Mastercard Incorporated (MA) Earnings Call Transcript & Summary

All right. Good morning, everyone, bright and early. Thank you for joining us for MoffettNathanson's Third Annual Payments Processors & IT Services Summit. Can't believe it's Year 3, to be honest. Thanks to all -- before we get going, thanks to all of our clients watching today for your support. I am very delighted to be kicking off the next 2 days with Sachin Mehra from -- the CFO of Mastercard. Sachin, very delighted to have you here.

Thanks for having me, Lisa.

Thank you. Yes. So before we dive in, guys, you'll hear me say this at the beginning of every session, but just Sachin will take some questions from the audience in the flow. If we can accommodate them, we'll certainly try to do that. So you should have a chat function in your webcast that you can send -- submit a question. I will see them, and I will be layering in -- them in throughout the session. So don't wait to the end or something like that. The sooner, the better. All right. And with that, we will get going.

All right. So I just wanted to start. I like to -- this is a very strategic conference. So I'd like to tell you a little bit of a retrospective, Sachin. You've been the CFO now at Mastercard for about 2 years. And obviously, prior to that, were in a number of senior finance [indiscernible] with Mastercard. But can you just talk us through, in your view, what are the top couple of ways in which Mastercard has evolved or is evolving throughout your tenure?

First of all, thank you again, Lisa, for having me. Good morning to everybody, and I am delighted to be here. This is a fantastic conference. I'm thrilled to be here. And it's a good question to kick off with because it's a nice way to kind of frame what's been happening at the company for the last couple of years. I would say the following things are areas which I've kind of observed as key evolutions of what's been going on at the company. First, the theme which comes to mind is one of diversification. And we've been on this journey as a company. We're diversifying our revenue streams over, I would say, the past decade. And over the last couple of years, that's a theme which has continued to evolve, and it's one we've been delivering on as a company, I would say, pretty effectively. And diversification comes across multiple layers. It comes across product diversification, and the reality is many, many years ago, we were primarily a credit card focused payments network. And we've evolved and diversified that product range to credit, debit, prepaid and commercial. And that diversification and balance that we've driven is something which has continued to evolve over the last couple of years, I would say. The second element of diversification, I would say, is in the nature of the revenues we derive from our core payments activities vis-à-vis the revenues we derive from our services activities. And we had mentioned that -- and this is at a prior earnings call, we had mentioned that now our services revenues represent roughly 1/3 of the revenues of the entire company. And in 2020, they grew at about 18%. So it's a fairly substantive portion of the revenues of the company. We think diversification drives resilience, and that was demonstrated in spades, I would say, last year as we went with the COVID environment. So that would be the other area of diversification. And then the third element of diversification, I would say, Lisa, is around how we've evolved our customer base, and our customer base, which Mastercard as a company many years ago used to be primarily issuer-centric, issuers are still a very important customer, but we've definitely focused and developed a product set and product capabilities, which now transcend issuers, acquirers, merchants, governments, you name it, it's going across the board. And so we feel like one big theme, which we've been actually executing on over the last couple of years is one of diversification. The other one is, I would say, the evolution into what we call a multi-rail company. And many people ask the question, what does it mean to be a multi-rail company? And I tend to think about this as you -- we're in the business of providing choice. We want to make sure we're providing choice to our customers, who in turn, are providing choice to consumers. And we've been able to execute on that by not only providing payments through card rails but now through ACH rails and then moving to whatever is the preferred choice. It could be tomorrow, digital leisure technology being the method to provide payments, and we'll stand ready to do that as well. But besides providing -- being a multi-rail company at the payment level, what we've also evolved to is to be a -- what I would call a data network, which is a -- it's a separate network. So we're a payments network. We've created capabilities, both through organic and inorganic means to be a data network and, most recently, to be a digital ID network. And this is kind of, again, executing on that multi-rail capability. The last piece from a team standpoint, I would tell you is there's a lot of other good stuff which is going on in terms of digital and the focus on contactless and on tokenization, but we can't forget about how the employee base of this company has evolved. The employee base of this company has really evolved. The talent we have acquired in this company through both organic and inorganic means has been one which is very much focused on driving through new and different and evolving technologies such as AI, for example. Lots of good, solid talent in the space that we've built the company to have and also the footprint in terms of where the talent sits, both in the U.S. as well as in international market. So look, I mean, I can't say there was a start and a stop. It's an evolution. The company has been evolving over the past decade. And over the last 2 years, it's more of driving around these teams is what I've observed to be the new and different so to say.

Good. All right. I wanted to talk a little bit about cash displacement. So cash displacement, of course, the sector driver in the sector for 50 years, I suppose, but the COVID-19 pandemic has clearly, dramatically accelerated the shift away from cash as consumers have both moved online and also gone to more digital bonus payments in-store. So I wanted to talk about what do you see as some of the opportunities and challenges associated with cash displacement in the sense that it was going to happen at some point, but it kind of has now happened very rapidly all at once, which is good in certain ways, but I'm sure also brings its own levels of challenges?

