Michael Miebach
Chief Executive Officer at Mastercard
Thank you, Devin. Good morning, everyone. Here's the headline. We closed down 2023 with another quarter of strong earnings and revenue growth. Quarter four, net revenues were up 11% and operating income up 13%; both versus a year-ago on a non-GAAP currency-neutral basis excluding special items, as always. These results were driven by healthy consumer spending and the ongoing execution of our strategy. Our deal momentum continued this quarter, powered by a broad range of unique, diversified products and services both designed to solve our customers' needs.
Let's start on the macroeconomic front, where we see both tailwinds and headwinds:
First, the labor market remains strong with low unemployment and rising wages, these remain key drivers of consumer spending. Some risks we're monitoring include credit availability and delinquency rates.
Second, while inflation continues to moderate, prices of many goods and services remain elevated. We're tracking the efforts of central banks, who are actively managing interest rates to normalize inflation.
And finally, geopolitical uncertainty remains a concern in several markets. On balance, we remain fairly positive about the growth outlook, but we are monitoring the environment closely and will manage the business accordingly.
Looking at our switch trends this quarter, domestic volume growth remains healthy and cross-border spending remains strong, up 18% globally in the fourth quarter on a local currency basis. With that as a backdrop, we remain focused on our strategic priorities, which fuel our growth algorithm across payments and services and new networks.
In Payments, our growth algorithm consists of five key areas: one, being in the flow to capture the natural growth of economies; two, accelerating the secular shift to electronic payments across both spend and transactions; three, further penetrating the addressable market in new flows; four, growing market share; and five, optimizing our customer portfolios for performance. Economies are growing, and that's not in our control. However, we are executing on the rest.
Building on that, the runway for the secular shift is substantial. We are accelerating it by scaling acceptance, enhancing the user experience for digital transactions, and driving adoption in new sectors and new use cases. In 2023, we added millions of new acceptance locations worldwide. This growth has been aided by scaling our Tap on Phone and Cloud Commerce capabilities. We are now live in over 80 markets. Smaller merchants can start accepting payments by simply downloading an app; and larger merchants are leveraging the technology to promote quick and seamless checkout experiences anywhere in store.
We're supporting partners like Apple, who in 2023 expanded Tap-to-Pay on iPhone into Australia, the U.K., France, Brazil and several other markets. We're also accelerating the secular shift away from both, from cash and closed loop transactions such as transit, through our contactless capabilities. Contactless provides a fast, secure and seamless consumer experience in areas like transit, it creates an opportunity to capture incremental transactions with a tap for every single ride. And when consumers use contactless for transit, they often extend that behavior across other low dollar spend categories.
We've made great progress with many major cities such as London and New York, operating broad-based open loop systems. However, there's still significant runway for us, giving that only a small percentage of large cities globally are operating open loop systems at scale. And we're leaning into advanced payment technologies like Click to Pay, Tokenization and Biometrics. They offer embedded, secure and password-free checkout solutions and with that bring an elevated level of security, simplicity and speed to every transaction. And that's true regardless of the device, browser or card. These solutions not only benefit consumers, but they also create value for merchants, as their customers are less likely to abandon a transaction, and issuers also benefit from an increase in customer stickiness.
For Click to Pay, we are now live in over 35 countries, supported by over 50 channel partners, and in 2023 we drove over 60% growth in transactions. Klarna will implement Click to Pay this year and activate their merchants across all European markets where they operate. We're driving Tokenization across all channels, including devices, commerce platforms, card on file and guest checkout. Tokenization reduces fraud and increases approval rates by approximately 3 to 6 percentage points across regions, and we're expanding our biometric payment capabilities, which enable payments with a smile or a wave. After launching in Brazil, we have now partnered with NEC Corporation to bring our biometric checkout to the Asia Pacific region.
We're also driving growth by winning and retaining deals across consumer payments, account-to-account and new flows. This week, we shared that BOK Financial will flip its U.S. debit portfolio to Mastercard, making us the exclusive partner across its debit and commercial portfolios. They selected us due to our differentiated virtual card and open banking assets, fraud solutions and our shared commitment to financial inclusion. This marks the third U.S.-regulated debit flip we signed in the last year, building on our recent successes with Citizens and Webster Bank, both of which have now started converting their portfolios.
And BPER Banca, one of the largest banks in Italy, will migrate their debit card portfolio to Mastercard as well. We renewed our partnership with Commonwealth Bank of Australia, where we will retain exclusivity across their consumer credit and debit portfolios. We signed a long-term partnership with Shinhan Card, the largest issuer of Korea, to solidify our leadership in the country. This relationship spans consumer and commercial card offerings and expands into new services including data analytics. And in Canada, we executed an exclusive long-term renewal of the President's Choice Financial, consumer credit and prepaid portfolios.
