me on that, if you like. I can see a headline right now. It's about the application, it's being about able to [inaudible] solicit business efficiently through an app. And it may involve a dongle; it may involve a more traditional form of point of sale. So that's very exciting and that's a way to get to particularly developing markets like BRIC. So I would expect more investment in China, more organic growth from China and then, of course, the big opportunity is partnerships.

Wayne Johnson - Raymond James & Associates, Inc., Research Division

So not to put too fine a point on it, but like, is there 200 salespeople there, and that could go to 400? Or -- I'm just trying to get a sense of magnitude here, numerically speaking, that there could be a numerical response.

Paul R. Garcia

Mac, maybe you can add a little color.

Morgan M. Schuessler

Let me -- can I give you a sort of framework about how we've approached the Chinese market and back up just a little bit, to give you perspective?

Wayne Johnson - Raymond James & Associates, Inc., Research Division

I don't want to dominate this. But what I'd like to get is, just how many are there? How many sales reps do you guys have in China, is what I'm trying to get at, and what could that be in the next couple of years? That's my question.

Morgan M. Schuessler

So let me answer that. But let me back up just a little bit and explain how we think about China as far as from a growth perspective. There are really 4 components to China. First is the legacy business that we bought from HSBC, and that was the international traveler coming into China and using their Visa or MasterCard at the hotels, the restaurants and the luxury brands. And that's the legacy business we got from HSBC and we took advantage of rolling out additional products like DCC to grow that business. But that's just a piece of it. The next phase was this relationship that Paul, frankly, built with China UnionPay over the past couple of years, to take the Chinese traveler and open up their spend to outside of the U.S. and that's where we've opened up markets in North America. Recently, we've deployed it in Spain, Russia and the U.K. The third piece, which I think is what everyone is most excited about, is the domestic business. And that's the transactions between a Chinese merchant and a Chinese citizen. And it's highly related right now; we have to go about from province to province to province to get approval. So what I would say is what we have now is a very small sales force that we're building; build the capability, the infrastructure, but what's going to really push the tipping point -- and Paul and I are working very aggressively to try and open up the entire market, and it's hard to time when that will be. If we had the data certainty, we would provide that to you. But it's with the regulators. So, that will take time. And were also working very, very hard for when that happens to be able to partner with a major Chinese bank. So it's a very small sales force. I would say, that until one of those things happens or both of those things happens, that's when it becomes a meaningful business. And we are putting the relationships in place so that it becomes a big business with that happens.

Paul R. Garcia

So a slightly finer point, Wayne -- and you don't get to ask any more questions; sorry. It's on the order of 40 salespeople. And it is, Mac said it exactly right, it's sized for the previous opportunity given where we were with HSBC and our partners. It is not yet sized nor scaling for the long-term opportunity or even the near-term opportunity for the deals these guys are working on. That's the next stage.

Wayne Johnson - Raymond James & Associates, Inc., Research Division

My follow up on a different topic is Guido has done a great job on the IT side and my sense here from the outside is that was really a Herculean task over the 6 to 9 months. So I respect the progress you guys have made there. Is there an example you can give that would illustrate that this is a lower cost per transaction; that it's faster? Is there anything that the retailer sees and says, "I don't know what you guys did on the back end, but, boy, it's really humming now." Like is there kind of a snapshot: "This is what we were before; this is how we are today," and kind of any kind of financial benefit outside of the operational improvement?

Paul R. Garcia

Guido, do you want to take a crack at it? [Operator Instructions]

Guido Sacchi

So Wayne, obviously there are many operational metrics that we use and also to reflect metrics that the merchant would see. But I can tell you, the new transaction processing platform we have installed, as it went through the holiday peak period, returned faster response times. And again, and merchant wouldn't necessarily see it, because we're still talking about sub-400 milliseconds. But what we see, for example, on batch processing, we have shorted those times by 2x or 3x; 200% or 300% improvement. So there are tangible improvements there across the technology stack. I mentioned like the time of provisioning of new environments, we went from 1 week flat to hours. So there are a lot of metrics, but I can tell you, they are very tangible metrics of improvements across the board. More importantly, maybe in addition to the operational improvement, is the leverage that, that gives us. So again, if you go back to the core transaction processing, we have expanded capacity by 2.5x. So we've been able to absorb a record peak in terms of both volume and transaction processing per second, and we have seen it over the Christmas period.

