Mastercard Incorporated (MA) Q3 2025 Earnings Report, Transcript and Summary

Good morning. My name is Julianne, and I will be your conference operator today. At this time, I would like to welcome everyone to the Mastercard Incorporated Q3 2025 Earnings Conference Call. [Operator Instructions] Mr. Devin Corr, Head of Investor Relations, you may begin your conference.

Thank you, Julianne. Good morning, everyone, and thank you for joining us for our third quarter 2025 earnings call. With me today are Michael Miebach, our Chief Executive Officer; and Sachin Mehra, our Chief Financial Officer. Following comments from Michael and Sachin, the operator will announce your opportunity to get into the queue for the Q&A session. It is only then that the queue will open for questions. You can access our earnings release, supplemental performance data and the slide deck that accompany this call in the Investor Relations section of our website, mastercard.com. Additionally, the release was furnished with the SEC earlier this morning. Our comments today regarding our financial results will be on a non-GAAP currency-neutral basis unless otherwise noted. Both the release and the slide deck include reconciliations of non-GAAP measures to GAAP reported amounts. Finally, as set forth in more detail in our earnings release, I would like to remind everyone that today's call will include forward-looking statements regarding Mastercard's future performance. Actual performance could differ materially from these forward-looking statements. Information about the factors that could affect future performance are summarized at the end of our earnings release and in our recent SEC filings. A replay of this call will be posted on our website for 30 days. With that, I will now turn the call over to our Chief Executive Officer, Michael Miebach.

