Mastercard Incorporated ($MA)

Good afternoon, everyone. I am Harshita Rawat, the senior analyst covering U.S. payments at Bernstein. I am delighted to be here with -- today -- with me today, Michael Meback, Mastercard's CEO.

Hello, Harshita. Thanks for having me.

Michael, there's so much to talk about as we were chatting earlier. Let's get the macro question out of the way first.

There's always a starter.

So let's talk about the overall consumer spending environment. What are you seeing in terms of spending trends, both domestically and in cross-border?

Good. So we have a good lens on consumer spending by the nature of what we do globally, all the card categories, which is not all of consumer spending, but it gives us a pretty good view of what's going on -- what we've seen is continued growth in consumer spending. That's the first thing to say throughout the first quarter. We gave you in our last earnings call an outlook into the April data as well. And the growth in consumer spending has continued into May, the first 2 weeks as well, where we saw stable to slightly better consumer spending. So that's fundamentally the good news and the trend that we're seeing. We drag it down a little bit. We see that coming through in consumers adjusting to higher prices driven by energy -- elevated energy prices. They're adjusting between discretionary and nondiscretionary spending. That's good. As long as it's on cards, that's great for us, which is a good chunk of the consumer spending. We're seeing it in the U.S. holding true as a healthy growth in the U.S., also internationally, just a little bit lower, but continued growing at a healthy clip. So that's true. And if we zoom out and ask ourselves, why is that? I mean we're reading the headlines on conflicts and this that and the other pressuring the consumer, but it's still fundamentally true that unemployment has been relatively low. It's also true that wage growth has kept up with inflation in a relatively good balance so that net-net spending capacity is intact. It's also true that general equity markets are doing fine. The wealth effect is still there. So all of that just points to basically a supportive environment for consumer spending. So that's fundamentally a good thing for us. So don't have to worry about that part of the business as that's a big fuel of how we grow. And then if you imagine, and there's a set of agents on a company side and then you have vendors that also use agents, and you can see a completely automated part of procurement for certain aspects, digital content, for example, I buy advertising space. Those are the things that could be easily automated. And this is where you could say, "Well, there might be a whole new set of transactions that haven't even happened before." So tremendous TAM expansion could emerge out of that, which is why we think that getting ready for that side of the equation is particularly important, cards can go a long way for that because we're used to high frequency, low ticket transactions, take transit. But we should also -- which we always do, we look around 2 corners as a company, if this is higher frequency instant micro transactions that are at the fraction of a dollar, our stable coin capability may just be about the right thing to go after those additional transactions, while our basic card proposition works for all the consumer things we've just talked about and for a bigger more regular B2B transactions. So -- this could happen. Our announced BVK acquisition, it might just be the tool set for that. Currently, we do this with third parties. We could do it today, but then we will do it in-house, so I'm excited. So bottom line of the whole thing, and genetic is a tremendous opportunity. It just takes a little bit of time.

And you talked about how it could accelerate B2B, create kind of new TAM. And I think also on the consumer side, in a way, the complexity of a transaction goes up a lot. And there is obviously a whole host of questions around like who actually authenticated the transaction, whether you had an intent to that transaction. And I know launched verifiable intent also earlier this year. So can you maybe talk about -- I think you talked about agent way, but when you talk about like the whole suite of capabilities and the additional value you're bringing on the transaction.

