[MUSIC PLAYING] (SINGING) When you walk in the room, do you have sway?
You might think Mastercard is a credit card company. Don’t tell that to C.E.O. Ajay Banga.
I actually wouldn’t know how to get to a credit card if you asked me to get you on. Because I don’t issue any, right? I got to go to a bank and then say, hey, would you please give my friend Kara Swisher a credit card?
Banga’s company works with card issuers and with acquirers who sign up shops or merchants. Basically, he’s a middleman, but a very powerful one. Mastercard has more than 3 billion cardholders around the world, and last year, $6.5 trillion passed through its pipes. That gives Banga a lot of leverage. If Mastercard turns off payment processing, companies fall in line. Just look what happened to Pornhub. After recent reporting on child pornography on that site, done by my colleague, Nick Kristof, card companies threatened to pull the plug on subscription payments, and Pornhub changed its policies. Banga has been C.E.O. of Mastercard for a decade. In January, he’ll step down in transition to the role of executive chairman. So I wanted the exit interview, to understand how he’s using his power, and what trillions of dollars in transactions tell him about the economic shitshow we’re in right now. [MUSIC PLAYING]
Let’s talk about the current economy. You run a corporation that switched 87 billion transactions last year. But then came 2020, and you’re flooded with consumer data right now. So how has the pandemic changed spending?
So can I dial back for a second and walk you through phases of this?
Sure, as long as they’re not talking points, Ajay, but go ahead.
So we defined that we’d probably operate the company through four stages when this pandemic broke. Very early, we said, there’ll be a containment phase, which is think of everything shutting down, kind of what happened in March and April. The world came to a stop. And then there’s the stabilization phase, which was the next couple of months. And really, stabilization was a polite word for the bottom of the pit. Basically, everybody was buying toilet paper and medicines, and fighting about Lysol and stuff like that. And then you come out of that into what we called the normalization phase — again, normalization in quotes — meaning it’s not really normal. It’s a new normal. You’re not really going to sporting events and going out to eat dinner. It’s just different from stabilization. Everything else is kind of happening, but the social angle is not there. We’re all talking on Zoom, and we’re not going to work, and we’re working from home — or as I call it — really not work from home, you’re living at work. And then the real fourth phase is growth, which I think is back to pre-Covid time periods, which requires, to my mind, a free and equitable and wide distribution of vaccines before consumer confidence, business confidence, comes back to that kind of level. So our spending patterns have changed over this period. So for example, in New York City, small businesses who had been doing regular transactions with us electronically — for the better part of March and April, around half of them had no transactions. Because basically, they were only physical, and didn’t know how to go digital. Now if you fast forward to now, it’s about 25% of them that seem to not be having any electronic transactions. The others seem to have reopened, have some physical transactions, and have figured out how to go digital in some modest ways. What we’ve seen around the world is that consumer spending is actually growing over the prior year domestically.
On what? What has it changed?
On everything from home improvement — because everybody is at home, and suddenly notices the paint on the table and the chairs. And they’ve been buying new computers and office things, and things that have enabled their life to work, as well as noticing things are done differently. They’ve been buying far more groceries, much more cooking at home, that kind of stuff. And then the last couple of months, restaurants have begun to pick up again, as even in the United States, indoor dining and outdoor dining picked up. But if you go to Asia, where indoor dining is still open in China, and in Japan and the like, there you see a slightly different pattern. It’s all based on what stage the pandemic that marketplace feels like it’s had.
Right. What do you see not coming back? I mean, I’m trying to think of things I don’t buy. I do a lot of delivery. I’m sure, if you looked at my spending patterns, it’d be delivery and hardware items, I guess.
So I walk you through two or three things. I mean, e-commerce doubled as a contribution to retail sales in the United States, from 8% or 9% pre-Covid to about 20-something at the peak. And it’s now somewhere in between those two. So the moment physical opened up, people kind of reverted back a little bit to their prior life. But they’ve also figured out the convenience. 7 out of 10 people are using e-commerce now. And 8 out of 10 people are doing contactless commerce, which is very different from pre-Covid.
So this is an acceleration of trends that were already happening?
Do you think they’ll go back, or is this here to stay?
So I think part of it has gone back. That’s what I’ve seen even in China, and even in the Asian markets that seem to be dealing with this crisis a little better than what we have been going through.
