‘India’s policy environment is very conducive’: Outgoing Mastercard CEO Ajaypal Singh Banga
Ajaypal Singh Banga, 60, India-born chief executive officer (CEO) of finance giant Mastercard, speaks to HT’s Padma Rao Sundarji and Rajeev Jayaswal on India’s future and why he will don the role of executive chairman in nine months.
You steered MC from a $26.5 billion credit card company to a $301 billion finance giant in 10 years. Naturally, many are surprised by the announcement you will step down as CEO on January 1, 2021. But you told an interviewer that “it was time to do so.” Why?
When I joined Mastercard, I had said that if the board wants me to, I’ll stay for 10 years. It’s been a great decade. But those numbers you quoted came about because of my very good bunch of people here. That’s my job: to build teams and work culture. Now, I am very ready for Michael Miebach. Michael’s a ‘bhala manoos’, a good guy to take over as CEO. For the last two years, the board and I have looked outside and within the organisation for people who fit the characteristics of the next CEO.
Last Sunday, Michael was unanimously voted to that position. In a staged process, I’ll be helping him for the next nine odd months before moving on to my new role. The decision to step down was completely and unequivocally mine. The board wanted me to stay another five years. But this, for me, is the right thing to do.
Coming to Mastercard in India, in what state is your current market share? Is it growing, shrinking or stagnant? Why?
It is growing. We are Number 1 in terms of the number of cards issued in debit, we are growing in credit and we hope to become Number 1 in that sphere as well. India is a growth market in absolute terms. I know there are a lot of doomsday predictions, but look, I am an optimist and I believe that India is going through the same ups and down that the USA, China, all others do too.
Homegrown UPI-based payment systems such as Rupay and BHIM have grown phenomenally. Have they dented the market-shares of Visa and Mastercard?
UPI-based payments systems are mostly about P2P transactions, which we have not played. We are working on developing products to run on the platform. We are not a card company. Through our technology, we can facilitate any platform that wants to make or accept payments. We bought the Vocalink software company in the UK and we’re going to run it in Saudi Arabia, the Philippines and elsewhere.
Whether a card or bank account, the choice should be left to the consumer. We already work in partnership with several like Paypal. Applecard is a Mastercard tie-up. We are not in the consumer business but in the business of infrastructure payment. My job is not to force consumers to pay in the one or another but to give them a choice. If I can enable infrastructure to work safer, simpler, smarter, and I am a little different from my competitors, that is good. This approach puts one in charge.
Google is also planning to capture the lucrative Indian payment market in a big way. How will you remain competitive in the changed market reality in India?
Google works with us in many countries, so do Facebook and others. We would love to work with Google in India when they get going with their plans. As of now, they haven’t decided anything yet. That’s where my role as Mastercard can help. They need acceptance for merchant payments. I can help them with cyber-security, safety, providing cross-border connectivity, B2B payments, etc. So there’s a lot that MC can do. I am not in the front end business. When you pull out a card from your wallet—Amex, Visa, MC—I haven’t issued that card, your bank has. I am in the infrastructure and technology and data business and that’s where Mastercard can help.
How do you see the growth of India’s e-commerce market in the next five years? How will it help providers of payment solutions to grow concurrently?
E-commerce is slated to grow very rapidly in India, mainly because physical distribution is challenged by the length and breadth of the country. Secondly, urban consumers are happier to not spend their time on physical shopping. Just think back on the ‘kirana’ store. We have always had e-commerce, even in our childhood. Now, that ‘kirana’ guy will have a website and that has become e-commerce. They will interact with their customers who will make payments on a website now. India’s culture of not going to shop ourselves but preferring to have things picked up, or delivered, ie, “proxy shopping” has been around for half a century.
So, e-commerce is a natural extension of that and will grow rapidly. But how does that help us and the Google pays of the world? E-commerce means there is no way to pay in cash without cash on delivery (COD), that’s how e-commerce started. Not very different from the kirana storewallah who kept a ‘khata’ (running account) or picked up cash for each delivery. But there is a problem with COD—it’s hard to handle, it’s not cheap, and cash could be stolen or misplaced. So automatically, e-commerce tends to drive digital payments. Therefore and whether for frontend businesses like banks or us, indeed for all digital players, e-commerce will help us grow our business.
On the technology front, to what extent are fin-tech companies such as Mastercard using Blockchain?
Blockchain is interesting. We are among the top three patent-holders of blockchain in the world. And we have invested a lot in understanding the technology and figuring out possible use cases. We are launching things like ‘Proof of Provenance’, for instance. Is this shrimp really organic as the seller claims? Is that medicine genuine or counterfeit? Is this shirt really made of Egyptian cotton or not? So, blockchain can be really useful. What we are yet to figure out is the stage of consumer payments or how to pay for your coffee with blockchain. But we are heading there.
Is the policy environment in India is conducive for the growth of payment solutions such as debit card, credit card, Rupay and other modes of payment? What are the areas where there is room for improvement?
