Although your author studied liberal arts at university, he has always been fascinated about how things work. Part of the privilege attached to writing about and investing in the future is to have this wish often satisfied. Beyond getting to visit the largest solar manufacturing complex in the western hemisphere on his recent US trip, there was also the opportunity to tour the experience centres of two other businesses. Such venues provide a wonderful additional insight into how they operate.

First up was a trip to Raleigh, North Carolina. This was a new US state for your author (the 24th he has visited) and home to Xylem’s customer experience centre. Xylem, for the unaware, is a leading player within the space of water technology hardware and software solutions. Growing water demands and ageing existing infrastructure create a long tail of demand for Xylem’s services, in our view.

The centre in Raleigh conducts around 300 demonstrations annually to a range of stakeholders (customers, regulators, investors etc). The key message from our visit was how to leverage the information embedded in water networks better. If done appropriately, then much of the process attached to reading meters, performing predictive maintenance and even controlling devices remotely can be automated. On the hardware side, it was an eye-opening experience just to see the number of tests Xylem’s pumps go through before being released to the market. They evidently need to be robust. Part of the process therefore involves simulating the kit enduring, for example, 150-degree temperature changes in less than a minute, or being dropped repeatedly.

Mastercard’s New York Experience Centre looked markedly different to when your author had last visited, just before the pandemic. The business has now moved to larger premises, on 5th Avenue close to Madison Square. It’s an impressive building and just one in the company’s suite of such centres around the world. We were told that Mastercard hosts around 5,000 stakeholder visits a year at its centres globally.

The two key takeaways from spending time with Mastercard were: how can the business reduce friction for customers and how can it add more value. At heart is a relentless focus on innovation and an ongoing expansion into services beyond payment processing. Each new proposition goes through a five-stage process from framing (assessing the addressable market) to market testing prior to release. On our trip, we got to see demonstrations relating to innovations in cybersecurity solutions and real-time fraud intelligence. However, what impressed most was seeing how Mastercard was contemplating the use of biometrics. Imagine, for example, being able to upload a secure personal avatar to a retailer’s website to see how any item of clothing may actually fit you. If successful, it could result in more completed transactions and fewer returns. Watch this space.

28 September 2023

The above does not constitute investment advice and is the sole opinion of the author at the time of publication. Heptagon Capital is an investor in Mastercard and Xylem The author of this piece has no personal direct investment in either business. Past performance is no guide to future performance and the value of investments and income from them can fall as well as rise.

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Alex Gunz, Fund Manager

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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 LLP 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 LLP, 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 LLP is under no obligation to update or revise information contained in the document. Furthermore, Heptagon Capital LLP 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. 

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