Q4 2023 Mastercard Inc Earnings Call

Good morning, My name is Brianna and I'll be your conference operator today at.

Brianna: At this time I would like to welcome everyone to the Mastercard incorporated Q4, and full year 'twenty twenty-three earnings conference call.

Brianna: All lines have been placed on mute to prevent any background noise.

Brianna: After the Speakers' remarks, there will be a question and answer session.

Brianna: If you would like to ask a question. During this time simply press star followed by the number one on your telephone keypad.

Brianna: He is the only press star one wants to queue up for a question as pressing star one multiple times may affect your position in the queue.

Brianna: If you would like to withdraw your question Press Star one.

Mitch: Thank you Mitch.

Mitch: Mr. Devin Quart head of Investor Relations you May begin your conference.

Devin Quart: Thank you Mariano good morning, everyone and thank you for joining us for our fourth quarter 2023 earnings call with me today are Michael Me back, our Chief Executive Officer, and Sachin Mehra, our Chief Financial Officer.

Devin Quart: Following comments from Michael and Sachin, the operator will announce your opportunity to get into the queue for the Q&A session. It is only then that the queue will open for questions. You can access our earnings release supplemental performance data in the slide deck that accompany this call in the Investor Relations section of our website Mastercard Dot com. Additionally, the release was furnished with the SEC.

Devin Quart: Earlier this morning.

Our comments today regarding our financial results will be on a non-GAAP currency neutral basis, unless otherwise noted both the release and the slide deck include reconciliations of non-GAAP measures to GAAP reported amounts finally as set forth in more detail in our earnings release I would like to remind everyone that today's call will include forward looking statements regarding mastercard's future.

Devin Quart: Your performance.

Devin Quart: Actual performance could differ materially from these forward looking statements information about the factors that could affect future performance are summarized at the end of our earnings release and in our recent SEC filings.

Devin Quart: A replay of this call will be posted on our website for 30 days.

Devin Quart: With that I will now turn the call over to our Chief Executive Officer, Michael Me back. Thank you Devin good morning, everyone hears the headline.

Michael Me: Closed out 2023 with another quarter of strong earnings and revenue growth.

Michael Me: For net revenues were up 11% and operating income up 13% both versus a year ago on a non-GAAP currency neutral basis, excluding special items as always.

Michael Me: These results were driven by healthy consumer spending and the ongoing execution of our strategy. Our deal momentum continued this quarter powered by a broad range of unique diversified products and services, both designed to solve our customers' needs.

Speaker Change: Let's start on the macroeconomic front.

Speaker Change: Let me see both tailwind and headwinds first the labor market remains strong with low unemployment and rising wages. These remain key drivers of consumer spending.

Speaker Change: Some risks we're monitoring include credit availability and delinquency rates second wind inflation continues to moderate prices of many goods and services remain elevated.

Speaker Change: Tracking the assets of central banks, who are actively managing interest rates to normalize inflation and finally geopolitical.

Speaker Change: Uncertainty remains a concern in several markets.

Speaker Change: On balance we remain fairly positive about the growth outlook, but we are monitoring the environment closely and we'll manage the business accordingly.

Looking at our switch switch trends this quarter domestic volume growth remains healthy.

Speaker Change: And cross border spending remains strong up 18% globally in the fourth quarter on a local currency basis.

Speaker Change: With that as a backdrop, we remain focused on our strategic priorities, which fuel our growth algorithm across payments and services and new networks.

Speaker Change: And payments outgrowth algorithm consists of five key areas one being in the flow to capture the natural growth.

Speaker Change: Economies to accelerating the secular shift to electronic payments across both spend and transactions.

Speaker Change: <unk> further penetrating the addressable market in new flows and for growing market share in five optimizing our customer portfolio for performance economies.

Speaker Change: Economies are growing and that's not in our control. However, we are executing on the rest.

Speaker Change: Building on that the runway for this secular shift is substantial we are accelerating it by scaling acceptance.

Speaker Change: Enhancing the user experience for digital transactions and driving adoption in new sectors and new use cases.

Speaker Change: In 2023, the added millions of new acceptance locations worldwide.

Growth has been aided by scaling our tap on phone and cloud commerce capabilities when alive in over 80 markets.

Speaker Change: Smaller merchants can start accepting payments by simply downloading an app and larger merchants are leveraging the technology to promote quick and seamless checkout experiences anywhere in store.

Speaker Change: We are supporting partners like Apple, who in 2023 expanded tap to pay on iPhone into Australia, the U K, France, Brazil, and several other markets.

Speaker Change: We're also accelerating the secular shift away from bolts from cash in closed loop transactions such as transit through our contactless capabilities contactless provides a fast secure and seamless consumer experience in areas like transit.

Speaker Change: It's an opportunity to capture incremental transactions with attached to every single ride.

Speaker Change: When consumers use contactless for transit they often extend that behavior across other low dollar spend categories. We've.

Speaker Change: We've made great progress with many major cities, such as London, and New York operating broad based open loop systems. However, there's still significant runway for us, giving that only a small percentage of large cities globally are operating open loop systems at scale.

Speaker Change: And we're leaning into advanced payment technologies like click to pay to organization and biometrics. They offer embedded secure password free checkout solutions and with that bring an elevated level of security simplicity and speed to every transaction.

Speaker Change: And that's true regardless of the device browser or Cod east.

Speaker Change: These solutions not only benefit consumers, but they also create value for merchants as their customers are less likely to abandon a transaction and issue US also benefit from an increase in customer stickiness.

Speaker Change: So click to pay we are now.

Speaker Change: Live in over 35 countries supported by over 50 channel partners and in 2023, we drove over 60% growth in transactions.

Client I will implement click to pay this year and activate their merchants across all European markets, where they operate.

Speaker Change: We're driving tokenism mission across all channels, including devices commerce platforms card on file and guest checkout.

Speaker Change: <unk> reduces fraud and increases approval rates by approximately three to six percentage points across regions.

Speaker Change: And we're expanding our biometric payment capabilities, which enable payments with a smile airwave.

Speaker Change: After launching in Brazil, we have now partnered with any C Corporation to bring our biometric checkout to the Asia Pacific region.

Speaker Change: Okay.

Speaker Change: We're also driving growth by winning and retaining deals across consumer payments account to account and new flows. This week, we shared that be OK financial will flip its U S debit portfolio to Mastercard, making us the exclusive partner across its debit and commercial portfolios. They selected us due to our differentiated virtual card and open.

Speaker Change: Banking assets fraud solutions, and our shared commitment to financial inclusion.

Speaker Change: This marks the third U S regulated debit flip we signed in the last year building on our recent successes with citizens and Webster Bank.

Speaker Change: Both of which have now started converting their portfolios.

Speaker Change: And deeper Banca one of the largest banks in Italy will migrate their debit card pool to Mastercard as well.

Speaker Change: We renewed our partnership with Commonwealth Bank of Australia, we will retain exclusivity across their consumer credit and debit portfolios.

Speaker Change: We signed a long term partnership with Shinhan card the largest issue in Korea to solidify our leadership in the country.

Speaker Change: This relationship spans consumer and commercial card offerings and expand into new services, including data analytics.

Speaker Change: And in Canada, we executed an exclusive long term renewal of the President's choice financial consumer credit and prepaid portfolios.

Speaker Change: We're also winning in Fintech co brands and public sector partners.

Speaker Change: When it comes to Fintech Mastercard as a partner of choice in fact, Mastercard says over 80% of the top digital payment and new bank Fintech on the CNBC Global Fintech list.

Speaker Change: This brought our starting bank one of the largest fintech and the U K renewed their partnership with Mastercard.

Speaker Change: And the co brand space with partnering with J crew and synchrony in the U S to launch the retailers first co branded digital first card.

Speaker Change: And in the public sector, we have an exclusive partnership with price of money network for all U S state and federal government benefits and wage disbursement debit programs.

Speaker Change: Part of our partnership we are thrilled to launch with the California Economic development Department in February the largest unemployment program in the United States.

Speaker Change: As you can see we continue a positive deal momentum powered by our differentiated products and services.

Speaker Change: Always keeping our focus on financial discipline.

Speaker Change: This also helps us to capture more of the secular tailwind and in turn further drive services growth.

Speaker Change: Looking to China, we are thrilled that our joint venture in China has received formal approval to commence domestic bank card clearing.

Speaker Change: Belief that vivo the uniquely positioned to provide Chinese consumers with an exceptional payment experience using a single card is optimized for both domestic and cross border spend.

Speaker Change: While we're excited about the medium to long term opportunity, there's still work to be done as we fully build out the issuing and acceptance footprint as we do that we continue to grow our presence with bank and Fintech partners in the market.

Speaker Change: <unk> launched the first blood Mastercard product in November.

Speaker Change: And bank of Communications selected Mastercard launched its first international debit card.

Speaker Change: Beyond <unk>, we also continue to make meaningful progress in the account to account space.

This quarter, we announced a long term strategic partnership with the clearinghouse the operator of the RTP network, which continues to secure our position in real time payments in the United States.

Speaker Change: Now shifting gears, we continue to execute against our strategy to capture the large secular opportunity and targeted new flows, including commercial payments and disbursements and remittances.

Speaker Change: We continue to win in commercial the spans commercial point of sale and <unk> accounts payable, which we target through our market leading virtual card solution. This.

Speaker Change: This quarter alone, we renewed our commercial relationships with J P. Morgan that fleet call two of the largest commercial issuers in the United States.

Speaker Change: BNP Powerbar Fortis will flip their business credit portfolio to Mastercard in Belgium.

Speaker Change: And on the virtual card front, we announced two exciting partnerships in the online travel agency space with booking dot com and our gorda.

Speaker Change: Turning now to disbursements in remittances in 2023, we grew transactions by over 30%. We continue to scale. Our use cases for example, UBS has integrated our cross border services capability. This will enable them to execute instant cross border payments for multiple use cases, including helping their customers pay <unk>.

Speaker Change: <unk> abroad.

Speaker Change: In addition, we also partnered with Ali pay to establish them as a cross border payments receiving institution in China.

Speaker Change: Payments services and new networks reinforce each other and we said it countless times.

Speaker Change: Services and new networks provide differentiation as noted in many of the wins I mentioned underlying.

Speaker Change: Underlying payments growth helps drive services tool and payments growth brings incremental rich data our services turn that data into valuable insights and when implemented by our customers. Those insights can drive incremental digitization of payments and turn this generates even more data more transactions more need for fraud tools and the powerful cycle.

Speaker Change: <unk> continues.

Speaker Change: The services and new networks components of our growth algorithms are built on.

Speaker Change: Driving increased penetration of existing customers.

Speaker Change: Attending our services across new customers and customer types, and continuing to build and deploy new services.

Speaker Change: Okay.

Speaker Change: Here are a few examples of how we are executing against each of these in the past year Bank of America has expanded their services relationship with US to include test and learn program management and supplier enablement solutions. This on top of many of our services they already have.

Brianna: Good morning. My name is Brianna, and I will be your conference operator today. At this time, I would like to welcome everyone to the MasterCard Incorporated Q4 and full year 2023 earnings conference call. All lines have been placed on mute to prevent any background noise.

Speaker Change: Axis Bank in India has also expanded their relationship with us they will use our consulting marketing and analytic services to support end to end portfolio lifecycle management.

Brianna: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. Please only press star 1 once to queue up for a question, as pressing star 1 multiple times may affect your position in the queue.

Speaker Change: We'll pace utilizing our fraud alerts to streamline the dispute resolution process and Citi has deployed consumer clarity digital receipts to provide eligible U S. Cardholders with detailed purchase information directly to their bank app.

Speaker Change: Now with increased visibility about the merchant and purchase details consumers can easily validate transactions and reduce the number of disputes date file squares also integrating consumer clarity solution.

Brianna: If you would like to withdraw your question, press star 1. Thank you. Mr. Devin Kaur, Head of Investor Relations, you may begin your conference. Thank you, Brianna. Good morning, everyone.

Speaker Change: Furthermore.

Speaker Change: Next he has chose Mastercard as a strategic partner to rollout open banking for e-commerce payments across Europe, and the list goes on.

Devin Kaur: And thank you for joining us for our fourth quarter 2023 earnings call. With me today are Michael Miebeck, our Chief Executive Officer, and Sachin Mehra, our Chief Financial Officer. Following comments from Michael and Sachin, the operator will announce your opportunity to get into the queue for the Q&A session. It is only then that the queue will open for questions.

