Mastercard, Inc. (MA) Management Presents at RBC 2018 Financial Technology Investor Day Conference (Transcript)

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About: Mastercard, Inc. (MA)
by: SA Transcripts

Mastercard, Inc. (NYSE:MA) RBC 2018 Financial Technology Investor Day June 14, 2018 8:00 AM ET

Executives

Dimitrios Dosis - President, Mastercard Advisors Data & Services

Analysts

Daniel Perlin - RBC Capital Markets

Daniel Perlin

So thank you all for being here today. I have to kind of get myself oriented, the room’s pretty long. For those of you whom I have not met, my name is Dan Perlin and I cover FinTech here at RBC and on behalf of myself and my colleague over there, Jason Gurandiano; and Michael Carter, who I don't see him here, but I know he is here today, so I just want to thank you for taking the time to be with us. We have a fantastic schedule. We have a series of public companies here [indiscernible] through in terms of fireside chat, keynotes and on panels. Many of them are industry leaders, not the least of which is here with me today at Mastercard. We also have PayPal in the afternoon.

We also have 45 private companies that we're going to be leading throughout the day in the [indiscernible] panels that you are going to hear from. So we hope that you find it informative and again thank you very much for being here.

We are going to kick it right off and go hot with Mastercard and from Mastercard we have Dimitrios Dosis, whom many of you may not have had a chance to meet. He is the President of Mastercard Advisors, which as many of you probably do know is becoming an increasingly large and important part of Mastercard's organization.

So thank you so much for being here sir. It's a pleasure. And so for level setting purposes because I don't think many people do know you or your background, may be you could just jump in and tell us a little bit about yourself and what you represent in the organization.

Dimitrios Dosis

Great to be here. Thanks for having me this morning and so I joined Mastercard back in 2005 and as you can hardly tell from my accent I have some German heritage. So I always have an agreement with Martin, I never make German jokes in a public space. Nobody laughs, that is the worst case happens. Sometimes people cry. So I won't make any jokes on that topic okay.

So I am currently the President of Mastercard Advisor. Before that, I was the EVP for our Global Consultant Service lines. Before that I was in market development across the Europe, the Middle East, Africa region and Asia-Pacific.

So I thought it might actually be good then if I can give you a little bit before we dig into it a bit of a quick overview of what Advisors is and what service this is overall, what our services lines is in Mastercard. So Advisors is the professional services arm of Mastercard. Think of us as the front and the feet on the ground, the concise subject matter experts who engage day-to-day with our customers okay.

If you think about service lines, what Mastercard has in service lines, there is a clear focus. The focus is to help our customers engage, retain and get new clients. So you see there is a very strong B2B2C focus all the way down to the C, which is the scale element of our business.

So I think a good way to think about our services is an end to end spectrum. Think about it from insights which we derive through our proprietary data and analytics, down to recommendation which are based on those insights, down to oh, let me check them before I do anything else with them if they are as good as we believe they are,

Here we use our Applied Predictive Technology Solutions that we acquired through APT a few years back. Then we moved into the recommendation stage into the real execution of things based on those recommendations that we tested and then we do support our customers in [run] [ph] space.

So it's an end to end set up from insights to recommendations, to tech [indiscernible] to executing them and running it, but don't think of it as a one-time event. All of our services and the majority of it is platform based. So this is a recurring process which is happening at scale. I just think this end to end give you a perspective of the value we drive with those services for our customer okay. And in my role and responsibility then I'm looking after bringing this end to end service spectrum to our customers. So we are the front end.

Our customers range from financial institutions, classical issuers to the broader set of merchants, which includes retailers, airline, travel, hospitality, but also manufacturers and government. So when I joined in 2005 then, I was actually -- Advisors was in its infancy. I was the first employee out of Central Europe.

The trajectory has been actually quite good. Today just to give you a feeling more than 50% of our customers in North America are engaged with Advisors.

