Mastercard CEO: The $15.6 Trillion Threat Most Investors Are Ignoring

**Michael Miebach** (0:03)
Looking forward a few years, by 2030, the amount of fraud and cyber risk driven and damage is going to amount to $15.6 trillion dollars. If cyber risk were a country, that would be the third largest economy in the world.

**Bart Shannon** (0:29)
That was Michael Miebach, CEO of Mastercard, on the scale of the cyber security threat facing the global economy right now.
I'm Motley Fool producer Bart Shannon. Mastercard is one of the most admired companies we follow, a business that has quietly become as much a cybersecurity and data company as a payments network. Motley Fool CEO Tom Gardner sat down with Michael on the day of Mastercard's second quarter earnings to talk through how the payment network actually works, why cybersecurity has become one of its most important growth businesses, and what stable coins really mean for the future of money. We hope you enjoy part one.

**Tom Gardner** (1:06)
Well, we're really excited here at the Motley Fool to have Michael Miebach, the CEO of Mastercard, joining us on the day of your second quarter earnings. We should probably start there, but because I don't think there's much introduction that's needed for Mastercard. Although, if you talk to the average consumer or talk to even the average investor, they may not understand exactly how your global payments network works. We'll go through a little bit of that as well, but I do think we should start with second quarter earnings, which showed some pretty remarkable growth.
Another round of amazing operating margins of the company above 60 percent, and I know cross-border business and your value added services growth are pretty pleasing to you. Any highlights that you'd like to share with us on a single quarter, a 90-day period, which I know isn't necessarily the best way to measure it.

**Michael Miebach** (1:52)
First of all, thank you for having me, Tom. I was looking forward to our conversation today. It's been a good quarter and a good engagement with investors today and analysts, and you actually hit the highlights just now. So strong volumes. It's interesting when you look around the world and you read the headlines, see geopolitical complexity and volatility, and then you see varying impacts on the macro economy. In the end, it all balances out with a pretty healthy consumer and continued healthy spending on the consumer and on the business side. It obviously is a big part of our business. That's what we facilitate spending, empowering the economy and value exchange in all forms. So it's good to be in payments at this time.
A few of the topics we talked about on the call, which you didn't mention, is there's a lot of innovation in payments right now. There's a lot of competition in payments.
The rise of fintech, the rise of stable coins, the headline of agent e-commerce, there is so much going on and we're at the forefront of all of that, shaping where the future of the digital economy is going. So exciting times for us at Mastercard.

**Tom Gardner** (3:05)
It is amazing how much dynamic change there is in the world today and in the marketplace and yet a very stable, solid performance from companies like Mastercard, again showing the strength of the consumer as you shared. Can we just talk a little bit about the relationship between the bank, the merchant and the cardholder just to set the table? For example, when we get to Stablecoin, we will ask you to define Stablecoin because there will be viewers of The Motley Fool that are encountering some of this for the first time. So maybe just walk through a little bit, you know, four billion cardholders, tens of millions of merchants and how the network interacts.

**Michael Miebach** (3:37)
Just to stick to the facts, 3.7 billion cardholders. That's still a lot. In fact, it probably is the, we are probably, and certainly geographically speaking, the most prevalent way to pay around the world, over 3.7 billion cards.
So you talked about the relationship between a consumer and a bank and a shop, wherever you shop, something, let's just take a step back on exactly that. So you're going to go and you're going to buy something. You buy it online or you buy it in a shop of your choice and whatever it is, there magically, you can either leave the website and you know the product will be shipped to you or can leave the shop and take it with you. So why is that happening? Because there's a payment guarantee in the background, which is issued by Mastercard that says to the merchant, you can let this person go because we will ensure you will be paid. This all works in a square, so to say, a four-party model between the bank of the consumer and between the bank of the shop. So your bank will take money from out of your account, out of your card account and pass it on to the shop of the shop's bank, and then the shop gets paid. This is how this works. Now, if you think about this in 3.7 billion times in 220 countries and territories, that is massive scale and that is massive complexity. Regulatory rules are different around the world. Infrastructure is different around the world. And we took 60 years to build this amazing system that powers the digital economy around the world. So that is what is at the heart of when you pull out your Mastercard and happens behind. Now, there's a lot more happening behind because this payment is not only happening, it's happening in a safe way. So you're protected. You know, if you use a Mastercard and you make a payment on a website and it turns out to be a fake website, that's one of the cyber risks that we all face today. You are still protected because it was not your fault. So you have a payment guarantee.