Motley Fool Hidden Gems Investing - Mastercard CEO: AI Shopping Agents, Machine-to-Machine Payments, and the New Infrastructure of Commerce

Episode Date: August 16, 2026

What happens when an AI agent does your shopping — and how do you make sure it doesn't order two grills instead of one? In Part 2 of his conversation with Motley Fool CEO Tom Gardner, Mastercard CEO Michael Miebach breaks down the company's Agent Pay protocol, explains why machine-to-machine payments could transform B2B commerce, and reveals why Mastercard just acquired the world's largest stablecoin platform. He also gets into what the AI revolution really means for employment, why proprietary transaction data is Mastercard's deepest competitive moat, and how he personally stays sharp running a $500 billion company.  Host: Tom Gardner  Guest: Michael Miebach  Producers: Bart Shannon, Lauren Budabin  Disclosure: Advertisements are sponsored content and provided for informational purposes only. The Motley Fool and its affiliates (collectively, “TMF”) do not endorse, recommend, or verify the accuracy or completeness of the statements made within advertisements. TMF is not involved in the offer, sale, or solicitation of any securities advertised herein and makes no representations regarding the suitability, or risks associated with any investment opportunity presented. Investors should conduct their own due diligence and consult with legal, tax, and financial advisors before making any investment decisions. TMF assumes no responsibility for any losses or damages arising from this advertisement. We’re committed to transparency: All personal opinions in advertisements from Fools are their own. The product advertised in this episode was loaned to TMF and was returned after a test period or the product advertised in this episode was purchased by TMF. Advertiser has paid for the sponsorship of this episode. Learn more about your ad choices. Visit megaphone.fm/adchoices Learn more about your ad choices. Visit megaphone.fm/adchoices

Who sits in the middle and drives interoperability and makes sure all of this connects and is not a spaghetti, you know, a plate full of spaghettis? Mastercard. So we're closing this quarter an acquisition of a company by the name of EVNK, which is the largest stablecoin platform out there to connect all of this for the world. That was Michael Meebok, CEO of MasterCard, on why the fragmented world of stablecoins and digital payments needs someone to hold it all together, and why MasterCard intends to be that someone. I'm Motley Fool producer Bart Shannon. Last week, in Part 1, Tom Gardner and Michael covered how MasterCard's payment network works, the $15.6 trillion cybersecurity threat, and why stablecoins are more opportunity than

threat. This week in part two, they get into the future, AI shopping agents, machine-to-machine payments, how MasterCard thinks about capital allocation, and what the AI revolution really means for employment and consumer spending. Hope you enjoy. Let's talk about agented commerce, where AI becomes the customer's main relationship and that transaction then starts to look for the cheapest alternative. Maybe we can talk about AP4M as well. I don't know if GPT should have allowed this,

but I created an image here of AP4M. It actually put the MasterCard logo in the center there, which makes it questionable as whether GPT should be able to place logos. but anyway i'd like to hear a little bit about ap4m and i will stop my all right so let's talk about agentic commerce uh first uh and hang it up a little bit higher before we come to ap4m and i can also decipher what that actually means when we get there um so agentic commerce so what's actually happening is so in straightforward online commerce what happens

today is you might go and go to your favorite search machine, search website and just put in whatever you're looking for. And we'll give you a bunch of sponsored links and then gives you a set of more links and then you pick where you go. Or you might be just irritated by all of that and just go straight to your favorite marketplace. Those are all things that we probably have experienced as consumers. Now, you just referred to an LLM where you created this lovely image just now chat gbt is the example that you used um so what you might want to do today is get a potentially better and more holistic answer for whatever you're trying to do let's say you want to go on a camping trip and say what do i need for a camping trip and it gives you 15 things

and because it knows your history it could have given you 25 things but already knows knows you have a tent so it's not offering the tent to you it's giving me all the things you don't have that for that particular destination actually makes sense. So if you have that result, then imagine you still have to go to every single website and say, all right, I'm going to find that tent now, or I'm going to find that little cooker or whatever the ingredient is. And then you're all over the place and you have just wasted half a day planning your trip. Wouldn't it be much easier if you could check out right in that moment on whatever that recommendation is from the favorite the LLM of your choice and say, I'm going to check out right there. I'm going to delegate

