Mastercard Incorporated (MA) Earnings Call Transcript & Summary

Hello, everyone. I'm Rayna Kumar, and I lead fintech equity research here at UBS. It is my pleasure to introduce CFO of Mastercard, Sachin Mehra. Sachin, thanks for keynoting UBS' TMT conference today.

Rayna, thank you for having me, and good morning to everyone.

Great. So to start out with, during recent Investor Day, you talked -- you spoke about 3 key strategic priorities for the company. Can you discuss these priorities and why they are important?

Sure. Happy to do so. So just at the outset, let me just frame this up by saying that our strategy over the past decade of grow, diversify, build still stands and will continue to stand the test of time. That is the overriding, overarching piece of our strategy, which is around growing our core payments capabilities and growing in various areas, diversifying our businesses and then building new areas and new capabilities as we go about doing what we're doing. What we shared with you at Investor Day was about how under that umbrella of grow, diversify and build that we're focusing on 3 strategic priorities, and 1 being to expand in payments. And I'll talk about each one of these just in a moment. Expand in payments, extend our services and then to embrace new networks. So let's talk first about what we mean by expanding in payments. I think quite a few of you already know that our stated objective in payments is to be the payments provider to consumers, to merchants, to governments, you name it, right, across a whole host of payment capabilities. That could be our card rails. That could be our multi-rail assets, which we've got across ACH. It could be around open banking. It's any and all of the above there. And we continue to believe there's a sizable opportunity in that space, which we're very focused on delivering on. And the second area of focus is around extending our services. And over the past 5 to 7 years, Mastercard has invested in building out our services capabilities. And we're seeing some excellent demand for those services, and we continue to see tremendous potential on a going-forward basis on what that is all about. And the idea here is to deliver a set of services, which will help across multiple lines. The idea being we want to utilize the services to diversify our revenue streams. We want to utilize those services to, in of themselves drive, revenue growth, which is what we're doing with those services. And third and last but not the least is to utilize these services to differentiate ourselves as it relates to our payment capabilities and the third area of strategic priority, which is around new networks, right? So that's kind of about extending our services capabilities. The third area, which is around embracing new networks, is an area where we believe that we have an important role to play, leveraging our expertise as a network provider in payments to expand into new networks. And specifically, where we're focused on is open banking and digital identity at this point in time. We believe there's tremendous value we can bring as a network player in both those spaces, not only to generate revenue enough of themselves but in terms of how they will enable our core payments capabilities as well as provide new opportunities for expanding our services. So that's kind of at the highest level, what the strategy is all about and what our strategic focus areas are.

Got it. Okay. So you introduced new 3-year performance objectives for '22 to 2024. If you can please walk us through those as well as the underlying assumptions, especially regarding the return of travel, which is, of course, in the news in the last few days?

