Michael Miebach
Chief Executive Officer at Mastercard
Thank you, Warren. Good morning, everybody. Another quarter. Let's jump right in. The headline is that in quarter one, consumer spending has remained remarkably resilient and that despite continued economic uncertainty. We kicked off the year with strong revenue and earnings growth. Quarter one adjusted net revenues were up 15% and adjusted operating income was up 17%, both versus a year ago, as always on a non-GAAP currency-neutral basis, excluding special items.
Focusing on the macro for a moment. Let's take stock, both the positive and negative factors we have been monitoring. First, the labor market in aggregate remain strong, while savings remain above historical levels and consumers continue to access credit, which all are key drivers of consumer spending.
Second, central banks continue to combat elevated inflation levels with higher interest rates. Although we are seeing signs of inflation cooling, additional stresses on the banking sector have emerged. We will continue to monitor how banks respond to these evolving conditions.
And finally, economic growth around the globe continues to vary by country and sector. The reopening of China is a positive catalyst. However, the impact of monetary and fiscal tightening in many countries will likely be with us for some time. So, overall, many moving pieces, but even so, consumer spending levels have remained resilient, while the mix of spending has continued to rebalance towards experiences.
Looking at our switched volume trends. Domestic volume growth has remained relatively stable with some recent moderation in the U.S., in part due to lower tax refunds. Cross-border travel in quarter one reached 148% of 2019 levels with all regions above 2019 levels. This includes notable improvement in Asia. Cross-border card-not-present ex travel continues to hold-up well. We will continue to watch the environment closely. And as we have demonstrated in the past, we are prepared to adjust investment levels appropriately, while maintaining focus on our key strategic priorities. And as a reminder, these three priorities are expanding in payments, extending our services and embracing new networks.
Now, I've been on the road for much of the quarter, meeting with customers, partners, government leaders and, of course, our teams. These conversations reinforce the energy we have for our collaborative approach and show the importance that many place on digital payments and driving much of today's economic activity. And it's with that in mind that I'll share some examples of how we are progressing against our three strategic priorities.
First, we're expanding in payments by winning deals across a diverse set of customers, innovating in and growing acceptance and expanding solutions to address new payment flows. We see our partnership evening with a diverse set of co-brand partners, financial institutions and fast-growing fintechs around the world.
This quarter we had a significant win with Costco Wholesale in Taiwan, the largest co-brand portfolio in the market. The dealer is a competitive flip that ensures exclusive co-brand issuance and exclusive acceptance of Mastercard co-brand cards in stores, effective in August this year. We also announced our exclusive partnership with Wells Fargo and Choice Hotels to launch their new credit card program in the United States.
In the Middle East, we think the renewal with National Bank of Egypt, the largest issuer in the country. And on the fintech front, we renewed our deal with N26, one of the largest neo banks in Europe for Mastercard to be the exclusive provider for issuing and processing services.
And in Latin America, we expanded our relationship with Uala, one of the fastest-growing fintechs in the region, to be the exclusive network on prepaid, debit and credit.
So, we are continuing on our trajectory, delivering another solid quarter of new and renewed wins, an important element of our growth algorithm. Beyond new wins, we are driving growth in payments through the development of innovative solutions like our installment offerings.
In Australia, we're scaling our solutions with some of the largest banks in the market, including Commonwealth Bank of Australia, National Australia Bank and Westpac. Providing the way to pay is central to what we do, so too is making sure people and businesses can use those payment tools when and where they want. Along those lines, we are continuing to drive growth in acceptance, expanding connectivity and trust across all forms of comp payments.
Our acceptance footprint has now surpassed 100 million locations, effectively doubling over the past five years. And that's just the start. Our innovative contactless Cloud Commerce and Click to Pay solutions give more merchants the ability to accept electronic payments with simple technology connectivity. To us, that's opportunity to bring more physical and digital transactions onto our network.
Over 100 markets have now reached at least 50% contactless penetration, double the number three years ago. Contactless drives higher consumer engagement and helps accelerate the secular shift to digital payments by accessing lower ticket size purchases and have historically been cash-based.
In quarter one, our tokenization capability was selected as part of a mobile payments launch in South Korea, enabling a significant number of private-label cards for contact-less and thereby giving us the opportunity to deliver services on those transactions.
We continue to see momentum in Tap on Phone with programs across more than 70 markets globally. We continue to scale, including with Stripe who announced in quarter one that they have enabled Tap to Pay on Android in multiple markets.
In addition to helping our partners bring Tap on Phone to market, our Cloud Commerce acceptance technology is now live in Europe. Our Cloud Commerce capabilities make it easier and quicker for businesses of all sizes to accept payments on virtually any device. And Click to Pay is now live in nearly 30 markets globally, including key markets such as Australia, Brazil, UK and U.S. We're partnering with payment service providers like Nexi in Italy to further expand our presence.
