The paragraph is the introduction to MasterCard Incorporated's Q4 and Full Year 2024 Earnings Conference Call. The operator, Julianne, welcomes participants and instructs them on the process for the question-and-answer session. Devin Corr, the head of Investor Relations, introduces the call, mentions the presence of Michael Miebach, the CEO, and Sachin Mehra, the CFO. The call is presented on a non-GAAP currency-neutral basis, and the related documents are available on Mastercard's website and were filed with the SEC. The call will include forward-looking statements, with factors affecting future performance summarized in their earnings release and SEC filings. A replay will be available on the website for 30 days.

The company reported strong financial performance, with notable increases in fourth-quarter net revenues and adjusted net income. Its diverse payment services and recent acquisition of Recorded Future enhance its market position and support long-term growth. Despite a mixed macroeconomic environment, marked by solid consumer spending, a strong labor market, and moderated inflation, the company remains optimistic about its future growth. The focus remains on executing strategic priorities in consumer payments, commercial payments, and services, leading to consistent success across different markets and product lines. It emphasizes the importance of a diverse customer portfolio and the ability to adapt to external changes.

In 2024, Mastercard has expanded its global customer base by securing and renewing several significant partnerships. In the U.S., Mastercard strengthened its relationships with ICBA payments and a large Mid-Florida credit union, both of which will migrate their portfolios to Mastercard. They also renewed their partnership for the Direct Express program, which serves over 3 million Americans. Internationally, Mastercard secured exclusivity with Saudi National Bank, extended its partnership with Nubank, Banco Santander in the U.K., and renewed a major agreement with HSBC in over 20 countries. Additionally, new co-brand programs were launched with Porter Airlines and the Bank of Montreal in Canada, and an existing partnership was renewed with IHG and Chase, as well as with Sam's Club in the U.S.

The paragraph outlines strategic priorities and achievements in consumer payments, highlighting growth opportunities in a $11 trillion market. The company aims to become the most accepted payments network globally and is revolutionizing checkout processes by phasing out manual card entries in favor of biometrics, enhancing security and convenience. High fraud rates and slow checkouts online are addressed through tokenization, which has significantly increased. The introduction of the Mastercard 1 credential offers consumers flexible payment options within a single secure system, simplifying transactions for merchants.

The paragraph discusses the various services and partnerships Mastercard is leveraging to expand their tokenized ecosystem and enhance security. They are driving more network transactions by opening closed-loop systems and collaborating with local wallet providers to simplify consumer access. Examples include partnerships with Swish in Sweden and Davivienda in Latin America to enhance digital payments and financial inclusion. Mastercard's "pay local" service connects with digital wallets, benefiting both consumers and merchants by easing payments and supporting local tourism. They are also building partnerships with major wallet providers across Asia Pacific and exploring new payment verticals such as consumer bill payments, exemplified by their collaboration with Bemobi in Brazil to integrate Click to Pay for recurring services.

The paragraph outlines Mastercard's efforts to enhance the crypto ecosystem by integrating blockchain technology with traditional payment systems. The company has partnered with various crypto platforms, including Crypto.com, Metamask, and Conexus by JPMorgan, to enable cryptocurrency transactions using Mastercard and to develop the Multi Token Network (MTN) for improved cross-border B2B payments. While consumer payments offer growth opportunities, commercial transactions represent a much larger market. In 2024, commercial credit and debit volumes accounted for 13% of Mastercard's total GDV, growing 11% year-over-year, with additional market potential in disbursements and remittances.

In Paragraph 7, the article discusses Mastercard's initiatives to expand its virtual card services and commercial partnerships. Mastercard Move saw a 40% increase in transactions year-over-year, and the company is pushing further into virtual card offerings across various sectors and regions. The company is partnering with entities like Net Narest in the UK, Citi in Argentina, and companies in the travel sector, such as Worldpay and Emirates NBD, to distribute virtual cards. Additionally, Mastercard is entering new verticals like trade, logistics, and consumer packaged goods, collaborating with Global Fintech Invoice Bazar to support digital payments in trade, and partnering with Dean Finance and Prime Dash to assist small businesses in the Middle East. The company is also expanding issuer partnerships worldwide, including deals with DNA Bank in Argentina, AMP Bank in Australia, and ANT International’s World First for SMEs. Mastercard views services as a growing market opportunity, valuing it at a $165 billion addressable market.