Thanks, Devin. Good morning, everyone. We delivered strong results in the third quarter. Net revenues were up 15% overall, and value-added services and solutions net revenue was up 22% versus a year ago on a non-GAAP currency-neutral basis. Our solid performance is a reflection of our winning strategy, our market-leading innovation and focused execution. We continue to see healthy consumer and business spending in the quarter with the macroeconomic environment still generally supportive. Inflation levels have remained fairly steady and labor markets remain well balanced. Financial markets were near record highs, further contributing to the wealth effect, which helps stimulate spend. Given this backdrop and our diversified business, we are positioned well for ongoing success. In looking at the quarter, our drumbeat of wins continued. Our partnership approach, combined with our differentiated payments propositions and value-added services and solutions continues to drive wins. This quarter, we have multiple co-brand wins with large airlines and retailers, including Japan Airlines, the Comair in Mexico and Uni-President Group in Taiwan. We have also expanded our relationships with bank partners globally, a testament to the unique value we bring. In the Nordics, we have renewed our strategic partnership with Nordea on card issuance and services capabilities. And we're happy to announce that Mastercard will be neobank's exclusive network partner in the U.S. as that card program launches, this builds up on our extensive partnership across the Americas. Earlier this year, we unveiled the Mastercard World Legend card designed specifically for the ultra-high net worth individual. Also launched the Mastercard Collection, a set of globally connected premium benefits and experiences for our World, World Elite and World Legend cardholders. This combined differentiated value proposition helped us win several key affluent portfolios around the world, including First Abu Dhabi Bank in the UAE, Saudi Awwal Bank and Saudi National Bank and Doha Bank in Qatar. In Brazil, we are partnering with several banks, including Itau, Banco do Brasil, C6 Bank and BTG on new affluent portfolios, reinforcing our strong credit position in that key market. Moving on from our recent wins. We are focused on executing against our three strategic priorities to unlock long-term growth. I'll touch on each, starting with consumer payments. The consumer secular opportunity is tremendous with $11 trillion in GDV and 1.5 trillion transactions still happening in cash and check around the globe and even further opportunity with China and a counter account bill payments. We are targeting these flows by expanding our acceptance footprint across under-penetrated verticals and by opening closed-loop payment networks. Let's look at the rent vertical. The volume of rental payments globally is substantial. Today, most of the payments are paid through check or ACH are now are recurring in nature. So, naturally a focus for us. Through our co-brand and services capabilities, we have successfully unlocked acceptance at scale with partners. This quarter, we partnered with Renti, a rental management platform in New Zealand. This relationship both unlocks card acceptance and includes rich rewards for their customers who choose Mastercard. A powerful example of how we are delivering value across this ecosystem. Moving on to closed-loop payment networks. This quarter, we deployed new contactless acceptance across closed-loop transit systems in Italy, Japan, Chile and with the Chengdu and Guangzhou Metro systems in China. Altogether, we have digitized hundreds of systems across major cities around the globe. The simple tap and go experience is a great way to shift consumer behavior and we are seeing strong results. It also can be a transaction multiplier rather than buying one monthly metro card, we see a transaction for each ride. Volumes are up too. Through the third quarter of this year, Mastercard GDV on open-loop transit systems increased 25% year-over-year on a local currency basis. Not to mention the halo effect this can drive in everyday spend categories, and that is powerful. We're also driving incremental volumes from local stored value digital wallets over the Mastercard network through our partnership with Alipay+, a network of 36 e-wallets, we're now expanding cross-border payment enablement to Kakao Pay in South Korea, following earlier launches with AlipayHK and GCash. And in India, we are working with PhonePe to enable their consumers to transact in person and online using their Mastercard payment credentials. Digital wallets are increasingly partnering with Mastercard because of the value they see in our unmatched global acceptance across hundreds of millions merchant locations and digital access points. Agentic Commerce is here, and we're at the center of it. With our global acceptance reach, trusted brand and services capabilities, we're instrumental in creating the foundation for agentic commerce. We're now working with key players such as OpenAI on their agentic commerce protocol and with Google and Cloudflare to set industry standards, all to drive safety and security. To Mastercard Agent Pay, we're enabling agents to facilitate transaction over a Mastercard's payment network in a secure and scalable way. You already have agents registered and have tools in place for easy onboarding as others are ready. Our first agentic transaction took place on our network this quarter at pivotal moment in payments, and that's just the start. U.S. Bank and Citibank cardholders can now use Agent Pay. The rest of our U.S. issuers will be enabled in November with a global rollout to follow early next year. And the beauty of it all, we've made it easy for merchants across the globe to benefit on day 1 with the same trust and security they are used to do from us today. Our acceptance framework enables any Mastercard merchant to participate without significant development or integration, a no-code approach. For agentic payments, we bring trust and transparency and have the right capabilities and acceptance reach. We have strong partnerships with the players I just mentioned and many more, including Walmart, to accelerate the adoption of agentic commerce using cards through Mastercard Agent Pay. And our services play a big role both today but even more so as we look to the future. Players across the payments ecosystem are partnering with Mastercard and our dedicated consulting teams to ready themselves for agentic commerce. Agents through Mastercard's inside tokens can make agentic commerce even more personalized. By harnessing our proprietary data, we will be able to provide agents with predictive insights to help drive smarter decisions and recommendations. The shift we're seeing in commerce is creating further opportunity for our capabilities, more consulting, more loyalty, more security and so on. The runway for agentic focused services in consumer and business use cases is long, and we're well positioned to capture this opportunity. Like agentic commerce, we believe stablecoins are an attractive and growing opportunity for our network, believe in offering consumers and merchants the choice in how they transact. For years, our network has therefore enabled crypto and stablecoins to be purchased and spent across our acceptance footprint. We have approximately 130 crypto co-brand card programs in market with associated volumes and transactions growing at a healthy clip. We're expanding our partnerships through new deals with consensus on the MetaMask card in the U.S. and with Binance in Brazil. We also continue to see strong growth in the on-ramp as well with quarter 3 year-to-date transactions up over 25% with spend at crypto merchants. Moving on to commercial and new payment flows. The B2B opportunity is massive, and we are deploying a targeted strategy to capture it. Small business remains a top priority. Over the last year, we have increased small business Mastercard in market by more than 10%. Key to our growth has been working with our traditional issuing partners such as Carrefour Financial Services in Spain, but also through alternative distributors. This quarter, we partnered with Zaggle, a spend management provider in India. Biz2Credit, a small business financing platform in the U.S., and RTS, a transportation services provider in the U.S. to distribute commercial and small business cards to their customer bases. Similarly, we are working with Instacart in the U.S. to issue small business cards, offering rich rewards and instant payouts using Mastercard Move capabilities. Our virtual cards drive benefits across the ecosystem. Suppliers get paid faster with certainty and streamlined reconciliation. Buyers improved working capital and gain more control over spend, all in a simple and secure way. [ BBVR ] will now be issuing Mastercard virtual cards to their travel agency customers in Mexico and there are plans to expand the solution beyond to South America and Europe. We're making it easier for corporates to use virtual card capabilities within their existing workflows. Now with more than 10 global B2B and T&E platforms on board with several regional partnerships also in place. Working alongside issuers, acquirers and payment facilitators to embed card payment tools and unlock acceptance within the platforms that buyers and suppliers already use every day. And we continue to deliver value to the supplier through simplified reconciliation tools and flexible B2B economics. We have offered flexible rates in the travel space and in the U.S. for domestic business-to-business flows for years. Looking at the U.S. program, we have nearly doubled the number of customers participating over the last 2 years. Given its success, we are scaling flexible rate programs across the globe. Next, Mastercard Move. Our disbursement and remittances capabilities remain strong with over 35% transaction growth this past quarter. To further scale adoption, we are integrating Mastercard Move into leading core banking platforms, including Infosys this quarter. Penetrating key markets in EMEA through our partnerships with Worldpay and STC Bank. And in China, we've enabled more ways for consumers to make outbound remittances across our billions of endpoints. In June, we announced how we have embedded stablecoins into Mastercard Move capabilities to support disbursements, remittances and B2B use cases. This spans prefunding with stablecoins to sending stablecoins across the globe, which can be received in any local fiat currency or support a stablecoin. We continue to execute against this roadmap now with prefunding capabilities in place with customers in Europe, Middle East, Africa, including Pay Send this quarter. Moving on to our third strategic pillar, services. We have curated an expansive services portfolio featuring security, consumer engagement and business and market insights. Our services differentiate our payment network and drive meaningful value for our customers beyond the transaction itself. We're actively driving growth by further penetrating our existing customers, diversifying into new customer types, and through new innovations. Let's look at each of them. We have extended our reach and share of wallet across our bank customers. We now have strategic relationships with the retail bank as well as marketing, loyalty and security offers across several of our customers. A great example is how we're building on a successful partnership with the Rogers Bank in Canada. We expanded our collaboration with the parent company, Rogers Communications to provide fraud prevention security offerings, and payment gateway solutions. They are also an initial partner to use our newly announced Mastercard merchant cloud offering, which I will touch on later. And we're expanding our customer base across merchants, governments and digital players. A few key examples from this quarter include the Polish Ministry of Digital Affairs who will use Recorded Future's Threat Intelligence capability. Equifax in Australia. We will be using our open finance capabilities to help inform their customers' lending practices to underserved consumers. Beyond that, we are continuously innovating to further penetrate and grow the $165 billion serviceable market we outlined at last year's Investor Day. We continue to innovate within payments. Last month, we launched on-demand decisioning, a fully customize rules engine that gives issuers greater flexibility and control of payment authorizations. This is a great example of how our network can help issuers optimize payment portfolios and strengthen their user experience in a fast, efficient way. For the merchant community, we launched a merchant cloud offering, Mastercard's acceptance, gateway tokenization, fraud and insight solutions through a unified platform. Partners can now simply integrate these services into their propositions or resell directly to their customers. This is a great example of how we are delivering our innovation at scale. We're also extending our value beyond the transaction by leveraging insights from our rich and extensive data sets. By combining Mastercard's payment expertise and global network visibility with recorded future's leading cyber threat intelligence capabilities we were excited to recently announce Mastercard Threat Intelligence. Issuers and acquirers using Mastercard Threat Intelligence can proactively detect cyber attacks in order to prevent payment fraud. Mastercard Threat Intelligence complements our existing cybersecurity intelligence, fraud, scoring and defense functionalities. And to conclude, we recently launched Mastercard Commerce Media, a new digital media network that makes advertising more personalized, relevant and effective. Advertisers are under pressure to prove that every dollar spend drives real outcome. Mastercard Commerce Media uniquely helps advertisers serve tailored offers to the right consumer at the right time by using our proprietary spend insights. Once the offer has been served, we're able to measure the effectiveness of each ad by linking it directly to a purchase made. Building off our existing loyalty programs and technology, we're able to connect the 500 million enrolled in permission consumers and 25,000 merchant advisers -- advertisers on day 1. As you can see, we're relentlessly focused on delivering value to our customers, and that's why customers continue to choose Mastercard. So with that, I'll wrap it up. We delivered another strong quarter, a significant opportunity ahead. The fundamentals of our business are strong. I am very optimistic about the future of Mastercard. Our proven growth algorithm, differentiated solutions and continuous innovation positions us to deliver and win as we've demonstrated time and time again. It's an exciting time in payments, and Mastercard is at the forefront. Sachin, over to you.

