Barbara Gasper
Good morning, everybody and welcome, either those of you here with us in New York or those of us who are joining on the webcast which is being video-streamed for the first time this year. I am, Barbara Gasper, Head of Investor Relations for MasterCard and on behalf of the entire MasterCard management team I’d like to thank you for joining us to spend time today at our Annual Investment Community Meeting.
We think that we have developed a program for you again this year which addresses many of the topics that we’ve heard that are of interest to you. And we are again as our standard practice combining a morning of formal presentations with an afternoon of product demonstrations.
Ajay Banga, our CEO will kickoff today’s formal presentations with a strategic overview and our progress to-date. You will then hear from several members of our management team beginning with Gary Flood, President of Global Products & Services, who will provide an overview of our products and services efforts. He will then hand it over to Ed McLaughlin, our Chief Emerging Payments Officer for some thoughts about what the opportunities for MasterCard are as the physical and digital payment spaces converge.
We will then move to hearing about the regional perspective beginning with Chris McWilton, who is President of North America, and then Chris will be followed by a panel that includes Craig Vosburg, Group Executive, U.S. Market Development; Tim Murphy, Chief Products Officer; Kevin Stanton, President of MasterCard Advisors who will discuss some of our efforts to provide value to our merchant partners.
Following a brief midmorning break Ann Cairns, President of International Markets will give an overview of our non-U.S. operations and then kickoff a panel discussion with three of her regional leaders, Daniel Monehin, Bella Stavchansky, and Eddie Grobler along with Cathy McCaul who will each talk about delivering on several of our key priorities in their respective areas. After that Martina Hund-Mejean, our CFO, will provide the financial perspective on our business.
And then after our second Q&A session, Ajay will be back up for some closing comments before we adjourn about 1:15 for lunch and the product demos.
Copies of the slides that we’re using today can be found either in your binders for those of you who are here and they’re also posted on the Investor Relations section of our website for your reference. Additionally, there will be an audio replay of this event available on our website for 30 days. Along with our presenters we have a number of other management members on the seat from the senior leadership team here with us this morning and rather than take time to introduce them now I would just point you to the back of bio-section in your binder where you’ll see a list and their pictures, so those are the other people who are here but not up on stage.
Today help facilitate the dialogue with our executives over lunch, there is also a diagram in your binder right behind the agenda showing the location of several lunch and discussion tables that will be down on the lower level and the executives who will be hosting those tables. Any executive who are not hosting a table will be stationed around the product experience room.
Before I go any further, I do to have acknowledge the other members of my Investor Relations team who have put a lot of effort into this event Catherine Murchie, Ryan Beaudry, and Tina D’Amato just a few administration items to get out of the way.
You can see from the agenda that this year we’re splitting the Q&A into two sessions. The first will begin about 11:15 and the second one out about 12:40. As in the past we will have the ability to take questions both from the audience and those of who are joining us by the webcast. There is an ask question button on your screen if you’re dialing in or listening in on the webcast and you can get any instructions there as to how to submit your question.
Our agenda does call for a brief 15 minute break at approximately 11:30. For those of you on the webcast can reconnect or stay on for 15 minutes you might just want to stay on. And as a courtesy to our speakers and those around you, I need to ask people who are here in the room if you would please silent your phones and your Blackberries now.
And then finally just as a reminder, today’s presentation includes some forward-looking statements about our expectations for future performance, actual performance could differ materially from those suggested by our comments today. Additional information about the risk factors that could affect future results is detailed in our SEC filing including our Forms 10-K, 10-Q and 8-Ks and now with that I’d like to turn the program over to Ajay Banga, Ajay?
Ajay Banga
Good morning everybody and thank you for being here and thank you for your consistent support and your questions and your participation. Over the course of the year we guys get to meet you in a number of different settings and this is only one of them, but it’s good to be together. So thank you for being here.
Let me start off by there we go, so something looks familiar here and you will see this coming up in a couple of times over the course of today, those three concentric circles. The reason I have got them is because they inform the basis of our strategy, the fact that personal consumption expenditure which grows on the average through cycles between four, five odd percent and Martina will talk about this in some detail later. That is, think of this as the three circles as being three legs of a stool for a minute. That leg of the stool is the one that has the most instant reaction on the company’s revenue; it’s also the one that in which we have no control.
That’s one of the realities of how our revenue comes, it comes out of how much people spend around the world. The only good news is over the years while some countries maybe going up at a particular point of time and others maybe struggling overall the world has been demonstrating the four, five odd percentage point growth of personal consumption expenditure.
The second leg of the stool is the second concentric circle and that’s really the share of those transactions that contribute to that personal consumption expenditure, how many percentage of those transactions are in and check versus how many of them are in electronic forms, and that typically has been 85, 15 and over the last few years it’s still 85, 15 because what’s happening is that the developing world, the emerging markets which are growing faster in terms of that consumption. But remember they are starting from a slower base, they are much more cash intensive in general. Whereas the developed world which grows a little slower in personal consumption expenditure but off a much higher base and therefore in the waiting they still play a large number, they tend to be much more electronically oriented, although remember Germany 78% cash.
Remember that Japan is 78%, 80% cash, remember that the United States is 50% cash but relative to an India, or a China or a Russia they are more electronic sort of oriented. That growing the pie is what you see us working on through the things they are doing on financial inclusion whether it be what you have heard or you will see downstairs with the South African Social Security System SASSA or whether what we have been talking about in Nigeria where they are doing both the ID system for the government as well as their social payments on one two sided card, or what we are doing with the U.S. Treasury Department, or what we’re doing in India with the unique identifier scheme.
And in fact we now have 100 such things around the world that are going on in 20 different countries right now. That’s one aspect. The World Food Program, digital food, they are just a series of examples of this; you will see a number of these in the product setups. So you will see that by the way we have tried to setup the product exposures in a way that they connect back to what you’re hearing so you can get a good sense of touching and feeling what you are listening to from us during the next couple of hours.