It’s a low bar. It’s a low bar, Ajay.
The other part of your question — well, what else we’re not doing, which is very important- – is travel. So travel is an interesting thing. Domestic travel seems to have come back a little bit, in the U.S as well, or even in Europe. So look at the TSA. They seem to be clearing a million passengers. They were, back in April, down to less than 100,000. Now pre-Covid, that number used to be 3 million. So where are we? We’re somewhere in the middle. Overseas travel is down to a much lower level. So travel cross-border— and therefore cross-border of that type that you’re used to seeing — is way lower. But travel domestically is on. I mean, rural is the new urban. People are going to hotels in places that aren’t in the big population centers.
Sure, but do you see any overwhelming trends? Are retail stores dead, movie theaters, and things like that? I mean, when you talk about acceleration of trends that were already happening.
Not really, I’ll tell you why. It is true that physical retail commerce had taken a big beating. But then if you look back over the last three months when things began to reopen, I saw that coming back up. It’s not back to where it used to be. But they took some share back from e-commerce. Clearly, you and I as human beings prefer to also go and touch and feel and buy, not just buy online.
Well, not me. Not me, Ajay.
(LAUGHING) Not you? But I do. I do a lot of stuff online. I always was, even pre-Covid. But I find that once things re-opened, I did go back. And you’re careful, but you did go back. I haven’t gone back to what I used to be, but I have gone back.
How long do you think it will take for consumer and business confidence to recover?
Consumer confidence? If you measure it with all the public indices, they seem to be back up to a pretty good level. But I think what that doesn’t measure is their confidence in traveling, and their confidence and being out and about socially, the way you and I used to do pre-Covid. That’s not what they’re measuring. They’re measuring something else called consumer confidence in its totality — confidence about their job — confidence about their pay, maybe. That kind of stuff seems to be doing OK. What’s not really back there is cross-border travel, or travel out there in social and entertainment settings — a soccer game, a football game, a theater. That’s not happening right now. My general belief on travel is that consumer travel will come back first to a higher degree. Because everybody’s been pent up for so long, that as they begin to feel the confidence of the vaccine, they’re going to be out there traveling. Business confidence will be the next phase to come back. A lot of people are saying people have figured out how to do stuff on Zoom, they won’t go back to physical travel. I’m not quite there.
But you think people will stay in offices?
Yeah, I think you’ll find human beings are human beings. They like the innovation, the interaction, the creativity, the social networking, the culture you build in an organization. Kara, these are not that easy to do digitally. And so I think you’ll find a reversal to the mean. Whether it goes all the way back to what it was pre-Covid or comes somewhere in between — I don’t know. Your guess is as good as mine.
Although I have to say — talking to a lot of business leaders, that’s kind of an outlier. They all kind of like this idea of not having to serve headquarters, or do the —
Yeah, leaders have big houses, and live in big homes, and it’s a little easier for them to do this. You’ve got to just think about all the people who work for you. They’re in an apartment with their mother-in-law, dog, and two children. And they’re all trying to work on Wi-Fi and Zoom at the same time. It’s hard. So I think you’ve got to just think about the people, and what they’re looking to do. Whether they want more flexibility— no question. 100%. So if companies weren’t giving them adequate flexibility on working hours, on being able to cater to their own personal circumstances, I think that’s changed forever. But is it that they want to work from home all day long every day of the week? I don’t think so. I think something else will evolve, is what I’m saying.
Now you’ve been going to the office physically?
Every day. Why is that?
Well for, two or three reasons. One, was I was in the midst of a C.E.O. transition to Michael. And it’s kind of hard to do a transition when you don’t see each other. And so we kind of built our own little bubble. And he and were, at one point in time, the two guys in this office for a while. The second part clearly was the ability to, honestly, get out of the house. The kids had come over and were living with us, so we had six adults in the house. I’m lucky. I’m blessed to have a reasonably large home. But at the end of the day, everybody needs a little space. And I was the one who could go out, and so I did. And I think the third thing was very clearly to be able to eventually say, how will we reopen offices? So when we began to shut offices, it’s not as though we had scientific evidence of how to shut and when to shut. It’s when governments came out and finally shut us down — that’s different. That’s legal. But otherwise, if you shut down because you think it’s not safe to go to work — you individually — how do you reopen? How are you going to decide? So my view has been — I’ve been coming to work. I’ve tried to make sure that our office is redesigned for all the right aspects of social distancing, from changing the air filters across the offices, to temperature screening, to P.P.E., to changing the occupancy of each conference room, and elevator, and pathways in the office, and the cafeteria, and how people are seated in A-team and B-team. We’ve done all the things that every other company is trying to do to make the office space safe and secure. And then I think at the end of the day, some people have opted to come back. And we’ve got about 15-20% attendance back. I think you’re going to get far more people back in the office than is currently being spoken of. Because I think people are speaking to today’s circumstance. You need to fast forward, six, eight, 10 months, with the vaccine out there, and I think we’d be in a very different place.
