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Mastercard (MA 0.57%)
Q1 2024 Earnings Call
May 01, 2024, 9:00 a.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Good morning. My name is Audra, and I will be your conference operator today. At this time, I would like to welcome everyone to the Mastercard Incorporated Q1 2024 earnings conference call. [Operator instructions] Mr.
Devin Corr, head of investor relations, you may begin your conference.
Devin Corr -- Head of Investor Relations
Thank you, Audra. Good morning, everyone, and thank you for joining us for our first-quarter 2024 earnings call. With me today are Michael Miebach, our chief executive officer; and Sachin Mehra, our chief financial officer. Following comments from Michael and Sachin, the operator will announce your opportunity to get into the queue for the Q&A session.
It is only then, that the queue will open for questions. You can access our earnings release, supplemental performance data, and the slide deck that accompany this call in the Investor Relations section of our website, mastercard.com. Additionally, the release was furnished with the SEC earlier this morning. Our comments today regarding our financial results will be on a non-GAAP currency-neutral basis unless otherwise noted.
Both the release and the slide deck include reconciliations of non-GAAP measures to GAAP reported amounts. Finally, as set forth in more detail in our earnings release, I would like to remind everyone that today's call will include forward-looking statements regarding Mastercard's future performance. Actual performance could differ materially from these forward-looking statements. Information about the factors that could affect future performance are summarized at the end of our earnings release and in our recent SEC filings.
A replay of this call will be posted on our website for 30 days. With that, I will now turn the call over to our chief executive officer, Michael Miebach.
Michael Miebach -- Chief Executive Officer
Thank you, Devin. Good morning, everyone. Our momentum continued this quarter as we once again delivered strong revenue and earnings growth. Quarter one net revenues were up 11% and adjusted net income up 16% versus a year ago on a non-GAAP currency neutral basis.
These results were powered by healthy consumer spending and strong cross-border volume growth of 18% year over year on a local currency basis. We had new deal wins in every region and we're driving growth by scaling our innovative technologies. That's why people choose Mastercard, a simple, seamless, and secure way to pay. With these strong results, we are reiterating our full-year 2024 outlook for both net revenue and operating expense on a currency neutral basis, excluding acquisitions and special items.
On a macroeconomic front, the picture remains mixed. First, strong labor markets and solid wage growth remain in countries across the globe. This is supportive of healthy consumer spending. Second, inflation has been moderating with a path toward normalization of monetary policy in most countries.
Persistent inflation in the United States could delay rate cuts here. And third, geopolitical uncertainty remains in several countries. In addition to these areas, we are closely monitoring the strength of the dollar, commodity prices and consumer balance sheet health. With tailwinds and headwinds to economic growth remain on balance, we are positive about the growth outlook.
With this backdrop, we are focused on our strategic priorities. Consumer payments, new flows and services, and new networks. The recent realignment of our organizational structure will help our teams to execute on these priorities faster to deliver more value to our partners and customers. In payments, our growth algorithm consists of being in the flow to capture the natural growth of economies, accelerating the secular shift to electronic payments, further penetrating new flows, growing market share, and optimizing our customer portfolios.
I will address a few of those. Starting with the shift to digital for personal to merchant payments, this secular opportunity has been a very important component of our growth algorithm across both volume and transactions. We are confident this will continue over the long term. Our acceptance footprint is a key competitive advantage and we continue to expand our reach globally while enhancing the user experience for digital transactions through our technologies.
Our fast and secure contactless technology has been instrumental in displacing cash. Contactless now represents more than two of every three in-person switch purchase transactions up from one and three prior to the pandemic. And our tap on phone capabilities are simply a cost effective way for merchants of all sizes to accept digital card payments. We're now live in over 100 markets.
In Brazil alone, the number of active devices is now over 1.5 million. And Apple continues to expand tap to pay on iPhone in markets like Brazil, where recently the solution was rolled out by Fintech's Stone, NewBank, SumUp, and CloudWalk. Payments become more digital. There's an increasing demand from consumers and merchants for a simpler and more secure payment experience.
Whether online or through a wallet provider, our tokens deliver an elevated level of security when payment credentials are shared between the bank and the merchant. This improves the performance of a client's portfolio while supporting new ways to pay. This key differentiator creates a flywheel effect. Lower fraud, higher approval rates, and a better consumer experience bring more transactions involved into the Mastercard network, which in turn drives more payments revenue and brings more data.
Tokens also create a streamlined way to accelerate the monetization of associated services to our customers. In quarter one, tokenized transactions grew over 50% year over year, with more room to go as only approximately one in four transactions on the Mastercard network are tokenized today. Further opportunity lies in the verticals traditionally under-penetrated by Card. Merchants are embracing solutions to simplify checkout, reduce missed payments, and drive engagement.
We are focused on segments such as housing and healthcare that have sizable spend and where our solutions can address the needs of providers and consumers. Rent payments is one vertical where we are working with aggregators to enable digital payments. In healthcare, we're partnering with several providers to grow acceptance in key markets like Germany. And we are playing in the gaming community all puns intended with partners like global video game commerce company, Xsolla, to improve the payment experience.
The opportunity to bring more transactions onto the MasterCard network remains. We now switch approximately two-thirds of our total transactions worldwide up from approximately 55% in 2018. Our actions and markets where switching penetration was historically low like Japan, Mexico, Colombia, and Chile have increased this penetration. And we will continue to focus on this.
My takeaway for you is the secular opportunity is large and it's lasting. And we are well-positioned to go after it. Our momentum also continues with issuers and co-brand partners as we are winning new deals and retaining key business in every region. Starting in the Americas, in the first quarter, we further solidified our position in Brazil.
Signing an agreement with Banco Bradesco, one of the largest banks in the market, across credit, commercial, and services. We're making great progress in converting the previously announced debit wins in the United States. The Fiserv Money Network card program for the California Employment Development Department has now gone live with Mastercard. On the conversions of citizens and Webster, we're well underway.
