Banking for humanity: making the digital economy work for all

“We will thrive when economies thrive; when they’re sustainable and inclusive,” said Michael Froman, Mastercard vice chairman and president of strategic growth. And this isn’t an exercise in corporate social responsibility alone, but making purpose and social impact on a commercially-sustainable basis part of a company’s long-term business strategy.

Froman was speaking in a fireside chat with Helen Milner OBE, group chief executive of Good Things Foundation, an international digital and social inclusion charity that operates in the UK and Australia. The Foundation is also part of Mastercard’s ‘Nobody in the dark’ coalition, which aims to support the 19.4 million Brits who feel in the dark about their financial futures.

Milner asked how, what with COVID-19 posing such an emergency, corporations don’t give into the immediate pressure to respond in a short-term way. “How do you make sure you’re focused on the long-term?” Froman responded with an acknowledgement that we have to do some of both. “There are people who are hurting right now and need support,” he said. Though our philanthropy and community relations activities Mastercard is among organizations that have made resources available to help people and small businesses that require them.

Examples include our work with cities such as LA, California in the US to dispense aid to its most vulnerable citizens in just eight days, and helping Main Street stores set up shop online.

Mastercard’s longer-term commitments include the recent expansion of our financial inclusion goal to bring One Billion people and 50 million micro- and small-businesses into the digital economy by 2025, with support for 25 million women entrepreneurs. “We looked around [when we met our 500 million commitment nine months ahead of schedule] and thought ‘Now’s the time to double down’, because COVID really underscored the importance of being connected to the digital economy.”

There’s been a definite acceleration of the digital shift in recent months: to contactless; to ecommerce; to other means of managing our money online. “We’ve seen through COVID that tech adoption has grown exponentially, and companies that had a three-year digital transformation programme have delivered it in three weeks,” said Milner. “I think of my 90-year-old father who never engaged in e-commerce before; now he’s ordering everything online,” added Froman. He expects habits, once learned, will stick: “I don’t think he’ll go back to grocery stores as often as he once did.”

But despite fantastic progress on digital inclusion, there are still vast numbers of people in developed and developing economies who remain unserved. “On one hand there’s been such tremendous dispersion of technology,” Froman said. Mobile phones, for example, have facilitated widespread access to mobile money and associated financial services in developing economies. “On the other hand, you still have billions of people who don’t have access to the internet… and more than a billion people who have no formal identity.”

“What the digital economy needs to be inclusive is to give people who don’t have an identity the capacity to be identified in a digital world,” said Froman. This allows them to access the networks and tools they need to be successful wherever they are, whether that’s in rural Africa or a city in the UK or the US. “We call that the democratisation of productivity.”

And that goes for businesses too. “[Mastercard has] been partnering for some time now with Unilever and financial institutions in East Africa to digitise the relationship between a micro-merchant, their supplier and their local bank so the merchant can access credit [on stock purchases] for the first time.”  That gives the micro merchant the opportunity to grow their business, hire more people, and support their families and their communities.

Those that remain digitally underserved can incur a premium to access financial services. “COVID-19 has exposed and exacerbated the links between digital exclusion and poverty,” said Milner, when it comes to things like online savings, help with debt, and essential support. Data shows that the least digitally engaged are more likely to be paying higher household bills irrespective of income, household or age: “for utilities alone, they are spending an average of over £348 more per year.”

In the UK, 11.7 million people lack basic digital skills they need to transact safely and confidently online. In order for them to meaningfully participate in the digital economy and feel comfortable doing so we must also grow digital and financial literacy to allow them to take advantage of digital tools, said Froman.

Milner asked what role the financial community has to play in helping to educate people in the use of these tools. It’s important that there be training along with the technology, says Froman. For example, The Mastercard Center for Inclusive Growth partners with organisations around the world to support training programmes for micro merchants, farmers and other small business owners, on the use of digital tools and services. For example, how to manage credit for the first time.

“Everyone has a role to play: governments, the private sector, as well as the non-profit community,” he added. Each brings different attributes and capabilities to the table. Protectionism and nativism is not the answer. “If COVID has taught us anything, it’s that the wellbeing of the individual is integrally related to the wellbeing of others halfway around the world,” said Froman “This is a time for collaboration and partnerships,” agreed Milner.

“Collaboration… is how we reach the last mile.”