No sooner had Martina Hund-Mejean signed on at MasterCard Worldwide than cracks began appearing in the global economy. Within months of joining the $5.1 billion card company as its CFO in November 2007, Hund-Mejean says, she had a sense "that things were not doing so well."
Although Bear Stearns had yet to stumble, "by January 2008, we were already talking with our business leaders, [saying] something doesn't really smell right," she says. "We started to line up contingency plans in case things didn't go the way that we might have forecasted before."
MasterCard makes its money from fees charged on each credit or debit card transaction, and that revenue stream suffered as economic activity slowed. MasterCard had the advantage of going into the financial crisis with "a really sound capital structure," she notes. "We have virtually no debt and we have a significant amount of cash on our balance sheet." (Nor did the company have any exposure to consumers' credit card debt.)
The finance team led MasterCard's effort to prepare for tough times, and the first contingency plan was executed early in the summer of 2008. "We lined it up in such a way that all through 2008 and 2009, we were able to drive expense management actions in order to continue with our very sound P&L," Hund-Mejean says.
The work paid off. MasterCard cut its total operating expenses 6.9% last year, with much of the reduction in advertising and marketing spending, which plunged 19.2%. As a result, the company's operating margin rose to 44.5% in 2009, excluding special items, an increase of 5.5 percentage points. And, Hund-Mejean says, "we produced every quarter a very solid profit, as well as very solid cash flows."
But at the same time that the company was cutting back on spending, it had to keep in mind the need to invest in technology, "because the payments space moves fast," she says. "The whole managerial effort was to make sure the company continues to be sound, but more importantly, that we can take the company forward and don't lose a beat."
MasterCard's surveys suggest that from the consumers' viewpoint, the attraction of electronic payments is "really the convenience vs. carrying around cash or checks," Hund-Mejean says. So the company has been focusing its investments on the payment methods most likely to be useful for consumers, which include debit cards, prepaid and mobile.
The growing use of debit cards is a major trend in payments. Debit is a part of the market where MasterCard has lagged behind rival Visa, issuing about 27% of U.S. debit cards vs. Visa's 73%. Hund-Mejean notes that MasterCard got a later start in the debit card market, but says the company has now invested in "a world-class debit platform" and has recently announced a number of customer wins in this area. "Our management feels that this is a significant opportunity, given that the volume and the transactions in debit are growing at a faster pace in the U.S. than credit," she says.
MasterCard also expects considerable growth in the area of prepaid cards. Hund-Mejean says that reflects interest in such cards from the youth sector, people who don't have bank accounts, and migrants around the world looking for inexpensive ways to send money home. "We've said publicly that the opportunity in prepaid today is already around almost $700 billion worldwide, and it's growing double-digits," she says.
While MasterCard peers into its crystal ball to discern how best to position itself for the future of payments, Hund-Mejean is working to integrate finance with the company's businesses. While finance reports to her, "we have dual reporting into the business unit heads to make sure we are very linked to them." The goal, she says, is to ensure that finance staffers understand their role in helping business units "do what they need to do. And part of that is looking at what we should be doing either from a product point of view or a segmentation point of view or a country point of view."
MasterCard has traditionally had a strong risk management process and culture, says Hund-Mejean, who has pushed the responsibility for identifying risks into the business units. "We just took it a step further to really integrate it into the company."
Hund-Mejean spends about 40% of her time on finance tasks and as much as a quarter on HR, with the remainder split between strategy and risk. As CFO, she oversees a staff of about 700 and she notes that she has implemented rotational programs for finance staffers as part of an effort to develop future talent.
Hund-Mejean, 49, experienced job rotation herself as part of the treasury training program at General Motors, then served as treasurer at Lucent from 2000 to 2002. She joined Tyco as its treasurer and senior vice president in 2002 as part of a new management team that remade the company after Tyco's top executives were indicted for fraud. "It was fun," she says, but adds that being a CFO is even more fun. "To be the CFO of a company gets you a lot broader, it gets you into the strategy part."
Meanwhile, the aggregate data that MasterCard sees on consumer transactions looked somewhat better in the fourth quarter of last year and the start of the first quarter, but Hund-Mejean is only guardedly optimistic. "We really think that we are not going to see a significant economic recovery until maybe the later part of this year," she says.
She is more upbeat about the business of electronic payments, noting that of the roughly $33 trillion in worldwide personal consumption expenditures in 2008, 55% of payments were still made in cash or by check. "So we're talking about trillions of dollars to be converted to electronic forms of payment," she says. "It's a great industry to be in."
The challenge for the company, she says, is identifying how people will make payments in the future. While consumers find current methods of payment effective, "look how the younger generation is using their mobile phones," Hund-Mejean says. "My 14-year-old daughter leaves her wallet at home but never her mobile phone. You have to figure out what are the forces in the market and how can you be at the forefront."