Ajay Banga, New MasterCard Chief, Wages ‘War on Cash’
MUMBAI, India
A DAY after the Indian government started a campaign to give identification numbers to all its 1.2 billion citizens, Ajay Banga, the newly minted chief executive of MasterCard, arrived in town, eager to lend a hand.
The program will identify people based on fingerprints and retina scans, and could make it easier for the government to route food stamps and other payments to people below the poverty line.
Mr. Banga says he believes he has a simple way to process the payments: via the MasterCard network.
“I wasn’t educated in the U.S.; I was educated in India. I understand what you are trying to do,” he said during a news conference at the Trident Hotel, in the financial center here. “I think it’s a huge opportunity for our government and people and companies like ours.”
Though Mr. Banga has risen to the top ranks of American business, the roots of his success are firmly planted in India, where he was born, raised and got his start in business. His success at MasterCard may well depend on India, too.
Observing that 85 percent of the world’s transactions are still in currency, he has declared a “war on cash” to nudge as many consumers as possible toward electronic payments, preferably processed by MasterCard. Although competition to handle payments is intense in the United States, the wider battlegrounds are in countries like India and Brazil, which have vast numbers of people without bank accounts, and a growing middle class.
Capturing only a small fraction of those customers — with prepaid debit cards, mobile payment systems or credit cards — could exponentially expand MasterCard’s business and profits. “Whether it’s 200 million or 400 million, it’s a lot of millions,” says Mr. Banga, referring to estimates of the size of the emerging global middle class over the next five years or so.
Nevertheless, Mr. Banga, 50, is taking over MasterCard as it faces huge challenges, from new rules governing credit and debit cards in the United States to nimble new rivals offering online and wireless transactions. And, of course, there’s Visa, its much larger rival.
“Visa and MasterCard are going to have to generate new business, and that’s overseas,” says David Robertson, publisher of The Nilson Report, an industry newsletter. “What you want to do is find new virgin territory where the margins aren’t compromised by competition.”
In Mr. Banga, MasterCard believes it has found an ideal, if unconventional, candidate for tackling such tasks. A Sikh with a jet-black mustache and beard, Mr. Banga says he loves fine wine, the New York Mets, Lady Gaga, Elvis Presley and Sikh spirituals, in no particular order.
During a recent dinner of Southeast Asian food at the luxurious Imperial Hotel in New Delhi, he teased Vicky S. Bindra, a regional MasterCard manager, for ordering khichdi, a simple Indian dish of rice and lentils. Mr. Banga ordered the $90 tasting menu and a $300 bottle of Tuscan wine. “It’s a $70 bottle in New York,” he noted.
His globe-trotting identity and animated personality are in jarring contrast to previous MasterCard chief executives, who were typically buttoned up, American and, often, Ivy League-educated.
“He brings a different vibe, a different sense of urgency to the company,” says Adam Frisch, an analyst at Morgan Stanley. “I expect MasterCard’s velocity to change.”
For example, Mr. Banga shook up the company by declaring that any request to headquarters not acted upon in two weeks would be automatically approved — a directive meant to speed decision-making.
For its first four decades of existence, MasterCard — originally known as MasterCharge — was owned by the nation’s banks and was a reliable cash cow for them. Visa was also owned by the same banks, so there wasn’t much head-to-head competition between the two.
Nonetheless, MasterCard developed a reputation for being more conservative and flat-footed than Visa. Not only was Visa more aggressive in pursuing the debit card market in the United States, which it has come to dominate, but it pushed ahead of MasterCard in the nascent prepaid-card market and in pursuing new business in developing countries in Latin America and Asia.
The differences became apparent when both companies went public — MasterCard in 2006 and Visa in 2008. Mr. Frisch says investors believed that MasterCard had a “phenomenal” business model and a well-known brand. Indeed, MasterCard’s stock price has risen more than fivefold since the company went public.
But when Visa went public in 2008, investors found that Visa’s execution in important growth areas was even better. Visa’s market capitalization is now nearly twice that of MasterCard.
Vikas Bajaj reported from New Delhi and Mumbai, India, and Andrew Martin reported from Purchase, N.Y.
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