Excerpts of a virtual interview with Ajay Banga -Chairman of the International Chamber of Commerce (ICC) and the Executive Chairman of the USD 360 Billion MasterCard Inc had with Dinesh Weerakkody- Chairman ICC Sri Lanka. Mr Banga also served as a member of President Obama's Commission on Enhancing Global Cyber Security and the Advisory Committee for Trade Policy and Negotiations.
Ajay what is your prognosis for the world economy for the next 6 months?
Thank you for having me and greetings. It's wonderful to get a chance to connect with the community in Sri Lanka. Look, I think we're living through a really difficult time in a number of countries, while I'm relatively optimistic about the United States today compared to where it was, due to the progress made in vaccinations, opening up of the domestic economy and the responses made in the fiscal and monetary fronts. I have a relatively good view of where the US economy will go in the next couple of years. But that's not the case around the world and we have disparities between countries based on the inequitable spread of vaccinations and opening of the economy. The second aspect is the “digitization”. The acceptance of digital technology has become a big part of what we are doing. Look at us talking today, you would have rarely thought of doing something like this entirely remotely so that seems to have become our new normal. I can see in the US, the pendulum swinging back to something in between physical and digital, heading towards a digital divide. I think we have got to be careful about that, especially with a K-shaped recovery, where if you are a SME or a student who doesn't have access to the broadband or infrastructure or the affordability that comes with the internet, you are creating long-term social and economic challenges. Overall, I'm optimistic about the recovery, I'm worried about this digital divide. The last point is my concern about what has been exhibited up-to this point- the absence of global leadership.You know, it really became every man for himself in the pandemic. The Bretton Woods Institutions did not work, global leadership did not work, the G7 or G20 did not work that well, I think that's a problem and we need to think about what comes next and how we navigate through that, global institutions need to come together. This is certainly not the only pandemic that we will go through.
Given the importance of Asia what is your take on the investment climate in Asia post 2022?
I think Asia remains “mission critical” because you have a continent that extends from Japan to India and is home to half the world's population. These markets cannot be ignored by the world. So, my sense is that, if you make vaccinations available across Asia-Pacific over the next 6 to 12 months, markets will recover very fast. I am beginning to be a little more hopeful now with the commitments of the G7 to give a lot of vaccinations. And as you know the MasterCard Foundation has made a pledge to put in $1.3 billion into Africa, so private companies, governments are all beginning to step up. So I'm generally optimistic about Asia in 2022, I think 2021 will remain a little choppy because of these challenges we spoke about at the beginning. Therefore, we need to take control of the virus spread to keep the economy moving.
Moving on to your company what are companies like MasterCard doing to reinvent itself and what is the next frontier for credit cards?
First of all, I think there is a long way for electronic payments to go. So, the answer to the second question is connected to the first one, we don't care whether you pay with a credit card, debit card, prepaid card or from a bank account. Tomorrow, you may pay by rubbing your fingers together or looking into my eyes and some technology makes it happen or you tap your phone. I think people get excited about connecting billions of people with millions of merchants, tens of millions of businesses and governments through a fully enabled payment system. And that's the MasterCard that we have been migrating towards. It's called MasterCard because it's in our name. But you know Apple has Apple in its name and it does not sell apples. So, we really are in the payments business, account to account, movement of money in a safe way, in a simple way, in the most efficient way and using the data that’s generated from that to provide value added services via data analytics within the cyber security space. That’s the company that’s being reinvented. You know I have been CEO for 11 years and I just stepped out to become the Executive Chair and handed over to a terrific guy called Michael Miebach. When I joined the company, we had a market cap of about $ 19 bn it's now over $360 bn .Our company is today the single largest holder of patents in the payments industry,
Can you talk of the impact the pandemic has had on people and talent?
I think the biggest problem with the pandemic has been twofold; one is the unequal impact on women and SMEs. So, look at the United States (US) for example, a lot of the small businesses that got impacted were owned by women because they were in hospitality services, restaurants, trainers, theaters, the roadside coffee shop, the barber. A lot of the people that are being employed in these industries are also women so, there is a disproportionate impact which I think is a real problem. The second part has a great deal to do when people say you could work from home. Well half the American jobs cannot be done from home. If you are a hospital services provider or you are a policeman or a fire fighter, or FedEx, UPS, Amazon, Walmart you went to work. So, when we say you could work from home, we're only talking about the educated knowledge worker which is half of the workforce in the US.