So speaking of being in a very different place, back in November, you joined Hillary Clinton and industry leaders in calling on Congress for more stimulus relief. What’s your outlook for the economy if that fresh stimulus doesn’t arrive?
Well, my view is that the fiscal stimulus — not monetary — we need fiscal. We’ve got enough liquidity. It’s really fiscal stimulus. It’s the people out of work. It’s the closed restaurants. It’s the folks who got impacted the most, minorities and women, and the likes of the industries which were more people-intensive and touch-intensive. I think there’s a lot going on there. And if we don’t get to both small businesses and the people who are impacted the ability to tide over the next six months till the vaccines are properly available and equitably distributed, then I think, shame on us if we can’t get that organized.
All right, so before this pandemic happened, you had been setting up for the longer game. And so your stock is up a lot, 1,500%, something like that.
You’ve tripled the revenues. And you’ve processed $6.5 trillion last year. But the digital payments startup Stripe says it processes hundreds of billions of a year in transactions. Square says it processed $106 billion last year in transactions. Talk a little bit about these companies, and how you look at them. And I know in some cases, they are partners with Mastercard. I get that. But it reminds me a little bit of what streaming companies or Netflix has done to Hollywood. They have come in an area that is your business, and moved forward really quickly. And right now, I think Stripe is at a $70 billion valuation, possibly $100 billion valuation. Talk a little bit about this, and if you’ve missed something, like a lot of big companies.
So my general view is that we weren’t actually in the same business that a lot of these were. For example, Square, run by Jack— Jack’s a very good partner and friend of our company.
Yeah. And if you think through what he did — he basically allowed acceptance of electronic payments to reach far more merchants than the ecosystem had allowed to operate prior to the arrival of people like Square, like iZettle. But Square— I would say they were the harbinger of that move. And so what they did was they enabled simple, easy sign on for merchants to become eligible for physical payments done electronically. Well, guess what? Those are still our rails. We are not in the acceptance business. Mastercard has never been in the business of actually going to sign up merchants to accept our payment. That’s done by acquirers. So if you understand the payment ecosystem, we play a role in it. And our role never was to encompass everything from the issuing of a payment instrument, all the way to the actual management of the transaction at a merchant. We don’t do that. There are other players that do that.
I get that, but you could have done it. One of the people that —
Well, not really. I don’t know that. I think you would never have got to the scale that the ecosystem has got to of 70-80 million merchants now accepting electronic payments if companies like us and others like us had tried to manage the entire ecosystem from soup to nuts on our own. The power of this ecosystem actually is in the form in which different players have come to play in it. And we are at the center of it, because we enable all the pipes to work. But we enable them to work in a way that value transfer and safety and security and simplicity of the payment is guaranteed. And that’s our role.
All right, but I don’t quite look at you as a cog in the system. So Stripe will be the largest enabler of payments in the world, with the largest I.P.O., probably, coming up. Someone wrote me — and I want you to respond to this — Mastercard missed Stripe like Microsoft missed Google. How would you respond to that?
Yeah, I mean, I think Microsoft and Google both have pretty good market valuations.
Sure do, sure do, but —
And just so, I think that question actually is not correct. It misses the point. And I think the point I’m trying to make here is if you want to be all things to everybody — sure, we’ve all missed everything. I also missed the chance to be in broadcasting. But that’s not what the point is. We are who we are because we’re good at what we do. And we are truly the enablers of those rails to connect. One big change in our company over this period of time is that we don’t just do guardrails, but we do do instant payment account-to-account rails. And we’re also enabling blockchain-based rails on central bank digital currencies, fiats. So we call that the ABC, the account-to-account, the blockchain, and the guardrail of what we are trying to do. That makes us a little different from some of our direct competitors, but it remains the principle. We are the one-stop shop. You want to be a Stripe, and you want to enable more merchants and more people to enter? Go ahead and do it. But you still can work with us, because we’ll enable all that work to happen for you. It’s the same.