Other examples of growing the pie, small merchants, low value payments, high value payments simplify, you will see a effort downstairs to begin making it easy for merchants to sign-up, to accept payments, card payments online in a way that hasn’t been as easy for them if they were doing a MasterCard, Visa card connect we think we can make it easier for them. You will see that downstairs, you will see efforts in Parkeon a parking equipment manufacturer and supplier that also runs parking franchises and you will see Vita’s new meters coming up in New York actually in Queens in a few weeks which are solar powered but also intelligent and can generate offers and rewards powered by Truaxis which also you will see downstairs, and the guy who sold us Truaxis Schwark is now a part of our management team, he is downstairs as well. So you will see different aspects on small merchant acceptance, low value acceptance, high value acceptance in the system downstairs. That growing the pie the second leg of the stool is longer than the first leg of the stool, meaning it takes longer to respond or generate revenue to us. It’s also less volatile than personal consumption expenditure maybe in any one country.
Overall personal consumption expenditure for the world as a whole, remember is not as volatile, by country it can create challenges for the guys who run countries and their scorecards and they get their knickers in a twists sometimes. But that’s part of what the business is about.
The third part the most inside concentric circle the third leg of the stool is the part that people tend to focus on are share and what is today electronic. And there we got a lot of things going on you will see in a number of presentations in Gary’s as well that we have done well in certain aspects of growing our share. In commercial payments, in debit, in prepaid in consumer credit we’re doing well outside of the United States in the U.S. as I have talked about openly we haven’t done enough, we’re changing, we’re winning 60% of every co-brand deal that has been around in the U.S. and Chris will talk about them including a few more that he is signed and he’ll refer to which of those he can talk about and which of those he can’t talk about.
But we have got those deals. That’s changing where we are, but the other three product categories debit, commercial as well as the old prepaid area we have clearly grown share. Now we’re doing it through not just going out and fighting with price, because that’s a question that I and Martina get often, but actually through building competitive advantage through technology and services. And I have talked about In-Control and I have talked about Smartdata, actually you will see Smartdata downstairs. But I have also talked about other things that you will begin to see downstairs one of which is an effort we did in Mexico recently which is called MIYAMO which is really interesting, it’s how you take music and you make it part of somebody’s digital life.
So we talk about physical digital convergence, it’s not just in using a phone to tap and pay or somehow using your eyeballs to pay, it’s how you interact with the consumer, it’s how you interact with the merchant, it’s how you interact with the government, it’s how you interact with everything you do when you do commerce. And you will see examples of that again downstairs. So that’s the first part, we haven’t changed what we’re trying to do.
The Company is changing but it’s been — I’ve been here four years and we’ve, over the last five-six years I would say from the IPO, but I’ve known for the four years as a personal experience. We’ve tried to not only focus on issuers obviously we focus on issuers, they are the point of entry into the system but also to provide the right kind of engagement with merchants, with government and of consumers and I’m hoping you’ll see a number of those examples in the conversations today but also in the product demos downstairs.
We believe that our brand has improved tremendously and without the brand we’ve gone from — and again in Gary’s slides you’ll hear about going from number 87 to number 20. And the fact is we’re spending the same money in fact in dollar terms probably around a little less or more that we used two-four years ago it’s how we spend it that has changed. We think we’ve got differentiated offerings I talked about a couple of them and in terms of smart control and Smartdata and In-Control in the lights but you’ll see more.
We think we are far more oriented towards innovation. This is one of Gary’s slides with our strategic plan of the Board and he wrote that more jump in our innovation step and I would encourage you to ask him to jump a little, it’s an attractive site. But that’s basically what this is about we believe that we have the ability today to embrace technology and fight for being seen as being innovative with the products we are doing and bringing to the market. The most important thing is we’ve got the people. We have, in the last four years of the top 100 people more than 25% are brand new to their job from outside the Company. Another odd 25 odd percent have moved into their jobs inside the Company. That number is not different for the top 200. When I joined here four years ago the percentage of millennials in our population was 4%, it’s now 30%. 30% of the Company is as young as a few of you in the room and way younger than me.
That’s a good thing for us because they ask different questions, they make us think differently, they’re making us respond differently and I think we need to encourage them to be a part of our Company for many years to come because that mix of experiences is what makes us who we are.
We’ve put more people overseas. We used to have 60 odd percent, close to 65% of our people in the U.S., we’re now down to 50 odd percent, the rest have moved out overseas. And we’ve actually physically moved people. We have product categories run from overseas. We have Ann Cairns who runs international markets based in London. There is a whole series of efforts going on to move resources closer to the bank, the merchant, the government and the consumer in the countries, and again Ann will talk about that.
So we think we are changing, and we’re changing because we want to be more than just payments. And Gary Lyons describes this very well that nobody comes to sort of wake up in the morning or go shopping waiting and looking forward to making the payment, that’s not the most exciting part of that whole interaction, it’s all the rest of it. And so whether a consumer or a merchant or a government or a bank, our objective is to try and get beyond just being slotted into all that little payment space there. I think we can add value with our data, with our technology, with our people, with our expertise in the whole interaction whether it’d be what a merchant wants to do grow their business, attract new customers, keep customers longer increase their profits, figure out where to locate their stores, figure out which marketing offer gives them a higher ROI, all those things, just one example, the merchant.
You can have those examples on the slide for all the other categories. We believe we can play a role in that form, and that’s part of what the investment is going into and later on in the deck you will see us talk about investment, a large chunk of that is going into making our self more than just payments.
So today what I hope you’ll get at the end of today and you’ll hear it through every one of these slides is the first one, that 85% of retail transactions that are still cash they provide us with a long runway for growth. It is changing. The markets are changing in the way they respond to electronics, but the convergence of physical and digital is changing not just the percentage of payments but changing the entire payments experience which is why we have been investing in trying to get past just being the payments guy to providing more value to merchants, to governments, to banks and to consumers.
