Warren Kneeshaw - Head of Investor Relations Ajay Banga - President and Chief Executive Officer Martina Hund-Mejean - Chief Financial Officer

James Schneider - Goldman Sachs Don Fandetti - Wells Fargo Darrin Peller - Barclays David Togut - Evercore Andrew Jeffrey - SunTrust Jason Kupferberg - Bank of America Bryan Keane - Deutsche Bank Craig Maurer - Autonomous Research Tien-Tsin Huang - JPMorgan

Thank you, Kim and good morning, everyone. Thank you for joining us for our fourth quarter 2017 earnings call.

With me today are Ajay Banga, our President and Chief Executive Officer; and Martina Hund-Mejean, our Chief Financial Officer. Following comments from Ajay and Martina, the operator will announce your opportunity to get into the queue for the Q&A session.

It is only then that the queue will open to accept registrations. 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 currency-neutral basis and exclude special items unless otherwise noted.

Both the release and the slide deck include reconciliations of non-GAAP measures to their GAAP equivalents. 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 release and in our recent SEC filings.

A replay of this call will be posted on our website for 30 days. With that, I'll now turn the call over to our President and Chief Executive Officer, Ajay Banga.

Thank you, Warren, and good morning everybody. So, our business continues to perform well.

We are very pleased to have delivered strong results again this quarter and I think that driven by our continued focus of the execution of our strategy that we laid out for you, in fact as recently as the Investor Day in September. For the quarter, we delivered net revenue growth of 18% and an EPS growth of 30%, excluding special items, which are primarily related to the U.S.

tax reform and our Venezuela operations. On that same basis, net revenue growth for the year was 15%, and EPS growth of 21%.

Major economies around the world generally improved in 2017 and we expect to see a relatively steady environment again this year although with some pockets of instability. In the U.S., consumer conference has been healthy, unemployment remains low, and holiday retail sales was solid although year-over-year quarterly growth was slightly lower in Q4 than in the previous quarter according to our SpendingPulse estimates.

In Europe, the economy has been relatively stable. Germany and France are driving some mild growth.

Retail sales growth in the UK, however slowed in the fourth quarter, again according to SpendingPulse. And about the UK, we remain concerned about the potential impacts of Brexit over the medium and longer-term.

Latin America, there the region has been recovering from its economic recession, and whilst Brazil and Mexico both have presidential elections coming up, and of course Mexico has the added uncertainty of NAFTA renegotiations we are cautiously optimistic that economic growth in that region in 2018 will be similar to 2017. The political and economic crisis in Venezuela continues to worsen and Martina is going to discuss that in some detail when she comes on to her section.

Now in Asia, we have seen improvement in consumer and business sentiment in Australia and the ASEAN countries continue to be bright spots. So, overall, and although we know that the world is not without geopolitical and trade-related risks, absent any major impacts from these, we expect 2018 to be similar to 2017 from an economic standpoint.

Under that the backdrop kind of focused on continuing to execute a strategy that’s allowing us to grow share across all of our product lines in 2017, and let me give you a few examples of how we are doing this. Through the U.S., you read this morning probably that we have just announced that we have now got the combined Bass Pro Shops and Cabela's co-brand that's chosen Mastercard for their consumer credit co-brand book.

It is one of the largest retail co-brands in the market. You probably know that we have been the network for the Bass Pro Shops co-brand and we will convert the Cabela's Club portfolio to Mastercard later this year.

We also renewed our exclusive agreements with KeyBank so that consumer and commercial credit and debit portfolios this quarter are now. KeyBank actually is a great example of a customer who uses various Mastercard services.

They use our decision intelligence authentication tools, our loyalty platform processing services, that’s a nice widespread of services. Another example is Bank of America, and as we told you in September we had won the Mastercard cash 1, 2, 3 consumer credit cards.

We were launching those exclusively by the end of the first quarter. They leveraged many of our capabilities, including fraud products, advisers, and are also one of our largest labs as the service customers.

And that’s where we innovate together with our customers using design thinking to rapidly co-create targeted solutions for their business opportunities. In Europe, we're just pleased to announce that later this year we will be launching the new Virgin Atlantic Consumer Credit Card and that’s issued by Virgin Money in the UK.

We continue to make progress with European Banks. We’ve signed a number of new deals with large issuers in France this quarter, including mowing market share with the flip of Credit Mutuel's debit business.

In addition, we are shifting share to us in credit and debit from local competitors with ING Bank in Italy as one example. ING is also launching new prepaid issuance with Mastercard and they are leveraging added benefits such as Mastercard instalments, which gives consumers financial flexibility to split their payments over monthly instalments.

Now, the interesting aspect beyond this is that ING's implementation is entirely managed by our API’s and of course it gives their customers an easy way to convert purchases to instalments through their mobile banking app. Now we're also winning debit in other regions such as in Latin America, where we signed a new deal with Davivienda in Colombia emphasizing cross-border and digital capabilities.

We launched a new co-brand debit programs with Amazon in Mexico. In the Middle East, a flip Doha Bank’s debit portfolio is giving us portfolio exclusivity in one of the most affluent markets globally.

In China and India, we're making progress. We've signed new deals in China this quarter with customers such as ICBC, China Industrial Bank, The Agricultural Bank of China.