Yes. No problem at all. So look, we introduced these 3-year performance objectives, like you said, for the period between 2022 to 2024 for net revenue, for annual operating margin and for EPS CAGR, and we're using 2021 as our base. And all of these objectives are on a currency-neutral basis, excluding the impact of special items, gains and losses on equity investments and acquisitions announced after November 10, which is the day that we had our analyst meeting. So let me walk through each one of these for you step by step. First up on net revenue. Look, we're confident in our ability to deliver high-teens net revenue growth given the strong fundamentals of our business and our multiple growth levers. And let me explain to you what I think are these growth levers for the company in terms of what will help us achieve the net revenue objective and also actually the other objectives, which I'll speak about. First off, we continue to believe there's a large untapped consumer payments opportunity, which still remains to be had. And we believe that we are very well positioned with all the work we have done historically as well as what we continue to do today to not only tap into that space but actually continue to grow in a very nice way as it relates to that. And when I talk about large consumer payments opportunity, we're talking about multiple facets to that. First, that is the inherent growth, which comes from a PCE standpoint, which we believe presents a tremendous growth tailwind. But in addition to that, all the work we've been doing around investment in digital technologies, whether it's e-commerce capabilities, tokenization capabilities, contactless, will all enable us to realize the potential to shift cash and check to electronic forms of payment. Now there's a fair amount of debate in the market as to what the remaining amount of the secular opportunity is. And based on all the work that we've done, we continue to believe that when you look at this opportunity on a global basis, there still remains a very sizable opportunity to shift cash and check to electronic forms of payment. So that's kind of the second building block of this large untapped consumer payments opportunity, which we want to talk about. Third is something we've executed on with some high level of success over the last 5 years to 7 years is the focus around continuing to grow our market share in the consumer payment space. We have grown market share year after year, and we've done that in a very disciplined manner and we will continue to do that on a going-forward basis. So when you take the aggregation of driving with the large consumer -- sorry, the PCE plus the secular shift plus the market share, that lends to that large consumer payments opportunity which exists. In addition to that, the second growth vector is how we're expanding our TAM, our total addressable market, by going after new flows and use cases. And we believe there's a significant opportunity. We outlined this as part of our Investor Day, where we talked about the targeted addressable markets by going after all these new flows and use cases. The third vector for growth is the tremendous growth we're seeing in terms of the revenue generated from our services capabilities. Our services continue to grow at a healthy clip. We had shared at Investor Day that services now represent approximately 35% of the total revenue of Mastercard, net revenue of Mastercard. And they're growing at a north of 20% growth rate. So that's pretty impressive. And we continue to believe that, that's going to be a key component in helping us deliver on this net revenue objective, which we laid out. And last but not the least is the fourth growth vector and that is of continuing to build out on these new network spaces, particularly around open banking and digital identity. So when you take the aggregate of all of that is where we develop the confidence around how we plan to deliver on the performance objective around the high-teens net revenue growth. Second up was the annual operating margin, which we laid out, where we kind of talked about, we will operate with a minimum of what I would call a floor on an operating margin basis of 50%. Now most of you know that we operate at an operating margin at a higher level than 50%. The reason we set this objective the way we did was to provide us enough room to continue to invest in the long-term prospects of this business through both up and down cycles. The point I will make as it relates to operating margin, which is important, is that -- and I shared this at Investor Day as well is that our philosophy around delivering positive operating leverage over the long term remains unchanged. It is our intention, it's our philosophy to continue to deliver positive operating leverage, which means higher net revenue growth and operating expense growth over the longer term. So that's kind of the objective number 2, which we've got around operating margin. And then the third objective is that of the EPS CAGR, which we said that we expect to deliver an EPS CAGR in the low 20s range on a currency-neutral basis, again, and excluding the impact of special items, gains and losses on equity investments as well as acquisitions. And all of that is kind of the impact of what I just talked about in the nature of the net revenue growth and the operating margin discussion which we just had. Now important to point out that these performance objectives are predicated on certain assumptions, and they are well-founded assumptions that of annual carded market volume growth of between 10% and 11% as well as the cross-border travel returning to 2019 levels by the end of 2022 and also that our services revenues will grow at 20%-plus CAGR over this period of 2022 to 2024. So that's kind of the overall view as it relates to the performance objectives we laid out at Investor Day.

Got it. Okay. That's very helpful detail. So on the point on cross-border travel, could we talk about fourth quarter trend? What are you seeing right now? Are you seeing any impact from the new COVID variant?

Sure. So the last update we gave on cross-border trends was at Investor Day. And so from an operating metric standpoint, we now have switched data through the end of November. And I'll tell you, this data continues to show both domestic spending and cross-border volumes have continued to improve relative to 2019 levels. And really, what we're seeing effectively is, I think, everybody is aware that the U.S. border has opened up on November 8 as did a few other countries like the U.K. Canada had opened up prior to that. And you're seeing the impact of that come through in the nature of inbound travel. As it relates to your question around the Omicron variant, which is out there, first, I would tell you, it's a little early to tell what the impact of this is. Right now at this point in time, I think there are many uncertainties as it relates to how transmissible this is, what the effect of vaccines is going to be and what the severity is going to be. But suffice it to say that at this point in time, we haven't seen much in the nature of any meaningful impact come through from the Omicron virus perspective. But again, it's early days.

Got it. Okay. [Operator Instructions] So Sachin, let's move on to everyone's favorite topic, which is buy now, pay later. So you recently announced Mastercard installments. Can you tell us a little bit about how that fits into your fast-growing ecosystem?

