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MasterCard: Building Today’s Smart, Sustainable Cities

As axes of culture and commerce, cities are where people come to pursue better jobs, services and lives. Today, more than half of the world’s population live in cities, and as policies, technology, and infrastructure evolve, the world’s urban population will hit 70 percent by 2050.

Urbanization provides a wealth of opportunities, including greater economic growth and the reduction of rural poverty, increased access to fundamental services such as healthcare and education, and environmental sustainability.

However, it also comes at a price, and governments and urban planners must be ready to mitigate the negative externalities of urban life, such as congestion, pollution and income inequality. Such challenges have the potential to prevent citizens from gaining access to key services, networks and the promise of a better life.

In order to be successful, cities need to harness the power of technology and data to create inclusive, smart, efficient spaces, where citizens and dwellers are empowered to live rich, rewarding lives.

This goal cannot be accomplished alone. Realizing a city’s potential requires collaboration from industries, sectors and geographies, as well as the leadership of global organizations such as the Centre for Liveable Cities Singapore and C40.

MasterCard’s global payments network provides governments, urban planners and business stakeholders with the insights and technology needed to help cities become safer, more efficient and inclusive. By embedding digital payments into core infrastructure and harnessing the data that electronic payments generate, cities can deliver on their promise to create smarter, more welcoming spaces, and empower their citizens to lead greater, more rewarding lives.

As a technology company in the global payments space, MasterCard is proud to partner with the World Cities Summit 2016, as part of its commitment to delivering three key elements of a smart cities solution:

  1. Making cities safer and more inclusive by reducing the reliance on cash;
  2. Making cities more intuitive and efficient by incorporating digital payments into core infrastructure; and
  3. Making cities sustainable and livable by employing the power of data.

Making cities safer and more inclusive by reducing the reliance on cash

Countries pay a high price for using cash, where the cost of cash production can account for nearly 1.5 percent of a market’s gross domestic product. This can be especially taxing for emerging markets, whose consumers tend to forego cashless payment methods for more traditional ones, given cash’s perpetuation of shadow economies, tax evasion and underestimation of a market’s gross domestic product.

Anonymous, easily stolen and virtually untraceable, cash also poses a limitation on cities working to become safer, more inclusive spaces. Residents and visitors of cash-dependent cities are more susceptible to theft and street crime. For example, a recent study conducted on crime rates in the state of Missouri revealed that crime levels decreased by nearly 10 percent when consumers received and spent their welfare funds via debit cards as part of the federally implemented Electronic Debit Transfer System. In India, governmental efforts are being made to promote the use of credit and debit cards, as well as electronic transfer facilities, such as tax filing forms to strengthen transaction accountability and transparency.

Consumers aren’t the only stakeholders affected by the instability of cash. In a world where cash drives 85 percent of retail transactions, businesses hang at the mercy of such an unstable tool. Larceny – including internal and external cash theft – contributes to nearly half of small business failures in the first year.

Smart cities recognize the benefits that cashless payments provide to enhance financial inclusion. Multifunction cards are a powerful way for cities to provide governmental funds to citizens without bank accounts – these cards can be used to receive and expend funds, and as a form of identification for accessing public domains such as transportation, museums and libraries.

Electronic transactions allow payments to be made with efficiency, accuracy and accountability. In 2012, MasterCard partnered with the South African Social Security Agency (SASSA) to enable biometric security features on 10 million debit cards carrying government funds. Today, a third of adults in the country carry a SASSA MasterCard, resulting in US$375 million savings for the government simply by shifting the administration of funds from paper to electronic. Since the launch of the program, 850,000 illegal fraudulent grants have been eliminated, saving another US$300 million.

Making cities more intuitive and efficient by incorporating digital payments into core infrastructure

Many cities across the world lack adequate, integrated public transport systems, which makes it difficult for residents and visitors to commute. The lack of seamless transportation stymies access to jobs and schools, and makes cities less attractive for tourists to visit, and international talent to relocate.

By providing flawless experiences to the everyday experience of commuting, smart cities can encourage drivers to become public transit users. As Enrique Peñalosa, Mayor of Bogotá, remarked, “An advanced city is not one where ‘even the poor use cars’, but rather one where ‘even the rich use public transport’.”

Not only do consumers experience more convenient travel experiences, but the increased use of public transportation also addresses car based pollution in cities. Private car usage alone contributes 35 percent, or the bulk of land transport emissions in Singapore. In fact, a report by the Institute of Transport and Development Policy and the University of California, Davis suggested that cities can cut carbon dioxide emissions by 40 percent by 2050 if the governments around the world expanded its public transport, walking and facilities.

Digital payments also enable city governments to carry out smarter business management, budget planning, and accountability. Consolidating purchases through traceable electronic payments ensures compliance with spending policies and provides detailed records for pricing negotiations. In the Colombian city of Barranquilla, MasterCard has helped streamline the city’s payment processes. As a consequence, the use of electronic payments by the local government grew from zero to 76 percent, driving payments processing costs down by 28 percent.

Making cities sustainable and livable by employing the power of data

Big data plays a key role in realizing the full potential of a smart city. MasterCard’s global payment network enables governments and urban planners to identify and predict consumption patterns and activities that can help inform more sustainable urban planning around housing, transportation and energy management.

Powerful analytics tools such as MasterCard’s Retail Location Insights help urban planners better understand business developments in particular areas, such as the opening of a restaurant, art gallery or transit stop. These insights guide investment decisions for transport links and commercial areas that can benefit cities, citizens and businesses.

Big data insights also play a critical role in mitigating traffic congestion, a vexing issue faced by cities undergoing rapid urbanization. MasterCard recently partnered with Cubic Transportation Systems to provide data analytics that encouraged their users into off-peak routes using a mixture of information and incentives. By diverting 5-7 percent of passengers to less busy routes at peak times, large urban transit systems could save up to US$150m- US $200m. When commuters in Singapore received free rides if they traveled before the morning rush-hour, 7 percent of them shifted out of the peak commute.

The promise of urban life is one of better living standards and greater, more cohesive communities. Whilst governments may be seen as the main stewards of this promise, there’s no overlooking the critical role that corporate stakeholders like MasterCard play in accomplishing this goal, and in supporting the cities around them.