Speaker Change: We're extending our services and solutions across new customer types, including large marketplaces, Alibaba use mastercard's open banking technology to help streamline the onboarding experience with small businesses on the U S marketplace and reduce fraud.

Devin Kaur: You can access our earnings release, supplemental performance data, and the slide deck that accompanied this call in the Investor Relations section of our website, MasterCard.com. Additionally, the release was filed with the SEC earlier this month. Our comments today regarding our financial results will be on a non-GAAP, currency-neutral basis unless otherwise noted. Both the release and the slide deck include reconciliations of non-GAAP measures to GAAP-reported amounts. Finally, as set forth in more detail in our earnings release, I would like to remind everyone that today's call will include forward-looking statements regarding MasterCard's future performance, and actual performance could differ materially from these forward-looking statements. Information about the factors that could affect future performance is summarized at the end of our earnings release and in our recent SEC filing. A replay of this call will be posted on our website for 30 days. With that, I will now turn the call over to our Chief Executive Officer, Michael Mieback. Thank you, Devin. Good morning, everyone.

Speaker Change: And meta user utilizes our digital identity technology to improve authentication for online orders.

We also continued to develop new services and solutions, many of which leverage the work we are doing with generative AI.

Speaker Change: Generative AI brings more opportunity to drive better experiences for our customers makes it easier to extract insights from our data. It can also help us increase in ton of productivity. We are working on many Jenny I use cases today to do just that for example, we recently announced shopping Muse shopping news uses generative AI to offer a conversational shopping tool.

Speaker Change: That recreates the in store human experience online can translate consumers collectively language into tailored recommendations.

Speaker Change: Another example is mastercard small business AI the tool will draw on our existing small business resources, along with the content from our newly formed global media coalition to help business owners navigate a range of business challenges the platform, which is scheduled for pilot launch later this year, we'll leverage AI to provide personalized real time <unk>.

Michael Mieback: Here's the headline. We close out 2023 with another quarter of strong earnings and revenue growth. Quota for net revenues was up 11% and operating income was up 13%, both versus a year ago on a non-GAAP currency neutral basis, excluding special items, as always. These results were driven by healthy consumer spending and the ongoing execution of our strategy. Our deal momentum continued this quarter, powered by a broad range of unique, diversified products and services, both designed to solve our customers' needs. Let's start on the macroeconomic front, where we see both tailwinds and headwinds. First, the labor market remains strong with low unemployment and rising wages. These remain key drivers of consumer spending. Some risks we are monitoring include credit availability and the link Second, while inflation continues to moderate, prices of many goods and services remain elevated.

Speaker Change: <unk> delivered in a conversational tone.

Speaker Change: And finally, we expanded master axis, which provides customers with a single point of connectivity to quickly and easily source, our AI digital and identity services using.

Speaker Change: Using access customers can deploy these services across multiple rails or networks, including those outside the Mastercard network. This is an exciting development, which enhances our ability to scale our services across networks and streamlines the ability for our customers to adopt our capabilities.

Speaker Change: So with that I'll wrap it up in summary, we delivered another strong quarter and year of revenue and earnings growth with.

Speaker Change: We're successfully executing against our strategy and on our growth algorithm.

Michael Mieback: We're tracking the efforts of central banks who are actively managing interest rates to normalize inflation. And finally, geopolitical uncertainty remains a concern in several markets. On balance, we remain fairly positive about the growth outlook, but we are monitoring the environment closely and will manage the business accordingly. Looking at our switch trends this quarter, domestic volume growth remains healthy. And cross-border spending remains strong, up 18% globally in the fourth quarter on a local currency basis.

Speaker Change: Our differentiated capabilities diversified business model and focused strategy position us well to capitalize on the significant opportunity in front of us.

Sachin J. Mehra: Sachin over to you.

Sachin J. Mehra: Great. Thanks, Michael turning now to page three which shows our financial performance for the fourth quarter on a currency neutral basis, excluding where applicable special items and the impact of gains and losses on our equity investments.

Sachin J. Mehra: Net revenue was up 11%, reflecting continued growth in our payment network and our value added services and solutions operating expenses increased 9%, including a minimal impact from acquisitions and operating income was up 13%, including a minimal impact from acquisitions.

Michael Mieback: With that as a backdrop, we remain focused on our strategic priorities, which fuel our growth algorithm across payments and services and new networks. In payments, our growth algorithm consists of five key areas. One, being in the flow to capture the natural growth of economies. 2. Accelerating the secular shift to electronic payments across both spend and transaction. 3. Further penetrating the addressable market in new flows. 4.

Sachin J. Mehra: Net income and EPS increased by 15% and 18% respectively, both reflecting the strong operating income growth as well as a nonrecurring tax benefit recognized in the fourth quarter.

Sachin J. Mehra: EPS was $3 18.

Sachin J. Mehra: Which includes an 8% contribution from share repurchases during the quarter, we repurchased $1 $8 billion worth of stock and an additional $586 million through January 26 2024.

Michael Mieback: Growing market share, and 5. Optimizing our customer portfolios for performance. Economics are growing, and that's not in our control. However, we are executing on the rest.

Michael Mieback: Building on that, the runway for the secular shift is substantial. We are accelerating it by scaling acceptance, enhancing the user experience for digital transactions, and driving adoption in new sectors and new use cases. In 2023, we added millions of new acceptance locations worldwide.

Speaker Change: So, let's turn to page four where you can see the operational metrics for the fourth quarter worldwide gross dollar volume or <unk> increased by 10% year over year on a local currency basis in the U S.

Speaker Change: GDP increased by 4%.

Speaker Change: With credit growth of 5% and debit growth of 3%.

Michael Mieback: This growth has been aided by scalability of our tap on phone and cloud commerce capabilities. We are now live in over 80 markets. Smaller merchants can start accepting payments by simply downloading an app.

Speaker Change: Outside of the U S volume increased 13% with credit growth of 13% and debit growth of 12% sequentially. The debit growth rate was primarily impacted by the lapping of the network portfolio migration in the UK.

Michael Mieback: And larger merchants are leveraging the technology to promote quick and seamless checkout experiences anywhere in-store, with supporting partners like Apple, who in 2023 expanded tap-to-pay on iPhone into Australia, the UK, France, Brazil, and several other markets. We're also accelerating the secular shift away from both cash and closed loop transactions such as transit through our contactless capability. Contactless provides a fast, secure, and seamless consumer experience in areas like transport.

Speaker Change: Overall cross border volume increased 18% globally for the quarter on a local currency basis, reflecting continued strong growth in both travel and non travel related cross border spending.

Speaker Change: While this is sequentially lower versus Q3. This was primarily due to tougher comps as we continue to lap the cross border travel recovery from last year.

Speaker Change: Turning to page five switched transactions grew 12% year over year in Q4, both card present and card not present growth rates remained strong.

Michael Mieback: It creates an opportunity to capture incremental transactions with a tap for every single ride. And when consumers use contactless for transit, they often extend that behavior across other low-dollar spend categories. We've made great progress, with many major cities such as London and New York operating broad-based open-loop systems. However, there's still significant runway for us, given that only a small percentage of large cities globally are operating open-loop systems. And we're leaning into advanced payment technologies, like Click2Pay, tokenization, and biometrics. They offer embedded, secure, and password-free checkout solutions, and with that, they bring an elevated level of security, simplicity, and speed to every transaction. And that's true, regardless of the device, browser, or car.

Speaker Change: Card present growth was aided in part by increases in contactless penetration as contact list now represents approximately 65% of all in Boston switched purchase transactions. In addition card growth was 8% globally. There are $3 3 billion Mastercard and maestro branded cards issued.

Speaker Change: Turning to slide six for a look into our net revenues for the fourth quarter discussed on a currency neutral basis payment.

Speaker Change: Payment network net revenue increased 7%, primarily driven by domestic and cross border transaction and volume growth and also includes growth in rebates and incentives.

Speaker Change: Value added services and solutions net revenue increased 17%, primarily driven by strong growth in our cyber and intelligence solutions driven by the growth in our underlying drivers and the continued scaling of our fraud and security solutions and our identity and authentication solutions. In addition, we saw strong growth in our marketing data.

Michael Mieback: These solutions not only benefit consumers, but they also create value for merchants, as their customers are less likely to abandon a transaction. Issuers also benefit from an increase in customer stickiness. For Click2Pay, we are now live in over 35 countries, supported by over 50 channel partners, and in 2023, we drove over 60% growth in transactions. Klana will implement Click2Pay this year and activate its merchants across all European markets where they operate.

Speaker Change: Analytics and consulting services as well as our loyalty solutions. This was partially tempered by slower relative growth in our other solutions.

Now, let's turn to page seven to discuss key metrics related to the payment networks again described on a currency neutral basis, unless otherwise noted.

Speaker Change: Looking quickly at each metric domestic assessments were up 7% while worldwide GDP grew 10%. The difference is primarily driven by mix.

Michael Mieback: We're driving tokenization across all channels, including devices, commerce platforms, card-on-file, and guest checks. Tokenization reduces fraud and increases approval rates by approximately 3 to 6 percentage points across regions. And we're expanding our biometric payment capabilities, which enable payments with a smile or a wave. After launching in Brazil, we have now partnered with NEC Corporation to bring our biometric checkout to the Asia-Pacific region. We're also driving growth by winning and retaining deals across consumer payments, account-to-account, and new flows. This week, we shared that BOK Financial will flip its U.S. debit portfolio to MasterCard, making us the exclusive partner across its debit and commercial portfolio.

Cross border assessments increased 21%, while cross border volumes increased 18%. The three ppt difference is primarily due to favorable mix transat.

Speaker Change: Transaction processing assessments were up 10% while switched transactions grew 12%. The two ppt difference is primarily due to lower revenues related to FX volatility versus the prior year.

Speaker Change: Other network assessments were $251 million this quarter as a reminder, these assessments primarily relate to licensing implementation and other franchise fees and may fluctuate from period to period.

Speaker Change: Moving on to page eight you can see that on a non-GAAP currency neutral basis, excluding special items total adjusted operating expenses increased 9%, which includes a minimal impact from acquisitions. This increase was primarily due to increased spending on personnel to support the continued execution of our strategic initiatives.

Michael Mieback: They selected us due to our differentiated virtual card and open banking assets, fraud solutions, and our shared commitment to financial inclusion. This marks the third U.S. regulated debit flip we've signed in the last year, building on our recent successes with Citizens and Webster Bank, both of which have now started converting their portfolios. And Biper Banca, one of the largest banks in Italy, will migrate their debit card pool to Mastercard as well. Additionally, we renewed our partnership with Commonwealth Bank of Australia. We will retain exclusivity across their consumer credit and debit portfolio.

Speaker Change: And increased spending on marketing campaigns advertising and sponsorships like the UEFA Champions League and the rugby World Cup.

Speaker Change: Turning to page nine you will see that we are no longer providing operating metrics as a percentage of 2019, given that we are well past. The pandemic now let me comment on the operating metric trends in the fourth quarter and through the first four weeks of January.

Michael Mieback: We signed a long-term partnership with Shinhan Card, the largest issuer in Korea, to solidify our leadership in the country. This relationship spans consumer and commercial card offerings and expands into new services, including data analytics. And in Canada, we executed an exclusive long-term renewal of the President's Choice Financial consumer credit and prepaid portfolio.

Speaker Change: Starting with switched volume growth year over year.

Speaker Change: The sequential decline from Q3 to Q4 is primarily due to the lapping effects from the routing of all Mastercard branded volume in Japan to the Mastercard switch and the migration of the <unk> portfolio to Mastercard.

Speaker Change: Specific to the U S. The sequential decline from Q3 to Q4 was primarily due to tougher comps.

Michael Mieback: We're also winning in fintech, co-brands, and public sector ponds. When it comes to fintech, Mastercard is a partner of choice. In fact, Mastercard serves over 80% of the top digital payment and neobank fintechs on the CNBC Global Fintech List. The Sport of Starling Bank, one of the largest fintechs in the UK, renewed their partnership with MasterCard.

Speaker Change: Moving to the first four weeks of January switch volume growth in the U S was impacted primarily by severe weather events across the country.