Sure. So I think from an opportunity standpoint, the secular trend of moving away from cash to electronic forms of payment has been something which has been underway. COVID has accelerated that. We think that acceleration, which has taken place during the COVID environment is one which is here to stay. The opportunity set, in my mind, is around -- it just creates more in the nature of opportunities for flows to go over, not only the card rails, but going back to that multi-rail strategy, there's a greater demand for -- and a greater appreciation, I would say, for the need to move away from cash/check to electronic forms of payment, even in the B2B environment. So the opportunity is there's more to go over card payment rails, but there's more to go over what I would call the multi-rail strategy, which we're executing and tap into that B2B opportunity. Along and attendant with that is, as more and more flows go into the digital environment, it provides you a greater opportunity to deliver services because, as you move into that digital environment, it provides you the opportunity to deliver greater data insights, data analytic capabilities, the consulting capabilities we've got as well as the fraud management capabilities. As you know, fraud tends to go to the point of -- where the most activity and the least resistance is. And as you've gone more digital, it creates a greater impetus for fraudsters to try and go down that path. The opportunity for us is we've built a set of capabilities to help our customers navigate through that environment. And we continue to believe that that's important. In fact, digital ID would be another example of the space we've been focused on for the last couple years, which, as we've gone more digital, provides an opportunity to generate more revenue because you do need to authenticate and validate who is doing a transaction, not only the payment transaction but actually things which happened before and after. So very clearly in my mind, there is a set of opportunities which comes along with it. If I just take this up one level, it's not only the flows which we get an opportunity to participate in and the related services, but it's also the engagement model which comes along with that with governments. I will tell you, it's top of mind with a lot of governments around the world as to how payments are evolving in their ecosystems and their environment. So at the end of the day, they want to have solid control over how things happen in terms of payment infrastructure, and we can be those -- that partner who can be the reliable partner for governments with a very much about a multi-rail approach to be able to help them navigate through this changing environment. The one challenge which comes to mind when we think about cash displacement actually ties back to what I was saying earlier around being able to provide greater services. It comes with a challenge that more and more data is being aggregated and, I wouldn't say -- it's been centralized into what could be potential risky places for where data could be. And when that happens, it creates the opportunity for bad practices around data, i.e., misuse of data without consumer consent or lack of data privacy or lack of data security. And that's something we as a company are very focused on. Our principles around data management are looking ahead to say, look, we need to be careful that as you go into -- the more into the digital environment, there's greater amounts of data which come into play. We need to make sure we're respecting consumer privacy, we're making sure consumer consent is had, we're complying with all rules and regulations, and we're delivering in an environment in which we're delivering value for the data which is being provided to all participants in the ecosystem. And so that could -- that's an opportunity for us, but it could also be a challenge depending on where in the ecosystem you are.

Okay. Well, you commented there couple of times on the transition to the multi-rail strategy. So I just wanted to talk more specifically about -- you recently closed the acquisition of Nets' Corporate Services business, and that has added another big building block to Mastercard's account-to-account payments strategy, complementing Vocalink, which is now 5 years old or so, I think. So can you just tell us a bit about what Nets brings to the whole solution in Mastercard's account-to-account strategy? And then also sort of where you are in what's been a multiyear journey, to build out account-to-account services?

