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Beyond the Transaction: Every Transaction Has a Story

Can Emerging Technologies Spell Financial Inclusion for Emerging Markets?

Raj Dhamodharan is the Group Head for Emerging Payments at MasterCard for Asia Pacific.

The number of mobile subscriptions around the world clocked in at 6.6 billion last year. That number is set grow by 6% to reach 9.3 billion in 2019, according to Ericsson’s 2013 mobility report.

With the ever-increasing uptake in the usage of smartphones, mobile PCs, and tablets, the future of payments will be mobile. The plastic credit card with its magnetic stripe will be a thing of the past, as will the physical wallet, replaced by digital wallets protected by the next generation of security technologies.

According to our Mobile Payment Readiness Index, while no two markets are the same, consumer readiness is the critical success factor to drive mobile payments adoption around the globe.

No market globally—either highly scaled and integrated ones like the United States or compact and technology-driven ones like Singapore—has progressed beyond the halfway mark in the journey toward mobile payments readiness.

MasterCard believes that a score of 60 on the MPRI will indicate that a market has reached the inflection point—the stage at which mobile devices account for an appreciable share of the payments mix.

The growth in mobile transactions is particularly meaningful for Asia-Pacific, which accounts for nearly half of the mobile subscriptions globally. According to Gartner, Asia-Pacific will overtake Africa to become the largest region for mobile payment transactional value in 2016, reaching $165 billion.

Within Asia-Pacific, what we’ve found is that mobile payments are driven by different motivations.

In developed markets like Singapore and Australia, it is a matter of convenience and because it enables new experiences – be it faster payments that are linked automatically to rewards and loyalty programs or promotions; or real-time alerts, account balances, and even features like saved shopping lists.

In less developed markets, mobile technology is all about connecting those regions and populations to the economic mainstream. For instance, in markets like Bangladesh, India or Myanmar– where more people have mobile phones than they do bank accounts – mobile technology is a lifeline to basic financial services that most of us take for granted. It is about not having to walk to a bank branch that may be 50 kilometers away from your home. It is about the ability to open and access a bank account, create a financial identity, save money, get a loan, or obtain insurance with relative ease.

Some 2.5 billion people on the planet have yet to open a bank account. Of these, approximately 1.5 billion have mobile phones. Which is why we believe mobile financial services is an important medium to deliver basic financial services to these under-served.

As no one entity can develop and promote mobile payments by itself, partnerships among the key players in the mobile payments ecosystem are essential to accelerate the commercialization of mobile payments. Strong cooperation and collaboration among financial institutions, telcos, governments, technology providers and others can foster an environment that enables a market to reach critical mass.

Some examples where we’re already doing this:

  • Through a partnership between the World Food Program (WFP) and MasterCard, digital innovation is helping people around the world to break the cycle of hunger and poverty. The ‘Digital Food’ project is using MasterCard’s payment and technology expertise to help the WFP deliver food vouchers via mobile phones or bank cards to people without regular access to banks or financial services.
  • MasterCard issued 10 million biometric cards to beneficiaries of the South African social security program that make use of fingerprint and voice recognition to cut down on fraud. The estimated savings to the South African government is US$350 million over the lifetime of the project.
  • In Soweto, South Africa, where ATM machines are scarce, MasterCard partnered with Blue Label Telecoms to deploy low-cost point-of-sale machines that enable people to use government-issued prepaid cards to buy groceries and other basic necessities.

It is still early days in the global journey from cash to cashless – today some 85% of all retail payment transactions are still done with cash. And contrary to popular belief, cash is not free, – the cost of processing cash can cost up to 1.5 percent of a country’s GDP. Electronic payments, on the other hand, have been proven to boost economic growth while advancing financial inclusion.

It is for these reasons that countries around the world are working to make their payment systems less dependent on cash. And mobile technology is proving to be one way of doing it.

Question is, what will it really take for mobile payments to catch on in your market? Let us know what you think by leaving us a comment below.