POINTS, ALMOST 2%.
JOINING US RIGHT NOW TO TALK
MORE ABOUT PRIVACY AND
TECHNOLOGY, ESPIONAGE, GLOBAL
PAYMENT CEO JEFF SLOAN.
THANK YOU FOR JOINING US THIS
MORNING.
>> THANKS FOR HAVING ME.
MARIA: ONE OF THE IMPORTANT
COMPONENTS TO GLOBAL PAYMENTS IS
YOUR FINANCIAL TECHNOLOGY
RELATED TO PRIVACY.
TELL US ABOUT THAT.
>> SURE.
SO THE MOST IMPORTANT THING TO
REMEMBER ABOUT OUR BUSINESS IS
THAT OUR CUSTOMER'S THE
MERCHANT, NOT THE CONSUMER.
THE HEALTH OF OUR BUSINESS IS
DRIVEN BY THE HEALTH OF THE
MERCHANT AND THE HEALTH OF THE
CONSUMER.
THE HIGHER GDP, THE MORE PEOPLE
SPEND, THE BETTER OUR BUSINESS
IS.
UNLIKE MANY OF OUR FINANCIAL
TECHNOLOGY PEERS, WE DON'T
ACTUALLY COLLECT THE DATA ON THE
CONSUMER.
INSTEAD, WE'RE FOCUSED ON THE
TRANSACTION.
MARIA: THE CYBER SECURITY AS A
SUBJECT HAS BEEN A REAL CONCERN
FOR THE MOBILE PAY INDUSTRY.
HOW DO YOU COUNTER THAT?
WHAT DO YOUR PRODUCTS DO IN
TERMS OF KEEPING INFORMATION
SAFE?
>> IT'S A GREAT QUESTION.
OUR BUSINESS IS ACTUALLY VERY
HIGHLY REGULATED ALREADY.
FOR EXAMPLE, IN EUROPE WE COMPLY
WITH THE GDPR, THE GLOBAL DATA
PRIVACY REGULATION.
IN THE UNITED STATES WE'RE
AUDITED BY THE FEDERAL RESERVE
FOR CYBER SECURITY AND
OTHERWISE.
WE SPEND HALF A BILLION DOLLARS
A YEAR IN OUR BUSINESS IN
TECHNOLOGY, SECURITY IS A CORE
STRENGTH.
ALL OF OUR DATA INENCRYPTED AND
TOKENIZED.
OUR CUSTOMER'S REALLY THE
MERCHANT, NOT THE CONSUMER.
UNLIKE SOME OF THE FOLKS WHO
HAVE HAD NOTABLE PRIVACY ISSUES
RECENTLY, WE'RE NOT TRYING TO
MONDAY TIES
TINDAY TIES
TIESAY TIES
MOESAY TIES
MONEAY TIES
MONETI TIES
MONETIZEIES
MONETIZE CS
MONETIZE CONSUMER DATA.
>> WHO ARE YOUR CUSTOMERS?
>> THEY ARE REALLY THE BANKS.
JP MORGAN, WHO IS STILL IN THE
BUSINESS, BUT AS TECHNOLOGY HAS
GONE ON, IF YOU LOOKED FIVE
YEARS AGO, APPLE WAS NOT IN
PAYMENTS.
GOOGLE WAS NOT IN PAYMENTS.
TODAY, THOSE THINGS EXIST.
OUR COMPETITORS ARE SQUARE,
STRIPE, PAY PAL, ONE OF OUR
CUSTOMERS, BUT CERTAINLY IN
CERTAIN MARKETS PAY PAL COMPETES
WITH US.
>> WHAT DO YOU SPECIFICALLY DO
AS A COMPANY, IF ANYTHING, TO
PREVENT YOUR INTELLECTUAL
PROPERTY, YOUR SOFTWARE, YOUR
COPYRIGHTS FROM BEING VIOLATED
IN CHINA?
>> THE WAY WE GO ABOUT OUR
BUSINESS IS IN CERTAIN MARKETS,
BOTH BY POLICY AND REGULATION,
AND CHINA IS ONE OF THEM, OUR
DATA HAS TO RESIDE WITHIN THE
FOUR WALLS OF THAT COUNTRY.
