Conference Transcript - MA 2026-05-28

Harshita Rawat, Analyst — Bernstein

Good afternoon, everyone. I am Harshita Rawat, the senior analyst covering U.S. payments at Bernstein. I am delighted to be here with me today, Michael Mibach, MasterCard CEO.

Michael Miebach, CEO

Hello, Harshita. Good to see you. Thanks for having me.

Harshita Rawat, Analyst — Bernstein

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

Michael Miebach, CEO

Always a starter.

Harshita Rawat, Analyst — Bernstein

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

Michael Miebach, CEO

So we have a good lens on consumer spending by the nature of what we do globally, all the carded 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 two weeks as well, where we saw, you know, stable to slightly better consumer spending. So that's fundamentally, you know, the good news and the trend that we're seeing. If 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 non-discretionary 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 in 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 why is that I mean we're reading the headlines on conflicts and these 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 in a relatively good balance so that net net spending capacity is intact it's also true that you know 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. Fantastic. Michael, let's talk about

Harshita Rawat, Analyst — Bernstein

agentic commerce. It's early, but things are moving quickly. Tell us about how you think agentic commerce may evolve both in consumer payments but also a new category of commerce around agent-to-agent micro transactions so gentic

Michael Miebach, CEO

commerce it is early days I think what's what's happening is you see AI enabled and you know AI enabled ways of commerce starting so people are changing their ways and how to discover products how they find out what they really want to buy, and then there are ways for them to check out in different ways than they might have done in the past. It could be on the chat pod of their choice. So that is a journey that is happening, but it's happening very slowly. Example of one, my wife tried the other day to search for something on chatGBT. It was a good result, good recommendation, and tried to check out. And that is just not as convenient as the reality is today when you go onto a marketplace and you check those very seamlessly. So what is true, though, is that over the past year, the ecosystem has been getting ready for consumer behavior to change. So what have we done as an ecosystem, a broader payments ecosystem? So a set of protocols were established to enable the merchants to make their product catalog available so that an agent can actually discover the product. So then the consumer can find them. Without discoverability, it doesn't work. So commerce protocols were established, and the payment players established payment protocols. So you can stick the two together that from finding the product, you can check out the same way you are used to. One of the complexities in all of this is to recognize that there's an additional party in the payment ecosystem, which is the agent. I think we should assume that this whole thing evolves in a way that first we see agent-assisted commerce happening, And eventually, it could be autonomous, which is the second part of your question. We can come to that. So the various protocols were put out. MasterCard, we put out agent pay, which is basically a trust layer in agent e-commerce that establishes that everything you're used to today in terms of protections, i.e. zero liability if something goes wrong, a path to disputes, authorizing the agent as the agent is actually a real agent versus a rogue agent, etc., etc. So that is done. we've also gone and we've enabled all issues globally and we're rolling this out with merchants a key part of the merchant rollout is you have to make it easy particularly for small merchants where's a big opportunity in all of this is that a small business can start to compete with a large business because they're suddenly discoverable because the agent will discover them in different ways than that happens today so it might go to a few marketplaces then it's a level playing field for everybody. So if that implementation is too difficult, that would be a real problem. So we have a low code to no code implementation, which is a big differentiator to other parties in the ecosystem. All of that is ready. Now it just takes a little bit of time and people to play around like my wife did. And next time it's going to be better and so forth. All of this takes a bunch of partnerships and big partners to come together, Microsoft, OpenAI, Google, and so forth. And that is happening. Now, that's on the consumer side. So you look in the world of B2B, tremendous opportunity. I mean, that's a huge upside as well because you can, you know, it's not hard to imagine that somebody will go to their chief procurement officer and say, why don't you get a bunch of agents that are going to help us procure what we need as a company? And then if you imagine, 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 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 two corners as a company if this is higher frequency instant micro transactions that are the fraction of a dollar our stable coin capability may just be about the right thing to go after those additional transactions while our you know basic card proposition works for all the consumer things we've just talked about and for bigger more regular b2b transactions so this could happen. Our announced BVNK acquisition 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 and natively. So I'm excited. So bottom line of the whole thing, Agentec is a tremendous opportunity.

