Visa & Mastercard: Addressing investor questions around European payments efforts (Wero & Digital Euro)

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Visa & Mastercard: Addressing investor questions around European payments efforts (Wero & Digital Euro)

less likely to be impacted as consumers who choose to pay with credit (~20-25% mix in

Europe based on Euromonitor and Global Payments estimates) likely value the credit

availability which is not currently contemplated in the Digital Euro or Wero. We

acknowledge the potential for credit offerings to be extended over time. Third is the

non-transaction portion of VAS, of which we believe the majority would likely remain

given Visa & Mastercard would still have relationships with the issuers (and merchant

side would be less impacted). And fourth includes a token amount for the net issuer fees

on outbound travel related debit cross-border payments.

Visa & Mastercard continue to be well positioned within our coverage: We

continue to view Visa & Mastercard as the preferred means of gaining exposure to the

broader Payments & FinTech sector. Both Visa & Mastercard provide a balanced exposure

to spend alongside support from new payment flows outside traditional PCE (P2P, B2C/

G2C, B2B, etc.), supporting persistent volume growth even in a weaker macroeconomic

environment. Further, from an operating expense standpoint, Visa & Mastercard have

the ability to reduce costs (marketing expense in particular) to support earnings during

times of slower volume growth. Additional attractive qualities include the ability to

compound YoY organic net revenue in the ~LDD range over the medium-term

supported by VAS revenue growth, including Visa’s Pismo and broader bank tech/issuer

processing opportunities, as well as Mastercard’s Cyber & Fraud capabilities, and cross-

border (which is benefiting from a shift toward e-commerce, a faster growth and less