Sure. So like you said, Lisa, we closed on the transaction with Nets in March of this year. Very excited to have nets as part of the family. At the highest level, I would say what Nets brings to Mastercard is a few things: one, it brings a set of infrastructure capabilities, which are complementary to what we got from Vocalink and what we've built with Vocalink. And I'll get into the details of what I mean by that in just a second. Second and equally, if not more important, is it brings a set of application capabilities, particularly in the bill payment universe, which is something we are very excited about. We think there's a tremendous opportunity down that path. They are the current providers in the Nordics and several other markets with their bill payment capabilities. We think there's a tremendous opportunity for us to take those bill payment capabilities and tap into different opportunities across the globe in that particular space. Also very important is the mindset of the people who came along with the Nets acquisition, i.e., their ability to actually build and deliver on applications. So yes, bill payments is a very important space, but what else can we do from an application mindset standpoint, which comes along with Nets. So let me just dive in a little bit more into the specifics, and I'll talk about not only Nets, but I'll talk about the evolution of our multi-rail journey as part of that process to answer your question. We think about our participation as a multi-rail company, all starting with the business of being in the business of providing choice, like I said earlier. In other words, if people want to pay, we shouldn't be telling them this is the right and this is the only way to pay. We want to give them choice. If they think cards are the right way to pay, we'll make card rails available. If you think ACH is the right way to pay it, that should be available. And if there's another way, then that should be done as well. And our multi-rail journey goes into delivering at the infrastructure level, applications and services. And on infrastructure, we've got card payment rails, which you're very familiar with, and then we built with Vocalink and Nets the capability to deliver ACH at the infrastructure level. In fact, we deliver -- or we are in the process of implementing our ACH infrastructure in 12 of the top-50 GDP countries across the globe. And we think that's really important. And we think it's important in multiple levels, not only because operating the infrastructure allows you to get a first-mover advantage in terms of delivering applications but also in terms of delivering on the services level. What Nets does is where Vocalink brings a very sophisticated and customizable infrastructure capability, what Nets brings is an infrastructure capability, which is conducive and useful in countries which want to move faster, more nimbly and not necessarily overly customize it. So it's complementary in that regard. We see different spaces in which we can go there. So that's in infrastructure. We continue to deliver and continue to execute on that. On applications, we have been in the process of building out bill payments capabilities even prior to the acquisition we announced of Nets. In fact, in the U.S., we've announced what we call Bill Pay Exchange. It is live. We now have access to roughly 1/3 of all bill payments which take place in the U.S. being available to be paid over Bill Pay Exchange and roughly 1/4 of all consumers who make bill payments electronically in the U.S. So we're well on our way. We've got to kind of make sure that we continue to execute on that. And what now Nets does is it brings a set of bill payment capabilities and expertise, like I said, not only in the context of Europe, but being able to take that technology to other parts of the globe and further solidifying our position in terms of what we're doing with Bill Pay Exchange in the U.S. So that's one application. The other applications which we're executing on are around cross-border account-to-account payments. We had acquired a company called Transfast a couple of years ago. We had built our own set of capabilities. We continue to execute on that. We now have a pretty broad reach, I would tell you, in terms of how many countries and what -- I think we can reach roughly 90% of the population of the world across 100 countries in terms of our cross-border account-to-account capabilities. So difficult to execute but getting good client interaction on that, good engagement across the globe. And so that's the other element. Mastercard Send. That's the other piece. It continues to grow and grows nicely. The use cases are important, both in what I call consumer-to-business flows as well as business-to-business flows as well as actually B2B. I shouldn't forget that. That's the other place where Mastercard Send is important. We continue to drive growth and engagement across the globe on that, so that's like the third leg of the storm. And then other applications which are out there are Mastercard Track BPS, which we've spoken about, launched and live in the U.S. I would say flow has still got to come on that. There's -- we're kind of in that phase of building out the ecosystem there. So there's a lot of activity going on in applications. And lastly, as we're executing on this multi-rail strategy is services. You've seen us execute on services primarily on what I would call the flows we are in on card rails. So as you know, we authorized here in [ settle them ] on card rails. That gives us an opportunity to deliver services on card rails. We're very much doing the same across other rails and other rails being now ACH, and then as we move further along in different payment flows, that's what the approach and objective is going to be. And then there are other elements I'm sure we'll get into as it relates to open banking and digital ID, which also form part of our thinking around multi-rail. But there's a lot of activity, good execution taking place, and we feel pretty good. We feel good about the way we're executing on that strategy.

All right. So we'll go to the other acquisition, yes, that you closed relatively recently, which was Finicity last year. And then I know you've recently said you completed a lot of [indiscernible]. Talk a little bit about how we connect all these dots. So where does Finicity fit into the open-banking strategy for Mastercard and then maybe also link that to your broader strategy with fintechs and kind of connect that, like you said, back to the account-to-account?

Sure. So we closed Finicity in November of last year. Very happy with the progress we're making after the acquisition. The acquisition is integrating very nicely. We have integrated the sales teams. We're starting to really leverage the power of both companies as part of growing and delivering on that business case. I personally will spend a lot of time tracking acquisitions that we do. I have regular reviews, and I'm very encouraged by what I'm seeing in terms of the delivery of actual results coming through as it relates to what we're seeing from Finicity. So let me spend a few minutes talking about what is Finicity? Why are we doing what we're doing? How does it fit into that open banking strategy? The best way to think about this is when we think about open banking, we think about it as establishing connectivity between bank accounts and thinking about it in the context of a data network. And that data network will ultimately evolve into what could be a payments network, depending on what the choice people want exercise is. So what Finicity does and does really well is they've built a set of fantastic connectivity across the fintech universe, the banking universe, you name it. And why do I say fantastic connectivity? Connectivity can be established through a whole host of measures, but it's foundational to do it in the right way. And the right way means to get into data-sharing agreements with the counterparty in question, different from screen scraping. You get into data-sharing agreements with the participants to be able to get the right data elements on a consistent basis in order to secure what is a long-term future for that business, and Finicity has done that all along and continues to do that very nicely. They are doing it while respecting consumer rights and consumer consent as well as establishing solid agreements with some of the leading banks in the United States at this point in time and executing on that. So at the foundational level, it's about establishing connectivity to be able to move data from one counterparty to the other with consumer consent. What they also do and do very well is deliver on applications. And the applications which they're focused on primarily right now are around credit decisioning and credit scoring being 2 very important applications, mostly focused on the mortgage space. And you might say, well, help me dial this all back to payments. What has this got to do with payments, right? And the reality is, that's why I said the multi-rail strategy is about being available for choice to give payments, having this data network and then digital ID network. And this data network is super important because what they're doing is, by delivering applications to enable our customers to do better credit decisioning and better credit scoring, you start to create pipes into the right parts of banks and fintechs, which then leads you down the path potentially to provide choice in terms of what could be payments as well, leveraging open banking rails. And so they've done that. And people say, what do you mean by credit decisioning? What do you mean by credit scoring? It's really as simple as, well, I make it sound simple, but there's a lot to be done there, verification of income, verification of employment, verification of assets. These are things which are super important, believe it or not. There's super manual processes taking place today to allow people to gain access to loans, to gain access to credit, which Finicity is solving for by allowing for that to happen in an electronic manner. So more to come on that space. And we'll build out on services as well out there, but there's a couple of elements on this, which is deliver in the U.S., continue to build that connectivity, build out the applications, extend it to new use cases beyond the mortgage space, extend it potentially to payments, depending on what the need is and the use cases there are, and then broaden it globally as to where we want to go. So that's kind of where we're taking Finicity. And that's how it ties back to what we're trying to do from a multi-rail standpoint.

