SOUMITRA DUTTA: Good afternoon. It's great to see you out here. And thank you for coming. Well, today I have the proud honor of introducing Johnson's Distinguished Global Leadership Series speaker, Ajay Banga.
Ajay Banga is president and chief executive officer of MasterCard and a member of his board of directors. Prior to joining MasterCard in 2009, Mr. Banga was chief executive officer of Citigroup Asia-Pacific, responsible for all business in the region, including institutional banking, alternative investments, wealth management, consumer banking, and credit cards.
He joined Citigroup in 1996 and held a variety of senior management roles in the United States, Asia-Pacific, and the Europe, Middle East, and Africa regions. He was also responsible for Citi's brand marketing, and from 2005 to 2009 oversaw its efforts in microfinance.
Mr. Banga began his career at Nestle India, where for 13 years he worked on assignments spanning sales, marketing, and general management. He also spent two years at PepsiCo, where he was instrumental in launching its fast food franchises in India as the economy liberalized.
Mr. Banga was named to the board of directors of the Dow Chemical Company in 2013. He's also currently chairman of the US-India Business Council. He also serves as a member of the Executive Committee of the Business Roundtable and chairs its Information and Technology Initiative.
In addition, he's a member of the Council on Foreign Relations, the National Advisory Board of the Moscow School of Management at Skolkovo, The Economic Club of New York, the Financial Services Roundtable, and the board of the New York City Ballet. He's also a fellow of the Foreign Policy Association and was awarded the Foreign Policy Association Medal in 2012.
From 2007 to 2012, Mr. Banga served on the direct of the Kraft Foods. He's also served on the board of trustees of the Asia Society, the New York Hall of Science, and the National Urban League, among others. He received a BA in Economics from Delhi University where he graduated with honors and as an alumnus of the India Institute of Management from Ahmedabad.
As you can see, he has an illustrious career. And I just spent an hour discussing and chatting with him in my office. I can tell you it's going to be a fascinating discussion that you will witness today. And to lead the discussion, joining Mr. Banga on stage will be Nicholas H. Noyes Professor of Management, a professor of marketing at Johnson, Vrinda Kadiyali.
Now, I'm sure many of you have taken Vrinda's classes, but let me add a few words of introduction out here. So, Professor Kadiyali's research is on firms' competitive strategies. She uses econometric models of game theory to study how firms compete with their rivals and the channel partners.
She has published in leading marketing and economics journals, like Marketing Science, Management Science, Rand Journal of Economics, and Journal of Econometrics. She's also on the editorial board of Marketing Science, Journal of Marketing Research, and Quantitative Marketing and Economics, and has refereed for several journals, including Journals of the National Science Foundation and the American Marketing Association.
Kadiyali teaches Johnson Strategy Core and has also been awarded the Best Teacher Award at Johnson multiple times. A very distinguished colleague that I'm very proud of. So please, join me in welcoming Ajay and Vrinda to the stage.
AJAY BANGA: I don't know. Yeah, it is. There you go. Will you sit here or there? What do you want to do?
VRINDA KADIYALI: Is mine on?
AJAY BANGA: Yup. You're on.
VRINDA KADIYALI: OK.
AJAY BANGA: Boy, that kind of introduction, if only my mother had introduced me she will have just said how good looking I am.
VRINDA KADIYALI: It's a pleasure to welcome the very good looking Ajay Banga. And I had a brief conversation on the phone as a set up for this, and he mentioned that he really enjoys playing new games he's never played before when he's on stage. Right?
AJAY BANGA: No, I didn't say that. You added that portion.
VRINDA KADIYALI: No, you said that something like this happened in HBS.
AJAY BANGA: Yes, that's true. That's true. That didn't mean I enjoyed it. I just said they did it.
VRINDA KADIYALI: Right.
AJAY BANGA: I just want to be clear.
VRINDA KADIYALI: So I thought I'd use this opportunity to begin with a game that neither you nor I have played before-- maybe you have. It's called a word association game. So I say a word-- you guys are probably familiar with this, right? So I say a word and you say the--
AJAY BANGA: Why would they be familiar if you and I are not?
VRINDA KADIYALI: Because they're cooler than I am.
AJAY BANGA: Because they're younger. I see. I got it. I got it. I got it. I get it.
VRINDA KADIYALI: So, I say a word and you say a first word that pops in your mind that's connected to a word. So if I say "today," you might say "Matt Lauer," or "carpe diem."
AJAY BANGA: I might say "yesterday."
VRINDA KADIYALI: You might say "yesterday."
AJAY BANGA: So long as you're cool with it. I get it. I get it. I get this little idea.
