Chief Future Officer: Sachin Mehra, Mastercard

to use electronic forms of of of pain. In fact, if you look at like the US, for example, you basically have been moving around two to three of payments from cash and check to some form of direct electronic just about every single year. To regard volumes ex China today at twenty trillion dollars and there's another fourteen trillion dollars worth of cash and check left to digitized Even at level god, penetration is growing, so yes, we are

moving towards a cash society. A new technology has promised to kick these trends into a higher gear. The terminal on the till of the merchant, depending on how old one is, one is used to that at least in the developed world, but that is not everywhere. But everyone has a phone, so electronic payments can end up in a super simple way in everybody's hands, and for our business, that's a massive growth opportunity. MasterCard is already seizing that opportunity.

After dipping in revenues shot past pre pandemic levels driven by a rebound consumer spending. CFO Sachein Mehra knows that this boom is likely to fade, and he's set on finding ways to keep the momentum going. The key to being successful in this kind of environment is to have a diversified portfolio. You've got to be nimbled from an expense standpoint, You've got to be very disciplined as a

finance officer. What I've got to do with I'm going to make sure that we are investing in those resources which are currently demand from a customer standpoint, but at the same time not losing sight of the long term. CEO Michael me Back counts on Meyer to do more than just oversee the balance sheet. The top line for me is um advisor and confident your conciliary. Yes, he's

quite happy pushing back and saying vice versa. The rule of the chief financial officer has actually changed fairly dramatically over this twenty plus year tenure that I've had, you know, in the past, it was more of a function of, you know, let's make sure the numbers are good. Let's make sure we've got a great control environment. Let's make sure we're actually able to close the books on time. Let's make sure we've got all the financial elements of

the business in order. The job of the CFO in in our view, in my view, is a function of making sure we're creating the right linkage between what the purpose of the business is, what the strategy of the businesses, and delivering on the financial returns for the company, all while driving long term sharehold of that. We're in the

business of leading beyond the numbers. It's great that we know what the numbers are, how do we use those numbers to better drive execution of the business to accomplishment of the strategy of the company. Master Cards core business is no surprise cards. Card At products currently account for over half the company's revenue. The company set ambitious growth targets that investor day, committing to expand this core and to diversify beyond it. We've been on a six year

strategy to be a multi rail company. In plain English, that means whichever way you pay, wee will enable that despite the fact that card is in our name is essentially any type of payment we have the reach. So I think we're reasonably well positioned. I mean, you've just got to recognize not only where the consumers today, but where they're gonna go, because a lot of what we got to do takes time to implement, and is it difficult.

You'll get something, You'll get it right, sometimes you'll get it wrong sometimes, but hopefully you're getting it right more often than you can get wrong, and you're working with through the forecasting preferences. Is complicated by an uncertain economy. Consumer confidence has been plunging to historic laws, and recession calls are getting louder. Still, a slowdown isn't likely to cause a crisis for master Card and it's peers. Contrary to what people often perceived, I think payments as an

industry it will be quite fasiliantiny Downtown. Generally speaking, even during a recession, the amount that consumers spend actually does not go down. It continues to grow. I think the thing that people are worried about more um in the payments industry is kind of how does the mix of spending change? The first thing that typically happens if you're going into a recessionary environment, is people tend to pull

back on discretionary categories to spend. They move into um the non discretionary categories of spend, the pivot into food, they've pivot into m rent, those kind of payments which are most important for them to meet. But the rails still stay the same. So the reils which run debit and credit are exactly the same, the technologies the same, the distribution models the same, so those those areas don't necessarily changed by virtue of moving into more of a

debit or credit environment. One area that master Card has been moving vigorously into is B two B payments, a market expected to reach twenty five trillion dollars by the end of the decade. We think there's tremendous promise in the B two B area. The card business as in the elements of the B two B space which are served by cards are doing well. Are they doing very well? And it's in the small business space and the mid market, it's in the large corporate space. All of them do

really well. On the accounts payable side. I would say we're in the build phase, and here we're about building an open loop environment to enable payments on accounts pable rails, whereas the opportunity in that spaces different to consumer payments where there is a global standard. The global standard is MasterCard.