In 2024, the company generated nearly $11 billion in services and solutions revenue while only penetrating less than 7% of the market, indicating significant growth potential. They are focusing on developing differentiated products and have introduced new services for customer acquisition, market insights, subscription management, and threat identification. They acquired Minna Technology and Recorded Future to enhance their capabilities. Recorded Future, now part of Mastercard, is a leading threat intelligence firm using AI-powered insights for risk reduction. These advancements will allow Mastercard to offer more robust intelligence and fraud prevention solutions, improving protection for governments, businesses, and consumers.

In this paragraph, Mastercard discusses its strategy to enhance market penetration and expand services through new partnerships and solutions. They highlight collaborations with Stripe for fraud solutions, Itaú Unibanco for digital channel services in Latin America, and Nordea for loyalty offerings in Norway and Sweden. By partnering with traditional and new clients like Webster Bank, DoorDash, and Sony PlayStation, Mastercard is increasing its reach into diverse sectors. The company also plans to leverage open banking capabilities with Hilton and sees strong demand for its services, which it views as a substantial growth opportunity alongside its payments business. Mastercard closes by expressing optimism about its strong business fundamentals and future prospects.

The paragraph discusses the financial performance of a company for the fourth quarter, highlighting a 16% increase in net revenue driven by growth in their payment network and value-added services. Operating expenses rose by 15%, and operating income increased by 17%. The net income and EPS rose by 19% and 22%, respectively, aided by strong operating income growth and a discrete tax benefit. The EPS was $3.82, with a contribution from share repurchases. The company repurchased $3.4 billion worth of stock during the quarter. Key growth drivers included a 12% year-over-year increase in worldwide gross dollar volume, with U.S. growth in credit and debit, and a 20% global increase in cross-border volume. Switched transactions grew by 11% year-over-year.

The paragraph reports on the growth in Mastercard's payment network for the fourth quarter. Both card-present and card-not-present growth rates were strong, with contactless payments making up about 72% of in-person transactions and card growth at 6%. Globally, there are 3.5 billion Mastercard and Maestro cards. Payment network net revenue rose by 15%, driven by domestic and cross-border transactions and increased rebates and incentives. Value-Added Services & Solutions net revenue increased 17%, partly due to acquisitions and strong demand for consumer and business services. Key metrics showed a 10% rise in domestic assessments, 12% growth in worldwide GDV, 24% increase in cross-border assessments, and 15% growth in transaction processing assessments. Other network assessments amounted to $239 million.

In the article paragraph, it discusses an increase in total adjusted operating expenses by 15% on a non-GAAP currency-neutral basis, primarily due to acquisition expenses, including the early acquisition of Recorded Future. Excluding acquisitions, the increase was driven by strategic initiative investments. Operational metrics showed strong switched volume growth in Q4, aided by consumer spending and travel, although transaction growth remained flat due to higher average ticket sizes. Metrics in January aligned with the fourth quarter, with U.S. switched volume growth driven by easier comparisons due to weather impacts. There was a decrease in intra-Europe cross-border volumes due to the calendar and travel spending patterns.

The paragraph discusses the company's outlook for fiscal year 2025, emphasizing strong business fundamentals and a positive growth outlook. The company expects net revenues to grow in the high end of low double digits to low teens range, excluding acquisitions, with foreign exchange posing a headwind and acquisitions providing a slight growth boost. Operating expenses are projected to grow at the low end of a low double digits range, with acquisitions and foreign exchange impacting these figures. The narrative includes details on acquisition-related expenses, notably the impact of acquiring Recorded Future and Minna Technologies, which will affect operating expenses significantly. These factors align with the company's previously communicated three-year performance objectives.

The paragraph discusses Mastercard's acquisition strategy, which focuses on buying complementary, fast-growing companies to expand its addressable market and achieve long-term growth through scaling revenues and synergies. For Q1 2025, net revenue growth is projected to be in the low teens on a currency-neutral basis, excluding acquisitions. Acquisitions are expected to contribute 1 to 1.5 percentage points to this growth, while foreign exchange could reduce growth by 3 percentage points. Operating expenses are anticipated to grow in the low double digits, with acquisitions adding 4 to 5 percentage points and foreign exchange providing a 2 percentage point tailwind. Additionally, the company anticipates a Q1 expense of $120 million due to interest rates and debt levels, excluding equity investment impacts. The non-GAAP tax rate is expected to be around 20% for Q1 and between 20% to 21% for the full year.

The paragraph discusses a portion of a conference call where Andrew Schmidt, from Citi, asks about the drivers of growth in cross-border transactions as of January 28 and expectations for 2025. Sachin Mehra responds, highlighting the strong value proposition of their cross-border services, attributed to efforts in winning various portfolios, including co-brand programs with airlines. He notes the 20% growth in cross-border volume for the fourth quarter and mentions that the January data represents only the first four weeks of the month.