To further strengthening our leadership position with retail co-brands in the U.S., Mastercard will be the exclusive network for the city-issued Dillard's co-brand. We have also extended our long-standing partnerships with Target and the TJX companies. In Asia Pacific, Middle East, and Africa, we signed a 10-year exclusive partnership with First Abu Dhabi Bank, the largest bank in the UAE. The agreement spans consumer and commercial issuance across UAE, Saudi Arabia, Oman and Egypt.
We entered into a new exclusive co-brand agreement across the EMEA region with Global Hotel Alliance, the world's largest alliance of independent hotel brands. And in India, we signed a 10-year consumer credit issuance deal with Axis Bank. And finally, in Europe, we extended our long-standing partnerships with Credit Agricole, the deal renews our payments relationship with one of the largest banks in the region, while continuing to embed comprehensive marketing, consulting, and loyalty solutions. These examples, like many others, are true partnerships.
Our teams are invested in making them a win-win experience, and we will continue to use our innovative product capabilities and differentiated service offerings and our solution-selling approach to abuse positive results for our customers and for Mastercard. Now, you asked before, why are we winning? That's exactly why we're winning. Moving next to the new flows pillar of our growth algorithm, we continue to execute against our strategy to further penetrate the addressable market in targeted areas, like commercial payments and disbursements and remittances. Growth in commercial is about making sure we are connected to the right partners and have the right solutions to power growth, to make great strides in securing key partnerships, including traditional banks, travel, and ERP providers.
We previously announced our expanded agreement with Wells Fargo in the U.S. As part of our small business relationship, I'm happy to share that we've made significant progress in the conversion of this card portfolio to the Mastercard network. Also this quarter, we won our first commercial credit issuance deal with SBI card in India. Commercial solutions were components of the Banco Bradesco and First Abu Dhabi Bank deals I mentioned earlier.
In addition to aligning with the right partners, it's also about having the right solutions to help commercial clients address their needs. Like consumers, they want an easy and secure payment experience. Our new innovative mobile virtual card app enables commercial cards to be seamlessly added to digital wallets as you do as a consumer. But businesses can easily enable employees to pay for expenses with a click and a smile.
At the same time, they can optimize back office processes with robust spend controls, enhanced reconciliation data. HSBC Australia and Westpac will be the first financial institutions to offer this solution. The same principle applies to the open loop commercial fleet space, where we are the market leader. Our differentiated capabilities have positioned us as a preferred partner with the market-leading fleet providers such as Corpay.
And Fleet Fintech AtoB has announced they will now convert their commercial credit card program exclusively to the Mastercard network. In stacking two new flows, disbursement and remittances we continue to extend our reach to new markets. In quarter one, we grew transactions by over 40%. Combined our portfolio of domestic and international money movement capabilities into one offering, Mastercard Move.
It includes our Mastercard send and cross-border services and reaches nearly 10 billion endpoints worldwide. This quarter, we extended our reach further in China with a connection to Alipay, the U.S., the partnering of Verituity, to create a white label solution for banks to modernize their disbursements and remittances through a plug-and-play solution. And we will work with Sweden-based Pagero to support account-based cross-border and domestic payments. Now shifting from payments to services and new networks, another important component of our growth algorithm.
It starts with a powerful set of diversified solutions with best-in-class fraud capabilities, data analytics, consulting, marketing, loyalty, identity, and open banking assets. These carefully curated assets help us grow and diversify our revenues and differentiate our payments. We drive goals and services and new networks across several vectors. First, remember a portion of our services revenue is driven by payments and these metrics continue to perform well.
In addition, we're driving growth by increasing the penetration of existing customers. We're extending our services across new customers and new payment flows, and we build and deploy new solutions. Here are a few examples of how we're executing against these. Starting with increasing penetration with existing customers.
Success in delivering our services strengthens relationships and can generate opportunities for future service engagements. Our best-in-class conversion support is often an entry point. A great example is with Westpac in Australia and New Zealand where we expanded our service offerings to include digital strategy, marketing solutions, innovation sprints, and portfolio optimization campaigns. We have a diverse set of solutions to also help banks manage critical business needs outside of payments.
Take credit risk, for example, core to all banks. Our consultants are working with Ford Brazil to improve their credit policies and management. In a Saudi national bank, we are enabling new credit risk modeling and scoring capabilities. There's still room to further penetrate services.
Our top 50 services customers on average are using two to three times more services than the balance of our issuing and acquiring customer base. We're also driving growth by extending our reach across multiple rails and networks outside of the Mastercard network. Mastercard Access provides customers with a single trusted connection to quickly and easily source a suite of services. And we are seeing great traction.
For example, Saudi National Bank will leverage access to deploy a set of scheme agnostic services across their portfolio. We also continue to innovate and develop new services and solutions. This helps us to meet the evolving needs of our clients while growing our addressable target market. Here's an example.
Think about how people are shifting to streaming and other digital services. As they do, they're looking for one simple view of all their subscriptions. I think we've all been there. It's why we developed Smart Subscriptions.
It's an open banking powered solution that puts a simple dashboard of all subscriptions regardless of network right into their consumer banking application. Cybercrime is a growing concern. Last year alone, people in the United States lost over $12 billion to internet scams. Scam Protect builds on the cybersecurity protections we have delivered for years.
Combines our identity, biometric AI, and open banking capabilities to identify and prevent scams before they occur. As part of this, we're partnering with organizations around the world, including Verizon, to collaborate on new solutions to protect consumers. By combining Mastercard's identity insights with Verizon's robust network technologies, new AI power tools will be designed to more accurately identify and block scammers. We continue to enhance our solutions with generative AI to deliver even more value.
Our world-leading real-time fraud solution, Decision Intelligence, has been helping banks score and safely approve billions of transactions, ensuring the safety of consumers and the entire payments networks for years. The next generation technology, Decision Intelligence Pro, is supercharged by generative AI to improve the overall score and boost fraud detection rates on average by 20%. So overall, there's a strong demand for our services and new networks across a diverse customer base. They continue to grow faster than the core, and we remain optimistic about the opportunity ahead.
With that, I will wrap it up. In summary, we delivered another strong quarter of revenue and earnings growth. We're successfully executing against our strategy in realizing our growth algorithm. Our differentiated capabilities, our diversified business model, and our focused strategy positioned us well to capitalize on the significant opportunity in front of us.