FOR EXAMPLE, IN RUSSIA, COMING
NOW IN INDIA WITH THEIR MOST
RECENT REGULATORY MOVES, ALSO IN
CHINA, THAT DATA CANNOT LEAVE
THE FOUR WALLS OF CHINA.
AS A RESULT, WE HAVE LARGELY
ISOLATED OUR TECHNOLOGY
ENVIRONMENTS IN THOSE MARKETS.
WE'RE NOT GOING TO GET THE
ECONOMIES OF SCALE AS A
TECHNOLOGY MATTER AND BRINGING
IT OUT ANYWAY.
THAT DATA NEEDS TO RESIDE WITHIN
THE FOUR WALLS OF CHINA SO THOSE
BUSINESSES ARE LARGE HIVED OFF
FROM A TECHNOLOGY POINT OF VIEW
FROM THE REST OF GLOBAL PAYMENTS
MAKING IT MORE SECURE WITHIN THE
WALLS OF CHINA AND GLOBALLY.
>> HOW MANY COUNTRIES ARE YOU
IN.
>> WE ARE PHYSICALLY IN 31
COUNTRIES, IT WILL BE 32 AS OF
JANUARY AS WE GO INTO MEXICO.
WE GO BUSINESS ACROSS DEER
WE GO BUSINESS ACROSS BEER
WE GO BUSINESS ACROSS BORR
WE GO BUSINESS ACROSS BORDER IN
BORE --BORDER OF 58.
MARIA: DID YOU HAVE TO TRANSFER
YOUR TECHNOLOGY TO YOUR CHINESE
COUNTERPARTS OR THE CHINESE
GOVERNMENT IN ORDER TO OPERATE
THEY?
>> NO WE'RE REGULATED BY THE
LOCAL GOVERNMENTS.
NO, IN GENERAL, THOSE ARE LOCAL
INSTANCES WITH LOCAL TECHNOLOGY
PROVIDERS IN THAT MARKET AND
IT'S NOT THE SAME TECHNOLOGY WE
USE ELSEWHERE AROUND THE WORLD.
DAGEN: WHICH OF THE COUNTRIES
IN WHICH YOU OPERATE IS THE MOST
DIFFICULT TO DEAL WITH?
>> WELL, THE MOST IMPORTANT
THING IN OUR BUSINESS IS JUST
REALLY THE HEALTH OF THE
CONSUMER.
THE WAY I THINK ABOUT YOUR
QUESTION IS HOW WELL IS THE
CONSUMER DOING.
DAGEN: I'M TALKING ABOUT THE
GOVERNMENT.
>> FROM A REGULATORY --
DAGEN: FROM A REGULATORY AND
GOVERNMENT PRESSURE POINT OF
VIEW.
>> WE'RE REGULATED IN EVERY
MARKET WE'RE IN.
AS TIME HAS GONE ON,
INCREASINGLY HAVING TO KEEP ALL
OF OUR DATA AND TECHNOLOGY
WITHIN A GIVEN MARKET IN CHINA,
RUSSIA AND INDIA PRESENTS A
SCALE CHALLENGE FOR OUR
BUSINESS.
WE PREFER TO BE ABLE TO DO THAT
CENTRALLY IN THE UNITED STATES.
BUT THAT'S BEEN TRUE FOR NUMBER
OF YEARS.
THAT'S NOT SPECIFIC TO ANY ONE
COUNTRY.
ALL THREE OF THOSE COUNTRIES
HAVE THAT REGULATION TODAY.
MARIA: LET'S GET INTO
E-COMMERCE A BIT.
THE WORRY IN THIS MARKET AS WE
LOOK AT INTEREST RATES WHERE
THEY ARE AND AS WE LOOK AT THE
MARKET SELLOFF RELATED TO
WORRIES OVER THE GLOBAL
SLOWDOWN, WHAT ARE YOU SEEING IN
TERMS OF E-COMMERCE?
>> THE CONSUMER IS VERY HEALTHY
IN OUR BUSINESS.
WE REPORTED IN NOVEMBER FOR OUR
SEPTEMBER QUARTER OUR SECOND
BEST QUARTER EVER AND WAS PRETTY
MUCH TIED WITH THE SECOND
QUARTER WHICH WAS OUR BEST
QUARTER EVER.