VRINDA KADIYALI: So if I say "yesterday," you might say "Beatles song," or "tomorrow."
AJAY BANGA: Yes. Yes.
VRINDA KADIYALI: Or "today."
AJAY BANGA: Yes.
VRINDA KADIYALI: So, are you ready?
AJAY BANGA: Sure.
VRINDA KADIYALI: Cash.
AJAY BANGA: Yesterday.
VRINDA KADIYALI: OK. Priceless.
AJAY BANGA: Today.
VRINDA KADIYALI: Really? OK. Discover.
AJAY BANGA: A competitor.
VRINDA KADIYALI: Express.
AJAY BANGA: Slow.
VRINDA KADIYALI: American.
AJAY BANGA: Huge.
VRINDA KADIYALI: Debit.
AJAY BANGA: Future.
VRINDA KADIYALI: Leadership.
AJAY BANGA: Critical.
VRINDA KADIYALI: Sequester.
AJAY BANGA: Awful.
VRINDA KADIYALI: Brick.
AJAY BANGA: Throw.
VRINDA KADIYALI: Civet.
AJAY BANGA: Not sure.
VRINDA KADIYALI: Global
AJAY BANGA: Very helpful.
VRINDA KADIYALI: Cornell.
AJAY BANGA: Fun.
VRINDA KADIYALI: Ambiguity.
AJAY BANGA: Important.
VRINDA KADIYALI: Innovation.
AJAY BANGA: Mission-critical.
VRINDA KADIYALI: Responsibility.
AJAY BANGA: Mission-critical.
VRINDA KADIYALI: Harlem Shake.
AJAY BANGA: No comment.
VRINDA KADIYALI: All right. So I think we've--
AJAY BANGA: That's very funny.
VRINDA KADIYALI: So we've broken the ice?
AJAY BANGA: Yeah, sure.
VRINDA KADIYALI: Not that there was any, given your warm personality. So let's actually start the conversation. So first question, what's a common misperception about MasterCard?
AJAY BANGA: I'd say in these three years that I've been around, when you talk to people both inside and outside the company almost everybody thinks-- or they call us a credit card company. And that actually does irritate me enormously, mostly because we are actually not a credit card company.
We are a technology company in the payments industry. We facilitate the movement of money and transactions and between billions of consumers with millions of merchants in tens of thousands of banks in 200 countries. The credit card business actually is run by banks, and we have nothing to do with the credit card aside from allowing it to be used as an instrument of payment. In fact, we have more debit cards, prepaid cards, and commercial cards than we have credit cards.
And so one of the things that makes me feel particularly concerned is because credit cards tend to have a sort of negative perception around them. For most people who ask me that question, it makes me feel that we aren't being able to bring across what we actually are. So I feel that that's who we are. We're a payments company. We're in the technology space. We use data intelligently. We facilitate these unbelievable networks of payments around the world. But we get called a credit card company.
VRINDA KADIYALI: That's a good question which segues into today's topic, which is a cashless future. So, a common misperception, and arguably some of it accurate, is that there are costs to going cashless. So if you think of credit cards, retailers have to pay interchange fees, consumers have to pay high interest. They don't always use their credit cards responsibly. They end up in high debt situations.
There are other costs. For example, competitive costs. So the payment system industry is an industry that is prone to large firms dominating, given the economics of the fixed costs of setting up payment systems. So you end up with sometimes with lack of sufficient competition.
And you think of other costs of going cashless in developing countries. So would the government have to subsidize setting up better communications systems, background check, or unique ID systems, and such like? So these are some of the costs of going cashless.
But there are also costs of using cash, both in developing countries and developed countries. So what's your view on the costs of using cash?
AJAY BANGA: Let's go to the side of the costs of cash, then we should talk a little bit about the perceptions about the cost of going cashless. Well, the cost of cash. Cash is perceived to be-- it's almost like an index of 100. Cash is 100. And everything else is compared to that.
In fact, cash is not 100. Cash is a cost, and that cost exists for society in all forms. It exists in a government level. It exists at a merchant level, and it exists at a business and consumer level. So let's talk about that for a second.
The United States government spends $1.2 billion a year on printing and securing dollars. That's the first number. If you took that $1.2 billion and you added on to it the cost of actually transporting those dollars around, and then you added on the costs for banks to go pick up those dollars from the Federal Reserve Bank's warehouses and bring them in armored trucks to their branches, and then if you added on the cost of having people receive that cash and count it and put it in a safe and then take it out and put it at the bank teller, and then two people count it each time, because if you think of life in cash, cash is fungible. If one person counts cash, it disappears. It's just the reality.
