Transcript

The AI agents in your wallet, with Mastercard CEO Michael Miebach

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1:20 Join us at masters of scale dot com slash apply twenty six. That's mastersofscom slash apply. Twenty six. Oh. We were all there cheering and said this is a good thing. It's a discontinuity and we're looking for discontinuities to provide more value in a fast changing world. What we cannot do is look in the rear view mirror and say, Hey, you know, what we have works.

1:47 And it does, uh, but I think there are many more choices coming, so constructive competitive paranoia I think is the mindset we need to have, and then I think what is at stake is also an opportunity for us. That's Michael Mieba. CEO of MasterCard, the global credit card and payments juggernaut. I wanted to talk to Michael to get his views on the recent holiday shopping season and what it indicates about consumer sentiment.

2:18 I also wanted to ask about AI's impact on the security of financial transactions and what the role of credit cards might be in a crypto adjusted agenti commerce future. Michael, as it turns out, has been asking himself and his company many of the same questions as he looks ahead at 2026 and beyond. So let's get to it. I'm Bob Safian, and this is rapid response. I'm Bob Safian. I'm here with uh Michael Meebach, CEO of MasterCard. Michael, thanks for being here.

2:55 Delighted to be here with you, Bob. You have a unique vantage point on on consumer activity. So many payments run through your system. From this past holiday season, uh uh do you have yet any observations about consumer spending or customer sentiment, any sort of Emerging trends or lessons you've seen yet?

3:17 Right, you know, uh when when you think about what we do is so we facilitate payments all around the world. So that that provides a really interesting data set um across all sectors, across all countries, two hundred and twenty countries and territories. Uh last year were about 160 billion transactions through our network, so it does provide quite a unique view. You know that the the uh Past holiday season, three point nine percent was the year over year growth. So yeah, that's that's a strong holiday season. You think political uncertainty, you think trade alignments and all these kind of things, but uh the consumer held up well. You know, one thing that I thought was striking is that apparel sales. So we see this by categories. You know, we don't see individual, you know, MasterCard holder data, but the aggregate data of what are people buying and where are they buying it. So apparel sales had a real moment. So 7.8% growth in apparel.

4:14 Um quite really a stick out kind of category. One other interesting thing uh that that I saw there in the data this particular season compared to last holiday season, consumers came in early. Probably. Um It's a continuation of what the consumer has done throughout twenty twenty five. I can look for a better deal. I can look for a promotion. So the you know the Black Friday was particularly strong and then you look thereafter. So

4:39 The savvy consumer is doing that, and so are businesses. Businesses were also worried about potentially sitting on inventory through that. So they're trying to uh you know, sell their inventory and put out offers earlier. So interesting to see what we're gonna see in twenty twenty six. The word affordability, at least in the US, has become like this big buzzword. And it sounds like y you you you're sort of seeing that in some of the data that that's where people are are leaning. When you look at uh some of the you know post terrorists, certain prices have gone up, others have come down. But it's very interesting when you look at the three point nine percent overall, um, you know, you were to say, is that inflation? No, it's about half as price increases, so uh pretty tame. Um and the other half is real volume increase where people were just still making investments into the things that it wanted to buy. It's interesting. You must see data every day about sort of spending patterns and changes. I'm curious how that impacts your planning and strategy. Like I I had a CEO on the show out of the tech world recently who said he's now like replanning every week that even monthly is too late. Very different.