The paragraph discusses the factors influencing a decrease in intra-Europe spending from 20% to 18%, citing a shift of travel expenses to December and calendarization effects. Despite these changes, overall cross-border and domestic spending remain strong, reflecting good consumer health. The paragraph also touches on commercial spending's positive impact on cross-border metrics. Additionally, it mentions an ongoing acquisition involving Capital One, indicating positive prospects for approval and highlighting Capital One as a strategic partner, despite their public decision to move debit volumes to the Discover network.

The paragraph discusses the strategic direction and growth expectations of a company, focusing on its network investment and partnership with Capital One. Michael and Sachin Mehra emphasize the importance of their partnership and the migration of debit volumes to the Mastercard network. They explain that they have incorporated their best assumptions regarding timing and migration pace into their full-year plans, acknowledging that forecasts are inherently unpredictable. Michael notes ongoing momentum in the debit sector and the development of various partnerships. Darrin Peller from Wolfe Research asks about future growth expectations, particularly regarding value-added services versus consumer payments, referencing 16% constant currency growth as the company exits the year.

The paragraph discusses the company's continued investment in value-added services and solutions, highlighting their strong capabilities in a large and fast-growing market. Despite not providing a forecast for 2025 growth, the company emphasizes healthy fundamentals, with diverse revenue drivers such as payment network improvements and consumer engagement efforts. The focus on value-added solutions is global, not limited to the U.S. or Europe. While there might be quarter-over-quarter variability, the overall business fundamentals are strong. The paragraph also mentions a Q4 exit rate of 16% and considerations related to future growth projections for 2025.

The paragraph discusses several key financial developments and projections. It mentions upcoming pricing strategies starting in Q2 2024 and intensifying in the following quarters, with some lapping expected as the year progresses. Significant wins in 2024 from companies like Citizens, Wells Fargo, and UniCredit are highlighted, although UniCredit's conversion is ongoing. The paragraph also considers that the consumer base remains healthy and outlines expectations for 2025, estimated to range from high end of low double digits to low teens. It considers factors like FX volatility, which increased in Q4, and the difficulty of predicting its future impact. The second part addresses a question about stablecoins, noting potential regulatory clarity in the U.S. and the primary use of stablecoins in crypto-native use cases. There is an inquiry into cross-border money movement and new settlement capabilities in the crypto sphere, with reference to previous work done on crypto and positioning for ecosystem growth.

Michael Miebach discusses Mastercard's involvement in the crypto and cross-border payment space. He highlights their success in crypto partnerships and stablecoin transactions, mentioning a significant transaction in Hong Kong. Despite not scaling significantly yet, Mastercard sees B2B cross-border payments as a growth opportunity, strengthened by partnerships with entities like JPMorgan. Miebach also touches on the development of real-time payment systems and the importance of multilateral approaches for international transactions, a proven strategy in their card business. He notes that with crypto gaining mainstream attention, particularly in the U.S., there is potential for further momentum in this sector.

The paragraph discusses Mastercard's success in gaining market share in Europe over the past five to six years. It highlights their leadership in the U.K., particularly in credit, prepaid, and debit cards, and mentions an extended partnership with Santander. On the European continent, Mastercard emphasizes a strategic partnership with UniCredit, spanning 13 markets, as well as significant progress in Italy with Banco Popular. The paragraph also notes that beyond market share, Mastercard is capitalizing on opportunities to reduce cash usage in large economies like Italy.

The paragraph discusses Mastercard's efforts in Europe, particularly focusing on the 2030 initiative to eliminate manual card entry via One Click payments, similar to the growth spurred by eliminating signatures for contactless payments. The discussion highlights Europe's suitability for this initiative due to its regulatory evolution and focus on security, consumer experience, and fair competition. Europe is seen as an ideal trial market to demonstrate the effectiveness of tokenization and secure payment innovations, aligning with Mastercard's strategy to use reference markets to showcase successful initiatives.

The paragraph discusses a company's strategic position in Europe due to its widespread deployment of token and biometric technology, which aligns with regulatory requirements and partnerships. The company sees global opportunities in this technology, aiming to enhance ecosystem safety and respond to government interest in payments. The dialogue shifts to a question from Ramsey El-Assal at Barclays, asking about the impact of new political changes and potential tariffs on the business. Michael Miebach acknowledges the relevance of this issue across industries and begins to address it without providing specific details regarding the business impact.

