Prime Acquisition

That's especially true after Mastercard's 2016 acquisition of UK-based Vocalink, which powers key payments technology platforms in the United Kingdom and elsewhere.

A few of those technologies are:

• Bacs Payment System: the Automated Clearing House (ACH) that enables direct credit and direct debit payments between bank accounts.
• Faster payments: real-time account-to-account service enabling payments via mobile, internet, and telephone.¹

With that acquisition, suddenly, Mastercard had the platforms and the power to disrupt, and it did.

At the Forefront

In the past decade, the rise of real-time payment systems as an alternative payment rail posed a potential threat to the card retail payment model, says Paul Stoddart, Mastercard President of New Payment Platforms. “Mastercard's approach [at the time] was to say that there are certain aspects that could be disruptive and so we are going to ensure that we are going to disrupt ourselves, and that we are developing and really understanding a robust approach to that challenge. We wanted to ensure that we are a part of it rather than it being done to us,” says Stoddart.

“The acquisition of Vocalink was very much about ensuring that Mastercard was participating in real-time payments, retail, and B2B flows over real-time payment systems, which were very much considered the main disruptor for card payments,” adds Stoddart.

As a digitally mature company, Mastercard continues to innovate and diversify its businesses to embrace all the payment rails that exist today and ensure that it's participating in the development of new rails.

Says Stoddart: “Initially that means expanding electronic payments coverage to account-to-account payments. These represent over 80% of all electronic payments. Card payments represent less than 20% so it makes absolute sense that Mastercard should want to participate in all payment flows and payment types. In doing so it means that we can be the payment partner of choice for many of our customers whether they are banks or corporates.

“We don't want to have increased complexity, and so participating in all flows and being the partner of choice enables a simpler, more efficient engagement model with our customers and we believe back for our customers with us.”

Forward Spin

Looking ahead, Stoddart says that distributed ledger technology or digital currencies also represents an emerging rail and funding source. Just as there are account-to-account transfers from bank accounts, there would be a blockchain network and a crypto- or digital currency.

“As that new rail and that new emerging payment ecosystem happens, we feel we need to be part of that and can bring the experience, the expertise, the capabilities that we've developed over the years for the other rails to that rail,” he says. “Primarily it's about engendering trust between participants.”

Partnerships and More

Beyond its initiatives under its own name, Mastercard provides services to other payment system operators across the globe. Again, it's all part of the company's financial inclusion agenda that brings the power of digital to the fintech space.²

With Mastercard's pledge to connect a billion people to the digital economy at the forefront, the company enlists partnerships and co-collaborations. A few of those initiatives include:

• Strive, a global initiative focused on strengthening the financial resilience of small businesses and supporting their recovery and growth. In Thailand, Mastercard provides the technology underpinning PromptPay, a national payment system that also enables the Thai government to distribute benefit pay to citizens and reduce fraud in the system.
• The Strivers Initiative, a consumer-facing platform, elevating the visibility of Black female business owners overcoming obstacles to maintain and grow their business, as role models for the community and future generations.

“We absolutely believe that the most effective approach in the digital economy is to embrace a combination of a sort of direct and indirect channels to market and engage with our customers,” says Stoddart.

He also points to the company's efforts in the merchant retail payment space. That aggregative approach enables hundreds of thousands and even millions of businesses to accept payments via Mastercard. As a consequence, these intermediaries extend Mastercard's ability to reach many more customers than it could directly.

Next-Level Engagement

Mastercard brings its digitally mature, innovative, and disruptive spirit to the next level of engagement, too. The company enables both direct and indirect customers to engage with its technology around all its various payment rails—to consume, test, trial, and self-serve.

“Our developer platform becomes a place where potential customers are partners. They can go and look at and find the directory for all the APIs [application programming interface] we have that would allow them to access a range of services. I think it is a way to bring our customers closer. Rather than keep them at arm's length and engage in a more standard formal and sequential process by opening up our developer platform and our APIs, this enables customers to come closer to us to be able to avail themselves of the services we have to offer in most cases without any human interaction and in a more dynamic way,” adds Stoddart.

Cash Constraints

Disrupt or be disrupted is the mantra. But despite Mastercard's size, its reach, and its innovative agenda, the company still faces a familiar challenge for almost all businesses, especially those not already heavily focused in the e-commerce arena.

That challenge is funding its initiatives—getting the balance right between funding new product development and innovation and growing and maintaining existing revenue streams, says Stoddart. The COVID-19 pandemic put a lot of pressure on large businesses to constrain their funding of new product development initiatives because of the reduction in revenues.

Most businesses that had a significant element of their business dependent on areas of the economy impacted by the restrictions around COVID-19 have had to scale back their funding on innovation and new product development. Mastercard is in that same situation, says Stoddart. “Not remove it; just constrain it” until revenues return to normal and then grow again.

“Whereas before we may have placed maybe ten more speculative investments in innovations, we will now only place five but that's still a meaningful reduction,” he adds.

Initially, the University of West London worried about financial uncertainty, too, when COVID-19 slammed the world in early 2020. “We were all thinking, will we have any students at all?” says Ellison. So, the university made what he says were some “harsh decisions,” and cut its innovations budget at the time.

But, because the students kept coming and recruitment remained very strong, UWL was able to eventually invest more in its cutting-edge UWLFlex, a mix of online and in-person learning. While still maintaining tight control on its finances, the university did, however, continue to make strategic investments and grow as a result.

