Mastercard’s CEO, Ajay Banga, recently offered a blunt assessment about governments creating or supporting their own national payments systems.
In an interview with Financial Times that was published on Sunday, Banga criticized the efforts of some countries to prioritize national payments control over global networks such as Mastercard.
“The economic cost of building siloed systems in a world where citizens travel globally is really stupid, and where crime travels globally is even more stupid, and where technology is completely global is even three times more stupid,” he said.
Banga told the publication that localizing payments networks has three issues: it requires significant investment in redundant systems, it makes cross-border transactions more difficult, and it fragments data, making it more difficult to use for tracking crime.
According to Banga, the problem is worse in times of rising nationalism, but countries including France and Mexico have tried building national payments systems in the past.
“This idea of finding a way to have national control on certain kinds of payments is not new — it’s a fantasy that’s been going on for a long time,” he said.
Most recently, India, which boasts a rapidly growing digital payments market, has been aggressively supporting its own homegrown payments methods, including UPI (Universal Payment Interface).
The country’s central bank, the Reserve Bank of India, also frustrated many foreign companies in 2018 by mandating that all payments data be stored locally, citing data security concerns. U.S.-based companies, including Mastercard, unsuccessfully lobbied against the rule.
Domestic payment facilitators have the potential to help bridge the gap between global networks and countries’ desires to keep both business and data local. For its part, Mastercard works actively with payment facilitators and other domestic companies in regions such as India to help expand its reach.