THE OUTLOOK FOR THE HOLIDAY
SEASON AND THE FOURTH QUARTER IS
A CONTINUATION OF THE BEST
QUARTERS WE'VE SEEN THE LAST
COUPLE QUARTERS.
OUR E-COMMERCE BUSINESS, MARIA,
FOR EXAMPLE JUST GREW IN THE
HIGH TEENS IN THE RECENT QUARTER
AND HAS DOUBLED IN THEREAFTER
THREE YEARS, THE SECOND LARGEST
PROVIDER OF E-COMMERCE ACQUIRING
SERVICE IN THE WORLD.
SO WE ARE VERY OPTIMISTIC IN OUR
BUSINESS AS E-COMMERCE NOT GROWS
JUST WITH GDP BUT TAKES
INCREASING SHARE FROM PHYSICAL
STORE PRESENCE.
MARIA: THE WORRY IS IN THE NEXT
TWO YEARS THAT THINGS ARE
SLOWING DOWN.
DO YOU HAVE ANY INDICATIONS OF A
SLOWDOWN IN THE TWO YEAR HORIZON
AHEAD.
>> WE DO NOT.
THE ONLY PLACE YOU SEE THAT IS
IN FOREIGN EXCHANGE RATES.
WE OPERATE IN 58 COUNTRIES
AROUND THE WORLD.
THE U.S. IS OUR HOME MARKET AND
THREE QUARTERS OF OUR BUSINESS.
WE HAVE A BILLION DOLLARS OF
REVENUE OUTSIDE OF THE UNITED
STATES.
YOU CAN SEE WHAT'S HAPPENING IN
FX DAILY.
WE HAVE NOT SEEN AN IMPACT FROM
THE TARIFFS OR THE TRADE THINGS
YOU'VE SEEN IN THE PRESS.
THAT CAN CHANGE GOING FORWARD.
>> ARE PEOPLE ACTUALLY USING
BITCOIN OR IS IT STILL KIND OF A
PROMISING TECHNOLOGY AND A
CURIOSITY FOR HOBBYISTS?
>> WE'VE BEEN ABLE -- OF WE'VE
ENABLED BITCOIN ACCEPTANCE.
THERE'S NO VOLUME ON IT.
THE REASON FOR THAT, IT'S MUCH
MORE OF A COMMODITY TODAY THAN
IT IS A CURRENCY.
UNTIL THE VOLATILITY SETTLES
DOWN ON BUILT COIN, IT'S HARD
FOR MERCHANTS TO ACCEPT THAT AS
A METHOD OF PAYMENT.
GROCERIES WHOLESALERS MIGHT HAVE
A 1% TO 2% MARGIN.
IF THE THING MOVES FOUR POINTS A
DAY, IT'S HARD FOR A GROCER TO
ACCEPT ABOUT COIN AS A FORM OF
PAYMENT.
>> YOU'RE IN PAYMENTS IN 30 PLUS
COUNTRIES.
WHAT'S THE UNDERLYING CAPITAL
THAT YOU HAVE TO PUT INTO EACH
COUNTRY?
IS IT CAPITALIZED, ALL YOURS IN
EACH COUNTRY -- ALL YOUR
BUSINESSES IN EACH COUNTRY.
WHEN I RAN UBS, OUR BIGGEST
CONCERN WAS YOU HAVE A GLOBAL
BUSINESS AND YOU GET RING FENCED
ON YOUR CAPITAL.
>> THAT'S NOT TRUE IN OUR
BUSINESS.
85% OF WHAT WE DO IS REALLY RUN
HERE IN THE UNITED STATES AS A
TECHNOLOGY MATTER.
WE DO SPEND A LOT IN CAPITAL.
IT'S A TECHNOLOGY COMPANY.
THIS YEAR WE'LL SPEND
$200 MILLION ON CAPITAL, THE
VAST MAJORITY GOES INTO
TECHNOLOGY.
THAT'S DRIVEN AT SCALE.
MARIA: FIN TECH HAS BEEN THE
HOTTEST THING.
I KNOW YOU'VE BEEN DOING
ACQUISITIONS.
MORE CONSOLIDATION DO YOU THINK
FOR TECHNOLOGY AND FINANCIAL
SERVICES?
>> ABSOLUTELY.
IT'S SCALE.
MORE SCALE IN A SCALE BUSINESS
IS A GOOD THING.