Stripe has a valuation which is almost a third of your current market cap. Is it worth that much?
I don’t try and understand market valuations. If I did, I wouldn’t be able to predict so many of these. I learned that long back. That’s what investors do. They put their money where they’re thinking they’re going. That’s all right, I am fine with that.
So now Visa’s been very aggressive. It made a big investment in Stripe in 2015. You did not.
Actually, we’re also invested in Stripe. We just invested at a different time. Both of us have invested at different points of time in players who have been in contiguous but away from us spaces, more as a way of connecting with them, and connecting with what innovations they’re doing. Because then we, as a company, can get that innovative spirit into ourselves. I mean, we have a whole group of people in our company who have spent the last 10-11 years investing in everything from startups— literally, what we call Mastercard Start Path. So banks, fintechs, and merchants invest with us there, all the way to larger investments through venture capital firms. And the idea is we don’t know how to access all those guys, but they do. And by investing with these startups, we learn how people are thinking, and that enables us to adapt our products, our capabilities, and our thinking to where the puck is going, as compared to where it is.
What are you looking for when you’re doing those investments? What are you thinking about?
Awareness and knowledge and learning, and the ability to inject that outside-in thinking into our company’s culture, so we can be more innovative, but innovative for those who are actually designing new-consumer facing applications at the other end.
All right, so let’s talk crypto. In 2017, you called cryptocurrency junk. Now you’re getting into the cryptocurrency game.
No, no, no, that was very clear. I called Bitcoin junk.
Bitcoin junk. OK, OK, sorry. The quote that you said was, “I think cryptocurrency is junk” in 2018, but you were referring to Bitcoin.
All right, I want to know why you think that. You signed a deal with cryptocurrency payments platform Wirex to let the company directly issue crypto-backed cards on the Mastercard network. So talk about your evolution of thinking, and whether you think Bitcoin is still junk.
Yeah, so the question that I was asked at that time — which is what the answer was to — was are these currencies? And I said, that’s junk, they’re not currencies. What they are is they are asset classes. I mean, at the of the day, a currency needs to be stable and somewhat predictable, at least over the course of a few seconds and a few minutes, as compared to what we saw and do see in most cryptocurrencies, unless they’re a stable coin, which tries to solve some of the stability, and then it needs to fit with regulatory standards in each country — know your customer, anti-money laundering — which Bitcoin does not find easy to achieve. And it has to be fast and easy to settle, which if you go through a typical cryptocurrency transaction, it’s actually very, very energy-intensive, and it’s quite delayed in its settlement. Although I believe that can get solved over time. And so it needs all these things to work well. And then finally, it needs to protect the consumer and their data and their privacy. So if currencies do all that, where that fits well is central bank digital currencies, fiat currencies. So if tomorrow, governments go into digital currencies, which a number of them are talking to us on — in fact, we are one of the largest patent holders in the world on central bank digital currency.
Yeah, by the way, if they could come up with a new name — CBDC sounds like marijuana. But go ahead, go ahead. [LAUGHTER]
So what do you think about Bitcoin now? Would you still call it junk?
Same problem, it’s got — no, I told you, it’s a great asset. If you want to invest in pork bellies, go ahead. You want to invest in shares, go ahead. If you’re a smart investor, go ahead. But don’t call shares currency. Currency is something you transact to buy a drink just now, and toilet paper the minute later. If that drink costs you $3 today, and then the value goes up to $2,900 the next day, that’s not a viable method of exchange.
Right. But do you personally own Bitcoin? I’m just curious.
I owned 10 once. When I was in the original early Bitcoin, I bought them for —
Yeah, so you got in good timing.
I bought them for like $20 or whatever at the early-early, and then I lost them.
You lost them?
I lost them.
Oh, because you put them on some exchange, and they got hacked into?
No, in the early days, you put them on a drive. You put all the information — and I lost the drive.
So there we have — I was just doing a story. This was a long time ago.
Well, that’s an expensive drive that you lost.