We're also winning in fintechs, co-brands and public sector partners. When it comes to fintechs, Mastercard is a partner of choice. In fact, Mastercard serves over 80% of the top digital payment and neobank fintechs on the CNBC Global Fintech list. This quarter, Starling Bank, one of the largest fintechs in the U.K., renewed their partnership with Mastercard. In the co-brand space, we're partnering with J.Crew and Synchrony in the U.S. to launch the retailer's first co-branded digital first card. And in the public sector, we have an exclusive partnership with Fiserv's Money Network for all U.S. state and federal government benefit and wage disbursement debit programs. As part of our partnership, we are thrilled to launch with the California Economic Development Department in February, the largest unemployment program in the United States.
As you can see, we continue our positive deal momentum, powered by our differentiated products and services, while always keeping a focus on financial discipline. This also helps us to capture more of the secular tailwind and in turn further drives services growth.
Looking to China, we are thrilled that our joint venture in China has received formal approval to commence domestic bankcard clearing. Believe that we will be uniquely positioned to provide Chinese consumers with an exceptional payment experience using a single card that is optimized for both domestic and cross-border spend. While we're excited about the medium to long-term opportunity, there's still work to be done as we fully build out the issuing and acceptance footprint. As we do that, we continue to grow our presence with bank and fintech partners in the market.
ICBC launched their first World Mastercard product in November, and Bank of Communications selected Mastercard to launch their first international debit card. Beyond cards, we also continue to make meaningful progress in the account-to-account space. This quarter, we announced a long-term strategic partnership with The Clearing House, the operator of the RTP network, which continues to secure our position in real-time payments in the United States.
Now, shifting gears, we continue to execute against our strategy to capture the large secular opportunity in targeted new flows, including commercial payments and disbursements and remittances. We continue to win in commercial. This spans commercial point of sale and B2B accounts payable, which we target through our market leading virtual card solution. This quarter alone, we renewed our commercial relationships with JPMorgan and FLEETCOR, two of the largest commercial issuers in the United States. BNP Paribas Fortis will flip their business credit portfolio to Mastercard in Belgium. And on the virtual card front, we announced two exciting partnerships in the online travel agency space with Booking.com and Agoda.
Turning now to Disbursements and Remittances. In 2023, we grew transactions by over 30%. We continue to scale our use cases. For example, UBS has integrated our cross-border services capability. This will enable them to execute instant cross border payments from multiple use cases, including helping their customers pay employees abroad. In addition, we also partnered with Alipay to establish them as a cross-border payments receiving institution in China.
Payments services and new networks reinforce each other, we said it countless times. Our services and new networks provide differentiation as noted in many of the wins I mentioned. Underlying payments growth helps drive services too, and payments growth brings incremental rich data. Our services turn that data into valuable insights. And when implemented by our customers, those insights can drive incremental digitization of payments. In turn, this generates even more data, more transaction, more need for fraud tools. And the powerful cycle continues.
The services and new networks components of our growth algorithms are built on: driving increased penetration of existing customers; extending our services across new customers and customer types; and continuing to build and deploy new services. Here are a few examples how we are executing against each of these. In the past year, Bank of America has expanded their services relationship with us to include test and learn, program management and supplier-enablement solutions. This is on top of many of our services they already have.
Axis Bank in India has also expanded their relationship with us. They will use our consulting, marketing and analytics services to support end-to-end portfolio lifecycle management. Worldpay is utilizing our fraud alerts to streamline the dispute resolution process; and Citi has deployed consumer clarity digital receipts to provide eligible U.S. cardholders with detailed purchase information directly through their bank app. Now, with increased visibility about the merchant and purchase details, consumers can easily validate transactions and reduce the number of disputes they file.
Square is also integrating consumer clarity solution. Furthermore, Nexi has chosen Mastercard as a strategic partner to roll out open banking for e-commerce payments across Europe, and the list goes on. We're extending our services solutions across new customer types, including large marketplaces. Alibaba will use Mastercard's open banking technology to help streamline the onboarding experience for small businesses on the U.S. marketplace and reduce fraud. And Meta, utilizes our digital identity technology to improve authentication for online orders.
We also continue to develop new services and solutions, many of which leverage the work we are doing with generative AI. Generative AI brings more opportunity to drive better experiences for our customers, makes it easier to extract insights from our data. It can also help us increase internal productivity. We're working on many GenAI use cases today to do just that. For example, we recently announced Shopping Muse. Shopping Muse uses generative AI to offer a conversational shopping tool that recreates the in-store human experience online. Can translate consumers' colloquial language into tailored recommendations.
Another example is Mastercard small business AI. The tool will draw on our existing small business resources along with the content from a newly-formed global media coalition to help business owners navigate a range of business challenges. The platform, which is scheduled for pilot launch later this year, will leverage AI to provide personalized real-time assistance delivered in a conversational tone. And finally, we expanded Mastercard Access, which provides customers with a single point of connectivity to quickly and easily source our AI, digital and identity services. Using Access, customers can deploy these services across multiple rails or networks, including those outside the Mastercard network. This is an exciting development which enhances our ability to scale our services across networks and streamlines the ability for our customers to adopt our capabilities.
So with that, I will wrap it up. In summary, we delivered another strong quarter and year of revenue and earnings growth. We're successfully executing against our strategy and on our growth algorithm. Our differentiated capabilities, diversified business model and focused strategy position us well to capitalize on the significant opportunity in front of us.
Sachin, over to you.
