Mastercard is one company that knows its way around a global payments network, and for a company like Facebook looking to launch Libra, the company would have been a massive asset to have on its side. Mastercard was part of the Libra Association from the beginning but was also one of the first companies to pull out.
A number of key Libra members have since evacuated from the project, all stating similar reasons, primarily around the notion that it was not what they thought it was going to be, or what was promised to them. Compliance is also a big factor that scared off the Association members as Libra hit a number of hurdles when it was announced.
Now, in an interview with the Financial Times, Ajay Banga, the long-standing CEO and President of Mastercard, has outlined some of the deeper reasons why his payments company decided to leave the Libra project.
Not what’s on the box
Part of the issue for Mastercard, according to Banga, is that the Libra project was supposed to be a globally inclusive currency that had altruistic purposes, but this quickly turned out to be a bit of a facade.
“It went from this altruistic idea into their own wallet. I’m like: ‘this doesn’t sound right,’” said Banga.
He said that financial inclusion would mean that a government is able to pay citizens in a certain currency, which they must be able to understand how to use, and must be usable in day-to-day transactions for items like food.
“If you get paid in Libra… which go into Calibras, which go back into pounds to buy rice, I don’t understand how that works,” he added.
Other issues included the fact that the business model was severely lacking a profitability pathway for the association members. The CEO was concerned that the money that would be made from Libra would not be in understandable or standard ways.
Of course, when the push back against Libra really started mounting from regulators, and it looked as if the project may not even get off the ground at all, the Association started showing its nerves.
Mastercard left the Libra project alongside its main competitor Visa back in October of last year. Although Mastercard did not say at the time why they had decided to leave, a Visa spokesperson said they had pulled out because the project had not been able to “satisfy all requisite regulatory expectations.”
Now, Mastercard has also shown it had concerns over regulatory issues as Banga admitted there was scepticism when association members would also not firmly commit to know-your-customer (KYC), anti-money laundering (AML) controls or data management controls