So first of all, by enabling all the parties, as I just talked to issuers, merchants we're bringing that value initially to get everybody ready with a set of protocols and standards so you can play together. So that's how you unlock a space generally. That is what we've done -- in cards, what we've done with our account to account a franchise basically a whole concept that everybody can go by. And then you go ahead and say, "All right, what are the things that we know a consumer or business will expect and that will not change. ease, trust, what happens if something goes wrong." as simple as that. So that is true today, and that was true yesterday today in forms of payment, it will be true in agentic. So we have to enable that. Tokenization is a big part of that. So every transaction in agentic will be tokenized, that's the way how the information moves from the person that's authenticating an agent that's giving the instruction to an agent and then for the agent to pass on the information and be recognized by the next party, which would be the bank and so forth. So all of that is tokenized. And the current world of payment, about half of our online transactions are tokenized. So a tremendous opportunity for us. At the same time, tremendous value that we bring to the system with tokenization. So that's a big part. But then you come and say that transaction happens. So imagine the following. You buy a pair of running shoes, you need check out on your chat bot. And at your doorstep, appear 10 payers of running shoes. And you're like surprised, okay, look, I never asked that. How do you prove that? How do you get to a point to prove it so that a return can be initiated and so forth. So that was a piece that was unresolved in that ecosystem. That's a piece that's perfectly box standard today when you pay with your MasterCard through chargebacks and disputes that is enabled. So we went out and said, okay, let's talk to a partner that's really close to the commerce ecosystem to figure out a standard that we can work on together and enable that missing piece in the ecosystem that is when we got together with Google tool have verifiable intent, which is basically an undisputable record of what the agent was instructed to do and what the agent then did. And is that the same thing? It can be automated passed on as an information token, so to say, to facilitate the whole transaction. So a lot of technology in the background, but essentially enabling the exact same experience that the Mastercard promise is today, 0 liability. Merchant, you will be paid consumer if something went wrong, it's not your fault. So that is, I think, a big unlock, and it should use the hurdles for consumers to really go about that. That is a lot of value that we bring from the start of the transaction even before the transaction, the standard setting, authentication, tokenization, dispute all elements of it. And then you can layer as a lot of set of services on top of it. How do we improve the identity of the person that's making the transaction if it was you. So there's identity solutions that we can bring to the table to say that is another piece of value that we bring. Another big piece is we have over 500 million consumers in our loyalty data that sits on our systems, that's all permissions personally identifiable data. So with the right kind of permissions, you can create an insight token that enables the agent to make an even better recommendation by leveraging loyalty information. So that is how you can layer on value after value. So I'm super excited about agentic from just like a growth opportunity. It's a transaction expansion opportunity because baskets was spread are on these -- all these SMEs that might be discovered. The most fundamental thing is if it drives a better experience, it's generally good a tailwind for commerce.

And trust identity dispute becomes even more important as services in the agentic world or e-commerce world and this is what you.

Good thinking ahead on our identity solutions. This will be another way to deploy them.

And Michael, there is a perception that stable coins can be more suited to be the money layer on this new Internet, this Gentech Internet as opposed to cards. You can do both. How are you viewing this?

Right? So I'm not sure where all these perceptions exist. It's not my perception for sure. I think we have to zoom out a little bit and look at what the card proposition brings that I just talked about, what stable coins bring. I gave you an example earlier why different types of transactions might might need different solutions, which is why we always expand our payment capabilities. But fundamentally, I think the starting of comparing that stablecoin might be whatever the cheaper answer or something like that. I think these are kind of misconceptions. They are really different things, very different things, but there are also similar things in a way how we look at it. Stablecoin is another rail. We have card rails, we have account to on rails. We have stable coins as a rail. It could be seen as another currency. So we have it as part of our offering, but say the cards ecosystem brings a lot of value for a lot of transactions in agentic, the consumer piece being one of them. And there will be these emerging use cases where stablecoin will matter. So that's how I look at it. Fundamentally, it's all expensive, and we have all of these capabilities. So if that weightage changes in 20 years from now, that's fine. But we want to be there today because if our customers want that, we want to offer that capability. But for now, I really think -- it's going to -- it's something that might happen on high frequency, very low value kind of transactions. But choice, whatever it is. It's just something for us to have a radar. There's a broader conversation to be had of a stablecoins in general. So aside from agentic. So where is that technology helpful? And you look at the B2B in the cross-border space, there's tremendous applicability of that. Again, from P2M, cards is great, but we love stable coins for a whole host of reasons we can talk more about.

So let's talk about that. So you recently announced BNK acquisition. You have a very healthy growth in your crypto co-brand card program. There is clear potential for stablecoins, especially when paired with cards. -- improve a lot of flows. And there's -- you also talked about the opportunity in B2B. This is an opportunity for Mastercard. That's why you made the BVNK acquisition. Why do you think -- what do you think is understood by some with regards to Mastercard and stablecoins?