Maybe just to follow up on that, is your -- are issuers excited about this offering and having Mastercard have this offering? I mean, that's a question we'll often get on it because it is sort of -- open banking is a somewhat, I guess, controversial topic when it comes to traditional bank clients.

Here's what I'd tell you. I would say I think issuers get the reality that it's here. It's going to happen. They want to make sure that they're participating in it in the right way, which is why I made the comment earlier around how you enter into connectivity agreements is foundational to be able to do this in a successful manner, which is not only making sure that you are entering into what we call data-sharing agreements with fair compensation across the ecosystem for the value being brought by each participant in the ecosystem but also doing it in a safe and secure manner because the reality is, at the end of the day, the credentials of the consumer are being leveraged in different ways and I would say with limited knowledge on -- to the extent that's happening through screen scraping. And so what issuers want is to make sure that they're protecting their consumers, and that's what Finicity does and does right as well as they want to be part of the solution as opposed to being circumvented and gone around. And that's the last thing which we're going to do because we do realize that there's participants in this ecosystem, including the fintech universe, right? We want to do it and do it in the right way. And I failed to mention earlier, you had asked the second part of the question is, how does this all tie back with the fintech universe? Look, we've done a lot of good work with fintechs. We continue to have what we believe is a leadership position in terms of our engagement model with fintechs. This is one more leg of the stool. You want to be available for fintechs to deliver to them what they need in the nature of choice with fantastic user experiences. And that's what Finicity does as part of that process from an open-banking standpoint. This is one leg of the stool. I would say there's a lot of other stuff which we do with fintechs, which allows us to gain the position which we have with them. That includes our engagement model of being nimble with them in terms of what their needs are. There are several assets such as our services capabilities, our processing capabilities, all of which are very valued by them because, as you can imagine, fintechs don't want to be really -- let's just step back. A fintech needs to get into the card-issuing business. They don't need to be focused on where do I get a card-issuing processor. Then where do I get -- how do I structure the program? What's the value prop going to look like? If you can bring that all in a box to them, that's really valuable, and that's something we've executed on pretty effectively, and what we can do with Finicity is to add one more leg to the stool on that.

Well, clearly, Finicity is a very popular topic because I have one more that just came in from the audience. So I'll just quickly layer it in, which is a clear question, how you think about what you're doing with Finicity relative to credit bureaus? Like would you consider a credit bureau like competition or partners in this context?

Well, again, so what Finicity does -- so some of the clients of Finicity include Experian and Quicken Loans, right? So at the end of the day, we -- Finicity plays its role from a CRA standpoint, a Credit Reporting Agency standpoint and does what it needs to do to meet those obligations. So I don't see this as necessarily being in a competitive kind of space. I see this as being, deliver applications to enable. Let me back up. A customer might use a credit bureau for -- as one element in terms of developing what they've got and the nature of their credit decision. What Finicity does is helps provide other elements, which might help them come up with that -- the ultimate score. I don't see it as an either/or. I see it as complementary across those.

Got it. Okay, okay. All right. Well, we're going to switch to another acquisition that you just recently announced the acquisition of Ekata in one of my personal absolute favorite areas are that Mastercard [indiscernible] digital identity. So can you talk about how Ekata augments what you're doing in digital identity? And then more broadly, how digital identity is evolving as a business for Mastercard, not just in payments, but more broadly, outside of payments?

