MasterCard Incorporated Class A Earnings Call Nuggets: Rebates & Incentives, U.S. Debt Business
Rebates & Incentives
Craig Maurer – CLSA: Wanted to ask on rebates and incentives they were materially higher in the quarter than what I was expecting, both absolute and as a percentage of gross. As we look through the year was there a timing issues that inflated first quarter, and what should we expect that pattern to look like through the rest of the year?
Martina Hund-Mejean – CFO: Let me take this. First of all, I have to tell you that actually rebates and incentives came in spot on, on our expectation. When I look at the consensus out there, the consensus seems to be actually really spot-on with what we expected. As you know, there are gyration from time to time and from quarter to quarter really depending on when we signed new deals and renewed deals, and in fact, for this quarter, we had actually the lapping of a new deal. So, we actually got a little bit of a benefit from that and that was the reverse in the last – in the year ago quarter. So, I’m not sure how to guide you other than to say what people have out there is pretty much spot on with what we expect.
Craig Maurer – CLSA: So, I could just follow-up, the Alibaba announcement, you were talking about MasterPass Wallet possibly getting into – while it was a very big number. I think, you said 800 million users, which I know is just the market size, but what’s the economic value of getting those wallets out there?
Ajay Banga – President and CEO: I’m not making money out of a fee from the wallet, that’s the difference in our program. I don’t want to charge consumers for the privilege of having this wallet, going to be 150,000 wallets out there before we knew what’s going on, and I don’t want to be the one charging fees on it. I want to make money from it when they use their wallets. So, if they use their card or they use services that the wallet will provide, that’s when we’ll make our money. So, I’m not doing it based on how many users pick up the wallet. It’s really to me what Alibaba is, is a partnership that expands the distribution footprint of MasterPass Wallets across the 6 million merchants that Alibaba has and has the ability to make it available to as many as 800 million users. They are adding 300,000 users every month. So, there is a whole new number there. But I don’t know how many of them will adopt it, we’ll see but the merchant for 6 million that will be a big distribution footprint expansion. In addition, they are going to use virtual card numbers for the merchants to buy goods cross-border as well as within China, which has been a big problem for them to be able to do thus far on e-Commerce. So I believe that’s going to help enormously with the facilitation of that purchasing. Then of course, we’re going to work with Alibaba and so on helping them with fraud, security and the like. So, it’s got three components to it.
U.S. Debt Business
Christopher Brendler – Stifel Nicolaus: I wanted to ask a question on the U.S. debit business. Do you think at this point we should start to see the more normal debit rates continue, and also it’s pressure on the yield (indiscernible) PIN debit (indiscernible) played its way through here? And I have a follow-up as well.
Martina Hund-Mejean – CFO: Yeah Chris, on the U.S. debit business I think what you seeing from the numbers and then what I said about April, you’re starting to see everything going more to normalized rates and to the market growth. Right? I mean we think from a volume, from a U.S. debit volume point of view, the market growth will be around 6% to 8% for the foreseeable future. That is kind of what we are trending to. And something very similar you’re actually seeing from a transaction processing point of view. We have one more quarter to round out and then you should really see us coming back to market…
Christopher Brendler – Stifel Nicolaus: My follow-up is more of a strategic question. We are hearing a lot of noise and mostly complaints about the U.S. EMV initiative. Is there anything you can sort of give issuers and merchants a little more of an incentive. Why this is going to benefit them? I think a lot of merchants in particular don’t see much benefit from moving to EMV. It sounds like some merchants are actually (indiscernible) liability shift is not much of an incentive. Can you just give me any color there?
Ajay Banga – President and CEO: I think you’re mixing up a couple of things, let me just help a little bit, put into context. The liability shift is right now being discussed mostly with the ATM operators, that’s where the conversation is different from merchants. The objective of that was people who had EMV cards from other parts of the world, when they came to the U.S., which was still a mag-stripe environment, the level of fraud was much higher. Fraudsters will move to where the security and protection is the weakest in the chain. EMV is clearly a higher security protocol than mag-stripe. All we are trying to do is ensure that card consumers who are traveling from other parts of the world when they come to the U.S. do not have experiences that make them feel that their cards are not safe. A number of the ATM operators and banks are actually quite comprehending of that, number of them are spending the effort and energy to get some of their ATMs upgraded. In others what we are trying to do is to roll out a tool called fraud risk manager, which allows the ATM operator and the issuer and the acquirer at the other end of the game to look at the risks involved in EMV card coming to a mag-stripe ATM and that helps them manage that risk. My expectation is not – just to make it clear, that people would like a tap switch-on on April 19th with tens of thousands of ATMs switched, I never expected that. What I expect is a roadmap that shows that in most places where tourists travel where the frequency of utilization of the ATM will be maximum that they will get the right experience with an EMV-enabled card. My expectation over a period of time most ATMs in the U.S. will switch. I just think it will take some time because it will be the right thing to do for all the right reasons. I think it’s connected a lot of the launch of EMV issued cards as well in the U.S. eventually. There will be a timeframe that will all come together. We are starting with ATMs. It will move to the issuance of cards, this may take 2 to 3 years to play out in its full form, and I understand that. But all we are trying to do here is protect consumers who travel as well as ensure that banks overseas do not get unnecessary fraud experiences because this market has the lowest ability to provide security protection based on mag stripe versus EMV, that’s what we’re trying to do. I think we’ve had a very productive dialog with a number of merchants and banks and ATM providers, and all big changes like this, this is a very big change, in all big changes like this you will have people pulling in different directions. Our job is to try and make them get the incentive to go and feel the importance of going to the right level of security protocol, that’s all we’re trying to do.
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