MasterCard’s Chief Executive Officer has said the payment processor abandoned the Libra project, which was led by Facebook after realizing that there were some issues regarding its business model as well as some revolving regulatory compliance.
Ajay Banga, the president and CEO of MasterCard since 2009 recently sat down with the Financial Times and had a candid conversation pertaining to the Libra project. According to Ajay, his attitude towards this project began to weaken when some of the members in this project advanced proposals that would have seen it get linked to Calibra, a proprietary digital wallet.
His problem with this proposal stemmed from the fact that when the idea to develop Libra was first muted, the currency was supposed to be all-inclusive. It was to be accessible to all people across the globe. Banga told the Times that:
“It went from this altruistic idea into their own wallet. I’m like: ‘this doesn’t sound right.’”
Global Financial Inclusion
Banga noted that financial inclusion would imply that governments and other authorities would be in a position to pay its people using a given currency. Once paid, the recipients would be in a position to understand how that currency is used, and would thus be able to use it in their day-to-day lives, e.g., paying for their daily food supplies. He went on to note that:
“If you get paid in Libra [coin]…. which go into Calibras, which go back into pounds to buy rice, I don’t understand how that works”
According to the CEO, the lack of a viable business model also raised some concerns for MasterCard. Based on the proposals being put forward, the proponents of the project had not identified a way in which the Libra Association would start making money after launch, which would then make it profitable.
He noted that when an investor is unable to understand how money is being made, it may end up being made in ways that he or she will not be proud of. Other issues that concerned him was the lack of commitment by the project members to abide by data management, AML, and KYC rules.