Master Card (NYSE: MA)
2022 third quarter income statement
October 27, 2022 at 9:00 a.m. ET .
Contents:
- Prepared notes
- Questions and answers
- Call members
Notes prepared:
promoter
Hello. My name is Audra and I will be your conference operator today. In the meantime, I welcome everyone at Mastercard Inc. via conference call. Based on the results of the third quarter of 2022.
Today's speech has been recorded. [Operator's Manual] At this point, I would like to turn the call over to Warren Nishaw, Head of Investor Relations. Please continue.
Warren Nishaw - Head of Investor Relations
Thanks Odra. Good morning everyone, and thank you for joining us for the 2022 quarter results call. Joining me today is Michael Miebach, our CEO; and Sachin Mehra, our director. After comments from Michael and Sachin, the operator will let you know if you can go online for a Q&A session.
Only then will the queuing questions be opened. Our income statement, additional performance data and accompanying slides are available in the investor relations section of our website mastercard.com. Additionally, the release was made available to the SEC this morning. Today's commentary on our financial results will be non-GAAP neutral unless otherwise noted.
EAT LUNCH:
10 promotions we love more than Mastercard
When our award-winning team of analysts have valuable advice, it's worth listening. After all, the Motley Fool Stock Advisor newsletter, which has been around for over a decade, has doubled the market*.
They just named ten stocks that they believe are the best buys for investors today...and Mastercard is not one of them! That's right - they think these 10 stocks are a better buy.
Check out 10 promotions
* Stock advisor returns from 30 September 2022
This article is a transcript of a conference call prepared for The Motley Fool. Although we strive for perfection, this transcript may contain errors, omissions, or inaccuracies. Like all of our articles, The Motley Fool is not responsible for your use of this content, and we strongly encourage you to do your own research, including listening to subpoenas and reading materials that companies file with the SEC. Please see our Terms of Service for more information, including our mandatory disclaimer.
The Motley Fool rates and recommends Mastercard. Motley Fool has a disclosure policy.
Notes and slide presentations include a reconciliation of non-GAAP measures to GAAP amounts. Finally, as detailed in our earnings report, I want to remind everyone that today's call will include forward-looking statements about Mastercard's future performance. Actual results may differ materially from these forward-looking statements. Information about factors that could affect future results is summarized at the end of our income statement and in our most recent SEC filings.
This call replay will be published on our website for 30 days. I'll give the floor to Mike.
Michel Mibach - Managing Director
Thanks Warren. Hello everyone. Let's jump into action. As such, the headlines suggest that consumer spending remains strong and cross-border travel continues to recover.
Against this backdrop, we are delivering strong revenue and income growth through the execution of our focused strategy. Third quarter net income was up 23% and adjusted operating income was up 27% year-over-year, excluding special non-GAAP items. However, macroeconomic and geopolitical conditions remain uncertain. Inflationary pressures continued to rise and the central bank continued to take aggressive steps to suppress inflation.
High tensions in the war in Ukraine and the supply of natural gas to Europe are causing concern. Despite all this, unemployment remains low, wages are rising, consumer savings remain high and credit is available. Under these conditions, overall consumer spending remains strong, although we are seeing some shifts in where consumers are buying. See changing volume trends.
Domestic volumes were flat, increasing from 2019 levels, compared to the second quarter of 2022. Experiential spending trends continue. We saw a significant increase in spending on air travel, accommodation and food, at the expense of categories such as furniture and appliances. The current mix of retail, T&E and other spending categories is generally in line with pre-pandemic levels.
Across the border Border traffic continues to recover as border restrictions are gradually eased. In the third quarter, cross-border travel was 124% of the 2019 level. Compared to 2019 levels, performance continued to improve in most regions, including a significant increase in Asia.
Cardless travel across borders continues to do well. As consumer spending continues to grow, we will continue to monitor the situation closely, including monitoring fiscal and other policy responses to events. This will affect our actions, as usual. If the market outlook deteriorates, we are ready to act quickly to adjust our costs.
As we demonstrated during the pandemic, we have the flexibility to respond quickly with a variety of levers, and we will do so while remaining focused on our three key strategic priorities. Focusing on this area will create new opportunities for growth, starting with strengthening our position and payments, as well as our various service lines and expanding into related areas such as open banking and digital identity. Let's look at some examples of how we are making progress in each of these areas. First, we are growing in payments, driving digital transformation with our customers, increasing volume, expanding adoption and capturing new payment streams.
There are more than 3 billion Mastercard cards in circulation today, helped in part by programs like our Digital First initiative. Digital solutions enable consumers to use new cards digitally in near real time after purchase. It helps customers create the best digital experience possible, resulting in an average 2 percentage point increase in adoption rates; reduce fraud by an average of 4 basis points; and increase active account spending by an average of 10%. To date, we have launched more than 200 digital clients worldwide.
Santander in Mexico, Chase in the UK, Citanamex, Den Haag in Spain and Nubank in Brazil are among the latest clients to partner with Mastercard to deliver an end-to-end digital customer journey. In addition, we are driving volume growth with new contracts and new contracts with various partners. In the United States, we recently expanded our exclusive agreement with KeyBank for debit, credit, business and small business, deepening our relationship in the services sector. This quarter, in partnership with Chase, we will launch a new co-branded program with DoorDash.
This transaction further expands our footprint in the digital food delivery space. We also launched the Uber Pro card and expanded our loyalty and payment options to help Korean drivers save on gas, tolls and other expenses. In Europe, we are seeing momentum in Italy, where IGT has signed an extensive agreement that includes credit and prepayments, and also underwrites the existing Mastercard wallet. And in Latin America, we extended our exclusive agreement with Mercado Libre and acquired an additional loan stake from Banco Scotiabank Colpatria.
Anyway, another great quarter with some good wins. By moving into sometimes underserved areas, we enable payment growth, giving individuals and businesses more options to use MasterCard. Over the past five years, we've added more collection points than the previous 50 points, and now we're accepted in 90 million stores. Priority contactless payments, which has grown in the last two years, continues.