We’re clearly trying to expand our reach therefore across the ecosystem to get that done well. And most importantly you will find us putting our money where our mouth is and growing our expenses hopefully at least in some of the cases in the right way. We make mistakes like everybody else but we’re trying to put our money in investing for the growth or what we think could be our future.
And we haven’t changed how we’re executing that strategy, aim for the 85% by growing the core business, that’s the consumer credit, debit, prepaid and commercial businesses win those deals, have products that are differentiated, have offerings that are differentiated, have a brand that is differentiated, have the capability to bring those to the market of the front edge by investing in the right resources at the right point in the countries, in the regions not in purchase. And that’s kind of the difference that we’re trying to put into growing our core business. But then we’re also trying to diversify our geographies and our customers and Ann has opened up a number of offices in the last two years that she has been here and you will see the expanding geographies but also expanding into merchants of different types as a customer into governments, into telecom companies, all that is a part of what we’re doing.
Building new business is an obvious one. We have all talked about the physical and digital conversions but most importantly the data that we think can really inform how we do things with this wider ecosystem and Kevin Stanton is on a panel later that Barbara talked about; he’s going to talk a little bit about how that data is used for just merchants. And so is Craig and so is Tim. So you’re going to hear about merchants in a number of ways as we go forward.
The key to all of this is having the data and having the technology with the right people and I’ve already talked about that. So, that’s where I am, that’s what we’re trying to do. Go off the 85%, do it through growing the core, diversifying our geographies and building out those new businesses, have a little spring or jump as Gary would say in our innovation step and earn the right to get the business from all the players in the ecosystem, the banks and the financial institutions but also merchant, consumers and governments and with that Mr. Flood, over to you.
Gary Flood
Those of us that get to work with Ajay every day, we know what jump means, right? But he also have understood the definition of quick, we know what that means, right? So, what I’m going to do is take you on a little bit of a journey. I’m going to share kind of how we’re thinking about things, progress, what’s happening on the ground, the progress we’re making and then I’ll kind of conclude with what’s on our mind.
And then I’m going to transfer to Ed who’s going to dig deeper into the physical and digital convergence discussion which is on many of your minds.
So, as I think about showing up every day and it seems like it’s earlier and later which is very, very healthy. The two things that I concentrate on are growing share and growing the pie. It doesn’t do us any good every day, if we come in and we are not driving our share in debit, credit prepay and commercial around the world and do we do that fundamentally by having the right people on the ground, in partnership with Ann and Chris’ teams locally.
But we embed certain value-added components into that mix which differentiate our proposition versus the competition. Couple of things I’ll talk about, I’ll talk about IPS, Cathy is on a panel later, that’s our prepaid and debit processing platform. We’ve been able to actually work with that to drive brand decisions so, not only making processing revenue but driving brand revenue as well.
I’d reflect on advisors, this year alone advisors rolled 1,200 projects worldwide. All of those are working either with issuers governments or merchants focus on driving our business that’s up about 45% from last year. So that’s their trajectory. The last one is interesting as it is MRS for us which is a rewards royalty platform, one that we started building several years ago; we have 70 million accounts on that platform around the world. Mostly outside of the U.S., so when you combine those types of assets with the people we have and the competencies baked in data, the propositions work. And I am going to in a few slides I’ll give you a little sense of kind of where we are and the progress we’re making.
Now, processing is interesting, I’ve talked about it in a sense in terms of extending brand decisions but it also puts us on the ground locally. I’ll build on this a little bit later and then Cathy will pick it on the panel this afternoon, but when you think about innovation there is nothing better than being on the ground at the point of sale working with merchants, working with issuers, working with acquirers to drive innovation and I’ll build on that concept a little bit later.
Grow the pie; new consumers and new merchants. The one example I love is SASSA which Ajay touched on, a lot of times we focused on the 10 million cards that are out and the potential for many, many more and what it’s doing to include consumers those are absolutely true. We’re digitizing benefits. But what’s interesting is you’re also including merchants, more merchants coming into the system, more accepting merchants of digital payments.
So that in South Africa the team locally work with the technology firm called Blue Label, they basically had a technology infrastructure in place, dealing with mom and pop convenient shops, if you think about beneficiaries this is where they shop but acceptance wasn’t where it needed to be. So the local team leveraged accumbency and a capability orient market to grow acceptance and we were on our path through about 20,000 to 22,000 of those locations accepting payments overtime.
That’s the ingenuity that occurs locally on the ground. When I talk about payment flows, new payment flows maybe for us but their payment flows that are additional payment flows that are out there. Whether that’s government benefits, whether that’s businesses providing benefits for paying people or whether that’s me sending money to you. P2P type and we estimate that’s about $ 62 trillion around the world. So we see that.
And in cash conversion, we wake up every day thinking about cash conversion guys, I will tell that the best example I can kind of play off on this one would be the work we’ve done with PayPass, I would say Canada, Australia and Poland where PayPass transaction penetration is north of 20%. It ranges, the teams later will talk on Ann’s panel. The average transaction is 21 bucks that’s cash displacement.
So, when I take a step back and assess kind of where we are we’ve got cash in front and center and we also have this convergence of digital and physical and the opportunities that that creates worldwide.
Building on that 85% of the world’s transactions are still cash and check, you have emerging markets developing a little different than developed markets, Chris will talk about the North American markets, each of them poses opportunities to convert cash, each of them are going to provide wonderful opportunities to balance and payoff the conversion of physical and digital.
Now, the best way I like to talk about this is kind of bringing a little bit of what you’re going to see downstairs. So, I’ll go to alignment government goals, Ajay talked about Parkeon, which is a parking management company, one of the biggest around, they are in about 50 countries, 3,000 cities and they have hundreds of thousands of devices deployed.