Sure. So look, I mean, Mastercard installments is all about what we call democratizing buy now, pay later. I think everybody understands and knows that Mastercard makes available credit, debit, prepaid, commercial and makes it available across our 80 million-plus merchant community. And the reality is, we view buy now, pay later as another add-on to that to make it available to our 80 million-plus merchants without the need for bespoke implementations for buy now, pay later at each one of those merchants. So the idea is to bring the benefits of an open loop network and make it available to all those merchants in a seamless manner, right? And at the same time, bring to the merchants the 2.9 billion cards which are in force, Mastercard cards which are in force. So this is back to the whole open loop and the benefits of the open loop. But the point I'd like to make is the following, which is in addition to making it available on a seamless basis to merchants and acquirers, it's also about opening up our network to lenders who wish to extend buy now, pay later capabilities to their consumers. And these lenders could be our traditional banks and financial institutions. They could be the new and emerging fintechs with vendor. They could be pure-play buy now, pay later players who are currently in the market, who are doing bespoke implementations and might choose to say, "You know what, we're happy to actually tie ourselves up and partner with Mastercard to gain access to Mastercard's merchant footprint," right, to offer the buy now, pay later solutions as also to digital wallet operators. So the idea really is all about making buy now, pay later available just like we do with debit, credit, prepaid and commercial.

Understood. Okay. Well, to that point, are you concerned about hiding closed loop for risk from fintechs, wallet players than other BNPL providers?

We continue to believe that the benefits of open loop have, time and again, shown that there's tremendous value there. Look, I mean there will always be some level of closed-loop players who will be there. Our experience has been over the past decade and some that more often than not, the players who are entering the payment space, the new fintechs see tremendous value with partnering with Mastercard. And so we don't necessarily view them as competitors. We view them as partners. And we've done this. We have tremendous partnership relationships with several players in the space. I mean you name it over the past decade, whether it's PayPal, it's Square, it's -- you name it. A lot of these players have been partners of us, continue to remain very good partners. And so we view the benefits of being able to bring what we bring as a network, i.e., the network effect, right, to these players as something which is very valuable to them and hence, they partner with us. So we stay vigilant. We are certainly aware about the discussions which take place in the market about what could be potential for closed-loop threats, the value we bring by virtue of our merchant acceptance footprint, by virtue of the tremendous cardholder base that we've got but also the services we deliver above that. And I think sometimes what's often forgotten, Rayna, is a few things. We don't just enable payments by virtue of the technology we've got. We bring a set of rules, franchise standards, which make it seamless for all participants in the ecosystem to operate. So when you think about charge back, right, when you think about zero liability, these are important considerations which we cannot take for granted as something which the network brings in the nature of value in the open loop environment, right? In addition to that, we bring tremendous assets in the nature of our safety and security solutions and our data insights and analytics, which also help improve the user experience. So when you combine all of that, we feel like we've got a really solid value prop, which continues to be recognized by our partners in terms of what we offer in the nature of an open loop.

Got it. That's very clear. Talk to us a little bit about despite the increasing competition, obviously, you're partnering with a lot of these competitors. But are your -- is your pricing and your ability to continue to expand operating margin, is that sustainable going forward?

Yes. Look, we feel like we -- a couple of thoughts. One, a lot of these players who are participating in the payments ecosystem, we believe as not only partners but enable our growth in many ways, right, because they're all playing in different parts of the market, which is enabling great electronification of flows. And we feel like that's incredibly valuable for the healthy growth of our ecosystem. On your specific question around pricing, I would tell you, we price for value. There's value we deliver as a company, and we continue to price for that. We do that for new products and capabilities, and we do that for our existing products. We will continue to do that. Now for example, in 2021, we have minimal net pricing. And when I say net pricing, I say pricing net of rebates and incentives which we've got built into our planning assumptions. But the reality is we will continue to price and we price for what we deliver on the nature of value. And we don't see that necessarily changing so long as we can continue to deliver value as we have historically.

Great. Okay. So services, that's becoming an increasingly important part of your business. In 2021, 35% of your overall revenue. If you can update us on your services strategy and why it is important to you?