Speaker Change: As we look specifically at the fourth week of January which did not have the same impacts from severe weather switched volume in the U S returned to approximately 5% growth year over year similar to what we saw in December.

Michael Mieback: In the co-brand space, we're partnering with J.Crew and Synchrony in the U.S. to launch the retailer's first co-branded digital first car. And in the public sector, we have an exclusive partnership with Pfizer Money Network for All, a U.S. state and federal government benefit and wage disbursement debit program. As part of our partnership, we are thrilled to launch, with the California Economic Development Department in February, the largest unemployment program in the United States. As you can see, we continue our positive deal momentum, powered by our differentiated products and services, while always keeping a focus on financial discipline. This also helps us to capture more of the secular tailwind and, in turn, further drive services growth. Looking to China.

Speaker Change: Outside of the U S. We continue to lap the migration of the Natwest portfolio.

Speaker Change: Switch transactions, followed similar patterns to switch volumes.

Speaker Change: Looking at cross border for both Q4 and the first four weeks of January.

Speaker Change: Cross border travel growth continues to be primarily impacted by tougher comps as we lap the recovery of crowd cross border card not present ex travel continues to show strength.

Speaker Change: Turning now to page 10, I wanted to share our thoughts on fiscal year 2024, let me start by saying our business fundamentals remained strong we continue to grow through a combination of healthy consumer spending new and renewed customer agreements continued secular shift from cash to card and strong growth across our service offerings.

Michael Mieback: We are thrilled that our joint venture in China has received formal approval to commence domestic bank cut clearance, and believe that we will be uniquely positioned to provide Chinese consumers with an exceptional payment experience using a single card that's optimized for both domestic and cross-border payments. We're very excited about the medium to long-term opportunity. There's still work to be done as we fully build out the issuing and acceptance footprint, but as we do that, we continue to grow our presence with bank and fintech partners in the market. ICBC launched the first World MasterCard product in November, and Bank of Communications selected Mastercard to launch their first international debit card.

Speaker Change: In short as Michael said, we are executing on our strategy and realizing the benefits from our growth algorithm.

Speaker Change: Overall, we remain fairly positive about the growth outlook.

Speaker Change: Consumer spending continues to be supported by a strong labor market and wage growth.

Speaker Change: Our base case scenario for 2024 reflects healthy consumer spending and recent spending dynamics.

Speaker Change: That being said we are closely monitoring both positives and negatives in the macro environment as well as geopolitical events.

Speaker Change: And we stand ready to manage our investment levels as appropriate while maintaining focus on our key strategic priorities.

Michael Mieback: Beyond cards, we also continue to make meaningful progress in the account-to-account space. This quarter, we announced a long-term strategic partnership with The Clearinghouse, the operator of the RTP network, which continues to secure our position in real-time payments in the United States. Now shifting gears, we continue to execute against our strategy to capture the large secular opportunity in targeted new flows, including commercial payments and disbursements, and remittances. We continue to win in commercial payments.

Speaker Change: As it relates to the full year 2024, our base case is for net revenues to grow at the high end of a low double digit rate on a currency neutral basis, excluding acquisitions acquisitions and foreign exchange are forecasted to have a minimal impact for the year.

Speaker Change: In terms of operating expenses, we expect full year growth at the low end of a low double digit rate on a currency neutral basis, excluding acquisitions and special items of note. This includes an increase of approximately one ppt in operating expense due to a new Brazil tax legislation, which went into.

Michael Mieback: The SPANS commercial point of sale and B2B accounts payable, which we target through our market-leading virtual card solution. This quarter alone, we renewed our commercial relationships with JPMorgan and Fleet Corp, two of the largest commercial issuers in the United States. BNP Paribas Fortis will flip its business credit portfolio to Mastercard in Belgium.

Speaker Change: Effect as of January one 2024.

Speaker Change: This legislation resulted in higher operating expenses due to an increase in indirect taxes, which was more than offset by.

Speaker Change: By a reduction in our income taxes expense.

Speaker Change: Acquisitions and foreign exchange are forecasted to have a minimal impact to this growth rate for the year.

Michael Mieback: And on the virtual card front, we announced two exciting partnerships in the online travel agency space with Booking.com and Agoda. Now, on to disbursements and remittances. In 2023, we grew transactions by over 30% and continue to scale our use cases. For example, UBS has integrated our cross-border services capability. This will enable them to execute instant cross-border payments for multiple uses, including helping their customers pay employees abroad. In addition, we have also partnered with Alipay to establish them as a cross-border payments receiving institution in China.

Speaker Change: Now turning to Q1 2024 year over year net revenue growth is expected to be at the low end of a low double digit rate on a currency neutral basis, excluding acquisitions acquisitions and foreign exchange are forecasted to have a minimal impact of this growth rate for the quarter.

Speaker Change: Let me briefly talk through why our full year currency neutral net revenue growth is expected to be higher than the first quarter of 2024.

This was primarily driven by two factors first revenues related to FX volatility were highest in Q1 2023 compared to the other quarters in the year and second while our value added services and solutions continue to grow at a healthy pace from a cadence perspective, we expect Q1 growth to be lower relative to the other quarters.

Michael Mieback: Payments, services, and new networks reinforce each other. We have said it countless times, Our services and new networks provide differentiation, as noted in many of the wins I mentioned. Underlying payments growth helps drive services too, and payments growth brings incremental rich data. Our services turn that data into valuable insights, and when implemented by our customers, those insights can drive incremental digitization of payments, too. This generates even more data, more transactions, and more need for fraud, and the powerful cycle continues.

Speaker Change: Primarily due to tougher comps.

Speaker Change: From an operating expense standpoint, we expect Q1 operating expense growth to be at the high end of a high single digit rate versus a Europe a year ago again on a currency neutral basis, excluding acquisitions and special items. Once again. This includes an increase of approximately one ppt related to the Brazil tax legislation that.

Speaker Change: I mentioned earlier.

Speaker Change: Acquisitions are forecasted to add zero to one ppt to this opex growth and foreign exchange is expected to be a headwind of approximately zero to one ppt for the quarter.

Michael Mieback: The services and new networks components of our growth algorithms are built on driving increased penetration of existing customers, extending our services across new customers and customer types, and continuing to build and deploy new services. Here are a few examples of how we are executing against each of these. In the past year, Bank of America has expanded their services relationship with us to include test and learn, program management, and supplier enablement solutions, just on top of many of our services they already have. AccessBank in India has also expanded their relationship with us. They will use our consulting, marketing, and analytics services to support end-to-end portfolio lifecycle management. WorldPay is utilizing our fraud alerts to streamline dispute resolution.

Other items to keep in mind on the other income and expense line, we expect an expense of approximately of approximately 60% to $65 million.

Speaker Change: For Q1, given the prevailing interest rates and debt levels. This excludes gains and losses on our equity investments, which are excluded from our non-GAAP metrics. Finally, we expect a non-GAAP tax rate of 16% to 17% for Q1 and approximately 17% on a full year basis, all based on the current geographic mix.

Speaker Change: <unk> of our business.

Speaker Change: This reflects the benefit to our effective tax rate related to the Brazil tax legislation that I mentioned earlier and with that I will turn the call back over to Deb. Thank you Briana you may open the call for questions now.

Deb: At this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad.

Deb: Please only press star one wants to queue up for a question as pressing star one multiple times may affect your position in the queue.

Michael Mieback: City has deployed Consumer Clarity digital receipts to provide eligible U.S. cardholders with detailed purchase information directly through their bank account. Now with increased visibility about the merchant and purchase details, consumers can easily validate transactions and reduce the number of disputes they file. Square is also integrating consumer clarity solutions. Furthermore, Nexi has chosen Mastercard as a strategic partner to roll out open banking for e-commerce payments across Europe. And the list goes on.

Deb: Pause for just a moment to compile the Q&A roster.

Harshita Rawat: Your first question comes from the line of harsh to revert with Bernstein. Your line is open.

Harsh Trevert: Hi, good morning.

Harsh Trehan: Want to ask about U S Cogs.

Harsh Trehan: So better side.

Harsh: The growth has decelerated a bit.

Harsh: State level versus what you've seen in the last five to 10 years.

Harsh: Actually if you compare that to PC.

Michael Mieback: We're extending our services and solutions across new customer types, including large marketplaces. Alibaba will use Mastercard's open banking technology to help streamline the onboarding experience for small businesses on the U.S. marketplace and reduce fraud. And Meta utilizes our digital identity technology to improve authentication for online orders. We also continue to develop new services and solutions, many of which leverage the work we are doing with generative AI. Generative AI brings more opportunities to drive better experiences for our customers and makes it easier to extract insights from our data. It can also help us increase internal productivity. We're working on many Gen AI use cases today to do just that. For example, we recently announced Shopping Muse. Shopping Muse uses generative AI to offer a conversational shopping tool that recreates the in-store human experience online and can translate consumers' colloquial language into tailored recommendations.

Harsh: Should we think about kind of a normalized volume growth in the U S.

Harsh: Is there simply more than the number of transaction. So thats the metric we should be watching.

And also just as a follow up can you also comment Greg II impact in U S. Thank you.

Harsh: Sure.

Speaker Change: Let me take both of those questions first on <unk> II, let me just kind of share with everybody that from a rig standpoint, we haven't seen any material impact come through as far as what we've seen so far in the data obviously, we will keep a close eye on it as the year progresses, but nothing to actually report from a any sort of material impact.

Speaker Change: On your question around U S card volume growth I look at the end of the day, Here's the way, we think about it right we.

Speaker Change: We continue to believe that in the U S. There remains a.

Decent amount of secular opportunity both from a volume standpoint, and from a transaction growth standpoint. In addition to that as you know business models are evolving spending behaviors are changing and that creates greater opportunity from a volume and a transaction standpoint, but more specifically what I would tell you is the following which is at least the U S.

Michael Mieback: Another example is Mastercard Small Business AI. The tool will draw on our existing small business resources, along with content from a newly formed global media coalition, to help business owners navigate a range of business challenges. The platform, which is scheduled for pilot launch later this year, will leverage AI to provide personalized, real-time assistance delivered in a conversational tone. And finally, we expanded MasterCard access, which provides customers with a single point of connectivity to quickly and easily source our AI, digital, and identity services. Using Access, customers can deploy these services across multiple rails or networks, including those outside the MasterCard network.

Speaker Change: We've got to kind of think about what's going on with DC and what the impact of inflation is in the BCE numbers relative to where it is taking place I E is it taking place in.

Speaker Change: Coated volumes or is it taking in a police and non carded categories of spend so as you do the analysis releases, we do the analysis. The way we think about this is we look at D. C. We think about.

Speaker Change: On a normalized basis, if inflation were to take place.

Speaker Change: Fairly evenly across both garden and non carded PCE.

Speaker Change: It gives us a.

Speaker Change: High degree of comfort that there's a decent amount of secular opportunity, which still remains in the U S. From a growth standpoint. In addition to the secular opportunity and the fact that the U S continues to actually performed well from a overall consumer health standpoint, we're very active with growing our volumes by winning share I mean, you've heard about this.

<unk> over quarter in terms of what we're doing to to wind volumes from new customers. We've had good wins on the debit space, which as you know is a challenged environment in the U S.

Michael Mieback: This is an exciting development that enhances our ability to scale our services across networks and streamlines the ability for our customers to adopt our capabilities. So with that, I will wrap it up. In summary, we delivered another strong quarter and year of revenue and earnings growth. We're successfully executing against our strategy and our growth algorithm. Our differentiated capabilities, diversified business model, and focused strategy position us well to capitalize on the significant opportunity in front of us. Sachin, over to you.

Speaker Change: So overall I would tell you from the US standpoint, it continues to be a very important market, one which is going to be a decent contributor to our growth driven by the PCE growth component the secular shift as well as share and again all I'm talking about is on the card payment volume side of the business.

Speaker Change: Perfect. Thank you.

Speaker Change: Sure.

Speaker Change: Our next question comes from Craig Maurer with Ft Partners. Your line is open.

Craig Jared Maurer: Hey, good morning. Thanks.

Craig Jared Maurer: So two questions one.

Sachin J. Mehra: Great. Thanks, Michael. Turning now to page 3, which shows our financial performance for the fourth quarter on a currency-neutral basis, excluding, where applicable, special items and the impact of gains and losses on our equity investment. Net revenue was up 11%, reflecting continued growth in our payment network and our value-added services and solutions. Operating expenses increased 9%, including a minimal impact from acquisitions.