Thanks, Michael. Let's turn to Page 3, which shows our financial performance for the third quarter on a currency-neutral basis, excluding replicable special items and the impact of gains and losses on our equity investments. Net revenue was up 15%, reflecting continued growth in our payment network and our value-added services and solutions. Acquisitions contributed 1 ppt to this growth. Operating expenses increased 14%, including a 4 ppt increase from acquisitions. And operating income was up 15%, which includes a 1 ppt headwind from acquisitions. Net income and EPS increased 8% and 11%, respectively, driven primarily by the strong operating income growth, partially offset by a higher effective tax rate due to Pillar 2 and a change in our geographic mix of earnings. The tax rate in the quarter was higher than expected due to a discrete tax expense. EPS was $4.38, which includes a $0.10 contribution from share repurchases. During the quarter, we repurchased $3.3 billion worth of stock and an additional $1.2 billion through October 27, 2025. Now turning to Page 4. Let's first look at some of our key volume drivers for the third quarter on a local currency basis. Worldwide gross dollar volume or GDV increased by 9% year-over-year. In the U.S., GDV increased by 7% with credit growth of 7% and debit growth of 7%. Outside of the U.S., volume increased 10% with credit growth of 10% and debit growth of 9%. Overall, cross-border volume increased 15% globally for the quarter, reflecting continued growth in both travel and non-travel related cross-border spending. Turning to Page 5. Switched transactions grew 10% year-over-year in Q3. We continue to see an increase in contactless penetration, which in Q3 stood at 77% of all in-person switched purchase transactions. This is up 6 ppt since the same period last year. In addition, card growth was 6%. Globally, there are 3.6 billion Mastercard and Maestro-branded cards issued. Turning to Slide 6 for a look into our net revenue growth rates for the third quarter discussed on a currency-neutral basis. Payment Network net revenue increased 10%, primarily driven by domestic and cross-border transaction and volume growth. It also includes growth in rebates and incentives. Value-added services and solutions net revenue increased 22%. Acquisitions contributed approximately 3 ppt to this growth. The remaining 19% increase was primarily driven by growth in our underlying drivers, strong demand across security, digital and authentication solutions, consumer acquisition and engagement services and business and market insights and pricing. Now, let's turn to Page 7 to discuss key metrics related to the Payment Network. Again, all growth rates are described on a currency-neutral basis, unless otherwise noted. Looking quickly at each key metric. Domestic assessments were up 6%, while worldwide GDV grew 9%. The 3 ppt difference is primarily driven by mix. Cross-border assessments increased 16%, while cross-border volumes increased 15%. The 1 ppt difference is driven by pricing in international markets, partially offset by mix. Transaction processing assessments were up 15%, while switch transactions grew 10%. On an unrounded basis, the 4 ppt difference is primarily due to favorable mix as well as some benefit from pricing and revenue from FX volatility. Other network assessments were $255 million this quarter. Moving on to Page 8. You can see that on a non-GAAP currency-neutral basis, excluding special items, total adjusted operating expenses increased 14%, which includes a 4 ppt impact from acquisitions. Excluding acquisitions, the growth of total adjusted operating expenses was primarily driven by increased spending to support various strategic initiatives, including investing in our infrastructure, geographic expansion, enhancing and delivering our products and services and advertising and marketing. Total adjusted operating expenses were lower than expected this quarter, primarily due to the timing of expenses between the third and fourth quarter. Turning to Page 9, let me comment on the operating metric trends. Starting with Q3, all our switch metrics are generally in line with Q2 and remained strong. As we look to the first 4 weeks of October, our metrics continue to remain strong, generally in line with the third quarter. Of note, U.S. switched volumes saw a sequential decline, primarily due to the expected Capital One debit migration as well as some tougher comps related to weather impacts in 2024. Overall, we continue to see healthy consumer and business spending. Turning to Page 10. I wanted to share our thoughts for the remainder of the year. The headline is that our business remains strong and consumer and business spending remains healthy. We delivered another strong quarter. The macroeconomic environment is supportive with balanced unemployment rates, wage growth continuing to outpace the rate of inflation for the most part and the wealth effect remaining intact. That said, there continues to be some ongoing geopolitical and economic uncertainty. We remain well positioned for the opportunities ahead, driven by a resilient and diversified business model, the significant opportunity for further secular shift to digital forms of payment and strong demand for our value-added services and solutions. We remain laser-focused on executing against our strategy and remaining at the forefront of payments and services as demonstrated by the innovative new solutions that Michael just highlighted. And we do all of this while also maintaining a disciplined capital planning approach. Now turning to our expectations for the fourth quarter. We assume continued healthy consumer and business spending. We expect year-over-year net revenue growth to be at the high end of a low double-digits range on a currency-neutral basis, excluding acquisitions. As mentioned last quarter, our rebates and incentives as a percentage of our payment network assessments is expected to be higher in the second half of 2025. We continue to see Q4 having the highest contra percentage relative to the other quarters, primarily driven by timing within the year and normal seasonality. For the quarter, acquisitions are forecasted to add 1 to 1.5 ppt to the net revenue growth rate, and we expect a tailwind of 4 to 4.5 ppt from foreign exchange for the quarter. From an operating expense standpoint, we expect Q4 growth to be at the low double digits range versus a year ago. Again, on a currency-neutral basis, excluding acquisitions and special items. Acquisitions are forecasted to add 4 to 5 ppt to this OpEx growth, while we expect an approximately 2 ppt headwind from foreign exchange for the quarter. Now turning to the full year 2025. We continue to expect net revenues to grow at the low teens range on a currency-neutral basis, excluding acquisitions. Acquisitions are expected to add 1 to 1.5 ppt to this growth rate for the year, and we estimate a tailwind of 1 to 2 ppt from foreign exchange. From an operating expense standpoint, we continue to expect growth to be at the low end of a low double-digits range versus a year ago on a currency-neutral basis, excluding acquisitions and special items. Acquisitions are forecasted to increase the OpEx growth rate for the year by 4 to 5 ppt, while we expect a headwind of 0 to 1 ppt from foreign exchange. Other items to keep in mind on other income and expenses in Q4, we expect an expense of approximately $110 million. This excludes gains and losses on our equity investments, which are excluded from our non-GAAP metrics. We expect our non-GAAP tax rate to be around 21% for Q4 and between 20.5% and 21% for the full year. And with that, I will turn the call back over to Devin.

