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Transcript of 2014 ma-investment-community-meeting
©2014 MasterCard.Proprietary
2014 Investment Community MeetingSt. Louis, Missouri
MasterCard Incorporated
September 17, 2014
©2014 MasterCard.Proprietary
Agenda
September 2014
Page 2
Topic Speaker TimeRegistration 9:30 a.m.
Welcome Barbara Gasper 10:00 a.m.
Advancing Our Strategy Gary Flood 10:05 a.m.
Driving Innovation Garry Lyons 10:35 a.m.
North America Markets Chris McWilton 10:45 a.m.
International Markets Ann Cairns 10:55 a.m.
Financial Perspective Martina Hund-Mejean 11:10 a.m.
Q & A Session Management 11:20 a.m.
Lunch Table Discussion with Management 12:00 p.m. – 1:00 p.m.
Product Experiences 12:00 p.m. – 3:00 p.m.
MasterCard Investment Community Meeting – St. Louis, MO
©2014 MasterCard.Proprietary
Lunch Table Discussions
September 2014
Page 3
1
2
3
4
IMK UpdateAnn Cairns
Europe UpdateJavier Perez
Merchant RelationshipsDenise Walker
Cost/Value of Card AcceptanceShawn Miles
5
Broadening our Processing FootprintMichael Manchisi
6
US Market UpdateChris McWilton
7 EMV UpdateCarolyn Balfany
2
7
3
1
4
6
5
MasterCard Investment Community Meeting – St. Louis, MO
©2014 MasterCard.Proprietary
Forward-Looking Statements
MasterCard Investment Community Meeting – St. Louis, MO September 2014
Page 4
Today’s presentation may contain, in addition to historical information, forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.
These forward-looking statements are based on our current assumptions, expectations and projections about future events which reflect the best judgment of management and involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by our comments today. You should review and consider the information contained in our filings with the SEC regarding these risks and uncertainties.
MasterCard disclaims any obligation to publicly update or revise any forward-looking statements or information provided during today’s presentations.
Any non-GAAP information contained in today’s presentations is reconciled to its GAAP equivalent in the Company’s periodic SEC filings.
©2014 MasterCard.Proprietary
2014 Investment Community Meeting
Advancing Our Strategy
September 2014
Gary FloodPresident, Global Products & Solutions
©2014 MasterCard.Proprietary
We Are Executing Our Strategy
September 2014
Page 6
Personal Consumption Expenditure
Cash & Check vs. Electronic Payments“Grow the Pie”
MA Share of Electronic Payments“Grow Share”
Grow the Pie(Chip away at the 85% still in cash / check)
• Facilitate financial inclusion
• Drive small merchant acceptance
• Capture low & high value payments
Grow Our Share(Gain larger portion of the 15% electronic)
• Build competitive advantage through technology & services
• Participate in more domestic transactions
MasterCard Investment Community Meeting – St. Louis, MO
©2014 MasterCard.Proprietary
Merchants Help them grow their business, understand their customers, increase their profits
Governments Help drive financial inclusion and transparency
Consumers Help them make the right purchase decisions,get the best deal, make shopping fun
Financial Institutions
Help them delight customers, grow revenues, identify new opportunities
Digital / Tech Players Improve payment experience, drive innovation
Telcos Increase revenue per user, improve stickiness
We Are Focused on Delivering Valueto a Broader Set of Stakeholders
September 2014
Page 7
MasterCard Investment Community Meeting – St. Louis, MO
©2014 MasterCard.Proprietary
Two Megatrends Continue to Create Opportunity Across Markets and Segments
Conversion of Cash to Electronic Payments
Convergence ofPhysical and Digital
Growth opportunity is significant; we are well positioned
September 2014
Page 8
DisplaceCash
NewMerchants
New PaymentFlows
NewConsumers
85% of transactionsare cash and check
2.5 billion underservedconsumers globally
Extend acceptance –100 million merchants
Social Disbursements, Bill Pay, P2P, Remittance
MasterCard Investment Community Meeting – St. Louis, MO
©2014 MasterCard.Proprietary
Core Products Continue toDeliver Strong Growth
September 2014
Page 9
1H 2014GDV Growth
Market Share Trend
Consumer Credit 11% • Winning share
• Driving preference
• Capturing new payment flows
• Embedding innovation
Commercial Credit 14%
Debit 16%
Prepaid 17%
Strong value propositions engaging stakeholdersSignificant opportunity for continued growth
MasterCard Investment Community Meeting – St. Louis, MO