Craig Jared Maurer: To what degree are conversions of new wins contributing to fiscal year 'twenty for guidance and secondly regarding China, knowing that you have.

Craig Jared Maurer: We need to launch your business there within six months of approval I was wondering if you could characterize conversations with issuers, there and whether you've been able to keep warm relationships with those issuers over the years, considering you were in a very strong position.

Craig Jared Maurer: In China when regulations changed.

Craig Jared Maurer: Whatever it was seven eight years ago.

Sachin J. Mehra: And operating income was up 13%, including a minimal impact from acquisition. Net income and EPS increased by 15% and 18%, respectively, both reflecting the strong operating income growth as well as a non-recurring tax benefit recognized in the fourth quarter. EPS was $3.18, which includes an $0.08 contribution from share repurchase. During the quarter, we repurchased $1.8 billion worth of stock and an additional $586 million through January 26, 2024.

Speaker Change: Alright, let me take the China question first and I'll come back to the conversion topic that you raised so needless to say we are we're thrilled about China. So this is a it's a massive economy and we feel we're well positioned to serve it as I said in my remarks at the beginning we feel we're in.

Speaker Change: Uniquely positioned to put into the hands of Chinese consumers a solution a seamless solution networks domestically as well as when they travel that's.

Speaker Change: Not unique there is another competitor that has that kind of a proposition but.

Speaker Change: We do have the much better acceptance network to provide an end to end solution that works well.

Speaker Change: On that basis, we're busy right now.

Sachin J. Mehra: So let's turn to page four, where you can see the operational metrics for the fourth quarter. Worldwide gross dollar volume, or GDV, increased by 10% year-over-year on a local currency basis. In the U.S., GDV increased by 4%, with credit growth of 5% and debit growth of 3%. Outside of the US, volume increased 13%, with credit growth of 13% and debit growth of 12%. sequentially, the debit growth rate was primarily impacted by the lapping of the NatWest portfolio migration in the UK. Overall, cross-border volume increased 18% globally for the quarter on a local currency basis, reflecting continued strong growth in both travel and non-travel related cross-border spending.

Speaker Change: With our partners in China with the banks with.

Speaker Change: Acquirers issuers and so forth to discuss.

Speaker Change: We're rolling out on the issuing side as well as on the acceptance side for six months as you rightly said.

Speaker Change: Now for the for years, we have been very active in China on the cross border side and those are strong relationships with the same exact banks.

Speaker Change: And we're just I mentioned too with ICC and bank of communications, we're just launching new products. So the fact that we are well positioned today with our banks gives us an edge here on moving forward at speed as I also said.

Speaker Change: Going live and within the first six months doesn't mean that we're alive everywhere and we have to build this out over time to get Fuller.

Speaker Change: Full opportunity in the medium to the long term.

Speaker Change: And on the conversion piece just to know for the U S.

Sachin J. Mehra: While this is sequentially lower versus Q3, this is primarily due to tougher comps as we continue to lap the cross-border travel recovery from last year. Turning to page 5, Switched transactions grew 12% year-over-year in Q4. Both card-present and card-not-present growth rates remained strong. Card-present growth was aided in part by increases in contactless penetration, as contactless now represents approximately 65% of all in-person switched purchase transactions. In addition, card growth was 8%. Globally, there are 3.3 billion MasterCard and Maestro-branded cards issued.

Speaker Change: We saw I mentioned this earlier for Webster and for citizens conversion is starting some of the big conversions in Europe have already completed such and talked about.

Speaker Change: The lapping for Natwest, and so forth so.

Speaker Change: If theres anything else, yes, Greg I would just add like Michael said right I mean, as you would imagine in terms of how we think about 2024 and our thoughts for 2024, we do factor in what our best estimate is as it relates to the conversion of the portfolios. What I'd tell you is we've had a decent amount of wins across the globe. We for the most part the sizable ones are.

Speaker Change: Staggered wins as in they'd come on over a period of time do not.

Speaker Change: Episodic flips, which will take place all at one time. So for example.

Sachin J. Mehra: Turning to slide 6 for a look at our net revenues for the fourth quarter discussed on a currency-neutral basis, payment network net revenue increased 7%, primarily driven by domestic and cross-border transaction and volume growth, and also includes growth in rebates and incentives. Value-added services and solutions net revenue increased 17%, primarily driven by strong growth in our cyber and intelligence solutions, driven by the growth in our underlying drivers and the continued scaling of our fraud and security solutions and our identity and authentication solutions. In addition, we saw strong growth in our marketing, data analytics, and consulting services, as well as our loyalty solutions. This was partially tempered by slower relative growth in our other solutions.

Speaker Change: Citizens Webster, who need credit Deutsche Bank all of these will play out over the course of 'twenty four in some instances over multiple years. So we factored in our best estimates on those conversions as we kind of put our thoughts together for the year.

Okay. Thank you.

Speaker Change: Our next question comes from Sanjay Zaccone with <unk>. Your line is open.

Sanjay Sakhrani: Thank you good morning, such and thank you for sort of.

Sanjay Sakhrani: The cadence for the year with the first quarter, but I was just wondering could you just elaborate a little bit more on the expectations for payments versus the value added service revenues and then specific to that.

Sanjay Sakhrani: Zero tax legislation I guess is it neutral to EPS that adds to opex, but lower taxes, just maybe you could help us with that too. Thank you sure. Let me just take the Brazil, one first.

Sachin J. Mehra: Now let's turn to page 7 to discuss key metrics related to the payment network, again described on a currency-neutral basis, unless otherwise noted. Looking quickly at each metric, domestic assessments were up 7% while worldwide GDV grew 10%. The difference is primarily driven by make. Cross-border assessments increased 21% while cross-border volumes increased 18%. The 3PPD difference is primarily due to favorable mix.

Speaker Change: First and I'll come back to your second question, so on the Brazil piece.

Speaker Change: It increases our operating expenses, because it's an increase in indirect taxes, which are there. There is a it's more than offset in our tax rate and then in the <unk>. We've given you from a tax rate standpoint, so from an overall EPS standpoint, it actually ends up being slightly accretive because of the more than offset which is taking place on the on the tax line. There on your question around <unk>.

Speaker Change: Payments versus value added services and solutions expectations look, we're not giving specific guidance as it relates to how we see our payment network revenue and value added services and solutions revenue, but at the high level, Here's what I would say, let me first address the value added services and solutions fees.

Sachin J. Mehra: Transaction processing assessments were up 10%, while switch transactions grew 12%. The 2PPT difference is primarily due to lower revenues related to FX volatility versus the prior year. Other network assessments were $251 million this quarter.

Speaker Change: We continue to see good growth in our solutions around everything around our fraud and security solutions or data analysts.

Speaker Change: Critics and insights.

Sachin J. Mehra: As a reminder, these assessments primarily relate to licensing, implementation, and other franchise fees, and may fluctuate from period to period. Moving on to page 8, you can see that on a non-GAAP currency-neutral basis, excluding special items, total adjusted operating expenses increased 9%, which includes a minimal impact from acquisition. This increase was primarily due to increased spending on personnel to support the continued execution of our strategic initiatives and increased spending on marketing campaigns, advertising, and sponsorships like the UEFA Champions League and the Rugby World Cup. Turning to page 9, you will see that we are no longer providing operating metrics as a percentage of 2019, given that we are well past the pandemic. Now, let me comment on the operating metric trends in the fourth quarter and through the first four weeks of January. Starting with switch volume growth year over year. The sequential decline from Q3 to Q4 is primarily due to the lapping effects from the routing of all MasterCard-branded volume in Japan to the MasterCard switch and the migration of the NatWest portfolio to MasterCard. Specific to the U.S., the sequential decline from Q3 to Q4 was primarily due to tougher COPs.

Speaker Change: And.

Speaker Change: We're building all of those into our thoughts for the year. We've had a good year in 2023, we continue to see good.

Speaker Change: A good outlook for value added services and solutions going into 2024, Likewise repayments right I mean as you can imagine in payments, it's a functional.

Speaker Change: What we think will happen from a guarded market volume growth rate standpoint, and what the impacts will be from share wins as well as the impacts of rebates and incentives to all of that is factored in what I would tell you broadly is that we continue to expect value added services and solutions to grow at a faster pace than we do on the payment.

Speaker Change: It looks like.

Speaker Change: Thank you.

Speaker Change: Our next question comes from Tien Tsin Huang with Jpmorgan. Your line is open.

Hey, Thank you good morning, Thanks for all the detail here just thinking about the outlook I think Hershey to ask it.

Speaker Change: As well just the outlook for growth between the U S and rest of world any.

Speaker Change: Anything to call out there do you expect the trends observed in 'twenty three to be different in 2024 here between the two regions. Thanks.

Speaker Change: Yes.

Speaker Change: Honestly I would tell you from a secular opportunity standpoint, right I mean, we continue to believe broadly speaking.

Speaker Change: The secular opportunity is greater outside of the U S than it is in the US there is a good news bad news story there.

Speaker Change: The good news is that that means we've been quite successful in driving the secular shift opportunity in the U S which is.

Speaker Change: Which is what youre seeing in the results come through.

Speaker Change: And again from a bad news standpoint.

Speaker Change: Lower remaining opportunity on the volume side in the U S. But if you asked me the question on a year over year basis, I would tell you I don't expect any meaningful shift in terms of suddenly the trajectory of how the secular opportunities being realized between the U S and the rest of the world to be changing between 'twenty, three and 'twenty four.

Sachin J. Mehra: Moving to the first four weeks of January, switched volume growth in the U.S. was impacted primarily by severe weather events across the country. However, as we look specifically at the fourth week of January, which did not have the same impact from severe weather, switched volume in the U.S. returned to approximately 5% growth year over year, similar to what we saw in December. Outside of the U.S., we continue to monitor the migration of the NatWest portfolio. Switched transactions follow similar patterns to switched volumes. Looking at cross-border travel growth for both Q4 and the first four weeks of January, cross-border travel growth continues to be primarily impacted by tougher coms as we lap the recovery of travel. Cross-border car transport not present ex-travel continues to show strength.

Speaker Change: Very clear thank you.

Speaker Change: Our next question comes from Dan Perlin with RBC capital markets.

Dan Perlin: Your line is open.

Dan Perlin: Thanks, Good morning.

Dan Perlin: Heard you call out a couple of times geopolitical concerns and I know that there is some I don't know 30 or 40 different elections happening around the globe. So my question to you is as you think about managing those potential concerns are there are there certain regions, where you feel like.

Dan Perlin: There could be pockets of more nationalistic behavior, which would be problematic.

You guys getting into those markets or that because of election years, historically, what you've seen or that it kind of slows down adoption.

Sachin J. Mehra: Turning now to page 10, I wanted to share our thoughts on fiscal year 2024. Let me start by saying our business fundamentals remain strong. We continue to grow through a combination of healthy consumer spending, new and renewed customer agreements, a continued secular shift from cash to card, and strong growth across our service offerings. In short, as Michael said, we are executing on our strategy and realizing the benefits from our growth algorithm. Overall, we remain fairly positive about the growth outlook. Consumer spending continues to be supported by a strong labor market and wage growth.

And some of the secular trends that you would've otherwise been able to enjoy in maybe a non election year. So just trying to handicap, what maybe some of those positives and negatives could be just geopolitical this year. Thanks.

Dan Perlin: Alright, Dan you just touched on some of the key things to watch out for but this is no different than us monitoring of fiscal and monetary policy reactions by Gov by central banks and governments. So those are all things that affect consumer sentiment potentially affect consumer spending. So we'll just have to stay close to what that.

Dan Perlin: It is our discipline around these things is too.

Dan Perlin: Do some solid scenario planning and making sure our playbook in terms of managing our financials responsibility.

Dan Perlin: And responsibly is up to date certainly the last three years have had no shortages of such challenges.

Sachin J. Mehra: Our base case scenario for 2024 reflects healthy consumer spending and recent spending dynamics. That being said, we are closely monitoring both positives and negatives in the macro environment, as well as geopolitical events. And we stand ready to manage our investment levels as appropriate while maintaining focus on our key strategic priorities. As it relates to the full year 2024, our base case is for net revenues to grow at the high end of a low double-digit rate on a currency-neutral basis, excluding acquisitions. Acquisitions and foreign exchange are forecasted to have a minimal impact on the year.

