Barbara Gasper – Head, IR Ajay Banga – President and CEO Martina Hund-Mejean – CFO.

Bill Carcache - Nomura Securities Bob Napoli – William Blair Jason Kupferberg - Jefferies Bryan Keane - Deutsche Bank Moshe Katri – Cowen & Co Jim Schneider – Goldman Sachs Chris Brendler – Stifel Nicolaus Craig Maurer - Autonomous Research Lisa Ellis - Sanford Bernstein Moshe Orenbuch – Credit Suisse.

Welcome to the MasterCard Third Quarter 2014 Earnings Conference Call. My name is Christine, and I will be your operator for today’s call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note that this conference is being recorded.

I will now turn the call over to Barbara Gasper, Head of Investor Relations. You may begin..

Thank you, Christine, and good morning to everyone. Thank you for joining us for a discussion about our third quarter 2014 financial results. With me on the call today are Ajay Banga, our President and Chief Executive Officer; and Martina Hund-Mejean, our Chief Financial Officer.

Following comments from Ajay and Martina, the operator will announce your opportunity to get into the queue for the Q&A session. Up until then, no one is actually registered to ask a question. Even if you think you have already dialed into the queue, you will need to register again following our prepared comments.

This morning’s earnings release and the slide deck that will be referenced on this call can be found in the Investor Relations section of our website at mastercard.com. We’ve added a new table in the slide appendix to the deck that breaks out the impact of acquisitions as an easy reference for those of you who track that detail.

These documents have also been attached to an 8-K that we filed with the SEC earlier this morning. A replay of this call will be posted on our website for one week through November 6.

Finally, as set forth in more detail in today’s earnings release, I need to remind everyone that today’s call may include some forward-looking statements about MasterCard’s future performance. Actual performance could differ materially from what is suggested by our comments today.

Information about the factors that could affect future performance are summarized at the end of our press release, as well as contained in our recent SEC filings. With that, I will now turn the call over to Ajay..

Thank you, Barbara. Good morning everybody. We had a good third quarter. We saw a net revenue growth of 13% along with net income and EPS growth rates of 15% and 19% respectively.

So we delivered another quarter of strong results and we’ve continued the momentum you’ve seen from us over the course of this year, as we are navigating through I think what everybody would agree is a mixed global economic environment.

So let’s take a look at the underlying global economic trends for the quarter and let’s start with the US and there the recovery continues. Our SpendingPulse data showed sustained growth over the course of 2014. US retail sales ex automobiles in the third quarter were up 4.2% and that was a higher number than the second quarter growth of 3.8%.

However the monthly growth trend showed some deceleration with several sectors lodging, furniture furnishings, grocery experiencing some noticeable slowdowns in September. So these are mixed trends in the US but overall the underlying indications [have been] positive. In October, the consumer confidence index is up over September as well.

Excluding the impact of the Chase de-conversion in both the second and third quarters, our core US GDP growth rate was roughly the same. Europe’s recovery slowed in the third quarter.

Annual PCE growth projections have been revised down from 3.5% to 3.1% and our SpendingPulse data for the UK also showed third quarter retail sales ex auto growth slowed to 2.9%, down from the 4.8% growth that we saw in the second quarter.

Consumer confidence economic sentiment also down slightly but unemployment levels continued to show improvement across the region. MasterCard’s total European volume growth for the third quarter was in the low teens and process transaction growth in the high-teens, about the same as the last quarter.

And the region’s growth was driven by a number of countries, including Russia, Turkey and Sweden. In Latin America, our third quarter SpendingPulse data for Brazil showed retail sales growth of 2.5%, down from 4.1% in the second quarter. Across the region, annual GDP growth expectations were also revised down from 2.3 to 1.3.

The primary exception in this whole thing is Mexico where they continued to benefit from improving exports to the US and our business in the region remains solid. Third quarter GDP and process transaction growth is in the mid-teens, again about the same as last quarter.

In Asia Pacific, there is a decline in business sentiment in the third quarter, mostly because of everybody’s being concerned about the economic slowdown in China but consumer confidence held steady.

And our business in the region continues to do well, GDP growth in the mid-teens, process transaction growth in the mid-20s in the third quarter, down slightly from last quarter. So in summary, the economic environment is mixed. The US is in relatively decent shape.

We’ve got some challenges in Europe and Brazil that we will keep our eye on but we are not seeing anything to cause us immediate concern and you will hear that from Martina when she updates you on our October trend volumes. So before we go to our business highlights, a couple of legal and regulatory matters.

First of all, nothing to report new on the European legislation. The council of ministers continues their discussions regarding the proposed legislation. We remain actively engaged with all parties. We still believe that the proposed legislation is most likely to be adopted sometime in the first half of 2015. Now Russia.

As you know, there are some new amendments to their national payments law. These have just recently been signed into law. What those amendments do is principally two things. And the first is the deadline for compliance has now been extended further to March 31, 2015. And the second is related to local processing.

As you know, the original law required us to find a local processing partner for domestic transactions. And we’d begun to do that through an RFP process. The new amendments clarify that the local processing partner will now be the central bank’s new domestic switch.