Yes. So I mentioned a little bit of this in my opening remarks, but let me kind of quickly touch upon this. Again, it's about driving independent revenue growth. From a services capability standpoint by selling the services that we do, they bring tremendous value. But they're very deeply tied into what we do in our payments and in our new networks. And that's important because it helps us differentiate ourselves from our competition on both payments and new networks. And it helps us drive some of our market share wins. So that's kind of the second piece, driving revenue growth on a stand-alone basis at a pace which is at a very healthy clip. Number two is differentiating ourselves from our competition. And third is around diversifying our revenue streams. And case in point would be during COVID. So I think you're well aware of the fact that during COVID, when the payments-related revenue streams were impacted by virtue of what was going on in 2020 by COVID, services continued to grow at a very healthy clip. And this diversification is an important consideration as we think about our services strategy. In services, we've got different buckets. We've got our cyber and intelligence tools. We've got our data analytics and insights. The combination of these two is the lion's share of what we've got and the nature of services capabilities. And we see tremendous demand around this. And let me explain to you where we see the potential for growth from this is coming from. One, there is an existing set of services which exists, and we're proliferating that out into new and different customers. So certainly, our issuing banks, our acquirers, merchants, governments, corporations work out there increasing the penetration of our existing services across those different customers on a -- what I would say, on a global basis. The second piece is around taking the set of services and expanding the utilization of that from what is today card rails to beyond card rails by leveraging those services on ACH, leveraging those services in the crypto space, leveraging those services in open banking, digital identity, you name it, right? And then the third vector for growth on services is around expanding the breadth of the services offering, and that's something we've done. You've seen over the last 5 years, we've grown the offerings we have from a services standpoint. And we'll continue to invest in the growth of that to allow us to realize this long-term revenue potential which exists there.

I guess to follow up on that, how much of a factor was services on some of the recent wins that you announced? Was that really the driving factor? Or was it more than that?

Yes. It looks -- I mean, this goes back to my point around differentiating ourselves from our competition. Services plays a big part in helping us drive the differentiation in terms of winning the deals we talk about often times, right? And you've seen us recently announced some fairly meaningful wins, those of NatWest in the U.K. with the debit card portfolio, that of Gap Inc. in the U.S., just to name a few, right? And the reality is services plays an important part. Take for example in the instance of Gap, right? We've had a services relationship with Gap Inc. for -- well before they decided to move their co-brand portfolio to Mastercard. And they saw the value we were able to bring as a partner to help them grow their top line, manage their expense base by virtue of what we bring from a services capability standpoint. And so when the discussion comes around, around what the co-brand should look like, it's more of a partnership discussion that we engage with to say, "We're here to help you grow your top line, manage your expense base as part of the process. And by the way, while we're doing all of that, we'd love to get what you've got in the nature of your co-brand business." So it certainly helps in terms of driving market share gains.

Got it. Okay. So to keep things interesting, well, let's take a question from the audience. So question number one, there's been news about a large merchant putting pressure on your competitors to change pricing. Can you talk about whether you think that you could -- that could lead to other merchants demanding more price concessions from payment networks? Or why don't you think that could happen?

Yes. Look, I mean I can't really comment about what's going on as it relates to the competitor and their dialogues with the merchant in question. The reality is we've got excellent relationships with the merchant community. We spend a lot of time back to the discussion we were just having in terms of -- it's a spectrum of discussions, which go from everything from what we can deliver in the nature of services to them to what we bring in the nature of value by virtue of our payment capabilities. And those discussions are going really well. We want to make sure that people understand that we are different in one key respect. And the difference we bring as a company is that we are in the business of providing choice. We want to provide choice to consumers. We want to provide choice to merchants. We want to be able to offer them multiple forms of payment. It could be card rails. It could be ACH rails. It could be open banking. It could be digital technology -- distributed ledger technology. It really doesn't matter. And so when you are in the business of providing choice, what you're saying is, look, I, at the end of the day, don't really care about trying to steer consumers or merchants to one form of payment. We want to provide choice. And that helps us in our discussions, whether we're talking to our merchants or we're talking to our issuing partners. And we continue to believe that, that's going to be the right strategy for us going forward.

