Mastercard Incorporated (MA) Autonomous Research Virtual Annual Future of Commerce Symposium (Transcript)

Sep. 15, 2022 4:42 PM ETMastercard Incorporated (MA)
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Mastercard Incorporated (NYSE:MA) Autonomous Research Virtual Annual Future of Commerce Symposium Call September 15, 2022 1:35 PM ET

Company Participants

Sachin Mehra - Chief Financial Officer

Conference Call Participants

Ken Suchoski - Autonomous Research

Ken Suchoski

Okay. I think we can get started with the next session. We have Mastercard presenting right now. So, welcome back for those of you who don’t know me, I am Ken Suchoski, I am the analyst on the payments and fintech team at Autonomous Research. We are excited to have Sachin Mehra joining us today. Sachin is the Chief Financial Officer at Mastercard. He has been with Mastercard since 2010 and was promoted to this position almost 3.5 years ago. So Sachin, I think he might have just dropped off the session. So we will just give them one moment and we will try to reconnect him. Just bear with us for one second.

Sorry about that. Apologies that we didn’t have the tech sorted out. So, that’s our fault. So great. Well, why don’t we get started? So my name is Ken Suchoski, I am the analyst at the – on the payments and fintech team at Autonomous Research. We are excited to have Sachin Mehra joining us today. Sachin is the CFO of Mastercard. He has been with Mastercard since 2010. He was promoted to this position almost 3.5 years ago. So, Sachin, welcome. Thanks for joining us. Glad we got the tech all sorted out.

A - Sachin Mehra

Yes, thanks for having me. Glad to be here.

Question-and-Answer Session

Q - Ken Suchoski

Great. And we would like to make the session interactive. So if you have a question for Sachin, feel free to drop that into the Q&A box on the Zoom app or you can e-mail those to me at and we will do our best to get those answered.

So Sachin, maybe to start off, I mean, the narrative around the consumer and the economy more broadly has changed a lot since the start of the year, right? It seems like just in a blink of an eye we went from talking about the travel recovery to a potential recession. So to start off, what are you seeing in terms of consumer spending habits and the main macroeconomic metrics that you are keeping an eye on as CFO?

Sachin Mehra

Sure, Ken. So look, at the highest level, here is what I would say is we continue to remain very constructive, but at the same time, vigilant about the macroeconomic environment as we see it. And we are monitoring several factors, some of which have a positive impact on economic growth and others which could have a negative impact on economic growth.

And let me just talk through some of those factors that we are keeping a close eye on and then what the implications for that are from our overall business standpoint. So on the positive side, what we see is continued levels of – very low levels of unemployment, I would say. That’s being accompanied by rising wage levels that’s being accompanied by high levels of consumer savings. All of these are, in our view, at least positive as it relates to the overall health of the consumer.

On the negative side and this is no surprise to anybody, we continue to see inflation remaining at incredibly high levels. It consists – it seems to be persisting. So there doesn’t seem to be a tailing off effect, which is taking place on inflation. Obviously, we are seeing the central banks act fairly aggressively. And that’s something we are keeping a close eye on, because we do believe that, that’s something which will – if it persists for a significant periods of time could have a detrimental impact to consumer spending. And beyond that, obviously, the world is a complicated place. There are several geopolitical concerns, which are around. We have seen some of them surface that ugly head in the early part of this year. And so we continue to keep an eye on that as well.

Now you will probably remember that at our second quarter earnings call in July, we had shared with you our expectations as it relates to how we were thinking about the remainder of 2022. And we had shared with you at that point in time that we expected a modest improvement in cross-border travel relative to 2019 levels and a generally resilient pattern from a consumer spending standpoint for the remainder of 2022. And based on the operating metric trends we have seen thus far through the first 2 months of the third quarter, that’s broadly in line with these expectations.

So net-net here is what I would tell you, the consumer continues to remain strong. We are encouraged by what we see there. At the same time, we remain vigilant about all of the factors, which I just walked you through. And we, as a business continue to remain incredibly focused on being diligent about our expenses, managing them in a nimble manner as we have demonstrated in the past and we will continue to do that on a going-forward basis.

The last point I’d mention, Ken, is that it’s important to recognize that Mastercard is a very different Mastercard in 2022 than it was 10 years ago. It’s a highly diversified business. We have got multiple sources of revenue, some of which are more impacted by the economy and macroeconomic factors and others provide a nice little offset to that, as you saw even during the COVID environment. So, that’s generally how we are seeing the macro environment and the implications on our business.