Oh well, too bad. [MUSIC PLAYING]
We’ll be back in a minute. If you like this interview and want to hear others, hit subscribe. You’ll be able to catch up on “Sway” episodes you may have missed, like my conversation with economist, Raj Chetty. And you’ll get new ones delivered directly to you. More with Ajay Banga after this break. [MUSIC PLAYING]
Outside of tech, you’re facing the challenge of a shifting consumer base. Like millennials are afraid of credit card debt. They want money back. Cash back is a big shift, rather than points and other things. So how do you think about this younger generation of consumers?
Oh, I think that their own desires are also what they are. We’ve got to cater to them. And at the end of the day, if that’s what they want, that’s why we’re all in existence. You can kind of say, hey, I don’t like what they want kind of thing. So long as it’s legal and ethical, you should be doing it. So we’re all doing that. We’re participating — remember, for us — I don’t really have a difference in my head about whether you pay with a credit card, or you pay with a debit card, or you pay with a prepaid card, or you pay bank account to bank account, or you pay on a phone, or you pay by bopping your forehead with mine. I don’t really care whether they’re into credit card or otherwise. Somebody else makes money in different ways from how you choose the instrument of payment. I make money on the payment transaction, and the information that flows from it that’s anonymized. And that’s what I care about. I don’t care about the methodology of the source of funding of that transaction.
But the idea of credit card debt — do you think it’s been undermined by these companies?
Not all debt is bad. Debt taken the right way, debt taken with knowledge, debt taken to manage what you think you can handle — that’s your choice as a consumer. But if you take it in a way you don’t understand what you’re signing up for, and you can’t afford to pay it back, that’s a pretty bad idea.
They certainly want cash back. That trend is very — cash back versus points.
Talking about cash back versus points — we’ve launched something called the Priceless Planet Coalition, where we’re trying to plant 100 million trees with our partners over the next few years by incenting consumers to change their spending behavior to be more ecologically friendly, for example, take the tube, don’t take a cab. I will give you an app that will tell you how many trees we’ll plant. And I will try and get you to collect trees rather than even cash back or points. So I think consumers will change over time, depending on what motivates them.
But as you were noting, millennials and Gen Z are also increasingly socially conscious, which could put pressure on you to take a stronger moral stance, something you’ve been asked to do recently when the Pornhub controversy — as you know, my colleague, Nick Kristof, recently reported the scale of child pornography on Pornhub, along with other terrible things. After that, MasterCard and Visa cut off the use of services on the website. Can you talk me through how you made that decision?
Sure. So what basically happens is that if you — look, if everybody came to me and said that you can’t accept things on that merchant, and you can’t do things there, then there’s a slippery slope that just says who makes the most noise? So is alcohol bad? This topic has been about guns in the past. Are birth control pills bad? So there is the concern of the legal standard as well, which needs to be applied. When Nick wrote that article, we went back and we looked. We found actually instances where clearly, the legal standard of what should be allowed on Pornhub had been crossed. So we went back to Pornhub and said, sorry, only you’ve crossed the legal standard. And that’s how we pulled away from allowing our payment instrument to be accepted there.
So why did it take so long? PayPal terminated services on Pornhub in 2019.
Well, if they found legal stuff earlier, great, then we should all see it, and we could do it. We couldn’t find it— illegal content earlier. It’s got to be illegal content. This is not a moral stand. If I do, I’m telling you, it’s a very slippery slope on all of these. It’s like, for example, I’ve had people ask me, why couldn’t Mastercard cut off merchants who sell guns? That’s really interesting, because Walmart sells ammunition, guns, and diapers, and I don’t know what you bought. So I don’t know how to cut it off. And trying to make that point has been one of the most interesting things, because people go right past that.
What about direct — like in Pornhub, you have a very easy situation.
No, porn’s not illegal. It is certain kinds of porn that are illegal. So child porn is, and that’s what we saw. That’s why we pulled out.
So you banned the use of the card for premium memberships on Pornhub, but you didn’t ban the use the card for buying ad sales. Why draw the line at subscription payments only?
