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Management in Practice

Can I charge that?

More and more, the answer is yes, as the credit card industry reaches billions of consumers and tens of millions of outlets. The CMO of MasterCard WorldWide talks about the company’s efforts to compete in this global market while responding to radically different technological infrastructures, legal institutions, and cultural understandings of debt.

You likely carry one around with you and use it nearly every day. You hand your card to a cashier to pay for a small purchase. You keep your credit card number on file to pay for subscriptions and online orders. Multiply such interactions by billions of cardholders—there are more than 135 billion credit card transactions worldwide each year—and you start to glimpse the impact the industry has on global commerce.

The global credit and debit card industry is growing fast, with both total transactions and purchase volume increasing substantially in recent years, as a greater fraction of global payments move from cash and check to cards. Meanwhile, the credit card industry is preparing to transcend its original plastic form, giving consumers the ability to use mobile phones to make payments.

As the CMO for MasterCard, Alfrédo Gangotena is at the forefront of this reinvention of how people pay for nearly everything in their lives. The company has 1.8 billion cardholders in 200 countries, and Gangotena cites this geographical reach as a source of strength. Nearly every country has its own approach to using credit, allowing MasterCard to try a wide array of products and approaches, such as new security features for its cards or going fully mobile and doing away with physical cards entirely. “The benefit of us being in 200-plus countries is that we can see the future trends 5 to 10 years before they're going to hit a market like the U.S.,” he said.


Q: How do your customers' needs vary around the world?

Alfrédo Gangotena: MasterCard is actually in operation in over 200 countries around the world, so clearly, you go from extraordinarily developed markets such as the United States or Europe or Japan all the way to emerging economies like Kenya or Nigeria, for that matter. So it’s very clear that the needs of the consumers will be different. In mature markets, people who use credit cards, debit cards literally all the time. If you go to the record of the world, it’s Iceland. There’s basically no cash today.

On the other hand, if you are in emerging Africa, it is obviously 99% cash. So, you’re in different stages of development. So we need to adapt our products to the necessities. In the U.S. you have the wide range all the way from debit to prepaid to credit cards and even P2P, person to person payments, whereas in Nigeria, we may think that mobile phones will be the way people will starting to pay. And instance, if a person in a village needs to buy something and needs to walk for 50 k to get the goods and then bring the cash and back that’s 100 k in a day. By paying through a mobile phone, it’s instant. The person does not need to do all that movement.

So, we are now developing, believe it or not, the most sophisticated technologies, actually, for those emerging markets, because they are—there’s a quantum leap and they’re jumping over the old technologies.

Q: How well do innovations in your business translate from market to market?

Gangotena: All the Nordic countries—heavy users of cards as opposed to cash: Sweden, Denmark. France also, very heavy use of cards, and yet, in between Denmark and France, you have Germany—very low usage of cards. So you have to deal also with the psychology of the local market, because in Germany, the idea of borrowing money, which is what a credit card does, is not acceptable. So it’s against the culture, locally. So, debit cards are much more popular in Germany in that case—90%, 95% of the people have a debit card and very few would have a credit card. So clearly the type of product, but the technology, despite the fact that it is available worldwide, will have a certain level of popularity that varies dramatically.

I like to call certain markets, what we say, 360s. An example here would be Australia. Australia or another country like Turkey which would be a surprise to you, perhaps, are extraordinarily advanced when it comes to electronic payments and they would definitely adopt anything that is new very simply, very, shall we say, immediately and in that sense, they are showing the rest of the world what’s coming.

So the benefit of us being in 200-plus countries is that we can see the future trends almost five to ten years before it’s going to hit a market like the U.S. Funny enough, it’s not the U.S. that is the most advanced. If you take a look at your own card, there’s not what we call the chip on the card: it’s only a mag stripe. And if you were to go to Europe, it’s 100 percent chips. What’s the difference between the two? The chip is more secure because it’s really a small computer that stores all your personal data and as a result, fraud is a lot tougher to be.