So we clearly need to work out all the operational details to connect to this new switch but nothing else has really changed in terms of being able to issue MasterCard branded cards for use in the Russian market, or for that matter, the potential financial impact of this new law for us.

If you recall in the last quarter earnings call, we had given some idea of the dimensions of that financial impact and our best estimate continues to be something less than $50 million on an annualized basis.

You’ve probably also seen some recent news stories about the Chinese government announcing that it will allow qualified domestic and foreign companies to apply for domestic bank card switching in China.

This is the first of many steps, we will get to know what it will take to become a qualifying institution, nor do we know what the broader regulatory framework will look like. And of course, there is no -- right now, no indication of timing. So while we are awaiting all these details, the fact is we are pleased with the announcement.

We see it as a good step in the right direction. So with that, we’ll move on to some of our recent business activity. You’ve kind of heard from us during the recent investor days in September and you’ve had an opportunity to see first-hand a number of the product and service innovations we are rolling out.

So rather than go back over the deals and the innovations, I am only going to pick a few items that we may not have talked about in those inventor days. A year ago on this call, we talked about tokenization, the development that everybody was focused on in the area of payment safety and security.

We talked about how we were working with the broader group that included technology companies and merchants and trying to create better consumer and merchant experiences while ensuring safer and more secure transactions.

And for the recent launch of Apple Pay will only help with the convergence of the physical and digital worlds and we are actually pleased to be working in partnership with Apple, and they are using our digital technology and our security protocol to enable MasterCard credit and debit cardholders to use Apple Pay.

It is the simplicity of Apple Pay that makes it attractive, the ability to make a payment with as little as your fingerprint. We’ve worked closer with Apple over the last two years and helped them deliver a user-friendly safe payment experience.

We’ve provided the most secure combination of payment technology [indiscernible] more issuers continue to sign up. I think the most current number is something like 500 and is growing. Now of course, Apply Pay has gotten a lot of attention. However there are many other elements of mobile payments and we are working with all of them.

And our strategy has been to work with all players to ensure that we have the capabilities to meet the needs of different market models and make choices available to consumers. So our most consumers have a phone, a number of them have PC, a tablet, a game system, a connected appliance and increasingly connected cars.

So our innovations using MasterPass are all designed to work across all of those devices. As many of you saw last month at our investor days, you saw a number of those devices actually in operation.

So remember that tokenization used by all of these digital payment options is based on an industry open standard that the networks have developed together.

As a result, others will be able to leverage this technology to enable secure digital transactions across any device, think of it like EMV, an open industry standard that allowed all issuers to issue cards with chips that conform to that open industry standard. That’s what this tokenization is all about.

Now all these new mobile payment options are putting more focus on contactless. And we continue to drive contactless technology which is a key component of our cash displacement efforts. Momentum is building globally. All terminals are being replaced with new ones that are contactless enabled while being installed.

Australia is leading in the adoption of contactless payments. More than half of all face-to-face transactions under $107 are now contactless.

We are also seeing progress in countries such as Canada, in Turkey, in Poland and just recently in the UK we worked with Transport for London to expand contactless payments to the underground, enabling commuters to use their credit, debit and prepaid cards across London’s entire transit system.

In the first two weeks alone, over 1 million contactless journeys were taken. And this adds to the list of transit agencies around the world whom we are collaborating with, we’re trying [ph] to use our thought leadership in the transit space to migrate their riders from cash to electronic payments.

So Apple Pay and Transport for London are just a couple of recent examples of how we are creating better shopping experiences for our cardholders using contactless technology. As you know, we just opened our new technology hub in New York City earlier this month.

And we’re just continuing to invest in innovation designed to make payments easier and safer. There are a couple of examples that demonstrate how we’re creating a better cross-border shopping experience. In this quarter, we announced a partnership with Transforex.

This is a company that is working with 7 leading tax groups in China to launch the largest tax refund platform in China. Chinese travelers leave as much as €3 billion worth of tax refunds unclaimed.

The idea of this new platform will make the tax refund process much easier for the Chinese travelers by enabling them to receive their refund back to their MasterCard and do it all from the comfort of their own home when they return from that trip.

In South Africa, our prepaid program manager, Access Prepaid Worldwide is working with the VAT Refund Administrator of the South African revenue service to migrate their single currency refund card to a four-currency MasterCard prepaid program allowing tourists to reclaim their VAT as they leave the country.

So that’s just two examples in that tax refund space. Finally, our work with governments continues to grow. We’ve talked about this a few times in the context of developing markets and financial inclusion. But we are actually doing a lot work with governments in the developed markets as well.

So for example, the UK government has awarded the Royal Bank of Scotland the contract for their e-purchasing card.

Over the next two years, all 17 central government departments, the Ministry of Defense and some regional governments will migrate their existing government purchasing cards to MasterCard’s purchase and pay solution, it kind of combines our multi-card smart data and inControl technologies.