In India, the government has finally published new merchant discount rates. And we think that’s going to spur merchant acceptance and continued transactional growth over the next few years.

And we're making progress with Vocalink. Since the acquisition in May, we have launched real-time payments to the clearinghouse in the U.S., we have further scaled the person-to-merchant Pay By Bank app, and we went live with an image-based clearing system for the check and credit clearing company in the UK.

In the fourth quarter, we expanded our analytics capabilities at Vocalink. We’ve successfully launched a corporate fraud alert product with RBS as our first customer.

They are using analysis of corporate payment history and machine learning to help protect companies who are their clients against various types of corporate fraud, invoice redirection being an example. On the infrastructure side, we’re participating in a number of RFPs around the globe and we believe these will position us well in the real time payment space over time.

And in parallel, we’re developing apps and value-added services that can be deployed across this infrastructure. So, a few comments on the digital space.

We have expanded the rollout of tokenization, which as you know is the foundational technology for secure digital payments. We’ve added 500 new issuers and 21 markets over the course of 2017.

I mean now a total of 1,200 issuers in 46 markets. For the year, we saw tokenized transaction growth of over 500%.

Now, not from a small base, but it reflects this momentum that I’m speaking to. And last year, we continued to see how important this seamless digital purchasing experience is to our merchant partners as we grew Masterpass acceptance with Dunkin' Donuts, Walgreens, Verizon Wireless, and many others.

And this quarter, we’re pleased to add several more partners, including in the grocery category such as, DJs and John Deagle [ph] in the U.S. In McDonald's, we are going beyond a simple implementation and helping them develop a food delivery app with exclusive Masterpass acceptance in multiple markets across Latin America.

So, now let me wrap up by saying a few things about U.S. tax reform.

We see this as a very positive development for the country, particularly in the near-term. As businesses will have an increased capacity to invest, and many consumers will have more disposable income.

What we’re thinking of taking the opportunity is to make several focused investments that build on our long-standing commitment to strengthen our business, support our people, and make a positive contribution to the communities where we operate, while of course continuing to provide strong capital returns to our shareholders. And so, I’m going to lay out a couple of steps we’re going to take.

The first one is, we will make additional investments in our center for inclusive growth, which we launched back in 2014 as a way to focus our data, expertise, technology and philosophic investments to support inclusive growth. You know that we believe that enables more people to become financially empowered.

It is therefore good for our business as well. Over the next several years, we plan to invest an initial $0.5 billion to fuel their philanthropic contributions into the community.

And among our initial efforts will be training programs for U.S. workers to help create the workforce for tomorrow.

Now these additional investments in this center were beyond the impact we already delivered through other existing initiatives across the company, as well as the Mastercard foundation, which you will recall as one of the world's largest private philanthropic funds and of course our public-private partnerships with governments, which today are in over 60 countries. We’ve got 1,300 programs and that’s taken us more than two-thirds of the way to our goal of bringing 500 million more people into the financial system.

Our second area of focus with this opportunity around the U.S. tax reform is our employees and their retirement planning.

And while we’ve always been an active and generous contributor to our employee benefits, we're going to take this opportunity to enhance our employer match to 10% for defined contribution retirement plans. And this will be an opportunity for the majority of our employees, including those across the United States to benefit from this change.

And finally, we will absolutely accelerate investments both in an organic and inorganic basis in areas that are aligned with our business strategy, digital infrastructure of fast ACH, data analytics those spaces. Now, just to put this in context; yes, we will be making all these initial investments, but the majority of the tax savings will be used to invest in the growth of our business, and also to return excess capital to our shareholders.

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

Thanks Ajay, and good morning everyone. As you can see in the highlights on Page 3, we have delivered another strong quarter.

Foreign exchange was of a tailwind of about 2.5 ppt to net revenue, and 3 ppt to net income, primarily due to the strengthening of the euro. I will now highlight the numbers on a currency neutral basis, excluding the impact of special items, which I will explain in more detail on the next slide.

Net revenue grew 18%, driven by solid momentum in our core business and includes a 3 ppt benefit from acquisitions. Operating expenses increased by 15%, and includes an 8 ppt impact from acquisitions, primarily for Vocalink.

Operating income grew by 20%, while net income was up 25%, resulting from our strong underlying performance and a lower tax rate. EPS was $1.14, up by 30% year-over-year with share repurchases contributing $0.03 per share.

During the quarter, we repurchased about 1 billion worth of stock and an additional $287 million through January 30, 2018. So, let me turn to Page 4 and here I’m going to touch on the special items we had taken this quarter.

The U.S. tax reform resulted in three impacts to the tax line in our P&L in the fourth quarter.

This is our best estimate based on our current interpretation of the new tax laws and could still change during 2018. The first item is a 629 million charge related to deemed repatriation on accumulated foreign earnings and is payable over eight years.

The second item is related to the revaluation of our deferred tax assets and liabilities at the new corporate tax rate of 21%. Since we are in a net deferred tax asset position, we have recorded $157 million charge this quarter.