And so you have an armored truck with two guards, not one. You have two people receiving it at the bank. You have two people counting it, putting it away. You have two people giving it to each time a teller takes a shift. If the money doesn't tally, two other people count it.
The whole system is archaic and it's built for cost. And when you put all that together, just the cost to the government and the cost to banks, and you start adding up the cost of tax evasion.
Tax evasion does not happen consistently with electronic forms of payment. I don't mean cards or mobile payments. I mean if you get your salary in a bank account, and if you make your payments from the bank account, there's only so much time that you can avoid taxes for. But the US is a relatively strong taxpaying nation. The Tufts University's Fletcher School has just estimated that tax avoidance in the United States costs $40 billion a year. That's the United States.
When you go to where I grew up, where you grew up, tax avoidance is a blood sport. And in India, the tax base is this small because it's only idiots like us who pay taxes. The average other guy doesn't pay. And then you go to China and Russia and it's a blood sport which has been refined to a fine art.
And so you go to Greece and the proof of the pudding is in the eating. Greece has a situation where people are not paying taxes. If you go to, in Athens, you go to a colony called Kolonaki where all the doctors and lawyers live, every one of them has got a swimming pool-- and they could see it in Google Maps, that's how they know-- but only 2% of them were paying taxes.
So it's an issue. Paying taxes and not paying taxes is a very serious issue. When you put all that together, the cost to society of cash today is between 0.5% and 1.5% of GDP. The US is a $15 trillion dollar GDP economy. You're talking $200 billion a year of that cost, just here.
Then let's talk about a cost that nobody knows how to estimate, which all of you young guys know and understand. Drugs have been coming into this country from countries in Latin America for 30 years. Do you really think anybody buys them in exchange for a Citibank credit card payment?
And guns are showing up in Mexico right now in the drug wars where so many people are dying. And those guns have been coming from the United States is what the newspapers say. You really think they go and exchange for a Bank of Nova Scotia wire transfer?
So cross-border illegal activity, be it drugs, be it guns, be it terrorism, does not happen adequately with electronic payment. You can have mistakes. You can have banks have been sort of held up recently for KYC email violations. I get all that. But if you put the whole thing together, there is no way that tax avoidance and illegal cross-border activity can happen in adequate forms with electronic forms of payment.
And so my point is that nobody knows how to cost that. Nobody knows how to put a cost on that for society.
Then you think about businesses and individuals and the cost to them. So in the case of businesses, again, the same Fletcher School study talks about the fact that close to $40 billion odd dollars of money is lost in the retail sector by theft. $40 billion.
That's because when you go to a retailer and you see a till, on the till it says if you don't get your receipt, it's on us. And you say, what a nice retailer. The reason they're doing it is because the guy at the till is pocketing the money.
So rather than let the guy at the till pocket the money, they'll let you have the money, but they'll make sure the receipt gets generated because they have to enter it into the till. It's as simple as that. It's a avoidance of theft methodology that's being put in. That's worth another $40 billion.
There are costs buried in the system. And unfortunately, the debate around cash and its cost has got hijacked by the interchange discussion and by the irresponsible spending discussion of people not using cash. And I think that's because people take electronic equal to credit cards.
But in truth, even in the United States, there are more debit cards today than credit cards. There is more transactions on debit cards than there are on credit cards. And that doesn't include prepaid cards. It doesn't include commercial cards. It doesn't include electronic forms of payments.
Well, how do you make a purchase on the internet with cash? Unless you watch a Capital One ad where the guy is trying to stuff cash inside the floppy drive, which doesn't exist today. But if you were trying to do that, there's no other way to make that purchase. All you guys in the audience, I doubt you use cash the way I did. My children don't. And I probably use less cash than my dad did.
And so there's a whole secular change going on here that I think is inexorable. So the issue really is not to fight that change, but to make it as smooth as possible, as beneficial to society as possible, and as responsible as possible, while fighting the cost of cash in a tangible, sensible way.
So what we're trying to do is to create a series of third parties who will discuss the cost of cash away from us, or create white papers-- like the Fletcher School is doing, or like the Singapore government is planning to do-- and publish them and have an open discussion about the cost of cash to society. But that 0.5% to 2% number is a real number, before cross-border illegal activity, before the cost of cash to businesses, before the cost of cash to consumers.
So I think cash is a real issue and I think it's an instrument designed for a different time. 300 years ago it made a lot of sense. Today, it doesn't even have a stored value. I mean there is no stored value to cash when a government can print whatever they want. And therefore, unless you're talking about going back to the gold standard, which I find to be unbelievably archaic, then I don't see the concept of the role of cash in this system.
