Interview: MasterCard's Ed Glassman

New York - MasterCard Worldwide Global Commercial Products Group Executive Ed Glassman in March spoke to BTN editorial director Jay Campbell following his speech here at the annual Commercial Cards & Payments Summit organized by Commercial Payments International. Glassman said his conference presentation focused on the "huge opportunity" in the corporate sector. "If you look at who is in this commercial payment space—ourselves, Visa, American Express and then lots of domestic schemes—and add them all up and see how much business that is, it’s about $1.7 trillion," he said. "But if you look at the total spend by corporates and governments around the world, it’s nearly 100 times that size, about $109 trillion. That’s twice the size of consumer spend." Glassman also discussed globalization, new technologies and other developments. Excerpts follow.

Is the opportunity for growth largely about globalization?

You would think it would be, and if you look at raw data, yes. The growth rates in emerging markets are much faster than developed markets. But even here in the United States—the most sophisticated market in the world from a commercial payments perspective—we see tremendous growth opportunity because frankly there is still a lot of terrible payments behavior. We are awash in checks, and checks are terrible instruments for commercial payments. They're slow, don't carry data with them and don't make it easy for either the buyer or the seller to do what they really want to do, which is to really have a tight activation of a commercial transaction, a payment transaction and a rich linkage between the two. That's true whether you look at the world of T&E or the B-to-B world. There's some different priorities as you get down into the SME space, where it's much more about cash flow and working capital and the ability to get paid in a reliable fashion, not worry about the collections side of the business and really focus on growth. Money is that fuel for growth in a small-business environment. That's where accepting cards and using that as a collections mechanism is tremendously powerful in the SME world.

Is there a different approach at MasterCard to commercial payments than there was five or 10 years ago? Is it more of a priority now?

Commercial has always been a big area of interest at MasterCard. What's changed in five years is the realization that we have a unique place in this ecosystem with the role that we play, with the data and the analytics that we can create and with the tools that we can bring to bear, and the experience around it in an otherwise fairly commoditized world, and frankly the payments world is a highly commoditized world. To have really differentiated solutions in that space—for instance, [reporting platform] Smart Data is a really differentiated solution. Smart Data coupled with the rich data that we have in the network makes it an incredibly powerful solution for lots of those participants, for that end corporate [user] and the way in which they experience their trip and handle an expense account, and for that corporate card program manager to see their spending around the globe, even if they're running with different issuers or have it on different brands. As an issuer, you now have a line of sight about what's going on at your customers, and it gives you the ability to have a much faster understanding about what's happening there and allows you to play the consultative role you aspire to. Whereas before, unless you showed up and asked all the right questions, you might not have known what was happening even with your own customers.

There's a realization that we can and do play a very important role and that this is a really big business area, whether you compare it dollar for dollar with the consumer space or compare it in terms of market maturity. We've really focused on it much more extensively, and it's a long haul and one of those things where you really need some core competencies to add value.

A few big changes seem to be related to emerging technologies and different platforms and formats—mobile wallet, chip-and-PIN, etc. Which of those are important?

There's lots of really cool technology that's really playing an important role from an innovation perspective in the payments world. An example: virtual card. In B-to-B, we've had virtual payments for a long time. What we've added to the mix is the combination of single-use accounts with controls wrapped around them that give a much stronger trust and competence to that buyer, or the set of actors on the buy side. If you're a corporate, you want to have a set of policies, and then make sure that your people behave according to those policies. If you can do that by influencing behavior before the commercial transaction happens as well as get the rich information afterward to understand what happened and continue to coach the whole business ... And it really is a coaching thing. How do you drive compliance? You can look at almost every business in the world and they might have policies, but how do they put those policies into play? Do they say it is mandatory? What's the difference between saying something is mandatory and actually getting compliance? That's what things like single-use accounts coupled with time controls, amount controls and merchant controls can do in this card space. It also gives a tremendously effective way for people, especially on the merchant side, to reconcile. The fact that they don't see the same number again and again from a repeat buyer—and lots of B-to-B relationships are based on repeat business—that they can have a unique number associated with the transaction makes the reconciliation process much easier.

There is an initiative to bring the chip-and-PIN format to the United States. How is it going?

The United States is one of the last markets in the world that hasn't adopted chip-and-PIN. That is changing. We have an EMV—EMV and chip-and-PIN are kind of synonymous. We have a road map for a chip-and-PIN deployment. There are a lot of things that need to happen. We need changes with the systems, at the point of sale, with the physical card people are carrying. There is lots of training across the enterprise that needs to happen. But there are lots of benefits associated with that. Business travelers are some of the early adopters of chip-and-pin. As U.S. cardholders go to other markets, the expectation is that they're going to interact using chip-and-PIN when it's a physical sale. That's the new norm that a lot of U.S. cardholders will experience. That rollout will happen over a period of time, and we've done a tremendous amount of work to anticipate how that's going to go, to make it as non-disruptive as possible and also to help accelerate that program and the successful adoption in the single largest card ecosystem in the world.

Are there concerns that you are going to put that investment into this initiative, but that other technology will leapfrog that?

A lot of people say, "Why don't we just go straight to mobile?" Actually, these things are quite complimentary. Chip-and-PIN is very much about a physical point-of-sale experience. Mobile, whether m-commerce or e-commerce, is much more about an online experience. In some ways they serve very different needs of the user experience. Will there be points where they come together? Absolutely. Do we need to figure out how EMV and mobile will work together and how we handle the rollout in that regard? Absolutely. A good example of where these things are being thought about in a very connected way: If you look at the new generation of point-of-sale devices, they're really multi-modal. They're doing mag stripe, chip, near-field communication. They're ready to be interactive so things that are happening on someone's mobile phone can include part of that interaction at the point-of-sale device. There's a lot of good, constructive thought being given to the infrastructure side of this. Those infrastructure plays take a long time, so you really have to be very forward-looking in how you construct the infrastructure road maps. And that's very much been a part of MasterCard's game plan on both mobile and EMV.

We've had issues in the travel industry with tracking ancillary expenses, etc. What is the potential solution?

Authentication services is a big area. Knowing who is on the other end of the transaction is an important thing. Being able to have secure access to your credentials ... The electronic wallet will, much like the wallet in your pocket, hold more than just your credit card. It holds cards, personal information, coupons, loyalty cards, etc. We really see that wallet as being a repository for a lot of those things. So in having access to that wallet and even using that identification to present your credentials, in much the same way that when you go to the airport you identify yourself with some sort of government ID, you can imagine the equivalent of that in the electronics space being very useful. This is part of the road map. The first part is really focused on getting the electronic wallet out there and making it the vehicle for the equivalent of electronic payment cards