Campaigner Leadership in Action: Mastercard CEO Ajay Banga
This is an edited extract from The Nine Types of Leader.
When Ajay Banga moved to New York in 2000 his career was on a roll. After four years at Citigroup, spent largely in London and Brussels, this latest promotion maintained the momentum that had begun when he started out as a management trainee for Nestlé in his native India 19 years earlier.
Before long, dispatched east to lead the Asia-Pacific region, he would be talked of as a potential leader of the investment bank.
But even though Banga had a high-paying role at one of Wall Street’s best-known institutions, there was a problem. He was astonished to discover that his lack of US credit history severely impacted his ability to put down roots.
“I couldn’t rent an apartment, I couldn’t get a phone,” he said, recalling those days. “Life was pretty crazy.”
Banga recalls wandering the streets of Manhattan trying to get connected. In an AT&T store, he handed over his new social security number to a young man behind the counter – who coincidentally also had South Asian roots – only to be told it wasn’t enough.
“I looked at him and said, ‘Listen man, I grew up in India, I have worked overseas, this is the job I do. How the heck can you not give me a cellphone?’” I didn’t believe it. The young guy replied, “I need some proof that you are actually worth some money.”’
Banga returned soon after with a statement from Smith Barney that detailed the private brokerage account he had set up while living in London. He remembers the shop assistant taking one look at it and with a laugh, saying, “You have too much money not to have a credit history.”
Still, it took several hours to get back-office approval as details of Banga’s wealth were shuttled between administrators before he obtained his handset. Renting an apartment was even more complicated and required a letter of guarantee from Citigroup.
These incidents were a minor taste of what would become a major issue for the man who went on to become president and chief executive of the financial services giant Mastercard in 2010.
Years later, and on several occasions, Banga raised the complexities of settling in the United States with those high up in the US government. “Our system is not built for immigrants, our system is built for those already here and that is a form of exclusion that I find reprehensive,” he said.
Banga made financial exclusion a key theme of his decade-long leadership of Mastercard, one of the world’s most instantly recognized brands that adorns billions of credit and debit cards and processes payment transactions between merchants and banks. What he had in mind was far more than merely helping out mildly inconvenienced New York bankers.
The financially included are the banked majority: those members of the global money system that can transact and save with ease. The ambition is to bring inside the rest of the populace, opening up access to a bank account or electronic wallet that allows them to store money digitally and send and receive payments for the first time.
It is a passport to a different world, a first step towards managing a family’s finances, taking advantage of other financial services such as credit and insurance, and even starting a business or investing in education.
Taken together, these measures are proven to boost quality of life, reduce poverty and encourage economic growth. The principal beneficiaries are women. Around the world, only 69% of adults have their own account and 1.7 billion remain unbanked, according to the 2017 Global Findex database in 2017.
Although these figures are a sharp improvement on a decade ago, it is still shocking that a Federal Deposit Insurance Corporation survey in 2017 found that 14 million Americans did not have a bank account.
One of the reasons the numbers are improving is that Mastercard set a target in 2014 to connect at least 500 million people outside the financial mainstream by 2020. This mission became synonymous with Banga the Campaigner.
What are 'Campaigner' Leaders?
Campaigners believe their remit extends beyond driving corporate performance to deliver purpose alongside profit. They stick their neck out and use their company as a platform from which to project a vision of equality, diversity or a greener world. They risk their reputation, speaking passionately for a cause, often committing shareholder funds to doing good deeds.
A generation or so ago, leaders led campaigns to develop the best product or outsell the competition. Today these Campaigners’ outlook appeals to millennial workers for whom the size of the paycheque is only part of the recruitment package, plus consumers who care about doing the right thing. Politicians, too, favour firms that benefit the broader community in which they operate.
Some Campaigners believe they are visionaries; others are far humbler. But neither should be mistaken for Greta Thunberg in pinstripes. They must alight on causes with enlightened self-interest: something that is good for business and the wider world – and, cynically, perhaps also themselves.
In a world drowning in thought leadership, the challenge is to turn big ideas into concrete action, without neglecting the bottom line. And they must do it credibly, conscious that multi-millionaire eco-warriors don’t always strike the right tone.
Banga the Campaigner
At Citigroup from 1996, Banga stumbled into microfinancing and began to understand that small money flows could have a large impact. A colleague was securitizing loans for Brac, an international development organization based in Bangladesh. It meant that transactions as low as a handful of dollars could be bundled together so that banks that typically dealt in sums far larger could deal in them.
“I began to understand how important it was for these institutions to free up their balance sheet so they could keep doing the work they were doing,” he said.
Banga also read The Fortune at the Bottom of the Pyramid, a 2004 book by the Indian academic CK Prahalad that made the case for encouraging entrepreneurialism among the world’s poorest as a method of eradicating poverty.
