Post #36: Messages from Mastercard - Heptagon Capital – Production

We were lucky enough to spend 6 hours with Mastercard yesterday at its biennial Investment Community Meeting, a relatively unique event with many employees of…

Post #36: Messages from Mastercard

We were lucky enough to spend 6 hours with Mastercard yesterday at its biennial Investment Community Meeting, a relatively unique event with many employees of the business present spanning everyone from the CEO through to product designers. Beyond being an opportunity for Mastercard to detail its strategy, the event provided a fascinating insight into the rapidly evolving world of payments. Our key take-aways follow:

1: “Any device can be a payment device.” These were the words of Ajay Banga, Chief Executive of Mastercard. It was evident from everyone with whom we spoke that the boundaries between physical and digital are becoming increasingly blurred. The job, therefore, for any business operating in the payment space is not to pick relative winners or losers but to design solutions to support transactions. Contactless payment is a great example: in the last 8 years, transactions in this form in the US have grown from 1% of the total made to 22%. With only 50% of all payments in the US currently transacted digitally, even in a relatively mature market such as this, the opportunity is still significant. Mastercard sizes the global addressable personal payments market at $50tr, currently growing at ~10% pa, driven both by GDP and secular shifts. Add in B2B payments and Government disbursements and the market could be over four times bigger. 

2: Cybersecurity matters: a rapidly changing world creates both opportunities and risks. Digital convergence and the Internet of Things means that many new payment mechanisms may have weak in-built security software. At the same time, the exponential growth in data (and its outputs - personalisation and customisation) raises questions over how such data is both collected and secured. Payment processors need to take a clear role in this area. Mastercard highlighted how its proprietary software had, for example, saved $10bn worth of attempted cyberattacks in the last 12 months and $55bn in the last 4 years.

3: Pushing back against economic nationalism: a pervasive theme across presentations was the growth in economic nationalism (think tariffs, but also the increasing sponsorship of ‘national champions’). Against this background, Mastercard highlighted the importance of partnering with governments across the world not only to deliver effectively services but in order both to promote inclusive growth and to allow for countries to advance their digital ecosystems. Making London’s transport system contactless has, for example, saved TfL (the government operator of the network) over £100m annually in terms of operating expenses. Beyond practical projects, lobbying also has a key role to play. Per Mastercard, “doing good is good for business; we thrive in thriving economies.” 

Disclaimers

The document is provided for information purposes only and does not constitute investment advice or any recommendation to buy, or sell or otherwise transact in any investments. The document is not intended to be construed as investment research. The contents of this document are based upon sources of information which Heptagon Capital believes to be reliable. However, except to the extent required by applicable law or regulations, no guarantee, warranty or representation (express or implied) is given as to the accuracy or completeness of this document or its contents and, Heptagon Capital, its affiliate companies and its members, officers, employees, agents and advisors do not accept any liability or responsibility in respect of the information or any views expressed herein. Opinions expressed whether in general or in both on the performance of individual investments and in a wider economic context represent the views of the contributor at the time of preparation. Where this document provides forward-looking statements which are based on relevant reports, current opinions, expectations and projections, actual results could differ materially from those anticipated in such statements. All opinions and estimates included in the document are subject to change without notice and Heptagon Capital is under no obligation to update or revise information contained in the document. Furthermore, Heptagon Capital disclaims any liability for any loss, damage, costs or expenses (including direct, indirect, special and consequential) howsoever arising which any person may suffer or incur as a result of viewing or utilising any information included in this document. 

The document is protected by copyright. The use of any trademarks and logos displayed in the document without Heptagon Capital's prior written consent is strictly prohibited. Information in the document must not be published or redistributed without Heptagon Capital's prior written consent. 

Heptagon Capital LLP, 63 Brook Street, Mayfair, London W1K 4HS
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