Harshita Rawat, Analyst — Bernstein

It just takes a little bit of time. And you talked about how it could accelerate B2B, create kind of new time, 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 you launched verifiable intent also earlier this year, so can you maybe talk about, I think you talked about agent pay, but maybe talk about, like, the whole suite of capabilities and the additional value you're bringing on the transaction so first of all by enabling

Michael Miebach, CEO

all the parties as I just talked to issuers merchants so 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 without a counter-accounts of 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 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 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. In the current world of payment, about half of our online transactions are tokenized. So tremendous opportunity for us, at the same time, tremendous value that we bring to that ecosystem 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 ten pairs of running shoes and you're like surprised okay like I never asked that how do you prove that how do you how to 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 boxed 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's when we got together with Google to 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 in enabling the exact same experience that the MasterCard promises today zero 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 reduce the hurdles for consumers to really go about that that is a lot of value that bring we bring from the start of the transaction before even before the transaction on the standard setting authentication tokenization dispute all elements of it and then you can layer a lot of a set of services on top of it how do we prove 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 permissioned, 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. It's like a growth opportunity. It's a transaction expansion opportunity because baskets will spread or 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

Harshita Rawat, Analyst — Bernstein

tailwind for commerce and trust identity dispute becomes even more important as services in the agentic world and this is what you good thinking ahead on our

Michael Miebach, CEO

identity solutions this will be another way to deploy them right and Michael

Harshita Rawat, Analyst — Bernstein

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

Michael Miebach, CEO

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 need different solutions, which is why we always expand our payment capabilities. But fundamentally, I think the starting of comparing that stable coin might be the cheaper answer or something like that, I think these are kind of misconceptions. They're really different things, very different things, but they're also similar things in a way how we look at it. Stablecoin is another rail. We have card rails. We have account account rails. We have stablecoins as a rails. 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 veidage 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 you know choice whatever it is it's just something for us to have on our radar there's a broader conversation behind of a stable coins in general so aside from agentic so where is that technology helpful and you look in the b2b in a cross-border space there's tremendous applicability of that again for p2m you know cards is great but we love stable coins for a whole a whole host of reasons we can talk more about.

Harshita Rawat, Analyst — Bernstein

So let's talk about that. So you recently announced BVNK acquisition. You have a very healthy growth in your crypto co-brand card program. There is clear potential for stable coins, especially when paired with cards, to improve a lot of flows. And 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 misunderstood by some with regards to MasterCard and Stablecoins.

Michael Miebach, CEO

So before we come to misunderstandings, like your perception question earlier, 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 two 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 to do with international trade transactions. and say, if these 10 conditions are fulfilled, I'm going to release this payment. You can't really do this in a 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, I'm sending a dollar stable coin, 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 stable coin 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 VC ends 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 said 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. 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's 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 BB&K 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 MasterCard capability we're gonna gonna 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 outstanding. Obviously, no gun jumping and all these kind of things. But, you know, 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 uh in your question it might just come from the fact that there are some enthusiasts and say well you know cheap uh stable coins are a much cheaper opportunity but i think beware what 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 uh that is to be considered is security so security costs something we invest billions of dollars in security. So how do you ensure the cybersecurity fraud identity? So 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 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.

Harshita Rawat, Analyst — Bernstein

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

Michael Miebach, CEO

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.

Harshita Rawat, Analyst — Bernstein

So Michael, let's switch gears and talk about the core of MasterCard, consumer payments more in detail. You have historically, globally in the US and Europe, have 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?

Michael Miebach, CEO

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 PC a 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. So take insurance or healthcare. Those are verticals we have talked about in our earnings and that we're very busy and putting card acceptance in place and you know 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. 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 MetroCard 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 one transactions into three transactions so just all this multiplicity that's happening on the transaction side in V with great methodology and precision we go after all of these transactions which is we why we laid out that goal across the management team people are primed for that our 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. is a bit further along. 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 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 you know 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 understand transaction opportunity works a little differently and we have laser-sharp focus on verticals, hard under-penetrated verticals in 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

Harshita Rawat, Analyst — Bernstein

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. And 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 context.