©2014 MasterCard.Proprietary
Differentiated Capabilities Delivering Better Payments Experiences
Safety & Security
Cardholder Solutions
Loyalty Solutions
DataAnalytics
Processing Program Management
Payment Gateway
DigitalSolutions
Labs / R&D
Advisors
Brand & Marketing Platforms
FraudSolutions
September 2014
Page 10
Richer, more compelling product propositions
Broader capabilities toserve stakeholder needs
Deeper customer and consumer relationships
Innovation across thevalue chain
MasterCard Investment Community Meeting – St. Louis, MO
©2014 MasterCard.Proprietary
Authentication• Extending SecureCode+• Implementing device recognition• Incorporating biometrics
Superior Safety & Security Drives Brand Preference and Competitive Advantage
September 2014
Page 11
Making MasterCard the safest, simplest and smartest way to pay
Physical Transaction Security• Enhancing global security• Leading the US market in security upgrade• Both chip and contactless
Digital Transaction Security• Leading development of tokenization standards• MasterCard Digital Enablement Services (MDES) is in production• Delivering EMV-based security for digital payments
MasterCard Investment Community Meeting – St. Louis, MO
©2014 MasterCard.Proprietary
We Are Leading in Digital
September 2014
Page 12
Easier, faster, safer digital transactionsProviding value before, during and after the purchaseMasterCard is playing a bigger role in the payments ecosystem
CredentialManagement
Digitized and tokenized card credentials, distinct from actual card number
Secure digital payment credentials and transactions
MasterPass
Integrated suite of services enabling digital commerce
Enriched and seamlessdigital shopping experience: online, in-store, in-app
Opening MasterCard services and assets to wholesale and retail developers
Open API & Apps
Connect to and benefitfrom creativity ofdeveloper community
MasterCard Investment Community Meeting – St. Louis, MO
©2014 MasterCard.Proprietary
We Have Grown Our Processing Capabilities
40 millionCards
43 billionTransactionsSwitched
September 2014
Page 13
5.2 billionTransactionsProcessed
55Countries
As of 2013
Added in 2014
As of June 2014, Annualized As of June 2014, Annualized
As of June 2014As of June 2014
MasterCard Investment Community Meeting – St. Louis, MO
©2014 MasterCard.Proprietary
Strong Value Propositionsare Growing Share
September 2014
Page 14
Winning affluent issuer and merchantco-brands around the world
• MasterCard Travel Services• Global Concierge• Luxury Hotel Program• Priceless Cities• Rewards• Benefits and insurance
Exceptional Services forAffluent Cardholders
Affluent
Market share gains acrosssegments and geographies
• Unsurpassed acceptance• Enriched program data• Program analytics and insights• Spending controls• Virtual cards
Leading Payments Solutions forBusiness and Government
Commercial
MasterCard Investment Community Meeting – St. Louis, MO
©2014 MasterCard.Proprietary
Converting cash and check to electronic payments
Inclusion initiatives provide entryto a “virtuous cycle” of
government engagement
We Are Driving Financial Inclusion and Opening New Payment Flows to Grow the Pie
September 2014
Page 15
• New industry verticals
• New senders and receivers
• New and expanded acceptance
Engagement basedon thought leadership
Mutually beneficial commercial outcomes
Stakeholder and constituent communications
Enriched policy dialogue
Government Engagement
Financial Inclusion New Payment Flows
MasterCard Investment Community Meeting – St. Louis, MO
©2014 MasterCard.Proprietary
Acquisitions Partnerships Innovations
Expanding Footprint
Extending Capabilities
Diversifying Business
Acquisitions, Partnerships and Innovations Extend Our Capabilities and Reach, as Well as Diversify Our Business
September 2014
Page 16
MasterCard Investment Community Meeting – St. Louis, MO
©2014 MasterCard.Proprietary
2014 Investment Community Meeting
Driving Innovation
September 2014
Garry LyonsChief Innovation Officer
©2014 MasterCard.Proprietary
The World Is Changing
September 2014
Page 18
MasterCard Investment Community Meeting – St. Louis, MO
©2014 MasterCard.Proprietary
We Created MasterCard Labs toTake Risks, Try Things and Fail Smartly
September 2014
Page 19
Labs asa Service
Startup Engagement
and Acceleration
TechnologyInnovation Management
Incubation
MasterCard Investment Community Meeting – St. Louis, MO
©2014 MasterCard.Proprietary
Where are the Labs Today?