And of course, we are continuing to add programs focused on financial inclusion in the developing markets, and I will give you a couple of examples. In Mexico, BANSEFI is converting their entire $6.5 million social benefits card portfolio to MasterCard debit and that’s going to be enabled with the EMV chip technology.

And in Africa, EcoCash which is a mobile money provider in Zimbabwe launched the MasterCard Companion debit card that’s linked to their mobile money wallet, a first in Africa by the way. The card will be issued to more than 3 million EcoCash customers making it the largest rollout of EMV cards in Zimbabwe to date.

So with that, let me turn the call over to Martina for an update on our financial results and operational metrics.

Martina?.

Starting with processed volume, we saw a global growth of 11%, up 1 percentage point from the third quarter. In the US, our processed volume grew 7%, that’s very similar to what we saw last quarter.

Processed volume outside the US grew 16%, about 2 PPT higher than the third quarter, primarily due to improvements that we see in Europe and in Latin America. Part of this is attributable to one of our deal wins in the Nordics as well as overall volume increases in both regions.

Globally processed transaction growth was 11%, 1 PPT higher than what we saw in the third quarter, also driven by improvements in Europe and in Latin America. And with respect to cross-border, our volumes grew at 17% globally, about 2 PPT higher than the third quarter, driven by improvements in Europe.

And we saw a strong growth across most major markets, including contributions from online travel programs. Looking forward, let's start with our long-term performance objectives for the 2013 through 2015 period which remain unchanged. We continue to believe that our business can deliver an 11% to 14% net revenue CAGR and at least 20% EPS CAGR.

We are also committed to our annual operating margin target of at least 50%. Remember these objectives are on a constant currency basis and exclude new M&A activities. Moving on, let me offer some commentary about full-year 2014 which is mostly unchanged from my comments last month at our investor day.

Our expectation for full year net revenue growth before any contribution from acquisition is now slightly better than the low end of our three-year range we previously thought, due to our better-than-expected third-quarter revenue performance primarily due to higher underlying volume and transactions.

Additionally, while the pace of the Chase card attrition year to date has been essentially in line with our internal projections, the volume shift has been a bit slower than we initially anticipated. Therefore we now estimate less than half of the volume to roll-out this year with the remainder in 2015.

We continue to expect about 1 PPP contribution to our 2014 as reported net revenue growth from our M&A transactions. Overall we haven't changed our view about total operating expense growth for full year 2014 from what we said last month at investor day.

We expect the as reported growth rate for full year 2014 to be in the low teens after considering the impact from M&A activities, and this does include high teens growth in G&A and D&A growth in the 25% range, again totally in keeping with what we discussed previously.

Our view of potential EPS dilution from the 5 M&A deals that we also previously discussed continues to be about $0.05 annually for each of 2014 and 2015. You should now assume a full-year tax rate of slightly below 32%.

The change in outlook is primarily due to our third quarter tax rate coming in lower than we expected due to some discrete benefits that only became known as we finalized the quarter.

And as I have said before, although the exact timing is uncertain, there may be some potential to lower our tax rate further as we continue to work on several initiatives geared at better aligning our tax structure with our non-US business footprint.

Finally with respect to FX in 2014, if the rates of our functional currencies remain similar to where they are today, so that’s the Euro trading at the 1.27 level and the Brazilian real at the 2.44 level for the rest of the year, the net impact of the euro and the real would be a slight headwind for the full year.

Further beyond the functional currency impact of the euro and the real we have already seen a 1 PPT headwind to net revenue growth year to date from other currencies depreciating against the US dollar and the euro.

As I have said before, we carefully manage those exposures but we have also assumed some impact for the rest of this year which will likely continue into 2015. So now let me turn the call back to Barbara to begin the Q&A session. .

Thank you Martina. We’re now ready to begin the question-and-answer period. And in order to get to as many people as possible we ask that you limit yourself to a single question and then queue back in for additional questions.

Christine?.

(Operator Instructions) And our first question is from Bill Carcache of Nomura Securities. .

It looks like your revenues per dollar volume reached an all-time high this quarter. Can you remind us how you think about this metric and how sustainable it is at these levels? And then separately, I was hoping that there has been some evidence of competition becoming more intense in the co-brand spaces, some contracts have come up for renewal.

I was hoping that you could just comment on what you're seeing there? Thank you..

So I am going to take the first question, Bill. Look, how we look at revenues is -- not every revenue is driven equally. We have domestic assessment fees which are predominantly driven by the volume and the volume growth that we have all around the world.

And there you have to make some significant differentiation between how much is driven domestically versus how much is driven cross-border. So the mix is very important on that.

Secondly, in a number of countries, we’re actually processing most of the volume and that is when we get an additional transaction processing fee but there are a number of countries where we are not processing the volume, so that is also driving the mix in terms of how much we are processing in a country and where you see the growth on that versus where we are not processing and where you’re using the growth in that, that is very much an impact.

Further on this quarter's numbers, you did also see an impact on the – from the recent acquisitions that we did and you see that in the other revenue line item which increased by 38% and that is mostly driven by the terrific acquisition that we did down in Australia, the company is called Pinpoint and it’s a play in the loyalty space. .