The global standard are Card payments, because that's been established, that isn't quite established yet and B two B and I think the more benefits we bring into the payments that are easier than just making a really complicated cross border payment, I think we will find out way there and we're going to see an explosion of creativity, a lot of other companies coming in and using those rails, innovating on top of the pursuing new opportunities, takes capital.

MasterCard has spent billions acquiring companies that add capacity and diversify its infrastructure. Acquisitions and partnerships have helped MasterCard offer more value added services to their clients, tapping into a lucrative revenue stream. What we call services, which includes data, insights, consulting, manage services, loyalty, and our fraud capabilities is roughly the revenues of this company. Wow. Yeah, So it's not insignificance.

Oftentimes people think MasterCard and think Gord very important, but there's a very different bottom masks Card as well. From a balance sheet perspective, MasterCard has maintained a healthy leverage ratio even as it's put more resources into acquisitions and taken on more debt. Given the company flexibility to continue investing, we don't go in and say, well, right now, evaluations are lower than they were a year ago, let's go and buy something. Um that is that is an opportunistic

approach that doesn't work for us. For me, it always starts, what are we trying to accomplish from a strategy standpoint, What our inherent capabilities we as a company have, What are the gaps and an own capabilities to meet that strategy? And then foll those gaps? Is it best to build? Buy our partner, and then we're out there and we're trying to find the right companies together. It's going to make sure that we have a clear view on short

and long term synergies and so forth. And then we both talked to shareholders and to investors to explain what we're doing and why we're doing and why it's good. Shareholders have reason to appreciate Mastercard's capital allocation strategy. It's

included annual share buy backs and steadily increased dividends. How do you prioritize the amount of money that you put toward innovation and toward building out different businesses versus share buy backs and dividends because master Card has traditionally had a robust program in rewarding shareholders, right first call of

capital is towards growth of the business. After we have done that, it's about making sure we're being good stewards of capital and returning excess cash to shareholders with a biased stewards share buy backs. And then once you start to come to say I have dealt with my strategic priorities, I either have invested in my organic growth or in acquisitions, then access cash. We will return back generally with a preference for buy backs over dividend because it gives a

small flexibility. But that has been a good model for us. It's been working well and it's been well received by the market. Such a mirror joint master Card is Group Executive and Corporate treasure two ten. Over the next decade, took on several different roles before being appointed Chief managed Officer in twenty nine. That's a very different path than the one he started out on. I grew up in India.

I went to school there, I went undergrad there. I worked with the family business that it's a textile business which my grandfather started. My dad and my uncle took over and then my brother and I got into and um. I worked with him for three and a half years and then I came up a business school. The moment of truth came on graduation day. My dad got on the phone. He congratulated me, He said, well done, graduated.

I'm looking forward to having me back home. My brother was older than I am, who went to business school as well and went back home and worked with my dad, got on the phone congratulated me and said, so such a what are you gonna do with your life? And I'm going, well, why are we having this discussion? Dad wants me to come up and work to the family business. He's like, yep, that's what Dad wants you to do. What do you want to And then it really got me thinking and I said, hey, given a chance, I'd

love to work in finance in the US. Mara took the chance, even though it took him six months to land his first job at General Motors, where he worked for over a decade. Then it was on to the energy industry at Hess Corporation before finding his way to MasterCard. Today, my dad couldn't be prouder of the fact that, you know, I chose the path I did. Obviously he misses the fact that we're not there as a family, but that's just spott of light, right, We've all got to grow

in blossom and groom. Did he accept it at the beginning? It took him all of thirty minutes to get there. When Mara gets together with his team in the employee cafe and master Card's campus, it's clear that he's in his element. Well, more important, more fun stuff. What's the plan for the weekend? And of course the cafe provides a demonstration of the tap and co technology that's changed the game for payment companies. Can I just got a regular coffee with help? Okay? That would? You? Got it?