Face changes now account for more than half of all transactions, up from a third before the pandemic. And this trend will be strengthened by the introduction of new technologies such as Tap on Phone. Additionally, our technology and global footprint drive growth and recognition, helping our partners realize their digital strategies. For example, we signed a contract with McDonald's to improve our gateway capabilities to easily deliver more solutions to emerging markets in the Middle East and Africa.
Finally, we drive payments growth by leveraging innovation to capture a new set of payment flow priorities. We continue to monitor payment and delivery flows as we expand into new use cases and geographies. For example, in the US gig economy, we signed a new global agreement with Airbnb to make it easier for hosts to pay with Mastercard Send in select markets.
We have also expanded our gaming payments by launching the Gaming Fast payment program. To address interbank, international and domestic payment issues, we have signed agreements with Pagero, one of the world's leading B2B network and solution providers, to automate payments for some of the world's largest corporate brands. We are also expanding our business operations at the point of sale, targeting small business, corporate T&E, purchasing and traffic flow. In the US, we announced our exclusive brand partnership with First National Bank of Omaha to introduce the Hello Alice mini business card.
This product gives small business owners access to business tools, benefits and services based on equal access to credit. We also continue to focus on the payment flow of B2B accounts by expanding our access and reach using our virtual cards. We signed an agreement with Marketa to enable the next generation Instant Payment virtual card solution. This solution intelligently and automatically sends direct payments to sellers.
We have also signed an agreement with SAP Taulia to integrate our virtual card solution with Taulia and SAP, enabling customers to facilitate virtual payments. We are also good at taking advantage of travel reimbursement through our Mastercard Bulk Travel program. In Bahrain, we signed an agreement with Infineon for online travel agency and travel management company Volumes. And in Europe, we signed an agreement with fintech company Swile, which tracks B2B travel in Europe and Latin America.
As you can see, we continue to make steady progress in our new suite of priority payment flows. We are now turning to services, where we delivered a solid quarter of revenue growth. Our services provide Mastercard with multiple revenue streams beyond payments. We achieve this by adding new service capabilities and expanding our existing service offerings for new and existing customers.
There is still a lot of room for growth in this space. First, we're excited about our unique Dynamic Results personalization platform, which is a great example of how we're adding new service capabilities. Since completing the acquisition earlier this year, we have added dozens of new retail and commercial customers. A good example is [inaudible], a German fashion store.
I always share German examples when I can. They have more than 1400 stores in Europe. We have expanded our content personalization capabilities to other markets. In addition, we are expanding our reach to financial institutions.
Now, apart from adding new services, there is room for growth by expanding existing offerings to new and existing customers. In the third quarter, we signed an agreement with Sky Italia, part of the Sky Group, one of Europe's leading media and entertainment companies, to launch and market new services to support small businesses. Imburse, a technology provider for insurance companies, implemented our card service for its micro-savings program at Generali Insurance in Switzerland. And in Spain, we expanded our relationship with CaixaBank in one of the largest transactions in Europe and Africa.
The agreement enables them to provide a more efficient reverse payment flow for all card wallets. As payments and services expand, our third priority area is reaching out to new networks. As a reminder, we are currently focusing on two axes: open banking and digital identity. This term I will discuss open banking.
Although open banking is in its early stages of development, it offers enormous opportunities. We work with a large number of financial institutions and fintech companies that are increasingly interested in different use cases. And what's unique and exciting here is that we're a partner that offers what's needed to scale and has always trusted this space, things like responsible data practices, consumers and overall compliance, all on top of our strong technical capabilities . . expanded connectivity and expanded applications. For an American flavor, Quicken, a leading provider of financial management solutions, has selected Mastercard as the provider of consumer approval data for its popular simple budgeting platform.
We're also working with Fidelity on student loan repayment innovations for organizations looking to help their employees improve their financial well-being. And then there is Jack Henry, who will put local and regional financial institutions at the center of their financial results for their account holders. They will achieve this by providing the ability to securely view all their financial accounts inside and outside of their major financial institutions in one glance. This will help consumers and businesses make better financial decisions.
This is just the beginning, there is still a lot to be done in open banking. Before I conclude, I would like to share an example of how we have combined our capabilities across the three strategic pillars. Our crypto-economy engagement strategy leverages assets in new payments, services and networks, the combination of which provides a completely different value proposition. Here we have implemented our payment option for consumers to spend their crypto holdings on the card and load their crypto wallet via Mastercard Send.
This quarter we partnered with Ebonex, which will be our first cryptocurrency card partner in Australia. We implemented a custom solution with Mastercard Send and recently added five new players in North America and Europe, including Binance and Uber, powered by Checkout.com. After all, we do not work with cryptocurrencies, but accept fiat currency transfers. Our services and new network capabilities enable market participants to provide identity, cyber and consulting services.
Crypto Secure is an innovative solution designed to provide additional security and trust in this digital ecosystem, helping card issuers reduce regulatory risk. We also recognize that people continue to show interest in buying and holding cryptocurrencies through trusted businesses such as their banks. That's why last week we announced Crypto Sources, designed to give our partner financial institutions access to a wide range of services for buying, storing and selling certain crypto-assets. This will be complemented by our verified identification, cyber security and consulting services.
To support this upcoming pilot program, Mastercard is expanding its partnership with Paxos Trust Company to use their services to exchange and store cryptocurrency assets. As you can see, our encryption strategy includes best-in-class capabilities at scale, and they're all based on our core principles of trusted consumer protection, safety and security. As such, we achieved strong quarterly growth in turnover and profit, facilitated by steady consumption and the continued recovery of cross-border railways. We continue to act on our three strategic priorities.
We have a strong dynamic with our clients and offer a wide range of innovative solutions. We will continue to manage our spending carefully in these macroeconomic conditions, and our well-diversified and flexible business model offers good prospects going forward. ачин, ово ебе.
Sachin Mehra - CFO
Thank you, Michael. Turn to page 3, which shows our financial results for the quarter, excluding foreign exchange, excluding special items and the impact of gains and losses on our equity investments. Net income is 23% higher than 2019 levels on flat consumer spending and continued recovery in cross-border travel. обретения опозидствовали етому осту а 1 .п.
Operating expenses rose 17%, including a 3pp increase for purchases. Operating profit increased 27%, including a decrease of 1% due to acquisitions. Earnings per share increased 22% from a year ago to $2.68, including a $0.06 contribution from share buybacks. During the quarter, we purchased US$1.6 billion of inventory and an additional US$505 million through October 24, 2022.