Ken Suchoski

Great. And Sachin, I mean, regardless of what the economy might do in the near-term, I think one thing we can all agree on is that the shift away from cash is here to stay. So can you share your latest thoughts on the long-term consumer to merchant payments opportunity?

Sachin Mehra

Sure. Happy to do so. Look, I mean, we think there is a sizable untapped consumer payments opportunity, which still remains and it’s probably going to be with us for a long time. We had shared with you in November of last year at our Investor Day that we had sized the P2M opportunity at roughly $45 trillion and approximately $20 trillion of that was in the nature of carded flows at that point in time.

At that same point in time, we had shared with you that we expected that over the long-term, carded volume growth on a CAGR basis would be somewhere in the 9% to 10% range. And while we haven’t really updated those numbers since then, we do track them fairly actively and we continue to believe there is a sizable P2M opportunity, which remains. We are well positioned to capitalize on that opportunity as we have done over the last decade. We continue to believe that we are well positioned through many things we are focused on, one of which is continue to grow our acceptance. The other is the investments we are making from a digital standpoint, the third being around contactless payments.

So all of these, we believe, ultimately will be accretive to tapping into this opportunity. But one more point, I know you asked about consumer payments. I think oftentimes, we tend to forget about the opportunity which exists at the commercial point of sale, which again we had cited at our November investor meeting to be approximately a $14 trillion opportunity, which is very lightly carded at this point in time. And that’s something we remain very focused on and continue to pursue in terms of the efforts to digitize those flows and bring them on to our aisles.

Ken Suchoski

Absolutely. And there is a great opportunity there. I look forward to following your progress. Sachin, your team provided a really interesting chart at your Investor Day, where you showed where cross-border would have been had COVID not occurred. And if your historical growth rate had continued, obviously, there is uncertainty with airports getting back to 100% capacity and borders reopening. But how much recovery is there left in order to return to that pre-pandemic trend level? And additionally, how important is China to your cross-border travel portfolio? And I guess how much lift will that give to cross-border when the country reopens further?

Sachin Mehra

Sure. Happy to take that question. I guess no conference would be complete without a question around cross-border in the context of payments and district selling. Look, here is what I’d say. I’d say the fundamentals of cross-border and what the value prop we provided there are incredibly sound and they remain sound. And we have had a high level of conviction of that right through the COVID environment.

Our basic premise is the following, which is when people have the ability to travel, they have demonstrated the intent to travel. And that has been shown in November of last year when the U.S. border was first started to open up. And then more, I would say, more assertively or more aggressively in the first half of this year where you have seen a very nice recovery take list from a cross-border standpoint.

To your question as it relates to the remaining opportunity, so to say, couple of thoughts for you. One, cross-border still continues to be – if you were to actually think about our historical growth rates on cross-border, we still haven’t recovered for lost time as it relates to the historical growth rate. So there is an opportunity which remains broadly speaking there, but even beyond that, if you look at markets in Asia-Pacific and we have mentioned this to you at the time of the second quarter earnings call if you take Asia-Pacific, Asia-Pacific was the inbound cross-border travel into Asia-Pacific was operating at roughly 60% of 2019 levels in Q2. So there was a fair amount of runway, which still remain at that point in time.

The more updated number for that, which is for inbound cross-border travel into Asia-Pacific, as we’ve seen through the months of July and August is right now at about 74%. So the reality is we are seeing some of that opening up effect come through, but there is still a long runway ahead of us, not only in the context of Asia-Pacific, but also in the context of other inbound border such as the U.S., UK, Canada, all of which, while they might be operating at – the above the 100% level has still not gotten back to the historical growth rate levels if you were to catch up for lost time. So we continue to believe there is significant opportunity, which remains there.

On your question around China, Ken, China is a relatively small part of our overall cross-border volumes, both inbound and outbound. In fact, outbound China in the pre-COVID days was slightly higher than inbound China. But both in the individual as well as in the aggregate are a relatively small component of overall cross-border volumes. Really, the direction of travel thus far in China, and this should come as no surprise to anybody, inbound is continuing to lag. It’s not showing any sort of real strength coming back. Outbound has shown some level of improvement take place in the recent past in terms of outbound from China into other markets.