Sachin, over to you.
Sachin Mehra -- Chief Financial Officer
Well, thank you, Michael. Turning to page three, which shows our financial performance for the first quarter on a currency-neutral basis, excluding where applicable special items and the impact of gains and losses on our equity investments. In line with our outlook, net revenue was up 11%, reflecting continued growth in our payment network and value-added services and solutions. Operating expenses increased 9%, including a minimal impact from acquisitions.
And operating income was up 12%, including a minimal impact from acquisitions. Net income and EPS increased 16% and 19%, respectively, both reflecting the strong operating income growth, as well as a lower tax rate, primarily due to a change in geographic mix of earnings and discrete tax benefits related to share-based payments. EPS was $3.31, which includes a $0.07 contribution from share repurchases. During the quarter, we repurchased $2 billion worth of stock and an additional $815 million through April 26, 2024.
Let's turn to page four, where I'll speak to the growth rates of some of our key drivers for the first quarter on a local currency basis. Worldwide gross dollar volume or GDV increased by 10% year over year. In the U.S., GDV increased by 6% with credit growth of 6% and debit growth of 6%. Outside of the U.S., volume increased 13% with credit growth of 12% and debit growth of 13%.
Overall, cross-border volume increased 18% globally for the quarter, reflecting continued strong growth in both travel and non-travel related cross-border spending. Turning now to page five, switch transactions grew 13% year over year in Q1. Both card-present and card-not-present growth rates remain strong. Card-present growth was aided in part by increases in contactless penetration as contactless now represents approximately 67% of all in-person switched purchase transactions.
In addition, card growth was 8%. Globally, there are 3.4 billion Mastercard and Maestro-branded cards issued Turning to slide six for a look into our net revenue growth rates for the first quarter discussed on a currency-neutral basis. Payment Network net revenue increased 8%, primarily driven by domestic and cross-border transaction and volume growth and also includes growth in rebates and incentives. Value-added Services & Solutions net revenue increased 15%, despite double comps in Q1 2023.
This growth was primarily driven by strong growth in our underlying drivers and continued demand for our consulting and marketing services, loyalty solutions, and fraud and security capabilities. This was partially tempered by slower relative growth in our other solutions. Now let's turn to page seven to discuss key metrics related to the payment network. Again, all growth rates are described on a currency neutral basis, unless otherwise noted.
Looking quickly at each key metric, domestic assessments were up 10%, while worldwide GDV also grew 10%. Cross-border assessments increased 22%, while cross-border volumes increased 18%. The 4-ppt difference is primarily driven by favorable makes and pricing. Transaction processing assessments were up 12%, while switch transactions grew 13%.
The 1-ppt difference is primarily due to lower revenues related to FX volatility versus the prior year, partially offset by favorable makes. Other network assessments were 226 million this quarter. As a reminder, these assessments primarily relate to licensing, implementation, and other franchise fees, and they fluctuate from period to period. Moving on to page eight, you can see that on a non-GAAP currency neutral basis, excluding special items, total adjusted operating expenses increased 9%, which includes a minimal impact from acquisitions.
The growth and operating expenses was primarily due to increased spending to support the continued execution of our strategic initiatives, as well as an increase in indirect taxes as discussed on our Q4 earnings call. This was partially offset by the timing of advertising and marketing spend. Turning to page nine, let me comment on the operating metric trends in the first quarter and through the first four weeks of April. As a reminder, our Q1 switch metrics include the impact of the leap year in 2024, which added just over 1-ppt of growth across each of switched volumes, switch transactions, and cross-border volumes.
In addition, our switch metrics in Q1 and in the first four weeks of April were impacted by the timing of Easter, which occurred at the end of Q1 this year as compared to in April in 2023. After removing the impact of those two items, our operating metric trends were generally stable for the quarter, as well as when looking at the first four weeks of April. A few items to note, U.S. switched volume and transaction growth benefited from the commencement of the conversion of the citizen's debit portfolio to Mastercard.
Outside of the U.S., growth was negatively impacted primarily by the lapping of the conversion of the network's debit portfolio to Mastercard. Cross-border card-not-present ex travel continues to show strength, and cross-border travel growth was impacted by tougher comps as we continue to lap the recovery of travel, particularly in Asia Pacific, which opened up later from COVID restrictions than the rest of the world. Turning to page 10, I wanted to share our thoughts for the remainder of the year. Our business fundamentals remain strong and our diversified business model and momentum with customers position us well for the opportunities ahead.
This is all underpinned by healthy consumer spending, the secular shift to digital forms of payment, and strong demand across our value-added services and solutions offerings. As Michael said, there are a number of headwinds and tailwinds that we are monitoring, and we stand ready to manage investment levels as appropriate while maintaining focus on the execution of our strategy. Overall, we remain positive about the growth outlook. As it relates to the full year 2024, our thoughts for net revenue and operating expenses remain unchanged on a currency-neutral basis, excluding acquisitions and special items.
We expect net revenue to grow at the high end of a low double-digit range on a currency-neutral basis, excluding acquisitions. This reflects continued healthy consumer spending and higher value-added services and solutions growth in all quarters for the balance of the year as compared to Q1. Acquisitions are forecasted to have a minimal impact for the year, and foreign exchange is now expected to be a headwind of 1-2 ppt for the year, primarily driven by the recent appreciation of the U.S. dollar.
In terms of operating expenses, our expectations for the full year are to grow at the low end of a low double-digit range on a currency-neutral basis, excluding acquisitions and special items. Acquisitions are forecasted to have a minimal impact to this growth rate for the year, while we expect a 0-1 ppt benefit from foreign exchange. Now, turning to Q2 2024, year-over-year net revenue growth is expected to be at the low double-digit range on a currency-neutral basis, excluding acquisitions. Acquisitions are forecasted to have a minimal impact to this growth rate, while we expect an approximately 2 ppt headwind from foreign exchange for the quarter.