This is all complemented by our work with partners to grow acceptance by integrating the payment experience where their customers are. You see that in the social commerce space with WhatsApp in Brazil, enabling consumers to make purchases directly from small businesses right within a chat. Further, we remain focused on expanding our set of new payment capabilities to capture a prioritized set of new payment flows.
I'll highlight a couple of areas we are targeting. Starting with commercial. We had a strong growth in this space with volumes across our commercial credit and debit products in quarter one, up 21% versus the prior year on a local currency basis. We see substantial opportunity to grow in commercial, particularly with our virtual cards and small-business solutions.
With virtual cards, where we are the market leader, one of our initiatives is to integrate our solutions with leading B2B technology platforms. This quarter, we signed a partnership agreement with Coupa to enhance their Coupa Pay solution, which embeds virtual cards to address accounts payable floats.
On the small business front, today only a small fraction of payments are captured on card. We are enhancing the value propositions from programs like Easy Savings, which offers automatic merchant-funded rebates to nearly 14 million enrolled cardholders in over 80 countries. And we are growing by establishing new issuance deals through partners like Galileo in United States. The Mastercard will be the preferred brand for small business and commercial programs.
Now, beyond commercial disbursement and remittances, flows represent a significant opportunity for growth through geographic expansion, new distribution partners and an expanding set of use cases. In terms of new markets, our gaming use case is now live in Canada and Peru. And we have added cross-border origination to the UAE and Uzbekistan. By connecting with MFS Africa, a leading digital payment company, we have enabled mobile payouts across 10 markets in Africa.
We are working with distribution partners like Checkout.com to increase reach to even more customers in Asia and the United States. And we're enabling our cross-border services solutions to small and mid-size banks through Cross-Border Services Express with a simple-to-use digital-first solution. Participating financial institutions can offer their customers the ability to send money or pay vendors across the globe quickly and securely.
In terms of expanding use cases, we have enabled cash-in at U.S., in Europe and the UK, facilitating under-bank customers to safely load cash into their accounts from a non-bank location, which can also help drive follow-on card spend. So as you can see, we continue to make broad-based progress in addressing our prioritized set of new payment flows.
Turning now to services, we love services, where we are focused on growth and resiliency through scaling our existing solutions and adding new capabilities. As merchants and consumers shift to digital, our comprehensive set of cyber security solutions becomes even more critical. For instance, RiskRecon helps an enterprise identify their own cyber security vulnerabilities, as well as for the ecosystem partners. With our acquisition of Baffin Bay Networks this quarter, we now have a solution to help these customers act on this information. Specifically, Baffin Bay's AI-enabled cloud-based threat protection helps us stop cyber attacks related to malware, ransomware and DDoS attacks. The acquisition also complements our other cyber offerings including our simulation and assessment tools, as well as our cyber security consulting practice.
You all are familiar with our comprehensive set of data analytics, marketing and loyalty assets. These are about helping our partners make smarter decisions to drive better outcomes. For example, Agoda, one of the world's fastest growing online travel platforms in Asia, is leveraging our economic insights to inform their strategic planning.
And MediaMarktSaturn, the largest electronics retailer in Europe, is utilizing our Test & Learn capabilities to support the assessment and optimization of new business initiatives. We also continue to make progress signing deals with retail and commerce partners, like Hyundai Motors Europe and PUMA, to utilize our recently acquired personalization platform, Dynamic Yield. We continue to look for ways to combine all these assets to deliver valuable end-to-end solutions. We just announced Element, a suite of applications which brings insights from Mastercard's data analytics to enrich Dynamic Yield's personalization experience.
Our third key priority area is embracing new networks, where we are making progress in the areas of open banking and digital identity. In open banking, we continue to work with a broad set of banks and fintechs who are interested in its potential across a wide range of use cases. In addition to the Pay-by-Bank solution with J.P. Morgan that we announced last quarter, we are working with payment risk and identification company, GIACT, member of the London Exchange Group, to embed a secure account verification solution. Also, Saxo Bank will use our open banking technology for account opening and top-ups in Europe.
Further, we are developing capabilities on top of our open banking platform. We have advanced analytics, partnering with fintech innovators like upSWOT, NAV, Enigma and ZenEquity to expand access to capital with better data for making lending decisions. This is another great example of how our technology supports small business.
Moving next to digital identity. We continue to see strong adoption of our intelligent identity solutions powered by machine learning. This quarter, we secured a key partnership with Southwest to embed our intelligent identity solution from Ekata to reduce fraud and friction in digital interactions. Still early stages with open banking and digital identity, but we are making progress scaling our technology to new markets and use cases with notable partners.
So with that, I'll wrap it up. And in summary, we delivered another strong quarter of revenue and earnings growth, reflecting a resilient consumer and a continued recovery of cross-border travel. We will continue to watch the environment closely and are prepared to act as circumstances dictate. We see significant opportunity ahead, having now surpassed 100 million acceptance locations worldwide. And our focused strategy, diversified and resilient business model and strong relationships around the globe position us well through economic cycles.
Sachin, over to you.
