#USISPFIndiaSummit2024: Michael Miebach, CEO, Mastercard & Frank John, COO, Lockheed Martin

But we're going to talk about each of their individual India businesses. Both companies, Mastercard and Lockheed Martin, have been in India for decades now. There has been a learning curve, and everyone here in the audience will sort of benefit from hearing of that learning curve. There's also been the opportunity to try and understand what India can do better, and we hope, since the minister is not on the panel now, there will be some candor in terms of that. We can talk freely.

And then we'll try and get their views on the two or three current challenges that the world is facing, whether they're geopolitical and election related, or the technology and artificial intelligence related. So with that, I'm going to start first with you, Frank. You've had a business that's been in India that spans from the Hercules to manufacturing fighter wings. And I'm trying to understand how much more India growth can Lockheed Martin unlock. What are the current numbers in terms of how much you manufacture here and how much you hope to grow that by over the course of the next 2 to 5 years?

Now can you put a number to that?

So you think they'll be significantly more? Would you put a number to that?

I know, I know. It's very good. All right, what is standing between you and the manufacture of entire platforms and munitions? What do you expect will be the challenges on that path?

Okay, I want to come back to questions about building out that supply chain, the challenges you face there, but also actively get your views on some of the orders that are currently underway and where you see Lockheed Martin standing in that. But before that, let me go to Michael and get some thoughts. India's been this fantastically growing payments market, financial services market. So you've got growth on the one hand, so attractive, and then you've got UPI on the other hand, which is this deep competition for you because there's no fee involved in it, and it sort of hurts the profitability of all other financial services companies. So what do you make of the potential growth possibility in India for companies like yours?

So there's tremendous potential here. And instead of talking about the journey, I want to talk about tomorrow. So tomorrow I'm going to open Mastercard's largest facility in the world in Pune. We're going to have about 8,000 people. And the reason we do that is because there is tremendous potential in the digital economy in India. Okay, so I think that underlines that very clearly. Now, we've been in a country for 40 years. I promise I will not talk through every single year. But back in the day, we were all about cards, as the name indicates, and it was consumer card propositions, and it was essentially an off-the-shelf solution coming into India that didn't really cater to the local needs, at least of the larger part of the population. That worked well for a number of years. And if you just look over the course of the tremendous journey since UPI, you talked about it, Aadhaar and the India Stack came into play. It has unlocked the power of 1.4 billion people. It's a growth opportunity for them, for their lives, their businesses. And we're on that journey that is tremendous. And this is why we're investing into the future. Because what we have learned here and what we're doing, what these 8,000 people are doing, is also looking at how do you grow in a market that's gone mobile first. I mean, how do you go into a market that has leapfrogged? Because India is setting the scene for many other countries around the world. So this is a very exciting chapter. You could take a view that this is competition, but then we might still be playing the same game. We're playing a different game. And India is a voice around the world. India is the voice of the global South. So we will see the India tech elsewhere, and we will engage, and we'll do that constructively and see that this tide that rises everybody's boat. What kind of solutions can we put on top? And they will go way beyond consumer payment solutions. They go into commercial payment solutions, buyer-supplier, reiring supply chains, as our secretary senators talked about. So fantastic growth journey. Before you ask, we never reported numbers on India.

Are you sure? Are you sure?

Yes. Okay.

What are those 8,000 people in Pune going to be doing?

So that number you could give? Yes, I just did exactly. So this is now official, actually would have only been said tomorrow. What are they doing? These are computer scientists, data scientists. They're innovating. They're building in partnership with seven other global tech hubs around the world in kind of a network. We have them here because of the talent base, because of the tech ecosystem. A big part of our growth opportunity is engaging with the fintech community, and it's a thriving one here in India. And they're going to be crafting products that you will take to the rest of the world.

Exactly. Great. That answers one part of my question. It doesn't answer the second part, which is UPI. Because India is also a big market for...

Actually, if I can push back on that, I did give you an answer. The answer is what has happened here is opening up a digital economy that wasn't there before. So the government stepped in to see here's all these people that are not part of the digital economy. Increasing the digital economy is the economy. So we got to pull them in, and that's what the government did very successfully. These are all people that come into a digital ecosystem, and they will be looking for choice over time. So this is a public infrastructure piece, like roads and railroads and so forth, but that allows people to move on those roads and allows us to engage with those consumers over time, as well as our customers, which would be financial institutions, fintechs, and so forth. So I find this is an unlock of a new model, as I said before, that wasn't there before.

Okay, great. That new model, can you give us any more details of how you hope to be able to serve this evolving India market? Not just build products in India for the rest of the world using the incredible talent that we have here, but actually service the India market in itself, because the payments business in this country has changed dramatically in the last decade. And how do you do that profitably?