Bill, it’s Ajay. About the co-brand space, actually the co-brand space has been pretty competitive for quite a while. I have talked about it a number of times in the earnings calls about how we’re going about trying to be players wherein we [ph] win there regularly. And we have been winning a number of deals there.

In fact, I didn’t mention it this time because over the investor day period and then we’ve talked about this a little while but for example, we won RAI [ph] over the course of this quarter – it’s every quarter that deals would come and go in the US and overseas. And that’s a competitive space, as I think new in that space.

I think the one development that’s interesting in that space has happened over time is that more and more the merchant driven co-brands tend to be driven with an issuer and the network is being separately approached during the course of the co-brand process. Years ago, it used to be that they were done together.

That’s kind of a trend that's pretty much changed – pretty clearly in the US, not so much overseas. So it’s a competitive space and it’s a space that you have to be very careful about both in terms of pricing but also in terms of the value-added features that you can bring to the party when you try and go win that co-brand.

And you will kind of win some, you won’t win all of them, so nothing new on that space..

Thank you. The next question is from Smitti [ph] of Morgan Stanley. .

Maybe just a follow up on the other revenue line items.

Can you just help us maybe rank order the various pieces of the business that are in there, I mean loyalty advisors, data analytics, repaid and then from maybe largest to smallest and also just wanted to get some additional perspective on how meaningful data analytics is to the revenue contribution today and given the progress that you’ve highlighted at the analyst day on this front?.

Look, Smitti, the other revenue line item is driven by a lot of different things. Certainly some of the items that you have been calling out i.e. our loyalty business and it’s not just the Pinpoint business, that have actually very thriving big loyalty business across-the-board in a number of our regions. It’s one of the big drivers in there.

Our advisors business which actually consists of three different pieces, quite a few of the revenues that are related to those pieces both in the consulting side as well as in the data side is actually related to that.

And then we have a number of other businesses, little bit on the program management that we are doing out of Access Prepaid et cetera that are driving that line item and I'm very pleased to say actually that all of those businesses are growing very nicely. .

Thank you. Our next question is from Bob Napoli of William Blair..

Just on the Apple Pay, I was wondering if you could maybe give a little bit of color on what you’ve seen from your customers and uploading and then how do you balance working with Apple Pay and with your MasterPass product and with other wallets – are there conflicts in there that you have and -- so that would be helpful, a little more color on that.

.

Bob, it’s Ajay. The people signing up for Apple Pay is actually pretty good. I would say the first few weeks have been very encouraging.

You see us in – if you’d been to the Giants game and Kansas City Royals game in the San Francisco stadium, which unfortunately I didn't go to see even though I was hanging around in San Francisco, but I met a number of people who have been there.

We were using and demonstrating the work of Apple Pay for purchasing in the stadium, we had advertising, we had activities and promotions going on in there. So there are a lot going on in the Apple Pay space right now. I don’t know that I would sort of agree that it conflicts with the stuff that we're doing in anywhere else in mobile.

I think you have to think of mobile and digital as a very wide space. One of those spaces – I have been looking at many different aspects to it.

One aspect to it is are you going to put your credentials on the phone like in Apple, but are you going to do it through postcard emulation which is what many others will do, or are you going to do it through NFC like Apple, or is it in app like Apple or is it browser based like others.

There are so many elements through mobile and digital commerce, I wouldn’t call it conflicts, I’d rather think that there is a lot of opportunity and lot of open space. The objective of MasterPass – MasterPass is not just a wallet by the way – please don’t think of it like somebody else’s wallet, it’s not.

MasterPass is a broad set of technologies, it’s got wallet, yes, which is both wallet branded as MasterPass but also a wallet servers for our issuers and merchants. We do value-added services with MasterPass, loyalty programs will be in there.

In the future there will be new additive ideas in that but I would label cost [ph] could be in there, in-store checkout is coming in there, online is already there with MasterPass. So it’s got a bunch of things in it, and those full elements of the MasterPass strategy is what we are rolling out around the world.

We are now in 11 countries, the US plus 10 others, Australia, Canada, China, Italy, New Zealand, Poland, Romania, Singapore, South Africa, UK, others. We are adding Taiwan soon.

So we are in a number of countries with MasterPass, we are working with different banks of different sizes in these countries ranging from Commonwealth bank and WestBank [ph] in Australia and New Zealand to BMO in Canada, with Citibank and Credit Union in the US to Standard Bank in South Africa.

So it’s got all that going on, there is 40,000 plus merchant signed up, I got to see this as being a series of parallel activities which are all aimed at providing choices to consumers. And once you do that, then they are going to walk with their wallets on their feet on where they go and we want to be able to be the provider of that space.

We are not in the consumer business directly. We are a B2B2C company and therefore we are trying to be that in every piece of what we do. .

Our next question is from Jason Kupferberg of Jefferies..

Thanks guys.

Just to start, can you just clarify what the cross-border volume growth ex Western Europe would have been and then can you separately clarify your stance on when you might implement tokenization pricing? We know that you’ve got the rate card out there but your biggest competitor has obviously said they are waiving those fees through 2015, so just wondering if the same is true for MasterCard?.