So let's go to page 4, where you can see the operating indicators for the third quarter. Global gross volume in dollars or GDV increased by 11% compared to last year in local currencies. On this basis, if Russia is excluded from the previous period, it rises by 18%. The US increased 10% with 20% credit growth, partly reflecting the recovery in travel costs.
Throughput increased by 2%. Excluding the effects of the customer agreement discussed earlier, the debt increased by around 5%. Outside the US, volume increased 12% with 15% credit growth and 9% debt growth. Cross-border transport volumes grew by 44% worldwide in the quarter, reflecting a continued increase in cross-border travel spending.
Turn to page 5. In the third quarter, the number of link transactions increased by 9% year-on-year. Excluding Russia for the prior year, commuter transactions rose 19% year-on-year in the third quarter. Card attendance and absence growth rates remain high.
Increased penetration of contactless payments in all regions except Russia contributed to the growth of card sales. Currently, contactless payments account for 54% of all personal link purchase transactions. In addition, the increase in cards is 5% or 10%, if we exclude cards issued by Russian banks from the total number of cards in the previous year. 3 billion cards have been issued worldwide under the Mastercard and Maestro brands.
Now let's turn to page 6 to look at the main income items, again described in currency neutral unless otherwise stated. The 23% increase in net income was primarily due to growth in volume and domestic and international transactions, as well as growth in services, partially offset by growth in discounts and promotions. обретения опозидствовали етому осту а 1 .п. Take a quick look at individual income items.
Internal ratings rose by 9% and international ratings by 11%. This difference is mainly due to the mixture. Fees for cross-border volume increased by 57%, while cross-border volume increased by 44%. Азница 13 .п. mainly due to the favorable mix, as during the quarter, cross-border operations in Europe with higher profitability grew faster than cross-border volumes in Europe.
The lift rate is 22%, and the conversion rate is 9%. Азница 13 .п. This is mainly due to the favorable mix, foreign exchange earnings and prices. Other income increased by 22%, including a contribution of 2 pp от ограммений. The rest of the growth is mainly due to our solutions in cyber security and analytics, as well as data and services.
Finally, discounts and promotions increased by 26%, reflecting a strong increase in volume and transactions, as well as the number of new and repeat business. Go to page 7. You can see that on a non-GAAP currency-neutral basis, total adjusted operating expenses increased 17%, including the impact of the 3pp acquisition sustainable implementation of our strategic initiatives.
Let's go to page 8. Let's talk about operational indicators for the first three weeks of October. Just for your information, to help you understand business trends outside of Russia, where we suspended operations in March 2020, we have included a later application in the stack to show all chart data points if you exclude business cards issued in Russia. previous period. Overall: our indicators held up well in October.
As expected, annual growth rates are more tightly constrained as we begin to repeat the period in 2021 when COVID-related restrictions ease and spending levels begin to recover. However, it is important to note that all indicators are still at levels of 2019. compared to the third trimester.
The Switch was up 9% year-over-year in the first three weeks of October, which is consistent with the third quarter. We remind you that the average number of checks in Russia is relatively small, which leads to a relatively large influence on this indicator. Overall, cross-border traffic volume during the first three weeks of October increased 36% year-on-year, down 8pp compared to the third quarter. Cross-border travel showed a quarter of active growth as water restrictions continued to be lifted.
As I just noted, cross-border travel during the first three weeks of October increased by 62% in annual terms, which is 11 pp lower compared to the third quarter due to a more complex one-year age indicator. Transgranichnye's current run is 125% of 2019 levels, 1 pp above Q3 levels. Cross-border card absences, excluding trains, were up 12% year-on-year in October, including the impact of major e-commerce advertising events, and 1pp lower than Q3. This indicator is still at a good level compared to the level in 2019.
ереходя page 9. I want to share my thoughts about Q4. Let me start with the fact that the implementation of our strategic priorities leads to the expansion and deepening of customer relationships and a wider implementation of our various hardware solutions and services. Consumer spending remains stable in the face of macroeconomic obstacles, and cross-border trips continue to recover as border restrictions weaken, and consumers switch their spending to travel.
осто обы ообщить ам о екоторых очабателях, оторые строндыем. Asia, which accounted for approximately 14% of cross-border inbound trips before the pandemic in 2019, is at a level of approximately 76% of the level of 2019 in the third quarter compared to approximately 60% in the second quarter. We still consider that there are more opportunities for growth, as some transport corridors, especially in Asia, remain limited, and the opportunities of the aviation industry continue to grow. We are still able to benefit from this growth thanks to our travel-oriented portfolio and service offerings, including access to an extensive network of airport lounges and concierge services, as well as our global program Mastercard Travel Rewards.
ак е оворили, ествует актов, оторые огут овлиять а ономический ост. е обыченная овышенная ост оцентных авок, а какже еополитическая апреженность, авновешенная овнем авок, акже еополитическая апраженость, авновешенная овнем еоабот. ак олько о азал айкл, отовы ействовать о, обы орректировать аши работы, обы отразить е ачимые ения в.
Что гачесть четвертого квартал, мы ожидаем, что нистая выручка в годумом чисчелении разстет на верхнее граница дрожностого основе на неутральной валютной основе, за экспрессиона программы. огласуется едыдущими отченицами оследовательно открасный одно, елом ойчивые отребительские асходно 20; о-проход, абильный есколько енный ост ансграничных оездок о авнению овнями 2019 ода с екоторым одолжающимых умеленнием е енноп е енноп е енноп е енноп е енноп е о-проход; -третьих, олее окие и оощрения оцентах от аловой - за овышенной active elok оответствии с езоннымви; And, finally, the end of the strong quarter of the previous year, because in the fourth quarter of 2021, border restrictions were lifted in the United States, Great Britain and Canada. огнозируется, о обретения обавят ому осту около 1 . ERNO 6-7 .п. artal. апоминаем, о евро ачительно обеценился года од ется обоиний ей ой ого ечного етра.