the checkout to the agent, to an agent, which in this case would be the LLM that does all the checkout for you. And it uses a MasterCard behind it and everything works. Would be so much easier. Now, for that to happen, we need to recognize that suddenly there's an entity in between that never existed before. That's the agent. And then back to cybersecurity. How do we know that this agent is actually an agent that is known and it's not a fraudulent agent, that the agent is actually what you're trying to do, buy stuff for your camping trip and not ordering something else, or that the agent actually makes mistakes or not. It orders two grills instead of one. So how do you prove that in the end when your card would be debited? So those are all things that we thought

about that today in the world of MasterCard payments, straightforward payments work very easily. You have a chargeback. You always protect it. You say, that never happened. I never ordered that. And you just undo the whole thing. So we created AgentPay. And AgentPay is basically a protocol that ensures that an agent is recognized, is accredited as an additional party in the ecosystem. So that could be an LLM or it could be a very large retailer that has an agent for all their brands, et cetera. So that's registered. The next thing is that this transaction is fully tokenized. What that means is every bit of data associated with this transaction is captured. So there can be as a proof point to say this is exactly what the consumer wanted to do.

Then the various parties in the ecosystem, the bank of the merchant and the bank of the consumer, everybody knows, and it flows the same way as it does today at a MasterCard transaction. So it's very, very technical. So I'm going to keep it at that level. So all of this is what is happening and the ecosystem is ready and these transactions are starting to flow now. So for us, is this a growth opportunity? It is. It is because tokenization is a service that we sell. All these transactions are fully tokenized, which is very different than the real world today. Not every transaction is tokenized just yet. So that's a growth opportunity. The related cybersecurity solutions for these transactions is a growth opportunity for us, etc. Will people buy a lot

more? Bottom line, will they buy five tens instead of one? No. So it's a bit of a replacement of existing flows, but with additional service opportunity for MasterCard. Am I wrong to just insert one thing? Am I wrong to think that it might lead to more transactions because it becomes so much more frictionless? Once I have a representative acting on my behalf, I might be trying new things that I wouldn't have found myself. It could. You most likely will have a better recommendations so your propensity to buy something might increase the other thing for us is there is a big there is a transaction growth multiplier if you would have instead today gone to a marketplace and have bought everything from one uh one merchant vis-a-vis go to different

merchants and have different individual transactions so there's a transaction multiplier we we basically facilitate transactions that's our business model so it has that kind of an impact for us. But it's still overall GDP will not dramatically rise because you still need one to end on not five. But now here's the other side of this. And this is very interesting. Now we're coming to AP4M, which means agent pay, MasterCard agent pay for machines. So if you think in the context of B2B commerce, one company with another company, think about the procurement, the chief procurement officer buying stuff on behalf of the company from some provider, some supplier. So today, this is all from happening account to account.

Invoices are being paid, all of that. But imagine the digital content that a company is buying. There could be APIs, there could be digital content, there could be data, there could be compute power, it could be all of those things. why would you send an invoice and do that you will want to do this as you you know as you use your compute power so i need 10 more you dial it up you dial it down and you pay as you need if you pay as you need your working capital efficiency is going to dramatically increase so how do we get an a payment ecosystem that can facilitate always on high velocity

micro fractions of a dollar kind of payments payments that don't exist today Well, that's what the chief procurement officer wants. It's total optimization. That's what the treasury wants, what the CFO wants, to really use the capital of the company in the most efficient way. So we've launched just very recently the agent pay for machines protocol, which basically is a further evolution of agent pay, which I described a bit earlier, and it just facilitates all of that.

I spare you the technical details because that goes even further, But it does facilitate immediate high-velocity microtickets between different machines at machine speed, at machine scale, with the same protections and with everything else that MasterCard promises behind them. The underlying rails and infrastructure are likely to be different than card rails. It could be stablecoin. It could be other rails for that. That is essentially going to come down to the choices of companies and what they want to use. We're pretty agnostic about that.

