“I believe all of us in business have a unique opportunity. We are successful in our role, and in turn we need to give back,” says Ajay Banga, Chief Executive Officer of Mastercard. He explains that business can’t rely on government to solve issues. “This isn’t good enough.” Banga came up with a Vision 2020 for Mastercard, which was a vision to reach 500 million people out of the two million who don’t have a financial identity and bring them into the financial services sector. As of today, Mastercard has reached 330 million, and with three years to go. “If Mastercard can reach 500 million, then shame on the world for not being able to reach the rest,” says Banga.
In an exclusive talk with HCLI’s network, Banga highlighted two key initiatives that he is passionate about: financial inclusion and water sanitation.
1. Financial inclusion
For a moment, let’s focus on what cash costs an economy. According to Banga, to print, secure and distribute cash costs most countries 2.5% of their gross domestic product (GDP). Even still, “cash is a developing and developed world issue,” he explains. Very developed countries like Germany and Japan are 80% cash whereas the UK is 50%.
Banga highlights that the worst off—with regard to socioeconomic class—are the people who exist only in the cash economy. They pay the most, and not just in terms of cash. “If you don’t have an identity,” notes Banga, “then people don’t give you the time of day. If you don’t have an identity, then you also don’t have dignity and respect.”
The cash economy is also predatory. Cross-border illegal trade happens in cash. Examples include illegal guns in Mexico, American students buying illegal substances on college campuses and terrorism. None of these purchases can happen using a Mastercard or an AMEX. Financial service companies, then, can minimise the chances of these illegal acts happening by making it easier to be financially included, by bringing transactions online.
One way for governments to begin to financially include their people is to sign them up for government social security and benefits programmes. “The people come in for financial services. Then the folks left out of the system want a way to save, receive and spend money. What people want is a payment mechanism that creates the transaction flow for banks to be willing to take a risk on you,” Banga explains. He shares this example: if an individual makes $125 a month and saves $25 a month, then the bank can make a judgement call on this person and their likelihood of paying a loan back. This is a way to help lift people out of the cash economy.
But cash economies still exist. How can cash parts of society be moved onto cards? How can this be scaled?
Scale comes from getting people into the financial services, then building other businesses onto it, explains Banga. He rhetorically asks, “How do you get people to leave some money in the bank?” Banks can not make a judgement call on people who live in a cash-only economy. Life can be tough enough without having an identity, says Banga, which he says is the government’s responsibility to provide to its people. If people can be introduced into the system and given an identity, their lives can be transformed. “What is the social contract between the government and citizens if the government doesn’t give you an identity?”
2. Water Sanitation
The single biggest problem after financial and social inclusion will be drinking water,” explains Banga. He cites Singapore as a country that recycles water and uses technology to track recycled water.
“Yet over a billion people in China and India only have access to polluted water. Ground water reserves are being depleted, he says. Banga gives the example of Palm Springs in the United States where there are miles of palm trees (that require lots of water) in the middle of a desert.
Banga shares that currently “venture capital funding goes to fintechs where as much as 13 billion dollars is invested whereas drinking water as an issue received 300 million in funding last year.”
The problem is in terms of how our priorities are funded today, says Banga. It would serve us well to consider the implications of not paying more attention to these two initiatives, and also to figure out how we can get involved.