очки ения елиности, одя екущего лева еса, одовое е ency оимости евро о о раз оллару а ое ое From the point of view of operating expenses, we expect that operating expenses in the fourth quarter will grow at low double-digit rates compared to last year on a neutral currency basis, Except for purchases and special articles. ается, о обретения обавят етому осту около 3 .
ается, о остранной алюты ет опутным ерно а 4-5 .п. artal. ? от от аших естиций акционерный апитал, оторые ены аших оказателей, е едусмотренных GAAP. , аконец, ожидаем, о алоговая авка отелит около 19% в етвертом артале, одя екущего еографичеаспроесафичеаспроесареаспроесереаспрое.ешеаспроге.ешеаспроге.ешеаспроге.
а ом ова ереадресую онок оррену.
оррен оу — оводитель отдела о есторами
asibo, ачин. а, еперь отовы сеансу опросов ответов.
presentations:
ератор
asibo. [Оператора Инструкции] Мы ответим на наш первый вопрос от Санджая Сахрани из KBW.
Санджай Сахрани — Киф, Брюйетт и Вудс — аналитик
Thanks Good morning Сачин, мне просто интересно, не могли бы вы немного разобрать ожидаемую чистую выручку в четвертом квартал. It was a little lower than we thought.
I'm just curious, how did the stimuli jump in the fourth quarter? Or it's just a general figure? Любой цвет там был бы useful. Thanks
Sachin Mehra -- chief financial officer
Finally. First, I'm just going to start by saying that the thoughts about the fourth quarter that I just shared with you are very consistent with what we shared in our estimated fourth quarter numbers when we gave you our forecasts for the full year on last week заработок звонок. Very consistent with the point of view of what we share with you regarding the fourth quarter. Но я хочу подчеркнуть несколько моментов в отношении наших ключевых предположений в отношении четвертого квартала: во-первых, мы по-прежнему верим, что будет устойчивый потребитель, и расходы потребителя по сравнению с уровнями 2019 года будут в целом устойчивыми. ; во-вторых, мы ожидаем стабильного роста трансграничных поездок по сравнению с уровнем 2019 года.
Что касается скидок и поощрений на ваш вопрос, в процентах от валовой выручки, мы ожидаем, что они будут выше в четвертом квартале. Это очень соответствует нашим сезонным нормам. Так что ничего необычного, насколько я понимаю, там нет. И затем, опять же, если вы посмотрите на это последовательно, на сравнение четвертого квартала с третьим кварталом, вы увидите эффект перекрытия, о котором я как бы говорил.
Так что на самом деле, я имею в виду, что резюме того, что я думаю, что я делюсь с вами, состоит в том, что наши мысли о четвертом квартале очень согласуются с тем, что мы на самом деле делились с вами ранее.
Санджай Сахрани — Киф, Брюйетт и Вудс — аналитик
ХОРОШО. Спасибо.
Оператор
Мы переедем рядом с Лизой Эллис в MoffettNathason SVB.
Лиза Эллис — Моффет Натансон — аналитик
О, потрясающе. Доброе утро, ребята. Спасибо, что приняли мой вопрос. Думаю, я хотел задать вопрос об устойчивости бизнеса перед лицом потенциального экономического спада.
Я просто думаю о том, что за последние несколько лет Mastercard значительно увеличила диверсификацию бизнеса за счет большего количества дебетовых, более быстрых ACH, большего количества услуг и т. д., большего B2B. Итак, что вы думаете о том, где вы сейчас находитесь с точки зрения устойчивости бизнеса, если мы в какой-то момент увидим замедление потребительских расходов? Спасибо.
Михаэль Мибах — главный исполнительный директор
Доброе утро, Лиза. Спасибо Вам за Ваш вопрос. Итак, позвольте мне начать с этого. Вы подразумеваете ответ в своем вопросе на самом деле.
Такова природа нашей постоянной диверсификации. Я имею в виду, просто чтобы напомнить всем о том, почему мы диверсифицируем, это должно дать нам диверсифицированный поток доходов, но также и дифференцировать наши платежи. И все это идет рука об руку с более качественными услугами. Мы увидим, как объемы платежей вырастут благодаря более качественным услугам, и нам будет легче войти в некоторые из новых потоков платежей.
Например, наши решения для обеспечения безопасности пользуются большим спросом в сфере B2B, независимо от того, где повсюду возникают проблемы с мошенничеством. Так что все это, я думаю, является хорошей отправной точкой для нас. Если я просто оглянусь на последние два года, у нас, безусловно, было замедление роста платежей в макроэкономической сфере в целом, и услуги сегодня очень важны для нас. Так что мы просто собираемся продолжать упорнее там.
А затем новые потоки, и ранее я привел целый ряд примеров того, как мы строим новые потоки. И если вы просто прольете свет на коммерческий POS. Так вот, это существующие инструменты, которые у нас есть. Для этого нам не нужно много строить.
Это пространство, в которое мы не проникали значительно в прошлом, и мы готовы, и мы собираемся войти. Это возможность на 14 триллионов долларов, которую мы используем, а именно продолжающаяся диверсификация платежей, в дополнение к нашей диверсификация услуг. А раньше, со статистикой принятия, просто больше мест, где люди могут потратить. В конце концов, люди будут тратить деньги даже в условиях экономического спада.
Для нас на самом деле не важно, на что они тратят, что они тратят на MasterCard, мы даем им больше возможностей для этого. Итак, диверсификация — это название игры.
Лиза Эллис — Моффет Натансон — аналитик
Спасибо.
Оператор
Мы перейдем к Даррину Пеллеру из Wolfe Research.
Даррин Пеллер — Wolfe Research — аналитик
Привет, ребята. Спасибо. Ваша модель явно показывает преимущества инфляции. И не могли бы вы еще раз напомнить нам о чувствительности в областях, которые вы видите в базисных пунктах, вызванных влиянием инфляции.
Но также есть ли какие-либо изменения цен, которые вы, ребята, заинтересованы в использовании на стороне, отличной от базисных пунктов, будь то транзакции или услуги, что, вероятно, более важно, просто учитывая то, что мы видели, или если вы уже сделали это? And then maybe just on a side note on that, on the other side would be the expense management and the willingness, just how willing you are on, for example, marketing to flex there if necessary? Thanks, guys.