Yes, on the latter question, it’s exactly the same. And on the first question, from a cross-border ex Europe, typically we don’t give these numbers but it's not too different, if you’re actually excluding Europe for the MasterCard volume side. .

So you are waiving your pricing through 2015 as well?.

Yes..

Yes, that’s actually out in the market. We said we’d only put it in there starting at the end of 2015. We put out our card and said, we will do it early 2016. So that’s not new position [ph]..

Our next question is from Darrin Peller of Barclays. .

Just on the cross-border growth rate, I think you mentioned, Martina, earlier that the spread narrowed a bit more because of the mix, in terms of intra-Europe versus people traveling from Europe to elsewhere, so that’s good to see.

I guess just if you could touch on were there still any lingering additional pricing changes in that line and then maybe if you could just comment on the potential for merchant assessment change on the horizon as well?.

Yeah, so first of all, on the pricing side, there is no impact from pricing in that line item. And in fact when you look at our entire revenue growth there is really no material impact at all on pricing as most of you know our main pricing actions that we took some time ago have been pretty much all lapping with the second quarter of 2014.

So you are just not seeing that in this quarter at this point in time. And in terms of future pricing actions, look, first of all, we are not going after pricing in order to make our top line, so when you actually look at the 2013 to 2015 long-term performance objectives we have relatively small aligned pricing embedded in that.

And if there were to be any changes, we will be talking about it when they were to be evident in our financials but we don't really see anything at this point in time. .

You’ve just got to remember we’ve got thousands of lines of pricing in the system and there is some pricing we are going on in every country while we speak. So pricing is a part of the way we approach the entire marketplace.

But I wouldn’t tell you that there is some strategic plan to put in some new price starting on a particular date next year kind of stuff. That’s not currently in our outlook..

Our next question is from Bryan Keane of Deutsche Bank. .

Hi, just want to ask on the Chase card transition. Are we a quarter of the way through that, or just trying to get a sense of that through the third quarter ’14? And then secondly on FX, Martina, maybe you could just help us to make sure we’ve got it right.

Are we looking at 2 to 3 points or in the fourth quarter for FX headwind and then if rates held today, I just want to start to set our models for next year, is it about the similar 2 to 3 point FX headwind for next year as well?.

Your first question was –.

Just on Chase migration, just want to make sure where we are so far?.

On the Chase migration, so what we said actually for when you look at all of 2014 we probably have less than half of the Chase volume rolling off. So you would still have some impact for 2015 and the way that it has been rolling off as we said before we didn’t see much in the first and second quarter, we saw more in the third quarter.

And I think you should see more in the fourth quarter. This is all subject to our own estimation. We don't really have a schedule from the customer but this is the best that we can at least get our hands around it based on what we see today.

From an FX point of view, for the fourth quarter, we are going to see a little bit of an impact on two things, one from a functional currency point of view. You're going to see about a 2 to 3 PPT impact on all line items and then from a local currency point to view, so those are the currency rates, other than the euro and the real.

So those are all the foreign exchange payers that are excluded on that versus the US dollar and versus the euro, we think we’re going to probably see another one PPT impact for the fourth quarter, and that’s very similar to what we saw in the first, second and third quarter. .

And then into 2015 if rates stay the same?.

You should expect some headwind of course given the strength of the US dollar versus many currencies in the world..

Our next question is from Moshe Katri of Cowen & Co..

You said quite an impressive success in gaining share in Europe, was in Europe during the past year or two. Is there any way to kind of talk about this in the context of how MasterCard has been competing against Visa Europe and have they been losing market share to MasterCard? Any color on that will be helpful..

[We’ve been going on] for a few years. I think if you look at the whatever public information that is available for Visa Europe you will find and there is some available, you will find that they themselves talk about losing share to us in the course of the last couple of years there.

How we are competing is – it’s not just the Visa Europe, we are competing around the world with a series of different things but obviously everybody starts with the conversation around what’s the financial impact for anyone at the other end of the deal.

But we’ve tried to talk about all the things we do with advisors, all the things we do with data, all the things that we can do with loyalty, and rewards and that’s – processing, if you look at our strategic plan, we used to add all those value-added services, so we can be a better service to the issuing community.

And Europe is reflective of that very approach and if you look at the acquisitions we are doing, we’ve had success in acquiring stuff in Europe as well both in the prepaid programs space as well as in the space of loyalty and rewards. That’s what we are up to. So it’s pretty much the same around the world..

Our next question is from James Schneider of Goldman Sachs..

Understanding that it’s very early days with respect to China and there are still a lot of details to understand.

Can you maybe share with us your approach to the overall Chinese market and how that might differ from other geographies specifically the existence of UnionPay and new entrants likely Alipay in that market and how you might plan to attack the market generally speaking from a top level perspective?.

So over the last couple of years, what we have done there three or four years is that before this whole announcement we were allowed to do – was to do no domestic processing but we were clearly the cobranded card is what you could be with China UnionPay so that when Chinese traveled overseas they could use their cards.