Dan Perlin: We adapted quickly.

Dan Perlin: Specifically to the points that you mentioned.

Dan Perlin: Elections happen regularly so there is nothing dramatically new there.

Dan Perlin: In 2024 and geopolitical conflicts.

Dan Perlin: <unk> been around and it keep going and that is something.

Dan Perlin: What is the impact on energy prices in various downstream into the broader economy yet.

Dan Perlin: Yet again, our economics Institute is keeping a focus on that so nothing very specific thats why we kept it relatively high level.

Dan Perlin: But these days one has to just take a look left and right all the time.

Speaker Change: Understood. Thank you.

Speaker Change: Your next question comes from Darrin Peller with Wolfe Research Your line is open.

Sachin J. Mehra: In terms of operating expenses, we expect full-year growth at the low end of a low double-digit rate on a currency-neutral basis, excluding acquisitions and special items. Of note, this includes an increase of approximately 1 PPT in operating expenses due to new Brazilian tax legislation which went into effect as of January 1, 2024. This legislation results in higher operating expenses due to an increase in indirect taxes, which is more than offset by a reduction in our income tax expense.

Darrin Peller: Hey, guys.

Darrin Peller: It's good to see the value added services solutions accelerated I think you went back to 17% from 14.

Darrin Peller: Maybe you could just revisit that for a minute in terms of I know you sounded confident about that.

Speaker Change: Sustained strong growth relative to the business so.

Darrin Peller: Maybe just revisit the drivers of that what gives you the confidence that sustains.

Darrin Peller: I'm really just overall whats the whats if you sort of rank the top items in that category.

Sachin J. Mehra: Acquisitions and foreign exchange are forecast to have a minimal impact on this growth rate for the year. Now turning to Q1 2024, year-over-year net revenue growth is expected to be at the low end of a low double-digit rate on a currency-neutral basis, excluding acquisitions. Acquisitions and foreign exchange are forecasted to have a minimal impact on this growth rate for the quarter. Let me briefly talk through why our full-year currency-neutral net revenue growth is expected to be higher than in the first quarter of 2024. This is primarily driven by two factors. First, revenues related to FX volatility were highest in Q1 2023 compared to the other quarters in the year. And second, while our value-added services and solutions continue to grow at a healthy pace, from a cadence perspective, we expect Q1 growth to be lower relative to the other quarters, primarily due to higher costs. From an operating expense standpoint, we expect Q1 operating expense growth to be at the high end of a high single-digit rate versus a year ago, again, on a currency-neutral basis, excluding acquisitions and special items.

Thanks.

Speaker Change: Alright, let me kick off on that.

If you split out the value added services here.

Speaker Change: Our other services, which are such and touched on earlier for example, our real time payment assets and things like that.

Speaker Change: The things that we have historically focused on here in this space is our.

Speaker Change: Our cyber and intelligence solutions fraud solutions.

Speaker Change: And the data insights and analytics solutions. So if you think about how that flywheel talks about I talked about the powerful cycle earlier on so more payments more payments that need to be kept safe more payments throughout more data, which drive more data analytics inside that is the underlying kind of secular trend, which is pretty closely related to the secular shift as well so.

Speaker Change: That is that the baseline.

Speaker Change: Of growth here.

Speaker Change: And then you look at some of the more.

Speaker Change: <unk> growth drivers here for example in data analytics in that group. We also have our personalization solution. So everybody is trying to engage their consumers at this point that is on the banking side, it's on the merchant side and here coming in with a solution that provides the right offer at the through the right channel at the right time to drive through that clutter.

Speaker Change: We have the number ones personalization company that we acquired two years ago that is one of the drivers we expect some big growth. There you look at the other hand on the digital on the cyber and security solutions digital identity and authentication solution today, and nobody likes Pos Woods Youre in a situation, where you have to end up making tradeoffs between.

Sachin J. Mehra: Once again, this includes an increase of approximately one PPT related to the Brazil tax legislation that I mentioned earlier. Acquisitions are forecasted to add 0 to 1 PPT to SOPEX growth, and foreign exchange is expected to be a headwind of approximately 0 to 1 PPT for the quarter. Other items to keep in mind. On the other income and expense line, we expect an expense of approximately 60 to 65 million for Q1 given the prevailing interest rates and debt level. This excludes gains and losses on our equity investments, which are excluded from our non-GAAP metrics.

Simplicity and security when it comes to digital payments and with our technology, we find ways to go around that effectively driving down fraud at the same time ensure that there is.

Speaker Change: Lower abandonment rates so.

Speaker Change: Biometric solutions I talked about them earlier is one of those examples so across these two portfolios C&I and DNS cyber analytics and data insights, that's where we see that the growth of the big demand.

Other solutions real time payments, we have a strong.

Speaker Change: Strong position that we talked about this a couple of quarters ago, where we said we are in the markets in which we are and we are driving to scale volumes and the reference to our strategic partnership with TCA, which just shows that we continue on that front. So those are kind of the key drivers that we see here. We feel this is a uniquely differentiated portfolio and it's in great demand.

Sachin J. Mehra: Finally, we expect a non-GAAP tax rate of 16-17% for Q1 and approximately 17% on a full-year basis, all based on the current geographic mix of our business. This reflects the benefit to our effective tax rate related to the Brazil tax legislation that I mentioned earlier. And with that, I will turn the call back over to Devin. Thank you. Brianna, you may open the call for questions. At this time, I would like to remind everyone, in order to ask a question, press star then the number one on your telephone keypad. Please only press star 1 once to queue up for a question, as pressing star 1 multiple times may affect your position in the queue.

Speaker Change: That's helpful. Thanks, guys.

Speaker Change: Our next question comes from Chris Kennedy with William Blair. Your line is open.

Chris Kennedy: Yes. Good morning, Thanks for taking the question and you just talked about it can you give a broader update on your digital identity solutions and what your strategy is for that and how it can ultimately impact your business. Thank you.

Chris Kennedy: Right so.

Speaker Change: Let me do that.

Chris Kennedy: I just gave you the headlines on that so specifically within that there's a whole set of solutions from biometric too.

Devin Kaur: We'll pause for just a moment to compile the Q&A roster. Your first question comes from the line of Harshita Rawat with Bernstein. Your line is open. Hi, good morning. I want to ask about U.S. card volumes. So, weather aside, growth has decelerated a bit in the single-digit levels, which is what we've seen in the last five to 10 years, especially if you compare that to P.C. So how should we think about kind of a normalized card volume growth in the U.S.? Or is there simply more runway, a number of times? And also, just as a follow-up, can you also comment on Reg I.I. Sure, Harshita.

Identity events, where we have an ability to provide an identity confidence score to one of our customers and saying this person has lift at this address before and.

Chris Kennedy: Here is that their previous employment, so with this now with a certain level of.

Chris Kennedy: Our confidence we can say this is the person all this stuff is kind of happening behind behind the scenes.

Chris Kennedy: That is the approach that we're taking.

Chris Kennedy: Not just our identity data we are combining this with open banking and we're trying to find use cases, where this really makes a difference for example, an account opening so we're taking our open banking technology and our affinity flipped.

Michael Mieback: Let me take both those questions. First, on REG-II, let me just kind of share with everybody that from a REG-II standpoint, we haven't seen any material impact come through as far as we've seen so far in the data. Obviously, we'll keep a close eye on it as the year progresses, but there's nothing to actually report on any sort of material impact. On your question about U.S. Guard volume growth, you know, look, at the end of the day, here's the way we think about it, right? We continue to believe that in the U.S., there remains a decent amount of secular opportunity, both from a volume standpoint and from a transaction growth standpoint. In addition to that, as you know, business models are evolving, spending behaviors are changing, and that creates greater opportunity from a volume and a transaction standpoint.

Chris Kennedy: <unk> here in the United States.

Chris Kennedy: All the way up to 90% of our deposit accounts in this market and we're taking our digital identity solution into a premium account ona verification and account opening solution that those are the kind of examples where we see where truly differentiate it at the highest level, it's before and after the transaction we are driving value through digital identity, we feel this.

Chris Kennedy: Is absolutely central to the digital economy, and that's why we put it in the new network because there are people who have identity data and there are people who want to use identity data, we don't want to hold it where sit at somewhere in the middle and we are essentially the trusted partner that can prove one way or another as a person is the person they claim to be minimal use of data.

Chris Kennedy: Permission data.

Speaker Change: Great. Thanks for taking the question.

Speaker Change: Your next question comes from Paul <unk> with Macquarie Capital. Your line is open.

Michael Mieback: But more specifically, what I'll tell you is the following, which is as it relates to the U.S. We've got to kind of think about what's going on with PCE and what the impact of inflation is on the PCE numbers relative to where it's taking place, i.e., is it taking place in carded volumes, or is it taking place in non-carded categories of spend?

Paul: Thanks, So much I guess I'll touch on furnace cities since you just mentioned Michael.

Paul: Do you see this evolving more so.

Paul: Value added service and solution driver or a volume driver now that you've had it in the portfolio for some time and then as a follow on just wanted to see if we could get some more color on the acceptance location growth from a regional perspective, given the strength in international volumes in the period. Thank you so much.

Michael Mieback: So as you do the analysis, or at least as we do the analysis, the way we think about this is we look at PCE. We think about, on a normalized basis, if inflation were to take place fairly evenly across both carded and non-carded PCE, it gives us a high degree of comfort that there's a decent amount of secular opportunity which still remains in the U.S. from a growth standpoint. Now, in addition to the secular opportunity and the fact that the U.S. continues to actually perform well from an overall consumer health standpoint, we're very active. We're growing our volumes by winning share. I mean, you've heard about this quarter over quarter in terms of what we're doing to win volumes from new customers.

Paul: Alright.

Paul: So starting with <unk> and then we have the correspondent corresponding set of capabilities through our <unk> acquisition in Europe. We're also building out connectivity in Australia. Those are the three regions, where we're focused.

Paul: And open banking does it does a number of things essentially what we see is a set of use cases here that that rise to the top and everything that you could do with open banking and yen. There's this big vision about open data where people can use their data footprint small businesses can use that data footprint for getting access to better services, but for now what's really rising at the top.

Michael Mieback: We've had good wins in the debit space, which, as you know, is a challenged kind of environment in the U.S. So, overall, I tell you from the U.S. standpoint, it continues to be a very important market, one which is going to be a decent contributor to our growth, driven by the PCE growth component, the secular shift, as well as share. And again, all I'm talking about is on the card payment volume side of the equation. Perfect. Our next question comes from Craig Maurer with FT Partners. Your line is open.

Paul: Is account opening. The example that I already gave open banking for payments I come to that for a moment.

In a moment open banking for lending and for small businesses in particular, so those are kind of the three categories that we feel are particularly relevant right now for payments is really interesting to your point, it's a volume driver.

Paul: Because the connectivity that we have here what we're trying to do is facilitate payments for example in non carded use cases as we have with the pay by bank solution in the United States in partnership with with Chase Bank. So.

Paul: We hope to see significant volume growth out of that that's the whole idea and.

Michael Mieback: Yeah, good morning. Thanks. So, two questions. One, to what degree are conversions of new wins contributing to fiscal year 24 guidance? And secondly, regarding China, knowing that you need to launch your business there within six months of approval, I was wondering if you could describe your conversations with issuers there and whether you've been able to keep warm relationships with those issuers over the years, considering you were in a very strong position in China when regulations changed, whatever they were, seven, eight years ago. Thanks. Right, let me take the China question first, and we will come back to the conversion topic that you raised.

Paul: That builds on our experience with pay by bank in the U K and this is somewhat different approach here in the U S where our open banking capabilities are the true differentiator. So.

Paul: Use cases that matter, that's the focus and out of that we hope to see not only API clicks on account opening but also payment volume coming through.

Paul: Yeah.

Paul: Okay.

Speaker Change: All right.

Speaker Change: There was a second half of the question.

Speaker Change: Was just reminding me acceptance growth regionally.

Speaker Change: It comes to the answer actually got such engaged earlier, where we talked a little bit about payments growth in the regional comparison. So when you think in terms of when you think beyond the United States we.

