Moving Beyond the Network: Michael Miebach’s Commerce Summit Keynote

In our 9th annual Commerce Summit, we’re discussing the future of credit and credit infrastructure across a three-part virtual series. From BNPL to changing tech stacks, we’re in conversation with some of the most influential leaders shaping tomorrow’s credit. Michael Miebach (CEO @ Mastercard) joined us for the second session, sharing his perspective on the changing role of networks, the increased demand for trust and security, and the imperative for greater financial inclusion.

After more than a decade with Mastercard, first joining to lead operations in the Middle East and Africa and later as Chief Product Officer, Michael Miebach became CEO of Mastercard in January 2021. For our second Summit keynote, he sat down with Barry Rodrigues, a senior advisor at Commerce Ventures, for a conversation on everything from emerging credit products to personal leadership and growth.

Key Takeaways

1. Even the best FinTechs need a path to scale. Incumbent players can and should view FinTechs as collaboration opportunities, and not always as threats.
2. The maniacal focus on the customer experience that drove FinTech success for a period of time is evolving. Tomorrow’s market leaders will need both security and experience to win.
3. Some spaces where FinTechs have made progress may encounter increased regulatory scrutiny as they scale.
4. The “super app” bet in the United States isn’t easily justified by the rise of the concept in Asia. In the U.S., deeply rooted customer engagement across brands are the leading barrier to adoption.
5. Financial inclusion is an ethical imperative, and can also be a commercial one too.

The New Credit Innovation Landscape

While digital BNPL (Buy Now Pay Later) may be one of the fastest emerging payment trends, Michael Miebach sees this product as one that has existed in an analog form for years.

Discussing the longevity of the new form of BNPL products that are taking the market by storm, Michael noted that the majority of these players have not gone through a full credit cycle. Indeed, some BNPL providers may be seeing initial signs of softness in the payment behavior. Recent data suggests that as many as one in three consumers that use BNPL are behind on payments (link here). Additionally, regulatory scrutiny, with focus areas such as affordability checks when extending credit, has yet to catch up with the solutions available in some markets.

Michael gave two main reasons why he thinks these products are taking hold. The first is the delightful and frictionless user experience that the BNPL players provide to the consumer. The second is the underwriting models the BNPL players are using, allowing them to individual transactions (diversifying risk over a broader base). Clearly, as BNPL scales, regulators will get more involved in how these lending models assess suitability and affordability at the moment they extend credit to a consumer.

The Expanding Role of A Network

The explosion of new products and solutions settlement methods like BNPL and blockchain-enabled settlement are pushing the boundaries of the traditional role of a network. Michael is working hard to ensure that Mastercard’s role as a facilitator continues to be prevalent through changes.

Michael highlighted this dynamic definition of a network, noting that the evolving value of the network lies not just in the facilitation of traditional card-based payments but the enablement of emerging payment methods (e.g., faster payments, digital currencies, etc.). These methods still require the participation of a trusted counterparty — the core role of the network.

“It’s not just to get a payment from A to B, it’s about anything. It’s about data analytics, about cybersecurity solutions, it’s about account-to-account payments, and so forth. That’s what the network does,” he said.

Michael also commented on how the payments ecosystem and regulatory environment are fast-changing. Now more than ever, disruptors can benefit from a participant that lends credibility to transactions that move beyond plastic. Mastercard’s recent acquisition of CipherTrace, a crypto-security company with a lens into 900 cryptocurrencies, underscores how they are broadening their role as a network.

“I don’t really want to be a traditional network.”

Challenging “Super App” Beliefs

The topic du-jour in commerce technology today, Michael and Barry discussed the chance of a “super app” player taking hold in the U.S.

Michael reminded the audience that there was a unique set of structural components that enabled the rise of super apps in Asian markets: limited incumbency, recent and dramatic digital democratization, and looser pre-existing grip on customer loyalty from brands.

​​Michael’s perspective is to,” wait and see and engage,” as opposed to backing one single challenger making the play for “super app.” The leader’s broadening vision of a network includes playing a part in even the most nascent technologies like “super apps.”

Building For Financial Inclusion

Michael spoke about financial inclusion being a global imperative. Even in developed markets such as the US, traditional credit scoring models like FICO put 40% of the credit-seeking population at a disadvantage as they have a low or no FICO. Having spent part of his career in continents like Africa, Michael saw the impact of providing financial access to underserved segments up close.

“So we initially looked at this and said — It’s just long-term business building for us. And it’s the right thing to do. Today, it is a way for us to pull people in,” said the CEO.

As a business that fundamentally increases in value the more customers it has at the end of its network, it simply didn’t make sense to him to abandon middle to low-income individuals. In fact, financial inclusion has become a broader part of Mastercard’s effort to engage and build relevance to a wider global audience, whether by expanding access to pre-paid cards or partnering with small businesses.

“So, you can do well and you can do good.”

Personal Reflections and Growth

Now approaching almost a year as the leader of Mastercard, Michael opened up about the struggle of creating balance during the pandemic transition.

“We are living in a Zoom world but also a real world. One hasn’t stopped and the other one hasn’t quite started, so the question of how do you organize yourselves now is actually much more difficult than it was at the outset of the crisis.”

Like many of us, he also confronted a new reality that included a need to create balance, “With all the craziness that’s going on, I try to remain focused on some of the good things I picked up last year. Spend time with the family and find a few kinds of spaces to seek balance in life that goes beyond work. So I try not to fall back into bad habits and keep that,” said Michael.

Part of that balance? Reading great books, of course. Michael recommended Trillions by Robin Wigglesworth to the audience.