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MA - Mastercard Incorporated - Business Update Call Transcript

    Ticker:MA
    Company Name:Mastercard Incorporated
    Event Title:Business Update Call Transcript
    Event Date:25-Jul-2013
    Event Time:12:30 PM ET

    Presentation



    Operator

    Welcome to the Conference Call to provide an update on the EC Proposed Legislation. My name is Trish and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session. Please note that this conference is being recorded.

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

    Barbara Gasper

    Head of Investor Relations
    Thank you Trish and Good afternoon everyone and Thank you for joining us today on relatively short notice for a discussion about the European Commission's proposed legislation that was issued yesterday. With me on the call today are Javier Perez, President of MasterCard Europe and Noah Hanft, MasterCard's General Counsel. We thought the call would be the most expeditious way to get back to you regarding all of your questions and we are able to take advantage of Javier being here in today so it gives you chance a to hear directly from him.

    Following some brief comments by Javier, we will open up the call for your questions. In total the call will last no more than 45 minutes. Finally, I need to remind everyone that today's call may include some forward-looking statements, actual outcomes could differ materially from what is suggested by our comments today. Information about the risk factors that could impact our business is summarized in our more recent SEC filings.

    And with that I will now turn the call over to Javier Perez. Javier?

    Javier Perez

    President, MasterCard Europe
    Thanks Barbara. As you saw in our press statement yesterday. We are fully supportive of the EC's goal of encouraging and more secure, efficient, competitive and innovative electronic payment system in Europe. However, we are concerned that some components of the proposed legislation would have the unintended effect of competition and innovation and would be harmful to consumers and small markets in Europe.

    Perhaps let me start by summarizing the six key components of the EC's proposed legislation as currently drafter. First credit and debit interchange will be capped at 30 and 20 basis points respectively for cross border consumer transactions within the European economic area or EEA. These same rates would then apply to all domestic consumer transactions in the EEA two years after the regulation is approved. It appears that this regulated interchange rates would also apply at least to American Express current GNS cards, where they provide some form of interchange to issuer, commercial card interchange rates are not covered.

    The card rules will be preserved except for products with different levels of interchange. This provision only relates to cards issued and used within the EEA.

    Third, surcharging will only be permitted on products that are not subject to regulated interchange rates. Fourth, a merchant would be able to sign up an acquirer who is established in another country and that acquirer would pay a maximum of 30, 20 basis points on consumer credit or debit transactions respectively. In terms of -- a network would not be able to restrict issuers from putting a competing brand on their card and debit card, on their credit and debit cards.

    Card holders would choose which brand to use at the point of sale and merchants would be allowed to steer consumer towards its preferred payment brand or method.

    Finally, the proposal comes with some separation of brand and processing in terms of legal form organization and decision making. The proposed legislation will not limit MasterCard's ability to charge networks fees to issuers and acquirers other than issuer net compensation. Restriction that will limit the amount of incentives that MasterCard provides to issuers so that they do not exceed the fees paid to issuers, the fees paid by issuers to MasterCard. The purpose of the net compensation restriction is to prevent circumvention of the interchange fee caps to issuers.

    Barbara tells me that separation is the topic where most of you have questions, let me spend a bit more time on this.


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