Daniel Perlin

So let's kind of do the pinwheel and dig deeper into each one of these areas of discussion. In particular you may start talking about insights and what you derive from the data and analytics. So let's unpack that a little bit. What exactly are you able to get with that and how are you bringing value to the client with that?

Dimitrios Dosis

So it's all about actionable insights Dan. I think this is the sweet spot for Mastercard and for our consumers. We derive insights from more than 65 billion transactions globally at scale. All of it as aggregated and anonymized. We never know what Dan or Dimi buys, okay.

However, we came to realize that Insight is not only about data. It is truly about three things. First of all, we need to understand analytics, technologies and platforms. These are the things which drive value. Pure analytics and just more data is not enough. So we need to have good analytics, good technology and good platform and we also came to realize that innovation is critical okay.

With the acquisition of [indiscernible], we have been able really to innovate ourselves and for our customers and our insights are very actionable. I mean they help you understand market share, market size. They help you understand opportunities that you have as a business. They help you understand how you can optimize the operations, how you can keep your customers secure okay.

Just to give you a couple of examples on that one, retail location is one of the solutions we are offering. So think about this as a heat map. You can drill down to a city level. You can drill down to even a city block level and understand the traffic which is happening there. Sales as the proxy for traffic. You can understand the ticket size. You can understand the growth volume. All aggregated and anonymized, but this is very insightful.

Imagine you need to build up a, you need to build up new store somewhere in New York, this insight can give you a very good guidance where to do it. Imagine you need to optimize the branch network. This insight gives you a really good insight where to do it, okay. So this is very actionable.

Another good example our Insight platform, what our customers have told us over and over again Dan is that they have problems with asking a question and getting a response. Sometime data queries can take up to two weeks and this is not good. Imagine you need to take a decision today, you need an insight and it takes you two weeks to get it, it's useless, okay.

So our insights platform really hits the center of this problem because we provide with our Insights platform a real time and self service access. We are able to very powerfully if you want, bring things together like what is my customer segmentation. What is the -- what are the fraud levels, what are the authorization levels and drill it down to city block level and understand the reasons behind this.

This is all happening real time and self services, very popular. Imagine getting all relevant data into one platform. Having a very standardized front end that allows real time access. You don't really need any more PhD to understand your analytics and this I mean people sometimes speak about it, but this is truly democratizing the use of analytics throughout the company. This is what our customers have told us when they started using the Insight platform.

Daniel Perlin

That's fantastic. Now when you think about the consulting capacity and what you guys are bringing to the table, you got all this data analytics and insights, how do you bring in the consulting side, that what kind of recommendations can you make, how specific can you make those recommendations to the client?

Dimitrios Dosis

So Dan, this about our consulting services as I said the feet on the ground, the go to market, the front end, near with our customer site, many times the consultants are also on site with our customers at their premises okay. A good example here for example the German Savings Bank Association which is if you want the second biggest retail bank in Germany, so the German Savings Bank we have them for over five years and ongoing engagement together. We have six people sitting on the ground with them helping them in the actual doing, increasing usage of their card business, but we also help them on how they transform the whole organization in the digital age and we also help them think through regulations like PSD2 to open banking.

So by being so close with the customer you build up a true partnership, very intimate partnership at the front and it's massively critical. Now the two things which I think differentiates us in the consulting space then, first of all, the mix of talent. Think about it like the state-of-the-art subject matter experts in payments and technology combined with strategy consulting and problem solving skill.

So this is the unique combination we have in our teams today and this I actually think that we are the leading payment consulting service company out there. The second asset which gives us a huge amount of differentiation is configurability and automation because we are so very much focused on payment with our customers, we don’t need to reinvent the wheel every time.

So think about, so don’t think about our consulting business as a totally people bespoke engagement model, it's not that. Because we have such a strong focus, we are able to really configure the solution. For example if we have our customers on daily usage in Germany, you know what the measures we need to do in India or in Australia are pretty much the same.