But we think of them maybe as a transaction device, no, they’re actually working with municipal governments to make the paying of tolls and parking fares more efficient. They’re also enabling opportunities to create marketing platforms to provide local merchants with the opportunity to communicate you when you park your car. Think about it, it’s a little different than just a transaction. Next one, consumer and merchant extension is huge, I talk about it times say now, today we have about 36 million merchant locations worldwide. If you think about what’s going on with technology and phones and things like that this could quadruple over some time.
Ajay touched on the World Food Program, we talk about enabling consumers again to benefit through digitized provision of these benefits, versus dropping physical food in a location, but on a parallel path one of the biggest opportunities is what the implications are for merchants. Whether it is a convenient store that doesn’t accept or a farmer that wants to sell their goods, so not only again are you including consumers but you’re including merchants that haven’t been included. You’re digitizing and you’re managing the convergence of physical and digital. Those two examples you’re going to see downstairs.
Now when I think about 66% of the world’s adults connected, yes, let me go to an example, you’ll also see which is Zoom in Brazil which is part of our telephonic relationship. And that scenario they have about 64 million consumers in Brazil, many of them not touched by financial institutions. So you’re going to have a prepaid physical card and you’re going to have a phone, you’re going to have the ability to use the card at the point of sale and you have the ability to make P2P as well as bill payments on the phone.
And you’re going to be able to load it in all their retail stores, for me that is an extension, that’s enabling issuance, and again building more and more acceptance for our franchise. Last one is improving the buying and selling experience. I’m not going to spend time on MasterPass although that I think is a outstanding demonstration of what this means, Ed’s going to do that for you. What I’m going to do is just go to quicker, think about sitting in the Legends Park at Yankee Stadium, you want a hot dog, you want a soda, or you want some popcorn. The ability to take your phone, scan, have it delivered, how about a movie theatre in Australia, same scenario, so the technology will enable us to deliver a user experience that’s convenient and simple. So cash is a big focus and again leveraging that convergence of physical and digital is front and center and you’re going to see that demonstrated downstairs.
Now, coming to work every day, we have to make sure that consumer’s credit, debit, commercial, prepaid and processing are on the right trajectory. Ajay touched on these, there’s no give and take, that’s fundamental to our business. I’m going to dig into that in a minute, a little bit more, customers and geographies, governments and merchants. I’ve given you examples of government programs; SASSA is one, non-government type organization program, World Food Program.
Those represent big opportunities for us to extending our franchise. When I think about merchants, about 10% of the advisor projects are merchants focused. The panel will be up in a few minutes, they’re going to share some of that they work on with merchants and how we leverage our data with merchants. It’s about more from existing customers and getting more customers, unbanked and under-banked I’ve touched on as well as new markets, convergence of physical and digital. The best example I can share with you is the work we’re doing with over 30 telco operators, MNOs around the world, covering 28 countries with a consumer patch of about 1.2 billion.
This will all take a lot of time, but we’re embedded we’re engaged and we’re defining experiences and working with them. The last point is advisors and information services, advisors is fully integrated with all of our go-to-market disciplines, as a matter of fact downstairs, there’s a demonstration of a cashless journey. The fellow who’s going to be orchestrating that discussion is Mark Burnett who runs our consulting services for us worldwide. The data and the information behind that are foundational to what we do with our clients. When we leverage it the right way, we produce more accounts, more volume, newer products and more growth. So let me dig in just for a second.
Ajay touched on consumer credit, double-digit growth, we’re focused on affluent, we’re concentrating on mass, we’re looking at new universes coming into the system by the virtue of convergence of physical and digital, we’re growing faster than the market, outside of the U.S. around the world. Chris is going to talk to you about the progress we’ve made in the U.S. and what we’re going to do to make sure we keep working that through.
On debit we’re concentrating on optimizing portfolios, converting ATM to point of sale, leveraging IPS as a debit processing platform. We also have advisors fully engaged on portfolio optimization there as well, on commercial, we made a number of investments, we deployed people who work with corporates directly around the world, we’ve invested in Smartdata, we have over 500,000 companies on our Smartdata platform around the world. 180 countries, 220 issuers and here we also have advisors integrated concentrated on extending our penetration to small business around the world.
Last point is prepaid; we’re growing faster than the market anywhere. We’re growing our share, we’re leveraging IPS and we’re intergrading this into all the MNO and all the government programs that we are concentrating on executing. With all these it’s a concentration of rich propositions which are based the assets we built over the last four, five, six years and on the ground coordination with Chris and Ann.
Now a lot of that is driven off insurance but you got to stay focus on the standard set of stakeholders, so on a consumer side you’ll hear about MasterPass. I will touch on Priceless Cities in a couple of moments, buying and selling, connecting consumers domestically and cross border, but Qantas Airlines converting their Loyalty Card to a dual Loyalty Card, Prepay Card with the ability to host nine currencies and to manage that through a mobile app as well as benefit from in airport experiences like lounge access, trolleys and alike all of this leveraging IPS and Access Prepaid worldwide as a processor and a program manager.
If I think about our merchants, I have touched on advisors about 10% of their products and programs and initiatives are merchant based. Ajay hit on simplified commerce which is what we’re doing to make it easy for small eCommerce merchants to get online to accept payments that will be demonstrated downstairs, but then I think about DataCash. DataCash is connected to 68,000 merchants around the world. The combination of the gateway we had in Asia and what we purchased with DataCash has put us in a wonderful position.
DataCash alone will add 20,000 new merchant locations to MasterPass in 2014 and then Truaxis. The work we are doing with Schwark who will also be downstairs in targeting offers and providing the right kind of value to consumers and issuers so that they value what we bring to them, but at the same time creating currency in the system. Merchants want value, they want the right consumer at the right time and they are willing to pay to for it. Governments and NGOs, the one I’m going to concentrate on here is just the World Food Program. We’ve talked about SASSA Direct Express, India UID, you’re familiar with the program, we’ve kind of touched it a couple of different ways.