5:44 leadership perspective from, you know, three year, five year plans. Is your system different because of the speed of the feedback you get? You know, it's not. Um we Five years ago we re-architected MasterCards network. We're in more and more countries around the world. We're facilitating more and more types of payments that might have been from an account to account are now happening on cardrails or stablecoins or you name it. So

6:13 We had a re-architect from that perspective, that is not really changing our plans. What is changing our plans is if consumer behaviors and consumer choices are changing in more fundamental ways. Younger consumers like buy now, pay later. So Well, we gotta have that built into our system. Those are the kind of changes there. Not short term change. Yeah, this is ups and downs from the economy. We capture that, the system can handle that. But where are the payment trends going? Where do we invest to really understand where consumer or business paying uh payments are going, the payments need to be smarter, they need to be faster, they need to be safer, all those kind of things, that's where we're investing. But that's not from week on week. We look out, you know two, three years, and then we uh you know put those make those technologies available for our customers, which are generally banks or large merchants or airlines. Those are our customers. You mentioned buy now pay later, a business like Klarna that went public last year. Is the credit card buy now pay later? Like what what's the distinction? Why do people get so excited about it?

7:14 You know, it's um it's yet another payment choice out there. So payments have not been more competitive than they are today. So you can pick you can pay in stable coins, you can have a push payment, you can have a prepaid payment, you can have a buy now pay later. This goes straight to essentially a personal loan kind of equivalent. Um so those are choices. And those are the choices that uh you know if we see them amongst consumers or the customers of our customers, then we make them available. Um, you know, if you are a buy now payload a pure play company, you're gonna find uh large merchants, large brands that are gonna have these offers on their websites and in their stores, if they have physical stores. The way that we did it, we build it just as an offer into our network. So wherever MasterCard is available and one of our acquiring partners can offer at the checkout terminal in in an in store and something, buy now pay later. So JP Morgan or Galileo are partners like that of us, they make that uh available. So The initial craze of buying alpha leaders died down a bit. I think it's a very credible choice. We offer it. And you know, a lot of young people think this is a good idea.

8:18 Yeah, because it gives you more planability off uh you know, of your interest payments and all that. We also think that uh, you know, kind of loans on cards where you say, let's say you pay five hundred dollars on a card and you turn that into three payments and you many banks just offer that and it's not going into a buy now pay later route, but it's the same outcome. So in the end, people want more control over their finances and more flexibility to buy bigger things that maybe cannot afford in the moment, and different solutions to that. We're all about consumer choice and we make all of that available. You're also a a brand. I mean, and uh and I'm curious how you think about distinguishing that brand going forward. You know, this this term like what's in your wallet has become ubiquitous, but that's capital one, right? In some ways, your customers become your Competitors or how how do you think about distinguishing yourself in that?

9:08 Kind of a noisy. Evolving market. So branding in our business, uh that's it's about trust. Oh yeah. So you're facilitating a payment transaction about somebody's money that it's hard earned money. So what's gonna happen if something goes wrong? So if you see the two interlocking circles of our brand, you know it's gonna work. Zobby's on. And if something goes wrong, I can complain and if I didn't do that transactions and I prove it, you will get your money back. So That is what happens when you deal with MasterCards. So what's in your wallet is great, but what I personally prefer is priceless. Uh, you know, that's a one of the most iconic uh advertising campaigns. We have invested in that a lot. You know, a bank is generally a local, rather local institute. You know, Capital One is mostly in the United States, but they have customers that travel around the world.

9:53 So what do we bring? We bring access to um let's say Fast Lane in uh in airports. How do you get into the uh leading restaurant in a city of your choice during your um Christmas holiday? Or how do you get into that uh Life Nation concert where all the tickets have been sold out. Those are all sponsorship partners of ours. So they're all you know part of our investment into our brand. I'll sometimes ask uh a a a version of this question to like an auto company CEO about what they drive. Like what carts do you carry around? Do you do you sometimes use a Visa or American Express to like test them out? Or like, no. There I never I'm never gonna touch anything but having a MasterCard in my wallet. Bob, if I if I had a wallet. So generally it's all lives on my phone. That's the first thing. The key word you just use is test out. So I test out a lot of our old cards so uh you know, try this new program, try that new program. And how would I ever know how it feels as a consumer if I don't use competitive product?