So first of all that itself tells you that it’s not an equal world, the separation of home and office also went away; so in some ways while we found it is convenient to work from home as you can work in your sweatpants and the days could be a little more flexible, the actually fact is that their days got packed up by one zoom call after the other and a lot of young people are complaining of fatigue, are complaining of stress. And companies like ours have set up mental well-being lines, the number of calls coming into our mental wellbeing lines went up. We instituted policies of zoom free days, meeting free days, telling managers to give their employees gaps between meetings. The third aspect has to do with all these young people who went to college and graduated during the pandemic and got jobs. Can you imagine, finding a job where you would never go to work for a year. But you don't even know anybody and the only way you get to know people is on zoom or a video call. That's not the way to build a network, that's not the way to build a social system, that's not the way to get imbibed into the culture of a company, that's not the way to become part of the family. So, I think the pendulum has swung too far. Hopefully we will be able achieve a good balance soon.
You talked about a leadership deficit, what are your expectations from global leadership?
My expectation is that they actually do their job. We voted them into their jobs because we expect them to provide us with the required leadership. They should do their job and one of the things they have to do is certainly to look after their countries and their people. But also, to ensure a better world for us and our children. For example, how do we tackle global climate, global trade and tackle supply chains without global cooperation? The development of vaccines in record time for Covid-19 would not have happened without global cooperation. Next, how do we deal with future pandemics? The global system, multilateral system, Bretton Woods institutions they all have gaps, including the WTO. We want to create a WTO that is appropriate for our new world of data, digital and interconnected world, young people don't look at boundaries as the boundary of their country, the boundaries for them are the boundaries of social connections. We need to give them the right to their life and their world and so my expectations of leaders are, lead and show that vision and show that capability to execute.
There was serious concern about the role of multilateral institutions, especially the IMF?
It's not just the IMF, the IMF actually came forward with some degree of assistance but the WHO faced a lot of criticism. People lost faith in the WHO’s clarity of thinking, so they are now trying to build it back. I think almost every multilateral institution fell short in the pandemic, partly caused by failures of leadership but partly also caused by the failure of large countries. It is important for countries to agree on the basic principle. That is we are in this together; it's an interconnected world.
Talking about ICC a hundred year old institution, there is lot of talk about keeping ICC relevant. What is your agenda for ICC ?
In my view, ICC has played an incredible role as the “merchants of peace”, trade leads to peace, when countries trade, they don't fight, when people trade, they build relationships, and relationships is equal to peace and prosperity. So now, not everything was done right with trade. The beneficiaries of trade did not look after those who got hit, that's a mistake. Should we have done better with trade, with social safety nets, with new kinds of roles and opportunities in jobs? Yes certainly, but trade did reduce global poverty quite dramatically over the last 30-40 years.
So, I think the ICC’s role, first is to help to grow the economies again. We've been through a very challenging period that means we have got to get vaccines out there, because without vaccines how will economies recover? You cannot otherwise open, therefore equitable distribution of vaccines and the effort to get vaccines to countries around the world is mission critical which is why the ICC is doing so much work on a vaccine clearing house, as well as COVAX and WHO. Second, is to help revive global trade, and I think there are many challenges. One is there's a lot of local and bilateral and regional trade deals being enacted; in a way that's not bad, provided our members in the ICC are engaged with those to ensure that business is well represented. But you know too many regional and bilateral deals make it very hard for SMEs to engage in global business. SME’s does not have the resources to change their product lines to suit every country. SMEs needs standards because standards create level playing fields and level playing fields allow SMEs to do what they do well, which is to make a good product and distribute it. We must help WTO to achieve some prominence over the next few years. But we urgently need to get a few things done, the fisheries deal, the e-commerce deal, get some quick wins and then really work on the rest of the reforms in the WTO that are needed for the future of trade.
What is the next level for data and technology?
I think we need a Data and Technology Forum like a Board or some type comprising the regulators and leaders from the top countries in the world, so that we don't make mistakes in the future of data cyber security and technology. We cannot afford to have balkanized technology and balkanized data. We just simply cannot afford balkanized standards. Now in the past recession, we created the Financial Stability Board (FSB) in the G20 which enabled the big countries in the world to work well together on financial systems, which is why if you notice in this crisis; Fiscal and Monetary Policy worked pretty well across the world. It's not by accident, it's by hard work and effort of the FSB, we need something like that for data and technology, maybe a Data and Technology Board at the G20 level.