But there is a ton of room still left for the Chinese markets to open up and border restrictions to be lifted and quarantine restrictions to be lifted. So that’s kind of where we are. We think tremendous opportunity still remains on cross-border. We are well positioned to capitalize on that opportunity.

I think for those of you who have been following the company right through the COVID environment, we had maintained a steady drumbeat of deal wins in the travel space because we had strong conviction in the fundamentals of cross-border. And those deals are holding us in really good stand right now because as travel is coming back, the fact that we are well positioned from a deal standpoint and from a customer standpoint to participate in those flows, whether it’s with the large airlines, with the co-brand deals we’ve done there or with the travel aggregators and the deals we’ve done there, there is tremendous opportunity, and we stand ready to continue to capitalize on that as cross-border continues to come back.

Ken Suchoski

Great. And I guess one question that I just thought of Sachin based on some of your comments. It seems like there is this opportunity to return to that pre-COVID trend level like we talked about. But is there an opportunity to get even above that as you shift? You have the secular tailwind from cash going to cards. So is that like – is that an additional lever that might put us even above that trend line?

Sachin Mehra

Yes, I think that’s an interesting question, Ken. Here is my thought on that, which is I think it’s less about the conversion from cash to electronic forms of payment. I think there is some amount of lift, which we get from that because when we think about the amount of cross-border volumes, which took place pre-COVID, there might have been some element of cash when somebody traveled overseas and they pulled out cash and they actually spent with cash. So there is the opportunity to convert that into card-based forms of payment for sure.

But I think the more sustainable change, which has taken place between the pre-COVID environment and the post-COVID environment is, right through COVID, a bunch of merchants went into omni-channel acceptance. There were a bunch of merchants, which in the past, would only do in-person transactions. It was a matter of survival for them. They needed to go omnichannel and enable e-commerce. When they went e-commerce, what that did do was it bolstered up, card-not-present cross-border volumes. And I’m talking about the ex-travel stuff. And you’ll see from the metrics we’ve shown you over the quarters that those levels have remained very robust. And so I kind of think there is structurally things which have changed through the COVID environment where we have, in effect, gotten the benefit of more acceptance in the e-commerce environment from a cross-border standpoint, which would be helpful to growth rates over the longer-term.

Ken Suchoski

Great. That makes a lot of sense, Sachin. Another topic I wanted to touch on is real-time payments, which – I mean that it’s gained traction yet again in recent weeks. FedNow is expected to launch next summer, which has been a concern for some investors over the years. We don’t necessarily agree with that notion. But can you just give us your thoughts around real-time payments? How Mastercard brings value to that ecosystem? And perhaps what’s most understood by investors as it relates to that topic?

Sachin Mehra

Yes, sure. Look, we continue to believe that there is an opportunity to capitalize on with the utilization of real-time payments capabilities. I mean, you’re well aware of the fact that we made investments in the real-time payments capability standpoint when we did the acquisition of OpenLink and then into our acquisition of the Corporate Services business of Nets, where we acquired some real-time capabilities.

Our view is the following, which is you’ve got to think about the real-time opportunity across two dimensions. One is the ability of the real-time payments opportunity to expand the available total addressable market because not every payment is ever going to get carded. There are going to be payments which are never going to get carded and it’s really important for us as a company. And we’re in the business of providing choice to our consumers to be able to be present with payment capabilities to offer our card rails, where card rails are the most appropriate way for payments and then non-card rails where non-card rails work the best, which is why we made the investments in real-time payments.

So to your specific question around FedNow, remember, at the end of the day, there is multiple things which are required to drive scale in this business. The first thing is establishing connectivity across the ecosystem to enable the movement of funds on a real-time basis, very important, right? Part of that is what we have done and enabled through our agreement with TCH with our Vocalink capabilities, and we’re doing this in several markets across the globe where we are participating in the infrastructure level.

We feel that’s important. We feel that’s a good play. We don’t think we need to do that in every market. We’ve done it selectively in those markets where we think the size and scale that we had and where we can actually really drive some value. And FedNow would be the equivalent of that, which is the creation of that infrastructure capability.

But at the end of the day, the infrastructure and of itself is not going to drive utility. Utility is driven by who develops applications and what applications are developed to meet the use cases that consumers, small business owners and mid and large corporates desire when they are utilizing that faster payment capability. And this is applications like bill payment applications, remittances, disbursement capabilities. It’s that whole gamut of things, which allows us to leverage our assets from a real-time payment standpoint and the applications we’re building on that to tap into these new payment flows we’re talking about, which is the expansion of the TAM opportunity, which I talked about.