Yes. So let's take a few sectors of the market. So this is one of the countries where you have the largest numbers of small and micro businesses in the world. They are, I would say, the powerhouse of India, and they are chronically underserved by the financial sector. Just making a payment from A to B isn't the answer. Using that data and allowing these small businesses to get credit access, that's for example something that we do where we apply our set of services around it. Take cybersecurity. Everybody in such a large digital economy needs cybersecurity solutions. More than close to 40% of our revenues globally are from payment-related services that we can bring into India at a totally unparalleled scale than was there before. So there's a whole range of buttons that we can press. Fundamentally, back to the point of global supply chains, more and more companies will come into India, you know, as rebalancing from China and various other things that are going on. And yet again, here you see a commercial payment sector that's been rather antiquated for decades. You would notice when you look at your commercial payments. It's a tremendous opportunity for us.

Okay, great. I'm going to come back to challenges in just a bit. No numbers. But before that, supply chain building, Frank. You have something called LM Ventures in India that has helped finance your supplier base and give them the opportunity to grow alongside the business that you provide them. What has that experience been like, both in terms of quality of manufacturing, because that's even more critical in your business, and the ability to achieve scale as your business grows in the country?

Quality and scale.

Okay, you're in the running for a large medium transport aircraft order. Yes. Are you going to win it?

When will you know if you've won it or not?

Will you have to make any more commitments to manufacturing in India to actually win it?

And you see the scope for adding to that MRO facility irrespective of whether you get this order or not? Do you see the scope as a large one?

Well, I would say it's limited to the aircraft in the region and the Indian fleet. You're also in the running for India's potential order for multirole fighters, if I understand that correctly. But that's not yet a more final timeline. It's not as close a deal as that. That one's a little further out.

Your chances are good in that?

So India will be what part of your business, let's say 10 years down the line, both in terms of what you're supplying to the Indian government but also what you're manufacturing here? If you can't give me absolute numbers, maybe a proportion of your overall book might help.

Excellent. Thank you so much. Thank you. Michael, still no numbers?

No.

You can check in in 5 minutes again.

I actually will. Yes, that's what they teach us in journalism school. Keep coming back.

Yeah, just keep going back. You spoke of serving parts of the commercial transactions market or the commercial business market. I also did read that you've just tied up with ADM to be able to reach some of your solutions to the agricultural community, if I'm correct. I want you to sort of quantify or expand on your previous answer about the India opportunity and doing business in India in terms of new segments. Like, will agriculture grow to be something significant for you?

Right. So first of all, let's come back to the model and how it overall works. So we provide payment solutions and we provide a whole range of services that make these payments either safer or smarter or more insightful. Any one of the above. Cybersecurity was one example I gave earlier. We make our own payment safer, we make other people's payment safer, and so forth. So that is the model. It all starts with a transaction, a digital transaction happening. So with a significantly enlarged and rapidly growing digital economy, you have an underlying secular trend which is a big part for our industry, very unique, where India shows a massive secular trend to produce more digital transactions. Different business models, your fintech ecosystem produces a whole different set of transactions that even didn't take place before. So earlier we had somebody on stage who was talking about micro payments in the gaming world. That's a big growth opportunity. Think about all the delivery services that exist that might have been a cash payment at some point in time, but now it's multiple payments where somebody pays a restaurant, they pay again somebody else, an aggregator, a website, and so forth. So for the longest time, India is going to be a huge opportunity as a function of its scale. You talked about scale earlier, Frank. So that's a starting point. So if that's good, then we have to have solutions that make people decide to use our solutions within that. So for commercial, for delivery services, for the farming community. Is farming going to be huge? I don't know yet, but it matters for India. So what we decided to do is, yes, a farmer needs to buy seed and a farmer needs to sell their produce. Okay, these are two payment flows. What is the problem that isn't yet fully solved? The issue for the farmer is price transparency. Where do I get the best price for my product? Right. The issue is also there's potentially a whole set of middlemen that obfuscate what the price is. If you do all of this in cash, you will have no track record to go to your local bank and say I need to buy enough seed for the next time harvest. So I don't have data, I don't have price visibility of any of that. That's what the Mastercard solution does. It's not a credit card, so it's something entirely different, but it uses the same technology that we have.

How many farmers are there in India, Gautam? I know lots. You've enabled 2 million already?