Sure. So as in more and more of the world is going digital, we think it's incredibly important for us to have a role in helping to help authenticate and identify who the transacting parties are in those digital transactions. And this could be the actual payment transactions, or it could be activities which happen either prior to the payment taking place or after the payment occurs. And our digital identity strategy is exactly that. How do we leverage our technology, our data and our reach to be able to go after this and meet that need because fraud is a huge issue in this space. More and more businesses and consumers are going online. And fraud is going to continue to be a pain point there, which is why we think digital identity is important. So kind of that sets the frame for you as to why this is an important space and why we need to be there. We also believe, it being a 2-sided network, we're well-positioned to participate in it. And I say 2-sided network, at the end of the day, there is a user of that digital identity score which comes out, and then there's a provider of that digital identity score, and we act as the network in between to actually create that environment for them. So what Ekata does, along with Mastercard's assets, is a couple of things: one, they've got, I would call world-class AI technology and machine learning technology to help consume data from data providers. To be able to take that along with Mastercard's data will help in creating what would be a even more robust score as it relates to what the idea of the person transacting is. So let's try and make this real. What do we mean by digital identity and what are the use cases out here? Let's talk about the opening of a digital account. So you as a consumer go to open an account. It could be a financial account. It could be an account at a digital currency provider. It could be an account at a merchant. It doesn't really matter. Nobody really knows who you are. You get online. You enter your e-mail address through the app, and wallah, there's an account opened name of Lisa Ellis. But the reality is, behind the scenes, there's activity going on. The activity that is going on is, is that really Lisa Ellis? Is that somebody else who's opening the account? How do I validate that this is the right person? That's where our digital identity strategy and Ekata come into play because what they're doing is they are providing on a realtime basis at speed an evaluation based on what credentials you've put in there as to whether this is truly Lisa, or could this be somebody else. So that's kind of one use case, right? So we could be in the nature of account opening. Well, then you go into entering into a transaction. Even before the payment happens, you enter and you fill your basket with the vascular goods. The merchant wants to know whether that truly is Lisa or that someone else who's using Lisa's credentials. Once again, they go and they ping our network, and they will ping our current digital identity network once we close on the transaction with Ekata, which will be part of that digital IT network, you'll get a score on that transaction. During payments, we already provide a set of services to help from a decisioning standpoint. Post-payment before shipment of goods, again, the merchant wants to ensure that there isn't fraud which is taking place. Again, they'll ping our network to be able to get that digital identity score. So if you think about that entire value chain, there's tremendous opportunity to try and solve for this. The revenue model is actually a very interesting revenue model. It's one of -- it's a per-call basis, you have a charge which goes along with that. And so as we sit back and we think about it, this is very much of an adjacency to what we do in terms of executing on our multi-rail strategy. Again, 2-sided network, we act as the network in between. We provide the technology. We provide them the capability by getting data providers to provide us data and data seekers to get the score from us to be able to execute on that. And that's what really our digital identity strategy is, and Ekata is a great way to accelerate on that.

All right. And I have one on this -- a question coming on this one, too, which is, can you clarify how you think about Mastercard's role in digital identity relative to like the handset players, like somebody like an Apple or Google, who do a fair bit of user authentication, I guess, more biometric-based on their own? Like would they be -- are they customers in your view? Or is that competitive? How do you think about that?

They very much could be customers. Without naming names, I will tell you, they're very much could be customers as part of what we're doing from a digital identity standpoint. And that's very much true for handset makers. But even as I go into this, what we call, digital-first card-issuing environment, right, there are banks who are issuing cards without even seeing people, right? And again, very much of a use case for our digital identity use case in terms of card opening.

Got it. Okay. All right. Well, we made it all the way to 8:30, and I haven't even asked you about crypto. So here it comes.

All right.

After the memorable events of the weekend, I guess, I could just ask you what your price target is on Dogecoin, but I'm just kidding. Let's focus on that. So you called out -- you mentioned on your Q1 earnings call that Mastercard is working with central banks on how they might use public-private partnerships to implement CBDC, so Central Bank Digital Currency. Can you talk a bit about the use cases for CBDCs that you're discussing with the government and then also some examples of the types of roles that Mastercard might play in relation to CBDCs and then, of course, more broadly with other cryptocurrencies?

