The credit card business turned 55 last year, and it might look as though the industry is having a midlife crisis—what with credit purveyors trying to dump the classic mag-stripe-and-plastic cards in favor of cards that use wireless technologies and even mobile phones. But that’s no midlife crisis. It’s market expansion, and it could change the way most people use their credit cards.

"Startling innovations in technology are rolling like thunder through our industry," says W. Roy Dunbar, MasterCard’s president of global technology and operations, in a May 2006 speech to the 18th annual Card Forum & Expo. Among the factors Dunbar cited as having sparked the need for innovation: consumer demands for easier, more secure transactions; globalization; and the impact of new technologies, which are creating new business opportunities (such as paying for something with a cell phone).

MasterCard faces more competition in part because it (along with Visa International) recently lost an antitrust suit, leaving the door open for its member banks to end now-exclusive relationships by signing deals with American Express and Discover. The company also sees an uptick in competition from PayPal and other online payment services.

Dunbar says MasterCard has plenty of good ideas; the question is knowing which ones to pick. Dunbar joined MasterCard two years ago after more than a decade at Eli Lilly. One of the main concepts he brought with him from the pharmaceutical industry was the idea of failing fast—that is, testing ideas quickly and discarding them if they don’t work. In this way, one can accelerate the process of finding ideas that do work.

"You can’t institutionalize innovation, but there may be supportive processes you can build," says Dunbar.

A Process for IT Innovation

Accordingly, MasterCard has moved to formalize support for innovation within its culture. It is two years into a program called Rapid Value Creation, an effort to approach new ideas systematically across the 210 countries where it operates. Rapid Value Creation starts with MasterCard’s key functional executives, who meet monthly to set priorities for new ideas that come from groups like IT, product development and marketing. In this way, management is able to get in step behind ideas—and get them to market—more quickly than in the past.

Dunbar says MasterCard’s IT systems are key to implementing new ideas. "The architecture is component-based and many elements are brought together in varying configurations to create just the right capability to support innovations," he said. At the beginning of the decade, MasterCard spent $160 million overhauling its core systems, which Dunbar says should help the company develop new markets ahead of its competitors (the biggest of which is Visa).