The glare of the media turned this year on MasterCard International and its president, Robert W. Selander, who seemed to be the beneficiary of a titanic flap between Visa U.S.A. and Citibank.
Mr. Selander, saying he was more concerned about matters of longer-term strategy and structure, shrugged it all off as a strange coincidence.
"What amazes me is how people can take random events and turn them into Machiavellian plots," he said in a recent interview.
The event that got all the attention was the resignation of Citigroup co-chief executive officer John Reed and consumer banking head Robert Lipp from Visa's board, reportedly in a dispute over branding policy. Hoping to more prominently display the Citi logo on cards, they signaled that they would steer more of their card-issuing business toward MasterCard.
Out of the public eye, Mr. Selander said, he had been executing some of the decisions made by MasterCard's senior management team and board of directors since he took the CEO job in May 1997.
It so happened that MasterCard was dealing with the same new realities- consolidation, competition, and technology-that have forced industry associations of all kinds into restructurings and revisions in governance. The Citi-Visa incident was only the most visible manifestation of new power relationships.
Mr. Selander, who generally keeps a low public profile, said he learned of the Visa upheavals when a MasterCard staff member asked if he wanted to answer a news reporter's inquiry about it.
(The reporter might have been enterprising enough to know that Mr. Selander spent 20 years with Citibank before becoming a MasterCard executive vice president in 1994. He refused to take the reporter's call, and he characterized much of the ensuing press coverage as misinformed.)
To Mr. Selander it was of more importance that MasterCard trimmed its international board from 31 members from 17, put more organizational emphasis on customer service than on geographies, and devoted more resources to the largest banks in its network.
One of them, of course, was Citibank. Sure enough, Robert B. Willumstad, Citigroup's head of global consumer lending, showed up on the streamlined MasterCard board.
There was no agenda other than efficiency, Mr. Selander said. With 31 directors, "some of our board members argued it was more like going to a conference than to a board meeting."
On this point he gets knowing agreement from the otherwise antagonistic president of Visa U.S.A., Carl Pascarella. The 26-member board he had in 1993 is down to 10.
The process was aided by consolidations that "took some banks out of the business," but Mr. Pascarella said the reductions would have had to take place anyway, if for no other reason than "group dynamics."
"It is essential to have the right decision makers-people who can commit their banks," Mr. Pascarella said. "And we have to have representation from all sizes of banks. But to get things done in a market changing like ours is, it was essential to do what we did, and I couldn't be more pleased with how it is working."
MasterCard-a global body, in contrast to Visa U.S.A.-kept its six regional boards intact. The European board includes representation from MasterCard's partner, Europay International.
The regional governing system was set up about five years ago, and given key international responsibilities, at roughly the time Mr. Selander came in under then-CEO H. Eugene Lockhart. The goal was to "decentralize," he said, so that the "global board delegated authorities to the regional boards, and also to Europay."
Under a separate organizational change announced in February-two weeks after the Citi-Visa incident-Mr. Selander placed senior executive vice president Alan J. Heuer in charge of all customer-related activities. Mr. Heuer, previously president of the U.S. region, thus took charge of the other four regional presidents who had previously reported to Mr. Selander.
Mr. Selander said the recasting of Mr. Heuer's position was misinterpreted.
"We didn't eliminate or take back powers, nor did I fire all the presidents of the regions, as some press articles have suggested," he said.
Rather, the "concentration and consolidation of the payments industry" prompted a new look at MasterCard's priorities, Mr. Selander said.
Of 200 geographical markets in which MasterCard operates, 20 account for 95% of its business, he said. Among the association's 23,000 member banks- Mr. Selander refers to them as customers-70 represent 70% of MasterCard revenue, transaction volume, and cards in force.
That skewing had to be taken into account as MasterCard moved to "significantly enhance the focus on customers," Mr. Selander said.
One executive, for example, is exclusively dedicated to managing relations with Citigroup outside the United States.
Mr. Selander also pointed out that in Canada, where MasterCard maintains a 16- to 18-person staff, duties have been shifted so that nine people work full-time with bank customers, up from three. Administrative tasks have been reduced, with some functions shifted to the main operations center in St. Louis.
Such changes stem from a three- to five-year master plan approved by the international board in November 1997.
"There is a relatively long lead time to some of the things we do," Mr. Selander said. "I don't think I would label a single event or single customer like Citigroup as a catalyst or precipitator. There was a whole series of things that happened."
When the master plan was articulated, "we envisioned convergence in the industry" but "had no idea it was going to happen as fast as it did," Mr. Selander said. Citigroup was a factor all along, he said, because it was only a month or two after the plan's approval that Citi bought the sizable AT&T Universal Card portfolio, which was predominantly MasterCard.
Mr. Selander sums up the plan in three words that he repeats like a mantra: focus, strengthen, differentiate.
"Focus" and "differentiate" refer to the enhanced attention being paid to the most important customers and markets. One piece of this is a more flexible pricing structure, which Citigroup in particular is said to favor, in which member banks can select from a menu of services rather than pay a flat fee for optional access to everything.
For example, Mr. Selander said, one bank may want to use MasterCard's direct-mail consulting services, while another might want advice only on portfolio purchases.
"We are separating the way we deal with customers into core services-the things that every customer needs-and user-pay services," Mr. Selander said. That way, issuers that generate larger transaction volumes get scale pricing, he said, and do not have to subsidize services that appeal mostly to smaller issuers.
"Strengthen" refers to improvements in operations and expanding the number of locations that take MasterCard.
"Four or five years ago, we weren't regarded as being as good in operations and technology as some other alternatives in the marketplace," Mr. Selander said. "But now we're considered not only as good as, but in fact better" than others.
Simplifying franchise rules, improving clearing and settlement procedures, and other technical changes contributed to the face-lift, he said.
In a bold move into smart cards two years ago, indicative of its strategic intentions, MasterCard bought 51% of Mondex International.
Despite lackluster U.S. interest in the technology, "we absolutely made the right decision," Mr. Selander said. "We recognized that we needed to have a product in the electronic cash area, and we felt that the endgame in electronic cash is Mondex."
Visa U.S.A. executives have interpreted MasterCard's moves as evidence that its rival is more interested in improving its transaction network than in building up the MasterCard name.
Visa perceives "two diverging business models emerging in the card market: the efficient processor versus the strong brand model," said Michael A. Beindorff, the San Francisco association's executive vice president of marketing and product management. He put Visa in the latter category.
Mr. Selander scoffed at the notion that brand matters less to his organization.
"There is not a person that I've spoken with who doesn't believe it's important for MasterCard to have a strong brand, strong acceptance," Mr. Selander said. "There are also a lot of our customers who want to have a very strong brand of their own, and very rightfully so."
He pointed to the "Priceless" advertising campaign, probably MasterCard's most successful. It was launched in late 1997 and is running in 35 countries. MasterCard said it has helped narrow a consumer "awareness gap" with Visa.
"We think 'Priceless' has legs-it can go on for years," Mr. Selander said. "It works on credit cards, it works on debit cards, it works on corporate cards."
Any marketplace confusion over MasterCard's branding aspirations is, in Mr. Selander's view, another example of how the "tea leaves were completely misread" during the association's reorganization and welcoming of Citigroup.
"What we're trying to do is find a way to serve our customers and to do it fairly and effectively," he said, "whether they are small, medium, or large."