So we don't need to reinvent the wheel. We have a high degree of configurability, which is good for scale; it is also on the delivery side of things because we still very much configured, we have a high degree of automation. It's very repetitive. So we don't need to do it every time bespoke.

And also as I said, because we have in the center of our services embedded platforms with our customers, think of the consulting team as the veneer, the tissue, the connecting tissue to our customers to get those scaled services into market, this is how you should think about consultants.

Daniel Perlin

Who are some of the other people you might compete against. I mean you bring up a good point, you guys have kind of two strategic competitive advantages. But I am just wondering who you might run up against periodically?

Dimitrios Dosis

Periodically we run up against some classical consulting companies out there, but right now the focus is really still very much on payments that it's not there. I mean we are so intimately with the customers. I mean I don't think there are very many banks in Germany for example who are not engaged with advisors in the payments over many, many years. So I don't think that this a topic we have many times.

Daniel Perlin

You also kind of have this test and learn capability, right, which is also unique to Mastercard, but tell us a little bit about what that can do and then again what differentiates you guys from that capability.

Dimitrios Dosis

So it all started with our acquisition of Applied Predictive Technologies three years ago and think about test and learn as a platform as a business model [indiscernible]. It is self service and it is recurrent revenue. So it has a lot of elements of scale to it.

So what's happening is that the customers are testing their strategies and the innovation at the subset of branche of our customer before they go to scale. So it really allows them to preserve the investments they are [indiscernible]. So this is an ongoing process where the customer is using their data securely on our platform.

The way I would like to see this is more of a rapid experimentation. So test and learn is a form of rapid experimentation, which helps in the decision taking of marketing, of merchandising, of how do I organize operations, how do I make the best capital investments.

Think for example, Thanksgiving in the U.S., does it make sense, by the way it does not exist anywhere else in the US, and so Thanksgiving does it make sense to stay longer open, will I get more traffic in my shop, we can test these things. Does it make sense to revamp my stock from it? Does it make sense to pay for return of [indiscernible]? Will I get more traffic on those, these are some things that we are testing on those platforms and the way I see this happening and the best in class customer interactions is it becomes part of their culture.

There is a culture of rapid experimentation because testing and learning is embedded in their day to day workflows and this is what is driving at the end true ROI. Let me give you a couple of examples then. TD Bank, so a few years back they were wondering, does it make sense to stay open for long hours on week days and on the weekend?

So they were struggling with this and they said well, let us use APT test and learn to check it. So they used a few options and tested them in a subset of branches. They didn’t do it immediately everywhere.

Now this had two effects. First of all they could first of all optimize their investment spend in the testing without rolling it out, but the other thing is they could also eliminate statistical bias, because in those sub branches where they tested let's say this option of staying on longer, what APT does very well we take out statistical bias meaning that because we use the data, we can say oh in this location where we tested at this particular time, there was a special local event which had an impact on traffic in this branch.

So you need to be able to eliminate the statistical noise, which APT does, APT Test and Learn platform does because we do use third party data there. So this is very powerful. At the end, we were able to drive the best options down in the markets and TD Bank had [indiscernible] impact of this, but even more important they could [indiscernible] as being the most convenient bank out there in the market.

So this is was a good example on [indiscernible] side, but equally as I said, it's not only [indiscernible] but also merchant and retailer McDonald's is another great example. They want to test does it make sense to extend my breakfast over time. Does it make sense to have an all-day breakfast?

So what they did is they tested this again in a subset of branches and actually it worked out very well. They even saw that the ticket size became better because the longer you serve the breakfast, they keep adding up items on their buy list okay. So it was very beneficial for them to test it and then roll out the optimal set of programs. So [indiscernible] this is very practical.

Daniel Perlin

Okay. So now we talk about test and learn, your consulting capabilities and obviously all this Insight, one of the questions that we get is your executional capabilities, right. So the question ultimately is once you gathered all this and you had the recommending, you’ve had testing. How you go through the implementation process with the client and what ultimately is the delivery model?