Over the last few years all the new co-brand cards that were being announced, I think we were the winner and the overwhelming majority of them, I am talking 90 plus percent of those deals over the last two years.

And that helped us a great deal in terms of changing our market share on the ground on cards issued in China, where the flow of new cards issued was all coming our way when they were co-brand. In the meanwhile China UnionPay both operates in China and also have begun to strike over the last many years bilateral deals for acceptance outside of China.

The impact of those depends on the marketplace, whether it’s Hong Kong they’re obviously stronger there, if it's the United States way weaker. And so in addition to the fact that we had to compete on the ground in China you have to be thoughtful about what is going on with these bilateral acceptance deals.

And we went and stuck partnerships with China UnionPay to help them where they are expanding some acceptance in return for expanding our acceptance in China. So when someone like you went there, your MasterCard as I hope you carry issued here was being used in China in as many places as possible.

That’s kind of the way we were working, kind of like a partner but with a clear acknowledgment that they were in a position that gave them a monopoly benefit inside of China and yet were an interesting partner to play with. That’s the way we were approaching China.

Meanwhile we were also dealing with the Alibabas and Alipays and the TenCents of the world and in fact, we signed work with the Alibaba and Alipay where we were helping them think about cross border acceptance for their websites and helping them tackle fraud and counterfeit goods on their websites and so on.

Now when that changes, with this announcement, it doesn’t change yet. The announcement just indicates the direction is there but remember this announcement is innovated now for quite a few months ever since the WTO ruling had its deadline set up.

So what’s really going to matter is how they propose the regulations, what’s called a qualifying company, would we need to be constructed differently in China to be eligible to be a qualifying company, or would we be allowed to participate there with the domestic processing capability? I don’t know the answers to all that yet but in general we’ve already made a number of steps that I will not competitively disclose that allow me to be relatively confident that when they make the right moves we will be able to respond.

That’s kind of where we are. You had a question there about – how does that differ from other markets – well, there isn’t a lot of other examples where a domestically mandated monopolistic switch exists, that’s not been our experience.

You could have banks coming together to create domestic debit schemes like Europe used to have in many countries which have been [ph] on the payment systems directive, have actually opened that up and that’s one of the ways they are growing in Europe, we are seeing more and more domestic transactions in the developed European countries as well.

But – and then there are similar domestically handled – domestic debit switches in Australia and Canada, so dealing with domestic debit switches and domestic debit systems is something we’ve had experience on for 30 years.

It’s just that China was uniquely different because not only did you have a domestic switch for debit, it is for every card being processed there issued domestically was controlled in terms of who could handle that transaction on the ground..

Thank you. Our next question is from Chris Brendler of Stifel. .

I wanted to ask about the Asia-Pacific market for a second. Looks like the growth rate there has slowed down a little bit, now midteens on an FX adjusted basis, as well as it’s been basically since the crisis. Is that mostly the Russian impact? I know there is also some macro weakness in that area.

But fundamentally do you expect the Asia-Pacific market to return to just the historical stronger growth rates over the medium-term, or is it -- that markets are restructuring getting more further along on the secular shift to electronic payments, not much secular growth available, that will be helpful, thanks. .

I think secular growth in Asia is still very much available. The level of cash utilization in the Asian market is the highest probably around the world other than a few Latin American markets.

I mean China and India are still in the 95 to 99 plus percentage of transactions being in cash, and that even Japan which is a developed country in that part of the world has a 75% to 80% cash percentage in its transaction in the country. So I'd be very careful to think that secular growth in Asia is beginning to slow.

I think the real issue in Asia – by the way when you start – when you grow at 15%, 20%, you’re not growing at 21 of 22%, big deal. And just you should take that in this context.

And it’s still growing very rapidly and ASEAN is probably growing faster than mainland China just because mainland China is genuinely facing a change not just in its GDP growth rate but in the manner of spending on the ground in China with all the different efforts of the leadership of the Chinese government is putting into place on what’s going on in the ground.

So that’s kind of two or three things going on there in China. India itself had slowed down over the last few years. It’s actually with the new government beginning to pick up again. So there is movement in economic growth indicators around there.

There isn't much impact from Russia into Asia, that's not what I would lay as the main cause of what we are discussing, it’s both the macro growth factors of China and then at the low level of India, ASEAN continuing to doing well, Australia slowed a little bit over time as the commodity boom has slowed.

You know Japan is going through its own stresses and changes. But don’t conclude – at least I wouldn’t yet, that the secular growth rate of cash converting to electronic in Asia is yesterday story. I think that’s the moral story yet to come..

Just on that topic, since you mentioned it. I mean India with its plans to leverage national payment scheme like RuPay and it’s not clear at this point how big of a role you guys can play.

How should we be thinking about the opportunity in India? I guess my question was more about -- markets like Hong Kong and Australia that are very highly card penetrated, you're not thinking about India as a huge opportunity for MasterCard but maybe that’s not the right way of thinking about it, is India still a very much a greenfield for MasterCard?.

Yes..

And we have some significant growth there and it’s growing actually by quarter..