Thank you, Sachin. Thank you, Michael. Julianne, you may now open up the call for questions.

[Operator Instructions] This question comes from Bryan Bergin from TD Cowen.

Wanted to ask on U.S. payment volume growth. So, steady overall activity is evident here. But just curious on the surface, are you just seeing any evidence of trade down or differing consumer cohort behavior? And then just any early views on potential holiday spend?

Sure, Bryan. I'll take that question. Look, I mean, drivers continue to hold up really well. And you can see that in our metrics, true in the third quarter, continues to be the case in the first 4 weeks of October as it relates to different segments of the population, when we do our analysis based on looks of the various products we have out in the market, which serve the affluent population versus the mass market population as well as when we look at the amount of spend which is taking place across different categories of products that we have. What we're seeing is continued steady growth, both across affluent and mass market, true in the U.S., true across the globe. So overall, the consumer continues to spend. And really, everything we're seeing so far is manifesting itself in the drivers which we're talking about right here.

And you can expect that consumers at different income levels make different decisions on their spend, discretionary versus non-discretionary. What matters for us is, it has to be carded and that plays in, and that adds up to the resilient trends that Sachin just talked about.

Our next question comes from Darrin Peller from Wolfe Research.

All right. Nice results. When I look at VASS at 22% growth, I think it was a few points from recorded future also, though, just -- if you could just remind us exactly, but just maybe revisit the underlying drivers that you're seeing really support that kind of sustainability. And if those are going to be sustainable throughout the year ahead of us in the next 12 to 18 months, what are they and what's driving it? How much of that could be tokenization that's driving into the agentic also going forward? And then just a quick follow-up also on the Capital One discover side. I know you mentioned you included it in the guide. I think that was the debit side. Is there anything on credit you're seeing? Or just a little more color on that would be great.

All right. So Darrin, so let me start on the VASS side. We took great care in curating the VASS portfolio over the better part of the last decade. And we were very keen to find a portfolio mix that is anchored in underlying trends. So digitization, more data, more data, more need for security, more data, more need for insights to run a business in a better way. You've heard us say that a 1,000 times and it continues to be very true. So, when I look at the demand on cybersecurity with the rising fraud landscape and more fraud vectors out there, that just continues to power on. And we step right into that with a series of innovation. I mentioned Mastercard Threat Intelligence earlier in my prepared remarks. To your question about the Recorded Future, Sachin can talk about the points there. But that is our data coming together with the Recorded Future's Threat Intelligence that comes with a powerful combination. And there's a lot of companies out there that provide security solutions, but you can spend -- you cannot really outspend all the threat. So, what Threat Intelligence does allows you to be very, very targeted in your spending on cybersecurity. And that is really a very powerful proposition for our customers. Just to have one example. When I think about the whole piece about how we help our customers run their business in a better way, drive their top line, consumer engagement, personalization, data and business market insights matter more than ever before. And for us, we have the whole set of solutions. Earlier, when I was talking about our loyalty components, that is a business that today also matters even more. So, I feel we are sitting on the right trends. I don't see any discontinuity in terms of the demand breaking bound for that. I mean, the tall order for us is we need to continue to innovate. I just -- I think, I mentioned like six new innovations around that, and that is what we just have to keep powering on. So, the innovation muscle in the company is alive and well, and we keep training it.