The paragraph discusses the impact of global political changes, especially the upcoming elections in various countries, on the economy, particularly in the context of payments and the digital economy. The speaker expresses a positive outlook due to the sustained growth of digitalization. With a new, business-friendly administration in the U.S., there is optimism despite uncertainties like tariffs, which will affect the company indirectly through impacts on customers and partners. The importance of digital trade and related policies is also highlighted, promising benefits for the global economy. Overall, the outlook for business, especially in the digital sector, remains positive.

The paragraph features a conversation primarily revolving around financial matters. Dave Koning from Baird asks about the impact of FX (foreign exchange) volatility on transaction yields, noting improvements through Q4 and into January. Sachin Mehra confirms that FX volatility affects the transaction processing assessments line, impacting yields positively with higher volatility and negatively if it goes in the opposite direction. The next question, posed by Bryan Bergin from TD Cowen, inquires about the level of rebate and incentives (R&I) renewal activity anticipated in 2025, and how R&I growth is expected to progress compared to 2024. Sachin Mehra emphasizes that while they continue to compete in the market and win desirable portfolios, they do not aim to win every portfolio.

The paragraph discusses the company's strategy for maintaining and growing its business. The focus is on winning the right kinds of portfolios without significant changes expected in renewal activities for 2025, compared to previous years, indicating business as usual. The teams are actively engaging with customers, emphasizing value through payments and value-added services. The company is particularly focused on driving net revenue yield rather than merely managing rebate and incentive levels. Michael Miebach emphasizes the need to remain relevant in payments and services, maintaining a virtuous cycle between the two. The goal is to ensure an attractive net revenue yield by targeting strategic portfolios and balancing various types of deals. The paragraph concludes with the operator introducing a question from Tim Chiodo of UBS.

In the paragraph, Timothy Chiodo asks about the company's hedging strategy in light of a stronger dollar. Sachin Mehra explains the strategy, highlighting three types of foreign exchange exposures: transaction, monetary assets and liabilities, and translation exposures. The company hedges transaction exposures with hedge ratios varying by currency, typically between 50% to 80% on a net basis. Some currencies are not hedged due to illiquid markets or because they are not considered significant enough. The strategy focuses on mitigating exposure without covering every minor currency.

The paragraph discusses the company's hedging strategy, highlighting that while they hedge monetary assets, liabilities, and transaction exposures based on forecasts to drive economic outcomes, they do not hedge translation exposures due to the absence of real cash movements between currency functional entities. Instead, cash movements like dividend payments are hedged at the time of transaction. Despite currency fluctuations, the company focuses on the core business fundamentals and growth opportunities, particularly benefiting from a geographically diversified portfolio that offers exposure to fast-growing markets. Michael Miebach emphasizes this diversification as a key differentiator, seeing forex considerations as secondary to growth potential.

The paragraph discusses the differences in growth rates between domestic assessments and Gross Dollar Volume (GDV), highlighting the impact of cross-border volume. Sachin Mehra explains that the apparent spread in growth rates is partly due to rounding, with both domestic assessments and GDV displaying growth rates around 10% and 12%. The paragraph clarifies that domestic assessments do not include cross-border revenue, while GDV does, which affects the perceived growth rate when cross-border volumes increase significantly. Additionally, a question from Will Nance of Goldman Sachs is introduced, asking about competitive dynamics in the European market and the potential impact of local payment schemes being integrated into the European payments initiative.

Michael Miebach addresses the competitive dynamics in the European payment landscape by emphasizing the company's success in increasing its switching ratio to 70%, which involves shifting volumes from domestic and closed-loop networks. He notes that while European countries are motivated to create local payment solutions for reasons like sovereignty and control, the ultimate deciding factor is consumer preference, including user experience and availability. Miebach believes that new payment apps face challenges in convincing users to switch, as seen in the U.S. He views competition as beneficial, prompting continuous investment and innovation. While monitoring the Vero initiative by three European countries, Miebach doesn't see it as a current threat but maintains a partnership approach.

The paragraph discusses a conversation where Sanjay Sakhrani asks about the factors driving volume acceleration, particularly in the fourth quarter. Sachin Mehra responds, attributing the acceleration to strong consumer and commercial spending, which indicates a healthy consumer base. While minimal impact comes from market share changes, underlying consumer and merchant spending trends are critical. Additionally, there is a slight lift from crypto activities contributing to volume growth.

In the paragraph, the speaker discusses the impact of forward spending on travel and expresses confidence in the company's strategy of winning the right portfolios and benefiting from a healthy consumer market. Devin Corr thanks Sachin, while Michael Miebach acknowledges the valuable discussion and extends gratitude to Mastercard's 34,000 employees and supporters. He looks forward to the next quarterly update. Sachin Mehra also thanks everyone, and the operator concludes the call.

This summary was generated with AI and may contain some inaccuracies.