September 2014
Page 20
MasterCard Investment Community Meeting – St. Louis, MO
©2014 MasterCard.Proprietary
2014 Investment Community Meeting
North America Markets
September 2014
Chris McWiltonPresident, North America
©2014 MasterCard.Proprietary
North America MarketsRegional Overview
GDV and GDV Growth 1H 2014 (local currency)
North America GDV: 33% of global totalGDV Growth: 9%
2013 PCE Growth (local currency) and Cash Penetration (% of transactions)
North America PCE: 3.4% Cash Penetration: 54%
September 2014
Page 22
MasterCard Investment Community Meeting – St. Louis, MO
Source: PCE – Oxford Economics. Cash Penetration – MasterCard Advisors analysis.
©2014 MasterCard.Proprietary
North AmericaStrength Across the Business
Merchant Co-Brand Winning Streak• Merchant expertise in-house• Products and services tailored
for merchants• Strong Issuer relationships
Core Products Drive Revenue• Consumer / Commercial Credit• Debit• Prepaid
September 2014
Page 23
MasterCard Investment Community Meeting – St. Louis, MO
©2014 MasterCard.Proprietary
North AmericaSafe / New Ways to Shop
September 2014
Page 24
MasterCard Investment Community Meeting – St. Louis, MO
Safety and Security• EMV• Merchant POS terminalization• Tokenization
Digital Transformation• Apple Pay entry into payments• Strength of MasterCard network
©2014 MasterCard.Proprietary
North America Positioned for Continued Growth
September 2014
Page 25
MasterCard Investment Community Meeting – St. Louis, MO
Operate in the world’s largest economy
At the epicenter of payments innovation
North America is mature – but definitely not a slow-growth market
Source of long-term profitable growth for MasterCard
©2014 MasterCard.Proprietary
2014 Investment Community Meeting
International Markets
September 2014
Ann CairnsPresident, International Markets
©2014 MasterCard.Proprietary
International Markets Regional OverviewPage 27
September 2014
GDV and GDV Growth 1H 2014 (local currency)
Latin America (8%)GDV Growth 14%
Europe (30%)GDV Growth 14%
APMEA (29%)GDV Growth 18%
North America (33%)GDV Growth 9%
MasterCard Investment Community Meeting – St. Louis, MO
©2014 MasterCard.Proprietary
International Markets OpportunityPage 28
September 2014
2013 PCE Growth (local currency) and Cash Penetration (% of transactions)
Source: PCE – Oxford Economics. Cash Penetration – MasterCard Advisors analysis.Note: Figures exclude China.
Europe 3.2%Cash Penetration 77%
APMEA 5.1%Cash Penetration 93%
Latin America 11.5%Cash Penetration 92%
North America 3.4% Cash Penetration 54%
MasterCard Investment Community Meeting – St. Louis, MO
©2014 MasterCard.Proprietary
IMK Continues to Grow SharePage 29
September 2014
Offering differentiated products & services
Winning new business with traditional partners
Reaching the underserved throughfinancial inclusion
Working actively with governments
Building value-added serviceswith merchants
Expanding acceptance footprint
Investing in the future
MasterCard Investment Community Meeting – St. Louis, MO
©2014 MasterCard.Proprietary
EuropeWinning with Differentiated Products and Services
Page 30
September 2014
Advisors• Leading with services• Optimisation and tailored solutions
Innovative Partnerships• Live and scaling with eNett• Signed and developing with Basware
Extending Processing Assets• Increasing presence in high-growth markets• Simplifying digitisation
MasterCard Investment Community Meeting – St. Louis, MO
©2014 MasterCard.Proprietary
Latin AmericaBuilding for the Future from a Solid Core
Page 31
September 2014
Solid Base• Strong banking and growing government
businesses• Scaling the market in Mexico
And room to grow:• Colombia – 10% PCE is electronic• Peru – banked population is only 30%• Brazil – electronic PCE: 20% in 2009
27% in 2013
Mobile• Live and scaling, launching and signing
MasterCard Investment Community Meeting – St. Louis, MO
©2014 MasterCard.Proprietary
Asia PacificNew Customers through Government Engagement and Financial Inclusion
Page 32
September 2014
Spotlight on: India
Partnership with National Skill Development Corporation (NSDC) and Central Bank of India• Debit solution for trainees• >200,000 cards issued to date• 150 million youths by 2022
UID Programme• Completed integration• Will support electronic-KYC
