Chief Future Officer: Sachin Mehra, Mastercard

CFO Sachin Mehra knows this boom is likely to fade, and he's set on finding ways to keep the momentum going. The key to being successful in this kind of environment is to have a diversified portfolio. You've got to be nimble from an expense standpoint. You've got to be very disciplined as a finance officer. What I've got to do is make sure that we are investing... The top line for me is advisor and confident, conciliatory. Yes, he's quite happy pushing back at the same time. The role of the chief financial officer has actually changed very dramatically over this 20-plus-year tenure that I've had. In the past, it was more of a function of let's make sure the numbers are good. Let's make sure we have a great control environment. Let's make sure we're actually able to close the books on time. Let's make sure we've got all the financial elements of the business in order. The job of the CFO, in our view and in my view, is a function of making sure we are creating that right linkage between what the purpose of the business is, what the strategy of the business is, and delivering on it.

We've been on a six-year strategy to be a multi-rail company. In plain English, that means whichever way you pay, we will enable that. Despite the fact that card is in our name, it's essentially any type of payment. We have the rails, so I think we're reasonably well positioned. I mean, you've just got to recognize... Consumer confidence has been plunging to historic lows and recession calls are getting louder. Still, a slowdown isn't likely to cause a crisis for MasterCard and its peers. Contrary to what people often perceive, I think financial services as an industry will be quite resilient in a downturn. Generally speaking, even during a recession, the amount that consumers spend actually does not go down. It continues to grow. I think the thing that people are worried about in the payments industry is more how the mix of spending changes. The first thing that typically happens if you're going into a recession is that people tend to pull back on discretionary categories of spending and move into non-discretionary. The distribution models are the same, so those areas don't necessarily change by virtue of moving into more of a debit or credit environment.

We think there's tremendous promise in the B2B area. The card business elements of the B2B space which are sold by cards are doing well. They're doing very well. And it's in the small business space, in the mid-market, in the large corporate space. All of them do really well on the accounts payable side. I would say we're in the build phase, and here we're about building an open loop environment to enable B2B. It isn't quite established yet. And I think the more benefits we bring into the payments that are easier than just making a really complicated cross-border payment, I think we will find a way there, and we're going to see an explosion of creativity. A lot of other companies coming in and using those rails, innovating on top of them.

Tapping into a lucrative revenue stream, what we call services, which includes data insights, consulting, managed services, loyalty, and our fraud capabilities, is roughly 35% of the revenues of this company. So it's not insignificant. So oftentimes people... Acquisitions and taken on more debt gave the company flexibility to continue investing. We don't go in and say, 'Well, right now valuations are lower than they were a year ago, let's go and buy something.' That is an opportunistic approach and doesn't work for us. For me, it always starts with what we are trying to accomplish from a strategy standpoint. What are our inherent capabilities as a company? What are the gaps in our capabilities to meet that strategy? And then, is it best to build, buy, or partner? And then we're out there trying to find the right companies. We're going to make sure that we have a clear view on short and long term synergies and so forth. And then we talk to shareholders and to investors to explain what we're doing.

The first call on capital is to growth of the business. We have done that. It's about making sure we're being good stewards of capital and returning excess cash to shareholders, with a bias toward share buybacks. And then once you start to say, 'I have dealt with my strategic priorities, I have either invested in organic growth or in acquisitions,' then excess cash we will return back, generally with a preference for buybacks over dividends because it gives us more flexibility. But that has been a good model for us. It's been working well and has been well received by the market.

I grew up in India. I went to school there, undergrad there, worked with the family business. There was a textile business which my grandfather started, and my dad and my uncle took over. And then my brother and I got into it. My brother was older than I am. We went to business school as well, and went back home, and my dad got on the phone, congratulated me, and said, 'So, Sachin, what are you going to do with your life?' And I'm going, 'Well, why are we having this discussion?' Dad wants me to come over to the family business. He's like, 'Yep, that's what dad wanted. What do you want?' And then it really got me thinking. And I said, 'Hey, given a chance, I'd love to work in finance in the US.' Mehra took the chance, even though it took him six months to land his first job at General Motors, where he worked for over a decade. Then it was on to the energy industry at Hess Corp., before finding his way to MasterCard. Today, my dad couldn't be prouder.

If I just go to regular coffee with this, that will be $5.71. Got it. All right. We can make this work.