Now you’re back to — again, at the end of the day, I have to follow a legal standard. I’m not trying to follow a moral standard. If I did, I personally abhor all kinds of things to do with gun sales as well. I don’t own a gun. I also abhor things to do with porn. But you know what? That’s not what this is about. There are laws in a country, and we’re trying to work within the laws. Take, for example, cannabis. You were talking about that in a joke with CBDC just now. Well, so different states legalize the sale of marijuana. But we can’t allow our cards to be used to buy them, because the federal government hasn’t legalized it. And so we followed that standard, and that’s what we’ve been doing all this while. It’s got nothing to do with my personal beliefs or otherwise.
Do you feel, though, that you could use your leverage to push Pornhub to do more? So many companies are being pulled into these issues, whether it’s Facebook, whether it’s any of these companies.
We have used our position on social causes extensively, which I do think you would acknowledge, whether it be financial inclusion, or small businesses, or in solidarity for African-Americans. And so yes, absolutely, we believe that corporations should have that kind of attitude. But you’ve got to be within the law.
The law is the way you look at it?
Well, American Express has a longstanding global policy that does not allow cards to be used to buy adult digital content at all. Would you consider a similar policy, or do you feel like legal usage is the way—
I just feel that I don’t know how to choose one over the other, Kara. I just don’t want to be the one who is making decisions that overrule anything else that’s the legal standard of that country. And you’ve got to be very careful on this. Now that’s not the only standard, obviously. Ethics matter, and there are lines that get crossed when something happens. For example, we’ve also gone back and told Pornhub that uploading by users is not something that we feel comfortable with. And if you notice, they are now addressing that.
They just cut them. They just cut all of them, right.
Yeah, so therefore — listen, there’s no right or wrong answer in this. There’s no black or white in this. There is a way of trying to find your way through it. And all we are trying to do is to find our way through it with using some form of standards that we can live up to, guide rails that we can live up to and not be seen as arbitrating. Because that’s not the role.
Do you see more corporations getting involved in these social issues much more strongly? How do you think about that as a leader? Because you do have the power to do that.
Look, I said this the other day to somebody, that I’m an old-fashioned believer in capitalism. But I believe that capitalism with the right guide rails is what we’re referring to here. And if you take the guide rails off, and if you just let people do whatever they want, you can get unintended consequences. And I think that’s happened. You could see inequality has widened. You can see a bunch of things that haven’t worked out the way they should have. So what we’re really talking about here is capitalism with guide rails. And I think the guide rails start with your employees. If you don’t start with your own employees, how can you talk about stakeholder capitalism? So my employees are a mix of— you were talking millennials— I’ve got 57% of my employees are now millennials. It is 7% 11 years ago. Well, they care about society in a completely different way. And so we have open discussions about that in the company. I’ll give you an example of things we’ve done. In our company, if you put 6% into your 401k, we give you a 10% match, which means you save 16% a year. And by the way, 97-98% of my employees take advantage of this. If you save 16% a year, and you join my company at the age of 25 on an income of $50,000, and you retire at the age of 55 at an income of $250,000, you would have a decent nest egg to retire with. That is putting your money where your mouth is for your employees.
So talk about that in the broader sense —
No, hold on, hold on, hold on. You’re going to hear me through now.
OK, all right, OK.
Because this is a topic I care about. You keep talking about Pornhub and guns, but let me tell you, this is where the rubber hits the road. Do you really care?
Yeah. OK, all right.
And so second topic — 16 weeks of parental leave, whether you’re a mother or a father, birth parent or adoptive parent. 16 weeks paid. No pro-rata on your bonus. We have that. Stock ownership — 3/4 of my company owns stock in our company. So yes, I personally have benefited from the performance of our stock over the last 11 years. So have very large swaths of my company. So I think you start with your employees. You treat them with that decency. You give them your hand on their back. And then you go and worry about society and community. And that’s why we made that commitment to reach 500 million people for financial inclusion by 2020, which we did. We’ve now upped that commitment to 1 billion in the midst of this crisis with Covid, and said we will reach 25 million women entrepreneurs and 50 million micro SMEs.
All right, I’m going to make the link for you between things like Pornhub. It’s the idea of corporations taking roles government has before — whether it’s helping people with stock ownership, or bettering people, or giving people benefits — corporations acting.
With one difference. This is not legal doubts. These are things I can choose to do.
Because it’s an open space, where I’m leading with my heart and my mind, not trying to figure out where the law is drawn. There’s a very big difference there, which deserves to be recognized. And that’s all I’m saying.
