Michael Miebach
Chief Executive Officer, President And Director at Mastercard
Thank you, Warren. Good morning, everyone. Starting with the key highlights for the quarter. We delivered strong revenue and earnings growth with further improvement in our underlying operating metrics, notably in cross-border travel. Quarter two adjusted net revenues were up 27% and adjusted operating income up 40% versus a year ago on a non-GAAP currency-neutral basis, excluding special items. On the macroeconomic front, we continue to monitor a number of factors that have both positive and negative influences on economic growth. Inflationary pressures have remained persistent, and we are now seeing central banks taking even more aggressive steps to reduce inflation as we have seen with the Fed yesterday. The situation has been compounded by geopolitical tensions and supply chain constraints, which have eased from pandemic peaks but remain in many industries. Despite this, unemployment rates remain low, wages are rising and consumer savings levels remain high.
With this backdrop, consumer spending and particularly travel-related spending remains strong. Looking at this from a geographic standpoint. U.S. retail spending remains healthy as consumers navigate a high inflation environment. Spending has been aided by strong job creation and the buildup of excess savings during the pandemic. According to our Mastercard SpendingPulse, which is based on all payment types, including cash and check, U.S. retail sales ex auto ex gas were up 6% in the second quarter versus a year ago. In Europe, spending trends are positive, although the risks related to both the supply of natural gas and higher interest rates remain headwinds. Growth in Latin America continues to moderate following a strong rebound in 2021. Asia has generally lagged the recovery of other regions. While COVID-related requirements have been relaxed in several countries, strong restrictions remain in others. Asia continues to have significant upside potential.
Looking more specifically at our switched volume trends. Domestic volumes continued to show strong growth with notable strength in airline, lodging and restaurant spend. We've seen some shift in spend towards gas and groceries from discretionary categories like home furnishings in the U.S. Cross-border continues its strong recovery as border restrictions continue to be relaxed. Cross-border travel in quarter two has now reached 118% of 2019 levels. Cross-border card-not-present ex travel continued to hold up well. Notwithstanding the strength in consumer spending, we will continue to watch the environment closely, including fiscal and monetary policy responses to high inflation and their potential impact on spending. Within this environment, we will continue to be nimble in managing our expenses.
We have the flexibility to respond quickly across a number of levers as we showed in 2020. Having said this, we will continue to invest in the business to drive top and bottom line growth over the longer term. We have well diversified business model, and we are executing against our three key strategic priorities: expanding in payments, extending our services and embracing new networks. And here's an update on how we're progressing against each one of those. First, we're expanding in payments by continuing to grow card volume, driving acceptance growth and leaning into innovation to capture other prioritized payment flows. We're driving growth in card volume with new consumer, small business, co-brand and travel wins globally. In Canada, we're excited to announce that we secured a new partnership with CIBC that creates an opportunity for material share shift for Mastercard with the bank.
We also renewed our relationship with the Royal Bank of Canada, including a range of services that will enable us to grow our proprietary and co-brand volumes with them. In the U.S., we established a new partnership agreement with the U.S. Bank, which extends our current debit, credit, co-brand and small business credit programs. It includes several new products, including the first large-scale launch of a consumer credit product, a small business credit offering and the development of Buy Now Pay Later installment solutions. We're excited to announce that we have completed the conversion of Gap Inc.'s existing 10 million card members to Mastercard across the Old Navy, Gap, Banana Republic and Athleta brands.
We renewed and expanded our co-brand with Brooks Brothers issued by Citi, and we have renewed and expanded our co-brand with Barnes & Noble in partnership with Barclays. Outside of North America, we have secured several new wins and renewals, including a number of deals that position us well in Asia Pacific as the region rebounds from the pandemic. In Australia, we've extended our partnership with Bendigo and Adelaide Bank Limited, enabling us to maintain exclusivity with Bendigo and convert several of their regional debit portfolios. We're pleased to announce that National Australia Bank and Mastercard has signed an agreement to retain and grow the Mastercard components of Citigroup Australia's consumer business that was acquired by NAB.
This marks the first significant issuing relationship between the two companies in years, and we look forward to partnering to grow these portfolios. In Hong Kong, we partner with Citibank and HKT's loyalty program and digital ventures arm, the club, to launch the Citi The Club Credit Card. In India, we're happy to report that the embargo on new issuance has been lifted. Issuers have restarted card issuance and they are eager to expand business with us. An example is YES BANK, where we signed a consumer credit agreement that will enable us to maintain a majority share and includes a commitment to scale our World Elite portfolio. We've worked on to expand our travel-oriented portfolios, which positions us well to capitalize on the strong recovery of travel. For example, in Asia Pacific, we entered into a 10-year commercial card issuance deal with Trip.com, one of the world's largest online travel agencies.
In the UAE, we renewed our co-brand portfolio with Marriott. In the U.S., we have renewed our long-standing co-brand relationship with Amtrak, and we've extended our co-brand partnership with Virgin Atlantic in the U.K., a partnership that will leverage our Test & Learn, innovation labs and SessionM loyalty assets. We're also driving growth in payments by continuing to expand acceptance. Mastercard is now accepted in 90 million merchants' locations worldwide, and we have more than doubled the number of acceptance locations over the last five years. Mastercard has been driving Tap on Phone innovation, enabling billions of active smartphones to become potential acceptance devices with over 130 deployments across 55 markets. This includes working with Apple to enable acceptance of Mastercard contactless cards and digital payments through the Tap to Pay on iPhone capability.
