Speaker 1: There's an old saying in finance that cash is king,
Speaker 1: but when it comes to payments, the data suggests that's
Speaker 1: no longer exactly the case. According to the latest World
Speaker 1: Pay Report, cash now figures in less than twenty percent
Speaker 1: of in person transactions around the world. The payments industry
Speaker 1: from the beginning has has really focused on getting people
Speaker 1: to use electronic forms of of of pain. In fact,
Speaker 1: if you look at like the US, for example, you
Speaker 1: basically have been moving around two to three of payments
Speaker 1: from cash and check to some form of direct electronic
Speaker 1: just about every single year. To regard volumes ex China
Speaker 1: today at twenty trillion dollars and there's another fourteen trillion
Speaker 1: dollars worth of cash and check left to digitized Even
Speaker 1: at level god, penetration is growing, so yes, we are
Speaker 1: moving towards a cash society. A new technology has promised
Speaker 1: to kick these trends into a higher gear. The terminal
Speaker 1: on the till of the merchant, depending on how old
Speaker 1: one is, one is used to that at least in
Speaker 1: the developed world, but that is not everywhere. But everyone
Speaker 1: has a phone, so electronic payments can end up in
Speaker 1: a super simple way in everybody's hands, and for our business,
Speaker 1: that's a massive growth opportunity. MasterCard is already seizing that opportunity.
Speaker 1: After dipping in revenues shot past pre pandemic levels driven
Speaker 1: by a rebound consumer spending. CFO Sachein Mehra knows that
Speaker 1: this boom is likely to fade, and he's set on
Speaker 1: finding ways to keep the momentum going. The key to
Speaker 1: being successful in this kind of environment is to have
Speaker 1: a diversified portfolio. You've got to be nimbled from an
Speaker 1: expense standpoint, You've got to be very disciplined as a
Speaker 1: finance officer. What I've got to do with I'm going
Speaker 1: to make sure that we are investing in those resources
Speaker 1: which are currently demand from a customer standpoint, but at
Speaker 1: the same time not losing sight of the long term.
Speaker 1: CEO Michael me Back counts on Meyer to do more
Speaker 1: than just oversee the balance sheet. The top line for
Speaker 1: me is um advisor and confident your conciliary. Yes, he's
Speaker 1: quite happy pushing back and saying vice versa. The rule
Speaker 1: of the chief financial officer has actually changed fairly dramatically
Speaker 1: over this twenty plus year tenure that I've had, you know,
Speaker 1: in the past, it was more of a function of,
Speaker 1: you know, let's make sure the numbers are good. Let's
Speaker 1: make sure we've got a great control environment. Let's make
Speaker 1: sure we're actually able to close the books on time.
Speaker 1: Let's make sure we've got all the financial elements of
Speaker 1: the business in order. The job of the CFO in
Speaker 1: in our view, in my view, is a function of
Speaker 1: making sure we're creating the right linkage between what the
Speaker 1: purpose of the business is, what the strategy of the businesses,
Speaker 1: and delivering on the financial returns for the company, all
Speaker 1: while driving long term sharehold of that. We're in the
Speaker 1: business of leading beyond the numbers. It's great that we
Speaker 1: know what the numbers are, how do we use those
Speaker 1: numbers to better drive execution of the business to accomplishment
Speaker 1: of the strategy of the company. Master Cards core business
Speaker 1: is no surprise cards. Card At products currently account for
Speaker 1: over half the company's revenue. The company set ambitious growth
Speaker 1: targets that investor day, committing to expand this core and
Speaker 1: to diversify beyond it. We've been on a six year
Speaker 1: strategy to be a multi rail company. In plain English,
Speaker 1: that means whichever way you pay, wee will enable that
Speaker 1: despite the fact that card is in our name is
Speaker 1: essentially any type of payment we have the reach. So
Speaker 1: I think we're reasonably well positioned. I mean, you've just
Speaker 1: got to recognize not only where the consumers today, but
Speaker 1: where they're gonna go, because a lot of what we
Speaker 1: got to do takes time to implement, and is it difficult.
Speaker 1: You'll get something, You'll get it right, sometimes you'll get
Speaker 1: it wrong sometimes, but hopefully you're getting it right more
Speaker 1: often than you can get wrong, and you're working with
Speaker 1: through the forecasting preferences. Is complicated by an uncertain economy.
