The Hill’s Steve Clemons interviews Ajay Banga, Mastercard president and CEO.
Read excerpts from the interview below.
Clemons: How does what’s happening globally like from your perspective?
Banga: I would say that this is truly a public health crisis and I think there’s a lot of work going on that front, but don’t forget that the authorities have moved really well on fiscal and monetary policy in most countries around the world. I think we’ve all learned our lesson from prior financial crises and have applied at least a good lexicon out of those. Now how well all that gets implemented and executed over a period of time will determine how well we come out of this over the next period. But the fact is the playbook is operating. Now the way we’ve defined the stages of this crisis for the company and for our investors and every employee. It is said that there are four stages. The first stage is containment. That’s kind of borders getting shut, schools getting shut, restaurants shutting, everything shutting, people, getting locked into their homes. Obviously, consumer spending falls off a cliff during that period. The second phase is stabilization, and stabilization is basically the bottoming out of the prior phase. It’s almost like we’re turning the corner and the curve of new cases and hospitalizations, and ICU admissions are beginning to bend down, and people are beginning to buy not just everyday groceries, but also adding on a few things like home improvement and the like. And so, I would say that a couple to three weeks ago, the United States and Europe are more or less operating through that bottom, that stabilization phase. China, on the other hand, which entered containment before all of us — was coming into the third phase which, for want of a better word, we call normalization. It’s not really normal in the sense that not everything will go back to pre-COVID kind of level. It’s actually lower than pre-COVID-19, but it’s coming off the bottom, and you probably won’t get the same recovery in long-distance travel or in mass entertainment. But you will in pent up demand for certain things. And it could be something as simple as hair and beauty pigments or gym memberships. Or like I said, home improvement. And maybe intraregional travel or domestic travel. Or as I say recently, “rural is the new urban” for tourism, in the U.S. as well. People will drive to nearby hotels to give themselves that weekend treat that they have wanted. So you’ll see that now in the U.S. and Europe we feel like for the last few weeks we’re entering into that normalization phase. And then the fourth phase, called growth, which will come pre-COVID kind of levels. I think that’s going to need a vaccine, things that build back consumer confidence and business confidence to what it felt like prior to COVID-19. I would say nobody’s back at that phase. Obviously and it’s not linear. Some countries have moved from containment to normalization and have gone backwards. That has happened for a little while for Japan and Singapore, when there was a resurgence of the virus in those countries. That’s kind of how we’re looking at it.
Clemons: How can a financial instrument help contribute to returning to high trust environments?
Banga: I would say, let’s break that down into two portions. Let’s first break it down into trust, per se. Then let’s talk about how do you manage trust in this digital-first kind of environment? So let’s talk trust first. Trust, let’s discuss economic, different economies around the world and the trust they had with each other. The fact is, even before the crisis, multilateral institutions that had been created in the last century were created to enable economies to operate on a platform that generated trust by the outside interpretation of those rules by third parties who were meant to be impartial. Now we’ve seen those very multilateral institutions over the last decade or two slowly begin to break down from their level of operation prior to that. So I would argue that they’ve already worn down the trust environment of big economies on a number of the issues. I think this thing has just exacerbated that. And so to me, at the end of the day, coming out of this, you look at the United States, what’s our strength? Our strength is human capital and our strength is our innovation and ingenuity and economies of scale, which allow us to benefit from an open trading environment. If you don’t manage and nurture our human capital, if you don’t manage and nurture an open trading environment. Level playing field — not an open trading environment where we operate with both hands tied behind our back, but a level playing field, open trading environment, then I think we can be leaders in the space of helping to rebuild this trust across the quality of nations to make sure that we can keep an open trading system going. The fact is, the last 20, 30 years, the growth in the world’s economies would not have happened. The reduction in poverty would not have happened without an open trading environment. And so the United States is vested in that and in leadership in human capital. That’s the point I’m trying to make here. I think we shouldn’t back off that completely. Now in the digital space, trust is a very much more interesting conversation. I think it starts with being careful about your identity, about individual consumers feeling safe about their identity online. And that leads to the whole conversation about digital identities that are secure with distributed platforms, cybersecurity efforts, that whole space. But I think way beyond that is the whole issue of ethical innovation. If you’re going to use artificial intelligence, if you’re going to use data for the right purposes of giving consumers and businesses better service, it is really important that we put the consumer and the business first. It’s really important that you say to a consumer: “This is your data. You deserve to benefit from it. You have the right to be forgotten. You have the right to have it deleted, and you must be able to feel safe when your data has been used by others.” I think that kind of principle, simple principles on data, something we call our “data responsibility principles,” our data imperative, that we issued a short little while ago — I think we really need to embrace all that when we go forward in this world of 5G and IoT and interconnected devices to rebuild the trust that’s going to be important in this coming decade.