From an operating expense standpoint, we expect Q2 operating expense growth to be at the low end of a low double-digit range versus a year ago, again on a currency-neutral basis, excluding acquisitions and special items. Acquisitions are forecasted to add 0-1 ppt to this opex growth, and foreign exchange is expected to be a tailwind of approximately 1 ppt for the quarter. Other items to keep in mind, on other income and expenses, in Q2, we expect an expense of approximately $85 million. This expense is higher than what we had in Q1, driven by lower forecasted net average cash balances in Q2, primarily due to higher working capital requirements, as well as the geographic mix of cash.
This assumes the prevailing interest rates and debt levels continue and excludes gains and losses on our equity investments, which are excluded from our non-GAAP metrics. Finally, we expect a non-GAAP tax rate of approximately 17% for both Q2 and on a full-year basis, all based on the current geographic mix of our business. And with that, I will turn the call back over to Devin.
Devin Corr -- Head of Investor Relations
Thank you. Audra, you may open up the line for Q&A now.
Questions & Answers:
Operator
Thank you. [Operator instructions] And we'll take our first question from Sanjay Sakhrani at KBW.
Sanjay Sakhrani -- Keefe, Bruyette and Woods -- Analyst
Thank you. Good morning. Yeah, Sachin, just a question on the guide. I mean, it seems like a lot of the guide lower on revenues is just FX, but I'm just confirming when we look at the volume and yield trends, those seem to be doing fairly well, if not slightly better than expectations.
And you mentioned the conversion beginning. Just trying to think through as we look ahead, it seems like those trends seem constructive. I just want to make sure that that's the way you're looking at it.
Sachin Mehra -- Chief Financial Officer
Yes. Good morning, Sanjay. I think you said it exactly right. First of all, just to be very clear, like I said, our guide for the full year on a currency neutral basis, excluding acquisitions, is unchanged relative to what we shared at the last earnings call.
What we're seeing generally speaking is healthy consumer spending. These trends are very much in line with what we expected when we put the guide out in the first place. So nothing unusual to report from an overall spending trend standpoint. Obviously, the U.S.
dollar has appreciated quarter over quarter. And what you're seeing is really our best reflection of what we think, the impact of the strengthening U.S. dollar is going to be on our as reported numbers, which is what we shared with you. That's the only real update.
Our guide otherwise is very much unchanged. And as it relates to your question on conversions, the conversions which are taking place are very much things which we had contemplated in our original guide. So that's very much part of what we have contemplated. So business is usual, and we'll be very clear, there's nothing which has really changed from a guide standpoint when you look at our currency neutral basis, excluding acquisitions.
Sanjay Sakhrani -- Keefe, Bruyette and Woods -- Analyst
Right. Thank you.
Operator
We'll move next to Craig Maurer at FT Partners.
Craig Maurer -- Financial Technology Partners -- Analyst
Good morning. Thanks for taking the questions. Two questions. First, it looks in the April trends as if the most material slowdown was entry Europe cross-border.
Could you just confirm if that's the case and if that was really predominantly Easter like you suggested Secondly, we should be coming up on the six-month anniversary of your announcement of Chinese domestic market approval. When should we expect the first transaction to be processed? And have you been able to work out whether you'll be able to use existing issued cards in the domestic market after a workaround on the EMV code or will you have to reissue? Thanks.
Sachin Mehra -- Chief Financial Officer
Craig, I'll take the first question. Your observation on entry Europe is exactly right, which you're seeing in the first four weeks of April is exactly what you said. It's related to the timing of Easter. Easter has actually a more pronounced impact in intra-Europe, and that's where you're seeing a more exaggerated number out there.
And then on your second question, as it relates to China, Michael's going to just take that right now.
Michael Miebach -- Chief Executive Officer
So on China, we got the license in November and we shared our excitement about that. So the excitement continues. The teams have been busy. Building out issuance relationships with our banking partners in China and building out the acceptance footprint.
We're obviously not starting from zero here. We had a strong cross-border business. So we have relationships in play to give us a heads up. There was a timeline associated with the license, and we're expecting to go live with the first transactions to a very specific question here in the month of May.
As far as using existing cards in China, I think the key question here behind that is how can you use existing acceptance in China and start to generate volume? And here, our approach is through the partnership with the digital wallets to have these cards put into the digital wallets so they can be used at a whole wide range of merchants in China. So I do want to say we are excited. At the same time, it's clear we're going to start processing, remember, transactions domestically. This is a medium to long-term opportunity.
In the short term, there's more work that we need to do to build out more acceptance and continue to get more card programs out. But we feel very encouraged about that. Our teams are very busy with that activity.
Sachin Mehra -- Chief Financial Officer
And, Craig I'll just add a couple of points as it relates to China. One, I think you might have seen in the press that the Chinese government is pushing hard to increase in-bound cross-border travel by expanding acceptance of international cards. That's their way of making sure that they're encouraging tourism inbound into the country. And we're actively working on expanding our footprint there, just expanding over what Michael said.
That's point number one as it relates to how we're seeing the China play-play out. The second point I'll make on China is it's kind of interesting when you think about a Mastercard card issued in China going forward, that would probably be one of the few networks which is most widely accepted across the globe, just by virtue of the fact that those cards are now going to be accepted in China and that expect already accepted across the globe. Different from our competitors in many ways. So we like what we're doing in terms of pursuing a strategy down there.
I just wanted to make sure I kind of brought those two points out as well.
Craig Maurer -- Financial Technology Partners -- Analyst
OK. Thank you for the color. Appreciate it.
Operator
We'll go next to Ramsey El-Assal at Barclays.
Ramsey El-Assal -- Barclays -- Analyst
Hi. Thank you for taking my question. Michael, how would you characterize or how do you think about the penetration rate of existing customers when it comes to value-added services? It's a more important part of the growth algorithm. How do you measure? How do you think about how mature the long-term opportunity is when it comes to cross-selling value-added services into your base?
Michael Miebach -- Chief Executive Officer
Ramsey, you are hitting on a really important point. Value-added services, key differentiator for our payment solutions, payment solutions. The link is pretty clear. More volume, more data.
And I talked about the whole growth algorithm earlier on the call. Now, this doesn't just naturally have to us. It requires really focused execution. To your point, we are all at any point in time, very clear what our cross-sell ratios are.