Speaker 1: Consumer confidence has been plunging to historic laws, and recession
Speaker 1: calls are getting louder. Still, a slowdown isn't likely to
Speaker 1: cause a crisis for master Card and it's peers. Contrary
Speaker 1: to what people often perceived, I think payments as an
Speaker 1: industry it will be quite fasiliantiny Downtown. Generally speaking, even
Speaker 1: during a recession, the amount that consumers spend actually does
Speaker 1: not go down. It continues to grow. I think the
Speaker 1: thing that people are worried about more um in the
Speaker 1: payments industry is kind of how does the mix of
Speaker 1: spending change? The first thing that typically happens if you're
Speaker 1: going into a recessionary environment, is people tend to pull
Speaker 1: back on discretionary categories to spend. They move into um
Speaker 1: the non discretionary categories of spend, the pivot into food,
Speaker 1: they've pivot into m rent, those kind of payments which
Speaker 1: are most important for them to meet. But the rails
Speaker 1: still stay the same. So the reils which run debit
Speaker 1: and credit are exactly the same, the technologies the same,
Speaker 1: the distribution models the same, so those those areas don't
Speaker 1: necessarily changed by virtue of moving into more of a
Speaker 1: debit or credit environment. One area that master Card has
Speaker 1: been moving vigorously into is B two B payments, a
Speaker 1: market expected to reach twenty five trillion dollars by the
Speaker 1: end of the decade. We think there's tremendous promise in
Speaker 1: the B two B area. The card business as in
Speaker 1: the elements of the B two B space which are
Speaker 1: served by cards are doing well. Are they doing very well?
Speaker 1: And it's in the small business space and the mid market,
Speaker 1: it's in the large corporate space. All of them do
Speaker 1: really well. On the accounts payable side. I would say
Speaker 1: we're in the build phase, and here we're about building
Speaker 1: an open loop environment to enable payments on accounts pable rails,
Speaker 1: whereas the opportunity in that spaces different to consumer payments
Speaker 1: where there is a global standard. The global standard is MasterCard.
Speaker 1: The global standard are Card payments, because that's been established,
Speaker 1: that isn't quite established yet and B two B and
Speaker 1: I think the more benefits we bring into the payments
Speaker 1: that are easier than just making a really complicated cross
Speaker 1: border payment, I think we will find out way there
Speaker 1: and we're going to see an explosion of creativity, a
Speaker 1: lot of other companies coming in and using those rails,
Speaker 1: innovating on top of the pursuing new opportunities, takes capital.
Speaker 1: MasterCard has spent billions acquiring companies that add capacity and
Speaker 1: diversify its infrastructure. Acquisitions and partnerships have helped MasterCard offer
Speaker 1: more value added services to their clients, tapping into a
Speaker 1: lucrative revenue stream. What we call services, which includes data, insights, consulting,
Speaker 1: manage services, loyalty, and our fraud capabilities is roughly the
Speaker 1: revenues of this company. Wow. Yeah, So it's not insignificance.
Speaker 1: Oftentimes people think MasterCard and think Gord very important, but
Speaker 1: there's a very different bottom masks Card as well. From
Speaker 1: a balance sheet perspective, MasterCard has maintained a healthy leverage
Speaker 1: ratio even as it's put more resources into acquisitions and
Speaker 1: taken on more debt. Given the company flexibility to continue investing,
Speaker 1: we don't go in and say, well, right now, evaluations
Speaker 1: are lower than they were a year ago, let's go
Speaker 1: and buy something. Um that is that is an opportunistic
Speaker 1: approach that doesn't work for us. For me, it always starts,
Speaker 1: what are we trying to accomplish from a strategy standpoint,
Speaker 1: What our inherent capabilities we as a company have, What
Speaker 1: are the gaps and an own capabilities to meet that strategy?
Speaker 1: And then foll those gaps? Is it best to build?
Speaker 1: Buy our partner, and then we're out there and we're
Speaker 1: trying to find the right companies together. It's going to
Speaker 1: make sure that we have a clear view on short
Speaker 1: and long term synergies and so forth. And then we
Speaker 1: both talked to shareholders and to investors to explain what
Speaker 1: we're doing and why we're doing and why it's good.