Michael Mieback: Needless to say, we are thrilled about China. It's a massive economy, and we feel we're well positioned to serve it. As I said in my remarks at the beginning, we feel we're uniquely positioned to put into the hand of Chinese consumers a solution, a seamless solution that works domestically as well as when they travel. That's not unique.

Speaker Change: We see tremendous growth opportunity out here in the United States, you would say, it's more new use cases and verticals and it's more generally and broader acceptance across the payments landscape in the rest of the world is even significant geographic opportunities to grow take Japan. For example, so as a country that is where the government has put.

Michael Mieback: There's another competitor that has that kind of a proposition, but we do have a much better acceptance network to provide an end-to-end solution, as you rightly said. On that basis, we're busy right now with our partners in China, with the banks, with acquirers, issuers, and so forth to discuss rolling out on the issuing side as well as on the acceptance side for six months, as you rightly said.

Speaker Change: Our stated policy to drive a cashless, Japan, so tremendous upside there we talked about China earlier on where we're investing heavily in acceptance footprint. So I would say, it's leaning a little more on the international side, but here in the U S with very busy going for new use cases and verticals.

Michael Mieback: Now, for years, we have been very active in China on the cross-border side, and those are strong relationships with the same exact banks. And, you know, we're just, I mentioned too, with ICBC and Bank of Communications, we're just launching new products. So the fact that we are well positioned today with the banks gives us an edge here on moving forward at speed. But as I also said, you know, going live within the first six months doesn't mean that we're live everywhere, and we have to build this out over time to get full opportunity in the medium to the long term. And on the conversion piece, just to know, you know, for the U.S., you know, we saw, I mentioned this earlier, for Webster and for citizens, conversion is starting. Some of the big conversions in Europe have already completed. Sachin talked about the lapping for NetWest and so forth. So, Sachin, if there's anything else,

Speaker Change: Your next question comes from David <unk> with Evercore. Your line is open.

David: Thank you good morning, Europe continues to be a driver of differentiated growth for Mastercard could you share your insights into your runway for growth in some of your largest countries for example, Germany and.

David: Italy, and maybe frame that in terms of payment volume growth and vast growth opportunity.

Speaker Change: Well, let me start off with that question.

Speaker Change: First of all I do want to underline what you what you just said.

Speaker Change: It is a source of differentiated growth for us we've had a great run in in Europe, and it's a combination of share growth, but it's also driven by the ways that we signed to go after the accelerated secular shifts that we saw in the back end of Covid countries like Germany, really driving up contactless usage.

Speaker Change: Just to give you. One example, so overall Europe has been firing on all cylinders for us.

Speaker Change: And I'll come back to the growth algorithm that we laid out for payments, which applies very much in Europe, so that young.

Speaker Change: European economies will do what they do but we will continue to focus on share gain but we will also be very busy to take the share gains.

Michael Mieback: Yeah, no, Craig, I would just add, like Michael said, right, I mean, as you would imagine, in terms of how we think about 2024 and our thoughts for 2024, we do factor in what our best estimate is as it relates to the conversion of the portfolios. What I can tell you is we've had a decent number of wins across the globe. For the most part, the sizable ones are, you know, staggered wins, as in they come on over a period of time. They're not episodic flips which will take place all at one time.

Speaker Change: Had in turn tap into profitable volume for us conversions driving that we had a question on that earlier, so thats driver number one.

Speaker Change: And then going into new flows in Europe. There is there is opportunity there as well if you look at the alternative payment systems everything Thats going on in Europe, clearly two PSD two PSD three and so forth. There is a lot of movement in Europe that we will stay on top of as we look ahead up into that.

See our differentiated assets and bill pay in the Nordics and so forth. So we have a pretty broad footprint anticipated all the drivers in Europe.

Sachin J. Mehra: So, for example, you know, Citizens, Webster, Unicredit, you know, Deutsche Bank, all of these will play out over the course of 24 and, in some instances, over multiple years. So we factor in our best estimates on those conversions as we kind of put our thoughts together for the year. Thank you. Our next question comes from Sanjay Sakhrani with KBW. Your line is open. Thank you. Good morning, Sachin.

Speaker Change: In terms of services.

<unk> been strong in Europe for a long time, our advisors are our consulting business has been a winner for us in Europe for the longest time and if you look at some of these big wins that we've talked about they're all have a significant.

Speaker Change: Contribution of services in fact, I would say oftentimes they are one of the reasons that we windows deals so nothing dramatically different there.

I think Europe has caught up on the secular trend and Digitization and we're firing and also notice we have we're fully invested in Europe. As you know one of the big topics in Europe is European sovereignty, and we're deeply invested in Europe with our efforts and we're engaging with and Brussels in the nation states and so forth.

Sachin J. Mehra: Thank you for sort of the cadence for the year with the first quarter. But I was just wondering, could you just elaborate a little bit more on the expectations for payments versus the value-added service revenues. And then specific to that Brazil tax legislation, I guess, is it neutral to EPS? It adds to OPEX, but lowers taxes.

Speaker Change: Which is very important for us to do to be a partner on their journey.

Yes, David it's such an I will just emphasize what Michael just said right.

Speaker Change: And a couple of occasions today that payment's traits Valeant citizens solutions and value added services solutions drive payments, it's no different than Europe right.

Sachin J. Mehra: Just maybe you could help us with that, too? Thank you. Sure. Let me just take the Brazil one first, and I'll come back to your second question.

Sachin J. Mehra: So on the Brazil piece, it increases our operating expenses because it's an increase in indirect taxes which are there. But it's more than offset in our tax rate and in the thoughts we've given you from a tax rate standpoint. So from an overall EPS standpoint, it actually ends up being slightly accretive because of the more than offset which is taking place on the tax line.

Speaker Change: For all those share wins, we've had in Europe, where all the growth we're seeing on the payment side it creates new opportunities for us in the services.

Speaker Change: Site, and then vice versa as you actually do deliver on the services you get the benefit of additional data when you get the benefit of additional data you are able to help optimize existing portfolios, which again drives speed and volume growth, So and that's not unique to Europe, it's actually true for the Wii.

Sachin J. Mehra: On your question around payments versus value-added services and solutions expectations, look, we're not giving specific guidance as it relates to how we see payment network revenue and value-added services and solutions revenue. But at a high level, here's what I'd say. Let me first address the value-added services and solutions piece. We continue to see good growth in our solutions around everything from our fraud and security solutions, our data analytics, and insights. And we're building all of those into our thoughts for the year. We should have a good year in 2023.

Speaker Change: We run the business globally.

Speaker Change: The fact that we are actually increasingly becoming more prominent in the payment flow enables that.

Speaker Change: Cycled to quite effectively.

Speaker Change: Thank you very much.

Speaker Change: Our next question comes from Ken Zukowski with Autonomous Research Your line is open.

Ken Zukowski: Hi, good morning, Thanks for taking the question I just wanted to ask about the yields on the domestic assessment revenue line that yield has declined year over year for some time now and it came in a little bit lighter than some were expecting this quarter I think you highlighted mix impacting the yields or the spread between revenue and volume growth.

Sachin J. Mehra: We continue to see a good outlook for value-added services and solutions going into 2024. Likewise, for payments, right? I mean, as you can imagine, in payments, it's a function of what we think will happen from a current market volume growth rate standpoint and what the impacts will be from share wins as well as the impacts of rebates and incentives. So all of that kind of is factored in. What I would tell you broadly is that we continue to expect value-added services and solutions to grow at a faster pace than we do on the payment network. Thank you. Our next question comes from Tianzhen Wang with J.P. Morgan. Your line is open. Hey, thank you. Good morning.

Ken Zukowski: So can you just provide some more detail around the specific changes that youre seeing.

Ken Zukowski: In terms of mix and can we get to a place where domestic yields are actually expanding year over year. Thank you.

Ken Zukowski: Yes.

Speaker Change: Yes look I mean.

Speaker Change: Comment on the European because what Youre seeing effectively in the fourth quarter of 2023, when you look at payment network net revenue.

Michael Mieback: Thanks for all the detail here. Just thinking about the outlook, I think Harshita asked it, as well. Just the outlook for growth between the U.S. and the rest of the world. Anything to call out there? Do you expect the trends observed in 2023 to be different in 2024 here between the two regions? Yeah, Dinjit, honestly, I would tell you from a secular opportunity standpoint. Right, I mean, we continue to believe, broadly speaking, the secular opportunity is greater outside of the U.S. than it is in the U.S. There's a good news/bad news story there.

Speaker Change: Aided by GDP is what you see every year in terms of the sequential decline in yields and that's primarily being driven by the fact that remember in the third quarter of all years.

Speaker Change: Tend to have our strongest cross border performance in our cross border tends to come with our best yields and so what you've got is when you're you're getting more bang for Buck for a dollar of GDP on the cross border side than you are on the domestic volume side. So thats whats closing for that sequential decline you will see that.

Speaker Change: As a pattern, which has existed in prior years as well broadly speaking I would tell you that.

Michael Mieback: And the good news is that that means we've been quite successful in driving the secular shift opportunity in the U.S., which is, you know, which you're seeing in the results come through. And again, from a bad news standpoint, there's a lower remaining opportunity on the volume side in the U.S. But if you ask me the question on a year-over-year basis, I would tell you I don't expect any meaningful shift in terms of the sudden trajectory of how the secular opportunity is being realized between the U.S. and the rest of the world changing between 23 and 24.

Speaker Change: Otherwise, there's nothing unusual to call out on the payment network net revenue yield. The one reminder, I'll give you is that we run the business not only to optimize payment network net revenue yield, but overall net revenue yield for our company because again it goes back to the question David asked right before you can which is at the end of the day, we've got to be in the payment flow we've got.

Speaker Change: To allow ourselves to have the opportunity to deliver services on those payments to generate additional revenue, which causes for overall net accretion and our overall net revenue yield. So I know your question is specific to payment network net revenue, but I just wanted to make sure you know that from our mindset standpoint, we're looking at Veeva network net revenue yield as well as overall net revenue for the company.

Michael Mieback: Very clear, thanks. Our next question comes from Dan Perlin with RBC Capital Markets. Your line is open.

Michael Mieback: Thanks, good morning. I heard you call out a couple of times geopolitical concerns. And I know that there are some, I don't know, 30 or 40 different elections happening around the world.

Speaker Change: I should say earlier when I was talking about the payment algorithm.

Michael Mieback: So my question to you is, as you think about managing those potential concerns, are there certain regions where you feel like there could be pockets of more nationalistic behavior, which would be problematic if you guys get into those markets, or that because of election years, historically, what you've seen is that it kind of slows down adoption and some of those secular trends that you would have otherwise been able to enjoy, and maybe a non-election year. So just trying to handicap what maybe some of those positives and negatives could be just geopolitically this year. Thanks.

Speaker Change: I said that we are putting greater focus on.

Speaker Change: Our financial discipline, and we do it with.

Speaker Change: Revenues in mind and with services revenue in mind, so yes, it needs to add up to the overall net revenue yield as such and just said.

Speaker Change: I'm, telling you we don't want to win every deal we want to win the deals we want to win and we're pretty disciplined about it.

Speaker Change: Alright, thanks, guys.

Michael Mieback: Right, Dan, you just touched on some of the key things to watch out for. But this is no different than us monitoring fiscal or monetary policy reactions by central banks and governments. So those are all things that affect consumer sentiment and potentially affect consumer spending. So we'll just have to stay close to what that is. Our discipline around these things is to do some solid scenario planning and make sure our playbook, in terms of managing our finances responsibly, is up to date. Certainly, the last three years have had no shortage of such challenges, and we adapted quickly. More specifically to the points that you mentioned, you know, elections happen regularly.

Speaker Change: Your next question comes from Andrew Jeffrey with tourists Securities. Your line is open.

Hi, Good morning, I appreciate you taking the question.

Andrew Jeffrey: I wanted to dig and Michael if I met a little bit more on.

Andrew Jeffrey: On your pay by bank initiatives.

Speaker Change: Can this be especially as we see the emergence of our networks like.

Speaker Change: Next in Brazil for example can this be.

Speaker Change: Sort of a standalone growth driver in its own right or is it sort of folded into your overall comments on open banking I just wanted to see if there is an important distinction to draw as we think about go forward growth opportunities.