Michael Miebach, CEO

Sovereignty.

Harshita Rawat, Analyst — Bernstein

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 perspectives and nationalism around payments and how you're engaging.

Michael Miebach, CEO

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 in payment systems. So, you know, 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 cyber security 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 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 one plus one, a three solution generally. So I think that's been serving as a good model. I think it's also important for us to show up locally, 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 are just talked about like cyber security resilience and so forth at the same time to recognize local needs and requirements including the resilience part so what we do is we just announced October last year with Europe you talked about Europe that we're gonna set up three new data centers that's 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 this 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.

Harshita Rawat, Analyst — Bernstein

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

Michael Miebach, CEO

Quickly on China. This almost feels like it is mutually exclusive.

Harshita Rawat, Analyst — Bernstein

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

Michael Miebach, CEO

So we negotiated and, you know, 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 a 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 you 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 normal for all of us, but that was not normal in China. It's now 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 our 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 and the Chinese digital players through our joint venture partner to build everything that's needed, issuance and acceptance and good value propositions. So there's a whole number of programs that we put out. So it's very encouraging. The Chinese government and the U.S. government, this is why we were part of that delegation, sees that both as 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, you know, 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.

Harshita Rawat, Analyst — Bernstein

Another significant part of your growth algorithm is value-aided services. Not long-term, it's happening now. And we were talking about this earlier. Historically, for investors, it was easier to forecast MasterCard revenue growth. All you needed was a content.

Michael Miebach, CEO

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

Harshita Rawat, Analyst — Bernstein

And now, valued 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 your valued services and what is driving your conviction behind that growth.

Michael Miebach, CEO

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 enriched data set highly 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 cyber security 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 competitors 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 virtual cycle and our strategy now in services is 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 this so the first thing to say is is the power of our distribution model through the network sixty percent of our services by design are distributed through the network and we we put those services out alongside the transaction before the transaction during the transaction after transaction earlier we talked about identity solutions we talked 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, you have 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, 60%. So if you're a SaaS company, you have to say, sell every widget by every widget. That's not what this services portfolio is about. It's designed that way. It's 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 risks coming along with that as people go after that data the fraudsters and scammers 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 the our services portfolio so combination of network 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, 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 advantage to go to market so you kind of waterfall that whole thing and you're you're starting with straight on the transaction opt-in and then you take our consulting services which we are the further the furthest out you know a good chunk of that used to be human delivered so we're one of where 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 customer 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 resolve you know address them said okay what's the next thing that companies worry about what is their concern in a world of these cyber security 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 recorded future like MasterCard with recorded future that 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 threat vector is In particular, this card number has been seen in the dark web. You should ask extra questions and put your 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 us vis-a-vis just selling widgets and being a services company.

Harshita Rawat, Analyst — Bernstein

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

Michael Miebach, CEO

And that has, you know, we do a lot of brand analysis and what does our brand stand for, the two interlocking circles. Trust is the word that is most often quoted because when you hear our Sonic brand or when you hear the interlocking circle, people say, okay, 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.

Harshita Rawat, Analyst — Bernstein

I would feel much safer with an agent with a MasterCard.

Michael Miebach, CEO

I hope you do. I hope you do. Is there anything else?

Harshita Rawat, Analyst — Bernstein

Let's talk about tokenization. a foundational layer 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.