Dimitrios Dosis

So I think execution is actually what started us okay 15 years back, This is in our DNA and it all starts with a very simple ask from the customer, help me get things done. Put your hand where your mouth is. This is very simple question our customers ask where we have an answer.

Let me give you a couple of examples okay. Bank of America, we are engaged with Bank of America in a variety of things. One of this to help them on their innovation. The way we are working on innovation there is we started with what we call a launch pad.

It's a very intense one week joint engagement with the customer with us which ends with the innovation supported by a prototype, an excellent prototype. Now execution in the sense is that we don't leave the customer with a prototype, but we move on.

We said you know what we're going to help you together develop a minimum [available] [ph] product, have you develop then the pilot and help you then in the co-creation of the actual solution in very agile ways. This is execution. This is what we are doing.

In the more classical sense, execution means that we are helping our banks in their day-to-day cost purposes. Now let me give you an example here, Bendigo Bank in Australia, a couple of years ago, we won a major deal there, which also included the conversion of the card portfolio.

We didn’t leave our customers alone. We actually helped them in the actual doing, which means customer segmentation, which means creative development, which means mailing, which means activation of their cards, once they have received them okay.

So we went down to the actual doing, not only PowerPoint and we are using actually a lot of our digital platforms to make this happen okay. So the way you could think about it then is that we have 15 years of conversion experience.

So those people that we sent there, we sent a team of five people for 12 months sitting on the site, helping them in their day-to-day operations. The customer just does not need to reinvent the wheel. I would like to call them my Navy SEALs. You go and get the job done. Get out again, this is what those people are doing. This is why they are good and what they can do and its mutual beneficial.

It's not only that it's a service right, but what we are effectively doing here is we are de-risking. We are taking risk out of the conversion and it's mutually beneficial. For the customer, it means that they will prevent any attrition or conversion issues and for us it means that oh, it will stop, it will expedite the conversion and we'll start seeing Mastercard transactions sitting sooner, that's very beneficial.

Daniel Perlin

Absolutely. Now you can't have a discussion without loyalty. And obviously, safety and security is two areas of focus for you guys within the services area. So what do you bring to the client in that regard? And then how is that maybe evolving and changing over time?

Dimitrios Dosis

So this is if you want the last element of the continuum I told you from insights to execution on that into running. So then we start with loyalty and we've been in loyalty for long time guys. So think about loyalty then as a preference okay. It's the behavior preference for products or brands when they are about competing product out there.

To win this preference game it is an interplay of three S's that we bring to the table. The first one are reward platform. Reward platforms can be from a very simple points calculation. Hey I go into a store, how do I make sure that the points I collected are somewhere put into and how do I then use them from this very simple point collect system into the more sophisticated one.

Oh how can I then redeem my points? Can I redeem them online, offline? Is there let's say, is there a real-time availability of those point redemption. So this technical platform, rewards platform is and also we have end to end. That's the one.

The second one is around the actual rewards on offer. This starts from the very basic fulfillment of merchant offers. I mean you think about it, if you go to a shop and say oh, I want my points to buy -- to get a toaster, how do I supply the toaster? How do I make sure the toaster reaches my home? These are very basic things. However it needs to be managed.

So this is if you want a very basic part of our management and it goes down into much more sophisticated things like I bought an airline ticket and it plays off my designation. I would like to have a copy made available to me. So this is the offer space we offer and plan.

And then the last elements are the benefits, benefits like cardholder insurance like lost and stolen. I am going on vacation. I want to make sure if my stock gets stolen, I have this in my pocket. Up till this point of more sophisticated services like lounge access or concierge services.

So this is the end to end venue chain we cover in loyalty. Maybe a couple of examples if you want, American Express -- American Airlines our key customer in the co-branch space, here is what we have done there. They are an active user of our loyalty platform and they are actually using it to have a much more deeper engagement with our customer and this is not so much a deeper engagement only on Mastercard cardholders that they're driving with it, but by using our platform they are also able to reach customers who are buying airline tickets okay.

