Michael E. Miebach
Chief Executive Officer and Director at Mastercard
Thank you, Devin. Good morning, everyone. On Halloween, well nothing spooky here. The headline this quarter, again, we delivered strong results across all aspects of our business.
We're adding to that momentum with the announcement of two planned acquisitions, Recorded Future and Minna Technologies. In the third quarter, net revenues were up 14% and adjusted net income increased 13% versus a year ago as always, on a non-GAAP currency-neutral basis.
These results were underpinned by healthy consumer spending, including strong cross-border volume growth of 17% year-over-year on a local currency basis. And Value-Added Services & Solutions net revenue grew 19% year-over-year on a currency-neutral basis.
The macroeconomic environment remains supportive and continues to underpin the strength in consumer spending. The labor market remains strong, even if slightly below historically tight levels. And inflation has moderated, albeit at varied levels across categories and countries.
Overall, we remain positive about our growth outlook, but we will continue to monitor the environment. We will continue to focus on the things we can control and execute on our growth algorithm.
By tapping into the sizable secular shift opportunity to electronic payments and that across both spend and transactions. Also, by further penetrating the addressable market in commercial and new payment flows by gaining market share, and by growing value-added services and solutions.
Let's take a look at our progress in these four areas, starting with the shift to digital. There's still a long runway for the secular shift for person to merchant payments. Our diverse global footprint and innovative digital first proposition enable us to maximize this opportunity.
A key driver is acceptance, which we have effectively doubled over the last five years. We are increasing acceptance by digitizing untapped pools of spend in areas like transit to open up new transaction flows.
Over the years, we have helped hundreds of transit systems around the world moved to open loop. And now our contactless technology is making it easier for international travelers in Beijing, and people in Hong Kong can now seamlessly pay for their train trips.
The shift to digital means turning every device into an acceptance device. Just think about that. Tap on Phone is now live in over 110 markets. Since the beginning of this year, the number of Tap on Phone locations almost doubled.
And more than 10% are net new acceptance locations for Mastercard. You see it everywhere at food trucks in major cities at the farmers market in my town, in the air to make in-flight purchases, and its sporting events like the Major League Baseball All-Star game.
We're adding more access through new acceptance efforts. In Africa, we're partnering to make our QR pay-by-link technology available to every merchant with a KaiOS powered-phone. That's putting affordable ways to be paid in the hands of underserved small businesses across the whole continent.
We're investing in cutting-edge technologies like tokenization and pass keys to make the online shopping experience better and more secure. And that's the expectation people have when they see our brand. They know it's convenient, fast and frictionless. And that ease and simplicity are not sacrificed for world-class security and protection against fraud.
They get all that from Mastercard in every transaction. Efforts like these are being developed by our teams across the globe, including at newly expanded tech hub in Pune, India, where I was earlier this month.
India is where we first launched a Mastercard payment pass key service which replaces the need for passwords or text for onetime pass codes with biometrics, simple and seamless ways to address the high-levels of fraud and the need to secure payments everywhere, no matter the channel.
We're extending and scaling that into new markets with partners like noon payments, one of the largest PSPs in Middle East, Africa. We're also collaborating with India's leading variables brand, both we will work with them to enable quick, highly secured, tokenized contactless payments on their devices.
The continued adoption of these capabilities positions us well to capture the large secular opportunity in consumer payments. Now, the consuerm is one part of the story. There's a sizable opportunity in unlocking new flows across commercial payments and disbursements and remittances. We're seeing strong momentum in these spaces.
In commercial, we have the right solutions, and we're expanding into new verticals with specialized partners who offer significant reach. Last quarter, we announced a partnership with CBC to provide car distribution, acceptance and financial education to almost two million retailers.
We're now building on this momentum with a partnership with payment Orchestrator, Yellow. They work with some of the largest consumer packaged goods distributors in Latin America, including Nestle, Mondelez, and Coca-Cola.
This partnership will enable three million small and medium-sized customers to use Mastercard's small business cards to make purchases. And in the health care industry, we're partnering with Thunbot, a FinTech specializing in supply chain financing. We will work with them to capture additional B2B flows with virtual cards and address insurance payment delays that have historically posed challenges.
Now shifting to disbursements and remittances, we're also scaling with important players in that space. You saw our announcement that Mastercard Move will be integrated into cities cross-border payments network, City customers in 65 countries can now make secure near real-time cross-border payment transfers to Mastercard debit cards in 14 receiving markets worldwide, with more to come early next year.
In the U.S., we have expanded our partnership with payment platform processor strike, to accelerate the adoption of Mastercard move for push-to-card payments.
In Latin America, we announced partnerships with Paycent, Lead Financial and Felix Pago to tackle the significant U.S. and Latin America, America cross-border corridor opportunity.
Another important element of our growth algorithm is gaining more share of the carded market, and we are even in today's competitive marketplace. We do this by understanding our customers' needs and by offering differentiated services that can help them and drive value and our choice to the end customer.
For example, this quarter, in Belgium, Brussels Airlines announced that they will migrate their co-brand card and loyalty program to Mastercard. We extended our agreement with the second largest bank in Europe, BNP Pariba Group.
