Credit Cards and Spendthrifts

By Jyoti Thottam

What's happening on the consumer side? We have, obviously, some credit issues.

We've seen the U.S. consumers' rate of spending--the year-over-year growth rate--slowing down throughout the year. Think also about energy prices--we've gone through $3 a gallon. But I'm optimistic that we won't see recession, that we'll manage through this.

What's the breakdown between U.S. vs. global as far as revenue for MasterCard?

In terms of the volume of business done on our cards, it's about 55% outside the U.S. and about 45% within the U.S. In terms of our revenue, it's almost fifty-fifty. We're just at the point where the non-U.S. business will become bigger than the domestic.

How do you distinguish yourselves from Visa?

One of the advantages we have for our globalizing customer base is that we have a single global structure. Our customers don't want to be told that they have to go through a separate board to get something done in another part of the world. We've had that structure since 2002. Visa Europe still stands separate from Visa Inc.

American Express sued MasterCard and Visa in 2004, alleging that you tried to keep it out of the credit-card business. Visa settled for up to $2.25 billion. Does that put more pressure on you?

No company really wants to go to trial if a fair settlement can be reached without a trial. However, we firmly believe we have strong defenses to Amex's claims.

Why is the debit-card industry so hot lately?

Globally, debit is becoming a bigger way to pay, in terms of the number of transactions, than charging credit. Debit has tended to grow up in stores or merchants that were doing business with cash and check. If you go back 20 years ago, you couldn't use a credit card in any grocery store in the United States, basically. It was a rarity. In the U.S., debit is catching up real fast with the rest of the world. MasterCard debit is growing at 15% to 20% per year. That plays into the global capabilities of the organization because we're learning lessons in different markets.

Such as?

Who are the merchants that really benefit from this? This tends to capture smaller transactions. It tends to capture places where there are queues--fast-service restaurants, parking lots, transit, buses, subways--where time is really important. So you go back three years ago, you could not pay with a card in McDonald's. The last thing they want to do is add 10 seconds to the time it takes to get you, after you get your food, away from the cash register. We found out, hey, the signature and the PIN--that adds a lot of time. So we said, Fine--and so for certain merchants, for transactions up to $25, no signature, no PIN--and the merchant doesn't have to worry about it.

Do you have any cell-phone-payment pilot projects going on in the U.S.?

We are working on a lot more with cell phones in other parts of the world, which will come to the U.S., I expect. We have a deal with the GSM [Global System for Mobile communications] Association in which we're going to work together to create a person-to-person money-transfer pilot. We're not sure where yet, but we'll be making an announcement soon.

You've bought a lot of sports-marketing tie-ins. Are you going to continue to do that?

We're trying to get ourselves aligned with things that have emotion. So while we still buy the big-gun stuff--you know, baseball, that's a big one here; football in Europe--we're also looking at the ones where we can have more of what I would call unique brand association. In Asia right now, we're doing fashion. Women in Asia have huge buying power. They travel a lot. Imagine having, in Japan, the Louis Vuitton card. I mean, one in six women in Japan own at least one Louis Vuitton item.

Who has the most technically advanced markets? Where can you have the most fun with the consumer?

If you're looking at rich, robust, inside information, it's going to be the U.K., the U.S., Australia. If you're looking at places where you can get spontaneous, rapid feedback, Brazil is an excellent place for that. There's a willingness to try stuff. And that's what makes it a little more interesting and exciting. So I can make good money and have fun.