What value we can offer to our customers and who we haven't offered to and who we haven't offered it to. I gave you a stat earlier that I talked about that you have two to three times more services with our top 50 customers. So there is tremendous potential in there. And our teams are very focused on that.
Across the company, we have our existing relationship manager, sales force out there, across the whole world, but we are also having a set of very specific, more hunter-oriented sales forces that drive very specific new products with deep value that we drive into separate selling centers into these customers. So it's a pretty broad approach. At any point in time, we see that data and we drive that because as you said, this is a near-term growth opportunity that we should leverage and we will.
Ramsey El-Assal -- Barclays -- Analyst
Thank you.
Operator
We'll go next to Harshita Rawat at Bernstein.
Harshita Rawat -- AllianceBernstein -- Analyst
Good morning. Michael, can you talk about the U.S. Merchant Glass Action Settlement? I know this still needs to be approved by the courts, but how should we think about the implications from the changes proposed on surcharging for specific brands and how do you think this plays out? Thank you.
Michael Miebach -- Chief Executive Officer
Right. Thanks, Harshita. So the first word I would say, relief. This has been long-standing and we are happy that there was an agreement found with the merchant community as well as with Visa and this is behind us.
So what this was about, this is the U.S. Merchant Rules Class. So what was in focus here was the business rules that make up the Mastercard promise. And the conversation was around how can we provide opportunities to merchants to manage their cost of acceptance on one hand, at the same time, how do we keep the major promise to consumers of the Mastercard brand, and that is you can pay anywhere and you will not be discriminated against in your payment.
So that was the toggle over the years and an agreement was reached. Basically what happens is we're going to have a mild reduction of interchange rates, number one, and we're providing more clarity and simplification around surcharging rules and discounting rules on one hand. At the same time, we retain the promise of the owner on our all card rule out there. So that is what is out there.
We don't expect any dramatic impact on the business from the interchange changes. And for merchants, we will see what choices they make on surcharging and on discounting. We've seen in the past that surcharging is not always clear to consumers. It's not always prepared.
So we'll see what choices will come up. So broadly speaking, I don't expect a major impact on our business. In terms of financial impact, we have accounted for the legal fees associated with that. Otherwise, there's no impact.
So all in, a very good outcome. And it proves one point. It proves the point that there is a lot of momentum and a lot of competition in the payments market. And yet again, another moving item.
And merchants agree to this and this is a good step forward for everybody.
Harshita Rawat -- AllianceBernstein -- Analyst
Thank you.
Operator
We'll take our next question from Dan Dolev at Mizuho.
Dan Dolev -- Mizuho Securities -- Analyst
Hey, guys. Thank you for taking my question. So rebates and incentives were a little bit higher than what we had expected in the first quarter. How should we think about the remainder of the year and do we expect it to cool off a little bit? Thank you.
Sachin Mehra -- Chief Financial Officer
Hey, Dan. So on rebates and incentives, very much in line with what I kind of shared in terms of our thoughts at the last earnings call, very much in line with our expectations is how we ended up in the first quarter. As it relates, and you know what the usual puts and takes are as it relates to what drives rebates and incentives, so I won't kind of repeat that. But the reality is we continue to be out in the market, working to win business.
We've got a strong pipeline of deals. We'll continue to execute on that. You hear about them on every earnings call. As it relates to the second quarter, as we see it right now, we expect rebates and incentives as a percentage of our payment network assessments to be roughly similar to slightly down from what we saw in the first quarter.
So the reality is I want to kind of just make sure we put this in perspective, right? We do these rebates and incentives to bring more volume onto our network. When we bring more volume onto our network, it gives us the opportunity to optimize those portfolios, to grow them at a faster pace. It helps us deliver more services, which helps us drive net revenue accretion from a yield standpoint. And so it's very much in line with our strategy, and that's what I've got in the nature of thoughts for the second quarter.
Michael Miebach -- Chief Executive Officer
Yeah. It's a competitive marketplace, so we have to be competitive on the financial side. We clearly see the flywheel effect that Sachin just talked about between payments and services, more volume on, more ability to sell our services. But it's also clear that we are very, very focused on what deals we want to win.
So we don't want to win every deal, and we're very, very targeted here, whatever meets our financial criteria and our strategic focus in certain markets and certain verticals.
Dan Dolev -- Mizuho Securities -- Analyst
Thank you, guys. Great results. Appreciate it.
Operator
We'll go next to Darrin Peller at Wolfe Research.
Darrin Peller -- Wolfe Research -- Analyst
Guys, thank you. Maybe we just hit on some specific travel trends, I mean, and really more broadly consumer trends. If you could just give us a little more on what you're seeing from a travel dynamic standpoint. It did decel a bit into April, and I know Easter timing was a factor, but it seems like it could be a little more than that.
So is there anything you're seeing behavior-wise that's impacting that? Do you expect that to rebound? And then maybe just, Michael, if you can give us a sense of your view of where we are in the dynamic of conversion onto electronic payments for the consumer payment side. Any changes in patterns we're seeing in terms of the U.S. growth rate in particular, and then more broadly? Thanks, guys.
Sachin Mehra -- Chief Financial Officer
I'll take the first part of your question. As it relates to cross-border travel, really what we are seeing is exactly what we said, which is the lower growth rate that you're seeing in the first four weeks of April, as we've seen and we've analyzed as being primarily driven by just the timing of Easter. There's nothing unusual to call out. The only thing I will say is when you think about cross-border travel, you should think about it in the context of also tougher comps, particularly as it relates to Asia, because Asia was late to come out of the restrictions of COVID.
So last year you saw a strong recovery take place in terms of cross-border travel in Asia, and then you just create tougher comps this year. But fundamentally, the value prop is very sound. We've got great portfolios. We could do in portfolios which are travel-leaning, cross-border travel-leaning, and we're executing on those portfolios.
So nothing unusual that I'm seeing. Travel growth rates are very healthy, and they're actually, I would say, are running at a clip, which is, when I go back to the pre-COVID days, it actually is running at a clip, which is pretty comparable to what we used to see in the pre-COVID days when it's adjusted for this timing of Easter and the comp impact.