Sachin Mehra -- Chief Financial Officer
Yeah, Darrin, I'll take that question. I guess to your point around inflation. Look, I mean, persistent in place for long periods of time, which causes for a shift in share of wallet away from carded categories into non-product categories would be the one area I would actually flag as a potential headwind as it relates to our business model. But putting that issue aside, the reality is you're very correct about the fact that we charge our basis points in cents per transaction.
Our basis points are of nominal value of spend and that reflects the impact of inflation in there. So the reality is, as we've said in the past, modest inflation and inflation in carded categories, we're generally -- we kind of -- our business model accounts for that because depending on if it's carded, it doesn't matter, like Michael said, whether it's happening in travel or it's happening in food and building, those are carded categories, and you kind of get the benefit of that come through. Look, I mean, as it relates to your question on expenses, we've always remained disciplined on expenses. The thing which we always keep in mind is a few things.
One, we want to make sure that we're investing in the long-term growth of our business along the three strategic priorities, which Michael talked about. We will continue to do that. That being said, as we demonstrated during the COVID environment, we do have the opportunity to flex our expenses whether it's around marketing, whether it's around professional fees, whether it's around T&E, it all is a function of making sure we are keeping an eye on the top line, keeping an eye on the bottom line while we're actually delivering what we need to do from an expenses standpoint, and we'll continue to do that going forward. The reality is we keep a close eye on to what are the things which are in demand from our customers, what is it that the consumer wants, and we are bouncing our expenses in that regard.
An example would be, as you remember in COVID, when travel was out of favor, we started to pull back on A&M-related travel. It just didn't make sense for us to be doing at that point in time. So we'll remain flexible on that. And then there are initiatives which we've got which are longer-term initiatives, which will pay off over many, many years in the future, where we have the opportunity to actually pulse the pace at which we're incurring expenses on those to the event -- in the event we start to see a little bit of a slowdown in terms of top line.
You asked the question on pricing. Our philosophy around pricing is very consistent as it's always been. We price for the value we deliver. And our assumption from a pricing standpoint, whether it's pricing in basis points or cents per transaction is very tightly correlated to the value we're delivering to our customers and to the end consumers, and to our merchant partners.
So all of that is very consistent at the end of the day. We assume minimal net pricing, net of rebates from a pricing standpoint.
Michael Miebach -- Chief Executive Officer
Ага. I just want to -- Darrin, just want to add one point here. And that is looking back at the last -- over two-and-a-half years now, back to the second quarter of 2020 when revenue was severely impacted by a truly unprecedented event out there. So to the power of the levers that we have and a range of levers that we have to modulate our expenses, hiring, AMM, professional fees, T&E, and your market appetite and all of that, it just showed that we did not have to make any compromises when it comes to driving our strategic priorities.
We pulled through it on new flows, we pulled through service expansions, and so forth. The model is wide and flexible. That helps us a lot. And as I look forward, there is optimism in how we're going to navigate that.
Darrin Peller -- Wolfe Research -- Analyst
Thanks, guys.
Operator
We'll take our next question from Harshita Rawat at Bernstein.
Harshita Rawat -- AllianceBernstein -- Analyst
Доброе утро. Michael, Sachin, can you talk about online debit routing in the US that very recently put out clarification approvals? If I recall correctly, last time you ended up gaining market share, but debit was implemented. So how does it impact Mastercard with online debit routing now? Спасибо.
Michael Miebach -- Chief Executive Officer
Hey, Harshita. Thanks for the question. There's always something in debit routing going on. So here, we have the clarification of the rule by the Fed.
And it takes us all the way back to a decade ago when there was this requirement to have two networks on every debit card. And basically, what the Fed here clarified is that this is applying to whether it's a debit transaction that's made online or in-store. So pretty simple, pretty straightforward implementation by mid of 2023. So we have some time, but we will be ready and we'll be implementing.
I think really what that does is we will just continue to compete with all the assets that we have in debit. I'm not really sure what this will do to the market, but we will certainly be there leveraging our technology to win more debit in the United States.
Sachin Mehra -- Chief Financial Officer
Harshita, I'll just add one additional comment to what Michael just said, which is, as you know, we've been investing pretty heavily in our services capabilities some of which relate to cyber intelligence. And in an environment where our partners, whether it's the merchants or the issuers need more of our services to better manage their product capabilities in the online environment, we stand ready to do that as well.
Harshita Rawat -- AllianceBernstein -- Analyst
Thanks very much.
Operator
We'll take our next question from Tien-Tsin Huang at JP Morgan.
Tien-Tsin Huang -- JPMorgan Chase and Company -- Analyst
Эй, спасибо. Доброе утро. Just you mentioned nothing unusual on rebates and incentives, but I just wanted to ask as I sometimes always do with deal activity versus 90 days ago. Any change there? Is your appetite to drive program growth versus maybe more disciplined growth on their side? Or are there changes in timing of deals and implementation, things of that nature? Спасибо.
Sachin Mehra -- Chief Financial Officer
Sure, Tien-Tsin. I can take that. Tien-Tsin, I think you know that we've been active in the marketplace. We've been winning share globally, and that's just part of the strategy of what we want to do, which is on a disciplined, profitable basis, we want to win share and deliver more in the nature of services on that share to optimize and grow our overall net yield.
I'll start with that as kind of the headline. But on your specific question on Q4, on rebates and incentives, nothing unusual. It's a rich pipeline. We continue to be active in the marketplace.
We're not seeing any changed kind of behavior as it relates to how our issuing partners are in the marketplace. And we just remain active, and that's really the essence of what we're seeing there.
Tien-Tsin Huang -- JPMorgan Chase and Company -- Analyst
Thanks for the update.
Operator
Next, we'll move to Ashwin Shirvaikar at Citi.
Ashwin Shirvaikar -- Citi -- Analyst
Спасибо. Michael, if I can ask about cross-border now that we've seen some normalization in travel? If you could kind of talk about how much more travel improvement there is yet to come in your view and the mix of cross-border now that some of the normalization has happened as we look to travel versus non-travel?
Sachin Mehra -- Chief Financial Officer
Sure, Ashwin. I can take that question. So first, I kind of mentioned that -- as we said in the last earnings call, we saw opportunity in terms of further recovery in travel. We saw some of that come through in our Q3 numbers.