Let’s get into financial inclusion, because it’s been a passion point for you. Do you have experience of being financially excluded? You’ve had a very successful career.
I didn’t grow up like this. I grew up in an army officer’s family in India with a very average background. And my dad grew, and became a three star general, and he prospered. If you knew the Indian Army’s pay scales at that time — and he had three kids going through college — he used to walk to work as a three star general and similar. And he used to re-sole his shoes, because he couldn’t afford to buy new shoes. That’s the family I grew up in. So I have not been financially excluded — don’t get me wrong — but I understand. If you grew up in India, and if you grew up with a family that’s that type, you cannot miss that life isn’t easy for a lot of people.
Sure, and a lot of them are unbanked — this idea of the unbanked — it’s usually talked internationally — but about 7 million US households were also unbanked last year, a little more than 5%, which was higher than I realized.
Well, actually, it’s more if you talk about underbanked.
But it’s a global issue —
— this idea of who’s being left out. So who is being left out, and what is the reason companies should be focusing on this?
Well, first of all, it’s in your own self-interest. Because I think you try and apply solutions to big problems in the world— if I may step back for a second — I look at the problems of the world through three sides of a triangle. The first side is one versus many. That’s the inclusion/exclusion. It could be gender, sexual orientation, ethnicity, grew up on the wrong side of the track, whatever. The other side of the triangle is humanity versus nature, all our issues with climate, ecology, water, air, all that. And the unfortunate part is that those two sides stay aloft because the bottom keeps them aloft. And that is the trade-off between short term and long term. Politicians, C.E.O.s who look at things shorter term than long term — if you think about it, these are long term problems being attacked with shorter term solutions. None of these are going to be solved by philanthropy alone. You’ve got to apply commercially sustainable solutions. And so that means we’ve got to apply a business model. The private sectors in generating capital technology has got to come to play here. Because there isn’t enough money in philanthropy and government to solve for 2 billion people being relatively excluded from the financial mainstream.
So what does that mean?
Well, you’ve got to come with commercial solutions. So what we did was we said we have a network of banks, merchants, and partners, and we have technology that connects them. So can we go and find a way to connect these billions of people? And we made a commitment to find a way to 500 million. So we found the biggest generator of cash in an economy was the government paying its own citizens — pensions, social benefits, health care benefits, distribution of rations and food when they were in trouble, that kind of stuff. And that lends itself to misuse by agents and corruption and leakage, and all those fancy words that people use. Leakage is a fancy word for theft, right? So that kind of is what was going on. And so we tried to get into that, and discovered the problem is that most of these 2 billion people don’t have an identity. And if you don’t have an identity, you can’t open an account for them. When you say, you could solve that by using a phone, because they can then transfer money from one to the other — yes, but the moment you need to do anything more serious than that, you need to have an account. And no bank in any country of any type, whether you want to open a fancy account or an account in the cloud, can open an account for you without an identity. So what are the challenges of that? So we in South Africa began to work with the South African government that wanted to issue biometric identities to its citizenry, which they did. And we put all that on a chip, and on the other side of the card put a payment card that enabled the South African Social Security Agency to start giving benefits on that card. And all of a sudden, people who were getting benefits and cash, and were at the mercy of in-between agents, now started getting it directly on the card. They could use it to go to an ATM and take out cash, or they could use it to buy their rice and their vegetables wherever they wanted. That idea spread from South Africa to saying, we’ll find 500 million people like this. We’re doing this in tens of countries around the world in 1,500 different programs. And that’s spread.
These are physical cards, rather than the mobile? Because mobile was sort of touted —
No, it could be — I don’t care about the physical card. It could be on a mobile phone. It could be on your fingerprint. I don’t care about form factors. That’s not what I’m into. Just because I have card in my name doesn’t make me a card company. Apple doesn’t sell apples. Whether it’s a card, whether it’s a phone, I don’t care. I just want to make it easier for you to do both the inward flow and the outward flow. And then I want to use that transaction flow to enable banks to start lending money to you and so on. That’s what means financial inclusion.
You said you don’t care. But is there one of them — of the biometrics — so whether the card, whether the phone that’s becoming more important than the other?