Finally, we have an $87 million impact, due to the loss of certain foreign tax credits and a change in policy regarding foreign earnings. The total of all tax impacts related to the U.S.

tax reform bill was $873 million or $0.82 per share. In addition, the economic and political conditions in Venezuela continue to deteriorate and therefore, similar to what other companies have already done, we have decided to exclude the financial results of those operations from our consolidated financial statements for future periods.

This has resulted in a pre-tax charge of $167 million, or $108 million after tax. However, we will continue to provide switching and other services in the country.

As a result of these special items, we had combined after-tax impacts of $981 million, or $0.92 per share this quarter. So, let me now continue to explain how our underlying business performance for the quarter.

Here on Page 5, you can see the operational metrics for the fourth quarter. Worldwide Gross Dollar Volume, or GDV, growth was 13% on a local currency basis, and that’s up 2 ppt from last quarter.

We saw solid double-digit growth in all regions outside of the U.S. U.S.

GDV grew 9%, up 3 ppt from last quarter, and was made up of Credit and Debit growth of 10% and 8%, respectively. Outside of the U.S., volume growth was 15%, that’s up 2 ppt from last quarter, led by Europe and Asia.

And cross-border volume grew at a healthy 17% on a local currency basis, with strong double-digit growth across all regions, again led by the U.S. and Europe.

Turning to Page 6, here you see switched transactions continued to show strong growth at 17% globally, with U.S. growth up sequentially.

Similar to the last few quarters, we saw healthy double-digit growth in all regions outside of the U.S. Globally, there are 2.4 billion Mastercard and Maestro-branded cards issued.

Now let’s turn to Page 7, for highlights on a few of the revenue line items, again described on a currency-neutral basis unless otherwise noted. As I already mentioned, net revenue increased by 18%, including approximately a 3 ppt benefit from acquisitions, and was driven by strong transaction and volume growth, as well as growth in services.

Rebates and incentives grew 23%, reflecting higher volumes and incentives for new and renewed deals. Let me quickly go through the individual revenue line items.

As we've commented on throughout the year, the difference between fees charged and volumes in the domestic assessments and cross-border categories were mainly due to pricing, which was essentially offset in Rebates and incentives, as well as some mix. This continues to be the case this quarter.

The Domestic assessments grew 19%, while worldwide GDV grew 13%. Cross-Border volume fees grew 19%, while cross-border volume was up 17%.

Transaction processing fees grew 22%, primarily driven by the 17% growth in switched transactions, as well as revenues from our various service offerings. And finally, other revenues grew 15%.

As a reminder, most of the Vocalink revenues show up in this line. Advisors and safety and security revenues were also up.

These items more than offset the 4 ppt impact from the changes we made to our loyalty business in Asia that I've called out previously. Moving on to Page 8, here you can see that total operating expenses increased 15%, excluding special items, on a currency-neutral basis, and that was higher than our expectations due to foreign exchange hedging losses.

Similar to last quarter, this includes an 8 ppt impact from acquisitions, primarily from Vocalink, including the impact of purchase accounting and integration-related costs. The remainder was due to our continued investments in geographic expansion in digital capabilities.

I’m going to move on to Slide 9 and here we are going to discuss what we have seen so far on the drivers for January and the numbers are through the 28 of January. Starting with switched volume, global growth is at 14%, up 2 ppt from what we saw in the fourth quarter with healthy growth in all regions.

In the U.S., our switched volume grew 10%, up 2 ppt with higher growth in both credit and debit programs. In switched volume outside the U.S.

grew 18%, up 2 ppt driven by higher growth in Europe to slower growth in APMEA as we lacked difficult year ago comps related to the demonetization effort in India. Globally, switched transaction growth was 16%, down 1 ppt from what we saw in the fourth quarter.

This decrease is the result of the exclusion of Venezuelan transactions as we will no longer be recognizing the related revenue in 2018. Ex-Venezuela, our growth was similar to the fourth quarter.

With respect to cross-border quarter volumes, our volumes grew 22% up 5 ppt with double-digit growth in all regions. So, let me explain this a little bit more.

About 3 ppt of this was driven by higher growth in Europe resulting from both increased intra and inter Europe travel, as well as holidays extending further into January this year in certain markets. APMEA also contributed about 1 ppt to this growth.

The remaining 1 ppt was driven by card holders funding accounts at crypto currency exchanges, which was then used to purchase these digital currencies. You should note that these accounts can be funded from a number of sources such as Bank Accounts, wire transfers, et cetera.

With the recent interest in and the price volatility of crypto currencies, we have seen an increase in this activity. Just to be clear, we do not switch or settled crypto currency transactions over our network.

Our plans do not assume this type of activity will continue as we have no line of sight as to how card holders will view crypto currencies in the future, and given that we’ve already seen some declines in our recent weekly trends. So, now I’m going to turn to our thoughts about 2018 on Slide 10.

And let me start by talking about the numbers on the same basis, as we always have. That is before the impact of the new revenue recognition was on a currency mutual basis and excluding acquisitions and special items.

On this basis, our business fundamentals remain strong, and we continue to grow through the combination of new and renewed agreements in our expanded set of service offerings. We expect the global economic environment to be similar to what we saw last year with a few areas to monitor as Ajay mentioned.