We still believe there's potential from a cross-border travel recovery standpoint, in particular, in Asia Pacific. I shared a metric about how Asia Pacific inbound cross-border travel is approximately 76% in Q3 of 2019 levels. So that just goes to show there's some more room to grow there. I mean, there are several markets in Asia Pacific which still remain to be opened.
Also, airlines are bringing more capacity back on. And as you know, from our personal experiences, getting seats on planes is hard, and it's expensive. And so the reality is all of that should be helpful in terms of the potential for cross-border travel recovery. The other point, which I think you alluded to, Ashwin, is as it relates to the mix and the mix is also important because the mix of cross-border has not reverted back to historical mixes.
So said differently, if you remember, as we were going through COVID, we first saw recovery take place in intra-Europe. And you know intra-Europe is generally low in yielding. We've recently been seeing a stronger growth of a pattern in ex intra-Europe cross-border. And so the reality is that makes us go back to the pre-pandemic levels at this point in time.
Michael Miebach -- Chief Executive Officer
And just one thing to add, it wasn't exactly your question, but that whole space has been in focus for us, pre-pandemic, during the pandemic, and now. While airlines were struggling with really no flights taking off, we were a strong partner, and it showed in how the engagement with airlines and travel-oriented portfolios work now. So we stand well-positioned to benefit from the trend that Sachin just talked about on the services side, as well as in the payments and the co-brand side, so exciting space. I think our bets are paying off.
Ashwin Shirvaikar -- Citi -- Analyst
Спасибо.
Operator
We'll go next to Rayna Kumar at UBS.
Rayna Kumar -- UBS -- Analyst
Доброе утро. Thanks for taking my question. You continue to see very strong growth in Latin America, 29% GDV growth in the quarter. Can you discuss some of the key drivers of that growth and how sustainable you think it could be going into 4Q and into 2023? Спасибо.
Michael Miebach -- Chief Executive Officer
Rayna, let me start off on that. Latin America, fascinating region for us, highly diverse from a super well-developed Brazil to markets at the other end of the spectrum, high travel markets with the Caribbean, so Mexico. So you have all of that in the mix. It's really interesting when you peel the onion of it and you look at some of these markets and you compare them, two of the largest markets, for example, Brazil and Mexico.
If you look at the digital penetration in Mexico compared to Brazil, there is so much more potential to go. So there's upside in digitization. There's other issues that require some of our solutions. The region has experienced some fraud issues generally in payments.
So our safety and security solutions are in great demand and a great driver for growth for us in the region, while the underlying digitalization continues. So you put those trends together, it's all fairly attractive. And then I talked to you about our engagement in the crypto economy. If there's one place in the world where crypto is really in focus, it's in that part of the world, historic pain through high inflation, and so forth.
People were thinking crypto might be an answer. A lot of innovation in the space. So across all payments, services, and new payment flows and innovation, this is a region that has -- is showing full momentum for us.
Sachin Mehra -- Chief Financial Officer
Ага. Rayna, I'll just bring to life one of the points which Michael talked about in terms of increased trends toward digitalization. As it relates to our performance in Latin America in Q3 and going forward, the reality is we've been very focused on the conversion of Maestro to debit Mastercard. And this has been part of what we as a company have been doing for a very long time.
You're seeing the fruits of that come through because as you know, as you go down the path of converting Maestro to debit MasterCard, whether it's a companion digital debit Mastercard or it's an actual conversion of the card, it now becomes enabled for online transactions back to the regional trend, which Michael is talking about. So it's all about us trying to enable those cards and we've been seeing good migrations take place from Maestro to debit Mastercard.
Operator
We'll go next to Jason Kupferberg at Bank of America.
Jason Kupferberg -- Bank of America Merrill Lynch -- Analyst
Thanks, guys. Доброе утро. I wanted to see if you can unpack a little bit what you're seeing in terms of consumer spending across different parts of Europe. And then, Sachin, I wanted to see if you could make just a quick comment around what you guys are envisioning the potential FX headwind to revenue in 2023 just based on current rates.
Спасибо.
Sachin Mehra -- Chief Financial Officer
Конечно. So, Jason, I'll give you on your first, and then I'll get into the FX question, which you're talking about. So in terms of Europe, we continue to see good Mastercard performance in Europe. Remember, in terms of what you're seeing in our metrics, you're seeing not only what the underlying economies are doing, but also the impact of our share growth, which has been taking place in Europe.
So it's kind of the amalgamation of all of that, which is coming through. In terms of regional patterns, I would tell you that we're not necessarily in any meaningful change in terms of trends across the continent, in terms of how the spending patterns are taking place. The consumer generally -- back to our comment earlier around consumer being resilient and strength in consumer, that's certainly the case. Now as you think about different markets, in markets like the UK, we're seeing stronger growth.
A large part of that is being driven by the fact that we've had recent share wins in the UK And then there are share wins we've spoken about in the past in Continental Europe, which are still to come to effect, right? So for example, we talked about our win with Deutsche Bank in Germany, that's still to come to effect. So anyway, there's a mix of all of that, which is kind of taking place at this point in time. On your question around FX.
I shared with you in my prepared remarks what the annual impact to net revenue of a $0.01 change in the value of the euro would be relative to the US dollar, which is about $55 million on an annual basis. We wanted to put that out there. So you have a sense on what the potential headwind or tailwind could be depending on what happens with FX rates.
The hard part is predicting FX rates. And so given the current mix of our business, that's the sensitivity I've just shared with you as it relates to how you should think about what the impact could be for 2023.
Operator
And we'll go next to Tim Chiodo at Credit Suisse.
Tim Chiodo -- Credit Suisse -- Analyst
Большой. Thank you for taking the question. I want to dig in a little bit on Mastercard Send relative to Visa Direct. I was wondering if you could call out for us and investors, any of the different maybe strategic focus areas, if there are any pricing differences, if there are any mechanical differences or maybe use cases where you seem to be getting traction relative to Visa Direct? That would be extremely helpful.
Michael Miebach -- Chief Executive Officer
Хорошо. Let me take that. So all the Visa-related stuff, you should ask them, obviously. So I'm not going to do a direct comparison here, but I can tell you how we are thinking about it.
