MasterCard steps up its game
FINANCIAL inclusion, riding on the back of a predominantly youth population, will take the economy of Bangladesh forward, said a top official of MasterCard.
Vikas Varma, MasterCard's executive director for South Asia, said: "It has got to do with the youth as they are optimistic and hard-working. This is a very young population. That is why there is a lot of hope."
From a finance standpoint, he said the youth population is yet to be financially included in the formal financial ecosystem.
"They will probably get a job in a couple of years and get their first formal relationship with financial institutions. They will start to save money and borrow money to build their lives."
"Financial inclusion is one big area that will really drive the economy forward."
For MasterCard, Varma said, financial inclusion is one of the large focus areas. "We do this in a way that it is good for the country as well as makes commercial sense."
MasterCard, headquartered in New York, entered the Bangladesh market in 1997, becoming the first plastic card issuing company in the country. It however served the country remotely until it opened a liaison office only two years ago.
"We have now realised the long-term potential of the market," he told The Daily Star in an interview in Dhaka on last Wednesday.
The company is catching up with other competitors; in the last two years, MasterCard has signed partnerships with 15 banks and one non-banking financial institution.
MasterCard also included Bangladesh in its index of consumer confidence in 2012. Since then, it has been publishing a survey that shows whether consumers in the Asia Pacific countries, including Bangladesh, are optimistic or not.
Varma said MasterCard would undertake a lot of activities to drive the growth of its business in Bangladesh.
For example, MasterCard has 365 days of special offers with 800 merchants in Bangladesh.
MasterCard recently launched a payment gateway solution in the country, allowing merchants to provide their customers a simple, safe, secure and convenient way to purchase products and services online.
"The procedure is extremely simple and will surely drum up people's confidence in the use of e-commerce," he said.
Varma, an alumnus of Institute of Management Technology, Ghaziabad of Uttar Pradesh in India, joined MasterCard in 2005. Previously, he worked for American Express and GE Consumer Finance.
The card company is also making investments in Bangladesh, but Varma did not disclose figures.
He said the digital space is very big in Bangladesh, and smartphone penetration is growing rapidly. "This is the right time for us to make the investment."
Bangladeshi consumers spend about Tk 10,000 crore a year in cash to make their everyday purchases. But less than 1 percent of the amount happens electronically.
It is about 4 percent in some markets in South Asia, while the global average is 16 percent. Consumers in South Korea make 65 percent of their purchases electronically, becoming the poster child of electronic payment.
"In Korea, it has happened because the government and the regulators actually mandated electronic payment in a way where there have been incentives such as tax deduction for both merchants and customers," said Varma.
A robust electronic payment system is replete with benefits, he said.
For example, the cost of funds goes down as there is no physical cash to manage.
The cost of managing, transporting and storing cash is 1 to 2 percent of gross domestic product in many markets, he said.
He said MasterCard educates merchants on the value of accepting payments electronically. "It means there is more accountable cash in the economy, the velocity of the cash movement goes up and the cost of managing cash goes down."
"It brings more benefit for the government as the money becomes a part of the formal economy. The amount of untaxed money goes down. It can drive significant changes to GDP growth."
According to Varma, consumers' comfort level is vital in driving the growth of plastic money. The chip card, which is being introduced in Bangladesh, will give consumers an added level of protection, he added.
There are about 5 million cards users in Bangladesh among a population of 160 million.
Varma said Bangladesh Bank, with a lot of foresight, has done a lot to drive financial inclusion. "Still, there is a lot of work that needs to be done in Bangladesh for grassroots financial inclusion to really scale up."
He said India has made it mandatory for banks to issue a debit card along with every savings account they open. That has not happened in Bangladesh.
Citing studies, he said the cost of servicing a cardholder at a branch is five times of that at an ATM. "Many times, banks do not see the cost because it is invisible. There are costs related to workforce, tellers and office space."
When it comes to giving back to societies, MasterCard works broadly for two groups: women and the youth.
In Bangladesh, the company is working toward women's empowerment.
In 2013, MasterCard initiated grant programmes to train 100,000 women entrepreneurs in Bangladesh, along with BURO Bangladesh, one of the largest non-governmental organisations.
The training focuses on providing business and financial literacy, and entrepreneurial training, aiming at their self-dependence, sustainability, and emancipation.
Among them, at least 60,000 recipients have started their own businesses by now, earning significant amounts of money, said Varma.
MasterCard also made a grant to raise awareness about business and financial literacy among 10,000 holders of Tk 10 accounts in 2014, and 25,000 account-holders this year, said Syed Mohammad Kamal, country manager of MasterCard Bangladesh.
On the National Payment Switch, Varma said MasterCard shares Bangladesh Bank's objectives of fostering a safe, efficient and reliable electronic payment system and accelerating the migration to electronic payments.
"We believe the government will take the safety and security agenda seriously and allow those who contribute to the payment ecosystem to invest in technology and fraud protection tools and systems. It will create an environment where payment services are provided safely and securely by operators in an open and level playing field."
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