So before we come to misunderstandings like your perception question earlier, let's just talk about this in more general terms. So this is stablecoins underlying digital assets, even crypto blockchain-based technology is fundamentally helpful technology. So it facilitates transactions between 2 parties that don't know each other. So we like it from that perspective. We want to offer it as a payment choice to our customers. And we see applicability in a set of particular use cases where this kind of technology is particularly useful. B2B, imagine programmability, which is an aspect of blockchain-based technology programmable payments in B2B is, let's say, you have something glue with international trade transactions, say, these 10 conditions well filled, I'm going to make release this payment. You can't really do this in the card payment today and you don't want to because you just buy whatever you're buying, it's just a once-and-done transaction, but you could do that in a B2B context. In cross-border payments, you have illiquid corridors where somebody wants to be preferred to be paid in dollars and you do that, okay, we spend a dollar stablecoin and it's a payout where you don't have an immediate value exchange of goods or services or something like that. That's why a stablecoin payment could be a very sensible thing. So we see these emerging use cases, B2B cross-border me-to-me kind of payments, and that's an opportunity on the upside. We feel it was -- we have to offer that to be a relevant payment partner to our customers. We have a lot of the related or needed capabilities, send, receive, store, convert today through partners. And we decided we want to have it in-house because it's going to be bigger over time, not in the card-based use cases, which are great for B2B payments, VCNs and so forth, that's not taking away from that. But in these emergence, we want to go after that volume as well because we apply services after all. So okay. So let's find a company that can help us in a world of stable coins. And if I just describe that world for a moment, we're going to have more chains. We're going to have more stable coins. We're going to have more denominations. So you can see this world of multiplicity. If you're a company and you're buying from me, and we have a payment flow in between and you have a stable coin of your choice, and I have a stable coin of my choice. So how is this payment going to flow? Because I want to be paid like this. And I say, I want to pay like that. So who needs to sit in the middle, somebody they can facilitate, send, receive, store, convert and manage the interoperability conundrum of this world. That's what BBNK does and they have the best licensing regime and the best talent to do that, best technology established, and we said, we do all of this today, somewhat okay through partners, but this needs to be a key master capability. We're going to go after them and we took a close look. And today, this transaction is announced and not closed. It's going to happen this year as we expect. But I can tell you that the demand we get from our customers on that today is is outstanding. Obviously, no gun jumping in all these kind of things. But the interest is there, "Hey, when can we start talking to you guys about that." And so we're starting those conversations. So this is, I think, a tremendous opportunity. So the misunderstanding part in your question. It might just come from the fact that there are some enthusiasts and say, "Well, stable coins are a much cheaper opportunity." But I think the way when you compare -- because if you're comparing, I'm getting money from A to B, it might be a similar price. The next thing is an FX layer. FX doesn't go away. It happens on either one of these payments. The second thing is -- that is to be considered as security. So security costs something. We invest billions of dollars in security. So what -- how do you ensure the cybersecurity fraud identity is all of those things we have just talked about on card payments. So you layer all of that up and you start to compare the price with the end kind of the resulting economic position for the user of that payment solution after fraud, after everything, is the price then competitive, is the value that we bring to that transaction worth the additional cost. And we can prove that very easily and customers that we work with, that want our services because they know they are protected and it's a better experience and the acceptance is there and everything that comes along with it. So I think that's where the misunderstanding lies. It's an easy comparison on a base level, but that's not how reality works. So we make sure that this is understood and it's not nebulous, but we really point to an outcome.

And you also provide on-ramps and off-ramps, right, like with stable coins which is such.

We do that. That's where most of the volume is today. That's exciting, but we're creating a future here for other use cases and other payment volumes for us to go after because there we can apply all of our services that we lay on top of that.

So Michael, let's switch gears and talk about the core of Mastercard, consumer payments more in detail. You have historically globally in the U.S. and Europe grown several percentage points faster than PCE, that delta in some markets around the world, not every market has narrowed versus historical levels. How do you see Mastercard's consumer volume growth prospects relative to addressable spend growth?