The extension includes additional services such as Launchpad to co-create new digital experiences through our dedicated innovation hub. We're building on our partnership with one of the largest commercial banks in Qatar, Doha Bank, in addition to renewing debit and prepaid they will migrate the majority of their credit program to Mastercard.
They were also the first bank in Qatar to launch our cross-border payment services. We're teaming up with Alibaba.com to enable their first co-branded U.S. small business credit card. And we signed an exclusive partnership with Movitel's mobile wallet e-Mola and Mozambique.
To make all these reinforce Mastercard is a valued partner to our customers. Last quarter, I highlighted the progress we're making against the significant opportunity in Africa. Today, let's focus on Latin America, a diverse region that embraces new technologies and represents a large untapped opportunity to convert cash and check to electronic forms of payments.
External sources estimate that more than 60% purchase transactions in Latin America are still paid in cash and check. We have been striving strong growth in the region with third quarter year-to-date GDV up 19% year-over-year on a local currency basis, and we are working locally to win share.
We're growing with two of the largest banks in Guatemala. Banco G&T Continental will migrate the majority of their debit portfolio to Mastercard in Banco Industrial will drive new MasterCard credit and debit issuance and users as the network provider for their Neobank.
In El Salvador, Banco Agricola has agreed, to migrate their debit portfolio to Mastercard and drive new credit issuance. The leading credit issuer in Uruguay, Oseya has renewed our agreement and will convert a private label portfolio to Mastercard. We also have excellent merchant partnerships in Latin America. In Chile, we're securing our position as the market leader with retail issuing partners.
We extended our card issuing partnership with the second largest merchant in Chile, Cencosud, renewed our exclusive card issuing partnership with Banco Ripley, the financial institution of Ripley Corp., one of the largest retail conglomerates in Chile and Peru. This snapshot of Latin America shows more examples of how we continue to win and retain customer agreements around the globe.
Now turning to value-add services and solutions. Our strong growth here is supported by strong differentiated products, transaction flows and customer demand. And we are not stopping here. We are investing in new products to further expand our addressable market and address the needs of our customers.
Let's start with cybersecurity. We play a critical role in advancing trust and securing a global digital ecosystem before, during and after transaction. Our agreement to acquire Recorded Future is expected to add threat intelligence capabilities to our leading identity solutions, real-time fraud scoring and cybersecurity services.
The company provides real-time visibility into potential threats through differentiated AI-powered solutions. This enables customers to act on and mitigate risks before they occur. We can enhance these solutions with the addition of Mastercard Insights product.
This planned addition is expected to make our cybersecurity value proposition stronger, open up cross-sell opportunities with new customers and add to our addressable market. Another trend is the growth of the subscription economy. Subscriptions are everywhere, delivery, entertainment, shopping, software, health care and much more.
They play a big role in people's lives and are supported by and help grow digital payments. With that comes an increasing demand for more transparency control from consumers as well as regulators.
That's why we have agreed to acquire Minna Technologies. Their payment scheme agnostic services go beyond insights, it enables consumers like those today with Capital One, to easily modify, extend or cancel subscription directly within their banking applications and websites.
And merchants benefit from the ability to reengage their customers. The technology will also add to our broader set of tools like consumer clarity to enhance the overall value we deliver, including helping merchants build long-term deeper relationships with consumers through loyalty, rewards and personalized offers.
At the end of the day, it's about creating a win-win approach for all involved, merchants, banks and consumers. The expectation from consumers for personalized experiences also continues to grow.
To meet this demand, we acquired best-in-class personalization assets in 2022 by dynamic yield. Since then, we have enriched the consumer-consented personalization experience with insights from our data analytics.
That's why we've had a lot of success scaling with around 500 retail and commerce partners, including luxury hospitality conglomerate in the Middle East Chrysler. And now, we have introduced a new solution for issuing banks called personalization Breeze.
It combines our market-leading personalization offering with propensity modeling to send individualized messages to cardholders. This is a fantastic example of the value we can deliver when we combine the proposition of our acquisitions, the data and other service offerings.
Now one of those offerings is open banking. It's no surprise. People want greater choice, control and access to financial services and banks want faster and more efficient processes. Our open banking technology can deliver all that.
We recently announced enhancements to our open banking lending program through partnership with Argyle, Lenders can now verify income and employment through consumer permission payroll data.
Fannie Mae and Freddie Mac have authorized this as a data source and we work with them to provide asset verification, rent history and cash flow assessment data during the mortgage underwriting process. This means a streamlined and informed lending process, especially for those with low tin or no credit files.
We continue to add to enhance our value-added services and solutions. We provide differentiated value at scale across a diverse set of payment adjacent areas, cybersecurity, fraud, marketing, personalization and insights, to name a few.
All with large addressable markets where we have the right to play, win and scale and all that, while driving the positive flywheel effect where payments and services reinforce each other.
Today's call is to look at the past quarter. We have accomplished how we continue to set ourselves up for the future. We deliver it again across all facets of the business, and there's so much opportunity ahead.
We look forward to diving into this and more at our investment community meeting on November 13. Now Sachin, over to you.