There is one unique twist to it that I love which is the fact that as a consumer if you are one of our 2 billion cards around world, you can register to make donations every time you use your card. Now, what’s great about that is that’s the reason for merchants to want to switch to us. The only way we can execute the program is as we see transactions, so we think we’ve got a power program. We also have leveraged our network to do some very interesting things.
Now, Brand Momentum, when you run a network worldwide you have to have a variety of things that matter, you have to have your acceptance infrastructure, you have to have your technology, you have to have your people, you have to have the confidence of your participants that you’re going to be able to run a network for them worldwide that’s going to enable them to grow and Brand is fundamental. Priceless is 16 years young and I’ll emphasize young, it’s in over 112 countries. It is an asset that partners want.
So our ability to create to innovate and to leverage that platform worldwide provides us with outstanding opportunities. Ajay mentioned the budget and how we’re basically managing that. We ensure that our ROIs on programs are exactly where they need to be. We inform all of our decisions with very, very strong analytics. We have integrated Kevin’s scientists that produce and execute data analytics for us for our advisors customers within our marketing group. So we have all the insight intelligence we need to make sure that we’re optimizing that investment and getting as much out of it as we possibly can. And I think the results here speak for themselves.
Now, how do you pay that off, I’ll just give you a couple of examples, Priceless Cities connecting buyers and sellers domestically in cross border. We have about 120 issuers supporting the program. Our satisfaction scores are strong and our net promoter scores are up. When I think about Stand Up To Cancer third year in the program in the restaurant category we’re up about 3.5 percentage points over industry growth as we execute this program started in the U.S. now it’s off to Russia with Bella and she is extending that across the rest of high growth and emerging markets as we speak.
Priceless Music, this integrates what Ajay mentioned which is MIYAMO, which is that digitized profile but it’s a comprehensive platform focused on new consumers, youth, 25% of the world’s population providing them with the right type of music experiences which is their passion or one of their passions, in the right way and format, digitized and social. So strong marketing assets leveraging the right partners around the world puts us in a position to keep winning big business.
Next point I’ll go back to is just processing, Ajay touched on it. We have been very thoughtful about extending our participation in the processing landscape for MiGS and DataCash on the acquiring side where we’ll touch 68,000 merchants, SPS in Australia where we’re driving about 5000 ATMs, 20,000 point of sale devices, 600 million transactions and then ECS and Trevica. ECS a minority investment in India, Trevica a wholly-owned company in Poland, both providing us with agile competency and capability on the ground in those areas and both extending beyond those particular countries. On the issuing side IPS, 16 customers, 25 countries getting done exactly what we want to get done, working hand and glove with Access Prepaid, so I have got a processing platform and a program management platform, combine that with outstanding product people, we should be in pretty good shape on prepaid and we sure that’s what is driving a good amount of those results.
And again on the issuing processing side ECS and Trevica, local installations, agile relatively small, can take care of the smaller opportunities that are represented in these parts of the world. So as I think about this the one point I want to leave you with here is touching more transactions, we touch more, our ability to innovate is enhanced. So this is the road we are on from a processing perspective.
Now I just want to go back to grow the pie, we have talked about the unbanked and under-banked, I don’t need to get too much more into that 2.5 billion. From a market organizing perspective you have sources of funds coming in. For us the challenge is getting at those funds before it gets activated in the form of cash, so you want to digitize it, whether it’s on a phone or a prepaid card. I mentioned how large those sources of funds are, 62 trillion.
Then storage of funds, multi-dimensional accounts, one dimensional accounts, prepaid accounts with lot of tone up flexibility, debit cards so a variety, and then use of funds. This is the part that actually resonates extremely well for me when I think about the World Food Program and SASSA. Funds in is one thing, funds out is another thing. So I go back to that farmer, I go back to that convenient store, that’s FASA shop in South Africa. And they need to connect both of those things; the ability to have funds and not use it doesn’t work. So our initiative is along those lines.
So when I think of new small merchants I think about all the progress you have all seen with phones, and enabling merchants to leverage phones. I think under penetrated categories I think it transits, whether that’s Moscow, Chicago, Seattle doesn’t matter, transit. Acquirers and non-traditional partners, I will go to the firm that Michael Maybach’s team use in South Africa, Blue Label Technologies to help us solve an issue and open up a wonderful opportunity and keep it going. And then scale new streamline acceptance models and simplified commerce which you are going to see downstairs. Take the friction out of the process for a small merchant who wants to be able to accept payments.
Now world beyond cash, we have been talking about this for few years, I am not going to go through every part of this slide. The journey or the cash journey Mark Barnett can explain to you downstairs will cover many of these areas. We know that cash isn’t free, we know we got to concentrate on low value payments, we know engagement with government matters, 20 countries, 100 programs with governments growing everyday and we know that acceptance development is fundamental, determining how you can open up new acceptance channels.
I have talked about that, mobile payments again happening in front of us a lot of activity around the world over 30 programs we’re working on right now. But what I want to do is just demonstrate one thing for you, the diagnostic that goes in to understanding how a consumer converts from cash to electronic payments, it’s a journey. This is a small component of what Mark will share downstairs. But you can see as the consumer progresses from relatively minor use of a debit card to a habitual user where the category extension is brought.
So what we do is work with customers, go in, diagnose their portfolio, see where consumers are on this particular journey, and then develop and execute programs that will help them advance through these stages.
What we found is this works country-to-country. Of all the projects that Kevin and his team have done, we have kind of synthesized it down to this framework. So at any point in time we probably have 10 to 15 of these going on around the world, and it’s all about that conversion of cash.