So that's what our mantra is. That's what we think we can make a difference to, for businesses, for people all around.
VRINDA KADIYALI: So what's a good way for private and public partnerships to develop socially responsible and yet profitable ways of cashless systems? So what are some examples that you like?
AJAY BANGA: You can take a ton of them. So take, for example, I was in Africa just a couple of weeks ago. And in South Africa, 10 million people now have a biometric-enabled card on which they get their Social Security payments. And so they no longer have to either go to a place to pick up their cash, or, frankly, pay a middleman for getting their own money, or, for that matter, have their family take the money from them, or tell them we'll go pick it up on your behalf, and all the leakage that happens there.
In this case, I met this lady called Hilda who was 75, 76 years old, and she had this card and kept it very proudly. And she talks about how she gets her money and her cash in a safe, secure way from that card.
Or you can do the US system, where the US Treasury pays close to 24 million payments to people every fortnight for their Social Security. And they used to get them either by check or by direct deposit to the bank.
The reason they were getting checks were a lot of the people who were suffering from unemployment didn't have a bank account. Or if they did, they owed money to the bank and didn't want their Social Security to come into the bank because the bank will take its first repayment back. So they would take a check and go to a check casher who charges 6%.
And if you ever go to a check casher in Ithaca-- I didn't know if there are any, but I'm sure there are-- but if you go out there and you go to where they are, they're not in the best parts of Ithaca. And there's a reason why, because it's the most disadvantaged sections of society that end up using check cashers.
Cash is a friend only of the rich man. Cash is not a friend of the poor man. It's just not true. The average guy who has a lot of money in their bank account, they actually pay very little in even banking fees. The guy who doesn't have money is the one who pays the highest banking fees. The whole system works against you when you don't have that ability to hand up on your own and get your own financial inclusion and your own space of being recognized for who you are.
So what I found over time is that whether it be Social Security payments or it be technology used for medical insurance payments, which we're trying to do in South Africa, or it be prepaid cards for purposes of migrants who need it, or it be the payroll card for Walmart. Walmart's employees currently get a payroll card, which is a MasterCard. 600,000 of them are taking the card out of the 1.2 odd million who work at Walmart. And they no longer have to take either a check or a bank account deposit.
Those who have a bank account take it in their bank, the others don't take a check. It's the same thing. Corporate payrolls, Social Security, these are all very good examples. The only example people talk about is credit cards and the high APRs of credit cards. And that's the tragedy of the system, that what sounds like a really good sound bite in the newspaper is not reflective of all that can be done.
My biggest frustration with this is I don't even decide the APR. I don't make any money from it. I make nothing out of all that. I make money from processing fees. Every time you use a card, I make a small number of basis points. So we're built off small margin, high volume business, just like any other manufacturing industry.
So that to me is the power of this model. It's small margin, high volume. It's a very low variable cost. Therefore, all the transactions you pump in through the system-- Social Security transactions-- can make money for our institution, even if they're small margin.
VRINDA KADIYALI: As you're talking of these business models, this is a good segue into asking you the following question. So there are other cashless payment, and especially electronic payment, systems. One that we spoke about in class in fall was Starbucks Square. So this sort of bypasses the interchange fees that retailers rebel against.
AJAY BANGA: It actually doesn't.
VRINDA KADIYALI: It doesn't?
AJAY BANGA: That's factually incorrect.
VRINDA KADIYALI: All right. OK. So this is what they claim.
AJAY BANGA: That's bullshit.
VRINDA KADIYALI: OK.
AJAY BANGA: So I'll tell you--
I will tell you exactly what they do. I'll tell you exactly what they do. All these systems don't bypass interchange. Interchange is merely the cost that the merchant pays for the acceptance of an electronic form of payment. Whether you pay it as a percentage, or you pay it as a dollar value or number of cents per transaction, whether you negotiate it down to a much lower level because you're a big merchant, or whether you pay a higher amount because you're a small merchant, that's a business circumstance that causes a lot of friction.
The fact is that they all pay that interchange. So in the Starbucks Square example, actually Square uses our cards through them. How do you put money onto Square? From where? It has to come from somewhere. So it comes from a card-- a MasterCard, a Visa card, a Discover card, an AmEx card, a system. And therefore, they still pay the same interchange concept.
The difference is what Starbucks Square does is if you register with your mobile phone before you walk in with that Starbucks outlet with your photograph, that in theory when you walk in, your phone will be recognized by the little gizmo they have there. And your photograph will pop up on the screen when you show up and they'll be able to give you a more personalized service by saying "hello, Vrinda." All that is to say "hello, Vrinda."
