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In conversation with Mastercard on how they’re driving digital financial inclusion
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Navin Jain, Country Manager, Indonesia, Mastercard.
I
n light of the lingering economic inequality in Indonesia, the government and private sector are endeavoring to achieve financial inclusion as a solution to the challenges the country is facing as it moves towards a cashless society.
Global payments and technology company Mastercard fully supports Indonesia’s efforts to accelerate financial inclusion by building a digital ecosystem through collaborative and scalable initiatives.
The first step towards achieving financial inclusion is by helping the unbanked and underbanked gain access to institutions and services that can help in the creation of a transaction account. These accounts allow people to safely store their money and make and receive payments everywhere, anytime efficiently.
“At Mastercard, we believe just providing access is not enough. Financial inclusion efforts today also need to focus on driving usage of the same tools and services that people now have access to,” said Navin Jain, Country Manager, Indonesia, Mastercard in a recent written interview with The Jakarta Post. “Without having the ability and knowledge to use the technologies and solutions, the benefits will not trickle down to all members of the community,” he added.
“Globally, when we look at our financial inclusion efforts, we look at three criteria: access, usage and social impact. As such, we are working relentlessly with the private and public sector plus the startup community to create access to the necessary financial products and services, provide the necessary skills to people to take advantage of what is available, and hence make lives seamless for all,” Navin said.
In recent years, there has been rapid expansion of financial inclusion due to committed efforts by both the public and private sector and innovation in the financial services and fintech space. While a significant proportion of the population has benefitted, financial inclusion continues to be uneven and still prevalent significantly in lower-income segments of societies across the world.
According to Navin, cashless payments were rising even prior to 2020. “The pandemic heightened people’s need and awareness of cashless payments to minimize social contact and access what they need even during lockdowns.”
“Today, 94% of consumers in Asia-Pacific will consider using at least one emerging payment method, such as QR codes, digital or mobile wallets, instalment plans, cryptocurrencies, biometrics, and others in the coming year,” he said, referring to the Mastercard New Payments Index 2021.
Ensuring digital access for everyday transactions has become an important step towards including those currently outside the digital economy. However, these can be complex and overwhelming for small and micro merchants who then continue to conduct their business and operations in cash only.
And a dependency on cash could prevent recovery for these people and take them further away from the digital economy. “This poses a challenge in Indonesia where the government is committed to boosting the country’s digital transformation as evidenced in its decision to expand the use of QRIS to 12 million micro, small and medium enterprises (MSMEs) this year from 5.8 million last year[1],” he said.
Navin highlighted the advantages of digitalization of payments. For example, it helps reduce cash usage inefficiencies and thus drives economic growth, financial inclusion, and benefiting society as a whole. “It keeps money in the formal financial system, driving efficient capital allocation and reducing costs associated with printing and handling paper money,” he said.
Moreover, digital payments also generate “big data” that can help the governments better understand the state of the economy and determine what policies are needed. It provides visibility and traceability over payments flows, reduces the “shadow economy,” corruption, and crime. More importantly, it also allows government disbursements or subsidies getting to the right beneficiaries.
Navin added that digital payments could lead to additional tax collections that can be reinvested for the benefit of the country and help decrease uneven economic growth. It also provides valuable insights into consumer behavior and business operations through payments data. This, in turn, helps citizens, especially smaller businesses, join the formal financial system, receive and initiate payments, drive access to credit, and create equal opportunities for growth.
When it comes to the ideal condition for financial inclusion, he referred to the World Bank standard, which says that for a country aiming to achieve financial inclusion, it requires to have strong political commitment and coordination among public and private stakeholders, an enabling environment, and wide-reaching policies focused on responsible financial access, financial capability, innovative products and delivery mechanisms, and quality data that can be used to inform policies.
“At Mastercard, we believe the following criteria are essential to kick-start development of the above conditions, narrow the digital divide and eventually reduce cash dependency: payment-enabled National ID, deployment of new e-payment acceptance technologies, and create even internet access,” he said.
He explained further that a system with a National ID linked to financial systems could be useful in providing formal financial access to all citizens and residents of the country, noting that “payment-enabled National IDs would be useful for government or donor disbursements of benefits, public servant salaries, or any other government to individual payment flows,” he explained.