Oh absolutely. India’s policy environment is very conducive to digital payment growth. India is among the most thoughtful countries in that regard and has been so for several years. Encouraging digital payments, electronic transfers, even demonetisation was aimed at encouraging transparency, while the General Sales Tax (GST) was aimed at digitisation. Look, whenever there are new moves, there are challenges.
But I am certain that in five years, the last five to ten years will prove themselves to have been an inflection point. I am very positive about this. Look even in the United States, we need to do things better. So in India, I would say the general direction is correct.
One of the key sticking points between the US and India is digital nationalism. This includes data localisation and also the push for Rupay at the cost of players like Visa and Mastercard. What’s the way out of that deadlock?
The Indian government has given us a pretty level playing field in most cases. We are growing our revenue. We are earning our growth through the quality of our product, our service etc.
India wants to have a domestically owned payment network to grow and compete with global networks. But so do France, Canada, Mexico, Australia, China and many others so I’m not fussed about that. As far as data localisation is concerned, we are one of the few players who met the commitment we made to the Reserve Bank of India (RBI) that by October 31, 2019, our data would be localised as per their guidelines.
My issue lies elsewhere. It is that India is losing the chance to use the best global Artificial Intelligence (AI) and fraud prediction tools for its market. Let’s say, there’s an overseas cyberthief who figures out a way to commit some kind of banking consumer fraud. We get to see it. We use that knowledge for our algorithms so that if, tomorrow, the same thief or another similar one tries that fraud in India, we would recognise and preempt it very early.
Over the past few years, we have been able to help Indian companies fight fraud in this way. But when you localise too much, you lose the chance of making these algorithms work for you, be applied to Indian data. Which means that you are assuming the thief is local, whereas, in today’s world, he could be from anywhere. Data privacy and security are very important. But cutting yourself off from global experience has repercussions. And this applies to and should be a conversation involving, the citizen too. Data should be private for a citizen, whether it is an Indian company or a global one.
What are your views on current Indian policies, regarding foreign investors?
I am no longer the chair of the USIBC but am a member of the US-India strategic partnership forum. Over the last 15-20 years, India has been attempting to open up to investment. It should continue to do so and reduce barriers. It should encourage the flow of foreign money not just as an institutional investment but also as FDI in every area from tourism to manufacturing, to construction.
In short, in all areas that India wants to grow and in which India wants to create jobs, enhance the quality of life, etc. India is doing that already. But every such journey bears road bumps. Political pressures, lobbying pulling in different directions, those are all part of life. I would say, India should stay focused on the North Star. Yes, certainly India can do it faster, can do it differently, but that’s easy to say when one doesn’t live there. The fact is, India is making progress.
Mastercard just cut its financial outlook for the first quarter, citing the impact of the coronavirus on cross-border travel and commerce. You now expect your growth to be 2-3 percentage points lower than initially expects. But MC is also entering China as the majority holder in a joint venture (JV). You said in a TV interview, that you expect your entry to take place in about 1-1/2 years. Is that time-frame also likely to be affected by the current situation revolving around the coronavirus?
Not really. I think China is trying to get its arm around the virus, new cases are coming down. I can’t say how long it will take, we have to monitor the situation. But I am not connecting the time-frame of the implementation of our JV with the coronavirus.
You are a much-admired figure in the finance and banking sector. One of your key ideas was the so-called Decency Quotient (DC), which you introduced successfully to Mastercard operations, both external and internal. Could you please outline DQ? And any further advice you can give to upcoming CEOs?
The idea came to me a long time ago when I was young and outspoken. I thought, just like one had the IQ, intelligence quotient, and EQ or the emotional quotient for how to survive good and bad days, we should have a DQ - a decency quotient. Do you bring your heart and mind to work every day? Do you make your peers and others feel that by you being there, the company is a better place for them? Do you feel that your hand is on their back, and not on their shoulder holding them back?
Look, DQ is what you would want me to be to you. You would want me to joke with you, chat with you, have discussions, but at the end of the day, care deeply about you and give you respect, show I care for you. As for advice to upcoming CEOS? I’d say this: don’t over-plan your career. Have a little bit of fun along the way. Be yourself and - it will all happen. Be yourself. Lead with the heart and mind.
Can you describe your new role as executive chairman?
A. I will want to focus outside the company with clients, regulators, NGOs, the World Bank, all we interface with on behalf of the management. I also want to focus on the interaction between the board and the management.
Will it give you a little more time for the many charities and other philanthropic work you are connected with?
I hope so. I’ve done my best for the past 10 years to merge our work merge with philanthropy. The latter doesn’t solve problems. One needs commercially sustainable solutions. We now have this Priceless Planet Coalition. We plan to plant 100 million trees along with our partners and we shall do it.
We’ve been bandying about with new words like inclusive capitalism, stakeholder capitalism, etc. Capitalism is a good thing but any system hijacked by people for their own benefit is not.