Speaker 1: Shareholders have reason to appreciate Mastercard's capital allocation strategy. It's
Speaker 1: included annual share buy backs and steadily increased dividends. How
Speaker 1: do you prioritize the amount of money that you put
Speaker 1: toward innovation and toward building out different businesses versus share
Speaker 1: buy backs and dividends because master Card has traditionally had
Speaker 1: a robust program in rewarding shareholders, right first call of
Speaker 1: capital is towards growth of the business. After we have
Speaker 1: done that, it's about making sure we're being good stewards
Speaker 1: of capital and returning excess cash to shareholders with a
Speaker 1: biased stewards share buy backs. And then once you start
Speaker 1: to come to say I have dealt with my strategic priorities,
Speaker 1: I either have invested in my organic growth or in acquisitions,
Speaker 1: then access cash. We will return back generally with a
Speaker 1: preference for buy backs over dividend because it gives a
Speaker 1: small flexibility. But that has been a good model for us.
Speaker 1: It's been working well and it's been well received by
Speaker 1: the market. Such a mirror joint master Card is Group
Speaker 1: Executive and Corporate treasure two ten. Over the next decade,
Speaker 1: took on several different roles before being appointed Chief managed
Speaker 1: Officer in twenty nine. That's a very different path than
Speaker 1: the one he started out on. I grew up in India.
Speaker 1: I went to school there, I went undergrad there. I
Speaker 1: worked with the family business that it's a textile business
Speaker 1: which my grandfather started. My dad and my uncle took
Speaker 1: over and then my brother and I got into and um.
Speaker 1: I worked with him for three and a half years
Speaker 1: and then I came up a business school. The moment
Speaker 1: of truth came on graduation day. My dad got on
Speaker 1: the phone. He congratulated me, He said, well done, graduated.
Speaker 1: I'm looking forward to having me back home. My brother
Speaker 1: was older than I am, who went to business school
Speaker 1: as well and went back home and worked with my dad,
Speaker 1: got on the phone congratulated me and said, so such
Speaker 1: a what are you gonna do with your life? And
Speaker 1: I'm going, well, why are we having this discussion? Dad
Speaker 1: wants me to come up and work to the family business.
Speaker 1: He's like, yep, that's what Dad wants you to do.
Speaker 1: What do you want to And then it really got
Speaker 1: me thinking and I said, hey, given a chance, I'd
Speaker 1: love to work in finance in the US. Mara took
Speaker 1: the chance, even though it took him six months to
Speaker 1: land his first job at General Motors, where he worked
Speaker 1: for over a decade. Then it was on to the
Speaker 1: energy industry at Hess Corporation before finding his way to MasterCard. Today,
Speaker 1: my dad couldn't be prouder of the fact that, you know,
Speaker 1: I chose the path I did. Obviously he misses the
Speaker 1: fact that we're not there as a family, but that's
Speaker 1: just spott of light, right, We've all got to grow
Speaker 1: in blossom and groom. Did he accept it at the beginning?
Speaker 1: It took him all of thirty minutes to get there.
Speaker 1: When Mara gets together with his team in the employee
Speaker 1: cafe and master Card's campus, it's clear that he's in
Speaker 1: his element. Well, more important, more fun stuff. What's the
Speaker 1: plan for the weekend? And of course the cafe provides
Speaker 1: a demonstration of the tap and co technology that's changed
Speaker 1: the game for payment companies. Can I just got a
Speaker 1: regular coffee with help? Okay? That would? You? Got it?
Speaker 1: All right? We're gonna make this work. There we go.