But they're still paying the interchange. So that's just a misnomer. It's not true. There is no free lunch in life. So whether you pay this interchange or that interchange, people will pay. The question is, how will you pay?
If you look at the new rules in the United States on regulating interchange on debit cards that got passed by Senator Durbin-- it's called The Durbin Act-- about a year and a half ago, all that's happened is that reward programs on debit cards have got suspended. Banks are trying to find ways to put fees back on checking accounts. The fact that you used to get a toaster free when you opened a checking account, now no longer do you get a toaster free, you have to put your finger in the toaster to open the checking account. You're paying for it.
It's such a misnomer that goes around in the world that thinks that banks will be altruistic, philanthropic organizations that'll open bank accounts for you and run 6,000 branches with ATMs, with online banking, with cards so that you don't pay them anything. It just will not happen.
And so the fact is, is it the right amount you're paying or more? Are you being misled when you're paying those fees? Do you know what you're paying? Did you sign up for it willingly? I think those are fantastic topics. Those point to fairness and awareness, as compared to disputing the value of what you pay.
If you dispute interchange, when the debit interchange got reduced, would you be able to still put your hand on your heart and tell me that your Coca-Cola became cheaper, or that your gasoline became cheaper, or that the shoes you bought were cheaper? All that happened is money went from the banks P&L to the retailers P&L. You haven't seen any difference in your pricing as a consumer. Do not support that which doesn't work for you.
What works for you is awareness and fairness. That I would fight every day for. As compared to intervening in the pricing model, that doesn't really benefit. That's the problem I have with that. So the whole Starbucks Square example is a misnomer. They pay the interchange. If it's a debit card, they lower interchange. If it's a credit card, they pay a higher interchange. That lower interchange, unfortunately, is not translating into lower price.
When you fill up gasoline-- how many of you guys drive cars? Lots, right? When you fill up gas, you may get a discount in some pumps for cash versus card. Have you ever seen a discount for debit card versus credit card?
Well, the gasoline attendant, the gasoline station pays the average interchange on debit cards is 26 basis points. The average interchange on a credit card is 150 basis points. So it was 150 for both till this new law came. They have not changed the price of gasoline to you. That's the issue. All that's gone is money from the banks to the retailers. Why is that a good thing? Unless you're a retailer, in which case it's a great thing.
VRINDA KADIYALI: All right. So let me ask the question a slightly different way, which is what competitor model have you seen that you've liked? So give me an example of a competitor electronic payment system that you look at and say, you know, this is good. This is smart. It's fair. It's smart. It's good. It has legs.
AJAY BANGA: I actually don't think of this as competitor. I think of all of these as ways to grow it.
VRINDA KADIYALI: Complementary.
AJAY BANGA: Yeah. So, for example, I think that mobile payments will be a real opportunity for the next decade or two. I don't know whether it'll be-- people today talk about it as though it's going to happen tomorrow. I don't think that'll happen. I think it takes a long time for consumer behavior to change and for people to adapt to it, and for the infrastructure to be built for it. But I do think mobility is changing everything. And that'll change the way that people use payments.
There are studies that say that the average individual touches their mobile phone, their smartphone, 67 times a day, which is more often than you touch your hair, which, in my case, you can't touch. But if you were to be touching your hair-- which in your case you can, although in my case we can too, or I can touch yours. But if I were to touch your hair 67 times, you would shoot me. So you touch your own 67 times, that's your smartphone. You will always have it with you.
But whether you want your entire financial system on that, I don't know. That's another issue. Because you do tend to lose your smartphone. You'll leave it on a bar table where there's water underneath and it freaks out. I don't know how many of you guys change your smartphone every year or two because it gets screwed up. You lose it. It gets wet. It starts raining, you drop it. Things happen to it.
Do you want your entire stuff in one place? I don't know. Is it secure enough for you, or will fingerprints be the ultimate security? And will fingerprints be something that Americans and Europeans are willing to give? Or are they scared about privacy implications of giving that out? So I don't know yet where this will go, but I think the whole mobile payment space will transform the way that people interact with merchants, and interact with cash, and interact with their bank. So I think that's going to be really interesting.
I think M-Pesa in Kenya did something really interesting. They tried to create a mobile payment system by which I could send money to you in two different cities without having to use Western Union, which I probably shouldn't say considering that Mr. Cornell founded Western Union. But if you sort of think about all that, you would think of the aspect that they solve for a problem, but only part of the problem. Because at the other end, when I send you money, you still have to go to the agent of M-Pesa and take out cash. So finally you're back to cash again.
And the real difference will be when you can use your phone to pay for your coffee, and your cigarette, and your newspaper, and your gasoline. I don't think we're there yet for quite a while to come. That would be a great development. There's a lot to go between now and then.