Christopher Shutler - William Blair & Company L.L.C., Research Division

Chris Shutler, William Blair. Paul, it sounds like you're pretty excited about India. Just curious what the RBI capping the merchant discount rates this past summer, how does that factor in to your thought process?

Paul R. Garcia

It's funny; every market has some approach to interchange. And that does not necessarily have a negative impact for us, and quite frankly, it can have a positive impact for us. So, I would say that India -- India is going to evolve. I mean, it's the largest democracy in the world and it's a big, complicated place to do business. But we are very high in that market. And I would say that's just another moving piece. Mac, any?

Morgan M. Schuessler

I mean, what I see in every market is that, at the end of the day, governments really want electronic payments to work in their economy. Because, a, it gives them transparency to the financial system. So even Vladimir talked about, it gives you visibility into what's the revenue that you can tax. Right? And that's a big component. Secondly, as Chris was talking about, they actually want card acceptance within the government agencies because it lowers their cost of doing business. And the third piece is they generally believe, the easier it is to facilitate a transaction, the better it is for the economy. So I think there's this overarching thing that generally governments want to do the right thing, to grow the electronics payment space. And to Paul's point, everybody's doing something different. But ultimately, if you are a large-scale provider like Global Payments that has a local presence, it's just another opportunity to compete better.

Paul R. Garcia

We were asked about surcharges earlier, too, because Visa and MasterCard announced that those are going to be rolling in, I think, the end of January for one and March or April for the next. And I think that, that's another complication. I personally think it will have very little impact. I think merchants that are in a competitive scenario -- meaning that there are other places to go, I think it's very unlikely you'll see much adoption. I think there'll be exceptions where the consumer is not going to impact whether they use that service or not and I think maybe they'll take advantage of that. It won't impact Visa or MasterCard use in China, in my opinion. But I would think that what we're going to see, going forward, is enormous rates of change by market. And generally, that's good for us. So we say, bring it on. Carter?

Unknown Analyst

How important it is for you to execute on an acquisition internationally for the strategy you've placed and you've articulated today, to continue the growth and continue the momentum you have?

Paul R. Garcia

Mac?

Morgan M. Schuessler

I would say partnership is important. I would say partnership -- so the question was, how important is an acquisition to the growth of the international space? I would say partnership, generally, whether it's a referral, be it on a local market like Kotak in India -- which really is an acquisition, but it's levering those referral channels; Intuit in the U.K., which isn't the Asia push, but Intuit, that type of relationship where you're leveraging someone else's brand; those referral partnerships are what really help drive our business. An acquisition, specifically, in Asia that really helps us expand our scale and market share, I think, is what really puts us to the higher ends of the ranges. But doing a good job, partnering in every market on a daily basis with either -- even in the U.S. APTs, partnering with software companies, that's a bit fundamental of our business. And I think we are doing that well. That's why you saw the 8,000 to the 10,600.

Gregory Smith - Sterne Agee & Leach Inc., Research Division

Greg Smith with Sterne Agee. As I think about your Global business, you guys have relationships with large merchants sort of everywhere but the U.S. So to truly leverage and service the multinational customer, is that a missing piece? Can you add that capability or potentially acquire?

Paul R. Garcia

So Greg, if that's a platform question, I'll turn it to my colleagues for sort of a field sales question. We are functionally and -- from a technology perspective, fully capable of servicing. In the U.S., you have a legacy of us chasing, and quite rightly, small to medium-sized merchants with nice margin characteristics, et cetera, but we can indeed process for and make a global value proposition to anyone. And we can offer that to -- those are our example for their burgeoning U.S. stores as well.