10:48 You just have to be careful when I pay with what, so people don't just m misinterpret me paying with another brand and saying I you know you have an issue with that. No, it's really I gotta know how it feels. And uh I used to be our chief product officer, so I call our chief product officer and say, Hey, you know, I think there's something that we could do better or differently. Um, and I encourage uh my team to do the same thing. We gotta know what's going on. You don't carry a wallet in the same way. Drastic evolution from physical cards and checks and even cash to contactless tap and digital wallets. Right. Is is this new standard like gonna stay, or do you think things will keep moving to things like biometrics or face scanning? I mean, I know you've talked about more personalized payments. Is that what you mean?

11:37 Uh that's not quite what I mean. But you know, when when you think payments, uh it's a constant evolution. So it's not gonna stay where it is. It took ten years for uh contactless to get what it is today. So you you tap with your phone, you tap with your card. It's about two thirds of global transactions on our network are now contactless. Well, that's now a big driver for the next kind of uh experiences where checkout r really becomes a non issue, uh, it just kinda disappears. So uh we put a lot of focus on making checkout a non-event. Um and uh Yeah, an enabling technology for that is tokenization. So you take your card data.

12:17 And you turn it into a one time code, it can only be used for the transaction that's securely shot between the different participants and the payment ecosystem, very safe. Now you can do the same thing with your biometric identity. And that comes along with that transaction token and Anybody on the other side can see that is the transaction and it should go through. So it increases security dramatically. So we invented tokenization in the payment side, you know, uh many years back, and it's now scaling. So we made a commitment that uh starting with Europe that by 2030, every transaction will be tokenized. On that basis, you can do Really the check out moment is just gonna really recede to the background. More choice, more opportunities, easier and safer transactions, Michael paints a fairly rosy picture for the future. But he's also quite aware of the double-edged nature of progress, that AI and global markets and disruption require new perspectives and new vigilance. We'll talk about that and more after the break.

13:19 Stay with us. Humans will never be more intelligent than AI. There's gonna be two types of companies. Those who are great at AI and those that went out of business because they weren't.

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14:39 I hope to see you there. Before the break, MasterCard's Michael Meebach shared insights about the 2025 holiday shopping season and what it'll take to differentiate a brand in 2026. Now we dig into AI's impact on the security of financial transactions, what he's doing to unlock new opportunities for MasterCard, and the lessons that people most miss about global markets. Let's jump back in. With AI, I w I worry sometimes that, you know, by doing a show like this, like someone can

15:14 take my image and can deep fake me and if my face is my access to my financial life, like how how do we protect against that? First of all, I'm real, so that's good. This conversation is actually real. Um we uh We recognize there's an arms race going on. Uh you know, and AI is fueling the arms race. So there's those of us that defend the digital economy, and then there's uh the hackers and the fraudsters. So tokenization is only one aspect uh of the arsenal of tools that we need to deploy. For example, um, you know, the speed with which you type on your device. Um

15:57 Uh Your device can tell if this is a left hand or right hand, uh and uh let's say it a fraudster uh Type with a different speed, a different pressure. Um, and is recognized, well, that's not Cannot be. the same person.

16:11 Then there's location data. Well, you you're actually in another place because you just Did a transaction over here somewhere, this transaction's come where somewhere else, or it's completely out of your buying pattern, and that would also be different. So there's multi-layered security Where the journey is really going is to uh leverage generative AI for cybersecurity and and fraud prevention is where you start to predict what is the most likely next fraudulent card number or the the next card number that will be befrauded. Let's say your card uh details for whatever reason you've stored them with some merchant a few years back, you have even forgotten that and that merchant is hacked. Those kind of scenarios happen all the time. So what we do through um a company that we've acquired in December twenty twenty-four, recorded future, we scan the world out there.

16:58 Um and all the the corners of the internet and dark web to see where is their you know, fraudulent card data that's out there. And then uh we flag that to your bank. So Both sides are arming up. Um and we've invested, I think over the last uh six years, like eleven billion dollars into our safety and security. So this is a big topic to stay ahead of the game. There's predictions that when you look up to twenty thirty that you know, it's about fifteen trillion off fraud out there by twenty thirty. If it were a country, uh you know, internet fraud and uh would be the third largest country in the world. So there's a lot going on. Um it's a big part of our business and is a big part of us saying that we uh we're promoting trust and payments uh across all types of payments.