Clemons: I’ve been fascinated by digital IDs and that question of how to get there for a long time. And how to make it safe and also make it something that can’t be exploited. What do you need to have to make that happen?
Banga: The fact is that if you have a digital ID where the government controls every aspect of that identity, most economies like ours will feel uncomfortable with that situation. Citizens in a country like ours and parts of Europe and a number of other countries around the world are uncomfortable having the government be the be-all and the end-all of everything to do with you. Yet, the government gives your driving license. They give you a passport. Your banks have information about you when you open an account with them. Or “know your customer” for anti-money laundering. Your cellphone companies have information of where you are because of me having a GPS tracker. So, the best form of digital identity to me is a distributive platform where companies do not keep all that information with them. Neither does the government. Instead, you the consumer empower this trusted identity system to say, “Hey, can you prove to so and so I am Steve; or I am above the age of 18; or I am male,” or whatever it is you wish to prove. And that trusted player can go into those distributed identity records and only bring back that information, which is necessary to answer the limited question that you wanted to have answered. So, let me expand on that with an example. Let’s say you’re buying alcohol on the web. And today a lot of people are doing that in coronavirus times, right? Home purchases of alcohol are much higher than they used to be. When they get delivered to your house, they have to make sure that you’re adult and you are the person who ordered the alcohol. You either got to sign for something, give them proof of identity. In some countries, you have to give them a driving license. And this young kid from a delivery company, take’s the photograph of your driving license. Now, on their phone, is your photograph, your full name, your exact date of birth, of course, your address. They knew that. But sometimes also the vehicle you’re allowed to drive. And, of course, your driving license number. In a number of countries, that is enough information to open a bank account in your name. I’m saying don’t do that. You only needed proof you’re above the legal age of drinking. You could do that by going into the driving license authority and bringing back the fact that Steve’s above 21. Going to the bank and having a second place to check it from. And then going to your cellphone operator and bringing back the fact that you are physically where you claim to be. Put those three points together and you can tell the delivery company, “Go ahead and deliver the booze, this is the guy who bought it.” In fact, I give you back your privacy. I give you back your identity. But I proved to everybody in the ecosystem that you are who you are. That, to me, is the form of digital identity — distributed databases, not centralized, no honey pot which people are going to break into. And create a cooperative system where nobody owns everything, but you kind of go in and work on this together. We’ve actually built this and launched this in Australia already.
Clemons: What are you seeing in sort of the cash flow in the commerce side of small businesses and what your sense is.
Banga: I think first of all, small business is the engine of growth of economies around the world, including in the U.S. I think supporting them and finding ways to make them come out of this the right way is the single best thing we can all do for the economic vitality and, frankly, the social vitality of our economy. So, I’m all-in for that one. I would say they are also suffering. There is no doubt that a number of them have struggled and are struggling right now through this period. But there are those who are being innovative and creative, and they will come out in the natural process, they will probably come out stronger. And it ranges from restaurants in Brooklyn who, being unable to be open, have now repositioned themselves. They are selling everything from wine out of their cellars to actually their own menus prepackaged and sold to people. They have changed who they are. There are others who are trying to find “omni channel” experiences and they were only physical earlier and they’ve learned very quickly to go online and become digital as well. And people like us are helping them. Not just us. There are many companies helping them in the space. I think the whole idea of small business, being alive and innovative is definitely correct. But there are those who was being very challenged. And there are those who are managing better through this process. We shouldn’t forget either of them as we come out of this. And, you know, Steve we set up a $250 million fund to help small businesses globally over these next few years. And part of that is by giving them free tools for cyber securities scanning, through education and how to use credit — to different kinds of aspects. And others are philanthropic donations to them, to help them manage through this period. And a lot of companies are doing good things for small businesses, for all the reasons we just talked about.