But the protocol to keep the trust and interoperable layer on top is critical. Now, here's the last thing on stablecoins. So agent pay, stablecoins, agentic commerce, this is a whole new way of doing commerce going forward. and if you just play that out over the next year you're going to have multiple chains you're going to have multiple uh stablecoin currencies that might be powering all of this in the background and along with card systems and account to accounts you have this very complicated world so you're company a i'm company b and we just want to do machine to mean machine payments with

each other but your your choice is stablecoin a and my choice is stablecoin b how are you going to pay me and how am I going to receive that stable coin from you? Who sits in the middle and drives interoperability, makes sure all of this connects and is not a spaghetti, you know, a plate full of spaghettis? MasterCard. So we're closing this quarter an acquisition of a company by the name of EVNK, which is the largest stable coin platform out there to connect all of this for the world. That's what we do in cards today and that's what we will do in the brave world of stable

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Our new double espresso with ginseng extract. Whatever lies ahead, don't change your morning. Let your morning change you. Discover Coffee Plus on Nespresso.com. There's so many ways to express what MasterCard is doing. Just one question on the value-added services and this component of the work that you're doing. Should we think of MasterCard as partnering even more deeply

with a variety of companies to bring these systems forward, or will you continue to be acquisitive, a balance between the two? What's the process of moving deeper and deeper into new technologies like agenda commerce, all the cybersecurity challenges, stablecoins, etc so our our approach to this is you know when you take our business a decade ago so very focused on card payments very focused on consumer card payments today um it is consumers is is businesses

is government in terms of customer set it's much more global and it's all forms of payments as we discussed it's also stable coins is also account to account and it's a whole range of value-added services we talked about the cyber security part of that uh there's a range of loyalty solutions consumer engagement solutions personalization solution anything that powers trade so uh when you think that our approach to this is um bio build that's always the first question we never go out and say the valuation cycle everything is cheap right now let's go and buy something it's very strategy driven we say all right we need more and capability on the personalization side so our customers, large retailers,

what are they trying to do in this time to cut through the clutter and the noise that exists in social media and everywhere to get the right offer to their right customer at the right time through the right channel. We do this at scale. We have a lot of consumer data, consumer behavior data,

not personalized, I should add. So we bought one of the best personalization companies in the world. Why did we buy versus build? We just don't know much about personalization. But I said, why don't we buy the best partner? But when we buy a company like that, We can leverage our data set, our huge data set, and our global reach and our network

to take their solution and push it to our network to reach all those customers that we have around the world. That's dramatic synergy. So M&A works and acquisition works very well in such scenarios. There are other things that are very close to our existing payment solution. We're much better off building them ourselves. So we will continue to be very acquisitive at the same time. We're always very good stewards.

let's, we try to be very good stewards of our shareholder capital and say, all right, we're actually better off building this ourselves. Well, you may or may not know that we've built a system at The Motley Fool where we score every public company. We have an LLM-based AI-powered system with coders around the world working with our investors to evaluate companies across leadership, the quality of their products, their competitive advantages, the valuation of the business, the financial capabilities. Out of 4,700 companies scored in the U.S., MasterCard is number 14. You were probably wondering why you're not I think we should be a top 10 company. A top 5 company.

And that's always... I will subscribe to your report there. We will send it to you without requiring a subscription. Thank you very much. But capital allocation is such an amazing strength of the business and you have a lot of options with the amazing rates of return on invested capital. But I'm just wondering how you make the decisions about, let's say, let's take an example of buybacks. I think you did additional buybacks this quarter. There was a moment in time there. I could pack seven questions together here for investors about this, but there was a moment in time where the stock fell to $470 or so. Now it's

$570. So there's a subordinate question to how people should think as investors, as you might know, retail investors and a lot of professional investors transact too frequently and don't realize the length of the capability of that organization to create value for you over a long periods of time. So I'm just curious how the share buyback process happens in a given quarter, how you determine how much to put against it and whether the movement of the price in that quarter matters. So the first thing that I would say when it comes to our capital allocation principles is always the first thing is reinvest in the business. So that is the best thing that we would do. And organic and inorganic, we just talked about that. Preference always start with organic.