I am going to conclude in a minute. So I have talked about differentiated assets driving new business. We have invested in payment gateways, data analytics, program management with Access Prepaid processing with IPS, we invested in the staff that we have as part of our team on advisors. We made this decision 10-12 years ago to build this functionality and capability. Loyalty I touched on, Ed’s going to kind of take you in a minute through emerging payments. But these things come together and provide our teams our local country management with the solution sets they need to win business.
So Access and IPS driving home Qantas, processing program management, DataCash, white labeling and acquirer solution to ReadyCard in Brazil and we bought DataCash, it was a straight to merchant proposition. Now we’re working through acquirers and proceeding to address more and more of those around the world. DataCash was live, I think August 21st. Fraud Shield in Germany leveraging our In-Control platform, data analytics from advisors 50 million accounts drove fraud down 65%.
So leverage and the ingenuity behind the assets and then advisors last year Kevin was up here, he talked about the three divisions within advisors consulting services, managed services and information services. I’ve reflected for a minute on over 40% growth in projects, almost 10% of those projects are merchant based. So that group has advanced and has provided tremendous leverage for us worldwide.
So now as I think about going forward strategy efforts are paying off frankly scaling more of the solutions and initiatives to drive more markets is what we’re concentrating on right now. Broader stakeholder focus the business opportunities that are coming by working with governments and merchants around the world, they are not shallow they are deep and they represent wonderful opportunities for our franchise.
Cash is converting to electronic yes make sure we’re going out of this fast as we possibly can, big opportunity for our franchise. Ajay touched on innovation technology I’ll touch on execution, we structure our organizations regionally and locally. We have developed customer delivery functions out in the regions to enable us to get a lot more done on the ground with pace. This is going to continue to be a key focus for us. Many of these projects, they’re not easy. So you got to make sure you have the right people with the right focus driving hard.
Next is, don’t take your eye off the basics. Tim Murphy is accountable for Debit, Credit, Commercial, and Prepaid and a few other things for us. We got to make sure that those things are humming and that our growth rates continue to be fast in the market. As I said on Credit, we’re doing really well outside the U.S., Chris has made progress in the U.S. and he is going to share that with you, but we’re not going to take our eye off the core at all.
Last thing as we get a lot of questions on the convergence of physical and digital. Hopefully what I’ve kind of expressed to you is we are tackling this worldwide. We are embedded and in the middle of all this. We are not taking it lightly, we are investing and we’re getting after it.
So with that I’m going to conclude and I’m going to invite Ed McLaughlin to jump up here, and talk to us a little bit more about this convergence.
Ed McLaughlin
Thank you, Gary, and good morning, everyone. So I’d like to take a moment, I’d like to take this opportunity to expand on the incredible growth opportunities that we have as a result of the ongoing convergence of the physical and digital worlds, and also take a moment to tie together I think a lot of the examples and a lot of the experiences you’re going to see from us today.
But let me start with something you already know. As you’ve already seen in your own like and particularly in the lives of our children we are in the midst of a global transformation and consumer behavior in both the developed and the emerging markets what is changing is nothing less than how consumers interact, it’s how we interact with our families, how we interact with our friends and how we interact with our communities. And these fundamental changes in how consumers interact will also transform how they transact. Because as consumer behavior shifts ever more to smart connected devices, the previous distinctions between the physical and digital worlds are becoming even more blurred.
So what does this mean for MasterCard? Well we believe the opportunity is nothing short of enormous because it now enables us to do things we could never do before with simple plastic. So for the consumers who use the nearly 2 billion MasterCards that we have out there to-date, we can increase spend. We can create new value. And perhaps more importantly for those consumers who may have another card or for issuers evaluating their portfolios, we will win share by being better at what’s next.
And it is exciting as thinking about all the new experiences are that we can provide for those consumers we have today. I think it is absolutely inspiring to think of how we can use digital to serve 100s of millions of new consumers. And these are consumers we could never reach before with our traditional products, with our traditional channels.
And this conversion of physical and digital is creating incredible opportunities for MasterCard to generate more value and drive more business for the nearly 36 million merchants who accept MasterCard today. But as Gary said, beyond the merchants we already work with convergence enables us to reach 10s of millions of new merchants who previously had never had access to the MasterCard network and we can now bring them all of the benefits of electronic payments and eliminate even more of the cash transactions.
But the last point I’d like to make and the really important is every one of these new merchants extends the reach of the MasterCard network. It increases the value of the MasterCard network and makes all of those products that our current consumers have and as 100s of millions of new consumers will have that much more value.
So the next question, how are we delivering on this promise? Well let me quickly cover three key topics; first, we’re optimizing our network. We’re making it easier to access. We’re allowing richer data to flow through the system, and we’re using digital technologies to make it ever more secure. We are creating an operating system for digital commerce. And we are making sure that every MasterCard issuing bank, every MasterCard accepting merchant can be fully enabled for digital transactions and everyone is ready for this world moving beyond plastic.
Secondly, we’re engaging with new partners and you’ll see examples of that all through the presentations today. Gary mentioned that over 30 active mobile partnerships we have around the world ranging from Samsung to Deutsche Telekom to our joint ventures with Telefónica to ISIS right here in the United States and with our open APIs our goal is to make it simpler for developers both corporate and independent to deliver innovations and build their businesses with MasterCard.
And third and finally, we’re helping extend new payment flows and increasing the opportunity for consumers to interact with us. So, we know this isn’t just about helping consumers make payments, it’s also about helping them receive the funds that they deserve and that is where this focus on government benefit distribution, payroll and other access to funds come from. But as importantly, after consumers receive their funds in their MasterCard account, we have tremendous opportunities to provide payment flows that are relevant to them in their communities whether it’s domestic transfer or bill payments or being able to shop online for the first time or even SMS based payments with the local merchants they shop with. All of which are more secure and more convenient than the cash based transactions they have today.
