Question

1. What economic and Business factors/issues impacted mastercard between 2014 and 2019? How did these factors/issues impact the company? What actions did mastercard take as a result of those issues?

Answer 1

The merchant network story has been a phenomenal one for India. If you look at pre-demonetisation, India’s merchant base was about 1.3 million. Today we are in the north of 5-million range. We think the merchant universe story over the next 5 years will see significant transformation. The 5 million could look like 50 million in the next 5 years and that is a very significant step-up for India as a whole.

Let me talk about trends since you talked about 2016 and how the digital transaction space has seen a significant growth particularly in 2016 when we saw that big jump on account of demonetisation. What are the trends that you are currently observing because cash is back in the system, perhaps the delta is not as large as it would have been, had demonetisation not happened, but what are the trends that you are observing specifically when it comes to card usage. Credit card continues to grow; 26 percent in FY18 which is perhaps the best in the last 5 years but debit cards are not so; growth of just about 8 percent odd in FY18. So what are the trends that you are seeing in this space?

If you look at debit card, purchase volume numbers went up 300 percent after demonetisation. I would say for the first two quarters post demonetisation the watermark went up 300 percent. There was an expectation that once cash was coming back into the economy you will see a decline in those volumes yet it will be higher than where we were traditionally, but it would certainly come down from the peak period of demonetisation. Interestingly, that has not happened. You continue to sustain the volume lift that we saw during those very critical months. Yes, of course you are not going to see 300 percent growth every year. We saw some fairly robust growth in 2017. Regarding 2018, you were right, the growth rates slowed down. But as we look at the MasterCard network, we are seeing growth. You are right, credit is growing at a faster pace but not too long ago debit card volumes were only a fraction of credit card volumes. Today debit card volumes are actually bigger than credit card volumes as an overall market.

What seems to be getting in the way of growing the debit card side of the business? What are the challenges for you to be able to keep the

double-digit sort of growth numbers going? In FY18, growth had slowed down to about 8 percent year-on-year. Is it infrastructure challenges, costs? What’s the issue ?

There are really three things, some of it is beyond technology. Firstly, one has to keep pushing the merchant acceptance base. We got 5 million, we got to keep pushing ahead to expand acceptance. The other part where MasterCard is putting a lot of energy is the awareness building in middle India. You have to go beyond the big 15-20 cities and go deeper into middle India where we do a lot of our advertising campaigns. We have signed up Mahendra Singh Dhoni as our brand ambassador. Last year, we reached over 500 billion people in 8 vernacular languages. So awareness of digital payments’ capabilities and growth of what we call e-commerce into middle India are going to drive the volume growth story over the coming years.

None of this is going to happen overnight. I just want to be very clear, but it’s a journey that one will necessarily have to go through. We are seeing much stronger volume growth in tier-II and tier-III cities. We are seeing e-commerce growth at a fairly robust click and in the e-commerce space you do need a digital payment capability. We are seeing a lot of card usage, we are seeing IMPS and UPS grow, and as awareness grows the volume story will expand over the coming years.

The merchant community is an equally important stakeholder. Our partnership with the Confederation of All India Traders, with whom we have been working for the last 4-5 years, is again driving education of merchants on why digital is important. As we drive that education, we bring more of the informal economy into the formal economy