Yes. And Darrin, I'll just add to what Michael just talked about on VASS, but I'll also speak to your Capital One question. First, your specific question around we had growth in VASS this quarter of 22%, 3 points of that was driven by the acquisitions in Recorded Future and Minna. So, you had underlying organic growth of approximately 19%. So, that's kind of one part of the question you asked. The second thing I'll just remind, the key drivers of growth on VASS come across the board, right? At Investor Day, we had shared with you that roughly 60% of our VASS revenues are network linked. So, underlying growth in drivers and underlying growth in tapping into that secular shift, which we got from a driver standpoint, contributes to the VASS growth, point number one. Point number two, back to what Michael said, with the steady drumbeat of new products which are being launched in the market as well as further penetration of existing products across security solutions, across consumer acquisition engagement, across our business and market insights. These are all contributing factors to the overall growth rate. And then, the last piece is pricing, right? And pricing is tied to the value we deliver. So, as we launch new products in the market, we can deliver and price for that. And so that's what we do. That's all adding to the overall kind of algorithm, which drives the services growth. I will say that and you know this as well, that services growth is something we look at as a long-term opportunity and we look at it certainly not only for this year but for years to come, but this is an important part of how we are driving the growth of our overall business. On your question on Capital One, look, I mean, the debit migration is underway. No surprise there. A few things to kind of just point out there. As you would expect, with the debit migration, which takes place, we will lose the associated revenue on this. I had mentioned previously in our prior earnings call that in 2025, we did not expect the net revenue impact from this Capital One debit migration to be material. Just a little bit of kind of context as we go into 2026. There will be further impacts, which will come through from an associated revenue standpoint as the cards start to migrate away from us and are migrating away from us. That being said, there are some contractual obligations, which will help offset some of this financial impact in 2026. Net-net, there'll still be an adverse impact from a net revenue standpoint. But I just wanted to make sure you guys had some context as we go into 2026 as to what that looks like. Specifically on credit, we continue to have a very robust partnership with Capital One on credit, and we don't see that changing as our partnership continues to grow and things are going well there as well.

I think there was one other aspect in your rather long question, Darrin. And that was about tokenization. So, I just want to not answer that. So, on the tokenization front, we're in the billions per month, and that has totally scaled. We started to build out a set of services around tokenization, and we started to price for that because that comes back to Sachin's point of value that we provide, and it's in great demand. We see that's a massive differentiator for us as many of our other services versus local payment networks and local alternatives and hence, the demand keeps going.

Our next question comes from James Faucette from Morgan Stanley.

I wanted to ask about the evolution and enablement, the Mastercard is providing for agentic commerce. Can you talk a little bit about how not only Mastercard is helping accelerate that, it seems like, but any of the unique threat or risk and even legal issues that you're -- that need to be considered and how we should think about tracking the growth in agentic commerce and its contribution?

All right. So let me start with that. So, this is a significant development. And I think there's two lenses to look at it. The first is, what we're seeing is behavioral change, driven and powered by generative AI and bots and so forth, where search behavior is changing. So, that's on the consumer side, if we start right there. So, consumers are migrating their search increasingly so to their favorite chatbot and they're asking their queries there, and they get potentially better answers, who knows. But that behavior shift is changing, but it still feels like you're searching for something and then you're going to some sort of a checkout. The other lens on this is, it's really quite a significant paradigm shift for the payment ecosystem, because in the payment ecosystem, what happens is there's no an extra party that has entered the realm, and that is the agent. So, that comes with a lot of those aspects you just talked about in your question, is there's legal questions, there's a security question. So, if I break it down and some of the things that need to happen in a world of agentic commerce is, the first is, is this a real bot? Is this a bot that we believe matches up to Mastercard's safety and security standards? So, we will certify and register bots out there. So that's what Mastercard Agent Pay does. That's what we do. That's what we do today with participants in the ecosystem. So, nothing really new from us on a perspective, but it's a new party. Not really visible to the consumer in that way, but certainly driving some complexity potentially for merchants, for issuers, for every other party because that is just a new flow for the transaction. I think the next thing to think about is, how will merchants deal with all of this. Earlier, I used the word no code approach. So, we have learned this during the day of the various wallets that were out there. It is not easy for merchants to consume this. So, what we have done here is we created a merchant framework that allows us to engage with merchants and with other parties that bring out protocols like Stripe and Open AI and so forth to make this very easy for merchants. So that is important. The merchant needs to know that the agent on the other side that we have certified is actually the agent. So, we have to pass through that information and ensure that the circle closes. We're doing that. Well, there's still the question of what is in focus today very much so is the consumer, the person they claim to be. So, consumer authentication needs to continue, but it now needs to flow through a somewhat more complicated transaction. So, all of this is happening. Now the tricky part is, if you have asked an agent to buy you something in a chat, and then in the end, you challenge that transaction, who can prove who's right. Is it the consumer? Is it the merchant? What happens? What do you do on return policies and various other things. Those are all complexities that we're pretty good at solving in today's world, and they were pretty busy solving in the future world, and that comes down to some of the aspects that you've talked about in your question. Where is the legal and regulatory framework on this yet? This is not something that's specifically contemplated, but that will evolve over time. And basically, it takes parties like us who focus on safety and security and not trust. Because only when there is trust, this whole space will actually evolve. Our set of services around this will assist in this effort that I have that I just described. I think, it's also important to note that this is an opportunity for us to drive our business forward. Because if we do this work better than anybody else, that's a tremendous opportunity for us. And some of the things that I see that we have built in our portfolio here to power agentic commerce. It's for example, on the point of challenging a transaction. We've bought a company a couple of years ago called Ethoca, and what they do is they provide transaction detail at the moment of a charge back to a consumer that says, "Hey, you actually did this transaction because you were here at this time doing the following." And the same can be done with this audit trail that would be capturing out of the chat that I talked about earlier. That is one example. There is identity solutions. There is merchant services, there's advisory, et cetera. The whole host of services will help us make this a safe and secure ecosystem and live up to the opportunity that we all think it could be. And everything I just said does not stop at consumer. You can transport the same logic into the B2B context for other use cases that will emerge over time.

Our next question comes from Jason Kupferberg from Wells Fargo.

