Michael Miebach
Chief Executive Officer at Mastercard
Thank you, Devin. Good morning from New York, everyone. Let me start by acknowledging the recent terror attacks in Israel and the resulting war with Hamas and the growing humanitarian crisis in Gaza. We're deeply saddened by the suffering and the loss. Our focus is on the well-being of our people. Those who have been directly impacted and those in our teams around the world who are dealing with this terrible situation. We will continue to give them support while contributing to relief efforts. We will monitor the situation closely so we can take action as required. Turning to our results. Our quarter three results demonstrate the strong fundamentals of our business, our diversified model and the continued resilience in consumer spending.
Quarter three net revenues were up 11%, and operating income was up 13%, both versus a year ago on a non-GAAP currency-neutral basis, excluding special items. On the macroeconomic front, there are a few factors we focus on. First, the labor market remains strong, which is a key driver of consumer spending. However, we continue to monitor aspects such as credit availability and savings behaviors. Second, although inflation levels have moderated, they remain elevated. As central banks continue to actively manage monetary policy, we expect the impacts to vary across countries and sectors. Also, geopolitical uncertainty remains a concern, further underscored by the recent events in the Middle East.
We are monitoring these moving pieces and stand ready to manage the business accordingly. Looking at our switch trends this quarter, domestic volume growth remains healthy with some moderation in spend in select international markets. Cross-border travel remains strong at 155% of 2019 levels in the third quarter. And cross-border card-present ex travel continues to hold up well at 209% of 2019 levels in the third quarter -- this is cross-border card-not-present ex travel. So overall, consumer spending remains resilient, and we remain focused on executing against our strategic priorities. We see substantial runway for growth through the long-term potential in person-to-merchant payments, the sizable opportunity to address new payment flows, our diverse suite of fast-growing service capabilities and our investments in areas of future growth like open banking and digital identity.
Let's explore these in more detail. Starting with person-to-merchant payments, where we see a sizable long-term growth opportunity. We're winning deals with a diverse set of partners and investing in technology to further drive the shift to electronic forms of payment and capture new ways to pay. In the third quarter, our deal momentum across the globe continued. In the U.S., we are happy to announce that Webster Bank, a leading commercial bank in the Northeast has chosen Mastercard as their exclusive payment network. They selected us because of our marketing assets, safety and security tools and commitment to small business.
This builds up on recent wins in the U.S. like the Citizens debit portfolio flip with the transition on track for 2024. These two wins are clear examples of the value we deliver through our partnerships and the reasons banks are willing to move their debit business to Mastercard. Further, we have partnered with Citi's wealth business to launch their ultra-high net worth credit proposition, targeting their private bank clients in Singapore and Hong Kong. And in East Africa, we signed a long-term deal with Equity Bank group that significantly increases our share across the six markets where they have presence. On the co-brand front, we joined Barclays to launch Xbox first credit card in the United States.
Building off our long-standing relationship with Microsoft, this product is an example of how we're tapping into the fast-growing gaming space. And of course, we continue to strengthen our travel-focused programs, renewing our Frontier Airlines program issued by Barclays as well as the Turkish Airlines program with Garanti BBVA. Winning deals positions us well to capture PCE and secular growth. There's a sizable opportunity across volumes and transactions, and we benefit from both. We're bringing together innovation, technology, the experience and trust that consumers want and expect in their daily lives, and that starts with our best-in-class digital solutions such as contactless and tokenization.
Contactless now represents 63% of our in-person switch purchase transactions and the convenience and security of our capabilities are helping us to further penetrate verticals like transit. By converting transit to open-loop, we gain access to more low-ticket, high-frequency transactions, both at the station and the surrounding merchants. In the last quarter alone, we launched open-loop programs with two of the largest transit systems in North America, Toronto and Philadelphia. We're now live with over 25 agencies in the U.S. and Canada. This year, in the Netherlands, we supported the launch of a nationwide contactless transit payment system.
And in Pakistan, we're helping to digitize daily commutes in Karachi with issuance over one million prepaid open-loop cards. On tokenization, it has been 10 years since we first introduced the token standard to the industry. Today, it is foundational to the network, and it's performing exceptionally well. The number of tokenized transactions has more than doubled over the past two years. We just processed over three billion tokenized transactions in one month. And this functionality is extending to new places to pay. For example, Mercedes-Benz customers in Germany can now pay for fuel directly from their vehicle using only their fingerprint.
And Honda Motor America is enabling in-vehicle payments to parking with additional features and EV use cases to be enabled in the future. Digital solutions are also key to migrating Maestro to Debit Mastercard. This conversion drives a better cardholder experience, including in many cases, the ability to shop online and across borders, which leads to incremental card spend. And prior to a full transition, we offer a virtual companion card to the current Maestro Cards for immediate online use. In Europe, we're in the process of sunsetting new issuance of Maestro, and we will continue to work with our issuers on the migration of well over 100 million cards over time.
A lot happening in [Indecipherable] for sure. On to the second vector for growth, New Payments Flows, they are substantial untapped flows across commercial payments and the disbursements and remittance space. In commercial, we continue to see strong growth. We're expanding our market leading virtual card capabilities into new use cases. In the U.S. and Canada, our mobile payment solution is now live with BMO and fintech partner Extend bringing our virtual card capabilities to contactless business payments. We also continue to expand our reach to corporates by partnering with Oracle to embed Mastercard virtual card capabilities into their Fusion Cloud ERP to enable supplier invoice payments and corporate purchases.