We also believe and this is fundamental that the key to winning this transition is not to simply recreate what you could do before, but to enable for its consumers all of those things that you could never do before. We know consumers don’t want to make a transaction. They’re trying to do something else, they’re looking for better experiences, they want shortcuts, they want things to be simpler and faster and we also know they certainly don’t want to lose any of the security, any of the benefits they enjoy today from a genuine MasterCard transaction.
So, what are these digital shortcuts that we can deliver? Well, first when you’re an active register, MasterCard’s PayPass allows you to tap your phone, now your watch anything for fast secure payment. And what we’ve seen in 56 markets around the world is consumers love the speed and convenience of contactless. It’s the ultimate proof, after they tap two or three times they almost never go back to their prior payment behavior.
And merchants are seeing this benefit, we’ve had 136% growth in PayPass locations in just the last year to over 1.2 million locations globally and new markets like Japan are opening up for MasterCard contactless with over 400,000 terminals announced to go in just the next few years. And this is because merchants are seeing the benefits. At Coles which is one of the largest retailers in Australia over 60%, that’s over 60% of MasterCard transactions today are already contactless.
And we have talked with Douglas Swansson he is Coles Head of Payments, he told us we have seen the share of cash payments fall, contactless is replacing cash and our view is that customers are at a tipping point in the way they wish to pay. That’s straight from how this is helping Coles business in Australia and this is not just for retail, as Gary mentioned transit systems from London to Chicago to Las Vegas are implementing contactless to help speed commuters do their churn styles. This is an environment where milliseconds literally matter and contactless is by far the best way for consumers to pay.
But beyond what happens at the physical point of sale, we know that perhaps the best way through the queue is to avoid entirely and MasterCard is doing exactly that by enabling consumers to shop in aisle or shop in apt so merchants are no longer constrained by their physical store or even their online website and they can now reach their customers anywhere at any time.
Now of course, as all know most of the volumes today is still through the eCommerce channels and in that channel today over 20% of total consumers worldwide use a MasterCard directly for online purchases. Now to put that 20%, over 20% in perspective that’s almost four times more than the leading alternate payment provider. And with MasterPass we’re building on that advantage providing consumers with simple and more secure ways of using your MasterCard from any device.
And finally as you know, MasterCard’s position has always been that any deceive will be a commerce device, this was never about PCs or even smartphones and now we’re seeing with connected watches and glasses and even appliances getting wired up. MasterCard is now ready to enable all of them for commerce and one great example perhaps my favorite example from earlier is when you go downstairs you’ll be able to see a pair of Google Glasses that MasterCard Labs has already enabled for MasterPass payments, which I think really brings home our fundamental point.
The device doesn’t make the payment system, it’s the payment system, it’s MasterCard that makes the device that much more valuable, and one other point and to be clear, we believe that for consumers it is not about any one of these experiences, it’s about all of them, so we may have many competitors trying to enable alternatives in some of these areas, but what we’ve seen is what consumers really want, and think about it, what you really want is for all of this to work together and that’s what MasterCard does. And perhaps the best use of all is, you can’t use cash, you can’t use checks in any of these environments, so to echo what Gary said, the convergence of the physical and digital world, these new shopping experiences are a major driver of that world beyond cash.
And MasterCard is ready, at the Barcelona Mobile World Congress in February of this year we formally announced MasterPass our platform for digital commerce. We’re now live in the four target markets, we’re working with financial institutions globally like Commonwealth Bank of Australia, Bank of Montreal, Citibank and we’ll have seven additional markets implemented by the end of this year.
Our merchant acceptance is also gaining momentum with over 20,000 merchants live in just the first few quarters, and we’re working to make MasterPass available to all MasterCard issuers as an integral part of the overall MasterCard global network. So MasterPass is digital MasterCard, and our focus remains the same, we’re providing a globally intractable platform, supporting all types of digital transactions. In-store, in-aisle, in-apt, online, and please remember MasterPass has been designed to enhance, not to interfere with the relationships our customers have with their customers.
MasterPass has been designed to enable integration across a wide range of partners, and MasterPass has been designed to make it as simple as possible for merchants to integrate it in with their systems and leverage the investments they already have in place. So finally, while it’s still very early days in this overall conversion of physical and digital, the opportunity for MasterCard is tremendous. In fact we see this as the greatest opportunity for MasterCard since we first helped to introduce the plastic credit card a generation ago, it’s that significant and we are on it. We’re enabling a full spectrum of digital shopping experiences for consumers. Not just one channel but every channel today and we’re ready for whatever the future will bring.
And we’re executing, we’re delivering new capabilities, more rapidly in more markets than any of our key competitors, so with that as a backdrop, I absolutely look forward to seeing everyone later today in the product demonstration area, so we can fully demonstrate MasterCard’s digital technologies and the incredible potential that digital convergence holds for MasterCard, so with that I’d like to turn it over to Chris McWilton, he’s going to cover the North American markets and thank you very much for your time and I look forward to seeing everyone later, Chris?
Chris McWilton
Thank you. It’s great to have someone like Ed who is so passionate about his space and so knowledgeable leading us in this great convergence we’re going to be undertaking. Well again, good morning and thanks for coming, I know this is a difficult day for many people, being the 12th anniversary of those terrible events just a few blocks from here, but I’m Chris McWilton, President of North American markets, and if you remember last year I was introduced as Chris McWilton President of U.S. markets, you’re probably aware that on January 1st of this year we combined our Canadian and U.S. regions under a North America umbrella, and we’re really glad we’ve done that, besides Ann Cairns not having to cover an additional three time zones which I know she’s happy about.
The U.S. to Canada consumer cross border corridor is one of the biggest in the world and we’re seeing increasingly our customers whether they be in merchants like Target or Wal-Mart or issuing banks like Capital One or TD Bank or BMO cross borders in both directions to meet their growth objectives, so we’re seeing a lot of good business coming out of that reorganization, we’re very happy Betty and her team continue to do a great job up in Canada.