Got it. Quite clear. Okay. So let's talk a little bit about open banking. You acquired Finicity last year and more recently, you acquired Aiia. How do you view the open banking space and discuss Mastercard's strategy there?

Sure. We view the open banking space as a significant opportunity for us. And we acquired, like you said, Finicity and we acquired Aiia more recently. But we started our work in open banking well before that. And the opportunity which we see around this is around tackling new and different forms of payment which currently don't go over card rails, which could potentially be candidates for leveraging our open banking connectivity to initiate payments as one area. And then the other area, which is really live in the market today and revenue generating today, is around leveraging our open banking capabilities on various new and different applications, which historically we have not generated revenue from. And those would be the likes of verification of income, verification of employment and verification of assets, all of which we bring together to enable what would be an application call related to credit decisioning and credit scoring. And those are important spaces. We believe that, that's an important attribute to be able to bring when we have our discussions with our payments partners, when we have our discussions with our broader universe of players we engage with. So I'll give you one example of that. So when we announced Mastercard installments, what we announced was not only the opening up of 80 million merchants to buy now, pay later capabilities. But what we also said is that we will make available our open banking asset in the U.S. to help lenders determine what might be a good credit score as did make lending decisions. And we're doing that by virtue of what we've got in the nature of application in open banking. And so when you take that, right, and you take that use case and you expand it to different verticals is where we see tremendous opportunity. And this is true certainly in the U.S. It will be certainly true in Europe with Aiia and in other parts of the globe as we expand. So tremendous opportunity that we see in that space.

So earlier this year, you acquired Ekata. Maybe talk a little bit about what the company does and how Mastercard plans to play in digital identity.

Sure. So we think of digital identity as a really important space as the world has gotten more digital. So let me just step back and explain to you what this all kind of means, right? Back in the day when there were fewer digital transactions taking place, then there were more face-to-face transactions taking place, when a person walked into a store and actually bought goods and services, there was a face-to-face interaction taking place between the person buying the goods and services and the person checking them out. And there was a way to establish some level of identity. Not to say that it was perfect because there used to be fraud in those instances as well. But as you've got more digital, oftentimes, you don't even know who's on the other end of that digital transaction. And so really, what we're trying to do with our digital identity capabilities, Ekata being one portion of that solution, is help our ecosystem partners provide greater assurance to them around what the digital identity is of the individual who is there on the other side of the transaction. So let me give you examples, right? With Ekata, what you have is the ability to leverage Ekata's technology and AI, artificial intelligence capabilities as well as the data that they've got as well as the data that Mastercard has got to be able to provide a really high confidence score to someone up -- to an ecosystem participant, who is looking to get that on a real-time basis or a near real-time basis. That's what we can do from a digital identity standpoint. So if, for example, there's a consumer who's looking to set up a new account and they do it in a digital format without showing up face to face to make that happen, the entity which is setting up the account for the consumer wants to know that the person who's doing that is a legitimate person and is indeed who they say they are. There's -- through API calls, they can connect to our network to get a score as to what that might look like and the nature of whether the person is indeed who they are. Or on the flip side, if there's someone who's looking to buy goods and services in a digital environment, the merchant before they ship to goods wants to know that the credentials of the person is indeed, again, accurate. And we can provide that score on real-time basis. So those are just a few examples of real-time capabilities which we can provide from a digital identity standpoint.

All right. Great. So crypto is, of course, another hot topic in payments. It gets a lot of attention. Do you see cryptocurrency as an opportunity or a risk for Mastercard? And can you discuss your strategy there, please?