So it's about increasing engagement with Mastercard card holders, but also fulfilling a service for the core business, which is selling more tickets. That's the beauty of loyalty that is especially with core brand partners, it addresses the Mastercard book, but it also allows the customer to really fuel their core business, airline tickets and the same applies for example in something we started last year, which I would like to call pay with reward.

It is a very nice way for consumers to use loyalty. It is a very flexible way for every Mastercard location you can go and redeem your points and get something. So you don't need to go and wait and see is this special merchant part of my coalition of the loyalty program, but really allows and instantaneously use of your reward points at every Mastercard location.

It is a great customer experience. We have now live in the U.S., in Canada, in Brazil and Mexico and we have seen that customers who are on this program, that they have a much better use of the let's say of the card.

We have monthly customers like Santander in Mexico, for example, who is using this. So this is a little bit then on the topic of loyalty. Now when you switch gears and go into safety and security, so look at the ecosystem. It's a very big ecosystem. We have thousands of merchants. We have millions of merchants and then we have myriads of technology providers.

In this setup, it does not, let's say there is not a single silver bullet to guarantee safety and security. It doesn’t exist. So the way we are approaching it is first of all we have security by design in our products and all of the services we are providing and we are approaching this with a layered approach. Think about this in the following way.

We have a first layer which is our prevention layer, making sure that our assets stay secure from cyber crime from whatever. So prevention is the foundation and layer of our safety and security service. On top of this, we have the identification, the identity layer.

Is it really the cardholder who says he is the guy who has or the lady who currently has the card. So we need to make sure we identify the cardholder that is the person who says it is. The third layer is the detection layer, is the transaction which is currently happening, a fraudulent transaction, yes or no? So prevention, identification, detection and last but not least but very importantly, it is the experience layer.

Let me give you an example, for example you have a house. You want to make it secure. So what you do then, you first of all put a lock on the door, then you want to be extra security, you put a second lock on the door and you put another lock on the window and you might actually also put a very complicated alarm system there.

But at the end of the day, you are the owner of the house. You want to make sure you can still go into the house okay, which means that whatever we do in terms of safety and security, we need to make sure that the customer has good experience when using his card product. This is very important.

Now decision analytic is one solution we brought into the market last year which is really using artificial intelligence to better core transaction. What we have seen in the first year is it has materially reduced fraud -- false declines which has driven usage, positively for the customer but also for us. We see more Mastercard transitions and really the acquisition of Brighterion has been very, very good there.

Now on those running services, loyalty and yes I think there is a very strong point to make okay because all those elements go down the chain B2B2C okay. So at the end of the day it's the end consumer who is keeping, we have their proposition in a sense.

Now we need to make sure we address the end consumer sentiment. What I mean by this is customer experience is just not enough anymore. I mean it's table stake. Everybody wants it, but nobody wakes up in the middle of the night and says who I need to have a better customer experience. This is not enough. It's table stake okay.

However, what we see that the end consumer is worried about, he see as what is happening with my card. Is my transaction being secured enough? Is my money going to get stolen? So there are fears. And they are also ambitious at the end consumer. How can I make more money out of it? How can I get more return from my activities and now with services we have; loyalty and safety and security address exactly those customer sentiments.

Safety and security, the fears, loyalty is addressing the ambition, that's why they are so much scale if we use our B2B2C channel to address this basic consumer sentiment.

Daniel Perlin

I wanted to drill back on this point of pay with pivot points because I do think that loyalty space is one where there's some differentiation that is happening. I mean, a lot of people are trying to attack it in different ways. So I just want to make sure I understood what you were saying. So anywhere that MasterCard is accepted and you have a Mastercard branded product, you're actually able to use loyalty points at that retailer? Or is it like a liquid report.