I think there's a tremendous opportunity. So you might expect me to say that. But there is, if you really break it down, there is a tremendous opportunity. I think the first is, we have to understand what is BC or proxy for. PC is a proxy for all of consumer spending. Not all of consumer spending is card-based. So that's the first thing to say. Obviously, that distorts the picture a little bit. But that difference is also pointing to that the pieces that are not card-based are actually an opportunity for growth for us to take insurance or health care, those are verticals we have talked about in our earnings that we're very busy in putting courage acceptance in place and get the growth up there. That's not something that we historically focused on because we're very busy with everyday P2M kind of volumes. And now we're doing such a good job that now it started to be really worthwhile for us to look at the next vertical and repeat some of the goodness that we have driven in P2M kind of categories. And then you start to kind of take a little -- put that argument aside and say, what are we seeing in terms of growth opportunities? So in our last Investor Day, we laid out a $1.5 trillion transaction opportunity. So PCE does not measure transactions. So it's a volume-driven focus, but the transaction opportunity is huge. One of the best examples is when you think about transit. Here in New York, MTA, the number of transactions where people start to tap themselves through it just used to be a metro card once a month. And now it's like every time you go and you pay, this is happening around the world in hundreds and hundreds of transit systems, one such example. We have previously talked about new business models where you went to used to go to a restaurant. Now if you do Uber, it turns on transaction transactions. So there's all this multiplicity that's happening on the transaction side and with great methodology and precision we go after all of these transactions, which is why we laid out that goal. Across the management team, people are primed for that, our focus area, even our compensation is focused on driving transactions because that's an opportunity for us to attach more services and so forth. So that's a broader picture of that. From a geographic point of view, if you look at the United States, everything that I just said is true. If you look outside of the United States, you find quite a number of markets, very large markets, developed markets where just a simple cash and check opportunity is still alive and well. The U.S. has been further on. If you go into Europe, my home country, Germany, you're somewhere in the 40s on digitization. That's tremendous cash opportunity look for the south into Italy and Spain. So these are very large economies where we just do what we have done in the last 10 years in just going after the transaction opportunity and turning cash and checks into digitized payments. There's an adjacent opportunity in some of these markets where you have domestic systems. That's not -- we put it in the category of secular growth because it's not fully digitized. These are systems that don't have tokenization, various other things. So it's a tremendous source of growth of transaction growth for us that, again, fuels our model. You look further into Asia, Southeast Asia, Japan, another huge third largest economy in the world, not very digitized, tremendous upside. Again, they're about around the 40% mark. Mexico and Latin America, Colombia, the fifth largest economy there. Again, tremendous potential. So take all of that, I think this narrowing part come back to the proxy piece, let's not yet to understand the transaction opportunity works a little differently, and we have laser sharp focus on verticals, card underpenetrated verticals and geography where there is a lot of growth potential. The reality is bottom line is more transactions are in cash and check today, still, despite all of our efforts that we can turn into digital transactions and apply our model.

And this transaction growth, I think people often miss that, right? Because you are getting into more everyday spend. There's also kind of processing penetration, which has grown for Mastercard, which also adds to the growth rate there. I want to also ask about payments nationalism in the consumer payments content.

Sovereignty.

We have seen this growing desire for countries to control their payments infrastructure or to at least have it locally. There have been some renewed discussions in Europe as you very well know. I know this is not something new to you and you've worked through this in the past, but maybe share your perspective on nationalistic how you're engaging?

So we are in payments because it matters. So payments matter to governments for the same reason. So it's pretty close to national critical infrastructure, electricity, water. So we like that. That's a good thing. We matter -- truly what we do matters to countries. There is a significant degree of alignment between what governments want out of their payment infrastructure and what we want out of it. So alignment on resilience matters and payment systems. So how would you translate that to the question that you have, it's never good to just have one payment system just simply from a resilience perspective. Inclusion matters. Inclusion is long-term market growth for us. The more people you pull in the digital economy, the better it is for our long-term growth. Governments want financial inclusion for economic participation. So there's alignment there. Cybersecurity. Everybody wants to protect their citizens and their businesses, particularly small businesses, which are always the weakest link in the chain. For them, it's very hard to predict against cyber risk. That is our business, that matters to us. So there is alignment. So when we have a conversation with the government how to participate in a country's digitization journey and building their digital -- their digital commerce environment, we're generally a welcome partner. Where sovereignty comes in is when countries decide, I don't want you to be my only solution that comes right back to the resilience topic, that's fine for us. So the ways we find as long as we can compete, we're very happy with that. But we also partner with local solutions. Take cybersecurity, take acceptance. There are certain solutions where we make our services available as long as we can compete, and that is a 1 plus 1, a 3 solution generally. So I think that's been serving as a good model. I think it's also important for us to show up globally, so to say, as a true global best practice kind of partner to serve to help with all of these priorities that these governments have that I just talked about, like cybersecurity resilience and so forth. At the same time, to recognize local needs and requirements, including the resilience part. So what we do is we did announce October last year with Europe, you talked about Europe, that we're going to set up 3 new data centers. That gives more resilience because more technology is on soil let's say, the undersea cable is cut or whatever happens. So supply chains are fractured as we've seen in COVID. These are kind of things that drive more resilience. It's also resilience from our own perspective because we always like to have a backup of -- a backup with current conflicts in the Middle East. We see that. That has served us very well. While some of the cloud companies suffered from that, we had the right kind of setup. So these kind of recognition of local needs is important. Our technology is flexible enough to do that. So in the end, we find the right balance between compete, partner and invest and therefore, we continue that journey. We've been on the sovereignty journey for like, I don't know, 12 years or so, something that I spend time on that I think a lot about, but I think our approach works really quite well.