reinvesting in the business the first thing ensuring a strong balance sheet is the next thing because we i mentioned a payment guarantee uh earlier that we have for every mastercard payment so that requires a healthy balance sheet um etc etc when it comes to uh buybacks so we're very opportunistic about that we're not in the business of buybacks we do that when it makes sense uh so um you know we had the ai trade uh dominating uh the market and we were a source of funds as a large, you know, high-cap company. And while we have a lot to do and invest a lot in AI, we're not the AI trade in AI infrastructure.

We're all about applied artificial intelligence. And so we were a source of funds. So the stock price was a little more volatile than I would have preferred, but it did exactly what you just described. It was at 470, now it's at 570. And we're getting closer in the right direction again, which is very good.

But we were opportunistic. We said, OK, you know, this is we believe in the continued growth of the company. We know exactly what we're doing. We have a clear strategy. We're driving operating leverage for the long, long term, etc. So we're going to do some buybacks. So that's our approach. You know, this is always a tool that is used for such times, but it's not one that we use beyond beyond that logic. New from Nespresso. Blend wellness into your coffee routine with the Coffee Plus range. Infused with functional benefits. Choose the coffee you love with added B vitamins.

Like Coffee Plus B12 to help support immune function. And Coffee Plus B6 to keep your day moving. Or go with the flow and choose Ginseng Delight. Our new double espresso with ginseng extract. Whatever lies ahead, don't change your morning. Let your morning change you. Discover Coffee Plus on Nespresso.com. as you might imagine i have more questions than this but respecting your time because we uh you

know 40 minutes was our target together i want to just ask one question about employment and i would say employment looks relatively strong wage wages look relatively strong but at the same time you have elon musk interviewed earlier this week saying we are five years away from ai exceeding the sum total of the human intelligence and virtually every job that i can see uh paraphrasing Musk is something that can be done as effectively and less expensively by artificial intelligence and breakthroughs in these technologies. So what are you simulating forward? How far are you trying to see forward as the CEO of a company that requires that you're thinking as far forward as you can? And what do you think about employment dislocations and wage deflation? Last little

portion of the question. I mean, what a time we live in that the largest technology companies with the highest levels of cash flows and the strongest balance sheets in human history are actually thinning their staff. We're seeing the workflows change and we're seeing employment levels change even at the most prosperous companies. So what is this indicating? What will it mean for consumer spending? How do you think about it within the context of MasterCard? Very important topic, Tom, and I'm glad you're raising it. So clearly when you think about artificial intelligence and what it could do. I think it's good to have a mindset that this is technology that needs to be explored if it deployed in the right way. It could drive a path

to prosperity and growth. So that's all generally the direction that I think and that we think as well. It has downsides. We talked about AI-driven risk, cyber risk in particular. So there's always with everything up and down, up and down side. So as technology is evolving, one thing we have to do, you know, because clearly in our, in certainly in our industry, but most other industries comes down to having the best talent,

we have to upskill our talent. So there's significant focus on, you know, making AI tools available and ensuring that we can upgrade the jobs in the company for people who leverage AI to do an even better job and do the things that machines cannot do. human-centered AI application is the focus that we're driving and saying, okay, use this tool to do a better job and don't do the redundant stuff. I've just created myself an AI assistant

for emails. So, you know, so I don't have to deal with that any longer. That's great. I still take a look at it, but it does take some of the kind of, you know, tasks away from that. So I think we need to be very thoughtful about that. Currently, when I see where our customers are on So the number of customers that want to talk to us about agentic commerce, stablecoins, all the topics that we think about, we use a lot of AI to prepare for those conversations because there's a lot of public data that's out there about those customers. There's a lot out there about the technologies available. We bring it together and we save ourselves a lot of time to have more engagement with our customers on the topics that actually matter. Artificial intelligence and cybersecurity, 180 billion transactions a year. how do we keep them safe, leveraging gen AI and threat intelligence data is all about technology.

