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: 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: That’s great color. Thank you, Michael. Thanks, Sachin.
Sachin Mehra: Sure.
Operator: We’ll take our next question from Tim Chiodo at UBS.
Tim Chiodo: 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: 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, etcetera., 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: Excellent. Thank you.
Operator: Our next question comes from Bryan Bergin at TD Cowen.
Bryan Bergin: 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: 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, etcetera? So that’s the whole play. It’s bringing structure and strategy in line and move forward.
Bryan Bergin: Thank you.
Operator: Next, we’ll move to Bryan Keane at Deutsche Bank.
Bryan Keane: 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: 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: Thank you.
Operator: We’ll take our next question from Dave Koning at Baird.
Dave Koning: 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: Yes, 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 towards 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: 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 amongst 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 number one Sonic brand in the world.
Michael Miebach: 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: Thank you.
Operator: And this concludes today’s conference call. Again, thank you for your participation. You may now disconnect.