Michael Miebach -- Chief Executive Officer
Right. Just a last comment on travel and tourism in general. Sachin earlier mentioned that the Chinese government is really focused on driving inbound tourism. I just came back from a series of trips, Indonesia, one of them, and you see yet another government that is driving inbound tourism.
We see it in India, we see it in Spain, and so forth. In order to, work with governments on how to actually do that, there's a whole practice around our public sector business to build out, use the data that we have to create, not, in order to aid the portfolios that we have, create approaches with governments to promote their respective destinations, and all this comes hand in hand to a much more holistic approach that we're now seeing around travel vis-a-vis competitors out there. So that was one thing I wanted to add. On the conversion piece and the shift to digital payments, you asked specifically about the United States.
I want to hang it up a little bit broader. Starting off with, there is a tremendous secular opportunity from a geographic perspective. So there is opportunity left here in the United States, but you look around the world and you see some other countries, G7 economies like Italy, you have 45% cash, so tremendous opportunity, even in developed opportunities to go after that. I just mentioned Indonesia.
In Indonesia, you have over 70% cash. So this is a country where the President has put out by 2045, they're going to be the fourth largest economy in the world, 280 million people. So there's the whole range across developed and developing economies for us to continue to go and push into. You heard us talk about changing behaviors post-COVID.
People are ordering more takeout foods, they're doing more things generally online, and that is generally a preferential place for carded transactions. So going into these verticals is important. We gave you the example on a number of occasions of takeout food, that's one transaction in restaurants, but it's multiple transactions as you pay your platform, the platform pays the restaurant, and so forth. But think about public transport.
There's another example. Here we're talking real scale around the globe. So, that is multiple transactions as consumers get into open loop systems multiple times a day. And then when they get out of the station, they use that same tapping behavior as they buy a coffee and so forth.
So there's tremendous transaction opportunity driven by change in behaviors of consumers. And there's whole new sectors, as I mentioned about in the prepared remarks, healthcare, rent, and so forth. So the secular opportunity, this was not just a throwaway comment earlier when I say it's big and it's lasting, it goes up exactly in those layers, and we are very focused on each and every one of those layers. So this is around for a while.
Operator
We'll go next to Tien-Tsin Huang at J.P. Morgan.
Tien-Tsin Huang -- JPMorgan Chase and Company -- Analyst
Good morning. Just wanted to ask on Value Added Services, the outlook here. Can you elaborate on the visibility for faster growth beyond the first quarter? I know comps is a big part of it. Just curious about visibility beyond the comps.
And then is there potential to catalyze growth in the other category within Value-added services? Thank you.
Sachin Mehra -- Chief Financial Officer
Sure. Tien-Tsin, I'll take that. So like I mentioned right, I mean, first of all, our overall outlook and the demand we're seeing for our Value-added services and solutions continues to be quite compelling and strong. I mean, we're out there actively, as Michael mentioned earlier, driving and pushing harder across the various vectors, which he kind of talked about, so I won't repeat them.
As it relates to, the thoughts I shared as it relates to growth rates for Value-added services and solutions for the remaining quarters of the year, which I said that the growth rates would be higher in each of the quarters compared to Q1. It's really based on what we're seeing in the nature of the pipeline, how we're seeing things shape up in terms of the cadence of how we're going to deliver on these Value-added services and solutions. We feel pretty good about the outlook there, which is why we're sharing with you what we're thinking about in the nature of this higher growth relative to Q1 in each of the quarters. The only other comment I'll make is, it's a little bit of a reminder out here, which is as we deliver on these Value-added services and solutions, we're obviously generating revenue from the Value-added services and solutions, but there's also driving very compelling kind of cases for us to accelerate our payments growth, right? So that's part and parcel of the strategy.
It's all kind of very interdependent one on the other. On your other question, which was around other solutions growth, look, we continue to remain focused on growing the other solutions. It's primarily comprised of our real-time infrastructure assets and our bill payment assets. That inherently is slightly slower growth compared to what we've got in our safety and security solutions, our consulting, marketing, loyalty solutions.
So we'll continue to drive on that. I don't necessarily expect that the growth rates there are going to get comparable to what we see on the safety and security side, as well as on the consulting, marketing, loyalty solution side, primarily because the opportunity, which is there on safety and security and on consulting is a much larger TAM and it's a faster growing TAM, and we're continuing to execute on it. The good news is the safety and security piece, as well as the consulting, marketing, and data analytics and insights component is the lion's share of what comprises our Value-added services and solutions.
Tien-Tsin Huang -- JPMorgan Chase and Company -- Analyst
Got it. Thanks for the talk.
Michael Miebach -- Chief Executive Officer
In fact, to the piece, Tien-Tsin, we discussed earlier about existing customers and the cross-sell, so that's an opportunity. We laid out the drive into new customer segments, so that's pretty clear. And here, give you an example, on the personalization thing, our dynamic yield acquisitions dating back to 2022, you have a lot of high-end retail and commerce brands that want to engage on that. Everybody's trying to cut through the clutter, take Saks Fifth Avenue they are using our personalization services.
So those are all opportunities to get into verticals that we're not even in today in a significant way. So that is what gives us great confidence, just great demand as we look ahead into services, and it's why we're saying they're going to be hired in the first quarter.
Tien-Tsin Huang -- JPMorgan Chase and Company -- Analyst
Understood. Thank you both.
Operator
We'll move next to David Togut at Evercore ISI.
David Togut -- Evercore ISI -- Analyst
Thanks for taking the question. Are you seeing any change in competitive intensity in Europe, primarily for your payment network? Your primary competitor called out share gains versus local payment networks in the quarter. That has long been a source of growth for Mastercard. So either changing competitive intensity from the principal competitor in Europe and/or any initiatives by local payment schemes to become more competitive themselves.
Thank you.
Michael Miebach -- Chief Executive Officer
All right, David. Europe's fantastic growth story for Mastercard, starting off with some of the big shifts and debit in the U.K., some great wins on the continent. Earlier I was talking about the renewal of Credit Agricole. Some big deals are still in flight on conversion.
If you think about UniCredit, 13 markets across the continent. So we're well positioned here. Obviously, Europe is in focus from a set of competitors that is local players, as in local schemes and so forth, but we've long found a way to partner with them. We feel they have a great proposition on credit and debit to compete.