Michael Mieback: So there will be nothing dramatically new in 2024. And geopolitical conflicts, you know, they've been around and they keep going. And that is something, you know; we'll watch what the impact on energy prices and various downstream into the broader economy. Yet again, our Economics Institute is keeping a focus on that. So nothing very specific. That's why we kept it at a relatively high level. But you know, these days, one has to just take a look left and right.

Speaker Change: Right so.

Speaker Change: Both questions. Your question on the previous question hit on an important point there there is a particular <unk>.

Speaker Change: Of interest for us at the intersection of open banking and payments. It enables the open banking connectivity enables us to go after use cases that we otherwise wouldn't be able to go. After so here is additional data that is available that you can then combine in combination with an underlying our RTP rail to make a profitable.

Michael Mieback: Okay. Thank you. Your next question comes from Darrin Peller with Wolf Research. Your line is open.

Michael Mieback: Hey guys, thanks. It's good to see the value-added services solutions accelerate. I think it went back to 17% from 14.

<unk> for our customer, which is exactly what chase pay by bank is basically your debit to your customer when there is a balance and that is with the open banking connectivity tells you. So that's that's a good solution. If we look broadly around the world.

Michael Mieback: Maybe you could just revisit that for a minute in terms of, I know you sounded confident that that should sustain strong growth relative to the business, and so maybe just revisit the drivers of that and what gives you the confidence that it's sustainable. And really just overall, what's the, what's, if you sort of rank the top items in that category. Thanks.

Speaker Change: Picks Upi in India Fed now there is a bunch of real tie up real time payment systems and those are the kind of rails, where we have experienced we have connectivity and some we operate them ourselves. So that is exactly what we're looking at is one of the assets and the propositions that we will bring together for our customers now.

Speaker Change: Now more broadly speaking when you look at pics when.

When you look at Upi one other thing to keep in mind is here's public sector.

Michael Mieback: All right, so let me kick off on that. If you split out the value-added services here, you have our other services, which Sachin touched on earlier, for example, our real-time payment assets and things like that. The thing that we have historically focused on here in this space is our cyber and intelligence solutions, fraud solutions, and data insights and analytics solutions. So if you think about how that Flywheel talks about, I talked about the Powerful Cycle earlier on.

Doing a good job in pulling in more participants in the overall digital economies. So we can come in with our solutions on a real time payment solutions, our card based solutions, but they're basically extending the digital economy to create a tide that kind of lift everybody's bolts financial inclusion being the headline.

Speaker Change: So that's something to consider somewhere in between there are points that we will manage very carefully and then when these systems grow and to provide alternatives to our solutions that we compete and provide the best.

Michael Mieback: So more payments that need to be kept safe, more payments through more data, which drives more data analytics inside. That is the underlying kind of secular trend, which is pretty closely related to the secular shift as well. So that is the baseline of growth here. And then you look at some of the more specific growth drivers here. For example, in data analytics, in that group, we also have personalization.

Speaker Change: Solution to consumers and to our customers.

Speaker Change: On the fraud side on ease of use a lot of these systems don't have all of these functionalities. So those are things that we focus answer where we are.

Focused on providing the best choice to our customers, we don't mind the competition, but we actually see quite a bit of opportunity for us to use these rails.

Michael Mieback: So everybody's trying to engage their consumers at this point. That is on the banking side, it's on the merchant side, and here comes in with a solution that provides the right offer through the right channel at the right time to drive through that clutter. We have the number one personalization company that we acquired two years ago. That is one of the drivers.

Speaker Change: Open banking type of solution that you just asked about so <unk>.

Speaker Change: Interesting space and drives the overall economic growth.

Speaker Change: Digitally appreciate it thank you.

Michael Mieback: We expect some big growth there. On the other hand, cyber and security solutions, digital identity. An authentication solution today; nobody likes passwords.

Speaker Change: Your next question comes from Trevor Williams with Jefferies. Your line is open.

Trevor Williams: Great. Thanks, such and I was just hoping you could put a finer point on the growth algorithm within the full year revenue outlook. I know you mentioned some of the cadence dynamics with Vas and currency ball, but any help on what you're assuming for volume and transaction growth relative to the January trends.

Michael Mieback: You're in a situation where you have to end up making trade-offs between simplicity and security when it comes to digital payments. And with our technology, we find ways to go around that effectively, driving down fraud at the same time, ensuring that there are low abandonment rates. So biometric solutions, I talked about them earlier, are one of those examples.

Trevor Williams: <unk> incentives pricing.

Trevor Williams: Any help on those would be great. Thanks.

Speaker Change: Yes so.

Speaker Change: Look I'm not going to give you a specific kind of forecast as it relates to what we're assuming from a driver standpoint, we've kind of shared with you what our base cases, and the base case continues to assume that.

Michael Mieback: So across these two portfolios, CNI and DNS, Cyber Analytics and Data Insights, that's where we see the big growth and the big demand. Other solutions, real-time payments, we have a strong position there. We talked about this a couple of quarters ago where we said we were in the markets in which we were and we're driving to scale volumes. And the reference to our strategic partnership with TCH just shows that we continue on that front. So those are kind of the key drivers that we see here. We feel this is a uniquely differentiated portfolio, and it's in great demand. That's helpful. Thanks, Ben. Our next question comes from Chris Kennedy with William Blair. Your line is open. Good morning.

Speaker Change: Consumer spending remains healthy and we're reflecting the current spending dynamics from an overall kind of volumes and transaction standpoint.

Speaker Change: To your question on pricing.

Speaker Change: Than it's been in the past, we always price based on the value we deliver to our customers and we will continue to do that.

Speaker Change: Wherever it makes sense across the globe and we kind of have.

Speaker Change: New things, which we're launching this new value, we're delivering to our customers and as we do that we'll continue to price for that on specifically the contract question I think the.

Speaker Change: The important thing to note on contra as that.

Speaker Change: At the end of the day, contrary is enabling volume growth right.

Speaker Change: Pay incentives and rebates to our customers to bring more volume onto our network and as we do that we're paying for that.

Michael Mieback: Thanks for taking the question. And you just talked about it, but can you give a broader update on your digital identity solutions and what your strategy is for that, and how it can ultimately impact your business? Thank you. Right, so let me do that.

Speaker Change: For the first quarter, we expect our contract as a percentage of our payment network assessments to be roughly similar to what you saw in Q4 of 2023.

Michael Mieback: I just gave you the headlines on that, so specifically within that, there's a whole set of solutions from biometrics to identity events where we have the ability to provide an identity confidence score to one of our customers and say, "This person has lived at this address before and here is their previous employment," so with this, with a certain level of confidence, we can say this is the person. You know, all this stuff is kind of happening behind the scenes. That is the approach that we're taking. But, you know, it's not just our identity data.

Speaker Change: I'd tell you.

Speaker Change: On a full year basis is going to be entirely a function of how we see deals play out what the pipeline is obviously, we know what the outlook is from a pipeline standpoint, some of that will come to fruition. Some of that will lower there'll be other things that can move in and out and so I'm not going to kind of share with you what the full year outlook is on contract for Q1, I can kind of give you.

My thoughts, which are we expect that characterize the percentage of payment network assessments will be.

Speaker Change: Roughly similar to what we saw in Q4 of 2023.

Michael Mieback: We are combining this with open banking, and we're trying to find use cases where this really makes a difference, for example, in account opening. So we're taking our open banking technology and our fintech footprint here in the United States, you know, all the way up to 90% of our deposit accounts in this market. And we're taking our digital identity solution into a premium account owner verification and account opening solution. Those are the kind of examples where we see we're truly differentiated.

Speaker Change: Great. Thanks, Okay.

Speaker Change: Sure <unk>.

Speaker Change: Just one more briana.

Speaker Change: Our last question comes from Ashwin <unk> with Citi. Your line is open.

Speaker Change: Thanks.

Ashwin: Hi, Michael.

Ashwin: Good quarter and I appreciate all the comments so far.

Ashwin: My question is on real time payments and Michael you did have some incremental comments Dan on th, but saw the TCA to renewal. Obviously you have a global set of capabilities. Here. My question is what's the runway and what drives it is the use cases rather than more countries.

Michael Mieback: At the highest level, it's before and after the transaction that we're driving value through digital identity. We feel this is absolutely central to the digital economy. And that's why we put it in the new network, because there are people who have identity data, and there are people who want to use that data. We don't want to hold it.

Ashwin: And then if it is use cases, what are some of the.

Ashwin: Use cases that you see coming up.

Ashwin: Net debt and exciting.

Ashwin: From a conversion perspective.

Right so.

Michael Mieback: We're sitting somewhere in the middle, and we are essentially the trusted partner that can prove one way or another if a person is the person they can trust. Minimal use of data, permissioned data. Thanks for taking the question. Your next question comes from Paul Golding with Macquarie Capital. Your line is open. Thanks so much.

Ashwin: First of all the strategic relationship here in the U S with the.

Ashwin: The clearinghouse is important to note.

Ashwin: <unk> and <unk>.

Ashwin: 2016, and 17 real time payments really took off.

Ashwin: Took off this is when we invested in vocal link and vocal link was a partner with.

Michael Mieback: I guess to touch on Finicity since you just mentioned it, Michael, do you see this evolving more so as a value-added service and solution driver or a volume driver now that you've had it in the portfolio for some time? And then, as a follow-on, just wanted to see if we could get some more color on the acceptance location growth from a regional perspective, given the strength in international volumes in the period. Thank you so much.

Ashwin: The clearinghouse at the time so.

Ashwin: Strong and more strategic renewal of here is a big statement and it speaks to our position in real time payments.

Ashwin: 10 out of the top 50, GDP countries, we either operate or.

Providing software and services to the real time payment system. So.

Ashwin: It's real it's there.

Ashwin: Indicates and it's carrying a lot of volume for us in itself, that's an interesting business, but it's much more than that it's much more than that as we're talking to various players including <unk>.

Michael Mieback: So starting with Finicity, and then we have the corresponding set of capabilities through our IAEA acquisition in Europe, and we're also building out connectivity in Australia. Those are the three regions where we're focused. And open banking does a number of things. You know, essentially, what we see is a set of use cases here that rise to the top of everything that you could do with open banking. In the end, there's this big vision about open data where people can use their data footprint, and small businesses can use their data footprint to get access to better services. But for now, what's really rising to the top is account opening, the example that I already gave. Open banking for payments. I'll come to that for a moment, in a moment.

Ashwin: Ones that I mentioned about new applications that come on top of that.

Ashwin: Coming right back to the Chase pay by Bank example, here is access to rails on one hand, and then a set of additional data that turns a simple payment that gets money from <unk> to something that's a value add payment that is where we're going to go in.

Ashwin: Use cases will play out in a somewhat different way. It is obviously always our interest defined global solutions, but it's also this is a.

Rather more.

Ashwin: Geographic specifically driven space. So we'll have to see where that all lands. So we keep that in mind, which is why were not driving into many more markets right now where the most critical markets and here, we're staying very close to where that is going but its applications and it's scaling volumes in the markets that we and it's where the focus is.

Michael Mieback: Open banking for lending and for small businesses. So those are kind of the three categories that we feel are particularly relevant right now for payments. It's really interesting. To your point, is this a volume driver? It could be.

Michael Mieback: Because the connectivity that we have here, what we're trying to do is facilitate payments, for example, in non-carded use cases, as we have with the pay-by-bank solution in the United States in partnership with Chase Bank. So we hope to see significant volume growth out of that. That's the whole idea.

Ashwin: Okay.

Speaker Change: Thank you. Thank you very much.

Speaker Change: Thank you Mike on your last comment.

Speaker Change: As always thank you for your support to Mastercard. Thank you for listening to assumption in May and thank you to everybody at Mastercard for making all of this work will speak to you in one quarter.

Michael Mieback: And that builds on our experience with pay-by-bank in the U.K.; just a somewhat different approach here in the U.S., where our open banking capabilities are the true differentiator. So use cases that matter, that's the focus. And out of that, we hope to see not only API clicks on account opening but also pay-by-bank. Your next question... That was the second part of the question. Thank you. My team is just reminding me.

Speaker Change: Also unusual to note. This is on a Wednesday today I don't think we ever had that before certainly for me. This is the first Wednesday, we will see how we mix. It up next time, we speak to you in a quarter. Thank you and bye bye thanks, everyone.

Speaker Change: This concludes today's conference call you may now disconnect.