This allows businesses to accept payments directly on their iPhones. Mastercard is further empowering the ecosystem through our cloud commerce capabilities, which enables our channel partners to quickly deliver cost-effective acceptance. It also provides easy access to a range of payment solutions and services, including Tap on Phone, QR, Installments, Loyalty, data insights and more via the Mastercard cloud. In addition, we continue to drive adoption of our Click to Pay online guest checkout capability. Click to Pay is now enabled in over 20 markets across all regions, and transactions have been growing over quarter. We're expanding in payments through innovations like Mastercard Installments. Our open loop buy now, pay later program has been very well received. Mastercard's Installment is now soon to be live, with Saudi National Bank and several new partners adding their support to the program. Examples include Cross River Bank, Evolve Bank & Trust, Jifiti, Live Oak, MOCA Financial and WebBank in the U.S. as well as HSBC, NatWest and JPMorgan's payments division in the U.K. In addition, Apple recently announced Apple Pay Later, which uses the Mastercard Installments program.
Finally, we're driving growth in payments by leaning into innovation to capture a prioritized set of new payment flows, including disbursements and remittances, commercial point of sale, B2B accounts payable and consumer bill pay. This is at the heart of the investments we've been making to develop a range of capabilities that span cards, account-to-account payments, push payments and blockchain. We're at various stages of scaling our capabilities across these different flows, and we're making steady progress. For example, we are expanding network reach through new cross-border services relationships with partners like Doha Bank and Vodafone in Qatar, and UPT, a leading money transfer operator in Turkey. We are targeting specific use cases and scaling distribution through B2B partnerships with Mastercard Send. A few examples, Caesars Sportsbook will leverage Send for instant payment of online winnings, and Paysafe will integrate Mastercard Send into their payments platform to enhance the payout capabilities offered to their merchant customers in the U.K. and the EU. Now turning to services.
Our service capabilities have proven to be a tremendous growth driver and differentiator for our business, build on a foundation of investments and experiences built over the years. Looking forward, we continue to see a significant opportunity for services in three primary areas. First, services will continue to enhance the value of payments. Services make payments intelligence safe and secure. For example, our Identity Check payment authentication service is driving double-digit improvements in approval rates. We are working with Postepay in Italy to support the deployment of their issuing portfolio, assist in growing their acquiring business and enhance the customer engagement approach. Now our consulting team in Europe is engaging with ING to help them create a seamless payment experience for their clients. Second, we see the needs of our customers expanding beyond payments. We can leverage our full suite of differentiated services to address these needs.
A recent example is Travelodge with utilizing our Test & Learn capabilities to support optimization of new investments in their business. And third, our services can be deployed to support new networks, making our open banking and digital identity propositions even stronger. With these adjacent networks, it's our services that will enable us to establish a differentiated position to scale and win. For example, we recently launched a new Biometric Checkout Program. The program outlined a set of standards from banks, merchants and tech providers, helping to ensure the security and privacy of personal data when people pay with a smile or with a wave. Now beyond expanding in payments and expanding in services, our third key strategic priority area is embracing new networks. As a reminder, our current focus is on two areas: open banking and digitalized entity. We're leveraging our Finicity and Aiia acquisitions to expand our open banking footprint, grow our customer base and deliver new solutions. This quarter, we expanded our Engage partner network to include our open banking services with new fintech partnerships, including Dwolla, Synctera, i2c and others.
They can now use our open banking capabilities to easily build and implement solutions for their end customers across a range of use cases from lending to payments to financial management. In addition, we recently launched a global Start Path Open Banking program. This program enables us to co-innovate with start-up fintechs like Dapi, Finantier, mmob, Mono and Paywallet as we support their path to scale. We've expanded our open banking product offering as well. We announced Pay by link in Europe, which allows businesses to send payment requests through invoice, e-mail, SMS or social media chat. This can expedite the payment of invoices in a cost-efficient way, enabling both parties to better manage cash flows. Online accounting provider, Visma Dinero is using Pay by link to simplify invoice payments for over 75,000 small- and medium-sized businesses. And in the digital identity space, Ekata continues its strong performance, signing over 200 new deals in expansion since we acquired the company just over one year ago.
This includes many of the leading buy now, pay later and crypto companies. It also includes real-time payment software providers like ACI Worldwide, who's leveraging Ekata's capabilities to help their global merchant network more accurately identify fraudulent transactions. Open banking and digital identity are attractive and growing opportunities, and Mastercard is uniquely positioned to be successful in both. So in summary, our business fundamentals remain strong. We delivered robust revenue and earnings growth again. We're executing against our strategic priorities in payments, services and new networks. We have fortified our strong position with travel-oriented portfolios to capitalize on the continued recovery in travel. On the macroeconomic front, we continue to monitor a number of factors influencing economic and spending growth. And with all of that, we will continue to manage our expenses carefully. That said, we will also continue to invest in the business to drive top and bottom line growth over the longer term.
Sachin, over to you.