Touching Lives

Along with many of the companies mentioned in these pages are other local, regional, national, and international companies that have embraced the power of the business platform and improved the lives of their people, their customers, their customers' customers, and their bottom lines in the process.

All are on the journey to digital maturity and working hard to deliver on better, faster, and more streamlined experiences. The power of the business platform helps solve one problem, and then with a little tweaking we can solve a bigger problem somewhere else, says Bobby Floyd, CEO of HHS. His multinational hospitality company has grown exponentially since embracing the DOM. After the first five years, HHS doubled in size, and then doubled again over the next five years.

At one point the company even considered monetizing its digital model—selling the tools it developed internally to improve operations. But then the company opted to keep it proprietary. “We feel it's our competitive edge,” says Floyd.

IndiaFirst Life embraced the DOM and brought the digital mindset to end-to-end insurance services for its customers. The University of West London utilizes automated machine learning to help students stay in school. Global Furniture Group uses the business platform to streamline internal operations and deliver better and more consistent services to its clients.

Each of these companies innovates in its own digital way. They operate on a scalable business platform, leverage data, process, and experience, and deliver better, faster, and easier to their people, their clients, and their clients' clients. They stay relevant by delivering greater experiences, and they're not done yet.

“Constant investment in automated processes and digital infrastructure is required to stay relevant,” says C&F's John Binder. “If this is ignored, one can't simply write a large check a few years down the road to catch up. It requires constant investment and innovation as well as an agile technology planning process to road map the future but constantly update with the latest information.”

Crisis: Lack of Skilled Labor Pool

As constraints on the labor pool become more apparent, HHS hopes to streamline its backend system to facilitate multiple diverse operations for the same company on one communication platform. Right now, for example, the company may provide food service, operations and maintenance, transportation, and cleaning services to a single company as siloed operations. Combining them all on one platform is the future, says Floyd.

It's all about explore, exploit, and disrupt and the ability to optimize your people and services to provide a better experience.

Floyd says his team could consider investing or participating with companies that are disruptors within its supply chain and that now are a cost of doing business. For example, he says, HHS might look at how it can use its company as a platform to help these companies grow. That doesn't necessarily always mean an exchange in capital either. It could be as simple as using a company's product—a field test, for example—in exchange for an equity stake or share of the company.

Regulations: Checks and Balances

Like HHS, Whitsons isn't yet at Level 5 of digital maturity, but it also has bigger and better plans for the future.

As is typical for companies at this level, Whitcomb looks ahead. He's not concerned about the competition as much as he is unexpected, sudden changes in the market, particularly regulatory changes that he knows well can happen overnight, such as in 2010 when Whitsons faced massive market upheaval with the passage of the Healthy Hunger-Free Kids Act.

In the financial services and technology space, Mastercard faces regulatory challenges, too. In part because of the vast differences in operating in certain spaces and countries, Mastercard will partner with local domestic operators or license its proprietary platforms in some countries and areas, says Stoddart.

Undaunted and Undeterred

Change is the constant for the digitally mature. In today's hypercompetitive, ever-changing markets if a company isn't moving forward, it's falling behind.

Beyond the platform and various payment rails and partnership initiatives, Mastercard is innovating from within. In 2021, the company brought product and engineering under one umbrella to help break down the silos that exist between business lines. Previously, the teams were split as product, sales, and then operations and technology.

The goal was to create a much more integrated products and technology capability to increase speed and response to customer needs, says Stoddart. “Twelve months into the journey and already it's showing strong signs of success in our ability to respond to customer needs more effectively.”

Overcoming Legacy

Making changes and eliminating silos isn't easy for legacy companies, including Mastercard. Most every company struggles somewhat, whether they are in insurance or food service, healthcare or education. Even small companies struggle with trying to change entrenched ideas, processes, and cultures.

It's a struggle newer companies without older ways don't face. Those companies born in the internet age more naturally adopt that sort of approach, says Stoddart. “Fintech startups now don't know any different. As a consequence, they almost certainly will have an advantage by doing everything digitally and electronically with very limited or zero manual or paper existence. That's a world that is very different than when you were setting up a business 10 years ago.”

Small businesses today don't have many of the entrenched barriers to change common to companies like Mastercard. “That's part of the challenge for businesses that have been around longer—how to engage with and indeed compete with businesses that don't have to worry about how to transform, that don't have to worry about how to get more efficient and manage a very complex technology estate,” says Stoddart.

It's an interesting psychological element of freedom that fintechs benefit from and puts larger businesses at a disadvantage. “Hence the need for the transformation,” adds Stoddart.

And when it comes to disrupt or be disrupted, Whitsons' Whitcomb says, “If you're not doing it, someone else will.”

High-Impact Presence

Every company is unique and their pathway to DOM different. Yet, the issues and challenges they face aren't all that different.

Global Furniture Group's Ari Asher has worked for diverse companies, from technology to now office furniture. “Over the years I changed industries because I was always curious about what's out there,” says Asher. “I really enjoy learning.”

When he first came to GFG, everyone kept telling him the company was unique and therefore its operations and challenges unique and not necessarily suited to the changes he advocated. “Every place is unique in a way,” says Asher. “But no place is really unique because at the end of the day it's all human nature and everybody is doing the same thing. Some people are doing it a little bit better; some people can improve. But at the end of the day every place I have been is the same. The same issues that we have in the furniture company, I had a few years ago at a technology company.”

Those companies and their leaders who recognize that and understand the benefits of digitalization will find success now and in the future with a DOM in motion.