Linda Kirkpatrick started out as an intern at Mastercard in 1997, at the height of the dot-com boom. More than two decades later, the lessons she learned back then resonate in her current role as Mastercard's North America president.
"Digital commerce was in its infancy, but everybody really didn't understand the magnitude of it at the time," she told Protocol. "They knew it was going to be really big and so everybody was trying to come up with their own unique idea for how they would capitalize on online commerce."
Today, Kirkpatrick, who assumed her new job in January, is helping Mastercard grapple with another technological upheaval. Fintechs are upending the way consumers and businesses pay for goods and services, and the impact seems even greater than during the dot-com era. Part of her job is to engage with these smaller, newer, nimbler players — and quickly figure out which technologies and startups to bet on.
"For a company like Mastercard, we want to partner with as many companies as we can, because we don't know what consumers will ultimately choose as their preferred form of payment," she said. "We don't know which players will ultimately be the clear winners, but we know that if we partner and collaborate across a variety of segments and a variety of technologies and a variety of solutions and use cases, we will end up with some winners."
Linda Kirkpatrick, MasterCard's president for U.S. operations.Image: MasterCard
Mastercard has been making some big bets recently. There's the pending deal unveiled two years ago to buy the Denmark-based payments platform Nets for about $3.5 billion. In November, the company completed its $825 million acquisition of financial data analytics company Finicity. Two weeks ago, Mastercard said it will open up its network to select cryptocurrencies, despite the fact they're not yet that widely used in commerce.
"Frankly, that has yet to be proven, that there's consumer demand to make payments in cryptocurrencies," Craig Vosburg, who previously held Kirkpatrick's position before he was promoted to Mastercard's chief product officer, told Protocol.
"But if you assume for the time being, given the level of interest in cryptocurrencies, that there may be demand by consumers to make a payment in a crypto, that's very much aligned with our strategy of enabling choice in how consumers and businesses make and receive payments," he said. "If there's demand on either side of the transaction for a consumer to pay that way and for a business to be paid, then that's something that we'll want to facilitate."
Mastercard's recent moves mirror those of archrival Visa. Last month, Visa announced a partnership with neobank First Boulevard that would enable customers to buy and sell Bitcoin through Visa partner Anchorage. Both companies have been investing more in blockchain and digital currency technologies.
And they even recently engaged in a tit-for-tat of sorts on the M&A front. Mastercard announced its merger with Finicity just a few months after Visa unveiled its own (now abandoned) acquisition of Plaid in January 2020.
Mark Batsiyan, a partner at Inspired Capital, said that "was clearly [a] defensive" move by Mastercard, a company that's been part of a longtime duopoly. Mastercard and Visa have, for decades, been able "to dictate lots of the terms of how payments are transacted in the United States," he told Protocol.
Kirkpatrick downplayed speculation that Mastercard was simply following its rival's lead: "You can assume that Mastercard has been looking at any and all partners in this space. If it's a company that's put itself out there for evaluation, we've looked at it. We have our finger on the pulse for what's important and we evaluate. Finicity was just one of those opportunities."
Pressed to act
Founded in 1966, Mastercard serves more than 20,000 financial institutions worldwide with 2.8 billion cards in use worldwide. Last year, the company's network recorded $6.3 trillion in transactions. On the other hand, Visa, which was founded in 1958, serves more than 15,000 financial institutions with more than 3.5 billion cards in the market worldwide. Last year, it processed $11.3 trillion in transactions.
Experts say both companies face new threats with the rise of fintech, particularly the emergence of payment technologies developed by startups such as Plaid and Stripe. "They were caught flat-footed by the explosion of fintech," Bill Pearce, assistant dean and chief marketing officer for the Haas School of Business at University of California, Berkeley, told Protocol. "These guys have been rocked."
He said these companies were particularly rattled by one technology: "Blockchain really scared them. Blockchain potentially becomes a real threat to them. So they've been aggressive to improve their innovation performance."