Dimitrios Dosis

So there are two things that need to be there. First of all the counter needs to be ready for Pay with Rewards, and we have currently the U.S., Canada, Mexico and Brazil and number one there.

Now when the customer then who, the customer for example, Santander in Mexico says, you know what I want to be enrolled on this program. Every customer who is part of this -- of this bank has then the right to use Pay with Reward and pay with the reward they have collected at the point of sale every month.

Daniel Perlin

Yes, that's fantastic. So when you wrap all these things up, and you think about services coming together, and what's being brought to the customer and thinking about MasterCard differentiation holistically, it is a competitive space. It does appear that you're attacking the services angle a little bit differently, almost philosophically differently than your other competitor and other big competitors.

So when you put that together, what is the major differentiation that you think you're offering when you go in head to head against some of those -- those other people.

Dimitrios Dosis

Sure. So I think there are two areas there right. The one area I would like to describe as the assets we bring to the table. So think about this. We have our data assets okay, which is very powerful, it's global, all anonymized and aggregated, but it's at global scale. So this is the one asset we bring to the table, which was is differentiating.

The second assets are our system. We invested early on in data warehouse which is the foundation of element of all the services we provide. The third asset we have which is highly differentiating is our expertise not only expertise in payment okay but it's also expertise we have in different sectors.

We have experts in financial institutions, in retailer, in healthcare and CPGs. This is our foundational and this expertise gets added on with having people who know what they think about when they talk about data protection and security as we at Mastercard.

And it also expands into things like software development, things like UI, UX and data sciences okay. So these are expertise which we have, which is pretty unique in this combination which is another stronghold. The fourth asset is our channel, our network channel our B2B2C channel, which is massive advantage we have out there.

And the last one is the brand and what it stands for. So this is the one bucket of differentiations then you could think about and the other bucket I'd like to call it the our ability for inorganic growth okay. So over the last year you have heard us really bringing companies into Mastercard and it's not only that we added their businesses okay, but we also added assets.

Think about five predictive technologies. We got a state-of-the-art platform out it, but we also got an excess point into a new channel, into a complete new space of retailer and healthcare, which we originally had no excess and we also got access to software engineers or when we acquired Brighterion.

It's not only the artificial intelligence technologies, but also the data scientists. When we acquired Pinpoint, it's only the loyalty business, but also the dataset and the channels they have into the business. Although coming it's not only the work, the close that we start adding now to our rates, but it's also the new dataset we brought for the business. So this is how you should think about differentiation in the space assets and our ability for inorganic growth.

Daniel Perlin

So I have to ask you on everyone's favorite topic, which is regulation, and it'll be a theme throughout the whole day, we just have to go through it. But how is that impacting the services and specifically I'm thinking of PSD2, I'm thinking of open banking, I'm thinking of GDPR? I mean, these are big issues, most of which are in Europe, but they could also be kind of leading factors as to what we might see in other markets, maybe in the United States. So how does services kind of hold up in that regulatory framework?

Dimitrios Dosis

Sure. So I actually think that our ability to address regulation is one of our key strength okay. So PSD2 is one. The other one that most of you guys probably is the European General Data and Protection Regulation, which is in place. So let me take a step back. So Mastercard has a long-standing position in data protection and information security okay.

What GDPR does is effectively harmonize the regulation across Europe and it provides a level playing field for all players and we also agree with the tenants of the regulations that it makes sense to give the customer the right to know what's happening with their data and also giving them control of what is happening with it.

So I don't think there is anything bad there right. So what we did at Mastercard let's say ahead of time practices is set together with IBM, we found an independent trust called Truata to really address data protection at its highest level by anonymization. I live in Frankfurt, I told you this morning and as the consumer on 25 of May, I got bombarded on my private email with 70 emails asking me for private consent.

I mean it was a complete nightmare. I am telling you guys, a complete nightmare. I think the way however that we at Mastercard have addressed this regulation proactively in this setup is really strong and we're few where regulations spreads off in Europe, but I think we will be in a very strong position to address this wherever it happens.