Now the second dimension, which people often think about is, okay, that’s great that you’re expanding the TAM. But what about the threat that exists when people make applications work in the real-time environment for person-to-merchant payments, where cards have traditionally played a role? Look, the reality is you’ve got to think about that person-to-merchant payment environment across multiple dimensions again. There is what we call the pay now solutions, which we which we normally call debit, right? And then there is the pay later solutions, which is credit.

So first, you’ve got to kind of take up the market and to pay now and pay later. When you talk about real-time payments and the applications which come along with that, they are typically going to go after the pay now side of things. Even there, you have to ask the question, what is the problem, which is looking to be solved there. Because today, when you think about what a debit card transaction does in most markets, it provides at a very economical cost, tremendous value to the consumer and the merchant. It provides things like zero liability, it provides charge-back rights. It provides all sorts of dispute resolution. It provides safety and security, all of which are very much value. A consumer doesn’t need to think about the transaction when they are doing a debit card transaction. So our view is, in theory, there is a utility which exists to transition the use of real-time payments with the right applications in the P2M space. It probably will happen. First of all, small use cases is our view, and we stand ready to actually capitalize on that as well. In fact, in the UK, we launched something known as Pay by Bank, which is effectively an app, which taps into your bank account to enable payments at the point-of-sale in a P2M manner. And we’ve come to realize that there hasn’t been great adoption to that because people just love their debit card product, and that’s what they use. So that’s kind of our view as it relates to this. We still think being a multi-tier company is the right approach for us, but we view that more as an opportunity in the nature of expanding our TAM.

Ken Suchoski

Maybe this is a good point to pivot, Sachin, into another area that I wanted to discuss with you today, which is open banking. And so can you discuss your open banking strategy and just provide an update on your progress in that area?

Sachin Mehra

Sure. We view open banking as another very interesting and potentially high-growth opportunity for this company. Specifically, what we believe open banking does is it drives tremendous innovation, and it allows consumers to control access to their data and realize the benefits of that data. This is really important because even though it’s called open banking, at the end of the day, what open banking so far has done has enabled the movement of data in the right way, at least as it relates to us. The movement of data in the right way with consumer consent with the right data security, with the right data privacy, right to make it available to application providers who are delivering services to consumers. And our play in this space has been – we’ve been involved in the space for some time now but really started to pick up steam with the acquisition of a company called Finicity, which we did a couple of years ago and more recently with the acquisition of a company called Aiia. Aiia is a company we acquired in Europe. Finicity is a company we acquired here in the U.S. And really, the way you should think about the opportunity here is there is the opportunity to create a parallel data network. And the power of that data is to deliver everything from use cases like consumer lending to SME lending. And again, we’re not in the business of lending ourselves and using our balance sheet. It’s about providing applications to lenders to enable them to do consumer lending, SME lending, it could be around account opening, ACH account validation.

These are some of the use cases. In the mortgage space, we’ve been very active with mortgage verification services. And this specifically relates to verification of income, employment and assets of people who are seeking mortgages from mortgage lenders. So we see tremendous utility in terms of being able to leverage this data to deliver value to consumers, all done in the right way. I will emphasize because there is the right way and the wrong way. And we believe screen streaming is the wrong way to go. The right way to do it is through API connectivity. The right way to do it is with consumer consent and do it with making sure we’re respecting the privacy of the consumer. So our opportunity in this, candidly, is around – we have built out very good connectivity in the U.S. And in the U. S., we have connectivity to roughly 95% of the deposit accounts. That’s the starting point. You build connectivity or you have access to connectivity, which allows you to gain access to the data. Thereafter, you continue to build these applications, which cater to the use cases, which I just spoke about. And then the third layer of the strategy is to deliver services to much like we do on our card rails. And those services would be – the services we would traditionally deliver around our cyber and intelligence capabilities, our consulting capabilities, things of that sort.

A real-life use case, where you will see tremendous integration taking place between our open banking assets and what we do on the payment side is with the launch of Mastercard Installments. As you’re probably familiar with, we launched Mastercard Installments. What we’re offering with Mastercard Installments is the ability for lenders to leverage our open banking rails to allow them to do better credit decisioning as they are lending in the installment space. So you can see there is tremendous synergistic value also in terms of what we’re doing in open banking and what we’re doing on the payment side of the business.