With this backdrop, we expect to deliver strong organic growth again this year with net revenue growing towards the high end of the low double-digit range. This is in-line with our recent trajectory though we will be absorbing a slight headwind as a result of the deconsolidation of our Venezuelan entity.

On the expense front, we continue to invest in key long-term growth areas such as digital, security solutions, and geographic expansion in addition to the incremental employee and technology investments Ajay just highlighted. Overall, we expect operating expenses will grow at a mid-single digit rate year-over-year, reflecting our ongoing cost management efforts.

So, as you can see, we are well-positioned to deliver strong operating performance again in 2018, slightly ahead of where we had previously expected. Turning to Slide 11, now let me add to those growth numbers.

The impact of acquisitions, the new revenue recognition rules, and the investment in the center for inclusive growth that Ajay talked about. All of these items are very important when you try to model our results for 2018.

So, please bear with me, as we are going through this. So, let me walk down the chart.

First, with respect to acquisitions, we estimate that having the acquisitions for full-year in 2018 rather than just a partial year in 2017 will contribute about 0.5 ppt to the revenue growth and approximately 2 ppt to OpEx growth for the year. Second, the new revenue recognition rules would contribute approximately 2.5 ppt or $300 million to revenue growth and 4 ppt or $200 million to expense growth based on our current estimates.

These amounts are driven by two factors. First, we have recently determined that certain market development programs will now flow through the P&L on a gross basis.

Resulting in a about a $200 million in increased revenues and offsetting expenses. The remaining $100 million relates to a change in the timing of when particular deal incentives are recognized.

These amounts, which are also detailed in the appendix are estimated based on our current and assumed commitments and are thus subject to change. We will be disclosing the impact of the new revenue recognition rules on a quarterly basis towards 2018, so you will be able to follow the effects each quarter.

Just as a reminder, the new rules have no impact on the underlying economics of the business. And finally, we will be expanding our center for inclusive growth.

The initial contribution will be $100 million to a new not-for-profit entity to enable a variety of workforce training financial inclusion and digital infrastructure initiatives, which will add another 2 ppt to operating expense growth for the year. We expect to take this charge in the first quarter.

So overall, with these adjustments, we estimate 2018 year-over-year growth net revenue will grow at the mid-teens rate and operating expenses will growth low-double digits both on a currency neutral basis and excluding special items. I have a few other items for you to consider for 2018.

We expect operating expense growth in the first quarter to be $250 million higher than what our annual growth rate of low double-digit would imply, due to the timing of the market development programs, which I just referred to as part of the new revenue recognition rules, the impact of the acquisitions, which occurred after Q1 last year and the charge for the center for inclusive growth. When modelling as reported numbers, foreign exchange is expected to be a 1 ppt to 2 ppt benefit to the top line, and about a 2 ppt benefit to net income for the year based on our planned exchange rates.

And finally, we expect a tax rate of approximately 20% in 2018, primarily due to the impact of the tax reform here in the U.S. So, turning to Slide 12, I would like to move to our long-term performance objectives for the 2016 to 2018 period.

As a reminder, these objectives are on a currency neutral basis that do exclude acquisitions and special items and are normalized for tax, they do however incorporate the impact of the U.S. tax reform in 2018.

For revenue, given our expectations for 2018 that I just discussed, including the new revenue recognition rules, we now believe that net revenue will grow in the low teens on a three-year CAGR basis. We remain committed to a minimum annual operating margin of at least 50% and we now expect EPS CAGR over that three-year period to be in the mid-20s, up from the approximately 20% we last commented on.

This reflects our continued strong business performance and expense management initiatives, as well as a 4 ppt benefit from lower taxes in 2018. The new revenue recognition rules to be implemented in 2018 are expected to have a minimum impact on the three-year EPS CAGR.

With that, let me turn the call back to Warren to begin the Q&A session.

Thanks Martina. Kim, we’re now ready to start the question-and-answer session.

Good morning. Thanks for taking my question.

I was wondering if you could maybe start out on the healthy trends you’ve seen across the globe, particularly in international debit, which I think accelerated as you mentioned quite a bit, there is particular pickup in Europe, can you maybe talk about how much of that is market share, how much of that is improving economy? And maybe you can kind of talk about the impact going forward on your yields given it seems like there was a substantial decrease again in the number of Maestro cards as you convert those to standard debit?

Yes, James, good morning. And let me just take you through a minute.

In Europe, where we are seeing really good drivers in Italy and Germany and France, number of these kind of countries and those are good economic environments, I called out that the holidays in January that’s the little longer in some of these countries. In terms of where we added the market share, what’s really in the Nordics, so we actually have flipped the deal in Sweden.

That is coming in over this year, and that will actually benefit these kind of numbers. From a Maestro point-of-view, yes you are absolutely right, we have been talking about that in a number of countries we’re actually flipping our Maestro portfolios into debit Mastercard both portfolios.

We are very well on our way in many of those countries, and what we are actually seeing is, when we do these kind of flips that are on the new debit Mastercards we see about 2x to volume that we use to see you on the Maestro cards. So, we're not just seeing cross-border volume, but we are also seeing local volume.

That will continue to benefit and it will improve our yield over time. You have actually been seeing that our yield has been improving over the last many years, both on the core business where you’re seeing it predominantly because of the additional processing that were coming in, by the way we are now processing about 54% of the transactions that are done on Mastercard versus - when you just look two years ago it was just shy of 50%.

