Mastercard has several plans in the works to target half a billion people around the world who fall outside the realm of the formal financial sector, according to Carlos Menendez, president of Enterprise Partnerships at Mastercard. Its latest initiative is to partner with consumer goods giant Unilever and provide entrepreneurs in emerging markets with resources like digital payments capabilities. In an interview with PYMNTS.com’s Karen Webster, Menendez explored how Mastercard’s coinciding efforts to promote smart cities around the globe are part of the financial inclusion agenda.
SMEs Go Cashless
The Mastercard/Unilever partnership will begin in Kenya, where the companies will work with local entrepreneurs — with a particular focus on female business owners — to connect them to digital financial resources.
“What we feel these communities need is a better economic opportunity and to get rid of cash,” Menendez told Webster. “We’re starting in Kenya because there is particular interest in terms of women in the community getting better traction and control over their lives and what they’re selling.”
Linking them to digital payment technology is one way for them to not only strengthen their own companies, but expand that success outward. For instance, digital solutions heighten visibility into cash flow and, Menendez explained, inventory or product movement throughout the supply chain. A stronger business means stronger sales means stronger economies.
Reducing consumers and SMEs’ dependence on cash is one step in this direction. Just look at India, where demonetization may have emerged as an effort to curb fraud but is now propelling FinTech’s ability to reach new customers and promote the use of electronic payments. Working in Kenya will help small businesses similarly enter into a digital economy.
“Too many small merchants and micro entrepreneurs are stuck, like their customers, in a cash economy that doesn’t work for them,” said Mastercard President and CEO Ajay Banga in a statement announcing the collaboration with Unilever.
Starting with an entrepreneur in a developing market is just one aspect of promoting financial inclusion. Menendez told Webster that linking small and micro-businesses into a digital economy is also part of Mastercard’s smart cities effort. According to Menendez, buses are a critical component of a smart city.
“We focus not just on the established cities of the world when we talk about transit — not just the Londons and the New Yorks — but also what we do for the Mumbais and the Lagos,” he explained. Financial inclusion, he continued, is also about better transportation for citizens, so Mastercard has its eye on transportation and infrastructure.
“Within the smart city concept, and the idea of financial inclusion within the city itself and how people get along — and you can see this in developed countries — an economic footprint is limited by how long it takes you to get from one part of the city to another,” he explained. Consumers tend to shop within only a few miles of their home or place of work, Menendez added.
Transportation is critical to the financial health of a small business, too. If an entrepreneur is stuck within a cash economy, that small business owner will have to travel, often via bus, to some form of financial institution with loads of cash on their person. In some instances, individuals entrust the bus driver to carry that cash from one destination to another. This process raises loads of security issues, of course, and limits the time an entrepreneur has to focus on her actual business.
Bringing in these small business owners to the digital economy is one way to buck this trend. And smaller smart city efforts, like providing real-time updates on bus schedules to the individuals standing in line at a bus stop, can be a smart move, Menendez said.
“Smart cities are certainly a journey,” he added. “Any step in the right direction helps.”
He cited the now-famous quote of Enrique Peñalosa, mayor of Bogota, Colombia, who stated, “A developed country is not a place where the poor have cars. It’s where the rich use public transportation.”
Digitizing public transportation and other infrastructure, Menendez explained, is critical to the well-being of consumers and small business owners — and to the economy as a whole.