So first of all, just earlier on, I talked a lot about the crypto space. To just give you one example. Here is an interesting new technology and a growing ecosystem. And what's the way to get out of your crypto wallet balances is, you turn it into fiat and you use Mastercard Send.
We were right on it from the first day, and we have all ownerships that do exactly that. Then you go around and basically there is new flows. There's geographies, there's use cases. So those are the dimensions on how we are looking at this.
We're very systematic about it. This has to have ubiquity. We're looking at all regions from a coverage perspective. We're looking at the key use cases.
We're very selective on the use cases because here you could get lost in 1,000 flowers bloom. The examples that I gave to you on partnering with large global firms like Airbnb, that is the approach, where you're going to say, you partner with somebody, that is in all the regions and covers a use case that just matters to people out there. So that's essentially the approach on Mastercard Send, it has a domestic angle to it. It has a cross-border angle to it.
It grows at significant rates. We're very happy with it across all of these aspects that I just said. So one thing to add. Earlier, we were talking about the numbers, ex Russia.
So Russia was a huge success on Send from day one, that's in fact, where a lot of our learnings came from and so we exited Russia, as you know, in March this year. So that is skewing the numbers a little bit, but the learnings are not going away. We're putting that into a whole set of other markets and to the earlier question around Europe. Particularly in Europe, we see some of those learnings translate in other parts of Eastern Europe countries and so forth.
Sachin Mehra -- Chief Financial Officer
And just to add to what Michael said, particularly on the remittance side, where you're seeing very good traction take place in terms of cross-border remittances and the capabilities we've got there and the capabilities we are building there. Our global reach out there is holding us in really good stead as it relates to how we are able to tap our partners to generate more and more volume down that path. So that's a -- it's a bright spot in terms of the broader remittances piece as well.
Tim Chiodo -- Credit Suisse -- Analyst
Превосходно. Thank you for all that context.
Operator
We'll go next to Andrew Jeffrey at Truist Securities.
Andrew Jeffrey -- Truist Securities -- Analyst
Привет. Доброе утро. Thank you for taking the question. Michael, I wonder if you could give us an update on your processing efforts globally, maybe with an emphasis in Europe, whether you're taking share and winning business in processing and how you think that can affect over time both the net revenue yield and maybe the profitability of the business, too?
Michael Miebach -- Chief Executive Officer
Хорошо. So Andrew, thanks for that question. So starting with Europe, but then we could extend this conversation looking at the Middle East or in Asia. So we have processing assets in those parts of the world.
And just to illustrate how this matters, so there is obviously a whole new set of players that are entering the payment space who are -- whose prime zone isn't really the process. They want to have a great financial app. So they're looking downstream for a whole set of solutions that complete what they do, make it relatively easy out of one hand, and that's what we provide. This is really the explanation for some of our progress on the fintech side, on the Neobank side.
Those guys where we have those partnerships, 70% win rate, I'd like to add here is really, to a large extent, coming down to our processing capabilities, which are state-of-the-art modern fintech-oriented processing capability. So it's been a joy for us to watch. In some parts of the world we do partnerships, for example, with Network International, parts of Africa, and so forth. So it's a combination of our own assets where we feel there is scale and differentiation and sometimes it's through partners.
So overall, there's a good play here in processing, and it's one of the services that we have in our portfolio.
Sachin Mehra -- Chief Financial Officer
I'll just add some color as the rates to beyond the processing fees on our efforts around switching and the proportion of our total MasterCard branded transactions, which, as you know, we've been pushing hard to actually get more switching share. And the reality is that is working very nicely. We are seeing growth in our proportion of switch transactions, which now stands at greater than 60% of total transactions worldwide. And that's super important.
Particularly where we're seeing improvements and progress is in Latin America and in Asia Pacific, both of which have been generally low-index markets from a switched transaction share standpoint in the past. So lots of good effort going on there, and we're seeing good progress come through.
Andrew Jeffrey -- Truist Securities -- Analyst
Большое спасибо.
Sachin Mehra -- Chief Financial Officer
Конечно.
Operator
Our next question comes from Bryan Keane at Deutsche Bank.
Bryan Keane -- Deutsche Bank -- Analyst
Привет. Доброе утро. Sachin, just wanted to go through the yield improvements again. It sounds like it's a lot of mix and some pricing in there.
How do we think about the yield going forward into the fourth quarter and into next year? Does -- is there some comps get a little tougher as we get into next year for these yields? Спасибо.
Sachin Mehra -- Chief Financial Officer
Конечно. So, Bryan, what you're seeing in the nature of yield improvement quarter over quarter, this is net revenue yield divided by GDV. You can attribute a large part of that to just mix. As you know, our inter cross-border has come back pretty nicely.
And as that has come back nicely, that is higher yielding and that gives us the benefit and the tailwind you're seeing on a sequential basis. I will point out that as it relates to Q4, you should expect that the yield will decline some, which is very consistent with what you see every year. That is just the nature of how the business works just because Q3 happens to be a large cross-border quarter and you still tend to see the benefit of that come through and in Q4, you start to see some of that slowdown. Now you asked a question about 2023.
I would tell you, we, as a business continue to remain very focused on driving and maximizing our net revenue yield. And there's multiple factors which are going to influence that, some of which is the mix of cross-border and domestic certainly, but also things around just like we just talked about how we're increasing our proportion of switch transactions, the more the switching we do, the greater the yield gets, and that's what we're focused on. How we talked about the shift from Maestro to Debit Mastercard. Again, lots of focus around that, and so we're very focused on driving that.
All of which, when you overlay all the services we've been bringing to the market, you get the benefit of that coming through as well. So generally speaking, as I look forward, I kind of feel like our focus as a business from a driving yield standpoint continues. And I don't see anything necessarily which is going to change dramatically going into 2023 from a yield trajectory standpoint.
Michael Miebach -- Chief Executive Officer
Да. And Sachin kind of explained the strategy again. And that's what -- we're trying to be in the payment transaction and you're at profitable levels, but then use our services to continue to improve the overall revenue yield. And that is that combination that makes us look at the future very optimistically.
So I don't really see anything changing here. These are the tools that we have and we're using them effectively.