And secondly, of course, the healthy cross-border trends. When you look at our word total yields, you know that is where obviously our growing services offerings are really benefiting us and that’s why you’re seeing very healthy yields across the whole company.

Thank you.

Good morning. You know, the cross-border number, even if you sort of strip out crypto currency was notably better and I know the dollar has been generally weakening, do you expect as you think about guidance for 2018 and just look out, have a sort of stepped up into a structurally higher cross-border rate and then lastly can you talk about volume into the U.S.

cross-border?

Don, I’m so glad you’re asking this question because of course when you see for the first four weeks in the year it’s 22% cross-border number, you’re asking exactly the right question in my opinion. What we always say is, four quarters do not make a year, in-fact the guidance that we are giving - four weeks don't make a year.

So, four weeks don't make a year, but in particular, all of the guidance that we’re giving you for the top line of 2018 we are not planning on those kind of cross-border numbers, growth numbers. We are planning much more to what we have been seeing over the last couple of years.

And even with the weaker dollar, I don't think that trend will change much. So, I don't think it’s prudent to be planning on this kind of number and I would like to point you back to the guidance that we had from a new revenue point-of-view.

And then the volume into the U.S.?

Volume into the U.S., we actually do is see, you now it is kind of mid-single digits, volume into the U.S., what we do see is a volume outside of the U.S. is picking up.

Okay, thank you.

Thanks guys. Nice job.

Just wanted to touch on, when you look at your guidance for 13% revenue growth or 15% including the accounting change, just, you know versus the 18% run rate, just to make sure we have the right variables that would cause the deceleration being I guess Venezuela M&A grew over lower pricing, anything else we’re missing there? I mean, just little pricing benefits?

And then just quickly Martina, on the - when you look at the tax investments, I just wanted to squeeze in, what will be the steady state of investment beyond 2018, some of this just feels that it could be one-time or should we expect that to continue? Thanks guys.

Okay. And the first question, first of all you need to take into account the 0.5 ppt on the Venezuela.

That’s the impact on revenue. And then in particular, you also need to take into account the acquisitions that you called out.

We had 8 months of acquisitions built into 2017 numbers, and so you only get the lapping asset from the four months. So, when you actually look at the total results at 2017, we're basically saying that 2018 is just going to be slightly better in part because of course what we’re expecting in the United States, even though we have a very watchful in the number of work potential risk countries around the world, right.

Middle East, Africa, West Country, we are watching very carefully Brazil, we are watching very carefully Mexico, as well as the potential impact from a Brexit point-of-view. So overall, while the U.S.

is a little better, we are actually believing that the economic environment in 2018 will be very similar to 2017. So, all of this is based Darrin, just slightly better than 2017 on the net revenue side.

That’s where we are.

Okay. And on the tax savings?

On the tax impact, it's your second question, so what we’re doing, in terms of the center for inclusive growth, as Ajay said, we are planning over several years to put $0.5 billion into that center. The first chunk is going to go in Q1 with $100 million and then we are going to see how we are going to lay it out for the next several years.

So, you are going to have do expect that you're going to continue to do some contributions in that. Not in 2018, but likely 2019, 2020 et cetera.

The employee benefits, that is a permanent adjustment of course, you know that subjects the one-time thing. We really want to make sure that our employees are focused on making sure that they are well situated from pension benefit point-of-view.

So, this is going to go in this year. Sometime this year, we haven't given a date yet and that’s going to continue.

The other investments are also in our baseline, and I would suggest to you that both organically as well as inorganically we're going to continue to look at that and make more investments.

Okay, excellent.

Particularly in those serious that we have been talking about. From digital and technology, and data and fast ACH, the kind of things we talked about in September.

Very focused on the strategy.

It makes sense. Thanks guys.

Thank you, good morning. Europe continues to accelerate nicely and clearly a lot of that is due to some solid market share gains, but I’m wondering Ajay if you could comment on the merchant acceptance footprint in Europe for electronic payments, especially post interchange caps a couple of years ago?

And then my follow-up is on PSD2, and any update you could give us on bringing Vocalink’s capability to the European continent in advance to PSD2?

The first part, the merchant acceptance, you know there is growth across the European region on merchant acceptance from large outlooks that earlier used to prefer to take either local payment systems only, or cash and goods. That changes all the way to small ones.

What you do see really changing also is a reduction in suppression. So, even if the outlook says we accept, you know actual fact we have showed up for a small ticket charge or low value payment, they would encourage you to kind of lay of the idea of producing electronic payment.

I think all that has changed quite dramatically. It’s helpful.

It’s part of the secular change in the way cash is used in the European economy. I wouldn't declare victory on that right now because I think a year or two in Europe is a relatively small time in a set of complicated countries with lots of local dynamics vis-a-vis local schemes, local players, and the like.

So, I would tell you, keep your eye on the space and keep working into the acquiring community, we are talking about a four, five-year translation in a continent like Europe. It’s good signs, it’s helpful, it’s a nice tailwind, and I am not running with it to the bank yet.

That’s kind of the first part. Your second question was about, remind me what the second question was.

PSD2.

