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How new product solutions, business models, and partnerships can advance electronic payments and financial inclusion

> Posted by Dan Salazar, Vice President, Product Development and Innovation, Acceptance and Solutions, Mastercard

Ten years ago, 85 percent of the world’s transactions were in cash and checks, and 2.5 billion people were unbanked. Since then, we’ve all been working hard as an industry to develop technology that will give the unbanked access to the world of digital payments. Mastercard has connected more than 360 million people to formal financial services – more than half-way to our commitment of reaching 500 million people by 2020. And the company has set a goal of connecting 40 million micro and small merchants to our payments network by 2021.

While more and more people and businesses are becoming “financially included,” there are still 2 billion people today who don’t have bank accounts, and over the last 10 years we’ve only managed to reduce cash usage by 2 percent. Up to now, we’ve been operating on the assumption that if we displace cash and simultaneously provide access to electronic payments, the unbanked will come. But, at this rate, financial inclusion for those remaining 2 billion people will take 200 years.

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Key fintech trends include publishing open APIs, which helps to expand customer bases and improve services offerings 

> Posted by Geraldine O’Keeffe, Chief Innovation Officer, Software Group

The following post is part of a blog series spotlighting perspectives and experiences from the Africa Board Fellowship.

Access to financial services in Africa is on the increase, up 10 percent from 2011 to 2014, according to the Global Findex. This change can largely be credited to digital financial services. New entrants to the financial sector such as telcos, fintechs, and in the near future bigtechs like Facebook and Google are all offering technology-centered financial services that are changing the landscape and posing a competitive threat to traditional financial services providers (FSPs). At the same time, new technologies can allow traditional FSPs to expand their outreach and radically improve operational efficiency.

Considering both challenges and opportunities, now, more than ever, financial institutions of all stripes have to accept that technology and innovation are integral to their business strategy. These changes require a shift in culture throughout the institution and among the leadership. Board members, for example, have to embrace this change, understanding the current industry trends, experiencing these financial innovations firsthand, and taking concrete actions.

Through our work with board members of financial service providers in the Africa Board Fellowship program, we have identified three key fintech trends especially relevant for institutions in Africa focused on financial inclusion.

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Nina Nieuwoudt of Mastercard explains the company’s commitment to financial inclusion for Financial Inclusion Week 2017.

Posted by Nina Nieuwoudt, Global Product Development, New Consumers, Mastercard

Women walking up dirt road with bundles on their heads

Around the world this week, governments, multilaterals, and companies are coming together to celebrate Financial Inclusion Week. It’s an opportunity to reflect on the progress that we’ve made in extending financial access to un-banked and underbanked communities, and also a time to take honest stock of how far we still have to go. As Mastercard’s Chief Product Officer Michael Miebach noted following his speech at Money20/20 last week – we’re making progress, but at our current pace we won’t achieve full financial inclusion for another 200 years. Needless to say, we’ve got work to do.

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> Posted by Center Staff

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Last week the Kenyan government officially kicked-off Huduma cards, a fintech initiative aimed at bolstering government services in the country and digital financial inclusion. The program leverages partnerships with Mastercard and a handful of prominent banks. If successful, the new cards will simultaneously improve the government’s functioning, enroll more citizens in key government services like health insurance and social security, and provide digital financial services to many unbanked Kenyans.

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> Posted by Center Staff

This post is part of Financial Inclusion Week, a week of global conversation on advancing financial inclusion. This year’s theme was keeping clients first in a digital world. Throughout the week participants shared their thoughts in events and webinars, on social media, and through blog posts.

Well, that’s a wrap. Last week, the global financial inclusion community came together to explore the key actions needed to keep clients first in a digital world. Over 45 partner and contributing organizations in 19 countries drove the conversation through events, and on social media hundreds shared insights with the hashtag #FinclusionWeek.

While October 21st marked the official end of Financial Inclusion Week 2016, there are still a few Financial Inclusion Week events happening this week, including a webinar on G2P payments and an exploration of the challenges to women entrepreneurs in India. Stay tuned for event recap pages on each of the Week’s events as well as an electronic magazine highlighting the insights shared throughout the week. Additionally, visit the Financial Inclusion Week website for a full rundown of partners, events, and a social media feed.

