Mastercard realigns business structure, NY Fed joins cross-border test

April 10, 2024 10:27 AM

Mastercard established a new structure for businesses focused on card acceptance and transaction processing, new payment flows and value-added services. Separately, the Federal Reserve Bank of New York is joining several countries' central banks in a test of tech to support cross-border transactions.

Here's what's happening around the world.

Daniel Acker/Bloomberg

Mastercard realigns around global money-movement trends

Under intensifying pressure to tap new sources of revenue amid a changing payments ecosystem, Mastercard on Tuesday announced plans to realign its organizational structure into three separate business areas beginning May 1, with key executive changes effective immediately.

Mastercard's core business of credit and debit card acceptance and transaction processing — along with support for instant payments — will be consolidated into one unit, while the card network's fastest-growing products including value-added services and new payment flows will be housed in two separate units, according to a press release.

The moves are aimed at diversifying the firm's revenue sources and capitalizing on growth opportunities, Mastercard's CEO Michael Miebach said in the release.

Analysts in recent quarters have flagged the need for Mastercard and rival global card network Visa to diversify their revenue sources in the face of competition from providers of faster payments, open banking and account-to-account transfers, along with downward pressure on credit and debit interchange. Mastercard's net revenue from value-added services in 2023 — including fraud-fighting and security tools, identity and authentication, data analytics and consulting and loyalty solutions — rose 18%, compared with a 10% increase in its net revenue from payments.

The change could help Mastercard's mission to squeeze more revenue from emerging products, but analysts at JPMorgan Chase this week said in a note to investors that Mastercard's strong results from value-added services during the first quarter of 2023 could make its comparisons in these areas tougher when Mastercard reports its latest quarterly results on May 1.

As part of the realignment, Mastercard appointed Jorn Lambert, a 22-year veteran of the firm, to lead its core payments unit as chief product officer. Previously Lambert was Mastercard's chief digital officer.

Raj Seshadri, who joined Mastercard in 2016 after stints at Blackrock and Citigroup, will head the commercial and new payment flows area, which encompasses small-business and commercial card payments including those from fleets, virtual cards, travel and entertainment, direct bill pay, remittances, disbursements and business-to-business payables and receivables, Mastercard said. Previously she was president of data and services.

A third unit, simply called services, will cover Mastercard's thriving value-added services including fraud-surveillance tools, cyber and intelligence, data and open banking, led by Craig Vosburg, who Mastercard named chief services officer. Vosburg, who has been at Mastercard for 18 years, previously was Mastercard's chief product officer.

Vosburg will also supervise the Data and AI organization, a new group led by Greg Ulrich as chief AI and data officer, who will focus on the commercialization of AI and data for internal and external uses.

Ajay Bhalla, Mastercard's president of cyber and intelligence, is retiring after more than 30 years at the firm. —Kate Fitzgerald

N.Y. Fed joins central banks in cross-border tech test

The Basel, Switzerland-based Bank for International Settlements and seven central banks have launched Project Agora, which will test the feasibility of a tokenized "unified ledger" approach to cross-border payments, according to Bitcoin.com. The effort will harness tokenized deposit-backed products and central bank digital currencies in an attempt to create secure, streamlined cross-border payments within a single decentralized ledger. Participating banks include the Bank of France, Bank of Japan, Bank of Korea, Bank of Mexico, Swiss National Bank, Bank of England and the Federal Reserve Bank of New York. The Institute of International Finance plans to invite private institutions to participate later this year. —Kate Fitzgerald

Zimbabwe tries new gold-backed currency

Zimbabwe has launched new banknotes backed by gold that the country's central bank hopes will stabilize its inflation-plagued monetary system, the BBC reports. ZiG — which stands for Zimbabwe Gold — replaces the Zimbabwean dollar, which lost 75% of its value in recent months. Annual inflation in Zimbabwe reached 55% in March, its highest point in the last seven months. By the end of April, banks must convert balances to ZiG and local citizens must exchange older Zimbabwean dollar banknotes for ZiGs that come in denominations from 1 to 200. Zimbabwe abolished its currency in 2008 and in 2016 introduced a new "bond note" currency pegged to the U.S. dollar; this new note subsequently crashed when the government printed excess money. The U.S. dollar, which accounts for 85% of transactions in Zimbabwe, will remain legal tender in the country. —Kate Fitzgerald

