So there is this lag which exists between when we’re recognizing the impact of those incentives and when we would expect at full ramp the volumes to come on as we win deals. But that’s more of a technicality as in how the math around that works. I think the bottom line still remains which is we would rather be in the payment flow on a disciplined basis to be able to drive higher net revenue yield for our company than not be in the flow. Because you’re not in the flow, you’re not getting the benefit of PCE, you’re not getting the benefit of cash, which are moving from cash to electronic forms of payment, and you’re certainly not getting the ability to deliver certain levels of services which we got out there. So that’s kind of the broad philosophy from a competitive standpoint that we’ve chosen to take here.
Operator: Next, we’ll move to Ashwin Shirvaikar at Citi.
Ashwin Shirvaikar: Hey, thanks. So I want to talk about a by-Bank. It’s live with JP Morgan. I mean, Verizon is piloting. Can you speak to the momentum you’re seeing in the product? And given that it uses traditional ACH banking rails, could you maybe more broadly speak to the economic model for this and similar products that maybe tend to not use Mastercard rails?
Michael Miebach: Right. So this is a combination of bill pay, of open banking. This is for us sitting in the new flow space. Very specifically, what we are addressing is trying to bring value to ACH flows. These are, somebody paying a doctor or things like that. And how do we add value to this is by plugging onto a flow that would take place and might not happen because of insufficient funds on an account. We’re putting in our open banking connection to make it clear is there a balance on the account. It’s called the payment success indicator. That is the product. And it is a per-click fee related to the API call. So that is the model. That is bringing value to a part of the payments industry where there wasn’t a particular problem to be solved and not anybody willing to pay for it.
I think we’re starting to find these corners where there is real value that we can bring. So for us, this is TAM expansion. This is new flows. And as I said, we’re bringing our unique combination of services together. We are in real-time payments and we are in digital identity and we’re in open banking. All of this is needed here to make the solution work. And this is why a player like JP Morgan comes to us to do this for us. And Verizon, to the point about momentum, will now be piloting it. So it would be a little early to talk about momentum. But we’ll come back on that as that solution is then rolled out into the market. But it is now live. And that was an important point for us, because it had to be built and put together and we have done that.
Operator: We’ll go next to Jeff Cantwell at Seaport Research.
Jeff Cantwell: Hey, thanks. I wanted to ask about your business update in October specifically. We can see in the U.S. switched volume growth is 5%. So that’s 200 bps slower versus the 7% you did this quarter. But can you talk a little more about how you see the holiday season developing this year? Because we’ve seen some estimates that consumer spend could increase by 5% versus last year, which sounds pretty good all things considered. You highlighted resilience and consumer spend this quarter. So I just wanted to take your temperature on how the entire quarter might develop, specifically in the U.S. Thanks.
Sachin Mehra: Hey, Jeff. So on the U.S. specifically, what you’re seeing in the day 21 numbers is, like I said in my prepared remarks, it’s primarily related to the timing of Social Security payments between this year and last year. So that’s really what you’re seeing in the nature of that 7% growth in Q3, which now shows that 5% in the first three weeks of October. So this really, from an underlying standpoint, other than that, there’s not much we’re seeing in the nature of a trend shift in the U.S. in the first three weeks of October. On your question about how we see Q4 shaping up, it’s actually very much in line with what I shared, which is basically a scenario continues to be one of where the consumer remains resilient.
I mean, the reality is, unemployment levels are at all-time record lows. When people have jobs, they hopefully are getting their paychecks, which they’re hopefully using towards meeting their spending needs. You also saw GDP came out this morning and it came out pretty strong. So I kind of generally think about this as saying our base case scenario around consumer strength and resilience is what we’re assuming going into Q4.
Operator: We’ll go next to Ramsey El-Assal at Barclays.
Ramsey El-Assal: Hi, thanks for taking my question. I wanted to follow up on Dan Dola’s question earlier and I’m wondering about the sort of dislocation between your valuation and the marketplace and the valuation of your distribution channels, the acquirers and banks that sort of flow transactions to you. Can you give us your updated thoughts on the overall health and TAM penetration of this core kind of value chain? When you look at the heritage distribution channels on both sides, are you seeing upheaval or are you seeing stability? In other words, are the market kind of getting the same benefits as the other?
Michael Miebach: Alright. Hey, Ramsey, let me start off on that. So if you look at how our distribution has evolved over the years, the whole theme of diversification across products and segments also applies here. So we’re doing a whole number of things. I talked about our work on acceptance. That is part of our distribution where contactless, tap on phone, things like that, a whole range of new merchant groups scaling these kind of technologies with partners like Stripe. Those are all going into areas that we haven’t been in. Then you have other parts of our go to market. We talked about in B2B, we talked about Oracle and SAP. You go over into the world of acquirers. There’s a whole range of acquirers, more traditional acquirers, which are our partners.
So across the board, it’s highly diversified, it’s regionally highly diversified. So these blips here really talk about other people’s business. But earlier on the question around what we’re seeing in Europe, we’re just not seeing it in our numbers because we have a highly diversified model. So whatever specific sector focus somebody has that is a partner of ours doesn’t necessarily throw through for us. So I don’t know if the market got it wrong or not. We’re not the Oracle, but we make sure we partner with everybody to drive the overall digital ecosystem.
Operator: Next, we’ll go to Bob Napoli at William Blair.
Robert Napoli: Thank you. Good morning. I wanted to follow up on commentary around the open banking, banking as a service. And MasterCard also, you’ve done a great job of partnering with a lot of fintechs. We were just at Money 2020, and I would say this year there were a lot more regulators than I remember in the past. And talking about open banking and how active they are in reviewing all the partners in those relationships. So just any thoughts on your outlook for your open banking investments and then how you think about the regulation, the growing regulation around open banking or banking as a service?