Sure. So very engaged and have been for actually the last few years in the CBDC space with numerous central banks across the globe. Clearly, there's a lot of activity going on. There's a lot of interest in this space. We are participating, I would tell you, at multiple levels. We are -- we've been developing from a technology standpoint, the capability to the extent that our central banks who wish to leverage our capability to execute on their CBDC strategy. So that's what I call building the infrastructure, developing the sandboxes, allowing for central banks to come and leverage those sandboxes and do what they need to do if they choose to go down that path. So that's kind of -- for those who made up their mind or wish to make up their mind that they want to go down the path of CBDCs, we want to be available as the infrastructure provider. At the same time, we're playing a consultative role to help them think through what could be their strategy from a CBDC standpoint. It's all kind of tied together, right? You don't just show up and say, look, I can provide you the infrastructure. I can help you with that. You actually do the consultative piece as part of that process. And what does that mean? That effectively helps them think through what are the objectives they're trying to serve and how can CBDCs get them there. Some people are thinking, shall we go single layer. Others are thinking should we go multiple layer. And by that, I mean, do you really want to have a central bank as being the issuer of currency or CBDCs directly to consumers? Or do you want to make it a 2-tiered structure just like exists today, where there are central banks and then there are commercial banks through whom central banks deliver out the currency which is necessary? We actually believe that the current environment is the right environment. When I say the current environment, I mean having the 2-tiered structure is the right way to go. Well, again, we'll see where it kind of all shapes up because everybody's got a different point of view on this, but it's one to kind of think about. So infrastructure being one element. Second being, what is the CBDC? It's the digital version of what is today physical currency. And today, if physical currency needs to be used, it could be used either in the form of cash at the point of sale, or it could be used in the form of electronic payments through payment network like Mastercard. Fast-forward, if there's a CBDC which is issued through the commercial banks or by a central bank directly, they still need an acceptance footprint over which it's going to be utilized. And that's really the second place in which we can participate with them to help them get the use case executed on at the point of sale. And we've executed on that. And it's a small nation, but it's an important kind of use case, which is, in the Bahamas, for example, right? And that's, again, all about you want to do a CBDC, how do you want to do it from a consultative standpoint? We can help you with the infrastructure, but we can help you create the use case you need to create. And that's how we're participating with governments across the globe on the CBDC layer. So if I take it over to the next space, which is stable points, which is, again, another kind of version of digital currencies, it's more in the private environment. It's backed by fiat. Look, our standard is pretty well set. It must be approved by regulators. It must be done in the right way. It must respect all our principles, and then we will engage with that, but we are doing that. And again, the participation we're going to have with that is at the infrastructure and the application layer. We also made the announcement that we do plan on a selective basis to enable the settlement of these stable coins and CBDCs over our network. That work is well underway. But we see that no different than how we enable settlement in different currencies today. We've got to make sure that the currency is legitimate, right, in respect to all the rules of the land. And once it does that, we want to enable it over our network to the extent this demand for it to be used and for it to be accepted. And if that's the case, we want to be part of that flow, which is what we're enabling our network to do. And then the last category, as I think about it is more an asset class than a payment mechanism, and that's around, let's call it, Bitcoin or other such free-floating digital currencies. The reason I think about that as an asset class is, in order to be a payment vehicle, you've got to have some sort of store value. If there's tremendous fluctuation taking place in the value of that digital currency, we think about that more as an asset class. And again, there what we do is our card network is used for the purchase of those digital currencies and has been for some time now, but also to the extent there are several digital currently wallet providers who wish to allow their consumers to be able to use that digital currency across our payment network at the physical point of sale, we're exercising on those programs as well with the partners. Now in that instance, we don't settle for those currencies over our network. We take delivery of fiat, and we deliver a fiat currency to the merchants. So that's kind of broadly the space from an overall, I would call, digital currency standpoint.

Do you have a Mastercard kind of house view on the time frame for implementation of things like CBDCs and what use case are most likely to be applied to initially?

I think it's, Lisa, pretty well spread out across the globe. I mean, somewhere in such early stages of discussion, there are some who have just chosen to put it on the backburner, and there are others who are further well-advanced depending on the country in question. So I can't -- what we are is we are ready to engage with who needs to engage. I can't tell you the pace of rollout. I think it's super hard. On the use cases, I think the use cases will spread the gamut of what could be consumer payments could be business-to-business payments. I think all is fair game. Although I do want to emphasize putting a currency out there doesn't make it have utility. Having acceptance of that currency out there is very important, and that's where the use case piece comes in, and that's where Mastercard comes in, in my opinion. So we want to be present to actually help those who wish to go down that path in the nature of central banks, we shouldn't do what they're doing there.

Okay. I want to talk a bit about other, meaning Mastercard's other revenues, you commented in your opening comments on the evolution of Mastercard about diversification. And on the income statement, the most visible form of diversification has been in other revenues, which have been an area of strength throughout the entire last year through the pandemic and actually grew 27% this past quarter. So can you just double-click a little bit into other revenues in the services portfolio and highlight which ones are driving a lot of this strength and which one's looking forward now as the pandemic's subsiding, which kind of pieces of other revenues or your services portfolio are going -- are really a focus going forward?