PSD2. You know, we’re coming up to the timeframe of when all this starts to go live in so many ways in different aspects of implementation in Europe.

We have been working both internally, as well as with the help of our largest clients, as well as in conversations with regulators about the implications of PSD2, and the things we can do around PSD2 with these European merchants and European Banks and the new European entities that will get creative as part of the PSD2. The PSD's and the various acronyms that are being created in PSD2.

Your question was around Vocalink and PSD2. So, to get Vocalink on to the ground in different European countries beyond the software status.

which is kind of what it is today in the Nordics and some other markets around the world will require us to actually participate in the RFP process of different ACH systems being opened up in Europe. We’re participating, you heard me in my opening comments, we are participating in those RFPs.

These stake a year or two to get resolved and settled. After they get settled, it will take a while to get invested in and implemented, but we are very active in all of those and one of the reasons why I think you will see us using some of the tax reform money in a sensible way in our business is to keep on focusing on the opportunity with fast ACH, thanks to Vocalink’s capabilities in Europe, but also outside of Europe even in the United States and other markets.

It’s not just an infrastructure, but it could be in the applications, it could be in the scheme rules and it could of course be in different aspects of the range of things we could do with fast ACH.

Thank you very much.

Thanks for taking the question. Ajay, kind of a big picture or strategic question for you, especially in the way last night of pretty meaningful shift in the PayPal eBay relationship.

One of the things that PayPal has asserted is its value prop to large marketplaces, especially next gen marketplaces, and I see Mastercard building a pretty comprehensive value proposition of its own and I just wonder how you think about the sort of so-called commodity nature of Visa Mastercard versus sort of the value-add of a provider like PayPal and whether or not the lines perhaps are beginning to blur a bit in terms of go to market value proposition?

So, I think in the whole E&M commerce space there is so much going on Andrew in that whole space. And I think, if you go back in time, when essentially Visa and Mastercard in those places and other brands like ours, the other card, which were called card network brands.

We got into a position where we became part of a drop down on a merchant's checkout site. You drop-down you got one brand or the other and you entered a lot of details, and you entered a lot of addresses and that created its own friction and it’s on lakh of branding at the checkout point.

Even though the consumer was aware of the brand because they were looking at the card and entering the data. I think that’s moving and PayPal is one way of that moment, but our own efforts with branded checkout points is moving.

And we will continue to do that. I think PayPal itself, its relationship with eBay, I mean look at the IPO time, something for Dan to answer, but I'm pretty certain that all of you thought about one day that relationship will come up for reassessment, and it’s come up for reassessment and eBay has chosen what it wants to do.

I think Dan has done some interesting work of building out his partnerships in the meanwhile. So he has kind of consolidated his own position today with the second and third leg of the stool, and I think we are a key beneficiary of that because as you know, we’ve got a great partnership with PayPal, which includes all their co-branded cards and their corporate cards and all the understanding and how their wallet is used, including visibility of the brand and the non-steering towards ACH and the data flow and basically the passthrough angle compared to the staged angle.

So, my general net takeoff on this is, this is still a wide-open field. It is going to years before you can figure out who is playing what game here.

All I’m trying to do with our company and all us are doing is, we want to be very much a part of that game. If we’re going to keep investing in tokenization and secure checkout, we’re going to keep investing in an enhanced consumer experience in digital.

You’ll find us doing all kinds of things with banks, with merchants in that space, we're going to keep investing and aligning the developer community to access our capabilities at digital and poor payments. So, the simplest form of APIs and SDKs so we can get imbedded in more and more locations.

We’re going to keep investing in creating good R&D with our labs and making sure that they are capable of working with our clients with labs and the service you heard me talk about that with specific reference to Bank of America, but frankly it applies to many other clients as well. So, you're going to see the strategies in digital to make us not pay anywhere other than at the for front forefront of what is going on here with simple transparent standards, and standards that are important because they enable merchants and banks to connect one-time, not multiple times.

So, you see us over this period of years to come that’s the focus. Simple experience, simple standards, focused on securities, secure every transaction, make sure we do good stuff that last, make sure we open APIs and SDKs are available and well used, and make sure that we focus on all forms of payment, not just guardrails, but ACH fast ACH, all those so that you enable banks and merchants to do the best thing for their customer.

That’s our additional strategy. Not changed.

PayPal, eBay other issues will come and go, we are doing what we need to do.

Thank you.

Hi, thanks guys. Just two quick ones.

First, on your rebate and incentive expectations for 2018, and then can you just give us the latest update on what you're thinking in terms of what may happen in Europe with European commission looking at some of the inter-European cross-border interchange fees, some of the potential funds, I know you’ve disclosed this in your 10-Qs, and anyway you could kind of frame up, what percent of your cross-border business is actually in-bound into Europe just so we have some sense of reference in case we get some headlines on this soon?

Okay. Jason, first of all on your first question, I am not going to give you any guidance on rebates and incentives at 2018 and it is because of the new revenue recognition rules coming in.

There is so many moving parts between gross revenue and contra revenue that I just feel, you know given all of the work that we were able internally to do, I just feel that the net revenue numbers is just the best guidance that I can give you, but I do want to take the opportunity to deep dive into that just a little bit more. As you know, I will call it at $300 million benefit on the net revenue line, due to the new revenue recognition fule.