And Michael, very quickly on China. It's been almost.

Quickly on China, this almost feels like it is mutually...

It's so much to cover -- it's been almost 2 years since you launched domestic processing in China. How are things progressing? You also recently accompanied President Trump on his visit to the country.

Right. So we negotiated and it was a long process to get the license in China. It's a domestic license. We've had a long-standing cross-border business in China. And now we are live in China since May 2024 with a domestic license. That is a really important point because the combination of both allows us as a large -- very large global player, the only one with the domestic license there is to put products into Chinese citizens hands that are available for dual use. So here's a Mastercard in your hand that can use in China, use it as a QR acceptance point through your Chinese app or through the card itself or now through Apple Pay. At the same time, you can travel with it and use it externally. That sounds super small for all of us, but that's not -- that was not normal in China. It's not a unique solution that we bring and people who travel, Chinese people who travel, they value that. So it's really given us a very good start. We are winning a fair share -- more than our fair share of the market since we went live, but we're also building an ecosystem. This is a massive economy, second largest economy in the world. So we're working with all the Chinese banks. We're working with the acceptance players in the Chinese digital players through our joint venture partner to build everything that's needed, issuance and acceptance and good value proposition. So there is a whole number of programs that we put out. So it's very encouraging. The Chinese government and the U.S. government is why we were a part of that delegation sees that. Both is a very helpful point to connect the Chinese economy with the global economy to also make sure that Western payment standards are available in China, and the Chinese people that are used to QR standard can pay elsewhere. So it's good connectivity. It makes sense from every party's perspective and see a long-term significant opportunity, which is why we called it out our Investor Day as a significant part of our growth algorithm going forward. So very happy with what we see but it's a longer-term thing. And of course, we need to keep geopolitics in mind all time.

Another significant part of your growth algorithm is valuated services, not long term is happening now. And we were talking about this earlier historically, for investors, it was easier to forecast Mastercard's revenue growth all you needed with a cord to vest.

Our investors so clever, they can forecast a lot of surely.

And now valuated services are 40% of your revenue and growing meaningfully faster than the rest of your business. So maybe help us understand what is driving the growth of our valued services and what is driving your conviction behind that growth?