All right? We're gonna make this work. There we go. I think contactless is a very powerful catalyst for accelerating cash depot conversion. In the last two years, what we have seen in the US is god penetration could growth rate annually has doubled versus what was the average and the prior five years. The pandemic was one of the reasons people didn't want to touch cash, and there's a lot of e commerce purchases. The contact lists definitely contributed

to this groot as well. It's made a change, it's

really made a difference. What it's really made a difference on has been in terms of how it's driving a shift from cash to electronic forms of payment, particularly on the small ticket items, which is really really important because at the end of the day, our model is as much about converting the dollar value of the spend as it is about the number of transactions we can get over our network, and even though it happens to be a two dollar transaction, transactions the transaction on which we

make revenue on which we can deliver services, and that's really more. Master Card introduced pay pass, its first contactless payment system, in two thousand two, but the technology took some time to gain traction. I would say we first invested in this many many, many many years ago. The adoption rate on this in the early part, even in markets like the UK, Canada, Australia, was fairly slow in the early part. The inflection point of when it really started to hit it stripe was when it was used

in the transit vertical. So what we figured is, let's get all the transit systems around the globe enabled for contact less technology. That will create muscle memory for the consumer will like the experience in transit and will use it elsewhere. How do you judge the revenue proposition for MasterCard with an innovation like that and the adoption in

the pace of it. Look, I mean for us, we're agnostic as to whether somebody's using the chip technology or the contact less technology or you know, using the mag stripe which was the old way of doing business. We own revenues which are quite similar across both of those. The revenue put aventual and upsite for us comes from the fact that now more spend is being done on guard based forms of payment than what's being done in

the past. So we're converting that cash over the electronic forms of payment, which is where the implemental revenue comes from. If contactless payments is the current revolution sweeping the payments industry, when's the next one? I think pay with your smile, so biometrics. I think that's where it's going to go. And I think we've reached that point that people are sick of too many passwords, people are sick of typing in stuff. And there's also too many wallets and other

ideas and stuff that is around. So why don't you just everybody has a smile, So just play with your smile. There you go, how much are you investing in that? How quickly do you see that becoming the next tap and go? Yeah? So look, I think this is gonna take a while. These things have an adoption code which typically is fairly flattened the early part, and then you start to see some level of steples. Mastercard's next breakthrough

maybe born in one of its global tech hubs. The company has open to innovation centers in Australia, India, Europe, Canada, and the United States. These are spaces where we draw in customers, where we draw the local community. We have them in big cities where the latest technologies and the players are all around us. In New York City it's in Tech Alley, and everybody in the tech industry is around us. It's a point where people want to work and we attract the best talent and we go and

this brings us back to the CFO. We go and look at our vitality index. So how are the our revenues looking what is generated from new products? What do we see is their real momentum, is their real growth. And if you overlay that um and link that back to our tech hubs in these regions where we have them, clearly that is what driving what is driving our new solutions.

From an investment standpoint, we try and make sure we've got our foot in the door and all of these new and emerging technologies because what we don't want to do is play favorites with one versus the other. We want to make sure we're investing just appropriate amounts of money to have skin in the game to know that if this thing has got legs to it, we want

to be at the inflection point for them. To write out in your tech hubs, can you act like Bond James Bond, one of the Q movies, And like the laboratories we walk in and they you know, you sort of face off and clear the system and they serve there are some people who are provolution in this company who can do that. Not everybody can and I'm not I'm not one of them. That's not me Like many of its counterparts, and the payments and financial services industry.

MasterCard has developed products and partnerships that bring cryptocurrencies into its networks. I think from the payments and payments system perspective, the players and members that make up that ecosystem are really agnostic. To them, crypto is just another current, literally, just another asset. At this point. The overall revenue contribution

is still so small. It's very early. But if I am a hard company, it's better to invest and also lean in any partner with some of these companies um for future revenue growth rate versus kind of sitting on the sidelines. Crypto is a term that encompasses a number of different projects, including central bank digital currencies and private sector stable coins, also digital assets like bitcoin. These volatile valuations and susceptibility to fraud have raised plenty of anxiety

among investors. Master cards long term plans to stay in the space haven't wavered. We're not really in the crypto hype of investment investing around crypto. We like the fundamental technology and the promise that it brings to solve problems that have not been solved. So if we see more revenue coming out of B two B solutions that leverage blockchain technology, for example tokenized bank deposits, you know, just to throw out one example, across border payments, whatever it

might be. In the crypto world, we play the rule um as an on ramp, so people use MasterCard card products to buy crypto, our debit and credit products. So that's the on ramp if people want to spend money as in fiat currency to buy crypto and react as the off ramp. And the off ramp is when people want to in cash it we help them actually gain access to be able to use their crypto balance as everywhere MasterCards excepted. We engage with central banks on central