At the same time, there are services partnerships that we drive across. And then more traditional competitors, of course, we're all eyeing Europe. Europe is too much of a growth story overall for everybody to keep competing. But, we, as I said earlier, we try to turn these relationships into win-win partnerships.
UniCredit in the end decided to go with us because they feel we have shown better traction in serving their customer needs. So it comes down to that. And I feel pretty confident as I look across Europe and it continues to be a growth opportunity. Back to this question about secular opportunity, Europe still has a lot to offer on that front.
And we have a whole set of solutions to go after that.
Sachin Mehra -- Chief Financial Officer
Just one more point I'll add, David, is as it relates, we've had this long standing focus on conversion of Maestro to debit Mastercard. And that's very much the case in Europe as well, that we continue to execute on that. And I feel like that's going to be one of those things which will continue to provide us a natural tailwind as we continue to execute on that capability. For example, in this quarter we migrated or converted roughly 7 million consumers from Maestro to debit Mastercard.
And that's a global number. That's not just a Europe number. But I just wanted to share that with you as another piece of how we're executing in Europe.
David Togut -- Evercore ISI -- Analyst
Thank you very much.
Operator
We'll move next to James Faucette at Morgan Stanley.
James Faucette -- Morgan Stanley -- Analyst
Great. Thank you very much. I'm wondering, you talked about strong cross-border and travel trends, etc. We've seen some more indications of uneven consumer spending development in other parts of the economy generally.
I wonder if you can call out, whether it be in the U.S. or in other markets, if there's anything discernible at your level in terms of consumer shifting, spending preferences or categories that are noteworthy. And if we should take in, if there's anything that could impact Mastercard or other indications that we should be aware of.
Michael Miebach -- Chief Executive Officer
All right. Let me start off on this and then Sachin can comment further. So you've seen the 18% growth. So this is strong.
So there is a travel component to that and there is an ex-travel component to that. Ex-travel continues to be particularly strong. It's cross-border e-commerce and the likes. On the travel side, if you break that down, we talked about the trends.
I want to lift it up a little bit to the broader, I think, the broader angle of your question. So what are the various things that consumers think about as they make spending decisions? How do they make ends meet? And travel has been strong ever since COVID, particularly strong from a recovery perspective. It has been strong even before COVID because the seeking of experiences is just a fundamental trend that hasn't gone away. So it is not one of those circular things.
This is just a secular trend that we see. People are seeking services and experiences and travel is the top of the list. Now, as you go and break this down into different countries, you're going to see different stages of inflation. You're going to see different monetary policy and fiscal policy, how governments and regulators are reacting to inflation and so forth.
And that affects consumers in different ways. If you see inflation in non-carded verticals, that's going to impact your payment decisions or your spending decisions on carded verticals and so forth. So it's a pretty not uniform story around the world. That's why I come back to the fundamental trend.
Travel is winning. People want to go out and make that trip. We remain pretty optimistic around that.
Sachin Mehra -- Chief Financial Officer
As it relates to what we're on the topic of cross-border travel, I just wanted to kind of share where we are in terms of where we see potential for some recovery, which is particularly in Asia Pacific, which has got still some room to grow. Case in point would be China, where we've shared these metrics with you in the past, but I'll share with you what the Q1 metric was inbound and outbound of China. So in Q1, cross-border travel inbound and outbound into and from China stood at approximately 80% of the pre-COVID level. So there's still room to recover.
And granted, China is going through a little bit of a slower period in terms of how the domestic economy is performing. But the reality is there still remains an opportunity over the medium-to-long-term to see how this recovery comes through in the nature of travel, even from that corridor per se.
James Faucette -- Morgan Stanley -- Analyst
That's great color. Thank you, Michael. Thanks, Sachin.
Sachin Mehra -- Chief Financial Officer
Sure.
Operator
We'll take our next question from Tim Chiodo at UBS.
Tim Chiodo -- UBS -- Analyst
Great. Thank you for taking the question. I want to talk a little bit about U.S. debit trends.
So you mentioned the Citizen Bank beginning, portfolio beginning to come through, but also on Reg II more specifically, we we've talked about it in the past as a small portion of your overall net revenue in terms of U.S. online debit. And often we talk about the risk or the threat to that small portion. But could you also talk about the flip side to that, so the opportunity for Mastercard to gain the position on the back of the card for some of the Visa debit cards of the U.S.? Thanks.
Michael Miebach -- Chief Executive Officer
So, Tim, great point. We love to talk about debit. You saw the 6% growth rate. So this is good.
We're doing well. And the impact of the conversions is felt. As far as it comes to routing and Reg II, this question comes up for now for a couple of calls. And I have to say, where we are, we're seeing some impact, but it's not material.
That comes to the bigger question that you raised, how do we look at that? So it's not material. That's great. That gives us even more reason to look at the opportunity side of this and fighting for back of card. And in the end, it comes down to the routing mandates such as just distorting the market.
I think what's happening here is it's ignoring the fact that in the end, a merchant will make a decision on the basis of an economic outcome. And the net economic outcome is not just the cost of operating related to some routing costs, but it is fraud costs, etc., the whole package altogether. And this is, I think, where we score well, because we have a better proposition. Last five years, we've invested $7 billion into safety and security solutions, and that makes a competitive advantage for us.
So I see the opportunity. Our teams are out. They're talking to merchants, saying, here's what the net proposition is if you go with choice A versus choice B. And so far, that is an encouraging set of dialogues.
Tim Chiodo -- UBS -- Analyst
Excellent. Thank you.
Operator
Our next question comes from Bryan Bergin at TD Cowen.
Bryan Bergin -- TD Cowen -- Analyst
Hi, guys. Good morning. Thank you. I want to just ask about the change in the organizational structure and any financial implications to be aware from that, and just how you're feeling about those early changes as you pursue the growth opportunities across the business.
Michael Miebach -- Chief Executive Officer
Right. So what we're doing here is you heard us talk about the growth algorithm, about our strategic priorities. In the end, what's happening here is we're realigning our portfolio of activities, always recognizing these are all interdependent. We're talking payments and services, and altogether, it makes our competitive advantage position.