Swan adds Wise for embedded payments

Paris-based Swan, an embedded finance firm founded in 2019, has formed a partnership with London-based Wise to enable Swan's business customers to send and receive funds instantly from more than 190 countries, according to a press release. The move will enable Swan, which processes payments for more than 100 companies in 10 European countries, to integrate Wise into its platform and extend international bill-payment services in 20 different foreign currencies to its customers through various online channels. More than half of Wise's cross-border transfers settle in less than 20 seconds, the release said. —Kate Fitzgerald

Kazakh central bank seeks to break lenders’ grip on payments

Kazakhstan's central bank wants to weaken the hold of the country's two largest lenders over payments by introducing a new system to facilitate transactions with universal access early next year.

"I told the banks' chiefs, 'we must make a system that will be available for all,'" National Bank Governor Timur Suleimenov said in an interview. Two lenders may have built an oligopoly in the Kazakh banking system, controlling 80%-90% of payments, he said, without naming the banks.

The central bank plans to introduce a pilot program for a QR-code-based payment system and extend it to all lenders in the country during the first half of next year, he said. That project may lead to less earnings for some banks, he said.

In 2022, Kazakhstan launched a domestic, interbank card payment system, which featured two services: tenge transfers between individuals and QR-code payments. Under that system, transfers are available for customers at nine of the country's 21 lenders, but that doesn't include the two biggest banks.

The banking industry is dominated by the country's two largest lenders, which in turn currently facilitate the vast majority of payments. Kaspi.kz alone handles about a 70% share of transfers and payments and Halyk Bank about 8%, according to Bloomberg calculations based on data from the lenders and the central bank.

Kaspi.kz serves 14 million monthly users in Kazakhstan, which has a population of 20 million people. Part of its offering is the QR application, "which is the backbone of our proprietary payment network," Chief Executive Officer Mikheil Lomtadze said during a February conference call. Customers using other banks' applications can't pay with Kaspi QR, which the lender says is Kazakhstan's most widely accepted payments method.

"We will always support steps to make digital payments even more accessible," Kaspi.kz told Bloomberg News. "In fact, we encourage the National Bank of Kazakhstan to go even further and introduce an open banking platform, which will lead to more competition between payments providers and will make payments and money transfers for consumers and businesses more seamless."

The lender stressed its application was "popular with consumers" even "with global companies such as Mastercard, Visa, Apple Pay and Google Pay competing against successful local players including Kaspi.kz, Halyk Bank and others." Halyk Bank didn't reply to a request for comment. —Nariman Gizitdinov, Bloomberg News

BOE’s Breeden says digital pound needed to keep grip on money

Bank of England Deputy Governor Sarah Breeden signaled growing support for a digital pound, saying the central bank needs to maintain its grip on money to stop the risk of a collapse in confidence.

Breeden — deputy governor for financial stability — said it is "crucial for us to be vigilant to preserve the share of central bank money settlement.

"It's the relevance of central bank money that underpins market confidence in the exchange rate between central bank money and commercial bank money," she said Monday at a Swiss National Bank event. "If this confidence were to erode for whatever reason, whether it's stress or even if driven by perception rather than the reality, the result could severely destabilize market functioning."

The remarks suggest that officials increasingly believe that a central bank digital currency will be needed in the future. The BOE has started design work on a potential digital pound, but a final decision on whether to go ahead hasn't yet been made and would have to involve the U.K. Treasury.

Breeden was referring to both retail and wholesale CBDCs, as the BOE explores technology to serve both consumers and businesses.

The BOE is developing a CBDC to ensure consumers have access to a form of "public money" issued by the central bank rather than just "private money" from commercial banks as the use of cash dwindles.

"If the emergence of new private settlement assets — stable coins or new forms of commercial bank money in the form of tokenized deposits — if they move settlement away from settlement in central bank money that could increase pockets of financial stability risk," Breeden said.

"Any loss of confidence in money would be irrevocable and so the bank, and I think other authorities globally, have tended towards a safety first approach and encouraged greater central bank money use over time." —Tom Rees, Bloomberg News