We would like to thank all of the Financial Inclusion Week partners and contributors. You came together to make this Week a success, and we are all inspired by your commitment to advancing financial inclusion. For a full list of partners, visit the Financial Inclusion Week homepage. We hope that all who participated will continue to explore how to protect and empower clients in an increasingly digital financial ecosystem.

Here is a recap of day five. If you missed any of the other recap blog posts, you can find them all here on the CFI blog, as well as a number of thought pieces from Tilman Ehrbeck of Omidyar Network, Elisabeth Rhyne of CFI, and John Hartman of Equifax.
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> Posted by Hannah Sherman, Project Associate, CFI

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In a world of rapid change, few organizations have all the capabilities needed to accomplish every aspect of their business. This is true for commercial banks, which often find success in adapting to new opportunities through partnering. CFI’s most recent publication, The Business of Financial Inclusion: Insights from Banks in Emerging Markets, a joint publication with the Institute of International Finance (IIF), illustrates how banks use partners to adopt new technologies and reach previously underserved markets.

The report, based on interviews with the financial inclusion leads at 24 banks, shines a spotlight on the role of banks as leaders in financial inclusion and discusses their specific strategies related to technology, data, financial capability, partnerships, and other issues.

The report found that banks create a variety of partnerships. The banks in our survey partner with telcos, payments companies, insurance companies, microfinance institutions, retailers, and consumer-goods companies. They work closely with governments for G2P payments and with international development agencies and donors that provide start-up capital for new financial inclusion initiatives. They also contract with digital technology providers such as data analytics companies, back-office systems providers, digital channel providers, financial capability providers, and other fintech firms.

Among many other areas, banks often use partnerships to improve on the following:
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> Posted by Center Staff

Today, around the world individuals, governments, and organizations are celebrating women and calling for increased action towards gender parity, including in the financial services arena. And for good reason. Research indicates that when women control finances, they’re more likely to be spent on household necessities, like food, water, and children’s education and healthcare. In recognition of International Women’s Day, we compiled some of our favorite recent industry efforts to further financial inclusion for women. But first, here’s a quick run-down of where inclusion for women stands.

The Global Findex tells us that there is a gender gap in access to accounts at seven percentage points globally (65 percent vs. 58 percent), and across developing countries it’s nine percentage points. In some regions, this gap is significantly more severe – 18 percent in South Asia, for example. Gender gaps exist in other areas, too. GSMA estimates that in developing countries there are 200 million fewer women than men who own a mobile phone. And as one example of the gap in financial capability, in the World Bank Group’s 2014 Financial Capability Survey in Morocco women scored significantly lower than men.

Prioritizing financial inclusion for women is not only the right thing to do, it benefits everyone. In addition to benefitting women and women’s households, financial inclusion of women augments economies writ large. About half of women worldwide are missing from the workforce. In Egypt, for example, the IMF estimates that achieving equal labor participation among men and women would increase GDP by 34 percent. The IFC estimates that women-owned businesses have an unmet financing need of $320 billion worldwide.

Many organizations are working to close the gap:

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> Posted by Hannah Sherman, Project Associate, CFI

Despite all the talk about fintech start-ups transforming how financial services are offered to the base of the pyramid, recent efforts by the government of Pakistan remind us that change can also be led from the top.

“Accounts” includes mobile money accounts, while “accounts at a financial institution” is comprised of bank accounts. (click to enlarge)

Pakistan has extremely low levels of access to affordable, diverse financial services. In the Center for Financial Inclusion’s (CFI) report By the Numbers, which assesses progress toward financial inclusion by 2020, Pakistan was identified as one of the countries predicted to fall short of the goal of universal account access by 2020. In Pakistan, only 13 percent of adults have accounts, compared with about 46 percent of adults in all of South Asia. Microfinance reaches less than 3 percent of the country’s population, and less than 7 percent of small and medium-sized enterprises (SMEs) use formal finance for working capital or investments. (To explore available data on the state of financial inclusion in Pakistan, check out the FI2020 Inclusion Visualizer.)

(click to enlarge)

While financial inclusion in Pakistan remains low, recent trends suggest that the country is poised for rapid growth in the near future. Pakistan placed fifth in the Global Microscope 2015‘s list of enabling environments for financial inclusion, up six points from its 2014 score. This reflects an energetic, sustained effort by the government to strengthen the financial inclusion landscape of the nation.