And that was always about technology and MasterCard. So that's not about people, because we've always been a network company, actually with a very light, you know, if you think about our market cap, and we think we're only 40,000 people across 220 countries and territories. So yeah, our industry is not the one way you would start to think, you know, fundamentally rethinking that. You know, if you think about some of our services, who will win and who will have a challenge in the world of AI?

The companies that set themselves apart are the ones that can use all types of different models, but have proprietary data that they can feed the model with and then drive their business forward. We're one of the companies that have the most unique data sets, transactional data. So those are all things that I think give us longevity

and give us right to and license to play and we're going to push forward on that basis. And if you had the chance or will have the chance to listen to our earnings call today, the last thing I said

on our earnings call today is I thank our employees for driving all those numbers and that output for us and our customers. Last question. Running a company with a market cap

of $500 billion with as much change, this isn't, well, every business is going through so much change, but I would say having gotten to know leadership at Starbucks

Over the last 25 or 30 years, there's a lot of continuity of what they're doing every day. They know what product they're putting out. There's not as much as many different decisions to be made on acquisitions all the way through to the technologies you're choosing, your workforce, etc. What is your approach to personal health to sustaining yourself through and your leadership team? Because obviously the top 15 people at MasterCard are connected into the business 24-7, in some ways have to be. So what is your approach to unplugging, to sustaining this level of output? Obviously, we're very happy and hope you'll be CEO for the next 25 years. So how are you going to do that? Yeah, so I think it's a really important point. And the first is to recognize how important that point actually is. So across our leadership team, yes, it is 24-7. At the same time, it's not 24-7 for everybody all the time. So we're a global leadership team, and that's a good thing. So somebody's awake over in Singapore, and they can do their part.

And so we manage in a somewhat balanced fashion around that. Divide and conquer is very clear. this is a strong team and this is true for the broader population at MasterCard. I have to say, I personally value vacation. I think it's a really important thing. I was having a conversation with somebody that works directly in my team and I said, hey, what are you planning for the summer? And he said, yeah, I might take a few days off. And I said, you should consider maybe like taking two weeks off. So maybe this is growing up in Europe. I don't know what it is, but I find that is important um you know but then you have to find these other moments uh where you just can

uh just think about something uh different so i'm involved in a set of activities outside of the companies on the non-profit side i just find that's important takes my mind off it's a source of energy um and then of course uh you know uh you know being a good german a lot of walking and a lot of talking um so with my wife uh these are things like that and um i mentioned it to you at the outset before we started i do like motorcycling um and skiing those two activities that focus your mind completely and at the end of the day you're physically very tired and you don't think about anything else much on that day so different ways different uh kind of approaches for everybody um one thing i regret uh which is i don't read as much as i probably should i read

much more summaries and newsletters. And I have taken the last couple of kind of long weekends that came around to actually grab a book again. And I find that was a really good idea. So I'll try to do more of that. Same. I mean, that's a commitment. We'll hold each other accountable too. Michael, thank you so much for this time. We began investing in MasterCard more than maybe Maybe it was around 2013 with a stock below 50. We have more than, I think, 30. Had a good run. More than 30 investments, but more than 25 investments.

And yes, we've had a good run and we're very thankful. We loved the work of Ajay Banga, obviously. And I mean, we didn't even talk about your succession in the middle of COVID. That was fascinating. That's got to be a good chapter of at least one book that you write at some point. But I don't want to take any more of your time. Thank you so much, particularly on earnings day, for giving us time at The Motley Fool. We wish you the very best and everyone on your team

and have a great next vacation. Thanks, Tom. And thank you for having me on. As always, people on the program may have interests in the stocks they talk about, and The Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. All personal finance content follows Motley Fool editorial standards and is not approved by advertisers. Advertisements are sponsored content and provided for informational purposes only. To see our full advertising disclosure, please check out our show notes. For the Motley Fool Hidden Gems investing team, I'm producer Bart Shannon. Thanks for listening. See you next time.