It is. Absolutely it is a significant opportunity. I mean RuPay is not a government mandated local monopoly unlike China UnionPay. RuPay is an effort by the government to create a national payment switch that operates in parallel and competitive about us and Visa and others. And clearly when you have a government switch they get certain benefit.

Guess what I was saying, we've used to dealing with the domestic switches in a number of countries, that’s kind of been true for Europe for the last so many years, it’s true for Mexico, it’s true for Canada, it used to be the case in a number of Latin countries, it’s around the world.

We do that -- we can compete on a level playing field because technology is superior, fraud capability, data analytics, the ability to do things with local banks, we can do that. So I still consider India to be an enormous growth opportunity. Just as by the way I consider China to be an enormous growth opportunity.

And by the way I consider Australia to be an enormous growth opportunity given the relative the penetration of cards, because even now the percentage of retail transactions in Australia that are cash versus electronic are still in the majority. That’s why contactless in Australia has been doing so well for the past two years.

A large number of the retail transactions that were cash in Australia was small ticket and Australia contactless first started doing well in small tickets and now it’s moved up.

That’s why understanding all the way up to Australian 100 dollars, more than half of those transactions in just two years have migrated to contactless, that’s almost all of it is fighting what used to be cash. So it’s pretty interesting what’s going on in that part of the world. As it is the other parts of the world..

I’ve risked of rules violation here but you mentioned it – one more question on that topic. Australia, is there still a surcharging headwind there or has that abated somewhat, so thinking about these small ticket transactions, I have seen that 30, potentially 40% of retailers potentially surcharge in Australia, is that –.

No, no, that’s not true. You get surcharging in a great deal from online transactions where people don’t have much choice. And that’s always been an issue but in the real world out there, yes, surcharging is but it’s a small number, it changes over the period of quarters and I don’t consider that to be an issue.

This is what I would like to see because I believe that consumers should be able to pay with whatever way they like to pay without having to face surcharges, and then by the way the Australian central bank has come back and put in restrictions on the level of surcharge for that very reason.

So there is a lot of stuff going on in the marketplace down there, and guess what, that’s our life, it happens in different countries, I still consider Australia to be a growth partner. .

Thank you. Our next question is from Craig Maurer of Autonomous Research..

Two questions, considering the slower de-conversion at Chase, when you now expect co-brand winds could start to offset that de-converion and additionally we saw the growth in Maestro cards continue to fall and drop to flat, should we expect to see that turn negative in the coming quarters?.

On the first one, Craig, we had always had our wins in the co-brand space, will be offsetting the Chase de-conversion over time. So that we are not talking quarters, we are talking over a couple of years.

And you will see that coming in from a volume point of view, already seeing some of the co-brand wins actually coming in and you will see that more coming in next year.

In terms of the growth of the Maestro cards, look, the Maestro business is very good and very live and what we are doing around the globe is that from time to time we are giving – we are working with our clients in terms of whether the Maestro product is appropriate or whether they would like to go with MasterCard debit card and you will see a number of switches in terms of where portfolios are going simply because of the kind of product construct and services that our customers are demanding.

So that’s really what you are seeing going on, it is more switching from a Maestro to a MasterCard debit card portfolio..

Craig, I would like to just make sure that the Chase de-conversion issue doesn’t overtake what everybody is thinking. So just try to think through for a second. The co-brand cards have a certain vintage built-up, all cards have that behaviour. The Chase cards were already vintage. When they go up, they go up for the certain volume spend pattern.

New cards take some time to build up to that pattern.

You will see in the number of cards being issued that the US is continuing to do well and frankly despite losing the Chase de-conversion of the consumer business that you are seeing, you are seeing that our GDV is still doing okay, that’s because we are growing with the other cards as well as in the commercial space.

So our portfolio is a healthy mix of many clients across many types of cards and what we are trying to do as we win and lose clients is still stay focused on growing the overall business in a tangible way. That’s what you are seeing.

We’ve got 13% revenue growth this quarter, we had good revenue growth for the past few quarters through this so called Chase de-conversion. In the meanwhile by the way Chase has been a really good partner on a number of other cards they are doing with us, co-brands as well as large corporate.

So life goes on from there and there are other wins that keep coming and going and that’s the context in which you should see our business portfolio. As I know you understand because we’ve travelled together a couple of times and we’ve talked about this. But I just want to make sure everybody on the call gets that picture. .

Our next question is from Lisa Ellis of Sanford Bernstein..

I had a question – one quick follow up question on China UnionPay, I am wondering if you are seeing them at all in issuer negotiations outside of China, they have been making some noise on directly verified by us, that they are starting to get some traction signing contracts outside of China, let’s start with that..

So first of all, glad to hear a woman’s voice on the phone asking me a question. Honestly I haven’t seen what you are seeing. I have heard noise about it in Russia for sure when the whole situation with the sanctions happened.

Clearly there was noise on the ground of issuers looking into possibility and I can understand that at that time although that didn’t go very far, in the meanwhile the law changed and has amended and adapted. So I think it depends where that goes. So I don’t know.