Logan Allin, managing general partner and founder of Fin Venture Capital, echoed this view, saying "unless they diversify their revenue streams and their partnerships, their businesses are going to continue to get disrupted."
"The innovation that's happening, whether it's in blockchain payments or alternative payment rails, what they're seeing emerging is they're going to get cut out as the middleman," he said.
Which is why they're scrambling to find ways to become more competitive, said Tonya Evans, a professor at Penn State Dickinson Law and CEO of Advantage Evans, an adult education services company. "In the interest of making sure that these companies remain competitive, they have to do something," she told Protocol. "It's not because they want to, it's because they've been pressed to do so."
M&A is clearly a key component of their strategies. And Mastercard recently outperformed its rival on this front. While Mastercard's Finicity deal went through without a hitch, Visa's bid to buy Plaid failed after the Justice Department opposed the deal, which it called anti-competitive. Visa and Plaid denied the charge, but decided to end the merger talks to avoid a protracted legal battle. The DOJ cited a comment by Visa CEO Al Kelly who described the planned merger as an "insurance policy" aimed at neutralizing a "threat to our important U.S. debit business."
Kirkpatrick declined to comment on Visa's failed merger, but said, "We were super pleased that we were given the green light to move forward, and not surprised. To be honest, because our acquisition was premised on giving consumers choice and giving them access."
Allin praised Mastercard for doing "the exact opposite" of how Visa positioned the Plaid deal; they painted the deal as "additive" and "nowhere near competitive."
'We compete vigorously'
Still, the collapse of the Visa-Plaid deal underscored the serious antitrust issues Visa and Mastercard face as they look for other potential M&A fintech targets. That's why beyond gobbling up fintechs, Mastercard, like Visa, is also looking to forge alliances with the startups that are disrupting their space.
"We look at them as partners," Kirkpatrick said. "We operate a payments ecosystem that sits in the center of multiple stakeholders, and we're almost at that nucleus. We're the convener and sort of an intermediary between lots of different players."
These players include the big banks with their "tremendous consumer reach and tremendous connectivity to their customers on one side," she said. "On another front, you've got fintechs. They're not banks necessarily, but they might have a great idea around how to access information and data from consumers that the banks can use to speed up decision-making. I view fintechs and financial institutions as peacefully coexisting."
One company Mastercard has aligned with is Payveris, a digital payment and money movement platform. Payveris is the company's partner in its Bill Pay Exchange platform.
CEO Ron Bergamesca said he was initially worried about working with a dominant corporate giant. "I thought Mastercard was going to be a pain in the butt to work with, and that they were going to slow us down," he told Protocol.
But the company, he said, is "surprisingly nimble." He said Mastercard has managed to take "a big behemoth that's been around for a while" and "act like an entrepreneurial company," he said. "Whoever is at the top over there is doing something good."
Mastercard Chief Product Officer Craig Vosburg.Image: Mastercard
Those at the top include Kirkpatrick and Vosburg, who are both drawing lessons from past tech upheavals to guide the company forward.
Vosburg, who joined Mastercard in 2006, also lived through the dot-com era when he worked as a management consultant. Fintech, he said, is "a continuation of that trend," which has created a "very innovative space where consumers are kind of voting with their business, and in some cases voting with their data" to embrace new technologies for managing their finances.
And the current wave of innovations reminds Kirkpatrick of the dot-com era, when Mastercard had to navigate a market where established and new players found themselves jockeying for position in a fast-changing market.
"The time that we're in right now is sort of a similar situation," she said. "We compete vigorously for share and for growth in the space. There are some things that ultimately when we work together increase the pie for all of us. There are other things where we're squarely looking to increase our piece of the pie. And we do that often and frequently and aggressively."
"Many companies are looking to get into payments because they see that it's a sexy space and they see that it's growing," she said. "You can have a model of competition or you can have a model of coopetition with those players. And we've chosen the latter."