Sure. So first, let me just tell you what's there and other -- what comprises other? And then what I would say the interplay of the services is in other versus in other line items, such as transaction processing fees. So in other revenue, we have our services revenue, such as what we generate in the nature of revenues from our consulting, from our data analytics and insights. We have our loyalty revenue in that. We've got our Cyber & Intelligence revenue in there. We've got our realtime ACH Vocalink-related revenue in there. We've got some of our processing revenue in there as well. So well, processing actually -- again, it straddles both -- it sits in services and it straddles both other as well as transaction processing fees. But there is a component of services which sits in transaction processing. We've always kind of maintained that. So the largest portion of other revenue is services revenue, and the largest portion of the services revenue comes from our data analytics consulting, the data insights piece as well as our cyber intelligence capabilities. We are seeing some incredible demand for those capabilities across the globe. I would say the -- on a stand-alone basis, they are in a lot of demand, but they're a key enabler of our core wins as well. We have been winning share, and we've been winning share on a systematic basis. And I would say our services capabilities have been a key enabler of that. So I think there's a very tight linkage between what's going on in other and what's going on in nature of how we're delivering revenues in the other line items such as domestic assessments, et cetera. What components of these are growing well, both data and analytics in this environment is very important. So if I think about what the strategy is, it's around -- you want to be consultative. You want to be able to actually have the capabilities with your customers to help them through data insights and analytics, identify opportunities to help them grow that top line and manage their expense base. This is where our consulting, data analytics, data insight capabilities come into play. And we do that a lot with tremendous engagement across the globe, right? At the same time, one of the biggest pain points for our customers is the current environment from a cybersecurity standpoint, and that's an element which continues to drive a lot of growth for us. So this is products like Safety Net. Decision Intelligence, things we're doing from a chargeback standpoint. We acquired a company called Ethoca. There's tremendous amounts of demand which is coming through that. And by the way, that has the potential and is currently being used in a, what I would call, network agnostic manner, so not just Mastercard transactions. Could be used beyond Mastercard transactions. RiskRecon, which is about providing a outside-in scan of the digital footprint and the cyber vulnerabilities in that digital footprint of customers. So again, it's that gamut of things which is driving that other revenue growth which you're talking about. We talked about this last year being about 1/3 of our revenues in terms of services and growing it about 18%, and a lot of that sits in other, and some of that sits in transaction processing. As I look forward, the potential for growth on services, we continue to see good growth, good demand and great opportunities down that space. And we're executing on that across the following elements: one, deeper penetration of our existing services across our customer base. Where we first started out with being primarily issuer focused, that has now moved from -- yes, we continue to penetrate our issuer base with our services capabilities. We're going to do more with acquirers, more with merchants, more with governments as part of that. So that's kind of pillar #1 in terms of go-to-market and how we're executing on our existing capabilities. Number two, how do we take those existing capabilities and execute on new flows, new flows being all the work which we're doing from an ACH standpoint, and we continue to execute on that and deliver on that. And number three is how do we continue to build out our services capabilities to beyond what we've got today. And that's kind of the third leg of the stool which is going to deliver on what we think is a tremendous growth opportunity on a going-forward basis. Are you okay?

Yes.

I thought maybe it was something I said. So anyway, back to your question on other and services. Tremendous opportunity. We've delivered on the growth aspirations we've got there. We see potential going forward as well. And I must say, the most important thing for us to keep in mind besides delivering growth is how it enables the core. It is very important for us to actually not lose sight of the fact that services on their own are delivering faster growth than the core, which is important. But they're also diversifying our revenue streams and differentiating us, and that's how we win share at the core, and that's what we'll continue to execute on.

Got it. Okay. All right. I'm not going to let you go without talking a little bit about risks. Can you just comment on how Mastercard thinks about and mitigates risks to your business? These can be -- with risks with Mastercard with the networks, it's always a little bit morphing. It can be anything from government nationalism to commoditization or pressure from these big e-comm platforms or account-to-account, other more, I'd say, like lower-cost, lower-frills rails? How do you sort of holistically think about risks and mitigating those?

Yes. So I would say that one of the things which is -- I've been here with the company 11 years, and one of the things which has struck me about being at this company for 11 years is just the general culture around, while it's great to keep on executing on the opportunities, you need to know what's going on in the landscape and what's the risk environment and be ready well in advance of that risk environment hitting you to be able to actually tackle it. So the risks you kind of talked about nationals, and you talked about things which are going on generally. I mean, from an overall evolution, the payments industry is very much top of mind for us. Look, I think one of the reasons we went down the path of being a multi-rail company and providing choice is exactly because we were seeing that there are risks which are evolving, and the risks could be in the nature of nationalism. It could be in the nature of new payment rails emerging where people will want to leverage those. And we wanted to be part of that rather than kind of dig our heads in the sand and say, you know what, cards is the only way to go. So are those risks there? Absolutely. Governments are going to want to do what governments are going to want to do. You have 2 ways to address it. You can fight it and lose, or you can participate and be a service provider and be a partner who can bring thought leadership to it as we're executing on the CBDC space, as we've executed in terms of local payment initiatives which are going on in different parts of the globe where we continue to participate, very much part and parcel of what we're doing. And it's the set of assets and the set of capabilities and -- that we bring, which can help us navigate through that risk environment. And this is true not only at the government level. This could be true for consolidation, which might be taking place across more flows going across marketplaces, right? There's often the threat which is perceived to be there with marketplaces growing and having larger concentration of flows going there, is there a risk of you potentially getting disintermediated. So the risk exists. I mean, it'd be foolish to think that the risk doesn't exist. The question really is what can you bring in the nature of value to help those customers deliver on their objectives and still retain what you need to deliver in the nature of being a core payment network? And we've done that very effectively, by the way. I mean, we talk about super apps, and we talk about marketplaces. Well, the vast majority of them still leverage Mastercard's rails to deliver on what they need to deliver. So I think it's a reality. We just need to kind of learn to live with it and keep developing our capabilities to be value-added providers as part of that process.