Government Engagement• Purchasing cards with governments of
Hong Kong, Singapore and Philippines• Key renewals with government-owned
banks in China
Financial Inclusion• First HomeSend partnership in Asia• Issuance with largest Islamic non-bank
savings institution in the world
MasterCard Investment Community Meeting – St. Louis, MO
©2014 MasterCard.Proprietary
Middle East AfricaDriving Business Expansion through “The New”
Page 33
September 2014
New Geographies• 62 of 69 countries• Pan-regional wins
New Customers• Governments as key change agents• Driving scale at the core
New Consumers• From unbanked to affluent• 22% year-on-year growth in cards
New Products & Services• Market-wide mobile ecosystem• Dubai processing hub
MasterCard Investment Community Meeting – St. Louis, MO
©2014 MasterCard.Proprietary
Regulatory UpdatePage 34
September 2014MasterCard Investment Community Meeting – St. Louis, MO
©2014 MasterCard.Proprietary
2014 Investment Community Meeting
Financial Perspective
September 2014
Martina Hund-MejeanChief Financial Officer
©2014 MasterCard.Proprietary
Topics for Today
2014 Outlook
Capital Planning
M&A Activities
Long-Term Outlook
September 2014
Page 36
MasterCard Investment Community Meeting – St. Louis, MO
©2014 MasterCard.Proprietary
Processed
Q2 Jul / Aug
12% 12%
10% 8%
15% 15%
12% 11%
16% 15%
2014 Business Drivers
As-Reported
Growth Q1 Q2
Worldwide GDV 14% 13%
US GDV 9% 9%
Rest-of-World GDV 16% 15%
Processed Transactions 14% 12%
Cross-Border Volume 17% 16%
July/August growth trends same or slightly better than previously reported through July 28th
September 2014
Page 37
MasterCard Investment Community Meeting – St. Louis, MO
©2014 MasterCard.Proprietary
2014 Financial Outlook
Net Revenue
Operating Expense
Tax Rate Approximately 32%, with potential for some improvement
Full-year growth rate in the low teens, including impact of acquisitions
Full-year growth rate at the lower end of 3-year range
FX ImpactEuro and Real net neutral
Underlying local currencies have 1 ppt headwind on net revenue
September 2014
Page 38
MasterCard Investment Community Meeting – St. Louis, MO
©2014 MasterCard.Proprietary
Capital Planning – Priorities
StrongBalance Sheet
Preserve strong balance sheet, liquidity and credit ratings
Long-TermBusiness Growth
Investments in organic opportunities and M&A
Return Excess Cashto Shareholders
Continue to return excess cash with bias towards share repurchases
September 2014
Page 39
MasterCard Investment Community Meeting – St. Louis, MO
©2014 MasterCard.Proprietary
$1.8 $2.4 $2.8 $3.1$0.1
$0.3$0.3
$0.4
$1.9
$2.7$3.1
$3.5
2012 2013 1H 2014 ThroughAugust 2014
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
$ in
bill
ions
Share Repurchase & Dividends
Share RepurchaseDividends
Return of Capital – Historical Perspective
September 2014
Page 40
MasterCard Investment Community Meeting – St. Louis, MO
©2014 MasterCard.Proprietary
M&A Strategy Execution
Capability Enhanced AcquisitionProcessing Provus, ECS
Mobile Technology C-SAMLoyalty Pinpoint
Personal payments HomeSend JV
2013-2015 Performance Objectives
EPS dilution Impact of about 5 cents for both FY2014 and FY2015
Exclude new M&A activity
September 2014
Page 41
MasterCard Investment Community Meeting – St. Louis, MO
©2014 MasterCard.Proprietary
Longer-Term2013 – 2015 Performance Objectives*
Net Revenue Growth
Operating Margin
Earnings Per ShareGrowth Rate At least 20% CAGR
Minimum 50% annually
11-14% CAGR
* On a constant currency basis and excluding future acquisitions
September 2014
Page 42
MasterCard Investment Community Meeting – St. Louis, MO
©2014 MasterCard.Proprietary
2014 Investment Community Meeting
Question & Answer Session
September 2014
©2014 MasterCard.Proprietary
2014 Investment Community Meeting
Final Thoughts
September 2014
Gary FloodPresident, Global Products & Solutions
©2014 MasterCard.Proprietary
Some Final Thoughts
September 2014
Page 45
Growth opportunity is significant
Shift to digital is changing payments landscape and creating opportunity
Delivering solutions to a broad set of stakeholders
Acquisitions and partnerships extending capabilities and reach
Innovating to accelerate growth
Safety & Security underpins everything we do
Strategy execution is on target
MasterCard Investment Community Meeting – St. Louis, MO