9 minute read 24 May 2018
woman paying farmer credit card

How purpose can turn potential into performance

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EY Beacon Institute

EY Beacon Institute supports and advises businesses on how to place purpose at the heart of their strategy.

Inspiring companies to build a better working world through our research and insights and by creating connections among our community of purpose-led business leaders.

9 minute read 24 May 2018

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A focus on financial inclusion is empowering Mastercard to bring the benefits of a growing economy to every corner of society.

Business has always been focused on growth. But many business leaders have realized that in today’s disrupted world, growth for growth’s sake is no longer justifiable. We’re seeing an increasing number of global companies focusing on making sure the benefits of growth are not only for shareholders, but that customers, employees and the wider society and environment benefit too.

With more than 80% of the world’s transactions still conducted in cash, Mastercard, a leading technology company in the global payments industry, has spotted an opportunity to grow its business by supporting sustainable and equitable economic growth. Its aim is to promote financial inclusion around the world, with a particular focus on developing partnerships that will bring more of the world’s 1.7 billion unbanked population into the formal economy. That ambition led Mastercard to ask:

The better the question: What if the banking system included the excluded?

The better the answer: A world beyond cash

At the heart of Mastercard’s purpose is its vision of a world beyond cash for every human being on the planet. Shamina Singh, President of Mastercard’s Center for Inclusive Growth, a philanthropic hub dedicated to achieving fair and lasting economic growth for all segments of societies, paints a clear picture of why that transition is so important. “Dealing in a cash economy means that you are not allowed, or you don't have the ability, to securely save and transact,” Singh says. That means “you don’t have the economic independence that you need in order to grow,” whether it’s a personal savings account or a small business.

Cash also has huge hidden costs in terms of both the resources required to print, store and transport it, and the difficulty it creates in taxing shadow activities. But there’s an even more urgent challenge than logistics: because cash is hard to trace, it facilitates crime associated with the informal economy.

Encouraging people to move away from cash and toward electronic or digital payments brings them into the formal economy. It helps set them on a path from poverty to prosperity by empowering them to make a living and provide for their loved ones. Today, Mastercard works with governments, NGOs and other businesses around the world to leverage technology that can bring banking services to the unbanked and connect more people to the vital networks that power the modern economy. The company has made a commitment to bring 500 million people into the formal economy by 2020.

To reach that ambitious target, simply providing access to financial services isn’t enough. Just as critical is driving usage of them. That’s why Mastercard followed the 500 million consumer target with a commitment to reach 40 million micro and small merchants around the world, to drive usage where the newly included consumers are most likely to shop. It’s only when people actually use financial services that they begin to see the benefits. At Mastercard, Sami Lahoud leads a team focused on increasing digital payment acceptance. As Lahoud told us, “If you get [the excluded and the unbanked] through electronic payments into the world of inclusion, you give them the means that they need to grow.”

That’s particularly important in emerging markets, where large numbers of people are engaged in agriculture or the informal sector. Farming is hugely decentralized in many of these markets. A lack of efficiency in information and the payment process keeps farmers from getting the best value for their produce. That means longer days toiling in the hot sun, fewer opportunities to grow their business and less time with family and friends.

This is where the “holy grail” of digital technology comes in. Mastercard has developed a mobile platform called 2KUZE (Swahili for “let’s grow together”), which aims to bring the benefits and security of mobile commerce to farmers throughout Africa. The platform enables farmers to negotiate quantities, pricing and payments, and to organize distribution of their crops. Ultimately, this means improved financial access, better operational efficiency and faster payments. It can also mean that farmers are able to gain access to small business financing – something that can be revolutionary for smallholder farmers.

Financial inclusion is about more than just access to banking and credit – it’s also about security and, at its core, human dignity. Nina Nieuwoudt, who has led Mastercard’s global product development for public sector and humanitarian solutions, knows how impactful this support can be for those in need. “The mere fact that people had a card made them feel as if they were somebody,” she says. “So we go beyond just the financial impact to them. It is also about dignity and the respect for another human life.”

As part of these efforts to build long-term resilience and prosperity inclusive growth, Mastercard has worked closely with Mercy Corps, a global humanitarian organization, since 2012 to address some of the world’s most pressing challenges. Their work together is a classic example of organizations aligning their core strengths in a powerful way: Mastercard leverages its core capabilities, such as innovative technology products and payment systems, which Mercy Corps builds into its global programming footprint. These efforts range from supporting refugees in Greece to providing pre-paid cards to Puerto Ricans after Hurricane Maria.

The better the world works: Financial inclusion through digital payments 

At a time of enormous global uncertainty, with more than 65 million people involuntarily displaced around the world, Mastercard firmly believes that access to digital payments can help create financial security. That security offers a sense of stability and opportunity.

Singh has seen how digital payments can transform the lives of some of the world’s most vulnerable people. Take, for example, a woman in a refugee camp who’s receiving aid in the form of cash and has to walk a half-mile each way to receive it. “You can only imagine what she’s facing on the walk back,” Singh says. “If that same woman is getting her aid digitally and is allowed to transact in a grocery store like everybody else, with the dignity of choice, her whole life is different.”

Mastercard is just one of many companies for whom creating business value and improving society go hand-in-hand. In our research, EY Beacon Institute has found that companies that harness their existing core strengths to make money and make the world a better place are best equipped to navigate the challenges of the 21st century. Last year, when we surveyed nearly 1,500 business leaders from around the world, we found that 73% said a well-integrated purpose helps them navigate today’s disrupted environment.

While many people still assume a trade-off between profit and purpose, Mastercard is unapologetic that its efforts to create financial inclusion are firmly rooted in business realities. As Singh notes, Mastercard’s purposeful focus isn’t a product of philanthropy or traditional corporate social responsibility. Its purpose is at the core of its business model. “Our competitive advantage is making sure that we not only connect people through financial inclusion, but that we also create inclusive growth, so that more people can engage in the formal economy,” Singh says. “That's a business proposition as much as it is a social impact proposition.”

Nieuwoudt is the first to acknowledge that upsetting the status quo requires persistence. “I don’t think this journey has been easy,” she says, reflecting on Mastercard’s fight for financial inclusion. “There’s many a naysayer out there, and there is often an awkward moment where people go, ‘Oh, so you make money out of this?’” But, she adds, “I don’t ever feel as if I need to shy away from that question. I’m building a sustainable business model. That’s what I’m doing.”

Summary

Having a clear purpose is helping Mastercard to identify new business opportunities and drive financial inclusion.

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By

EY Beacon Institute

EY Beacon Institute supports and advises businesses on how to place purpose at the heart of their strategy.

Inspiring companies to build a better working world through our research and insights and by creating connections among our community of purpose-led business leaders.