The difference it has made in terms of driving a shift from cash to electronic forms of payment, particularly on small ticket items, is really really important because at the end of the day, our model is as much about converting the dollar value of the spend as it is about the number of transactions we can get over it. And even though it happens to be a $2 transaction, a transaction is a transaction on which we make revenue, on which we can deliver services. And that's really important.

I would say we first invested in this many, many, many, many years ago. The adoption rate on this in the early part, even in markets...

Look, I mean, for us we're agnostic as to whether somebody is using the chip technology or the contactless technology or using the magstripe, which was the old way of doing business. We get revenues which are quite similar across both of those. The revenue potential and upside for us comes from the fact that now more spend is being done on card-based forms of payment than was being done in the past. So we're converting that cash over to electronic forms of payment, and that's where the incremental revenue comes from.

Yeah, so look, I think this is going to take a while. These things have an adoption curve which typically is fairly flat in the early part, and then you start to see some level of steepness.

And if you overlay that and link that back to our tech hubs in these regions where we have them, clearly that is what's driving our new solutions. From an investment standpoint, we try and make sure we've got our foot in the door in all of these new and emerging technologies, because what we don't do is play favorites with one versus the other. We want to make sure we're investing just appropriate amounts of money to have skin in the game, to know that if this thing has got legs, we want to be at the inflection point.

Satya Nadella tells me what advice he'd offer a CFO just starting out in the job. I think it's important to stay calm. I think it's important to recognize that change is going to happen. You can't fight change. This is Bloomberg.

I think from a payments and payments system perspective, players are in very early stages. But if I am a private company, it's better to invest and be in a partner. Some of these companies' future revenues made sense. Sitting on the sidelines... Crypto is a term that encompasses a number of different projects, including central bank digital currencies and private sector stablecoins, also digital assets like Bitcoin whose volatile valuations and susceptibility to fraud have raised plenty of anxiety among investors. MasterCard's long-term plans are to stay in this space. We're not really into crypto hype. We're investing around the crypto ecosystem, the fundamental technology and the promise that it brings to solve problems that have not been solved. So people use MasterCard card products to buy crypto with debit and credit products. So that's the on-ramp. If people want to spend money, as in fiat currency, to buy crypto, that's the on-ramp. And the off-ramp is when people want it in cash, we will help them actually gain access to be able to use their crypto balances everywhere MasterCard is accepted. We engage with central banks on central bank digital currencies. We engage with governments on how policy could look, how regulation could look. We engage with the startup community and say, 'Come on in. Let's sit around the table in one of our tech hubs and discuss what solution actually is needed by whom and how we can bring it together.' They have the greatest idea, but the greatest idea needs a path to scale. That's what we can bring.

The principles we care deeply about are stability, as in stability of the currency in question. Point number two, it must meet consumer protection requirements. It must meet the laws of the land. And this is not new news to us. We've done this in the space for the last 50 years. For everything we've been working with regulated financial institutions on. So which is why when we got into this space, the first thing we did was define principles. And we will keep abiding by those principles in what we do. I feel happy because we're in discussions shaping that ecosystem. And then one day it will look like what we have done in many other spaces over the years.

If you think about it globally, there's a ton of cash which remains to be electrified, and that opportunity is huge. The second pillar for me is around... We have identified over the past few years a sizable total addressable market in what we call new payment flows. Bucket number three is our own services. It goes back to our insights, analytics, our fraud management capabilities, and everything we're doing in that space. And then the last piece of our new Netflix is our open banking and digital identity.

So that's number one. Number two is, look, the world is getting more and more into a regulatory environment where regulation and the regulators are playing a bigger role. Nationalism is playing a bigger role. It's important for us to continue to do everything we're doing by being deemed local. It's important to be a global company but be deemed local. And that's going to be important for us to execute on because, at the end of the day, sitting in my role as the CFO, strategy is great. Vision's fantastic. But what really matters is can you really deliver and execute. And we've got to stay focused on execution. And that's what we do every day.

I think it's important to stay calm. I think it's important to recognize that change is going to happen. You can't fight change. What? They should believe that you are a good investment. And notice I've said nothing about financials. I've said nothing about necessarily financial infrastructure and systems, because I do believe as a CFO all those things are table stakes. You've got to make sure that stuff happens. You've got to leverage technology. You've got to drive efficiency in the business. You've got to get the numbers right. Have a good control environment. What's going to color your board are the other elements which I spoke about.