So for the next 15 minutes or so I’m going to share with you the journey we’re on in North America markets, it’s a journey that’s taking us to a place that we’re going to be a very well balanced and diversified profit engine for the Company for a long, long time. We’re doing really well in debit, in North America we’re doing really well in commercial credit and I’m going to spend some time sharing some of the great news we’re seeing in that space and in the prepaid space as Gary mentioned.
I know there’s a great interest in our U.S. consumer credit position and I’ll spend a few minutes of my remarks sharing our progress in that space. But I hope you leave with an appreciation that while North America is more developed than some of the markets Ann covers and her region Presidents cover that doesn’t mean it’s a no-growth or slow growth region, it’s a high growth region and we’re very bullish on the prospects.
Let me just frame the North America region with some factoids. First of it’s the largest revenue generating region of our Company, generates about 40% of our revenue, and we’ve maintained strong financial results through a very complex operating environment. We’ve obviously lived with increasing levels of government regulation, starting with the Card Act to the Durbin Amendment to the Dodd-Frank bill. We have seen consolidation in the industry not only the financial institution side of the equation, but on the merchant and our co-brand partner side of the equation. And obviously consumers have been impacted significantly by the economic conditions, the high end employment rates, and the foreclosures in the housing over the past five years.
But we’ve been pretty resilient through that, the first six months of 2013 we’ve grown our revenue 11.6% and we’re quite proud of that. Eight of 10 of the largest cross border quarters that we see consumers using MasterCard products and services either start or end within the U.S., so it’s a key market for our cross border activities particularly affluent and travelling consumers. Our revenue yields in the U.S. are quite high relative to our other regions because we switch nine of 10 transactions of MasterCard products. North of the border in Canada, we have been the leader in technology and innovation Betty and her team led the rollout of EMV and broad based acceptance of PayPass or NFC enabled contactless technology.
She is doing a great job up there with MasterPass as well which Ed has talked about and the Roger Telecommunications a large cable and television network in Canada has been the first telecommunications provider to receive a payments license in Canada and we’re really honored that they have selected MasterCard as a network for their first payment card that I’ll be rolling out very shortly. There are great growth opportunities in North America, new verticals that haven’t been fully tapped, healthcare, insurance and rent. There is still a large swath of underserved and unbanked customers Gary talked about that in terms of the cash conversion opportunities.
Small merchants are continued to look to ways to sell their products and services online and simplify, you’re going to see down the product showcase, and we have MasterPass rolling out I’ll talk a little bit about the success of that in the U.S. and elsewhere but we’re very optimistic we’ve got great momentum in that space.
So let me rewind five years ago, explain where we’re and then I’ll let you know where I think we’re headed in terms of changing our business. Five year ago, we had a very concentrated customer base we were highly reliant on a single large credit card issuer. We had no debit franchise to speak of insignificant. We had no real merchant interaction within the halls of MasterCard we refer to merchants as customers, but to be honest with you it’s probably a little bit more lift service than it was real interaction and concerned about helping them growth their top-lines.
We were reactive to government regulation and we certainly didn’t consider in any broad way that the government could be a big customer of ours. And we had a good brand but a brand that consumers were aware of not necessarily that they were engaged with or necessarily preferred. So fast-forward today, we have got a much broader mix of customers a much diversified mix of customers, including regional banks and a growing base of independent banks and credit unions which provide us a great revenue yield compared to some of the larger issuers.
We have a very robust debit franchise. We are enabled either on a signature or pin basis on half the debit cards in the United States. We have gone from approximately a 3% or 4% share of the pin debit network of pin debit to becoming the largest pin debit network in the United States. We have a growing commercial base and again I’ll talk about that in a few minutes and a growing prepaid business, so we’ve diversified our product mix in addition to our customer base. We significantly expanded our merchant interaction and this isn’t something that happened six months ago. Craig Vosburg, who is going to be on the panel in a few minutes, has been leading our efforts in merchant development and market development for about three years.
We have 40% of our account management personnel dedicated to merchants wasn’t even close to that five years ago and we have made investments in this space. Gary mentioned Truaxis which I am very excited about, it gives as a chance to interact with merchants and with issuers in delivering products and services to consumers based upon their payment patterns and you will see that down in the product showcase. Government; government is now a big customer of ours, Direct Express, the social security payment program is issued on prepaid MasterCard cards the disbursements are made on prepaid MasterCard products. And we have a brand as Gary mentioned that is in the significantly different place than it was five years ago, with Stand Up To Cancer and Priceless both consumers and our issuing bank customers and merchants view our brand much differently than they did five years ago.
So let me talk about credit and I am going to talk about credit holistically in terms of both consumer and commercial because that’s the way we view it. In the past I have highlighted the reasons why we weren’t where we thought we should be, and need to be from a U.S. consumer credit perspective. And I have discussed things like the fact that we probably under invested in big T&E co-brands in the past. And I talked about customer mix as well, the fact that some of our large issuing bank customers and our large co-brand partners had more difficulty navigating the great recession than those of our competition.
I also talked about the fact that getting back in the space was not going to happen overnight, it wasn’t going to be a grand slam homerun. It was going to take doubles and singles and stolen basis to get our share back to where it needs to be. And speaking of stealing basis we’re actually stealing a lot of co-brands from our competition. As Ajay mentioned 60% of the co-brands that have been up for RFP, up for bid over the past 12 months we have taken from the competition while not losing any where we were the incumbent.
You can see some of the co-brands up on the screen here, Intercontinental Hotel Groups which is a co-brand with JP Morgan Chase, Virgin Atlantic which is a co-brand with Bank of America, Bass Pro Shops with Bank of America as well. We drove our production people a little crazy over the past several days, we did have two other co-brand deals that are signed and will be announced shortly, however the co-brand partner in that case called us up and asked us not to announce that, because they didn&