Got it. Okay. All right. I do have one timely one but on the theme of diversification that you've been on today, which is related to cross-border travel. Now clearly, the pandemic has depressed severely cross-border travel levels, which has impacted your business, and I am, like everyone, dying to book the next international vacations. But talk about, as you look forward, will cross-border travel continue to be as important a part of your business? Are you looking at ways of balancing that out a little bit? How do you think about sort of -- in a strategic sense, how you think about the role of cross-border travel in your portfolio?

So Lisa, the answer to that is yes and yes. We think cross-border will continue and international travel will continue to be something which we would remain focused on. We're positioning ourselves as a company for the recovery of cross-border travel. The cross-border garden in our present environment is growing at a very healthy base. We shared that with you a couple of weeks ago as part of our earnings call. We think travel comes back. We think personal travel comes back before business travel comes back. I like to think about this in the following manner. Every consumer thinks about this or at least instinctively feels about this as, do I have the intent to travel? And do I have the ability to travel? The reality is that the intent to travel has been demonstrated by consumers in the personal travel category in the domestic environment already in those countries where vaccination programs have taken hold. That's true in the U.S. It's true in the U.K. It's true in several other markets because they've had the intent and had the ability to travel as quarantine requirements have helped diminish. I would say in the international cross-border environment, we have seen that same ability and intent be demonstrated in those corridors which have actually not had restrictions in place. For example, the U.S. to Mexico, the U.S. to several Latin American countries, I would say, to between, let's say, Russia and the UAE. In fact, more recently, with the opening up of Australia and New Zealand, you're starting to see some activity come through there. Hong Kong and Singapore, there is activity. So I would be a lot more concerned about this if people didn't have the intent to travel. Now the question is, really, okay, I've got the intent, when is the ability going to happen? And ability will happen in space we think it happens, more in the latter half of this year. But it will be very much seeing green shoots of international travel come back. So I want to leave you with that message. And on the diversification team, which you're talking about, I would tell you, the best way to reduce concentration to international travel is to grow the revenue pool in other business lines, not by reducing your exposure to not being participating in international travel. And that's very much part and parcel of what we're trying to do. I know we're running over, so I'll stop.

No, no, no. Good. Perfect. All right. Good. So we'll just go through our closing question as we wrap up, which is we've obviously covered a lot of topics, a lot of exciting investment areas that Mastercard is involved in. As you personally as CFO, what are your personal priorities now looking out over these next couple of years?

So it's around hyper-focused on execution. It is great to have a strategy. It is most important to deliver on that strategy. We have executed as a company incredibly well over the last 10 years, and I would argue that, that's something which I've got to stay completely focused on. And that's going to come in the nature of making sure we are doing the appropriate capital allocation and the appropriate investments in the right spaces to deliver on that strategy. And people will often ask the question as to how you think about expenses and what you want to do from an expense standpoint. Look, the philosophy is pretty clear, and it's unchanged: one, we will continue to invest in the long-term growth of this business. We will keep an eye on top line growth and bottom line growth. We've done that historically. We'll continue doing that going forward. We have tremendous flexibility in our expense capabilities. We've demonstrated that through COVID. In fact, at the last earnings call, we talked about how we're leaning in to start to invest a little bit more in towards our strategic priorities, and we talked about that in the context of the second quarter. We'll do that both organically and inorganically. You know our philosophy around acquisitions is one-off. We'll invest in acquisitions. We will continue to show you X acquisitions for a period for the year in which the acquisition closes as well as next calendar year as to what the profile of that looks like. We do not expect our acquisitions to be dilutive beyond 24 months. We obviously keep an eye on how the expenses are overall, which is ex acquisitions, including acquisitions and make sure we're managing that in the appropriate manner. But the philosophy is one which is make sure you invest in the right priorities. You do that by driving top line growth and delivering positive operating leverage, which is very important for us on a going-forward basis.

All right. Excellent. Well, Sachin, thank you so much. Wonderful way to kick off our event. Fantastic, as always, sort of sets the stage with one of the, obviously, top players in this space, thinking about your strategy holistically over the next couple years. So very, very much appreciated. Thank you for kicking us off this morning, Sachin. And with that...

Thank you, Lisa, for having me. Really appreciate it. Take care. Bye-bye.

Okay. Thank you. Bye.