Michael Miebach, CEO

So tokenization most fundamentally takes the payment credential, the 16-digit card number, and puts it into a one-time use token. And that facilitates the transaction in the most secure way, should it ever be hacked and you can't do anything with it because it was only for one-time use so that was a simple idea it goes back to over a decade ago and 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 transaction are now tokenized and And, you know, 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, which we now have with half of our transactions. So then we can go ahead and say we can tag on a set of additional services around the basic token capability. that could be token authentication you could go ahead into lifecycle management say for example a card like when your card credential runs out and the card expires and you have a token then automatically that can be updated to say here's the new just a refreshed card number and that's all behind 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 reached 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 three to six percent because it's safer transactions. Security is 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 you know token driven services on top of that you can quantify that value and start to see that as part of just how we continue to grow because we invest in this foundational technology we rolled it out and it drives a better digital commerce ecosystem earlier we talked about agentic and you know in this case tokenization is the center of all of that so with agentic rising you will see a world where the the growth rate of tokenization is going to continue to increase because that is everything by definition is tokenized there 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 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 in 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 as part of our services portfolio Michael we have about

Harshita Rawat, Analyst — Bernstein

six minutes left and we haven't talked about commercial and new flows 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

Michael Miebach, CEO

our investor day, if I 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, heterogeneous, I think is what you called it just now. All commercial entities are on increasing pressure for profitability. Everybody's focusing on streamlining their processes, put out better products. So we're just at a situation where I feel there's an unlock. You see people that are used to slick, easy digital experiences in their personal life, and then look at a 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's still heterogeneous. I think that's also true. So we're finding easy ways to create points of aggregation and finding 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 ECN and VCNs and said so what else can we do said we need flexible economics so that payers and payees can agree on that so you know mass guard 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 is does commercial even mean so it's industry by industry and we're looking for other aggregation points ERP systems are a good example of that we're now in 10 plus of the leading ERP systems where we just recognize their existing services and we plug our services that make payments easier right into that so many points of unlock have now been put together I feel this is a tremendous growth opportunity for us some of these is not even about new products are simply distribution. Take small business. So just more and more governments, more and more banks, therefore, more and more countries are focused on enabling their small business sector in a better way. And if you have a fit for purpose SME proposition, we're launching these programs left, right, and center all day. So this is just, it's really gaining a lot of momentum. From our growth perspective, as far as we can see, we're outpacing the market. So I see the momentum coming I'm impatient though I want to see more and I was sunny to see it quicker and I'm pretty convinced with with our team that we're on the right track there so those 80 trillion if you break it it looks very huge so we're really breaking it down very specifically say by vertical bike and geography and say here's a big focus for us and as you alluded to earlier

Harshita Rawat, Analyst — Bernstein

agentic commerce as some of the best product market fits in B2B and can potentially accelerate the digitization. Exactly. So, Michael, we have about two minutes left. We have talked about a number of growth opportunities for MasterCard. What is your vision regarding how MasterCard as a business will evolve five years from now? Right. So,

Michael Miebach, CEO

the vision that I see is we laid out a very clear strategy across our consumer payment opportunity, which we just spend a lot of time the commercial payment opportunity and a set of services truly differentiate that that is a strategy that is set to last the years to come i'm excited about that strategy it works when i look at the underlying product set our go-to-market our distribution capabilities our data advantage i'm very excited about how we roll that strategy out and we see it in our numbers and how we continue to put good prints out there and are there for our customers. I'm excited about our team that is behind that strategy that I work with every day. So I think we're a truly differentiated player. What I'm particularly excited about is our continued constructive paranoia of looking around the next two corners to see what else is coming so that we had the right kind of sentiment and drive to go after B, B, and K at the right time. This is right for us to come, that we were there on day one with agent pay, that we found verifiable intent. So we're really shaping the industry. We're not following the industry. We're shaping the industry, and then we adjust our strategy where needed, but that is, I think, the thing that really sets us apart. We do this in the emerging market. We do it in developed markets, and from that perspective, I think we're going to have a long and exciting future, and we lean in every day.

Harshita Rawat, Analyst — Bernstein

And this is what you did as, I think, as the chief product officer 10 years ago for Valuated Services.

Michael Miebach, CEO

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

Harshita Rawat, Analyst — Bernstein

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

Michael Miebach, CEO

Thank you very much.