Sure. I want to, at the outset, just kind of share what I think about in the nature of crypto, all other things like bitcoin, right, and how that's different from the underlying technology, and the underlying technology being the distributed ledger technology. We see tremendous use cases which will come out from the distributed ledger technology, right? And as it relates to crypto, what we think about it is in the following way. There are things like bitcoin, which are more in the nature of an asset class. We're involved in those spaces in multiple ways. Let me explain to you a few of the examples we're involved in it. We act as an on-ramp and an off-ramp in the crypto space. So in other words, people can leverage and utilize Mastercard products to buy crypto, and they do that today, by the way. So that's the on-ramp piece. The off-ramp piece would be where we enable the conversion back and we don't do the actual conversion but the remittance back of crypto back into fiat currency, where we could use products like Mastercard for that. Or also, what we do is we enable and we partner with several crypto providers to have card products issued which can be used everywhere Mastercard is accepted for people who have crypto balances. Now just to be clear, in those instances, we Mastercard don't take delivery of crypto. We take delivery of fiat currency. But what we're doing is we're leveraging our acceptance footprint to provide consumers the ability to utilize their crypto balances at locations where Mastercard is accepted. So that's kind of what we do from a crypto standpoint. In addition to that, at the services layer, we recently acquired a company called CipherTrace, which is in the business of identifying what might be compliance-related concerns, AML-related concerns, fraud-related concerns, which go on in the crypto space. So that's a service we deliver to crypto providers today to help them identify what might be fraudulent transactions. Now that's all quite different from what might be the utilization of distributed ledger technology for the creation of CBDCs, central bank digital currencies and/or private stablecoins. We have stated our intent to enable the settlement of CBDCs and private stablecoins, which meet our standards and our principles and regulatory requirements and are in compliance with the laws of the land, right, to enable the settlement of that over our network. We've invested heavily in the distributed ledger technology. We've got a significant amount of IP in this space. We're working very actively with central banks as well as private participants to enable them to have access to the sandbox we've created for them to experiment as to how they would like to go about issuing the equivalent of a CBDC, for example, if that's what they choose to do. So that's another level of involvement where we can bring our technology to bear to help them at the infrastructure level with the issuance of what might be crypto. Separate from that, right, at the end of the day, when CBDCs are issued or when private stablecoins are issued, if they are indeed something which consumers want to use as a payment mechanism, they still need to be accepted, whether it's at the physical point of sale or at the e-com point of sale. And this is, again, about leveraging our reach to be able to help them get that ubiquity of acceptance, which is where we'll play our part. So when you think about it, there's a wide spectrum of involvement that we will have in this space. And that will continue to evolve as we start to see how the ecosystem is evolving and what level of interest is there, both from the consumer community and the merchant community in this technology and the use cases which emanate from there.

Got it. Okay. Let's take a few more from the audience. So you spoke about offering consumers more choice. But if consumers choose to use payment options that are not traditional card rails, doesn't that negatively impact your economics?

I think the short answer to that is no. And the reason we believe that to be the case is it's all a function of what value we can deliver with those alternative payment choices and how that stacks up against the value which they're getting from whatever other form of payment they might have been using historically. So look, I mean, at the end of the day, you've got to think about the economics in the ecosystem in its totality and what the network economics are. And you've got to kind of figure out what the value of each participant in the ecosystem is under different payment methods and what the compensation they can derive for that is. And so as we think about our strategy, we remain very focused on delivering value at the infrastructure level, the application level and the services level. And we do believe, independent of whether it's on card rails or on ACH rails or whatever alternative form is there, that there are enough problem statements to be solved if there is indeed an attraction to use an alternative form of payment by a consumer for us to be delivering value at each one of those layers to help us generate the returns which we will deliver as part of delivering the value, which we're going to charge for.

Got it. Okay. Another one from the audience. Will Mastercard ever take delivery of cryptocurrency? What would you have to do to enable that?

Yes. So again, I want to be sure we are not conflating a couple of issues. Cryptocurrency is different from private stablecoins, different from CBDCs. We have talked about how we are working towards enablement of private stablecoins and CBDCs on our network. As it relates to crypto, the basic genesis of our decision to go down the path of enabling private stablecoins and CBDCs on our network is if they meet our standards. And meeting our standards means they must be compliant with local law. That's kind of table stakes. We will not do things which are not complying with local law. Two, they must bring value to all ecosystem participants. They must respect data privacy requirements which are there and the laws of the land as well as what consumers would require as well as data security elements which are there. So these are important considerations. And that will be -- those principles will be defining principles, which will help us decide whether we are going to participate in taking delivery of one currency or any other currency. No different, by the way, than what we do with fiat currency today. We settle in a whole host of fiat currencies today. They happen to be issued by the central bank of those countries, which means they meet the principles we've just defined, right? And we'll want to kind of make sure that as we go forward, that they continue to live by those principles, incredibly important in terms of decisions we make going forward.