17:44 Because we're investing into that. Yeah, no, it's it's uh you know, AI is a is a great tool for identifying potential fraud, and it's also a great tool for perpetrating fraud. Exactly. And it's a it's an ongoing battle. We're not really sure where that's gonna net out. Somebody comes out with the latest cool technology, but it's just cool and not safe. You know, that is what uh standards are designed to do. So we're partnering with Google's and others to do exactly that. In the world of, you know, uh agents uh doing payments on behalf of people in an AI world. Yeah. So you got the next kind of open flank if you don't put in standards early. So collaboration is really important amongst the industry, but also then with a regulator.

18:27 So that safety and security is recognized by regulators in a way that doesn't stifle innovation. And uh that's where we spend a lot of time with regulators and governments around the world on the same thing. You've been working with OpenAI and Google and Cloudflare on agentic commerce standards. I is is this vision of AI agents doing buying for us like is this a is this a near term reality or do we still have a a a long way to go before that? That can come to fruition in any question. I I don't know the answer to that, um, but I can tell you a lot of people are going for it right now. Uh the question is will this be a zero sum game? I this is now the only thing I'm gonna do, most likely not, because we've not seen these comp complete changes with new technology emerging. I think it's more choice. I think we see gradual change, uh, but we will not see gradual change if

19:21 Yeah, you deal with an agent and that agent is not an accredited agent that is known and understood in the payment network as in that is actually the agent that it claims. Um and That's Problem number one to be solved, which we have solved is MasterCard Agent Pay. The other problem to be solved is what happens if something goes wrong. How do you sh how do you say, well, actually I never asked the agent to buy this. Um, how do you prove that? So there's an audit trail there. There's a lot of technology behind it to do the same thing that happens in payments today, where you could just say, Well

19:50 I never did that. So we're just doing that and I think uh with uh where where we are on that, it is now following the same standards. So this is kind of live now. Um then um we have some real opportunity in here that might be a significant change. I think agenda commerce and agent driven purchases on behalf of a consumer. Can also level the playing field in terms of competition on the merchant side. So our small business um can now compete in a very different way because the agent looks at everything that's out there. Joe's travel shop somewhere, they can compete. And because they're recognized, participate in the ecosystem, they will be on a level playing field. So I find that an exciting thought. More choice for consumers, more competition, um, a chance for small business. I think that it has a lot going for it. So maybe we see some shifts.

20:40 But I don't think a dramatic change. As you look at how AI will impact your business, how much do you think about sort of what you build yourselves versus what you would acquire or partner to use. So um, you know, what sets us apart um in a world of AI or what sets anybody apart in the world of AI is is your data set. models. So all those kind of things are gonna commoditize over time, but uh the data that you have is absolutely central. And that's how we started our conversation talking about our data. It's non-personalized data, but it's global data. It's high frequency data, high quality data

21:19 We have like 19 million rules that we apply to sanitize our data and then start to extract insights from that. Now, um, that puts us in a really good position in the world of AI. So Yeah, when it comes to building agents, do I see ourselves in the business of building agents? No, that's really anyway not our business as a network. We're an AI company because we uh have a lot of data and we use that data to drive better insights and drive more value. I do hear from some folks that like there's a push to sort of integrate this, but they don't necessarily see the value from it yet commensurate to what they have to invest in it. I think most you most Company leaders, you would talk to everybody's trying to make their own operation more efficient, you know, on customer service and so forth. We do the same and we s see some good value there.

