Mastercard 1Q17 Earnings Call Notes

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Ajay Banga – MasterCard, Inc.

Not much has changed in economy

“Now turning to the economy, broadly speaking, not much has changed since the last quarter. We’ve seen modest pickup in global growth, in part due to market-specific fiscal stimulus, although uncertainty about the direction of trade policies continues to be a concern. In the U.S., consumer and business confidence remained strong. Employment is rising. Wages are beginning to increase.”

Brazil emerging from recession

“In Latin America, Brazil is showing signs of emerging from its two-year recession, and we continue to see modest growth in Europe with the unemployment rate nearing a 9-year low. Germany remains solid. There’s slower growth in the UK, Italy, and France, driven by rising inflation and some uncertainty around the impact of Brexit negotiations. Regarding travel, we are seeing increased inbound traffic into the UK due to the weaker pound. However, outbound consumer spend has declined in the case of the UK.”

Brazil is turning a corner

“So, Don, you’re absolutely correct that the international markets have in the last, I would say not just this quarter, over the last six to nine months, things have been moving up in the international markets. Remember, Brazil was one of those big markets for us that was holding it back. Brazil is turning the corner. I wouldn’t yet call it a reshape movement, by the way. I’m looking at a kind of flat U. It’s stopped declining. It’s improved a bit. This is a good thing. There’s a lot going on in Brazil on the political and economic environment that still has to pan out for this to be a continued improvement, but it’s a way better than it was a year ago at this time. So that’s the first one.”

Lower growth in China but Korea and Hong Kong are fine

“China is interesting. There is lower growth in China, but Korea and Hong Kong remained very strong, so it moves around. But if I were to focus on cross-border, it would be Europe and North America that are showing results, with Brazil as well. And then the others come a little after that.”

India still not totally back to normal because of cash withdrawal

“Overall, GDV is still impacted. I think if you spoke to consumer product companies that are large in India, a Unilever kind of company, they would tell you they still see an impact on total consumer volumes and downsizing of inventory in the retail system because of some non-availability of adequate cash for transaction capability. So there’s an interesting mix going on. You’re seeing more electronic. You’re seeing a little more cash, still not back to where it was, but it’s headed in the right direction, but more importantly, headed in the right direction with some tailwind on the need to fix towards electronic versus more cash. That’s what’s going on underlying all this.”

Debit cards growing but still a heavy reliance on cash

“Now let me give you a couple of numbers that will tell you the magnitude of what has to be done there. So there are about 840 million debit cards in India, and those have grown by 20% – 25% over the last six months. This is a huge number. But of those, 770 million of them only take out cash from ATMs. Only 70 million of them have been used more than once at a point of sale. And therefore, the total volume of the number going through these two, the ones that I use for cash at an ATM, it’s $450 billion a year, the ones that are used for point-of-sale transactions $30 billion. So we’re talking a very cash-heavy marketplace with a great deal of reliance on cash as the instrument of driving the economy. That’s what they’re trying to work their way through.”