Driving a culture of non-stop innovation at Mastercard
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Driving a culture of non-stop innovation at Mastercard

Sooraj Shah — February 2020
How Ed McLaughlin, president of operations and technology at the global payments processing company, is fostering continuous innovation right across the organization.

Ed McLaughlin’s role at Mastercard can be seen as encapsulating the payments processing giant’s ambitions — present and future.

As president of operations and technology, McLaughlin sits on the company’s management committee, overseeing both Mastercard’s technology functions (including its global network, platforms, tech hubs and security) and the business’s core operations centered around its processing of more than a billion credit and debit card payments every day.

Combining those two pillars of the business was critical in order to support a environment of continuous innovation, he said in an interview with I-CIO at the The Economist’s recent Innovation Summit in London — especially at this pivotal point in the evolution of financial services.

“Operations is who we are and what we do, it’s the value we bring every day. Technology is what we become. And bringing those two together in a continuous feedback loop enables us to build and advance,” he said.
Innovation mindset

For McLaughlin, innovation is akin to business ethics in that to genuinely take effect it has to pervade all parts of an organization. While it’s important for the leadership to passionately believe in innovation, it can’t come from the top down, it has to be everyone’s responsibility, he said.

“Ed McLaughlin”

Despite coming from the technology side himself — he was previously CIO of Mastercard — he argues that innovation is often mistakenly equated with technology.  “Innovation is not just a bunch of programmers working on a new mobile app,” he said, though that is part of it. “Innovation is the relentless pursuit of how you can do all things better.

“Too often innovation can be self-serving, [led by] people who want to build a super weapon. Or else, it is little more than ‘innovation theatre,’ backed by a cool video of what the future could be like but with zero plan on how to get there. Then there’s the tendency to create an innovation bubble where all of the clever kids work and everyone else is [seen as having] a slack job,” he said.

But none of these is the Mastercard model. “Rather, innovation is everyone’s responsibility — every day — to say, ‘How can I make this better?’ and ‘What are the tools and capabilities I need to do that?’”
Kaizen culture

Rather than using a traditional project model with a clear beginning and end, the goal is to build a culture of continuous improvement across all activities — with outcomes focused on delivering business value.

Achieving that takes requires both inspiration and structure. “We introduced Program Groups, which have all the development, servicing and infrastructure [required] around them to innovate. Working with autonomy but within a strong framework, they are free to focus on the direction they take and to obsess about the value that they’re generating,” he said. “What we’re doing is team-based development on a continuous basis with fully empowered teams focused on the objective of who they service, continuously releasing value,” he said.

In short: “If you put the right principles in place, you can unleash an unbelievable amount of innovation.”

“By using AI, we have been able to reduce the number of false positives by over 60%.”

McLaughlin cites one major example of how the company has jumped on a technology change to make big gains. In order to spot fraud in transactions, Mastercard has traditionally used rule-based systems that flag up an issue based on a situation previously encountered. But the application of artificial intelligence (AI) promised a better solution – for the company and its customers.

“When we initially introduced our rule-based systems, we wiped out billions of dollars’ worth of fraud. But we also saw that the systems could be a little too blunt, with legitimate people sometimes getting transactions turned down. By using AI, we have been able to reduce the number of false positives by over 60%, and to react to incidents as they are happening in real time, so consumers have a better experience and merchants sell more,” McLaughlin said.

“The innovation wasn’t about thinking, ‘How can we stop more fraud?’ it was about ‘What’s the best consumer experience?’” McLaughlin added.

That AI technology is now built into Mastercard’s SafetyNet monitoring and authorization program, which the company says prevents around $50 billion in potential fraud losses for our customers.
Willing to fail

Taking innovation successfully through to market-testing phase also requires some clear thinking. “For example, don’t label a project as a pilot if you’re going to do it anyway,” he said. “That’s a beta.”

“A pilot is quite a scientific process, where you’re putting effort into finding something out. Based on that, you decide whether or not to go forward. You’re asking a question but don’t ask it unless you know what you’re doing to do with the answer,” he said.

“You need to be ready to avoid making further investments on a pilot that isn’t panning out. It’s the same as failing fast — you can only fail fast if you frame the entire experiment as something you will take down,” he added.

McLaughlin looks back at the example of contactless payments when it was piloted 12 years ago. During the pilot phase, the company found that consumers typically embraced contactless after only three transactions. “So even though we had only done it in a couple of cities we could [quickly] see the value. The pilot proved to us there’s something better than we were already offering,” he said.

Such a realization, saw the company gearing rapidly for a global scale out of contactless technology.

It also pointed the way to a perception — both within Mastercard and externally – that a company that was once seen as a financial service player is now first and foremost a technology company alongside Amazon and Facebook.

First published February 2020
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