Michael Mieback: Acceptance growth regionally. I mean, it comes to the answer that Sachin gave earlier, where we talked a little bit about payments growth and the regional comparison. So, you know, when you think beyond the United States, we see tremendous growth opportunity. Out here in the United States, you would say it's more new use cases and verticals, and it's more generally and broader acceptance across the payments landscape and the rest of the world. There are even significant geographic opportunities to grow. Take Japan, for example.

Speaker Change: Okay.

Speaker Change: Sure.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

[music].

Michael Mieback: So, it's a country where the government has put out a stated policy to drive a cashless Japan. So, tremendous upside there. We talked about China earlier on, where we're investing heavily in the acceptance footprint. So, I would say it's leaning a little more on the international side.

Speaker Change: Okay.

Speaker Change: [music].

Michael Mieback: But here in the U.S., we're very busy going for news cases and verticals. Your next question comes from David Togut with Evercore. Your line is open. Thank you. Good morning.

Michael Mieback: Europe continues to be a driver of differentiated growth for MasterCard. Could you share your insights into your runway for growth in some of your largest countries, for example, Germany and, you know, Italy, and maybe frame that in terms of, you know, payment volume growth and vast growth opportunities? Let me start off with that question. First of all, I do want to underline what you just said. It is a source of differentiated growth for us. We've had a great run in Europe.

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Michael Mieback: And it's a combination of share growth, but it's also driven by the ways that we find to go after the accelerated secular shift that we saw on the back end of COVID. Countries like Germany are really driving up contactless usage, just to give you one example. So overall, Europe's been firing on all cylinders for us. And, you know, I come back to the growth algorithm that we laid out for payments, which applies very much in Europe. So that, you know, European economies will do what they do.

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Michael Mieback: But we will continue to focus on share gains. But we will also be very busy to take the share gains that we've already had and turn that into profitable volume for us. Conversion is driving that. We had a question on that earlier. So that's driver number one.

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Michael Mieback: And then going into new flows in Europe, there's opportunity there as well. If you look at alternative payment systems, everything that's going on in Europe, clearly through PSD2, PSD3, and so forth, there's a lot of movement in Europe that we will stay on top of as we look ahead of that. You see our differentiated assets in BillPay and the Nordics and so forth. So we have a pretty broad footprint to participate in all the drivers in Europe. In terms of services, services have been strong in Europe for a long time.

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Michael Mieback: Our advisors, our consulting business, has been a winner for us in Europe for the longest time. And if you look at some of these big wins that we've talked about, they all have a significant contribution from services. In fact, I would say often that they are one of the reasons that we win those deals. So nothing dramatically different there.

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Michael Mieback: I think Europe has caught up with the secular trend and digitization, and we're firing on all cylinders. We're fully invested in Europe. As you know, one of the big topics in Europe is European sovereignty, and we're deeply invested in Europe through our efforts, and we engage with Brussels and the nation states and so forth, which is very important for us to be a partner on their journey. Yeah, David, it's Sachin.

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Sachin J. Mehra: I'll just emphasize what Michael just said, right? You mentioned on a couple of occasions today that, you know, payments drive value-added services and solutions, and value-added services and solutions drive payments. It's no different in Europe, right?

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Sachin J. Mehra: For all the share wins we've had in Europe, for all the growth we're seeing on the payment side, it creates new opportunities for us on the services side. And then, vice versa, as you actually do deliver on those services, you get the benefit of additional data. And when you get the benefit of additional data, you're able to help optimize existing portfolios, which again drives payment volume growth. And that's not unique to Europe.

Sachin J. Mehra: It's actually true for the way we run the business globally. But the fact that we are increasingly, you know, becoming more prominent in the payment flow enables that cycle to work quite effectively. Thank you very much.

Michael Mieback: Our next question comes from Ken Sikofsky with Autonomous Research. Your line is open. Hi, good morning.

Sachin J. Mehra: Thanks for taking the question. I just wanted to ask about the yields on the domestic assessment revenue line. You know, that yield has declined year over year for some time now, and it came in a little bit lighter than some were expecting this quarter. I think you highlighted the mixed impact of yields or the spread between revenue and volume growth. So could you just provide some more detail around the specific changes that you're seeing in terms of mix? And can we get to a place where domestic yields are actually expanding year over year?

Sachin J. Mehra: Yeah, look, I'll comment on the yield piece, because what you're seeing, effectively, in the fourth quarter of 2023, when you look at payment network net revenue, divided by GDP, is what you see every year in terms of the sequential decline in yields. And that's primarily being driven by the fact that, remember, in the third quarter of all years, we tend to have our strongest cross-border performance, and our cross-border performance tends to come with our best yields. And so what you've got is when you're getting more bang for the buck for a dollar of GDP on the cross-border side than you are on the domestic volume side. So that's what's causing that sequential decline. You'll see that as a pattern which has existed in prior years as well.

Michael Mieback: Broadly speaking, I would tell you that otherwise, there's nothing unusual to call out on the payment network net revenue yield. The one reminder I'll give you is that we run the business not only to optimize payment network net revenue yield but overall net revenue yield for our company. Because again, it goes back to the question David asked right before you, Ken, which is, at the end of the day, we've got to be in the payment flow.

Michael Mieback: We've got to allow ourselves to have the opportunity to deliver services on those payments to generate additional revenue, which causes an overall net accretion in our overall net revenue yield. So I know your question is specific to payment network net revenue yield, but I just wanted to make sure you know that from our mindset standpoint, we're looking at payment network net revenue yield as well as overall net revenue yield for the company. I should say, you know, earlier when I was talking about the payment algorithm, I said that we are putting great focus on our financial discipline, and we do it with revenues in mind and with services. So yes, it needs to add up to the overall net revenue yield, as Sachin just said.

Michael Mieback: But I'm telling you, we don't want to win every deal. We want to win the deals we want to win, and we're pretty disciplined about it. Great. Thanks, guys. Your next question comes from Andrew Jeffrey with Truist Securities. Your line is open. Hi, good morning.

Michael Mieback: I appreciate you taking the question. I wanted to dig in, Michael, a little bit more on your pay-by-bank initiatives. Can this, especially as we see the emergence of networks like X in Brazil, for example, be a sort of a standalone growth driver in its own right?

Michael Mieback: Or is it sort of folded into your overall comments on open banking? I just wanted to see if there's an important distinction to draw as we think about going forward growth operations. Right, so both questions, your question and a previous question, hit on an important point there. There is a particular point of interest for us at the intersection of open banking. The Open Banking Connectivity enables us to go after use cases that we otherwise wouldn't be able to go after. For example, here's additional data that is available that you can then combine in combination with an underlying RTP rail to make a profitable proposition for a customer, which is exactly what Chase Pay-By-Bank is. Basically, you debit your customer when there is a balance, and that is what Open Banking Connectivity tells you.

Michael Mieback: So that's a good solution. If we look broadly around the world, PICS, UPI in India, FedNow, there are a bunch of real-time payment systems, and those are the kind of rails where we have experience, we have connectivity, and in some, we operate them ourselves.

Michael Mieback: So that is exactly what we're looking at as one of the assets and the propositions that we will bring together for our customers. Now, more broadly speaking, when you look at PICS, when you look at UPI, one other thing to keep in mind is, you know, this is the public sector doing a good job and pulling in more participants in the overall digital economy. So we can come in with our solutions, our real-time payment solutions, our card-based solutions, but they're basically extending the digital economy to create a tide that kind of lifts everybody's boats, financial inclusion being the headline. So that's something to consider. Somewhere in between, there are points that we will manage very carefully, as in when these systems grow and they provide alternatives to our solutions that we compete with and provide the best solution to consumers and to our customers. On the fraud side, on ease of use, a lot of these systems don't have all of these functionalities.

Michael Mieback: So those are things that we focus on. We're focused on providing the best choice to our customers. We don't mind the competition, but we actually see quite a bit of opportunity for us to use these rails for the open banking type of solution that you just asked about. So, interesting space, and it drives the overall economy. Thank you. Your next question comes from Trevor Williams on behalf of Jeffreys. Your line is open.

Sachin J. Mehra: Great, thanks. Sachin, I was just hoping you could put a finer point on the growth algorithm within the full-year revenue outlook. I know you mentioned some of the cadence dynamics with VAS and currency Vault, but any help on what you're assuming for volume and transaction growth relative to the January trends, rebates and incentives, and pricing, any help on those would be great. Thanks. Yeah, so, Look, I'm not going to give you a specific kind of forecast as it relates to what we're assuming from a driver's standpoint.

Sachin J. Mehra: We've kind of shared with you what our base case is, and the base case continues to assume that consumer spending remains healthy, and we're reflecting the current spending dynamics from an overall kind of volumes and transaction standpoint. I think to your question on pricing, it's no different than it's been in the past. We always price based on the value we deliver to our customers, and we will continue to do that wherever it makes sense across the globe.

Sachin J. Mehra: We kind of have new things which we're launching. There's new value we're delivering to our customers, and as we do that, we'll continue to price for that. On specifically the contract question, I think the... The important thing to note on Contra is that, at the end of the day, Contra is enabling volume growth, right? We pay incentives and rebates to our customers to bring more volume onto our network, and as we do that, you know, we're paying for that. For the first quarter, we expect our Contra as a percentage of our payment network assessments to be, you know, roughly similar to what you saw in Q4 of 2023. I would tell you, on a full year basis, it's going to be entirely a function of how we see deals play out, and what the pipeline is.

Sachin J. Mehra: Obviously, we know what the outlook is from a pipeline standpoint. Some of that will come to fruition, and some of that will not. There'll be other things which will move in and out, and so I'm not going to kind of share with you what the full year outlook is on Contra, but for Q1, I can kind of give you my thoughts, which are that we expect that Contra as a percentage of payment network assessments will be roughly similar to what we saw in Q4 of 2023. Thanks. I think we have time for just one more, Brianna.

Michael Mieback: Our last question comes from Ashwin Shirvaikar with Citi. Your line is open. Thanks. Hi Michael, Sachin, good quarter.

Michael Mieback: I appreciate all the comments so far. My question is on real-time payments, and Michael, you did have some incremental comments there on TCH, but you saw the TCH renewal. Obviously, you have a global set of capabilities here. My question is, what's the runway, and what drives it?

Michael Mieback: Is it use cases rather than more countries? And then, if it is use cases, what are some of the use cases that you see coming up that are exciting from a conversion point of view? Right. So, first of all, the strategic relationship here in the U.S. with the clearinghouse is important to note. Back in 2016-17, real-time payments really took off. This is when we invested in VocaLink, and VocaLink was a partner with the clearinghouse at the time.

Michael Mieback: So, a strong and more strategic renewal here is a big statement, and it speaks to our position in real-time payments. You know, 10 out of the top 50 GDP countries we either operate in or are providing software and services to the real-time payment system. So, it's real, it's there, as the name indicates, and it's carrying a lot of volume for us in itself. It's an interesting business, but it's much more than that. It's much more than that, as we're talking to various players, including the ones that I mentioned, about new applications that come on top of that. Coming right back to the Chase Pay-by-Bank example, here is access to Rails on the one hand, and then a set of additional data that turns a simple payment that gets money from A to B into something that's a value-add payment.

Michael Mieback: That is where we're going to go, and these use cases will play out in a somewhat different way. It is obviously always our interest to find global solutions, but this is a rather more geographically-specifically driven space. So, we'll have to see where that all lands. And we keep that in mind, which is why we're not driving into many more markets right now.

Michael Mieback: We're in the most critical markets, and here we're staying very close to where that is going, but the applications and the scalability volumes in the markets that we're in, it's where the... Thank you. Thank you, Michael. Any last comments? Well, as always, thank you for your support of MasterCard. Thank you for listening to Sachin and me, and thank you to everybody at MasterCard for making all of this work. We'll speak to you in one quarter. It's also unusual to note that this is on a Wednesday today. I don't think we've ever had that before. Certainly, for me, this is the first Wednesday.

We'll see how we mix it up next time. Speak to you in a quarter. Thank you, and bye-bye. Thanks, everyone. This concludes today's conference call. You may now disconnect. ♪♪ ♪♪ ♪♪ ♪♪ ♪♪ ♪♪ ♪♪ ♪♪ ♪♪ ♪♪ ♪♪ ♪♪ ♪♪ ♪♪ ♪♪ ♪♪ ♪