Speaker 1: I think contactless is a very powerful catalyst for accelerating
Speaker 1: cash depot conversion. In the last two years, what we
Speaker 1: have seen in the US is god penetration could growth
Speaker 1: rate annually has doubled versus what was the average and
Speaker 1: the prior five years. The pandemic was one of the
Speaker 1: reasons people didn't want to touch cash, and there's a
Speaker 1: lot of e commerce purchases. The contact lists definitely contributed
Speaker 1: to this groot as well. It's made a change, it's
Speaker 1: really made a difference. What it's really made a difference
Speaker 1: on has been in terms of how it's driving a
Speaker 1: shift from cash to electronic forms of payment, particularly on
Speaker 1: the small ticket items, which is really really important because
Speaker 1: at the end of the day, our model is as
Speaker 1: much about converting the dollar value of the spend as
Speaker 1: it is about the number of transactions we can get
Speaker 1: over our network, and even though it happens to be
Speaker 1: a two dollar transaction, transactions the transaction on which we
Speaker 1: make revenue on which we can deliver services, and that's
Speaker 1: really more. Master Card introduced pay pass, its first contactless
Speaker 1: payment system, in two thousand two, but the technology took
Speaker 1: some time to gain traction. I would say we first
Speaker 1: invested in this many many, many many years ago. The
Speaker 1: adoption rate on this in the early part, even in
Speaker 1: markets like the UK, Canada, Australia, was fairly slow in
Speaker 1: the early part. The inflection point of when it really
Speaker 1: started to hit it stripe was when it was used
Speaker 1: in the transit vertical. So what we figured is, let's
Speaker 1: get all the transit systems around the globe enabled for
Speaker 1: contact less technology. That will create muscle memory for the
Speaker 1: consumer will like the experience in transit and will use
Speaker 1: it elsewhere. How do you judge the revenue proposition for
Speaker 1: MasterCard with an innovation like that and the adoption in
Speaker 1: the pace of it. Look, I mean for us, we're
Speaker 1: agnostic as to whether somebody's using the chip technology or
Speaker 1: the contact less technology or you know, using the mag
Speaker 1: stripe which was the old way of doing business. We
Speaker 1: own revenues which are quite similar across both of those.
Speaker 1: The revenue put aventual and upsite for us comes from
Speaker 1: the fact that now more spend is being done on
Speaker 1: guard based forms of payment than what's being done in
Speaker 1: the past. So we're converting that cash over the electronic
Speaker 1: forms of payment, which is where the implemental revenue comes from.
Speaker 1: If contactless payments is the current revolution sweeping the payments industry,
Speaker 1: when's the next one? I think pay with your smile,
Speaker 1: so biometrics. I think that's where it's going to go.
Speaker 1: And I think we've reached that point that people are
Speaker 1: sick of too many passwords, people are sick of typing
Speaker 1: in stuff. And there's also too many wallets and other
Speaker 1: ideas and stuff that is around. So why don't you
Speaker 1: just everybody has a smile, So just play with your smile.
Speaker 1: There you go, how much are you investing in that?
Speaker 1: How quickly do you see that becoming the next tap
Speaker 1: and go? Yeah? So look, I think this is gonna
Speaker 1: take a while. These things have an adoption code which
Speaker 1: typically is fairly flattened the early part, and then you
Speaker 1: start to see some level of steples. Mastercard's next breakthrough
Speaker 1: maybe born in one of its global tech hubs. The
Speaker 1: company has open to innovation centers in Australia, India, Europe, Canada,
Speaker 1: and the United States. These are spaces where we draw
Speaker 1: in customers, where we draw the local community. We have
Speaker 1: them in big cities where the latest technologies and the
Speaker 1: players are all around us. In New York City it's
Speaker 1: in Tech Alley, and everybody in the tech industry is
Speaker 1: around us. It's a point where people want to work
Speaker 1: and we attract the best talent and we go and
Speaker 1: this brings us back to the CFO. We go and
Speaker 1: look at our vitality index. So how are the our
Speaker 1: revenues looking what is generated from new products? What do
Speaker 1: we see is their real momentum, is their real growth.
Speaker 1: And if you overlay that um and link that back
Speaker 1: to our tech hubs in these regions where we have them,
Speaker 1: clearly that is what driving what is driving our new solutions.