VRINDA KADIYALI: So in that space, you didn't name a competitor-- or a complementer-- whose model you like. It's not Starbucks Square, I gather.
AJAY BANGA: No. Because I think they're all-- I should think greatly of the experience, but I don't think it solves for interchange. You were asking from the interchange point of view. It doesn't. It's a cool experience. I can walk into a store and somehow people recognize who I am. That's pretty cool. But beyond that, does it solve anything? That's my point.
All these things are technology looking for a problem to solve. The problem is the consumer doesn't have a problem with using a card today. It's pretty convenient. I can swipe it. I can tap it. I can do things. So unless I find some reason to connect my phone back to my loyalty programs, or all my receipts come there so I don't have to worry about this stuff, or my banking happens somehow automatically and I don't need to worry about or the phone, something else has to happen to make the phone ubiquitous as a payment device. Otherwise, there's still a lot of friction in the system.
So I don't know. I admire all the guys. I admire all the people who are my competitors because I think they do a better job than us on many things, but I don't know that I can point to that one and say I have the solution for tomorrow. I really don't. I think the payment industry is going to go through in this next decade monumental change.
And in many ways, the way that the printing press revolutionized knowledge 500 hundred years ago and took it away from the control of the church, and temples, and priests to freely being disseminated by your willing to pick up a book, I think the internet did that with sort of making knowledge easily available to everybody. And I think the mobile phone will take it another step forward. So I see great power in that technology, I just don't know how it's going to work yet.
VRINDA KADIYALI: That's a good answer.
AJAY BANGA: Unlike the other answer.
VRINDA KADIYALI: I didn't say that. So moving away from specifics related to cashless-- unless you want to talk further about it, we can come back or I'm sure there'll be questions from the audience-- asking you more general questions. Which is you've been a global manager, so what principles should guide a manager in a global world?
AJAY BANGA: Managers. First of all, I think you have to embrace this trend towards increasing global everything. And you're going to embrace it from deep inside, meaning you can't just talk about it and say, I know I need to understand it. You need to embrace it by living it and experiencing it.
So I can look in the audience, there's lot of people here who clearly may have grown up here or have come from elsewhere and live here. That's global experience happening daily for you guys, right? It's for us who grew up elsewhere and came to live here. I think you have to do that deep inside.
And understanding globality does not mean that you live in Ithaca, or in Chicago, or in New York, and run a global business. Because traveling for two days to Brazil is not the same as understanding Brazil. And so immersing yourself in a global environment where you live there and understand it and work with people there is, I think, the first key.
Which means you have to have cultural sensitivity. It means you have to comprehend the circumstances of those countries and their own unique situations and learn how to manage that. That to me is one.
The second part is it's inevitable that this will continue, even though it feels like in the last few years with the financial crisis and with all the things going on that there's been some steps forward and some steps backward on globalization. I just think that the young people of tomorrow will not take anything less for an answer. And that's where it's going.
And so if you look at the emerging world-- and you look at India with 60% of the people under the age of 25, and Turkey is the same, and you look at China with 40% or so, and you look at the US with 30 something percent, look at the Middle East with 50%-- the young are where the future will go. And they're going to walk with your feet, and their feet are increasingly built for global. And so that's kind of what I think you have to embrace that part and understand it, along with all the sensitivity that comes with it. So that's one.
The second part, I think, is that you have to be willing to have around you people who don't look like you, don't walk like you, and don't talk like you, and don't have your background. And so if you're willing to truly be global, you've got to take diversity beyond the check the box diversity that the United States has adopted for some years now. But it's really to have enough African-Americans, Asians, yellow guys, white guys, you know, women. You've got to get past that to real diversity, and real diversity comes from thought and practice of thought.
If you surround yourself with people who don't look like, you don't walk like, you don't talk like you, don't eat the same food as you, didn't have the same background as you, you will automatically get to the diversity that checks the boxes, as compared to checking the boxes and trying to work backwards. So I think that is something you have to embrace from deep inside, that you are not insecure enough to want to take with you the people you are used to.
So a lot of managers when they go and work in a new company, they fire the guys who used to work there and they bring in all their old pals from their old company. I should think that's awful, because all you're doing is transplanting the same culture into this new place, irrespective of what it really means and what you need to do with it. So that's the second aspect.
And the last part about embracing global work is the ability to understand that global companies will have scale, will have advantages of cost, but they will only succeed if they think global and act local, which a lot of people say but very few people do. So being what I call glocal is actually what this is all about.