Bryan Keane -- Deutsche Bank -- Analyst
Большой. Спасибо вам обоим.
Operator
Next, we'll move to Ramsey El-Assal at Barclays.
Ramsey El-Assal -- Barclays -- Analyst
Привет. Thank you for taking my question. I had one on rebates and incentives. And more specifically, kind of how the mix of those rebates and incentives have changed over the past several years.
I guess the underlying question is, are you having to incentivize an expanding number of value chain players, fintechs, merchants to kind of support consistent growth? How has that mix evolved over time? And how do you expect it to evolve in the future?
Sachin Mehra -- Chief Financial Officer
Ага. So in terms of rebates incentives, the mix in terms of how we're actually incentivizing to generate incremental revenue has not changed fully. We've historically been more focused as we have actually delivered higher levels of rebates and incentives to our issuing partners. That continues to be the case as to where we are actually expanding most of our rebates and incentives dollars, and that really hasn't changed.
And as it relates to the mix between rebates and incentives for domestic volumes versus cross-border, I'd say, that mix also hasn't really changed. As you know, cross-border has generally been indexed lower from rebates and incentive standpoint, and that continues very much to be the pattern right now as well, Ramsey.
Ramsey El-Assal -- Barclays -- Analyst
ХОРОШО. So pretty stable environment is what it sounds like. I appreciate it. Спасибо.
Sachin Mehra -- Chief Financial Officer
Да. Абсолютно.
Operator
We'll move next to David Togut at Evercore ISI.
Michael Miebach -- Chief Executive Officer
David, are you there?
Operator
And, sir, you may have your line on mute. We're not hearing you.
Michael Miebach -- Chief Executive Officer
Audra, maybe we go to the next, please.
Operator
Да. We'll move next to Bob Napoli at William Blair.
Bob Napoli -- William Blair and Company -- Analyst
Привет. Thank you, and good morning. Just would like an update on your B2B -- your thoughts around the B2B payments market and the opportunities there? I know you called out a commercial POS of $14 trillion. And what inning are we in? What is -- any thoughts on the changes of that market, the growth of that market? Спасибо.
Michael Miebach -- Chief Executive Officer
Верно. Да. So I'm really not into baseball analogies. So that's why -- earlier, I was talking about the first half of the game.
But to your question, very specifically, B2B, huge opportunity from a volume perspective. We called it out and we cut it down into very distinct types of flows at our investor day at the end of last year to focus on B2B accounts payable on one hand, but there's other B2B flows which we're very active in. For example, through all the illustrations I gave you earlier on virtual card use cases. So virtual card is the current and most immediate answer to go after B2B flows.
There's the commercial POS piece somewhere which is kind of an in-between space between B2B and small business. That's a huge space with a lot of cash and checks. So you build it up over those into the accounts payable piece. And you know the long-range vision that we have on accounts payable is really the Mastercard Track business payment service piece, where we say over time, we're building a two-sided network here.
That continues to grow, but that takes time. But we have the large -- we have large players around the table, HSBC, JP, and so forth. So a good initiative for us. But for now, we are very active on virtual cards to solve the issues of buyers and suppliers in the space.
So we have not moved away this by any stretch of the imagination, this is a huge opportunity, and we're going to go after it.
Bob Napoli -- William Blair and Company -- Analyst
Хорошо. Спасибо.
Sachin Mehra -- Chief Financial Officer
Audra, I think we have time for one last question.
Operator
We'll take that question from Jamie Friedman at Susquehanna Financial Group.
Jamie Friedman -- Susquehanna International Group -- Analyst
Привет. Sachin, transaction processing fees increased 15%, but switched transactions increased 9%. I know you called out in your prepared remarks mix changes. I was just wondering if you could elaborate on that.
Sachin Mehra -- Chief Financial Officer
Конечно. So there are a few things going on right there where our transaction processing fees are growing faster than the underlying driver, one of which is the mix change. And really, remember, when we make cross-border revenues, we make cross-border revenues on a basis-point basis, as well as on a sales per transaction. And the component, which is on basis points since and cross-border volume fees and there's some component of cross-border related sales per transaction that sits in terms of the number of transactions which we process with the same transaction processing fees, which is where the mix effect comes through.
Because as you've seen, inter cross-border grow at a rapid pace. That's contributing to that delta between what we're seeing in the revenue line and what we're seeing in the driver because cross-border is high-yielding than is domestic. There are a couple of other factors which calls for that differential as well. I talked about FX-related revenues and some level of pricing.
Those are the two other contributors which go into that chain.
Jamie Friedman -- Susquehanna International Group -- Analyst
Спасибо.
Michael Miebach -- Chief Executive Officer
Хорошо. Let me bring the call to a close. First of all, thanks for your questions. And to all of our investors, thank you for your support.
This morning, I sent a note to all colleagues here at Mastercard, thanking them for a strong quarter because they are the ones who make all of this happen. So a shout-out to them as always. And with that, we'll talk to you in the next quarter. Большое спасибо.
Sachin Mehra -- Chief Financial Officer
Спасибо.
Operator
[Operator signoff]
Duration: 0 minutes
Call participants:
Warren Kneeshaw -- Head of Investor Relations
Michael Miebach -- Chief Executive Officer
Sachin Mehra -- Chief Financial Officer
Sanjay Sakhrani -- Keefe, Bruyette and Woods -- Analyst
Lisa Ellis -- MoffettNathanson -- Analyst
Darrin Peller -- Wolfe Research -- Analyst
Harshita Rawat -- AllianceBernstein -- Analyst
Tien-Tsin Huang -- JPMorgan Chase and Company -- Analyst
Ashwin Shirvaikar -- Citi -- Analyst
Rayna Kumar -- UBS -- Analyst
Jason Kupferberg -- Bank of America Merrill Lynch -- Analyst
Tim Chiodo -- Credit Suisse -- Analyst
Andrew Jeffrey -- Truist Securities -- Analyst
Bryan Keane -- Deutsche Bank -- Analyst
Ramsey El-Assal -- Barclays -- Analyst
Bob Napoli -- William Blair and Company -- Analyst
Jamie Friedman -- Susquehanna International Group -- Analyst
More MA analysis
All earnings call transcripts