“Today, payment solutions like QR codes and mobile wallets are a low-cost way to start cashless acceptance. Innovation and rollout of such solutions can bring smaller businesses and consumers into financial inclusion,” he said, referring to deployment of new e-payment acceptance technologies.
However, more effort needs to be made to generate awareness among businesses and consumers of the advantages of payments technologies, and the government plays a big role in this space. “For instance, Bank Indonesia has just announced open payment API standards to come into effect from later in 2021 that would make it easier for connections between fintech companies and traditional banks. This could enable more people to use a single app to access financial services,” he said.
Navin also added that internet access has become a basic necessity, yet today it continues to be more prevalent in cities than in rural areas. Providing uninterrupted internet access to everyone everywhere in the country would enable seamless access to essential services such as education and healthcare, and also have access to better economic opportunities.
“Over time, Mastercard has evolved its commitment to reflect the changing needs of the global communities it serves. We have already achieved our initial goal of including 500 million people in the digital economy through more than 350 innovative programs across 80 countries,” he remarked.
“Last year, we expanded our global commitment to financial inclusion to bring a total of 1 billion people and 50 million micro and small businesses into the digital economy by 2025,” he added.
Skilling program
He went on to explain that in Indonesia, Mastercard launched its skilling program, the Mastercard Academy 2.0 in 2019. By 2023, the program will equip 100,000 schoolchildren, young adults, entrepreneurs and mid-career professionals with the digital skills they need to thrive and actively participate in Indonesia’s digital transformation journey.
Additionally, Mastercard and Digiasia, as part of the latter’s collaboration with Women’s World Banking, Mastercard Foundation, Sehati, and the Indonesian Midwives Association, launched Midwives & Mothers to provide 30,000 midwife entrepreneurs with digital and financial literacy training and help 2,000 midwives become digital banking agents who can effectively educate their patients about formal bank accounts.
“At the request of the Education and Culture Ministry, the YCAB Foundation will expand the innovative and engaging Mastercard Girls4Tech online STEM curriculum”, said Navin. Mastercard Center for Inclusive Growth and Mercy Corps Indonesia are providing access to one-to-one business mentoring with volunteer mentors, business development webinars, and cybersecurity training on the MicroMentor Indonesia platform and working together with the Cooperatives and SMEs Ministry to reach a minimum of 30,000 micro and small businesses.
“Despite economic and technological progress, many people in Indonesia continue to be unbanked in that they do not, for example, have access to financial services and products,” he said. To that end, in support of the government’s agenda of creating a financially inclusive society, Mastercard has been working with financial institutions, merchants, governments, and NGOs to leverage its technologies, resources, and insights.
Mastercard is introducing the Micro Credit Platform, which opens access to credit for shopkeepers who historically have been locked out of the financial system. To empower small business owners with the skills they need to use credit in the most productive ways possible, Mastercard has partnered with NGOs to provide financial and digital literacy training. In Indonesia, the program has reached 5,000 micro retailers. “We are also working with key partners to speed up cashless acceptance and adoption of cashless payment options,” he noted.
Mastercard has also launched educational programs and workshops for merchants, issuers, and individuals to help them better harness the power and potential of digital payments and to enable them to implement these technologies into their businesses and successfully meet their customers evolving demands.
In 2020 Mastercard organized Digital-First workshops with major issuers and digital license candidates in Indonesia. “We are collaborating with select partner banks to design and launch Digital-First card products with fully digitalized acquisition and onboarding experiences. As part of our efforts with banks, we’re also working with our customers to design the consumer journey and to support the journey through our products and solutions with customer safety, security as a core feature,” he said.
Navin went on to say that as businesses move toward digitalization, cybersecurity needs to be a key priority. This is why Mastercard brought the Global Cyber Alliance’s SME Cybersecurity Toolkit to Indonesia to help them protect themselves and yet remain competitive and be able to reach new customer bases.
“Financial inclusion remains a great challenge and obstacle in several countries’ growth journeys. However, cashless payments, including contactless and digital, can play a vital role in accelerating financial inclusion goals,” he concluded.