22:05 I find it's more interesting when you apply it on the product set and what are we selling and how are we driving value for others. Um Let's go back to the cybersecurity side of things. So we're leveraging generative AI there to scan what is out there, predict the next fraud. This particular solution is called Maskut Threat Intelligence. In the first six months of market testing. We have taken down nine thousand five hundred fake merchant sites. We saved 150 million dollars in fraud. Now that's real value. That is not real value would have been able to create with machine learning and traditional rules based on artificial intelligence. So this isn't Gen AI at work next generation. Um, so there is real value there, but is it, you know, it's gonna transform the world because we're looking at you know uh you know AGI, that's not that. It's very specific use cases that make a lot of sense and drive value right now, and that's actually where our focus is.

23:03 You mentioned the Uh global nature of MasterCards business. You operate all all over the world. You personally worked in Africa and the Middle East, uh I I know. Um business media tends to be quite US centric. And I'm curious what you think is being overlooked. Are consumers the same or different in different places? Like what what lessons have you learned about

23:27 the global consumer or is if there's a global consumer. You know there there there are things that are commonly true. People want safety, security. But then the circumstances are very different. If you go to an emerging market into a rural area Uh what means an easy payment, uh if it's on a feature phone versus a smartphone, that's a whole different and you know, just engagement.

23:49 Um, there might not be a bit bank available. So you're actually doing it through your phone company. Circumstances, infrastructure, all that is very different. In Africa, most of uh financial services are driven through uh the phone companies and th those are our partners. There are no limitations through legacy technology in some of these markets. You Just think of things in a very different way because you're not held back by legacy technology. Build something brand new, which we then export and say, this is actually great. Um so we're gonna take that to other parts of the world. Uh the the leapfrogging idea out of emerging markets, I think that is overlooked to to your question. Back to the arms race, the fraudsters and hackers don't care about borders. They don't care about countries. So if we have a world of digital islands where every you know different governments do their own thing and they don't agree that cybersecurity is an issue that needs common tackling, then we're gonna have a problem. I think that is overlooked. Given all these different pieces that are moving around and and and what you're managing and looking at, what's at stake for a MasterCard? Right now.

24:55 If you look at the Tectonic shifts um in the world that provides Uh, certainly when it comes to technology and payments, some you know interesting discontinuities. Agentic commerce, for example. Suddenly there's this additional entity, the agent, which is run by some company potentially, you know, there's like the large LLM company. So that's an opportunity for us to engage in a very different way and you know create a lot more value for our shareholders and for MasterCard by engaging upfront. Being proactive, leaning in, stable coins is another and discontinuity. So I think our mindset of we will always lean in, it's always providing choice, uh is the right mindset. We just have to do it and have to be out there and have to be out there fast.

25:43 When the Genius Act uh you know was signed uh last year, we were all there cheering and said this is a good thing. It's a discontinuity and we're looking for discontinuities to provide more value in a fast changing world. What we cannot do is look in the rear view mirror and say, Hey, you know, what we have works and it does. Uh, but I think there are many more choices coming. So Yeah. Constructive competitive paranoia, I think is the mindset we need to have. And then I think what is at stake is also an opportunity for us. Well, Michael, this was great. Thanks so much for chatting with us.

26:18 Well thanks, Bob. Uh I appreciated the conversation. I wanna double click on the phrase Michael uses at the end of our discussion, constructive competitive paranoia. It's a compelling concept, especially for a world facing so much transition. To turn discontinuity into opportunity, we need a mindset that keeps us on our toes. and also open to new ideas. That openness is the constructive piece, which is so critical. I also have to tip my hat to Michael for acknowledging that he uses competing products to test them out. The fact that he's wary about being seen doing so reflects the unforgiving nature of our media ecosystem. But in this arena, as in so many business activities, a little bravery is worth the risk.

27:09 I'm Bob Safian. Thanks for listening. Rapid response is a wait what original. I'm Bob Safian. Our executive producer is Eve Tro. Our producer is Alex Morris. Associate producer is Mashimaku Tonina.

27:33 Mixing and Mastering by Aaron Bastanelli. Our theme music is by Ryan Holiday. Our head of podcasts is Lytal Malad. For more, visit rapidresponsshow.com. Yeah.