$100 million of that is really in relation to customer business agreements and to incentives. And there are a number of facts that we had to be estimating in this.

First of all, as you know we had amortization of incentives on previous deals that have been previously expensed. So, in prior years, we expensed those.

And then we will be now expensed over the life of the deal. And that will be a negative, right.

You estimate actually that roughly about $0.5 on incentives will need to be recognized as contra revenue under the new rules starting 2018 and we will, you know the average life of this recognition is approximately 7 years. So, it is not - so it is a headwind, it’s not really material in the context of our size.

But then in addition to that we would have had some incentives in 2018 or later that will now have to be carried back to prior years to the original deal inception or carried forward. That will actually reduce the amount of incentives recognized in 2018.

So, you can see these two things are toggling with each other. And then the last, the third thing is that obviously we will be having new deals coming in and that could impact this calculation too depending on the terms and conditions in these kind of deals.

So, when you put all of this together, we do estimate the net benefit of that $100 million that I just referenced, but obviously that could change over time and then beyond 2019, we will continue to amortize the remainder of that 0.5 billion of that roughly 500 million that we have to recognize as contra revenues under the new rules. So, you can see this is a relatively complex area and that’s why we’re staying with net revenue guidance and we’re not going to split it up in growth and into contra.

With respect to your second question, there is really not much more that we can say to you and quite frankly what our cross-border business, in-bound business in Europe has actually no relationship in terms of how the European Commission would be looking at finding us, if they find us, but they have at this point in time really no new News. So, I’m still going to point you back to the last Q that we filed, that is a pretty accurate statement in there, and I let something happen between now and when we filed the 10-K on what Feb 14 or 15.

If you have an update, obviously the K will be updated by that time.

Martina is in accounting heaven for the last few weeks or months.

Yes, between rev rec and tax, I'm sure it's been a party.

Yes, and you also got Venezuela, but she has done an outstanding job often trying to put her arms around how to manage that through the next period of time. In Venezuela, we are still very much on the ground, doing all the right things.

We got a great team. We are supporting a lot of our clients there.

We are not pulling out of the business from the ground. That would be a very unfortunate thing to do, and I think it will spark all kinds of humanitarian issues given the role we play in that economy.

In fact, we try to work with other players, including multilateral institutions try and find a way to make this a sensible outcome because there will be an outcome one day in Venezuela. So, this is not a, you know, you got to think-out long-term and you know what we're doing is all of these things whether it’s European cross-border of Venezuela or these rules.

At the end of the day, we are trying to give you guys some thought on what we are thinking in terms of what the impact could be, but Martina has laid out a pretty good estimate of where we think our 2018 revenues and expenses in EPS and our combined 2016 to 2018 goals will go. And I said you, over 2016 to 2018 we’ve had a good run.

We gave you an update in September when we raised our guidance. Now, what we're doing basically is making sure the accounting flows through.

Yes, there is a small improvement in 2018, which she pointed out. Some of it gets eaten up by Venezuela.

Some of it gets eaten up by the laughing of the acquisitions. That’s kind of where we are.

We are running our business to win, share, and keep taking advantage of the secular trend in the business. That’s what we’re trying to do and not getting ourselves tied up between rebates and incentives and growth revenue and net revenue at a time when there are so many moving parts and asking someone to estimate accurately would be asking for the moon.

It all makes sense. Thank you.

Hi, Brian.

Thanks. Just wanted to talk or ask about two things.

One, just the strength in U.S. credit and debit, is that just some lapping of some of the headwinds, obviously USA, but the numbers are obviously picking up there may be strengthened.

It is.

Okay. There is nothing else that call out there?

No. Most of it is just that, and all the other things you read about as winning, they are all coming on board.

So, you will see some benefit in Bank of America when it starts issuing. It will take time.

You will see some benefit from the co-brand, the Cabela's co-brand. But these things will take time.

Meanwhile, there is the natural spending pattern that shows up and there. As I said, fourth quarter growth was actually lower year-over-year than third quarter, just to be clear.

Yes, it doesn't seem there is no flips go on in the other way, like that created a headwind like USA.

Don't go there. You're giving me nightmares, don't go there.

Yes. And then my follow-up is just on tax reform.

I just was trying to quantify total tax reform investments, I got the 100 million for the inclusive growth and then just thinking about employee retirement and then some of the accelerated investments that you talked about Ajay, just in all - it seems like maybe we’re getting to 20% to 25%, I am just trying to get to a number of what we are reinvesting total of the tax benefit? Thanks.

So, just to let you know, the total cash tax benefit as a result of the tax reform on an annual basis is in the ZIP Code or $450 million, right. And we’re doing then two things.

One, we’re taking the $100 million in order to invest into the center for inclusive growth, and the other part that Ajay was mentioning in terms of the employee benefits, as well as the additional investments we’re doing, we have that embedded in the base line of the operating expenses. Okay, and that’s all embedded in the low double digits guidance that I have been giving to you for 2018.

Based on the new revenue recognition rules.

I don't want to run a business in which I’m paying employees for their retirement long-term because this is not a one-year $1,000 contribution kind of thing. This is, we are adding to our already good 401(k) and defined contribution plans around the world.