Ken Suchoski

Right. That was very detailed. Maybe we can continue on this topic. I mean, Mastercard has identified a set of targeted new flows that you’re pursuing in areas like B2B accounts payable, commercial point of sale, consumer bill payments and disbursements and remittances. So can you provide an update on how you’re progressing in each of those areas?

Sachin Mehra

Sure. And so you just laid out the four areas which we had highlighted as focus areas for us as a company. So let’s break them up, and I’ll walk through each one of those four areas for you. But before I do that, just for the benefit of the audience here, last year at Investor Day, we had sized what we thought was an addressable market across those four areas at roughly $80 trillion of payment flows. That’s what we had sized that opportunity at. But let’s go with each one of them piece by piece, right? So if you take something like remittance and disbursements, we’ve got a set of assets, and I would call them world-class assets, which include our Mastercard Send capabilities and our cross-border services capabilities, which are performing really well out in the market. We are seeing great demand for them to come through. We’ve got – we’re opening up use cases on a regular basis around that, not only in the U.S. but in different parts of the globe, right? And the use cases range from P2P to remittances, which is a cross-border kind of play for the most part, which we like the economics of because of the extra value we deliver them, to disbursements. I would give you examples like the insurance vertical where we have been very successful, but there are several other areas as well. Earned wage access being the other areas. So, there are several use cases which we are exploring and we are actually participating in on the remittances and disbursement side. That capability of ours and the focus on those flows are, I would say, further along on the journey because there are different stages of how far along the journey we are across those four vectors, which we had identified. So, remittances and disbursements, good set of capabilities in market, generating revenue, growing at a rapid pace.

The second one was around commercial point of sale. And this is, as you would know it, which is our SME propositions, our T&E propositions, procurement card, fleet card, things of that sort. That business continues to go pretty well. We are – we have always been very focused on that. We continue to drive some real traction with the capabilities we have built over the years in that space. Most recently, we announced an expanded agreement with Bank of America, where we are going to be their preferred partner from a new card issuance standpoint in that commercial point-of-sale space. Similarly, we have got an agreement recently, which we talked about with WEX to work with them to help create open loop capabilities on their millions of closed-loop COGS. So, look, there is good traction taking place on that commercial point-of-sale, and we have had some very nice wins in the small business space recently as well, which will lend to share growth. So, I feel pretty good about those two. On the B2B accounts payable piece, I would tell you there is a part of it, which is generating revenue in the here and now, that specifically relates to our virtual card capabilities. We have been the market leaders in virtual cards. Those continue to grow at a very healthy clip. There is the B2B track capability, which we have invested in and we continue to invest in. I would still say that, that’s in its early stages of development. We are in the process of building out the ecosystem there. We are creating an open-loop environment to allow payers to send money to their suppliers across our B2B track platform. The value prop out here is around creating an open-loop network, much like we have done in consumer payments to allow for folks to enable the payments along with data to flow. And when I talk about data here, I am talking about the invoice data, the flow between payers and payees in this instance. It’s going to take time. Setting up ecosystems takes time, but we are well on our way on that as well. We believe the opportunity there is to bring in other value-added services such as potentially supply chain finance providers, so on and so forth, once you have got the flow going on that Mastercard Track asset, which we have built. And then the fourth area is around bill payments. Bill payments is something we have got very good traction going in the European market. It’s doing very well. There are a select few other markets where we are starting to see good green shoots going to start to emerge in bill payments. I will tell you, bill payments is not going to be something which we are going to pursue in every country across the globe. There will be a select few countries where we will target – where we think there is a real opportunity where the conditions are appropriate for us to go after them from a bill payment standpoint. And when we talk about bill payments, there is bill payments and there is bill presentments, both of which we are going to be engaged in. So, the revenue opportunity here is certainly on the payment side, but there is also an opportunity to generate revenue to enable an exchange-like environment for presentment of bills, which ultimately get paid over the assets we are bringing here.

Ken Suchoski

Great. I appreciate that detailed answer, Sachin, a lot to digest there. Maybe you could provide an update on Mastercard’s efforts to expand the global acceptance footprint.