Unknown Executive

So, I think there's 2 elements and I think David is absolutely right. And Mac should lead on to this. But from the U.S. point of view, I think our experience has been that many of these multinationals are domiciled here in the U.S. So my experience with that is when they're looking for multiple market solutions, it's not uncommon for them to come to us because there's very few providers on those kind of services in multiple markets. So it's one thing to have a good value proposition in your home market. It's another to provide a global solution. And where I think our services, Greg, are differentiated are, we'll have one contract for around the world, one service provider to manage one service center and one relationship manager; really managed in one location. And complete connectivity around the world. So those are really important points of differentiation. So what multinationals are really looking for is, "I want to make sure," as Mac said, "I get a good competitive price. But I also want to know it works and I can use you in multiple markets." So I think it's less a question of, do we need large corporates at low margins in the United States to get that? In fact, what we're seeing is a lot of reverse inquiry because of value of the platform around the world. Now, you can bet when a multinational comes to us that's based in any region, but just to take U.S. as an example, we say to them, "The more volume you give to us globally, the better the price is going to be." So we incent people to give us more of the volume, but we also say to them, "It's fine with us if you want to be slow-process, where you'll pay a higher price in a given region, because you're not giving us all your volume elsewhere." And that's fine too. That's really an economic decision for those guys to make, but we certainly incent them. And what we're not going to do is take on business that we don't think makes economic sense unless it's in the context of the corporate whole.

Morgan M. Schuessler

I would just say that there's a broad range of the Chanels, the ZARAs, the Louis Vuittons, where we have huge market share in Asia and throughout Europe. And I think -- what you've got to remember is, we've acquired these assets over some period of time. And I think there is an opportunity to continue to cross-sell some of those relationships back into the U.S. But most big multinationals realize they're going to have a couple of acquirers to plug in different places. So I don't think it limits us, but I do think there's an opportunity to continue to cross-sell across these different regions and I think that will be a focus in the future.

Paul R. Garcia

And I would add one thing, in all fairness, too: We're not in the position we're in today to take advantage of that because of the technology we have today versus the older technology that didn't lend itself to the efficiencies to go pitch those below-penny deals that had some value proposition. So you're not imagining that.

Morgan M. Schuessler

What I'd also say is, it's nice to be able to pick off the pieces of the business we want. So if you look at the way some of these recent wins have evolved, Greg, people have come to us and said, "I want the Card-Not-Present solution in this market; I want the mobile solution in this market." We have a lot more leverage when it relates to pricing and terms on stuff that's not a pure commodity. So I think from our point of view, it's nice for us to have openings that way, but it's also great to be exposed to the higher growth markets and markets where we offer a lot more value where the pricing of the service is not as commoditized.

Paul R. Garcia

Okay, so to respect your time, I think we're going to get one more question. We're actually a half hour past where we should be.

Christopher C. Brendler - Stifel, Nicolaus & Co., Inc., Research Division

Chris Bender, Stifel Nicolaus. Just to go back to Canada for a second; nice to see some stabilization there. My question is, it seems like a lot of the pricing pressure you've seen there was due to transparency created by the new regulations as well as some new entrants. Are there any international markets that have or that had similar -- or have, today, similar excess spreads you saw in Canada before they compressed? And the U.S. market, is there any threat of regulation similar to the Code of Conduct and merchant statements or do potentially the dongle providers increase pricing transparency at the small merchant level?

Paul R. Garcia

Let me start, just to make a comment. I think the code -- I think to say that the Code of Conduct was the reason that we have spread decline is not exactly correct. I think there was a huge increase in Visa/MasterCard fees at a set period of time and that kind of caused all of these to happen. Now, we are also; I'm personally a fan of the Code of Conduct. I thought that was a very intelligent non-legislative way -- read, non-Durbin way, of doing something. I thought the Canadians did a very thoughtful job with that. And I think if you're ever afraid of transparency, shame on you. It means you're doing something you probably shouldn't be doing if you're afraid to tell your customers about it. Now, there are other markets that have had kind of similar -- well, Australia was a very interesting example, although that was legislative. But there are markets that have higher spreads. But generally, I would say, I don't see anything on the horizon that is like that.

Morgan M. Schuessler

There are smattering of initiatives in different markets around the world. We referenced India a little while ago. In terms of market movement and sort of full transparency, there's nothing brewing, I think, of which we're aware of that looks and smells like Canada. And I would just say one other thing about Global Payments: One of the virtues of being on one back end is, I know what our statements look like; they are transparent. We hope our merchants understand them. And we're happy to compete on a transparent base.

Paul R. Garcia

Okay, guys. We'll stay behind and answer some questions. Thank you very, very much for your questions and your support.

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