FINANCIAL TECHNOLOGY | Staff Reporter, Singapore

Mastercard's Rama Sridhar on why fintechs are leading the charge for financial inclusion

Mastercard has collaborated with fintechs that meet the underserved's financial needs.

The past few months saw the rapid growth of digitisation in financial services, with many banks across Asia reporting astounding increases in the number of their customers banking digitally. In Hong Kong, large banks witnessed their e-banking transactions rise by 50% and more in the months after lockdown measures took place, as the majority of clients began using digital banking apps. In rival financial hub Singapore, more than 80% of banking clients indicated that they planned to stick to banking online even after the pandemic subsides.

But social distancing measures, and the months-long closure of many banks’ and non-bank financial firms’ physical branches, also further drove home the importance of addressing financial inclusion problems across Asia. The subsequent rise in unemployment resulting from the global recession meant that many individuals may have otherwise been locked out of gaining much-needed credit if not for digital lending offerings, which many financial technology (fintech) companies readily offer at just a few taps and clicks.

“In many Asian markets, it is the fintechs – rather than traditional banks – that are moving the needle  when it comes to digital financing and financial inclusion. Many of these innovators, in India and  China in particular, have generated such scale and influence that they have acquired government  support and sponsorship of the new banking service models they advocate,” said Rama Sridhar, executive vice president, digital & emerging partnerships and new payment flows, Asia Pacific, Mastercard.

The global payments network company has partnered with many fintech firms across the region as part of its quest to support innovation and growth across the financial industry, Sridhar said.
“[Partnerships] are crucial because huge numbers of people in Asia still need simple and  secure access to financial services. Policy changes will continue to open up the banking system and  all players must adapt to meet the needs of increasingly digital consumers who expect maximum  choice and highly personalized experience,” Sridhar noted.

Asian Banking & Finance talked with Sridhar to learn more about her thoughts fintechs’ roles in financial inclusion, Mastercard’s partnerships with fintechs across APAC, as well as what to expect from their presentation in the upcoming Singapore Fintech Festival x Singapore Week of Innovation & TeCHnology (SWITCH) 2020, taking place from 7-11 December.

How do fintech firms help underserved and unbanked customers achieve greater financial  inclusion? What gap and barriers have they bridged or removed?
COVID-19 has shown the extreme disadvantages faced by small businesses and millions of people excluded from the financial system and the digital economy. This makes Mastercard’s commitment  to financial inclusion even stronger now.

Five years ago, Mastercard set a target to bring 500 million people into the financial system and we  have accomplished that goal. Now, Mastercard has expanded the pledge to bring a total of 1 billion  people into the digital economy by 2025 – including 50 million small businesses and 25 million  women entrepreneurs.

When you are excluded, you are stuck in a cash-based economy and don't have access to the basic  financial tools we take for granted, like saving and borrowing money or making contactless and  electronic payments.

To drive commercially viable financial inclusion, it’s essential to put consumers and their needs front  and center. The needs of the underserved go far beyond just access to electronic accounts and  payments. To make a real difference in their lives, we have to drive toward widespread usage. This  means appropriately designed products, education and acceptance infrastructure.

Mastercard works closely with fintechs and other partners to drive growth in technologies and solutions that bring people into the financial system, including real-time payments and digital banking platforms. Fintechs are also powerful enablers of inclusion by addressing the financing  needs of micro, small and medium enterprises (MSMEs) that are the backbone of the economy. 

In Indonesia, fintech company Digiasia is accelerating financial inclusion with three tools: KasPro, an  e-wallet and payment platform; KreditPro, a peer-to-peer lending and financing platform geared  towards MSMEs; and RemitPro, which offers efficient and secure remittances across digital channels  and through a network of offline agents such as telecom companies, post offices and retailers.

In Malaysia, where there are several million foreign workers, the fintech Instapay is catering to this underbanked community. Regulated by Malaysia’s central bank, Instapay partnered with Mastercard  to provide e-wallet accounts to migrant workers so they receive wages quickly and securely. For  employers, the benefits include using technology for payroll management, reducing cash handling,  lowering costs and eliminating downtime as the workers no longer need to queue up on paydays.

In Bangladesh and Cambodia, Mastercard partnered with the apparel industry to digitize supply  chains by introducing a combination of digital payrolls and an educational tool. The "Digital Wages Toolkit" has been tested in Bangladesh with more than 10,000 female garment workers and has  been adapted and translated for use in Cambodia.

In Vietnam, Mastercard is working with Care International to assist banks and fintech firms to tailor  financial services and products to bring women into the financial system and promote business  growth among female entrepreneurs. The goal is to reach more than 1 million Vietnamese women.

