Ubiquity, Safety, and Utility: The Trifecta of Success in Financial Inclusion

> Posted by Michael Miebach, President, Middle East and Africa, MasterCard

FI2020 Week is a global conversation on the key actions needed to advance financial inclusion, grounded in the findings of the recently launched FI2020 Progress Report. From November 2-6, 2015, stakeholders around the world are participating in more than 30 events and sharing their voices over social media, with #FI2020.

FI2020 Week offers a good opportunity to review the findings in the FI2020 Progress Report and to consider actions the global community needs to take to advance financial inclusion. This is of particular interest to me as I work every day to expand MasterCard’s payments platform in the Middle East and Africa, and in a volunteer capacity, I also serve on the board of directors of Accion.

The report asserts that it’s not enough to “build the rails” to enable payment and transaction access, but that “providers, regulators and support institutions need to ensure that the financial services that follow provide value and quality to the passengers who climb aboard.” Here is where interoperability is essential—if last mile customers are to benefit. Banks, telcos, merchants, and governments must be connected—despite different rules and technologies—in a way that is seamless to the user. From a customer perspective, that means ubiquity, safety, and utility—the trifecta of success in financial inclusion. It won’t work if all the stakeholders are competing to create their own end-to-end solutions, or operating in silos. It won’t work if we are creating islands, where the unbanked transact with each other and where data is used in proprietary ways to support individual business models, rather than being shared as a public good.

Now, a parent in Zimbabwe sends money to his daughter studying at university in South Africa using a mobile money operator connected to the global banking system. All he needs to do is go to an EcoCash agent and top up his mobile money account. His daughter then accesses the funds using a MasterCard debit card linked to the same EcoCash mobile money account to purchase text books, and pay university fees as well as other day-to-day expenses while at university in South Africa. This is ubiquity, safety, and utility put into action.

Equally critical is the focus on client protection in the digital age. The explosion of data brings new opportunities for inclusion, but it also requires trust in a system many have never used. The distributed trust model requires that both merchants and customers can trust in a secure transaction when making a purchase without cash. An expanded merchant acceptance network along with an expanded Internet add to the complexities. This will be even more challenging with the rise of P2P transactions, which will bring more micro merchants into the financial system. One solution for increasing protection and decreasing fraud is the use of biometrics. For many people, a biometric ID—using fingerprints or an iris scan—may be the first form of identification they have ever been issued. It increases security and transparency and can open the door to having a bank account, receiving government benefits, and even voting. In this case, biometrics can lead not only to greater financial inclusion, but also to greater social inclusion.

But the fundamental challenge ahead is addressing customer needs, underscored by the gap between access and usage that proves there is still much work to be done despite many new accounts being created. Take the great leap forward of moving from cash to electronic payments for G2P social benefits. This is a good change all around—good for governments, which can reduce transaction costs, leakage and fraud, and good for customers, who can avoid the theft of their money and no longer have to wait in long lines either to receive their social benefits or to pay bills. Yet despite this advance, many customers don’t really take advantage of the service—at least not at first. Many people simply head to the nearest ATM to withdraw all of their funds. Yes, they have avoided the long lines to receive the payments, and the government still saves money—but the customers are not using the service to their own benefit.

This is where the Center for Financial Inclusion’s message about the need for providers to take the long view is key. Take the SASSA debit card in South Africa (the South African Social Security Agency electronic benefits disbursement program). The good news is that, over time, people started changing their behavior when provided with a tool they could learn with through use. We found that from year to year, POS purchases increased by 27 percent, cash withdrawals without a purchase decreased by 24 percent, and cash back with purchase transactions grew slightly by 3 percent. This, of course, means that beneficiaries were not simply cashing out as soon as they received their payments and were using the card to store value in a more secure way. And, along the way, merchants have seen as much as a 30 percent increase in sales in the first year of the card.

For all of us working on financial inclusion, the questions about technology circle back to the central question of the customer experience. If we keep in mind the need to create value for all stakeholders, the access/usage gap will be transformed, and we will move closer to a financially inclusive world.

Michael Miebach is president, Middle East and Africa for MasterCard. Based in Dubai, Mr. Miebach is responsible for driving the evolution of payments in markets across the Middle East and Africa region. Mr. Miebach recently joined the board of directors of Accion.

Image credit: Accion

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