I wanted to come back to the topic of opening new acceptance channels. On the consumer side, you mentioned rent. I feel like that's been targeted for a while, hasn't really taken off. I'm wondering what you see as some of the catalysts to unlock those volumes or the interchange models changing at all? And just any other newer acceptance verticals you see as emerging would be interesting to hear about. And then, Sachin, if you can just give us a quick word on M&A pipeline, I think it's been almost a year since the Recorded Future, that would be great.

All right. So going into underpenetrated verticals where there's ingrained behavior for many years, it takes a little bit of time. But I feel we're starting to make some real progress here. Gave you an example from another part of the world, New Zealand, but here with Bilt, we've made a lot of progress here in the United States. A lot -- if you ask around in your circles and young kids who pay their rents, they're dying to pay on Bilt. There's -- our rewards loyalty programs, all that behind is an important differentiator. I really feel there is momentum there. We are very specific not to pick a whole host of different verticals, because they all have their intricacy. So, we focus on healthcare as well. We focus on tourism. We gave plenty of updates over the last couple of calls on that. So, it is trying to use our existing set of solutions, but then find the nuance that makes a difference and find those partners like Bilt and Renti in this case. So, I do say -- I do think we are making progress. It's a tremendous opportunity that we laid out from a target market perspective, and we're chipping away at it.

And Jason, on your question on M&A. Look, I mean, just stepping back, our philosophy on M&A remains pretty much unchanged. It's always been strategy led and it will continue to be strategy led, right? And so, when we have something from a strategy standpoint, which we need to accomplish, we kind of think, step back and think about, do we want to build, buy or partner. And to the extent we think it's appropriate to actually buy, that's where M&A comes in. The pipeline is robust. We are very, very deliberate about how we go about filtering through and funneling through on that pipeline to make sure it's on point and it's going to deliver the synergistic value that we expect to deliver as part of that. So look, I would say the focus areas will remain very similar to what they have in the past in terms of how we have gone about executing on M&A. It's been primarily focused on services that will continue to be the case on a going forward basis. And then on occasion, if there's areas around the payment network side that we need to do stuff, we'll certainly look at that as well.

Our next question comes from Bryan Keane from Citi.

I have two just kind of follow-ups. On agentic commerce, Michael, maybe you can help us understand how Mastercard maybe can take share in agentic commerce given your position and versus competition, what can maybe differentiate you? And who would you be taking share from? And then just a clarification for Sachin. On the Cap One migration, the debit migration, how much comes off in '25 versus '26. And then I guess, with the contractual obligations, then it's a very small headwind in '26 and maybe a little bit of a headwind in '27, if that's onetime? Just some quantification there.

Right. Bryan. So on the share side, so first of all, I try to lay out that we have a differentiated proposition overall for agentic commerce. So, we hope to be positioned well with partners out there who look to get into the space and work with us. Now the share part that you were talking about is beyond services goes into the payment side as well. So, one thing that I think is a pretty obvious opportunity is, this is going to be very hard to do for local payment networks. So, if you look around various kind of local payment systems that exist in Europe, in Asia and so forth. Big markets for us is an opportunity for us to continue to drive up our switching ratio as we've done in years, and this gives us another, kind of, field to execute on. I think that's the first thing to say. There's another aspect here on where we'll have to see how it works from a share perspective, but the general nature of the agentic commerce driving more transaction is a good opportunity for us to drive share to start with, because what might have been one basket at one merchant might not be a very broader set of recommendations from a bot that gives us multiplicity of opportunity to get into the flow and provide the kind of solution that helps us get this over to us. I think, one other thing to keep in mind is, kind of, when you look at agentic and you think back about the days where everything was in store and what kind of services portfolio we had and the opportunities we had to apply services and drive differentiation for us versus others. And then it went online. There was a whole different set of solutions that were suddenly needed to keep the online transaction safe. And agentic, it's going to be even more opportunity for us to do that. So, those are all lenses on how we look at it. Most tangible near-term one would really be as this plays out, not near term as in the next month. But near term, as in the next year, possibly when agenetic commerce really gets momentum to compete versus local payment solutions.

Yes. And on Capital One, like I said, look, I mean, the conversion is underway. We expect the conversion to complete in 2026. I mentioned that there is an offset due to the net revenue loss as part of the conversion. You should not assume that the offset completely negates the impact of the lost net revenue. I'm not going to size for you exactly what the amount is that we're expecting in 2026. But it is fair to assume that the headwind in 2027 will be there, because you no longer have the benefit of that contractual obligation offsetting in 2027. So, if you're looking on a year-over-year basis, what you're going to see is, you're going to see an adverse impact in 2026 by virtue of this conversion. And then on a year-over-year basis, you will see in 2027 an adverse impact as well just because the contractual obligation is no longer benefiting us in 2027.

Our next question comes from Harshita Rawat from Bernstein.

Michael, I want to ask about Mastercard Commerce Media. Can you expand upon the announcement? It looks like you're bringing together a lot of your assets across offers, loyalty, personalization. Maybe talk about the early feedback from advertisers who've received distribution channels, how will it work? And the release also talked about kind of like a high return on ad spend? Can it sustain at these levels of the scheme?

Thank you, Harshita. So from the date of the plastered Times Square with Commerce Media, a lot has happened. So, we're out there with advertisers. We're out there with publishers. So, those are both kind of parties in this ecosystem. Today, how that industry works is, kind of the, one of the problems to solve is, can you really attribute the ad spend? And this is one of the problems that we can solve here. Because we can tie it to a specific transaction, a specific purchase that went through our network. So, that brings us a different -- gives us a different starting position for all of this. When you go and you want to enable somebody to place the right ad -- in the right ad at the right time, you need more data to do that. And we do have proprietary spend data and insights from our commission 500 million consumers that sit in our loyalty programs and 25,000 merchants. That is a very unique position that we are in. Other competitors having -- there are other players out there who haven't been in this business. We've been in loyalty for a long time. And we just started to look at this. This is a whole different approach for us to get into business that go straight beyond the payment transaction as I framed it earlier on. So, the initial reception is interested. We have a set of big players on both sides of the equation. And I mentioned advertisers and publishers who are engaging with us to drive this. But it's also pretty early days when we launched it. So, I can't really have anything to share from a numbers perspective, other than there is demand, let's go and do this because the proposition is pretty clear.