Right. So I want to start off with, it's probably the most frequent question I get -- and I always love talking about it because I see there's a tremendous growth opportunity here, and I'm happy to always find another angle as I lay it out to make it even more tangible. So first thing is to start off with what we call the virtuous cycle of growth of Mastercard. So we go and we go after all this payment volume, as we have just discussed for the last 30 minutes that fuels our data set, very unique and rich data set, high-frequency global data set that fuels our services. We choose services that benefit from that data set because it's such a unique differentiator versus other services providers, if you start to look in the world of cybersecurity services, we have competitors outside of payment, but they don't have the payment data. So that differentiates us. In loyalty, we have a lot of transaction data. There's loyalty specialist companies out there, but they don't have the data estate that we have, again, that differentiates us. So more transactions, better services. Now better services drives more differentiation of our payments because our payment would be smarter and safer than the next competitor's payment, particularly when you compare it to domestic schemes and things like that. So they can just cannot do what we can do. That retain -- helps us retain more payment portfolios and win more payment portfolios, which means more data and the whole cycle keeps going. So that's the fundamental basis of our virtuous cycle and our strategy. Now in service itself. How do we go to market? How is this a sustainable piece of growth, not in the short term, but in the long -- in the medium to the long run is. So the first thing to say is the power of our distribution model through the network. 60% of our services by design are distributed through the network. And we put those services out alongside the transaction before the transaction, during the transaction, after transaction. Earlier, we talked about identity solutions. We talk about transaction fraud solutions that come along with the transaction. Tokenization services come along with the transaction, they carry the transaction. And then post transaction, things like disputes and others, and then you have consulting and marketing services around it and loyalty. It's kind of like the set of concentric circles. But with the transaction at the center of 60%. So if you're a SaaS company, you have to sell every widget by reside. That's not what this services portfolio is about. It's designed that way. It is designed to be network distributed in its majority, and that will drive a big part of longevity. The next thing is within those kind of network distributed solutions, there's a lot of choices to be made on what we put into that portfolio. It's very carefully curated. We focus on things that we believe have long-term underlying secular trends, cybersecurity. In our world, in our data more digital world by the day, there will be more data, there will be more cyber risk coming along with that as people go after that data, Frostys and scales go after that data. So that's a long-term trend. Think about an AI-enabled world and AI-driven scams and frauds. It's just going to be more of that. So that looks like very risky. For us, it's actually an opportunity because that's what we do, and it will drive part of our services portfolio. So a combination of network distribution and underlying trends, need for data and dealing with cyber data-related risks that makes a really solid portfolio. The next thing then is -- even when you then go and look at the other 40% of our services that are not network distribution, and then you say, what kind of products are those? A good chunk of those are still enabled by the data, they're just not distributed through the network in the same way. And they're kind of on top of the transaction. They're like an opt-in or something like that, that we do that doesn't come necessarily straight with the transaction. And that's still a very advantaged go-to-market. So you kind of waterfall that whole thing. And you're starting with straight on the transaction, opt-in and then you take our consulting services, which we defer this out, a good chunk of that used to be human delivered. So we're one of -- we're probably the largest payment-related consulting company in the world. We're not just consulting. We're consulting on payments. And yet again, you have a link to our transaction, you have a link to that data, and we help our customers use that data in a better way. So it's always going back to the heart of our differentiation, our data and the fact that we have this network that can put that out there and collect that data. So all of this together is a very durable model. We still look to obviously bolt on into the next piece and record the future is a great example of that and said so if we have a differentiated proposition which we do today in cybersecurity, which I'm very excited about, there's too many risks in the world, but it's good for us to help result address them. Said, okay, what's the next thing that companies worry about? What is their concern? In a world of these cybersecurity risks, you cannot outspend against every risk. It's impossible because the risk threat vectors come from all angles. So if you had a partner like a recorded future like MasterCard with Recorded Future, I would tell you, your risk is the highest in this area because there's a set of threats that are occurring that we see from whatever this particular threat actor, this particular consortium. And here, you should raise your defenses vis-a-vis trying to raise them across the board. That is what recorded future does. They have data sources that literally nobody else has from the dark web and to every data source there is. And now we put that together with the data estate that I just talked about, which gives an amazing capability to predict where the next fraud piece is and say to a bank, this is where your next threat vector is. In particular, this card number has been seen in the dark web, you should ask extra questions and for the security level up, reduces cost increases efficiency of the fraud solutions and so forth. So very, very powerful durability because we keep extending, but we always keep in mind the starting point that differentiates vis-a-vis just selling wigs and being a services company.

And it's fascinating. I think in the early days of e-commerce and up until now, cybersecurity is a great example where and fraud, I guess the inverse each other, they were such a big area for you to focus on, and I think that also drove a lot of your [indiscernible]

And that has if you -- we do a lot of brand analysis and what does our brand stand for, the 2 interlocking circles, Trust is the word that is most often quoted because when you see -- when you hear our Sonic brand, or when you see interlocking circle, we say, I don't have to worry about that transaction. It works in the furthest corner of the world. And with all these new risks emerging, that still gives us a lot of applicability to prove that point every day in different ways and better ways.

I would feel much safer with an agent with the Mastercard.

I hope you do. I hope you -- is there anything else .

Let's talk about tokenization, a foundational there for growing payments use cases and services enabled by Mastercard. Maybe talk about what do tokens do for you with respect to enhancing the network and your opportunity to deliver more value to services?