Which specific financial services offered by fintechs have helped bridge financing gaps/  barriers for underserved and unbanked customers? In your opinion, are there other little-explored pockets of potential that fintechs can take a look at?
By accelerating the growth of electronic payments, fintechs have been monumental in bringing the  underserved and unbanked closer to financial inclusion. This is because of the lower transaction and  service costs. Fintechs are also able to reach people who would otherwise be unable to benefit from  standard financial services because they have no bank accounts.

The trend is clear In Southeast Asia, where the gross transaction value of electronic payments – including e-wallets, account-to-account transfers and card-based cashless transactions – is projected  to hit US$1.2 trillion by 2025. 

Peer-to-peer lending, where people borrow directly from other people, is another gap that fintechs  are bridging between formal financial institutions and low-income households.
In Indonesia, for example, millions of people obtain funds through informal social gatherings where borrowers raise small loans from the rest of the group, usually repaid without interest after a year.

Now, Indonesian peer-to-peer lending is being digitized. Through its app, Indonesia-based fintech Mapan serves about 2.5 million members by facilitating loans and payments for purchases.
In the Philippines, where internet penetration is about 67 percent but more than 70 percent of the  people are unbanked, the fintech Tonik aims to drive inclusion and expand access to formal financial  services as the country’s first digital-only neo bank. 

The onset of the pandemic and its effect in humans’ daily lives is said to have led to the faster  uptake of digital financial services. Based on what you’ve seen, how has this phenomenon  affected fintechs in the region? What are some trends that you’ve observed?
The shift to digital was already happening before COVID-19 but has now accelerated rapidly and  irreversibly as people embrace the benefits and convenience of e-commerce and contactless  payments as part of an experience that is safe, secure and seamless.

The future of money is digital and there’s just no turning back. Even in developing markets,  technology is affordable for almost everyone and access to smart devices, mobile telecoms and the  internet is becoming ubiquitous.

Whilst the global financial crisis of 2008 saw the emergence of fintechs, the pandemic has proven their value and underlined their role in financial inclusion by providing financing to consumers and  MSMEs. Fintechs are bringing disruption to traditional models but also innovation, customization  and greater choice.

With technology and the whole landscape shifting so rapidly and profoundly, it’s essential to have  successful partnerships to co-create and innovate. That why being a true partner to everyone in the  new ecosystem is crucial for Mastercard – including the fintechs that we support and nurture.

Also, now that traditional banks and lenders are also scaling up digitalization, what role do  fintechs play in the future of digital financing and financial inclusion? Do you see fintechs  competing with banks, for example, or are they more likely to carve out their own niche  separate to banks, or something else?
Fintechs and traditional banks often make excellent partners with complementary capabilities.  Banks provide fintechs with access to distribution networks, balance sheet strength and reputation,  while fintechs offer nimble technical infrastructure to banks and more innovative client experiences.

Across the Asia Pacific region, there is plenty of room for growth in electronic payments. That  creates huge opportunities for more innovation where many consumer segments remain  underserved, not least in the small business and commercial spaces. 

As a global technology company, Mastercard is a catalyst and partner for the transformation of the  payments ecosystem and a committed force for financial inclusion. That includes partnering with  regulators and governments in efforts toward digitization of payment infrastructure and offering multiple payment rails for cross-border payment flows.

How does Mastercard help or support its fintech partners to help them scale up their services?  Could you give us numbers or testimonials on how your partnership has helped fintechs scale  up their businesses?  
Mastercard has long partnered with fintechs. With that knowledge and expertise, we’ve been ahead  of the industry in creating efficient and quick pathways to innovation and growth.

Our Accelerate platform helps fintechs rise to the next level by connecting them to technology  partners, end-to-end solutions and ways to innovate. In Singapore and around the world, we run  incubators, accelerators and partnership programs to support fintechs, collaborate with them and  build smarter solutions.

The platform includes a full suite of programs – Mastercard Engage, Start Path, Mastercard  Developer and Fintech Express – to help fintechs at various stages of development and growth.

Start Path evaluates more than 1,500 applications each year and selects about 40 start-ups that  offer the most promising technologies and demonstrate a readiness to scale. Start-ups in this  growing network have gone on to raise $2.7 billion in post-program capital and collaborate with  Mastercard, major banks, merchants and other high-profile organizations.

What can we expect to see from Mastercard and their partners in your SFF x SWITCH’s  “Fintech Demo Day” presentation?
Singapore Fintech Festival is an important event for Mastercard as we are very enthusiastic  supporters of start-ups and fintechs. 

Mastercard will have many speakers and panelists there, including Asia Pacific Co-President Ari  Sarker who will talk on Day 2 about the importance of digital solutions and financing for SMEs. We’ll be making several important announcements and hosting lab crawls, workshops and product demonstrations for everyone who attends.

Without giving too much away, Mastercard will be highlighting solutions and insights around digital  payments, cybersecurity, data analytics, government solutions, programs for SMEs and other  initiatives as part of our commitment to building an inclusive digital economy with frictionless  commerce and secure, accessible transactions.

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