Our next question comes from Tien-tsin Huang from JPMorgan.

Nice results, of course. Just following up on a few of the questions asked already. Just thinking about this build versus buy for Mastercard. And Michael, your comment on carefully curating the VASS portfolio. On the build side, it feels like you've announced a few things, cloud platform, Harshita just asked about the Commerce Media Network. Are these the recent build projects, are they moving the needle in VASS in the near term from your perspective? And on the buy side, there were some press reports about Mastercard's interest in crypto infrastructure. Can you comment on that? And just your appetite in general for infrastructure versus services assets?

All right. So, Mastercard has been -- you all know, I've been the Chief Product Officer before. So, I kind of know a lot about organic innovation and so forth. And we have been very good at that over time. But we've also been very focused on leveraging the acquisition lever whenever we could. And whenever it makes sense, strategy-led as Sachin talked about earlier. So, somewhere in the middle is where you find some of these recent announcements like Commerce Media, what Harshita just talked about. I see that as a pretty big bet for us. It's a really unique position that we bring to the party. There's clear interest in the market. So, we feel this is something that will make a difference. Otherwise, we wouldn't do it, but it's also early days. And there isn't just one big bet. So, there's a few things that we're given -- trying at any given point in time. They get some preferential funding in the company and so forth that we push forward. That's a discipline that we filled out over years on top of our everyday organic innovation. So, Commerce Media on-demand decisioning, as I talked earlier, and a few others that are coming. So, that's been a strong quarter. But we felt like rather than giving you a bits and pieces every quarter, we thought we'll take this quarter and put everything together to show you that the innovation muscle is all well and it's not just about buying companies out there. Now, we are not commenting on market rumors. You would have not expected me to say anything else. Yes, I saw that article as well.

Our next question comes from Andrew Schmidt from KeyBanc Capital Markets.

I wanted to ask on cross-border. Cross-border volumes have been remarkably resilient and very consistent here. Maybe just comment on the sustainability, the drivers of sustainability on a go-forward basis. And then, if we peel back the layers for both card-not-present and travel, card-not-present, card-present travel, if there's anything to call out in terms of verticals, corridors that's worth mentioning in terms of shifts you're seeing?

Sure, Andrew. I'll take that. So look, I mean, just to set the stage, for cross-border, right, the value prop on cross-border continues to resonate across the consumer base as well as across business, right? I mean cross-border is a combination of consumer spend as well as business spend, which has taken place there. And that value prop is alive and well and people are using it and leveraging it and they see some significant benefits as a result of that. That in combination with winning the right portfolios, which is what we focus a lot on, which is winning the right kinds of portfolios, which could be cross-border heavy, affluent portfolios. Case in point, Michael talked about Japan Airlines, right? Great example, when you win a co-brand portfolio or, for example, the renewal with American Airlines, these are important portfolios to win. Because they actually help sustain that growth rate on cross-border because when people buy -- take those products, they're actually using them in the cross-border environment. So, winning the right portfolios is important. Number two, it's the effort which goes into the daily blocking and tackling to drive cross-border volumes, right? We have a team inside of Mastercard, which actually spends a lot of time focusing on pulling the right levers to drive optimization of cross-border flows. Because it's not as easy as it sounds, right? And very often what happens is, you've got a stimulate spend in the acquiring corridor so that people pull out their Mastercard card when they're actually traveling overseas. So, we'll work across borders and our teams to ensure that we've got the right level of focus to drive spend across important corridors. Really important. So I'm going to just bring it together. Value prop works, winning the right portfolios, driving optimization across those portfolios. And last but not the least, being present across both card-present and card-not-present. Really important. You can see strong growth in card-not-present. It's been running at roughly 20% growth on card-not-present ex-travel for cross-border. Look, I mean, it's all the things that we do every day to execute on that to be present and have our acceptance available in those cross-border channels, which makes that come to life. That is partially also sustained by something which Michael talked about earlier. He talked about how Mastercard products are used in the on-ramp for stablecoins and for crypto. Well, that comes into card-not-present ex-travel, right? So when you have that kind of growth coming through there, that's coming through in these metrics as well. So overall, I would tell you, I won't give you a forecast. I know you're looking for that. I will tell you that the underlying fundamentals of what drives our cross-border volumes is very much intact.

Our next question comes from Tim Chiodo from UBS.

I want to talk a little bit more about that cross-border acceptance. So, when either Mastercard or maybe an attempt by another local or another competitor looks to build out that global acceptance I was hoping you could talk through what do you need to do that, right? Is it things like licenses, relationships with merchants and PSPs or acquirers, there's a branding aspect, there's customer awareness, there's probably a bunch of infrastructure investment. If you could just elaborate on just how much of a moat and how challenging that is? And then lastly, somewhat related to what extent do you think it's possible and some have done this that competitors could more partner on this rather than building out on their own? And what the difference is in the two approaches?