“I also understood there is not enough money in philanthropy and government in the world to solve our problems. That means we have to put private sector capital, ingenuity and technology to work,” he added
Beginning at Mastercard in 2009, Banga could not figure out how this developing ambition fitted with the firm’s business model. Mastercard already had a charitable foundation, created at the time of the group’s initial public offering (IPO), which invested in education programmes in developing markets. But Banga knew he could not mix business with philanthropy.
An early partnership with the South African Social Security Agency (SASSA) showed him the way. Mastercard helped to digitize a system of cash benefits that was cumbersome and prone to fraud. In a four-month period during 2012, a newly issued debit card for grant payments was credited with driving up South Africa’s banked population from 63% to 67%. By summer 2013 there were 10 million active cards in the programme.
Banga set about doing more. What this campaign needed now was a target. That came in 2014, at the World Bank and International Monetary Fund (IMF) spring meetings, an annual pow-wow of central bankers, politicians and leaders from business and civil society discussing the state of the world.
Banga was due to share a stage to talk about financial inclusion with World Bank president Jim Yong Kim, IMF chief Christine Lagarde and Queen Maxima of the Netherlands, the United Nations’ special advocate on the topic. Before they went out, Queen Maxima urged Banga to give some sense of the scale of Mastercard’s ambition. Unplanned, mid-way through the discussion, he announced the 500 million target.
“I think she almost fell off the stage,” he said, referring to Queen Maxima. “There are photographs that show us both laughing hysterically. She said to me, ‘I only expected 50 million. Are you crazy?’ It was a hairy target but it worked out.”
With the objective formally unveiled a year later as a Universal Financial Access commitment, Mastercard had clear impetus from the top and something to be measured against. Whenever Banga took to the stage at a conference somewhere in the world, he was invariably asked about his campaign. But beneath the grand sweeping gesture there was no single scheme designed to make a vast difference.
Instead, 750 financial inclusion programmes grew up in more than 80 countries to tackle the challenges of income equality. Rather than wielding a stick in markets with low penetration, Mastercard dangled carrots that offered numerous reasons for the unbanked to sign up.
For example, in Egypt the company pioneered a method for women to receive alimony payments on their card so they no longer had to go into a bank branch and identify as a divorcee.
In East Africa in 2017, the digital platform 2KUZE was developed to connect smallholder farmers, agents, buyers and banks.
In Kenya and Tanzania, most farmers might tend no more than a couple of acres of land and until they began transacting on their phones, would otherwise have had to walk hours to market to find a buyer for their produce.
Mastercard’s target was accomplished early and increased to 1 billion by 2025, something for Banga to keep an eye on, having moved up to become group chairman in January 2021.
This Campaigner was successful in his own right, but also fortunate to have landed at a company like Mastercard. Here was a fast-growing and extremely profitable enterprise – much more so when Banga had finished running it.
In 2019, net revenues rose 16% to $16.9 billion and net income was up 42% at $8.1 billion. Mastercard had $9 billion of cash and cash equivalents sitting on its balance sheet. It committed $500 million to financial inclusion, a not inconsiderable sum, but it could afford to do good.
It also had international reach. The group’s customers had 2.6 billion cards in issue – although many of them were not physical cards – and gross transaction volumes amounted to $6.5 trillion. It had a global network across which it could defray technology investment and good local understanding of what each market needed.
It is also important to acknowledge Mastercard’s back story. The business began life in 1966 as a credit card association of US banks and only struck out independently in 2006. In that year it converted into a private company and sold shares on the New York Stock Exchange, which at the time was the 12th-largest domestic IPO in US history.
It used to be the place “where bankers went when they were sent to pasture”, Banga pointed out in an interview at Goldman Sachs in 2019. “It was not a bad life.”
The co-operative of thousands of financial institutions was also grouped into regional fiefdoms all around the world, using a patchwork of systems. Banga’s predecessor, Robert Selander, made great strides to mesh all this together into a single entity but by the time he took the helm it was still a company figuring out its culture and beliefs. Financial inclusion was a timely campaign, but also a unifying force.
Banga judged it well. He made sure that Mastercard was not acting alone. His campaigning spirit carried others along with it, inside the company and out. Mastercard worked in partnership with governments and international development organizations.
For example, in East Africa 2KUZE was piloted with the Cafédirect Producers Foundation and developed with the help of a grant from the Bill & Melinda Gates Foundation.
Of course, nor was financial inclusion completely altruistic. Jousting with its arch rival Visa to be the pre-eminent global payments system, Mastercard clearly wanted to recruit as many new customers as possible.
Additionally, Banga was mindful of the plethora of fintech start-ups that threatened his business model – and that the real enemy they were united against was cash. But those newly included sign-ups will be largely loss-making for a long time to come.
“Commercially sustainable does not necessarily mean immediately profitable,” Banga said. “It just means that if you were to be investing in this for a period of time it would at the end of the day enable your business to be better run, better managed and more profitable for you and those who you work with.”
Banga successfully united a good cause with investment in Mastercard’s future while continuing to drive up returns. Not all Campaigners have a credit history of which they can be so proud.