And in my general perspective, bigger perspective on this is that given that 85% of the world’s retail transactions are still in cash, I am a little less fuss about every new effort being put into payments being a direct competitor as against being a part of the whole ecosystem that must fight cash have been talking about this for five years, cash is the real opportunity for a company like ours.

And that’s what we are focused on. It doesn’t mean I am not competitive, trust me, I am very competitive on share and you would see that growing share quarter by quarter in markets around the world. But I don’t really view each entry or exit as a direct competitive issue.

I view that as something you’re going to be careful of, but you’ve got to also realize that few players that are aiming at cash is probably a good thing..

And then just quick follow up, in the emerging market programs you are doing like I think the one you mentioned in Nigeria where you’re partnering on sort of these mobile prepaid or other types of migrating on bank to bank via some sort of digital prepaid model.

Can you give us some color on the economics to MasterCard of those types of programs?.

So Lisa, it’s Martina, let me start with that. First of all, typically in all of these agreements our normal pricing applies. So if we do [inaudible] if you just do, and see the volume from an assessment fee point of view, the price gets – there are no really changes on that.

But you’re going to have -- when you think about it, when we start those kind of undertakings, so for instance in South Africa where we are much further along, we have 10 million cards out there for the social program, and people typically utilize those cards in such a way that they go to the ATM and pull out cash and then they pay at the merchant.

That is typically a lower yielding transaction for us and then over time as we’re actually establishing the acceptance base in those merchants where they could be using the card and we are having programs in place, so people rather going to the ATM go directly to the merchant and [save up for the band] – they are not carrying cash around, et cetera et cetera, then we are starting to go into the higher yielding transactions.

So you have to look at this as an evolution, we first develop the infrastructure, it’s first being used in a lower yielding way, you see that coming through our numbers and in a number of ways.

And then as we are migrating people to be using the cards at POS, you’re going to see higher yielding transactions coming through, and that is pretty much the experience that we have had so far on all of these programs. .

The only other thing I would add is beyond all digital, by the way, you’re talking digital programs – South Africa and Nigeria are cards with a chip on them in both biometric enabled, and South Africa is even voice enabled to be recognized at the back-office.

But in Nigeria it’s the biometric card with a chip enabled card, and the other side is the payment card. It is mobile based in some markets but it’s also card based so the world food program example in Syrian refugees, and Lebanon, Jordan is also a card. It just depends on what's going on in that marketplace and its ecosystem.

Building a mobile ecosystem for delivery of product to people at the disadvantage level, when you start a remittance, which is what the [impasse] type of thing is, that’s not easy because if that mobile system isn’t accepted at a shop, it’s not a lot of use to the consumer.

So I’d be careful to assume that it’s all about mobile, I think it’s about different ways of reaching these consumers and getting them into electronic payment system and then the revenue dynamics as Martina said low in the beginning because of higher cash use, you will see it in our numbers and in terms of the cash transactions and lower yield on those.

And then hopefully over time the people will migrate towards being more in the system and using their cards at the point of sale, at which point of time you would see a bigger impact in our revenues. .

Thank you. Our last question is from Moshe Orenbuch of Credit Suisse..

Most of my questions actually have been asked and answered. But I was hoping you could kind of give us a little more detail around the acquisition activity and how that shakes out.

I mean Martina, you had said that at least one of them was already contributing to revenue and that there still would be this EPS dilution, can you talk about the revenue path and the earnings path as you go forward?.

We are making acquisitions for a number of reasons. Some of the reasons like the Pinpoint acquisition as well as Provus, the processing entity that we bought in Turkey, it’s really because the building and expanding our business and they will be contributing over time to our topline.

What you should be expecting from them in terms of how the loyalty space is growing, that’s how Pinpoint will be growling, what we are doing in the processing space in order to take Provus which are connecting to our processing in Turika [ph] and Poland together, you should be expecting them to grow based on how the processing space and the expansion grows.

However we also made a couple of acquisitions which have basically built our skillset. Such as a company called [Sesame] where we acquired a terrific workforce, engineers, mostly based in India who really have a significant skillset in the digital and in the mobile space.

That did not come with a lot of revenues but it came with a capability that we are now using for a number of engagements in the digital and in the mobile space.

So clearly you will see more expenses coming through on that and that when you put everything together as we are in the early stages of integration you are seeing that $0.05 dilution in 2014 which we are expecting to be the same number in 2015..

But some of that would have been money you would have spent anyway, wouldn’t it?.

Exactly..

So you are kind of penalizing yourself a little bit?.

That’s a good way to penalize, Martina and I love doing that. And I will buy you a beer for that though. So guys, thank you all for your questions and Lisa, thank you for yours. And I will leave you with a closing thoughts.

Yes, the global economic environment remains mixed but I think we are demonstrating that we can navigate through this pretty well and to this last question, you will see us continue to invest in our business, on products, on services, on technologies that are key to our strategy, not just organically but also through acquisitions.

I really appreciate your continued support of the company. Thank you for being on the call today..

Thank you and thank you ladies and gentlemen, this concludes today’s conference. Thank you for participating. You may now disconnect..