Speaker 1: From an investment standpoint, we try and make sure we've
Speaker 1: got our foot in the door and all of these
Speaker 1: new and emerging technologies because what we don't want to
Speaker 1: do is play favorites with one versus the other. We
Speaker 1: want to make sure we're investing just appropriate amounts of
Speaker 1: money to have skin in the game to know that
Speaker 1: if this thing has got legs to it, we want
Speaker 1: to be at the inflection point for them. To write
Speaker 1: out in your tech hubs, can you act like Bond
Speaker 1: James Bond, one of the Q movies, And like the
Speaker 1: laboratories we walk in and they you know, you sort
Speaker 1: of face off and clear the system and they serve
Speaker 1: there are some people who are provolution in this company
Speaker 1: who can do that. Not everybody can and I'm not
Speaker 1: I'm not one of them. That's not me Like many
Speaker 1: of its counterparts, and the payments and financial services industry.
Speaker 1: MasterCard has developed products and partnerships that bring cryptocurrencies into
Speaker 1: its networks. I think from the payments and payments system perspective,
Speaker 1: the players and members that make up that ecosystem are
Speaker 1: really agnostic. To them, crypto is just another current, literally,
Speaker 1: just another asset. At this point. The overall revenue contribution
Speaker 1: is still so small. It's very early. But if I
Speaker 1: am a hard company, it's better to invest and also
Speaker 1: lean in any partner with some of these companies um
Speaker 1: for future revenue growth rate versus kind of sitting on
Speaker 1: the sidelines. Crypto is a term that encompasses a number
Speaker 1: of different projects, including central bank digital currencies and private
Speaker 1: sector stable coins, also digital assets like bitcoin. These volatile
Speaker 1: valuations and susceptibility to fraud have raised plenty of anxiety
Speaker 1: among investors. Master cards long term plans to stay in
Speaker 1: the space haven't wavered. We're not really in the crypto
Speaker 1: hype of investment investing around crypto. We like the fundamental
Speaker 1: technology and the promise that it brings to solve problems
Speaker 1: that have not been solved. So if we see more
Speaker 1: revenue coming out of B two B solutions that leverage
Speaker 1: blockchain technology, for example tokenized bank deposits, you know, just
Speaker 1: to throw out one example, across border payments, whatever it
Speaker 1: might be. In the crypto world, we play the rule
Speaker 1: um as an on ramp, so people use MasterCard card
Speaker 1: products to buy crypto, our debit and credit products. So
Speaker 1: that's the on ramp if people want to spend money
Speaker 1: as in fiat currency to buy crypto and react as
Speaker 1: the off ramp. And the off ramp is when people
Speaker 1: want to in cash it we help them actually gain
Speaker 1: access to be able to use their crypto balance as
Speaker 1: everywhere MasterCards excepted. We engage with central banks on central
Speaker 1: bank digital currencies. We engage with governments on how a
Speaker 1: policy could look like, how regulation could like look like.
Speaker 1: We engage with the startup community and say, come on in,
Speaker 1: let's sit around the table in one of our tech
Speaker 1: hubs and we discuss what what solution actually is needed
Speaker 1: by whom and how we can bring it together. They
Speaker 1: have the greatest idea, but the greatest idea needs a
Speaker 1: path to scale. That's what we can bring. Is there
Speaker 1: a potential liability because of the volatility, because of how
Speaker 1: Bitcoin and certain other cryptocurrencies have been painted, Is there
Speaker 1: any liability for MasterCard. Yeah, well, long as we follow
Speaker 1: our principles, we think we're in really good shape. And
Speaker 1: the principles we care deeply about our stability as in
Speaker 1: stability of the currency in question point number two. It
Speaker 1: must meet consumer protection requirements, it must meet the laws
Speaker 1: of the land. And this is not new news to us.
Speaker 1: We've done this in the space for the last fifty years.
Speaker 1: For everything. We've been working with regulated financial institutions on
Speaker 1: UH and so, which is why when we got into
Speaker 1: the space, the first thing we did was to find
Speaker 1: principles and we will keep abiding by these principles and
Speaker 1: what we do. Yeah, I feel happy because we're in
Speaker 1: the discussion. We're shaping the ecosystem and then one day
Speaker 1: it will look like what we have done in many
Speaker 1: other spaces over years of the past years. Such in
Speaker 1: Mira is a leader within a company that has the
Speaker 1: power and reach to shape ecosystems, and he'll be making
Speaker 1: strategic and financial decisions that shape the business. I wanted
Speaker 1: to know what he sees when he looks ahead, what's
Speaker 1: the opportunity for master Card in the next ten years
Speaker 1: that most excites you. There still remains a very sizeable
Speaker 1: consumer payments opportunity which we stand very well poised to
Speaker 1: actually capitalize on. This is the trend of the shift
Speaker 1: from cash to electronic forms of payment. If you think
Speaker 1: about it globally, there's still a ton of cash which
Speaker 1: remains to be electronifying, and that that opportunity is huge.