So, clearly technology is advancing very fast, but certain markets are adopting it better than others.

Q: Does technology make it easier or harder to reach your customers?

Gangotena: It is actually a paradox. In the good old days, if I may say, it was very easy because MasterCard cards were distributed by the banks. So you open a bank account and automatically you would receive a MasterCard card. Today, the world has changed dramatically because the cards themselves like MasterCard may be preferred over the competition because it fits your needs. It can be an airline card and every time you spend, you’re going to accrue more and more miles. Therefore, even if your bank does not have that card, you may want to acquire it. So that we know. But today, to reach the consumer, to reach what I call the next billion consumers that are not today banked, we have to come up with a different model than the banks.

To give you a sense, there is about 1.5 to 2 billion bank accounts in the world. There are 5 billion mobile phones in the world. So we do see mobile technology as a new way to reach consumers and distribute our cards. Today, MasterCard is accepted in 33 million locations. What about the next 100 million?

So again, we need to come up with new technologies and you have seen the likes of Square, which is a little gizmo that you put on your mobile phone, but in the future, I would not be surprised that you don’t even need that because it will be embedded automatically in the phone of the retailer, in your phone, and you just physically tap and then you’re done. So I can imagine that reaching our consumers through new technologies is just going to make this whole space, you know, much, much, bigger.

Marketing is also using technology. In the past, classical advertising—and as we know, people are now zapping; they don’t necessarily watch TV the same way they used to. Yes, there are banners on the internet, but in my view, it’s very similar. What we do see is the power of Facebook, the power of Twitter, the power of YouTube, because the recommendation from an advertiser to you may not be as believable than that of your Facebook friends. So, it’s more sophisticated. That’s the paradox. It’s much more difficult, but I think we’re evolving towards the marketing where the product is personalized and the solution, the benefits or the services, will be very personalized.

Q: How do you balance building a global brand with the need to adapt to global markets?

Gangotena: The brand in itself has grown tremendously. It is now sitting on the top 100 in the world—it’s actually number 29 most valuable brand in the world, together with the Coca Colas and the Nikes. For a simple fact, that few people would imagine, that 1.8 billion cardholders out there have a MasterCard or a Maestro Card from our company. So it’s a massive number if you think about it—one human being in four, roughly speaking.

So, today, we need to understand market by market what resonates. And we have taken our advertising concept, which is "Priceless," under the umbrella of there are things that money can’t buy, for everything else there’s MasterCard, so this world between the material world and the more emotional world, which has been so successful for the brand, to take it to the next level. And that program is to recognize that people live and spend their money or enjoy time, enjoy their lives based on their passions. So if you love golf, you may not love necessarily football. Or you may not love baseball, but you are into golf. So that defines you as an individual. You may love the opera. You may love certain types of cuisine and so on. So, the passions of the people tend to define the individual.

B, those passions are shared with your friends and that is a cultural phenomenon that depends very much on where you live. If you take a person that lives in Atlanta, by definition, that person has decided not to live in New York. Or a New Yorker will never think of living in Los Angeles, perhaps. It’s even more accentuated in Europe. Think about Rome and Milan. They would never mix. Or Barcelona and Madrid, they would never mix.

So this concept of you, your passions, and the environment where you live, which is your city, we see that as the new phenomenon around the world, much more than the notion of country. Country is more diluted. City is very personal to you. That program we have baptized and it’s called "Priceless Cities." So we have launched that program, which essentially connects you as an individual to the passions that you have in the city where you live and the passport to access those passions, those experiences, those priceless moments is your MasterCard.

This program allows us to be extraordinarily local at the level of a city, recognizing that in the next whatever, 20 to 30 years, it’s not going to be country domination. It’s going to be city domination—a little bit, by the way, like it used to be in the 16th and 17th century around the world where cities were dominant force of the economy. So we’re a little bit back to that and in some way, that allows us to have a global program because people travel from city to city— a global program, but that is very personalized to you in where you live with the ones that you love.