So if you can adjust and adapt your product to really be local while taking into account what you get from your global feelings, then you are in a great place for tomorrow. It's tough to do. It's really tough to do. I worked for Pepsi restaurants.
We were launching KFC and Pizza Hut in India. And the number of managers from KFC globally who came to tell us how we had to launch chicken with skin in India was amazing. And the fact is if you grow up in India, nobody eats their chicken with skin. Nobody does. Here everybody does. There no one does.
And to explain to them that launching it with the skin is the same as ensuring that it will not sell well was like water off a duck's back. And that's not right. Now it's different. Today they've got vegetarian burgers, and they've got food adapted, and they've got skinless chicken, and outlets. And the Pizza Hut system has adapted to local flavors.
So good companies find ways to adapt, and they have to think global but act local. I think that's kind of what this is all about.
VRINDA KADIYALI: So a related question, which is in your several years as a leading manager, can you talk about a leadership situation where you really had a pause, step back, evaluate, where the solution was ambiguous and you had to pick an option with uncertainty, and yet you said, OK, this appears to be the way to go? And what heuristics did you use to reach such a decision?
AJAY BANGA: I could pick a ton of them. Let's pick one that's to do with people because we're in a management school and there are young people here listening to us. Let's talk about people.
So take my current company. When I joined three years ago, we used to get about 55% of our revenue from outside of the United States. It's now 60% from outside of the US. So we're actually a global company that happens to be headquartered in the US. We are not an American company that's trying to go global. It's quite the other way around.
And that's a different mindset. If you think of yourself as a global company headquartered here, you think differently. So go into that a little bit in detail and you'll see that a lot of our people were based in the US as well. A lot of our talent base on global products was here. I've moved that out. And a number of them are now based in London, and Singapore, and in Brazil, where that's now. So 55% of my employee base is now in the US, 44% is outside. And that's completely different from three years ago.
Similarly, we were a very bank-oriented company. We were owned by banks till six years ago. We were an association owned by the banks till six years ago. Now we're a public company with a market cap of $65 billion, and it's a completely different company today.
And that company cannot have only bankers in it, which is where the majority of our recruiting pool used to come from. Now we've got people from merchants, people from technology companies, people from consumer product companies, people from government, from banks, and there a ton of young people out of schools and colleges who are joining us as their first job as a way of getting this company to look and feel different.
Now, why is this important in answer to your question? When I came, conventional wisdom would have told me not to do this. Conventional wisdom was you bring in a guy who understands the payments industry, which typically means they come out of banks. Conventional wisdom was you're global, you need scale. Then you develop the product in the US, the most advanced payments market, and send it elsewhere. I'm doing the opposite. I'm building MasterCard laboratories which are innovation centers in Dublin, in Singapore, and also in the US, because I think you will get a lot from there, much more in some ways, than what I'll get from the US to go outside.
So, conventional wisdom was stay with what you have got. It's doing well, don't fix what's not broken. I actually think that is not going to work in a company that is susceptible to the amount of change that technology will bring to my industry. I cannot do tomorrow what I did yesterday and hope to do better. If you just keep repeating what you're doing and think you'll get a different result, you're insane. And that's kind of the issue.
I'm trying to change that insanity. I'm trying to get the lunatics to not run the asylum. I'm trying to get the place to feel the power of young people of diverse backgrounds, with merchant, and banking, and government backgrounds, based around the world, as compared to what would have been conventional wisdom. So it's a risk, and life is all about taking risks.
And the one thing I've-- I put a little sign up in my office that says that done is better than perfect. And it is so difficult to make people in the company understand that. It is so difficult because the place is built for Six Sigma. It's built for every transaction you use to be approved faultlessly in one .350th of a second each time.
That's the enemy of innovation. That's the enemy of trying out things. It's the enemy of taking a risk. If you don't take a risk, you won't make progress. That's such an issue. I started talking to our employees about taking thoughtful risks and two things happened.
The first thing that happened was in town hall like this I got a question from an employee saying, will we have a seminar to learn how to take thoughtful risks? And I said, no. What crap. Did your mother teach you one time-- she must have-- that you don't cross the road when there's a truck coming your way? Next time, you're going to learn that, or you get run over. You've got two choices.
There's also that you don't have a seminar to teach you how not to take a risk, or how to take it thoughtfully. You've got to have it in your head and mind that says that a risk reward equation makes sense. You do it in life at home. You do it when you get up from your bed. You're taking a risk. You could fall off the bed. You could fall in the bathroom and injure yourself. You could choke on your toothpaste. You took a risk, right?