Right. So, it sounds like you worked in our industry for a while because you just gave a good part of what it takes to do this. And if you take a step back and look at the list that you just talked about, it just tells you it's hard to do. It's difficult to do and it took a long time to build it. So, that's important. Different players have tried to replicate some of that, and it continues to be the better proposition that's out there. It's driving a lot of value because it -- with 100 whatever, 50 million acceptance points, whatever the latest number is, it is very hard to replicate. And for us, as a company, we are well positioned with our domestic license in China to continue to drive that footprint. The complexities that come in is, indeed, you have to be a global player and act local, understand the local regulatory system. You have to understand the local partners because remember, we are the global fabric that sits on top of this. We're not doing the last mile of this, and this is why it's really important for us to continue to build partnerships around the world and drive the cross-border acceptance. But you got to help them drive preference for us. You've got to ensure that the user experience that they provide to the consumer at the point of interaction is a compelling one. It's easy. It's all that, and it's delivering the standards that we put out for us to ensure that the Mastercard transaction actually comes through. And one of the most critical things about all of this is that in the end, you need to have to ensure safety and security, because as people worry that what happens if something goes wrong, where is my data going? What happens if this transaction is a fraudulent one, et cetera, et cetera. Those are all aspects of this. And by the way, they reflect a good chunk of our services portfolio that we also offer to those partners that drive that acceptance for us in markets. So, all of this comes together. So yes, I think it's hard to do. There will be others that come at it. And so far, I think this is just the most differentiated proposition that's out there. Earlier, there are different cross-border solutions for different types of payments that we're also active in, because it's not just B2M. There's Mastercard Move, where you have B2C disbursements and gig work payouts and so forth. So, we're doing that, leveraging our network in bidirectional ways to do the same thing to keep this resilient proposition. Can you just repeat the second part of your question? There was a particular angle you were after?

Sure. It was around the ability to do this by partnering with other networks rather than building it on your own? And to what extent you thought there was maybe quality or other differences?

Yes. So, there's other networks is an interesting angle. Let me talk about where we see partnership opportunity, and I talked about that with digital wallets. So, this is right now a particular opportunity. There's a clear trend that in some parts of the world, people love wallets for a range of reasons, the stored value digital wallets that I mentioned with Alipay+ and so forth out in Asia. That is a great partnership, because they provide a particular local solution, we provide global acceptance, the combination of that makes a great opportunity for partnership. General processors, acquirers, those are different types of partners. There occasionally we see competition coming in, but it's pretty clear, we -- that for us, we have a need to find ways to partner with people that can cover the last mile for us. So it's never an either/or. We always look for opportunities even for people where in certain pockets, we do compete, we'll find other ways to partner to drive the reach of our network.

Yes. And I'll just add, Tim, to that point, which Michael just made. Look at the end of the day, right, when we build out acceptance, we're building out acceptance, both for domestic and cross-border. It's not like you're exclusively building our acceptance for cross-border. So, back to your question around the sustainability and how difficult or not it is for others to compete. It's a question of what your global footprint is. To the extent, we've got thriving domestic businesses in many, many, many countries across the globe, where we built out the acceptance footprint, right? That serves us not only in the domestic volumes, but certainly serves us from a cross-border standpoint as well.

Yes. Every transaction starts somewhere domestically.

Our next question comes from Sanjay Sakhrani from KBW.

So pricing, Sachin, you mentioned it as well has been a tailwind this year. I'm just curious can that trend continue in 2026 to a similar degree? I guess also when I think about it, that core payments business, like do you think there's still a decent pricing power there? And then, just I have one quick follow-up on the Capital One data disclosure. I'm just trying to think about the step down in volumes sequentially. That seems like a significant number given how early the Cap One transition is. Maybe you could just help us think about that. I know the revenues are separate. I'm not necessarily as concerned about that. I'm just thinking about the optics of the volumes. But maybe you could just speak a little bit about what we should expect as we move through fourth quarter and into next year in terms of the magnitude of impact on U.S. volumes?

I'll take both questions here. On Capital One, right? So remember, when I was talking about the first 4 weeks of October on U.S. volumes, right? It's certainly the Capital One piece as well as the lapping effect due to weather impacts we had in 2024. So, it's a combination of both of those, which reflects on the 8% number that you're seeing in Q3 going to 5%. But it's important to also look at what the growth rate in September was, because 8% is the average across all of Q3. So, it's kind of this step change, which takes place as cards migrate that you're going to start to see the volume come down. And candidly, I mean, the cards are migrating over, and they will continue to through the course of the fourth quarter and going into the early part of next year. So, I feel like at the end of the day, that's something which is just the reality, that's well understood. That's well contemplated in every bit of guidance that I've shared on 2025. I've kind of given you a little bit of a look into what the puts and takes for 2026 are as it relates to Capital One as well.

Can I say one thing? There are a few questions on Capital One. And of course, that's Capital One is an important partnership. But it's not the only partner we have in the U.S. So, we keep winning on the other side. And if you zoom out and you look at it from a global perspective, it's a truly global company, like we have 27,000 bank partners. And we win a lot. Our share has been up, which we shared with you at the Investor Day. So, there's a lot of winning going on. And I think it's always good to keep that perspective. There will be shifts and puts and takes here and there. But overall, the trend has been pretty positive, and we continue to win.

Yes, Sanjay, your question on pricing. Look, I mean, at the end of the day, if we do our job right, there's no reason why we cannot price with the value we deliver. We continue to deliver new products in the market, we can deliver incremental value in existing products, and we price that. And so, if we continue to do our job right, as we've done this year, we'll do in ensuing years, we feel like there's an opportunity both across the payment network side of the business as well as value-added services and solutions. So, generally we feel pretty good around that.

Thank you. Michael, any closing comments?

Yes, I'd love to continue to talk, but we're just slightly over time. So, thank you again for joining the call. Past hour, we covered a lot of ground together. We appreciate your support all the time, and this is always the opportunity to thank those people to make it all happen here at Mastercard, our colleagues. So, thank you to you all, and we'll talk to you again in the next quarter. Thank you very much, and take care. Bye-bye.

Thanks, everyone. .

This concludes today's conference call. Thank you for your participation. You may now disconnect.