But we're basically saying we want to focus on core payments. We want to focus on new payment flows. We want to focus on an integrated services set of offerings. And that is what is part of this announcement.
Plus, we see tremendous opportunity on the AI side, particularly on the generative AI side, and we've created a central role for that. So these are four very seasoned leaders in the company that have tremendous experience around these topics. They're going to take this on. And the whole idea is to move faster and drive more value to our customers.
In terms of financial impact, what I hope to see is we can deliver the growth that we think is out there in terms of potential. That is the impact that I'm looking for. So that's really the play. There's nothing else to say behind that.
I'm looking at talking to Craig, who's going to lead the services thing. What is going to be on our product roadmap going forward? How do we drive even more services growth, etc.? So that's the whole play. It's bringing structure and strategy in line and move forward.
Bryan Bergin -- TD Cowen -- Analyst
Thank you.
Operator
Next, we'll move to Bryan Keane at Deutsche Bank.
Bryan Keane -- Deutsche Bank -- Analyst
Hi. Good morning. I just want to ask about the continued positive yields you're getting across border. Your major peer isn't seeing the same kind of positive yield, and they talk about low currency volatility as part of the reason.
So I think you mentioned, Sachin, pricing and mix and just helping us understand how much is sustainable of those changes for yield and cross border and the differences maybe between your closest peer. Thanks.
Sachin Mehra -- Chief Financial Officer
Sure. So first, I just want to quickly remind you that as it relates to the impact of FX volatility, in our instance, that shows up in our transaction processing assessments. It doesn't show up in our cross border assessments. So the impact of the, what I would say, the drag associated with that with FX volatility shows up in this transaction processing assessment line.
It doesn't show up in our cross border assessment line. Point number one. Point number two, you're right about the yields. Our portfolios continue to perform well.
It goes back to what Michael said earlier. We want to win not only every portfolio, but we want to win the right portfolios. And that's what we focused on doing over the last few years, which is winning the right portfolios for cross border. And what that's helped us do is see this table and mix come through where we are seeing the inter-cross border grow at a more rapid pace than the intra-Europe cross border.
And you do know that the yields on the inter-cross border side are higher than the yields on intra-Europe cross border. So that certainly helps from a yield standpoint. And then as it relates to your question on pricing, look, we've always kind of done pricing for the value we deliver when we deliver value to our customers, whether it's on the issuing side or the acquiring side, we price for it. I called out that in this quarter, we had a little bit of a lift come through on pricing in the cross border assessments line.
And you'll see that come through the ensuing quarters as the year progresses as well.
Bryan Keane -- Deutsche Bank -- Analyst
Thank you.
Operator
We'll take our next question from Dave Koning at Baird.
Dave Koning -- Robert W. Baird and Company -- Analyst
Yes. Hey, guys. Thanks. Nice job.
I guess advertising is my question. It was the lowest in a long time, by quite a bit too. And I'm wondering if there's some correlation between how much you have to advertise and even rebates, that if you're giving back some in dollars to your clients, you don't have to advertise quite as much. Is there a correlation there? And maybe just why is it down so much?
Sachin Mehra -- Chief Financial Officer
Yeah. Look, I mean, the A&M spend is typically, it's a cadence of how we see the promotions we want to do. So let me just step back and kind of think a little bit about why we spend on A&M. You could do it at the brand level, but you could do it toward activation of sponsorships.
And depending on when your sponsorship assets are in play, is when you want to do the activation around those sponsorship assets. So that influences, Dave, the cadence of spend on A&M. So you're right, we had lower A&M in the first quarter. I kind of mentioned in my prepared remarks about how it's the timing of A&M.
What I was basically alluding to is that as the year progresses, we will be spending more on the advertising and marketing line. On the second part of your question, as to the toggling factor between the expense line and what we might be giving in terms of marketing for, marketing spend in terms of contract, there is an element of marketing which we do give in terms of rebates and incentives. It's to drive portfolio spend. We work very closely with our issuing partners on that.
And so, it's across both of those that we are looking to actually optimize from a marketing standpoint.
Michael Miebach -- Chief Executive Officer
Right. The last comment that I want to make on this is, so we are a very large Fintech, but we're not just a Fintech. We have a massive consumer brand. It's a fast-moving brand.
It's among the top 10 brands on brand Z. So investing in marketing is absolutely critical. This is not a trade-off that we make to from quarter over quarter. It fluctuates exactly the way that Sachin just talked about.
When is the Champions League on? When is this on? When is that on? And we have a very carefully curated set of sponsorship assets and it drives a bit of the timing. But we love our brand. We invest in it. I think for the fifth year in a row, we have been the No.
1 Sonic brand in the world.
So there's a lot going on the marketing side that we are very proud about. And I think that brings us to the end. What a great question to end the call on. Thank you so much.
It is Labor Day in most parts of the world today. So when I thank our colleagues yet again, which I do in every call on Labor Day that makes even more sense. So a big call out to the 33,000 at Mastercard and thank you to you and our shareholders for your continued support. Thank you very much.
Speak to you next quarter. Bye-bye.
Sachin Mehra -- Chief Financial Officer
Thank you.
Operator
[Operator signoff]
Duration: 0 minutes
Call participants:
Devin Corr -- Head of Investor Relations
Michael Miebach -- Chief Executive Officer
Sachin Mehra -- Chief Financial Officer
Sanjay Sakhrani -- Keefe, Bruyette and Woods -- Analyst
Craig Maurer -- Financial Technology Partners -- Analyst
Ramsey El-Assal -- Barclays -- Analyst
Harshita Rawat -- AllianceBernstein -- Analyst
Dan Dolev -- Mizuho Securities -- Analyst
Darrin Peller -- Wolfe Research -- Analyst
Tien-Tsin Huang -- JPMorgan Chase and Company -- Analyst
David Togut -- Evercore ISI -- Analyst
James Faucette -- Morgan Stanley -- Analyst
Tim Chiodo -- UBS -- Analyst
Bryan Bergin -- TD Cowen -- Analyst
Bryan Keane -- Deutsche Bank -- Analyst
Dave Koning -- Robert W. Baird and Company -- Analyst