So who taught you about that? Nobody did. Why would I teach you in business how to take a thoughtful risk? A thoughtful risk is a risk that doesn't always turn out to be a loser. If it does, you're fired. If you make a mistake one time, it's cool. If you make a mistake a second time, the same one, then I have to ask how much intelligence you have. If you do it a third time, you should go do it with my competitor so he [INAUDIBLE].
It's actually not that difficult to fathom. It's really a very simple rule. It's common sense. It took a long time for people to understand that. And so people's conventional wisdom will drag you downwards. You just have to be willing to take these thoughtful risks and not have 100% data every time. You just will not. You will never have 100% of the information.
VRINDA KADIYALI: I'm going to shift gears a little bit and ask you a couple semi-personal questions. So what do you do outside of work that reflects--
AJAY BANGA: Sleep.
VRINDA KADIYALI: --your worldview. No. No, no, no.
AJAY BANGA: Oh, you have a catch in the question.
VRINDA KADIYALI: Yeah, of course.
AJAY BANGA: That reflects my worldview?
VRINDA KADIYALI: Yeah.
AJAY BANGA: You don't know what my worldview is.
VRINDA KADIYALI: Yes, that's why I'm asking. Of who you are. Like some activity that reflects you.
AJAY BANGA: My worldview, actually I'll tell you what really does impact. My worldview is that-- you've heard me talk about young people. My worldview is that the young will change this world tomorrow. That right now where this world is headed, it's not in a good place. Forget about economic circumstances, and sequesters, and muck like that, or the European crisis and all that.
I don't mean where it's headed, both in terms of the environment, and education, and health, and all those things that we have enjoyed in our lifetime. I'm not sure if our children's children will enjoy it as much as we have. That will change because this generation, my kids-- I have two daughters who are 26 and 21-- they're different from us. They will change it, and I'm glad for it.
So I believe that what we have to do-- that combined with the fact that 60% of India is people under 24, and so has Turkey, and 50% of the Middle East, and things like that-- means that imparting the youth to be independently capable of leading a good life is our future. That's where it will be.
And I do a lot in that. I try and get involved with that in many ways, and whether it be within the US or elsewhere. In the US, I used to be on the board of the New York Hall of Sciences, as your dean was saying, and that's because that Hall of Science is all about young kids learning about science STEM is now a buzzword, but that's kind of what I'm into.
I used to be involved with the National Urban League, which I was deeply worried about the way the African-American community, younger people in this country, do not have the same opportunity as some of the others. And their community isn't one. The Hispanics have relatively stronger representations. The Asians tend to do well because of various things in where they're coming from.
The African-American community, the younger community, is struggling in many ways. And we're all trying to do many things, as people, with them, but I thought the National Urban League had a head start on trying to do things with them. So I got involved with them to get after that young person in that community.
I do it in India with a personal investment that my wife and I have made in trying to grow vocational training schools in India, because I believe that that will transform the ability for India's economy to cater for tomorrow's service economy. There's only so many engineers, and doctors, and lawyers that India needs. It needs waiters, and carpenters, and domestic help, and drivers, and people in the service industry, electricians, and the like. And so I'm trying to put money into that, in a way of transforming that experience in different parts of India.
So I just think that doing things with young people and empowering young people is a big part of what we can do. The second part of my worldview is that there is no superior model in the world than democracy and free market capitalism. I genuinely believe in this. That's why I left my home country and I've become an American citizen. Because I believe that this country, despite the current foibles of Washington DC politics, embodies the best of both of those values.
Things go wrong in both. Democracy can go wrong and free market capitalism can lead to bad solutions. But by and large, it comes back to the right place. I believe in those two. This country has the ability to connect with other countries like this around the world to make that the right way to grow, in a good way.
And I think India, where I came from, is a country that, as I speak very often, India and the United States were born to be together because they have the same faith in these things. The same faith in the entrepreneurial spirit. India survives despite its government. And in some ways, the US is doing well despite its government.
And so democracy and free market capitalism, to me, are really interesting topic. And that's why I chair the US-India Business Council, because I think in my own way I can give something back in trying to bring these two countries together commercially and socially in whichever way I can make it happen. So those are my two worldviews, young people combined with democracy and free market capitalism and it'll be a better world tomorrow.
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While cash remains the dominant method of payment throughout the world, students and faculty heard from Ajay Banga, president and CEO of MasterCard, on the misperceptions around the cost of cash and the value of electronic payments during a visit to the Samuel Curtis Johnson Graduate School of Management on March 4.
Featured as a Distinguished Global Leader Speaker, Banga spoke during a fireside-chat-style conversation on the question
Do you believe in a world beyond cash? with Vrinda Kadiyali, Nicholas H. Noyes Professor of Management and professor of marketing and economics.