Daniel Perlin

Okay. If we work ourselves and think about geographic opportunities and/or threats, and we think of services holistically in this regard, how do we look at it from a developed market versus developing market versus even taking some of this stuff into the emerging markets? Like where are these products and where do they lend themselves as you work around that geographic footprint.

Dimitrios Dosis

So I think our services are relevant wherever we go. There are some markets where -- who are a little bit less developed there. You probably need to start at a bit of an earlier stage like for example we have markets where we still have our customers in their digital transformation identifying their digital strategies and then there are other markets who are more progressed in this spectrum.

We said you know what, on the actual innovation, on the prototyping on the development, then there are markets where it has really then the next factory where we talk about more innovative services like artificial intelligence okay. So this is how you should think about it.

Daniel Perlin

Okay. One of the things that Mastercard has brought to the forefront is finding these new payment flows, right? And that has been a big recurring theme over the past, really, couple of years. And you, obviously, made a very large investment as a company in VocaLink. And so I'm wondering how kind of Fast ACH plays into the services construct? Are there opportunities for you to kind of capitalize and monetize on that as well? Or is that a little bit disassociated from that.

Dimitrios Dosis

No absolutely not. I think they are a massive amount of synergies because it's not only that we added new payment flows onto our layers, but as I said, we also added a complete new dataset and customers to our business, which means with the datasets we have a complete different way to addressing problems.

For example a service we are driving together with VocaLink right now is to understand how fraudulent transactions happening on the ACH. We call it the money wheels. So we can see if money gets bounced around thousands of accounts and at least the country, we can detect those flows ahead of time and really prevent them.

So there is a used case there, many used cases which on the basis of let's say us coming together we can address in the market and drive service.

Daniel Perlin

Okay. How penetrated when we look at services as a whole? I know you've mentioned, I think 50% or so, something like that in the very beginning of your kind of opening remarks. In and around advisors who are using it, but how do we look at that when we think about data analytics? Like how penetrated is it into your existing user base? And what about like loyalty and fraud solutions, so those types of things, are there data points you could share with us.

Dimitrios Dosis

So I think Dan it would be good for this to take a step back and understand a little bit of why Mastercard is at all in services, okay. I think this very important for you to understand and then I'll address it. So Mastercard is in services for three key reasons okay. The first reason is to have win and retain new business okay. The second one is to drive a better performance of the Mastercard portfolio and the third one is to diversify the business and this a little bit of the way your question.

So I'll just start with the first question. We win business out there sometimes also without RFP, a European retail bank, for example. We've been engaged with those guys since 12 years. It also started with us developing their debt and credit card proposition to developing and running their loyalty program.

Since then we have embedded a huge amount of platforms there. We had up to 10 people working with them day in, day out. A few months back they came back and said, we would like to expand the deal. We didn't got hung up in a lengthy RFP program okay, but in fact we very quickly for mutual benefit extended the contract, which means that the partnership we created at the front end, it cannot just be replicated.

You cannot replicate or clone the people who have been working together right. So this is a really a stickiness, which is mutually beneficial for us and the customer, but also when we bring new deals. I think when it was in the last investor program we mentioned our partnership with Bank of Baroda, okay, in India.

Ahead of this deal we were engaged with Bank of Baroda in what we call a joint value identification effort okay understanding what needs to happen to drive debt usage in India, what they need to change okay and this changed agenda that we identified with the customer is not only the BIU business, but it also addresses what do I need to do to drive my transformation digitally? How do I use artificial intelligence to drive top line, bottom line benefits across the end of class, not only payment or how do I address regulation okay.

So it really drives a huge amount of partnerships, which happens really then win the deal and regulation as you said is a major theme. I mean in Europe the last two years we worked more than 30 issuers and merchants helping them understand what's happening with PSD2, what's happening with open banking.