Speaker 1: The second pillar for me is around we have identified
Speaker 1: over the past few years a sizeable total addressable market
Speaker 1: in what we call new payment flows. Bucket number three
Speaker 1: is around services. It goes back to our insights, analytics,
Speaker 1: are fraud management capabilities and everything we're doing in that space.
Speaker 1: And then the last piece around new networks, which is
Speaker 1: around open banking and digital identity. What are some of
Speaker 1: the challenges from MasterCard over the next ten years that
Speaker 1: keep you up at night. It's around staying plugged in
Speaker 1: on what's going on from a technology innovation standpoint and
Speaker 1: making sure we're leading from the front, not turning our
Speaker 1: back to it and saying we're going to walk in
Speaker 1: the other direction. We've got to engage with people who
Speaker 1: could potentially be disintermediators competitors to let them know what
Speaker 1: value we can bring while they're executing on their strategy.
Speaker 1: So that's number one. Number two is look, I mean,
Speaker 1: the world is getting more and more into a regulatory
Speaker 1: environment where regulations, regulators are playing a bigger role, nationalism
Speaker 1: is playing a bigger role. It's important for us to
Speaker 1: continue to do everything we're doing by being deemed local.
Speaker 1: It's important to be a global company, but be deemed local.
Speaker 1: And that's going to be important for us to execute
Speaker 1: on because at the end of the day, sitting in
Speaker 1: my role as the CFO, strategy is great, visions, fantastic,
Speaker 1: but what really matters is can you really deliver and execute?
Speaker 1: And we've got to stay focused on execution and that's
Speaker 1: what we do every day. What's the biggest change that
Speaker 1: you see a role having over the next ten years.
Speaker 1: That's a good question. Honestly, I am not really in
Speaker 1: the business of predicting that much as it relates to
Speaker 1: how it's going to change. What I can see happening
Speaker 1: is greater emphasis on making sure we're leading from the front.
Speaker 1: It on executing, but also failing fast. And that's where
Speaker 1: a CFO can play a big role. And by that
Speaker 1: I mean that you're not always gonna win the things
Speaker 1: you're gonna do. Hopefully you get more right than wrong,
Speaker 1: but recognizing things which are not working out and making
Speaker 1: sure you actually fail fast on them and get out
Speaker 1: of them. Because you can get you can fall in
Speaker 1: love with stuff, keep doing it, keep wasting resources to
Speaker 1: only realize that it's not going to pay off. And
Speaker 1: I think the emphasis around that is going to only
Speaker 1: increase for that for CFOs in a scarce capital resource environment.
Speaker 1: What advice would you give a CFO today. I think
Speaker 1: it's important to stay calm. I think it's important to
Speaker 1: recognize that change is going to happen. You can't fight change.
Speaker 1: What really matters is how you can get up and
Speaker 1: I actually deal with that change. That's super important for
Speaker 1: a CFO. Being really clear and crisp in your communications.
Speaker 1: The outside world wants to hear in very simple terms
Speaker 1: what exactly this company stands for and why they should
Speaker 1: believe that you are a good investment. And notice I've
Speaker 1: said nothing about financials and I've said nothing about necessarily
Speaker 1: financial infrastructure and systems, because I do believe as a
Speaker 1: CFO those things are table sticks. You've got to make
Speaker 1: sure that stuff happens. You've got a level of technology,
Speaker 1: you've gotta drive efficiency in the business. You've got to
Speaker 1: get the numbers right. You gotta have a good control
Speaker 1: in moment. But what's going to call you apart is
Speaker 1: the is the other elements which I spoke man. If
Speaker 1: master Card can meet ambitious goals for growth in its
Speaker 1: core business and build on strategies that are taking payments
Speaker 1: to the next level, such in Merora, will deserve a
Speaker 1: lot of the credit. I'm Lisa Abramo. It's this is Bloomberg.