Mastercard’s strategy to diversify beyond traditional card payments and become a multi-rail company will gain momentum as regional economies begin to emerge out of the Covid-19 pandemic.
“The pandemic has brought in a radical shift in how consumers and businesses are behaving from a spending perspective,” says Raghu Malhotra, President for the Middle East and Africa at Mastercard. “During the Covid-19 outbreak, we have seen a dramatic shift in the role of technology in people’s lives. Contactless payments, and the boom in e-commerce are some of the trends observed.
“The reality is online always existed. Nevertheless, what has changed now is the pace of change. I think the replacement of cash by digital payments will become faster.”
The new normal
Digital payments and online transactions have been surging as consumers opt for contactless transactions amid the coronavirus pandemic. In the UAE, three in four people are using less cash in favour of contactless and digital payments, according to a recent Mastercard survey. The percentage of contactless payments in the Emirates as a proportion of all face-to-face card payments doubled in the first quarter compared to the same period last year, says Malhotra.
Diversification for us is really about first and foremost having a multi-rail capability. While, it's great to have multi-rail capability, it has to be safe and secure. I mean, that's a promise we make; it has to simple, safe and secure.
Eighty-two per cent of UAE consumers preferred to pay in a contactless manner due to safety and hygiene concerns amid the global coronavirus pandemic, according to Mastercard.
“We foresee a trend, which is adjacent to this new digital play,” says Malhotra. “Now, if I'm comfortable with digital, I will not just pay and shop online, which I will do in any case. What we expect to see is a rise in peer-to-peer payments, which will drive the whole push towards digital.”
Currently, more than 92 per cent of people in the UAE use smartphones, presenting a substantial opportunity for companies focusing on mobile payments, according to YouGov.
As Mastercard looks to cement its place as a one-stop shop for all payments serving merchants, banks and governments, it has sought to increase capabilities through product introductions and acquisitions.
The company in recent years has entered or reinforced positions in markets such as governments, account-to-account, and business-to-business payments, and has rolled out technology for real-time transfers in bill payments and payouts. To help guard against increased fraud risk, it has also added heft in security technology.
Last year, Mastercard acquired Transfast, a global payments company with significant cross-border network reach. Transfast enables Mastercard to continue servicing the growing needs of consumers and businesses as well as governments and merchants in cross-border transactions while it builds on Mastercard’s strategy to offer choice to its customers through the expansion of the Mastercard global network.
“Diversification for us is really about first and foremost having a multi-rail capability. While, it's great to have multi-rail capability, it has to be safe and secure. I mean, that's a promise we make; it has to simple, safe and secure. We have invested a fair amount in cybersecurity and intelligence to ensure that.”
Partnerships gather pace
The accelerating drive towards the digitisation of business and consumer behaviour comes at the right time as Mastercard renews its impetus on a grassroots level by working with regional governments, SMEs and various other financial players to move from cash to digital.
SMEs make up more than 94 per cent of companies in the UAE and employ nearly 86 per cent of the private sector workforce, according to government data. Most took a hit due to Covid-19, and many are turning to technology to keep their companies afloat.
“Now more than ever, having a digital presence is critical, especially for small businesses,” says Malhotra. “We are actively supporting SMEs open their digital doors and ensure they have the right tools to digitally transform. So one of the things we have done is we invested in platforms that allow SMEs to get online quickly.”
The new on-boarding process platform added a great amount of efficiency, claims Malhotra.
As part of Covid-19 contingency plans, the firm has committed $250 million over the next five years to small businesses in many markets where it operates, supporting the vitality of businesses and the financial security of their workers.
Digitising the supply chain
As part of its quest to push business beyond the realm of electronic payments, Mastercard has also unveiled a blockchain-enabled partnership designed to increase the transparency of supply chains in the food industry.
To address some of the credit challenges micro-retailers are facing, Mastercard and Unilever launched the Jaza Duka (fill up your store) programme in Kenya. The initiative plans to digitise the supply chain for micro-retailers – allowing banks to better understand their cash flow and daily purchases.
In May, DP World partnered with Mastercard to facilitate payment for services at its ports. This will enable individual shippers and SMEs to make payments for freight-related services remotely and easily.
“The initiatives are part of a concentrated effort to broaden the scope of what we do,” says Malhotra. “I feel supply chains will change and digitise in terms of small enterprises, large firms as well as for some of big cities in the world.”
Mastercard is also working with governments in the region to digitise infrastructure, says Malhotra. In Egypt, it is busy deploying the technology stack for the country’s new capital taking shape east of Cairo that is being touted as a smart city.
“We work closely with governments around the world, including the Middle East. In Saudi Arabia, we enabled Saudi Arabian Monetary Authority’s (Sama) domestic cards for e-commerce using our gateway services,” says Malhotra.
In 2019, Vocalink, a Mastercard company, partnered with Saudi Payments, a fully owned subsidiary of Sama to launch real-time payments - a significant step in enabling the kingdom’s transition towards a more digital economy.
For consumers and businesses, the new real-time payments platform will enable credit transfers, e-invoicing and billing, real-time payment acknowledgement, remittances and bulk payments instantly. The technology will also enable instant peer-to-peer money transfers between friends and family.
“In Egypt, we have worked with the government to enable the economic infrastructure of the new administrative capital near Cairo – to make it completely cashless,” adds Malhotra.
The technology leader is developing innovative urban solutions in collaboration with Egyptian government entities to address common urban challenges, including transportation, economic development, and financial inclusion.
Emirates Digital Wallet
One project that is set to introduce a society-wide transformation to digitisation in the UAE is the Emirates Digital Wallet. Mastercard is working closely with Emirates Digital Wallet under the aegis of the UAE Banking Federation, says Malhotra. “The UAE likes to do things that are cutting-edge and the Emirates Digital Wallet is one such example. It can be the best of its kind in the world.”
Fully supported by the country’s banking sector and regulatory authorities, it will mark a major milestone in the UAE’s push towards digitisation and bring access to consumers, he explains. “It will enable person-to-person payments via mobile phones. Cash will disappear because you will be able to store, receive and pay money via your mobile device.”