Sachin Mehra

Sure. As you know, acceptance is a super important part of what we do as a company, right. And I feel very good about the traction we have had there. Over the last 5 years, we have doubled our acceptance footprint as a company. In fact, over the last 3 years, between 2018 and 2021, we have had a CAGR of approximately 18% across that acceptance footprint. And the way we have gone about doing this is by investing in new and different capabilities to actually meet the needs of the market. And this is everything from the digital capabilities we invested in to contactless, to the safety and security products, which we bring to market to make the user experience that much more secure. This is part and parcel of what we do every day. This is kind of our bread and butter business. We are doing it. We are doing it globally and take time to believe there is tremendous opportunity to keep expanding that. The other point I would mention on acceptance for you is it’s not only about acceptance as you would have known it for the last, call it, couple of decades. Acceptance is changing and we are driving that change, particularly with the utilization of cloud commerce and the work we are doing out there to bring our assets to bear, to make them available to the acquiring community to enable things like Tap on Phone, which is really important because remember, the world is gradually changing or I should say gradually. It’s probably rapidly changing to doing commerce anywhere. And when you do commerce anywhere, you want to have the ability to actually accept card payments anywhere. And most people do have smartphones. And when they have smartphones, and you can convert those smartphones into acceptance devices, which is what I am talking about when I talk about Tap on Phone, it’s a very interesting proposition. We actually have Tap on Phone capabilities and programs right now working across, I think close to 55 countries, where we are working on this as we speak. So, I would call that as kind of the future to come. So, there is a lot of work going on acceptance generally, which we have done always, and you have seen the results of that come through. But there is more to be done in terms of how the technology is evolving. And I just cited one of those cases, which is on Tap on Phone.

Ken Suchoski

Right. Let’s switch to another major topic I wanted to cover in our conversation today, Sachin, which is value-added services. So, can you remind us of the main areas that your value-added services focus on. And what gives you the confidence that Mastercard will be able to sustain that impressive growth rate in services over the medium-term?

Sachin Mehra

Sure Ken. So, our value-adds or what we define as services includes the following. It includes our consulting capabilities, our cyber intelligence capabilities, our data and analytics capabilities, loyalty and rewards and our processing capabilities. So, there is kind of a range of capabilities, which we include. And I have kind of given you the lion’s share of what comprises services when I just define that. I just want to remind the audience about why we are doing what we are doing in services because we believe it drives value at multiple levels to our company. Number one, it’s a standalone revenue generator and it’s growing at a pace faster than our core payments capabilities are. So, we like that. We like what we see there. Number two, it really helps us differentiate ourselves from the competition when we go and pitch our overall Mastercard story. In fact, a large part of what we have been driving in the recent past and the nature of increasing market share for our company has been aided by our value-added services. When you go in and you talk to a customer and you share with them that you are there, not only to be the network provider, but to actually help them grow their top line and manage their expense base, it’s a very different discussion than a pure vendor relationship discussion. It’s a partnership discussion. And that’s what really what our value-added services do. They help us differentiate our core payments capabilities. The third area is the diversification benefit they bring, Ken. And you have seen this come through actually during COVID, where our value-added services generated strong returns and strong revenue growth in an environment where our general GDV was somewhat trimmed by virtue of the fact that COVID had hit. So, we like that aspect of what value-added services brings as well. You asked the question as to why we remain confident in the long-term growth prospects of this area of what we do. Here is why I would tell you that. One, we have got excellent traction. We have got superior set of assets. But really, the market opportunity, which remains is still incredibly sizable. And the three vectors, which I would focus you on when we think about the opportunity for services. Number one, deeper penetration of our existing customer base with our existing set of services. There is still a ton of customers. We still need to tap both on the issuance side and the acquiring side, where we haven’t quite reached and we need to get to. We need to broaden that customer base, which we are doing. We are working now more with governments, with merchants, so on and so forth. So, it’s about expansion of the customers with our existing set of capabilities. While we are doing that, we are expanding our set of capabilities, which allows us further traction to go after a set of customers, existing and new, to allow us that growth opportunity. And then the third vector of growth, as we see it, is to take this set of services, existing as well as to come services, and apply the same logic over on our multi-rail strategy. And by that, I mean not only on card rails on everything we are doing on our real-time ACH assets, everything we are doing from open banking, everything we are doing in the crypto space. All of this is super important for us. And we think there is tremendous opportunity for us to keep kind of finding the payment and driving this through from our overall services strategy standpoint.

