At first glance, MasterCard's core business model would seem enviable: it collects a fee on every payment it processes. But while Martina Hund-Mejean, who became CFO last year, appreciates "the high profitability of this sector," she's quick to add a cautionary note: "We can never put our head in the sand." Hund-Mejean is constantly scanning the horizon for signs of what's ahead, in terms of both technology and competition. What market segment will attract new rivals and where will they spring from? What device is likely to replace traditional credit cards? (Hint: you're probably carrying one right now.) And with the economy forcing consumers to cut back on discretionary spending, how long will it be before MasterCard holders hesitate to plop down their cards so freely? Hund-Mejean doesn't have the answers, but she's well trained to look for them. A product of General Motors's rigorous treasury program, she assumed increasingly demanding finance positions at GM before serving as treasurer and senior vice president at Tyco International. That broad experience will no doubt come in handy at MasterCard, as economic uncertainties pile up as steadily as, well, credit-card solicitations from banks.
You have said that you are constantly thinking about strategy and ways to stay on the leading edge. Is that a new focus?
We are focusing on strategic planning in a renewed way now that the company is two years out of an initial public offering. We have a nine-person executive committee that consists of our CEO, Bob Selander; business partners; unit leaders; and myself. We meet every week for an hour and a half, and one full day a month. It's a great team.
MasterCard faces some interesting challenges. For instance, the House Judiciary Committee recently approved a bill that would require credit-card companies to negotiate fees with merchants, rather than letting the banks set those rates. How would the Credit Card Fair Fee Act affect MasterCard?
If the bill passes, it will harm consumers. Australia passed regulations slashing these "interchange fees" about five years ago, and it is clear that consumers have been hurt through higher fees and fewer rewards. Merchants are paying lower fees, but there is no evidence that they have lowered the prices they charge consumers. The result was completely contrary to what the legislators wanted to accomplish.
What about the technological hurdles ahead? Will cell phones ever replace plastic cards in the United States?
MasterCard's [tap-and-go wireless] PayPass technology has enabled us to lead the development of the communication standard around contactless payments for the industry, which ensures that cards and terminals supporting all contactless-payment brands are globally interoperable. This has led to the transformation of mobile phones into secure contactless-payment devices. We have been working with telecom providers and industry organizations to ensure that standards are met as mobile phones move to the center of commerce [see "Cash, Credit, or Cell Phone?"]. As of today, we have announced about 17 mobile pilots across all major regions.
What else is MasterCard doing to differentiate itself from its competitors?
We differentiate ourselves in three main areas. One, we can custom-tailor our products to fit a partner's particular need. For example, Lufthansa wants to make sure its frequent flyers are really using their credit cards and are having a unique experience, like going faster through security. We made a card for them to do that. We placed a PayPass feature on the cards so that users can make last-minute purchases at the airport. Number two, we are truly global, with about 50 percent of our revenues generated outside the United States. If we develop a new product in one part of the world, we can deploy it in other parts of the world. Our third unique competency is our professional-services arm, MasterCard Advisors. Through that group we provide information, consulting, and outsourcing services to our customers, the banks.
Will MasterCard's future business model look entirely different?
Unlike many other industries, the global payments industry is still in its infancy. Cash and checks are still the predominant forms of payment in many global economies, and this translates into tremendous opportunities for us to grow.
Given all the areas you have to be involved in at MasterCard, is there one that you find especially exciting?
I have a passion for strategy. Whichever proposition we're looking at, I put it in the context of "What does it mean for MasterCard?" — not only today, but years from now. I'm constantly focused on, What are we missing? What are we not thinking about? What is it that we don't know and how do we learn about it?
How do you figure out what you don't know?
From a finance perspective, you have to do a number of things. First, be very connected to the businesspeople in the company and be on top of where the business is moving or can move to. Having a finance group that is well connected and embedded in the business is key to this. Second, be connected to other external sources that provide objective input to shape the company's strategy. And third, engage in a constant debate on possible scenarios and prepare the company to either take advantage of those or make defensive moves.
What skills do you think an aspiring CFO needs most?
CFOs can come from various backgrounds. They'll need to develop expertise in areas like financial planning and analysis. It helps if you have been the controller of a unit, run a subsidiary, and have M&A, tax, and audit experience. By growing up through the General Motors treasurer's office, I was fortunate to get experience in most of those areas.