bank digital currencies. We engage with governments on how a policy could look like, how regulation could like look like. We engage with the startup community and say, come on in, let's sit around the table in one of our tech hubs and we discuss what what solution actually is needed by whom and how we can bring it together. They have the greatest idea, but the greatest idea needs a

path to scale. That's what we can bring. Is there a potential liability because of the volatility, because of how Bitcoin and certain other cryptocurrencies have been painted, Is there any liability for MasterCard. Yeah, well, long as we follow our principles, we think we're in really good shape. And the principles we care deeply about our stability as in stability of the currency in question point number two. It must meet consumer protection requirements, it must meet the laws

of the land. And this is not new news to us. We've done this in the space for the last fifty years. For everything. We've been working with regulated financial institutions on UH and so, which is why when we got into the space, the first thing we did was to find principles and we will keep abiding by these principles and what we do. Yeah, I feel happy because we're in the discussion. We're shaping the ecosystem and then one day it will look like what we have done in many

other spaces over years of the past years. Such in Mira is a leader within a company that has the power and reach to shape ecosystems, and he'll be making strategic and financial decisions that shape the business. I wanted to know what he sees when he looks ahead, what's the opportunity for master Card in the next ten years that most excites you. There still remains a very sizeable consumer payments opportunity which we stand very well poised to

actually capitalize on. This is the trend of the shift from cash to electronic forms of payment. If you think about it globally, there's still a ton of cash which remains to be electronifying, and that that opportunity is huge. The second pillar for me is around we have identified over the past few years a sizeable total addressable market in what we call new payment flows. Bucket number three

is around services. It goes back to our insights, analytics, are fraud management capabilities and everything we're doing in that space. And then the last piece around new networks, which is around open banking and digital identity. What are some of the challenges from MasterCard over the next ten years that

keep you up at night. It's around staying plugged in on what's going on from a technology innovation standpoint and making sure we're leading from the front, not turning our back to it and saying we're going to walk in the other direction. We've got to engage with people who could potentially be disintermediators competitors to let them know what value we can bring while they're executing on their strategy.

So that's number one. Number two is look, I mean, the world is getting more and more into a regulatory environment where regulations, regulators are playing a bigger role, nationalism is playing a bigger role. It's important for us to continue to do everything we're doing by being deemed local. It's important to be a global company, but be deemed local.

And that's going to be important for us to execute on because at the end of the day, sitting in my role as the CFO, strategy is great, visions, fantastic, but what really matters is can you really deliver and execute? And we've got to stay focused on execution and that's what we do every day. What's the biggest change that you see a role having over the next ten years. That's a good question. Honestly, I am not really in the business of predicting that much as it relates to

how it's going to change. What I can see happening is greater emphasis on making sure we're leading from the front. It on executing, but also failing fast. And that's where a CFO can play a big role. And by that I mean that you're not always gonna win the things you're gonna do. Hopefully you get more right than wrong, but recognizing things which are not working out and making sure you actually fail fast on them and get out

of them. Because you can get you can fall in love with stuff, keep doing it, keep wasting resources to only realize that it's not going to pay off. And I think the emphasis around that is going to only increase for that for CFOs in a scarce capital resource environment. What advice would you give a CFO today. I think it's important to stay calm. I think it's important to recognize that change is going to happen. You can't fight change. What really matters is how you can get up and

I actually deal with that change. That's super important for a CFO. Being really clear and crisp in your communications. The outside world wants to hear in very simple terms what exactly this company stands for and why they should believe that you are a good investment. And notice I've said nothing about financials and I've said nothing about necessarily financial infrastructure and systems, because I do believe as a CFO those things are table sticks. You've got to make

sure that stuff happens. You've got a level of technology, you've gotta drive efficiency in the business. You've got to get the numbers right. You gotta have a good control in moment. But what's going to call you apart is the is the other elements which I spoke man. If master Card can meet ambitious goals for growth in its core business and build on strategies that are taking payments to the next level, such in Merora, will deserve a lot of the credit. I'm Lisa Abramo. It's this is Bloomberg.