Right. So tokenization most fundamentally, takes the payment credential, the 16-digit card number and puts it into a onetime use token. And that facilitates the transaction in the most secure way should that ever be hacked and you can do anything with it because it was only for onetime use. So that was a simple idea. It goes back to over a decade ago when we created that and it's been a facilitator for us to -- particularly on the online payment space where we see more fraud to roll that out. Today, I mentioned it earlier, about half of our online transactions are now tokenized. And we started rolling that out and sharing with our partners around the world, this is a better way to do things. And we wanted to find a way to critical mass around that, so which we now have with half of our transactions. So then we can go ahead and we say, we can tag on a set of additional services around the basic token capability. There could be token authentication. You could go ahead into life cycle management, say, for example, a card like when your card credential runs out, the card expires. And you have a token then automatically that can be updated to say here's a new refreshed card number, and that's all behind the scenes and technology that is updated. So these are a set of services that you can imagine. It's a new vehicle to distribute services. It's a very powerful tool. We started to -- once we reach critical mass, we started to price for the value that we provide. And the value that we provide in the simplest terms is higher throughput, so the approval rates go up 3% to 6% because it's safer transactions. Security has increased and fraud goes down. So that's very quantifiable value. We were very excited to go out and have these conversations with our customers, and then we're also charging for that. And then you can see as you lay on other token -driven services on top of that, you can quantify that value and start to see that is part of just how we continue to grow because we invest in this foundational technology. We roll it out and it drives a bet additional commerce ecosystem. Earlier, we talked about agentic and in this case, tokenization is the center of all of that. So with a agentic rising, you will see a world where the growth rate of tokenization is going to continue to increase because that is everything by definition, is tokenized. So that is one reason we're excited about that. But you can also see, as I touched on that is if there were additional tokens that carry other information than just a payment credential, it could be your preferences out of your loyalty program, say, here's a tokenized set of information on what her -- she likes and what she doesn't like so that the agent can provide a better recommendation inside tokens. Yet again, that could be the next layer and the next layer. So our product people are very excited and very busy to find more layers of value that we can deliver through tokenization as another angle. And that's part of our services portfolio.

Michael, we have about 6 minutes left, and we haven't talked about commercial and new flows, is such a big opportunity for you. And over the past year, you've had more focus on segments where there's a more proven product market fit. Historically, commercial had also been such a hard addressable market to go after because of the heterogeneous flows Tell us about how you see the opportunity, what you're doing? And how has your thinking evolved?

Right. So in our Investor Day, recall correctly, we had about $80 trillion laid out as the kind of addressable market there. It's a humongous opportunity. It's pretty clear that this market is ripe for better solutions. So it's fragmented as you heterogeneous. I think is what you called it just now. All commercial entities are on increasing pressure for profitability. Everybody is focusing on streamlining their processes, put out better products. So we're just at a situation where I feel there is an unlock. You see people that are used to slick easy digital experiences in their personal life and then look at the green screen at their job. So that kind of doesn't line up. So there's a lot more momentum in the space than we've ever seen before. but it still had a genius. I think that's also true. So we're finding easy ways to create points of aggregation and finding in parts of the commercial ecosystem where there's just a clear alignment between payers and payees on the need to really disrupt this and make it easier, so travel was a good example. So we really got into the world of travel and online travel agencies, where we said, okay. So you both have a pressure point between airline and hotel payments and how you do all of that in a much simpler way, much more aggregated all this data that needs to be reconciled, very good. We do that through our VCNs where we are the leader in AC and VCNs and said, so what else can we do? Said we need flexible economics so that payers and payee can agree on that. So Mastercard rate Manager is an example of that. You always need to make sure that the supplier and the buyer side that their respective issues are addressed. So all of that very systematically that we have done for that particular vertical. We're now doing this in other verticals in rental, for example, in health care and insurance and just rolling that out. I think that's a better approach than going across the whole world, what does commercial even mean. So it's industry by industry [indiscernible] and we lean in every day.

And this is what you did as I think as the Chief Product Officer 10 years ago for value-added services.

There might have been a reason that I'm in the seat today, yes, exactly.

On that great note, Michael, thank you so much for joining.

Thank you very much. Thank you.