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.”
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