No, it’s actually a very good question. I think biometrics began to move. The only problem, Kara, with biometrics —
It’s creepy, one, and two, who should keep that? So if you take the government of India, where they have run a very successful scheme where they’ve collected the biometrics of all the citizenry — all 10 fingerprints and the irises — well, they’re all in one location. Now you can tell me it’s kept safe. You just have to look at what happened recently in the United States over the last couple of days.
Anybody who believes that anything is safe is the one person you should not believe knows what they are talking about. And so at the end of the day, my view of identity is nobody should have everything about you.
Many people think the secure thing is cash itself, although I get the stealing and theft, and running off with your money. But when you started Mastercard, a lot of the coverage focused on your war on cash.
Don’t you need to win the war on financial exclusion before you win the war on cash?
It’s actually intertwined, which is how we ended up with a war on cash. It was because of the fact that we defined our marketplace as cash, not other electronic funds. And then we realized that the generator of that cash was the government, and it was going to do excluded. And therefore, for me, financial inclusion and the war on cash are intertwined. I don’t mean by the war on cash that you should make sure that people who are excluded get even further disadvantaged. Very far from it. I actually think that cash is the friend of the someone who has something to hide. If you’re poor and you’re excluded, Kara, you can’t do anything that you and I take for granted. You can’t hire a car. You can’t rent a hotel room. You can’t get access to credit or insurance. Nobody counts, so you don’t count. You’re not even counted in a survey, because you don’t have an identity. So I actually am on the other side of this, which is that these folks need to be helped to not be in that game of cash. You need to get them to the right place. That doesn’t mean you cut off their cash. It means you help them get something else as well. This is not an either/or. It is about being there for them.
When do you think the world will be actually cashless?
I doubt — it’s interesting, when I joined, 85% of the world’s retail transactions were in cash. It’s still 80-plus%. But I do think that the pandemic has changed people’s ways of thinking about interacting with cash. But that doesn’t mean that we should be thinking of going past cash by saying, therefore let me deny people who have to deal in cash. That’s not the idea. You’re not lowering the river water, you’re raising the level of water, and providing people the chance to go higher. That’s the idea.
When’s the last time you made a transaction in cash? Me a year ago. I don’t use cash at all.
Oh, I do cash only if I’m tipping somebody, mostly.
Do you do mostly on your phone, or what is your —
No, I do a lot of stuff still via card, for a very simple reason. I just find taking out a card to tap very easy. Taking out a phone to double-click on the right-hand side, to then unlock the phone with my face, and then use it is just one step extra for me. But I do use Apple Pay frequently.
Apple Pay, me too. So what are you going to do next? You’re a young man.
I don’t know. I don’t know, maybe you’ll hire me, and I’ll come work with you.
No, I’m working for Mastercard, with all those benefits. But what do you what to do?
I want to do something with that triangle. I’ve tried to do it here. To be honest with you, I’ve tried really hard. The financial inclusion thing, the Priceless Planet Coalition for the climate side — and I’ve really tried to run the company for the long term.
Would you like to work for the Biden administration?
First of all, you’ve got to be asked before you can say yes or no to that.
And so that’s very interesting. But secondly, I’m here as executive chairman for at least a while. And so my first commitment is to make Michael successful, and to make the company go through this period of time. And then I’ll see. I don’t know that I’m a great believer in being a secretary of anything or the other. I don’t know that that enables me to focus on this triangle. If there were roles in any administration of this type — particularly for somebody like him and his vice president— who said, hey, there’s a role you can play here which can actually make a difference to these three things — that would be interesting. I don’t know what that is.
All right, this is great. I really appreciate this, thank you so much.
Kara, thank you. Be well.
All right, bye. [MUSIC PLAYING]
“Sway” is a production of New York Times Opinion. It’s produced by Nayeema Raza, Heba Elorbany, Matt Kwong, and Vishakha Darbha, edited by Paula Szuchman, with original music by Isaac Jones, mixing by Erick Gomez, and fact checking by Kate Sinclair. Special thanks to Renan Borelli, Lrial Higa, and Kathy Tu. If you’re in a podcast app already, you know how to subscribe to a podcast, so subscribe to this one. If you’re listening on The Times website, and want to get each new episode of “Sway,” terms and conditions do not apply. Download a podcast app like Stitcher or Google Podcasts, then search for “Sway” and hit subscribe. We release every Monday and Thursday. Thanks for listening, and also hit me up if you know where my Bitcoin drive is. [MUSIC PLAYING]