Payments

How MasterCard Labs fosters a culture of payments innovation

How MasterCard Labs fosters a culture of payments innovation

Selfies that authorize credit cards, laundromat washing machines that call when they’re free and distributing food assistance in Africa by debit card are all steps on the path toward one common goal, according to MasterCard CEO, Ajay Banga.

“Our vision is a world beyond cash,” Banga explained in a recent interview at the Stanford Graduate School of Business. “85% of the world’s retail transactions are cash and check. Only 15% are electronic.”

To realize that vision, Banga has transformed MasterCard over the last five years by making technology and innovation critical to MasterCard’s identity, and the results are paying off.

Banga, an Indian Sikh who wears a black turban, was previously the Chief Operating Officer at Citibank, a protege of banking mogul Sandy Weill’s, and was being groomed as a potential CEO. But he chose to leave all that behind for a different kind of job:

Citibank had 290,000 — 300,000 employees around when I was leaving. And at a point of time, 200,000 of them used to work for me. And it’s impossible to make change with 200,000 people in your 3, 4, 5 year span. But if you’ve got 5,000, 2,000, 10,000, 15,000 people working for you, you can touch them, feel them, put your arms around them, they know who you are, they can understand you, you can make a difference. You can actually change things in that company. […] [W]hen I joined MasterCard, we had 9% of our population was millennials. It’s now four and a half years later, we closed last year with 34% from millennials. I could never have done that at Citi. I just could not.

Banga has made innovation a priority by forming MasterCard Labs as a center for developing new technologies that reports directly to him. Banga approves the division’s overall budget himself, but doesn’t provide any oversight. “So I told them, here’s the money, you choose the projects. I need commercially viable two products after two years. If I don’t, I’ll fire the whole lot of you and start again.”

At Work at MasterCard’s NYC Technology Hub
At Work at MasterCard’s NYC Technology Hub

One example of using technology to push the boundaries of existing payments is MasterCard’s Identity Check mobile app, which uses selfies as a form of biometric identification. The app addresses the problem that people typically choose weak passwords for authenticating online payments.  As reported in The Verge, users will have to actually blink while taking their pictures to prove that they are not merely presenting a photograph, and MasterCard algorithms can detect the use of video.

Groceries by MasterCard
Groceries by MasterCard

MasterCard is also working with established businesses to develop new products and services. The company partnered with Whirlpool to create an app called Clothespin that helps washing machines and dryers tell customers when machines become available and operate without the use of piles of quarters. Working with Samsung, Groceries by MasterCard is another project of MasterCard Labs that integrates a program within the “family hub” refrigerator. Groceries will learn family shopping habits and “suggest” re-stocking and new products. Over the last five years, the company has worked with partners such as the World Food Program to distribute aid to the poor in developing countries, and recently they’ve given cards to Syrian refugees.

Innovators at MasterCard Labs are also turning to the creative community for a source of ideas outside of the kinds of workshops and hack-a-thons designed to generate ideas from engineers and programmers. This weekend, MasterCard Labs will host its first “Fashion and Design Hack” with students from the New School’s Parsons School of Design. MasterCard executive Sherry Hammond explained to Finextra that the company wants to, “integrate design-led thinking into payments innovation and tap into the creativity and ingenuity of the school’s design students.”

MasterCard Labs executive John Sheldon recently told Fast Company that his division’s job is “looking ahead three to five years, taking risks, failing smart, quick, cheap, and learning something along the way.” MasterCard Labs strives to “be the company’s own disrupter,” hosting 48-hour “Innovation Express” events to create new products such as the pre-payment and ordering app Qkr, which has been taken up everywhere from Yankee Stadium to restaurants all over the US to school lunch programs in Australia. Despite all his team has accomplished, one challenge remains for Sheldon, “I also want to solve for giving the tip to the guy at the garage who brought my car back without a scratch – because it represents the barrier between where we are now and the cashless society we envision.”

MasterCard’s commitment to innovation seems to be paying off for investors, too.  The company’s share price is up over 250% over the last five years.

photos courtesy of MasterCard

Payments, Podcasts

Splitit’s Brad Paterson: ‘The state of the industry reminds me of the early days of PayPal’

  • Splitit enables consumers to make installment payments on their purchases.
  • New CEO Brad Paterson joins us to discuss his company's growth strategy.
Zack Miller | February 20, 2020
Payments

Amex’s Stewart Kendall: ‘81% of our cardmembers are now engaged with us digitally’

  • As Gen Z and Millennial users further engage with the brand, the mobile app experience has evolved.
  • Kendall, the head of Amex's mobile app, joins us to discuss his firm's mobile strategy.
Zack Miller | February 18, 2020
Payments

‘A dollar saved is 100x better than a reward’: Ramp launches corporate card

  • With Brex's success, it wasn't long before more competitors joined the corporate credit card space.
  • New entrant Ramp has a strong team, a focus on curbing spending waste, and now $25 million in the bank.
Zoe Murphy | February 12, 2020
Payments

Pay Fresh: How Subway is upgrading its payments experience

  • Subway wanted to upgrade its payment experience across channels.
  • The company is now working with Adyen to provide omnichannel payments across markets.
Michael Deleon | January 29, 2020
Payments, Podcasts

Extend’s Andrew Jamison: ‘There’s a broad disconnect between what happened in ERP with what’s going on in financial technology’

  • Managing B2B products at Amex, Andrew Jamison saw card issuance didn't serve the way the economy was headed.
  • He founded Extend, which works with banks' existing technology to issue virtual cards.
Michael Deleon | January 17, 2020
More Articles