Historically, there have been three major types of financial inclusion players in Pakistan: microfinance banks (MFBs), microfinance institutions (MFIs), and rural support programs (RSPs). While these three players continue to dominate the financial inclusion landscape in Pakistan, previously “benched” players have begun to play an increasingly important role.

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> Posted by Center Staff

Last week, FI2020 Week created 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 participated in more than 30 events and shared their voices over social media, with #FI2020. As part of the week, global financial inclusion leaders offered calls to action. We started to provide highlights, but found that every single contributor had an important perspective to add, so this post includes all of their voices.

If there were any doubts about the potential to achieve global financial inclusion, it would be dispelled by the passion and sense of opportunity in the calls to action that were posted last week as part of FI2020 Week. A visionary tone was set by the inaugural posting by Ajay Banga of MasterCard, who declared that “financial inclusion is both economic and social inclusion and necessary for the future well-being of our planet.” Jean-Claude Masangu Mulongo, former Governor of the Central Bank of the Democratic Republic of the Congo, draws the link between financial inclusion, economic growth, and poverty reduction, while also—appropriately, given his role–noting the link to financial stability. Yves Moury of Fundación Capital heightens the urgency by stating that “poverty is the greatest scandal of our times,” and Martin Burt of Fundación Paraguaya adds that “poverty elimination must be the endgame of all financial inclusion strategies.”

This strong sense of social mission comes out in a call from Dr. William Derban of Fidelity Bank Ghana to “leave no one behind” in the march toward inclusion. Michael Miebach of MasterCard also talks about meeting the needs of all members of society, including women, and Bindu Ananth of IFMR Trust mentions smallholder farmers as another group that is often excluded. In light of breakthroughs in technology, Sonja Kelly of the Center for Financial Inclusion urges us to reach out to those who are traditionally excluded from technology, and not just early adopters. As Larry Reed of the Microcredit Summit Campaign puts it, “We need to approach the challenge with the end in mind, designing a system that can sustainably reach clients in the most remote areas and who transact in the smallest sums.”

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> Posted by Center Staff

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 is nearing its end! Today is the final day. We’re sad too, but there are still lots of opportunities to get involved, and it’s been a lively four days. Also, we’ll continue to report out on all that happened, so there’s more to come! Along with the in-person events, there are a handful of webinars today, you can submit a call to action, or take part in the far-reaching social media conversations, which we’re capturing on the FI2020 Week site, here.

Since our last recap there have been dozens of events around the world bringing together stakeholders passionate about advancing financial inclusion. Here is a quick look at a few of those events:

Nkosilathi Moyo, CEO, VisionFund Zambia

Nkosilathi Moyo, CEO, VisionFund Zambia

In Lusaka, Zambia, representatives from a variety of organizations, including the Bank of Zambia, came together at an event hosted by VisionFund Zambia to discuss promoting financial inclusion by leveraging savings groups and microfinance institutions. Participating stakeholders identified three major gaps for achieving financial inclusion in the country: lack of a conducive regulatory framework; poor infrastructure; and information asymmetry between different players in the market. Moving forward, the participants agreed on the importance of convening and decided that an FI2020 event should be held each year until 2020. Additionally, the participants agreed, there needs to be a stronger focus on establishing strategic partnerships between mobile network operators, financial service providers, NGOs, and government to develop cost-effective delivery channels that reach people in rural areas.

Forty-five leaders in financial capability, financial literacy, and financial health came together at a roundtable in Washington, D.C. to review a draft paper on innovations in financial capability written by the Center for Financial Inclusion in partnership with the JPMorgan Chase Foundation. The event was hosted by the Institute of International Finance. The draft paper focuses on seven principles to re-orient financial capability building toward customer needs and behaviors, with a call to action to all stakeholders—providers, governments, social sector organizations, financial capability providers, and donors—to make this shift.

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Credit Suisse is a founding sponsor of the Center for Financial Inclusion. The Credit Suisse Group Foundation looks to its philanthropic partners to foster research, innovation and constructive dialogue in order to spread best practices and develop new solutions for financial inclusion.

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The views and opinions expressed on this blog, except where otherwise noted, are those of the authors and guest bloggers and do not necessarily reflect the views of the Center for Financial Inclusion or its affiliates.