And we are integrating our commercial payment and open banking capabilities into SAP Fioneer platforms to deliver an embedded payment and lending experience. There remains a significant opportunity to convert cash and check to commercial card products. We're signing deals across the globe to do just that. We're excited to announce that we have agreed a long-term deal with Citibank to forge a global commercial card partnership covering more than 60 markets. The deal extends our leadership position with Citibank and reinforces our efforts to modernize and grow B2B payment flows. We also signed our first ever commercial contract with Axis Bank in India, and a commercial deal with the biggest investment bank in Latin America, BTG Pactual.
Now let's focus on disbursements and remittances. With access to more than 95% of the world's bank population, our reach spans more than 180 countries and more than 150 currencies, and we are seeing strong growth. In the third quarter, transactions were up more than 30% on a year-over-year basis. To continue growing in this space, we're expanding into new use cases and geographies. A great example is our partnership with Remitly, one of the fastest-growing digital remittance platforms with over five million active users. Remitly will leverage our disbursement and remittance solutions to help make international payments faster, easier and more secure. We're also expanding our collaboration with Paysend in the U.K. to enhance cross-border payments for SMEs.
Now our value-add services and solutions are another important driver for our growth. Collectively, this suite of capabilities is fast growing and provides a diversified revenue stream. We have invested thoughtfully to develop services focused on supporting our customers in areas of growing need. Cybersecurity threats are rising, a trend that will unfortunately persist. And there's an increasing demand for actionable insights and more personalized experiences. Our services, bolstered by our data-driven intelligence can help customers reduce fraud, grow their portfolios and better engage with their end customers. Take our cyber solutions which protect consumers and the payments ecosystem more broadly, one example is Safety Net, which in the past 12 months has prevented more than $20 billion in fraud.
This is just one of our many fraud solutions that we're deploying to deliver more value and support continued growth. AI also continues to play a critical role powering our products and fueling our network intelligence. We're scaling our AI-powered transaction fraud monitoring solution, which delivers real-time predictive scores based on a unique blend of customer and network level insights. This powerful solution gives our customers the ability to take preventive action before the transaction is authorized. This quarter alone, we signed agreements in Argentina, Saudi Arabia and Nigeria with financial institutions and fintechs who will benefit from early fraud detection and with merchants who will experience less friction and higher approval rates. In the end, this all makes for a better consumer experience.
We're also using our services, combining our data and expertise to help clients optimize and do more with their portfolios. This drives both direct services revenue and incremental payments revenue. Our consulting, marketing services and targeting analytics help clients design and execute portfolio migrations, drive incremental card acquisition and stimulate spend. For example, in Spain, we are working with Financiera El Corte Ingles to boost the migration of closed-loop clients to our new open-loop co-badge proposition. And we're working with Saudi National Bank to enable growth in their credit portfolio by increasing penetration from their debit base. So the headline for me is the power of our strategy to drive payment network and service revenue for Mastercard.
Service improved the performance of our client's portfolio, leading to incremental payment flows, which lead to more opportunities to use our services and so on and so on, it's a virtuous circle. We also had success in expanding our customer base and services through best-in-class personalization and our leading Test & Learn analytics capabilities. Don't just take our word for it. Gartner recognized the superior value proposition of Dynamic Yield personalization activities and selected as the leader in its 2023 Gartner Magic Quadrant for the third year in a row. That's why luxury brands like Saks Fifth Avenue work with us to create hyper-personalized experiences for their e-commerce customer.
This quarter, we extended our partnership with the merchant Aldi in both the U.S. and Australia to continue to leverage our Test & Learn platform to optimize category reviews, store hours and marketing spend. And we're working with Dunkin' International to enhance their foundational data analytics capabilities to improve operational efficiencies. Our best-in-class Solutions addressed the unique needs of a diverse set of customers, giving us ample opportunity to continue to grow across our value-add services and solutions. We have a strong foundation for growth in P2M as discussed new flows and services, and we are also embracing new opportunities for future growth.
As digital adoption continues to rise, open banking remains a key opportunity. We have a powerful set of assets with connectivity to over 95% of deposit accounts in the U.S. and 3,000 banks across Europe. We're engaged with a broad set of partners who are increasingly interested in the scale and potential of the open banking solutions we bring. This includes the account-to-account bill payments use case. Our open banking solutions enhance existing ACH flows by providing a simple and secure experience, allowing consumers to seamlessly share data with trusted parties. Previously announced partnership with JPMorgan Payment's Pay by Bank is now live and Verizon plans to pilot this offering with the U.S. customers in the coming months.
In addition to this, we're now collaborating with Worldpay to enable consumers to pay bills directly from their bank account. Our progress here continues. So in summary, our third quarter results reflect the strong fundamentals of our business and the continued resilience in consumer spending. Their substantial runway supported by opportunities to digitize person-to-merchant payments across both the with the dollar volume of flows and the number of transactions and opportunities to address new payment flows and extend our diverse suite of services, all while we continue to invest in future areas for growth. When you put it all together, our diversified business is well positioned for strong growth for years to come.
Sachin, over to you.