So sitting with the customer, the moment that they need you the most and help them work through their issues. This is true partnership and this is why services are there to help Mastercard win and retain their core business. So that's the first reason. So the second reason is around driving performance.

So we have seen the customers who are engaged with services ahead of materially better performance. We have sets that show their customers performance their Mastercard folks performance is up to 30% better when they are engaged with services or how is it coming.

I am telling you it’s very easy because our services are very much helping them in their operations. I talked about the execution capability spend. When we run a usage campaign on debit, this is not only a service offering we are giving, but it actually helps them increase their usage, which drives the performance of the Mastercard folks on the customers benefit and for us or our safety and security things right.

We did two years ago in the Middle East, Africa region a campaign to increase authorization rates to increase them across their region by 160 basis points very material okay and this allowed us to really drive the usage for the benefit of the customer and for us.

So just think about this, our services is not only that we are driving differentiation, but we're also getting paid for and we are also driving this what I would like to call the post multiplier effect on our own business that's very powerful. That's just the second element okay.

And the third one is really diversifying our business. So this is one of the element you mentioned and here I think it was last year when we said at the Investment Community Meeting, we disclosed actually that our various services line in aggregate amount to around 25% of our revenues in 2016.

This by the way also includes processing that we did not talk about today and I can tell you that our service line continue to grow well and the mix has generally continued okay. So these are the three reasons for us being in services, which I think are very relevant.

Daniel Perlin

Yes. So we're coming up near the end of our time, but I did have a couple of last questions, and then I'll let you have the last word. But you know you've acquired a lot of these assets, and so I'm wondering, is services, as a business, can this be a collaborative effort with third parties? Or do you have to own the asset in order for you to kind of execute on all the things you've been talking about?

Dimitrios Dosis

I think it's a mix okay. I think it's a mix. I think we have had a good experience because of our global schedule only as such okay, but it doesn’t mean that from the beginning everything needs to be homemade okay. So we have a variety of partnerships that we are working through, but I think that given that we have global scale, I think and we have a very strong sweet spot on what we want to do, with platform-based business, I think you will see us getting more and more involved there.

Daniel Perlin

Any technologies out there that you think enhance the ability for you to have services or even be disruptive? And so Blockchain comes up a lot. We'll talk about it later in the day. Anything there that you can offer in terms of insight, good, bad, indifferent?

Dimitrios Dosis

So I talked to you about how we help our customers depending on their development space okay. Sometimes it's just digital strategies. Sometimes it's innovation. What we have seen lately is customers who are highly interested in the next click of innovation okay, which is since this year we are providing what we call artificial intelligence as a service.

So we are going then have our customers identified as topline, bottom line benefits enterprise-wide and then we use our Brighterion technology to really execute on this. This is what we are doing.

The same thing we started this year on Blockchain as a service, we have proprietary Blockchain technology that the customer can really use in its own product development. So these are two things that we are bringing into the market on the service line.

Daniel Perlin

That's fantastic. So I said I would give you the last word and we're running up against the clock, so if there's anything, closing remarks you want to have on the services business that we need to take away as investors in Mastercard, what would that last word be?

Dimitrios Dosis

So I hope you understood that we are doing business for 13 years. I am very excited in this business. I still think it's the best thing that we came up here because of those effects I discussed. The one thing which is a takeaway is that partnership, true partnership is about and beyond sitting with the customer and helping them problem solving, but it also has economic benefits.

Think about all the new things that our customers need to do, artificial intelligence, machine learning, these are huge investments okay and we at Mastercard can centralize those investments to the benefit of our customers in terms of optimizing investment needs, but it also has a benefit in terms of time to market.

We have been proactively in all those topics and we can have a much quicker time to market by let's say centralizing those things with us. So this is I think the thing I would like to leave you with, their true partnership really extends also into driving a true economic benefit to our customers.

Daniel Perlin

Excellent. Well Dimi, thank you so much for being here today. I know you travelled a long way to do it and I very much appreciate that. So thank you so much.

Question-and-Answer Session

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