Got it. Okay. We'll take one last question from the audience, and we'll go back to mine. So Sachin, what do you view as the biggest regulatory threat to Mastercard?

Again, I think about regulation as something which we, as a company, have dealt with this industry has dealt with for some time now. And I don't think that's necessarily going to change going forward. I think the most important thing to recognize when you think about regulation is what is it that the regulator is trying to achieve. They want to make sure that consumer arm doesn't occur at the end of the day. If you go back to the strategy we just discussed about Mastercard, where we're all about enabling choice for consumers and choice for merchants, we too are aligned in that regard. So while there will be instances where regulators will want to test our conviction in terms of what we are talking about. So long as we can stay true to our strategy and deliver on that, we feel like there's a good path to navigate through different regulatory environments. Now all of that being said, there's perfectly logical reasons why regulators want to do certain things in certain countries. It's our job to help explain to them the virtues we bring as a payment network and how we can help them achieve their objectives. And that's really what we've been focused on doing and we'll continue to focus on doing as we execute our multi-rail strategy, including our services and our new networks.

Got it. Okay. Could you just walk us through your capital allocation priorities and whether that's changed at all since the pandemic?

Sure. So our capital allocation priorities are unchanged. And really, it's all about we want to make sure we maintain a solid credit rating, and this is important given the role we play in the network ecosystem. We are very focused on making sure that we're investing in the long-term growth of our company. And we'll do this through both organic investments as well as inorganic investments, and you've seen us do this historically. And thereafter, whatever we have in the nature of excess cash, we would look to return that back to our shareholders through a combination of dividends and share buybacks, with a bias towards buybacks. And that really is -- this philosophy is something which has held us in good stead over the past decade. And we continue to believe it's the right approach going forward.

Got it. And to just expand on that, what are your biggest M&A priorities?

So again, you've got to kind of think about M&A in the context of what's the strategy we're trying to change. So everything starts with the strategy. We first define what we're trying to accomplish. We then determine whether the best way to accomplish that is through organic growth, or is it better to actually end up buying a company or partnering with someone to achieve that, which then gets us to that space of M&A. What you've seen us historically do is in the new and different areas that we're embarking into, whether it's in the services space or it's in terms of our multi-rail strategy. It has been the focus of our M&A historically. And then as we continue to execute our strategy, you should expect that we will continue to utilize that same discipline, which is strategy-led M&A in areas where we believe it's better for us to be buying or partnering with somebody as opposed to building because either we can get faster to market and the opportunity in the marketplace happens to be there today, or because we believe that the whole -- there's an incumbency advantage, which exists with an existing clear where we could get a certain technology, which otherwise would take us much longer to deliver. So that's kind of the theory behind which we will go and execute our M&A on as we have done historically.

Got it. Okay. So as we're getting to the last few minutes of our session, I'm just going to ask you one final question. So Sachin, what keeps you up at night on Mastercard? And then secondly, what are you most excited about from Mastercard as we enter 2022?

Yes. Look, I mean, I think it's important to keep our eye very keenly focused on what's going on in the macro environment. We don't control the macro environment. What's really important for us to do is stay in tune with what's going on in terms of evolving technologies, what's going on in the regulatory environment, what's going on in the fraud space. And we view these as important considerations, which could be there from a threat perspective but equally as an opportunity perspective because, very often, what you can convert is threats into opportunities, which is what we will remain focused on as a company. From a promise for the future standpoint and an opportunity standpoint, I continue to believe that there's tremendous growth potential that we've got as a company. It goes back to the discussion we had earlier around the 4 growth vectors, around large opportunities and consumer payments, the opportunity which exists in new flows and use cases, the services potential of the new network. So that's kind of the way we think about both the threats and opportunities, which we see ourselves kind of looking into going forward.

Great. Well, Sachin, thanks again for key noting UBS' TMT conference today. It was great having you. To everyone else, thank you for watching, and have a wonderful afternoon.

Thanks, everyone, and thank you, Rayna. Appreciate it. Take care.