Yeah, so on the platform we have 3 million actually. But yeah, yeah, on... yes, and actually that's been said publicly. 3 million are on the platform already here in India. We this platform is now put into East Africa as well. So interesting. So everything, it's a sector that matters. And if it matters to India, because we want to be on the India journey, we said okay, let's take a look and see how with our technology we can solve something. Go back into small business. We talked about that earlier. Actually, similar kind of opportunity where you go and you take the data that a small business has, which is unstructured, and you turn it into a structured set of data that allows them to find customers more easily, to go online more easily. Once they are online, that they actually safe through cyber solutions, etc., etc. Take the value chain of a small business. We put all of these solutions into kind of one box, like an in-a-box kind of solution, and it levels the playing field. They can compete much easier against a startup that might have just been starting off as a very technical company or as a larger company.

So I am I assume that retail payments and commercial payments or businesses, small businesses, are two of the largest parts of your India revenue model?

So we've never really said that. I just... yeah, so I'm... let me explain again. Let me explain again. I got the... I'm just asking if they're... yes, there are two important parts of your India revenue model.

Okay, great. Yes.

We pay... we are a payments technology company, and there's a range of services that come along with that. And this is really important to understand. It's about just under 40% of our revenue, and it's really important to note that if somebody else has another payment solution, we are ready to provide our cybersecurity solutions. We have a deep partnership with the Indian government on cybersecurity, for example.

I understand. But the reason I was asking though is not to doubt the gamut of products that you have, but regulation in India has been interesting over the last few years when it comes to financial services and the payments industry. Earlier this year, you had the Reserve Bank of India, which is India's central bank, I think clamped down on certain services that you and Visa were providing when it comes to exactly what you were talking about, services to small businesses or commercial payments. More recently, we've had a new rule come into effect in India where if I was applying for a credit card, I could choose the card company of my choice. Decades of building relationships with banks to market cards in India, whether it's Mastercard or Visa, were put to waste with that move. So I'm curious as to how you quantify the regulatory risk in India.

So earlier we had the secretary from the IT ministry on stage sitting round about right where I'm sitting, and he said the following: he said reform is a constant process. It's a... there's never an end to it. And that is still true. So in the Indian market, we have a set of evolving regulation. They come partly from lawmaking, partly it's the regulator. So all of this, there's new sectors emerging. We just talked about something where there is no regulation, artificial intelligence for example. So it's in flux. When you take the one last example that you just gave there, providing a consumer a choice, I think that's fundamentally a good thing. And consumers in the end make a decision on the basis of what solution do they like the best. This is the standard in many other markets around the world. So I find this... there is constant progression in the direction that India wants to go. The good thing that I find is you have a government. If Minister Goyal would be sitting, he would probably sit in the middle if he were here. One thing I would say about him... so I'm part of the US-India CEO Forum, obviously here to work that US-ISPF is doing. You have a government that's listening, that's reaching out to the private sector and saying tell us what works and what doesn't work. At the last US-India CEO Forum, the last session was okay, where are the actions? What are we going to do? And that's taken away and that finds its way into lawmaking and into a government approach. And we take a lot of comfort from that, which is why I'm opening this big facility here tomorrow.

You're good with the regulatory environment?

I'm very good with the approach that we're going to ask, we will consult, we will evolve. That's a very good approach.

All right. So one last final question, because both of you have already spoken of AI and the role it's playing in some ways, illustrative ways in your business. So the last question is the known unknown that we're all facing today, and this US-India relationship is facing as well, which is the US election. I'm not going to ask you who's going to win, but I do have to ask you, will this relationship progress at the same speed that it has or faster irrespective of who wins? Or do you think comments from the candidates, for instance President Trump saying India is abusing tariffs in response to the high customs duties we have in India, will that impact this relationship significantly? Frank?

Okay. Can you tell us who you're backing? Lots of American CEOs have come out and made their preferences public.

You win. Same question to you, Michael.

So what Frank just said is fundamentally true from our perspective as well. So the geopolitical environment is the same environment for India and the US after this election. The fundamental balance where the world is between various powers at work, I don't think will dramatically change. There's been policy that's been fairly consistent between the previous administration in the United States and the current administration. So that hasn't so dramatically changed on the foreign policy side. From that perspective, I don't expect any dramatic changes as far as the India relationship is concerned. The other thing is I come right back to the secular trend in a rising digital economy. The digital economy will power on regardless. AI will power on regardless. And that is what our company is doing. So from that perspective, we're not worrying about that either.

Do you have a pick between the two?

I'm a German citizen. I can't vote.

Sorry. If I didn't know better, I'd have said he rigged that. Well, thank you for being a fabulously attentive audience, but most thanks to both my panelists for waiting out the day and for a great conversation. Thank you so much.

Thank you.

Thank you, Michael and Frank. And Manai, it was like two against one.