Ken Suchoski

Great. Sachin, we received a question from the audience. I know we have just a handful of minutes left. So, I wanted to leave this one in just, it’s a little bit shorter term. I know we have been focused on a lot of longer term kind of medium-term trends. But the question reads, is it a correct interpretation based off of the spending pulse data that was released earlier this week that card-not-present is anticipated to decelerate from 3Q levels this holiday season?

Sachin Mehra

Yes. So, here is what I would tell you. Look, holiday seasons are – first of all, you got to remember that spending pulse is across all tenders first. And I know this question specifically about card-not-present, but the reason I am stating that is oftentimes people view spending pulse as a proxy of what Mastercard is. Well, there is parts of spending pulse, which actually tie back to what Mastercard does, but there is much more in spending pulse than what Mastercard has because it’s across all tenders, including cash. that’s kind of a side comment just so that people have that. But on the specific question around card-not-present and what our expectations are, we continue to believe card-not-present will perform. There has been a fundamental shift which has taken place during COVID, which lends to digital payments and e-commerce related payments, which will continue to persist. Will it move up and down as time goes along, sure, it could. As more in-person transactions take place, you tend to see a little bit of a pullback take place in card-not-present. But honestly, the long-term fundamentals still continue to be very sound there. And that’s the way I would kind of think about e-commerce on a going-forward basis.

Ken Suchoski

Great. I wanted to touch on a popular topic, which is regulation and the potential regulation that would give merchants the option to process Mastercard and Visa credit card transactions through unaffiliated networks. And I know there is a lot of uncertainty here, but can you share your perspective. There are a lot of networks on the debit side, but you just don’t see that many on the credit side.

Sachin Mehra

Yes. Ken, I think you said it. There are a lot of unknowns. Honestly, I think there are unknowns from a technology readiness standpoint. There are unknowns from a legislative ability standpoint, in other words, the ability to pass it from a legislative standpoint. And I would say the third piece I would mention is not necessarily an unknown, but it’s more around this questionable thoughts around is this equitable. And is this equitable for consumers, and is this equitable for companies such as Mastercard who have invested heavily in building out our safety and security capabilities and our acceptance capabilities, all of which are now being asked to be opened up as part of what’s being proposed here. So, there are a lot of unknowns. I will tell you the one thought, which I will leave you with is the following, which is it’s our job to make sure we spend the time and the energy to educate the stakeholders who are in play out here on how we believe this will adversely impact the consumers and what the consequences of that will be. And that’s what we are spending our time and energy on. And that’s the extent of what I can share with you right now, Ken.

Ken Suchoski

Yes. Great. I appreciate that. And maybe just – I know we have a couple of minutes left here. But just last question, Sachin. I mean what are you most excited about for Mastercard? And what potential challenges do you foresee?

Sachin Mehra

So, I continue to remain very excited about the key strategic priorities that we have laid out, which is our focus around expanding in payments. Oftentimes, we get very focused on the new payment flow side, and I think that’s a real good opportunity, but let’s not forget that there still remains a very sizable consumer payments opportunity, which we are banging on every single day. So, that’s something which I personally feel like remains very exciting for us. The other two areas, which – and both of which you touched upon actually, Ken, it’s around services and around the new network capabilities that we are establishing. I think this is the promise for the future. Honestly, between what we are doing in open banking and what we are doing in digital identity, there is tremendous runway which we are going to be opening up as it relates to allowing us to deliver long-term sustainable revenue growth, right, much like we have kind of always been focused on as a company. So, between services, new networks, and the payments opportunity, I think we remain very encouraged. On the risk side, I would say there are a few things which are top of mind. Regulation and nationalism, certainly, kind of rises to the top, and you just talked about that a little bit, so I thought I would mention that. But in the very, call it, near to medium-term, the macro environment is something we are closely monitoring. And the other area, which I think is a risk results an opportunity is the increased pace of cyber attacks and cyber threats, which are proliferating commerce in general, not just payments, but commerce in general. And yes, it’s a risk, but we think it’s an opportunity given the suite of products and services we have, which we are trying to tackle, and we have been quite successful thus far in going after them.

Ken Suchoski

Absolutely. Alright, Sachin, I think we are out of time, unfortunately. So, I think we are going to have to leave it there. Thanks so much again for doing this. It was a great conversation, and I look forward to doing it again next year.

End of Q&A

Sachin Mehra

Ken, thank you very much for having me again. Really appreciate it. You take care.

Ken Suchoski

Alright. Stay safe and we will chat soon. Alright.

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