And second, we were investing in data in digital and fast ACH. We don't want to run a business if that stuff is kept as a separate item.

So, Martina has got those embedded in the way we look at the future of our business. The only thing that’s not embedded in that is these lumpy contributions that will go into the center for inclusive growth because honestly $100 million is going into that center being directed for workforce training and financial intrusion in the U.S.

and elsewhere that kind of lumpy contributions is the one that we’ve not got embedded in our guidance to you. We’re telling you about it, but it’s embedded in the total, but not in the net that we’re looking at.

Right Martina?

Well, it’s in the low double-digit operating expense guidance. We put 2 ppt for that particular contribution.

In the total?

In the total.

But not in the organic growth?

No.

Okay, great, thanks. Very helpful.

I got it. Thanks.

I wanted to ask you on Brazil, considering recent IPO drawing attention there plus you are seeing the recovery finally seeming to be on firmer ground, you’ve gained fairly enormous market share against visa there over the last few years and I believe last summer you are now the biggest new issuance brand in Brazil. I was wondering if you expect to see, a, these will be able to rebound against you there; and b, how you look at that market going forward, considering the big gains you got recently?

First of all, I will always expect my competitors to make every effort possible there. They go to a strong company.

They got good people in the ground, they are going to make efforts to win back share, and that’s the reality and it’s - I believe that we survived by being competitively paranoid about all of our competitors. That to me is just a, I take it as a, given that they will attempt.

There’s a lot of competition in the ground. It’s not just Visa.

It's Cielo. It's the local methods of doing a lot of work.

There is a lot of competition on the ground locally. There’s also a lot of regulatory changes that is going on in Brazil, including with the Bankers Association attempting to look at the idea of the way instalments are paid and the whole instalment method is managed, including the settlement time.

There’s a ton of things going on in a market in which we are today a very large market share player there. The political environment in Brazil, yes, this year 2017 showed an improvement, but you got to remember you are comparing 2017 to 2016, which was not a predictably let us delightful year in Brazil.

It was a hard year, and they got some political stability, 2017 turned out to be better, good economic policies were getting put in place. Remember that 2018 has an election, and that election has currently identified two players to come there not of whom within the current government and so it’s a little unclear to me what instability that could cause in economic environment.

That’s why Martina pointed out, and I pointed out that there are pockets of instability across the world that we’re careful of. Brazil is one of those.

For this reason of the political circumstance, and the longevity of that economic reforms. I have been around a lot time long time working with Latin America and I have learnt that you cannot take for granted what happens for a couple of years because it does find its way through changes on where politics goes.

So that’s where we are. I am relatively constructive about Brazil.

We are investing on the ground, the number of people we have in our office has increased, our capabilities in the ground have increased, our technological investments in the ground have increased, and we're going to keep seeing growth there is what I’m hopeful for, but 2018 is a year to watch out for.

I think, we have time for just one last question.

Alright, thanks for including me here. I won’t to accounting question.

Just want to ask a bit about the deal activity may be because based on Craig and Brian's questions, how would you characterize guys the pipeline for new deals and renewals this year in 2018 versus 2017. It seems like you have had a good backlog going.

So, I’m curious what the pipeline might look like for this year, especially in things like B2B, if you can comment on that?

So, Tien-Tsin obviously with the numbers in Q4 that you saw in the rebates and incentives and we had given you a little bit of a heads-up in our November call that that number might be coming in a little bit higher than what we have forecasted before. That should show you that we have actually terrific deal activity in Q4 and those deals will be rolling in over the next 6 months to 18 months that depends, which deal you’re looking at.

I quite frankly with everything that I’m seeing from the pipeline from our world regions around the world, I think that we’re going to have a similarly robust deal activity in 2018. I don't think there’s any letting up.

I think there is a lot of players in the market that are looking to do things with us a network and it would be similarly robust.

And on B2B Tien-Tsin, you know the global travel deals that we did over the last couple of years they are actually helping us in our cross-border. As an example, back to somebody's question I forget on cross-border.

But, there is all this work we’re trying to do with the B2B have. We’ve announced that one partner had signed up, there is a bunch of partners in the pipeline.

Hopefully, a few of them will come into locking on. There’s all the work we're trying to do with fast ACH and Send in different parts of the world.

So, B2B is pretty active far as right now. We consider ourselves to have good access from the place.

So, we are working our pipeline hard.

Alright.

I’m sorry, we're going to cut you off, Tien-Tsin. We can chat another time.

But thank you all for your questions and I would like to wrap-up with some closing thoughts. We’re pleased with 2017 financial results.

We think it’s all driven by strong operating performance and execution of our strategy. Overall economic trends are positive, and as we said a couple of times in this call, we’re going to monitor some risks and uncertainties that Martina and I have spoken to.

But overall, we expect 2018 growth to be similar to 2017. Meanwhile, we expect tax reform will benefit the U.S.

economy and I have a positive impact on our company. We see this as an opportune time to further invest in our employees and communities and continue to strengthen our business and strategic investments in those key growth areas, while continuing to return excess capital back to our shareholders.

And so, thank you for your continued support of all of us and our company, and thank you very much for joining us on the call today.