Then on the Sustainability Agenda?
We certainly cannot afford to ignore climate change, we must advance sustainably as businesses, and it is incumbent upon us to do that. So, if you're going to have new standards on ESGs for big companies, the big companies are only as good as their SMEs and their supply chain. So, we've got to find ways to enable SMEs to keep pace with the idea of sustainability which is why the ICC is doing a lot of work on its climate hub, SME 360x tools that allow SMEs to be climate and sustainability compliant.
Banks are facing fierce competition from fintech start-ups and tech giants like Amazon and Facebook, what should banks do to stay relevant going forward?
Well banks have to be willing to compete, they can no longer believe because they have distribution, they have strong balance sheets and that they have walled gardens, they have cover. Today regulators are breaking down walls. So, the banks have to compete with fintech start-ups and with retailers and they’re eminently capable of doing so. You look at banks in every country most of them are nimble and adapting very fast, they're doing a great job. I'm very familiar with HDFC Bank in India, nimble, competitive, digitally enabled, oriented for what the country wants. So, my view is that banks can compete but they have to provide the right capital and resources for new technology like cloud computing, customer facing AI and big data customer analytics and really look at the consumer, their problems and solve them. Now they need a level playing field with regulators, if regulators have a different set of regulations for them, that's not fair. They have to create a level playing field.
Big Data can help the banks increase ‘Customer Centricity’ which consumers want, are banks on track?
Banks have enormous information. Because when your bank account is in the bank, they know how much I earn, how much I spend, where I spend, how I spent, so if banks cooperate across institutions and share data with privacy protections in a way that enables for better delivery of product and pricing, so what is wrong with that? that is a good thing. So, I think that's the idea of open banking. But be aware that the fintechs and the retailers can take the data for their benefit, it has to be that the banks can also get their data, so you create a level playing field and then make the best company win. When the best company wins, the consumer will benefit.
What are the challenges around Cryptocurrencies?
Crypto currency are of three types; there is the basic asset-based ones like Bitcoin and others; there are those that they call stable coins which are not as volatile they connect them to some formal fiat currency, but they are still private sector issued, then there's the government issued central bank digital currencies which is a digital representation of fiat currencies.My belief is that currencies which are volatile and floating are not currencies. They are asset classes. If you are a sophisticated investor, well then go ahead and invest in them, but know that you could lose all your money, you can see bitcoins prices go up and down and its quite volatile. I think ultimately central bank digital currencies will have a real role to play in enabling the digital ecosystem that consumers are migrating towards, and some countries are already adopting them, others need to get there.
What we've done as a company is, we have laid out certain principles. First principle, it must be stable, so the consumers are protected; second, it must meet all regulatory and compliance rules in a country, a currency if it does not meet the needs of the country's government that is not acceptable; and third, it must have protection for the consumer, consumers must be protected from fraud, they are used to having chargeback rights, they are used to having dispute settlement rights, they are used to data privacy, they think about these things when they make their payments. cryptocurrencies have to satisfy all those requirements. We have already enabled some cryptocurrencies to be converted to fiat currencies and run on our network. We are working with central banks in a number of countries looking at other cryptocurrencies.
As a global leader what really keeps you up at night?
Two things mostly. One is everything to do with cyber security. And how do we make the world more digital. Also, for the world to prosper from the Internet of Things and for the Internet of Things to enable a new vision for medical care, education, and access to products. I think it can provide that; however, this will depend on the trust the public has on new technology. If we have frequent cyber security breaches the trust will evaporate and if trust evaporates people will not embrace new technology openly. Right now, cyber security and ransomware is like the coronavirus pandemic. People are still not taking it seriously enough, like the pandemic in the early days, they all thought it would go away. Now we're all taking it very seriously, well let's start doing that with cyber security, let's take it seriously and work smarter to manage the threat.
Finally, what is your message to the regulators and in general to investors?
If the perspective is about investing my view is that you should be confident that the world economy will come out of this crisis stronger. I think central banks and regulators are actually doing a terrific job of guiding the fiscal and monetary policy challenges. Some countries can do more, some have less resources, so they can do less, so we need to find a way for greater global cooperation where developing countries can be assisted by global institutions. Otherwise, we will end up increasing inequality in the global system. And that to me is not acceptable.
(Assisted by Nelumini Withana and Ruwan Senanayake)