Harbouring a vision of a financially inclusive, digitalised society and working relentlessly towards realising this mammoth task are two distinct realities. Raghu Malhotra, president for Middle East and Africa (MEA) at technology giant Mastercard, has the unique opportunity of not just having that vision, but also bringing it to life.
“We want to get one billion people financially included into the formal economy by 2025,” says Malhotra, who is currently overseeing the company’s growth strategies across 69 countries. That the Covid-19 pandemic and its economic implications left the world reeling is nothing new. In the weeks and months following the outbreak, a new ecosystem seemingly cannibalised the old, causing a departure from the traditional ways of how people worked, shopped, and lived. While it posed an existential question for some, it created a challenge of distinctively different but overwhelming proportions for companies such as Mastercard, which were keen to help millions of people transition seamlessly towards a new world order.
“If I just step back and think of the pandemic, it has had an adverse impact on various global economies and people, but in many ways, it has also been a catalyst of change. Everybody understood that the cost of cash was very high. I think what the pandemic did for payments was that it changed consumer habits – in the Middle East and Africa, 73 per cent of people are shopping more online than they did prior to the pandemic. That’s a staggering number,” adds Malhotra.
E-COMMERCE: RAPID GROWTH
Digital adoption on an individual and institutional level were arguably the redeeming features of the Covid-19 pandemic. Consumer spending habits are now digitised and the opportunities for stakeholders – be it retailers, financial institutions or fintech operators – to leverage the space are unprecedented.
“Our current estimate is that between 20 to 30 per cent of the Covid-related surge in e-commerce spending is going to remain permanent. And that’s just the immediate shift. As people get their infrastructure in a better place, the consumer experience will get better, and then you should expect more of a change to come through,” predicts Malhotra.
According to Mastercard’s New Payments Index, 97 per cent of UAE-based consumers are considering emerging payments such as wearables, biometrics, digital wallets and currencies, and QR codes. In Q1 2021, Mastercard witnessed one billion more contactless transactions globally, compared to Q1 2020.
Malhotra adds: “The three trends that I see on the payments side are that, firstly, e-commerce has gone up a lot. But more importantly, it’s not just that it’s scaled during the pandemic, because you’re sitting at home and you still need to shop; it is now that consumers have tried it and are comfortable with it, and as we go forward in the future, it will be a channel that consumers will use more often than they have ever done in the past. So, in effect, the quantum shift from one channel to the other is one part that’s come through. The second is contactless – when one suddenly starts to think that physical contact has issues, cash has issues. And the third trend is domestic spend, which has actually gone up.” Mastercard’s domestic volumes in MEA grew by 38 per cent year-on-year in Q1 2021.
However, the rise in online transactions and digital payments has been accompanied by a surge in threat actors who, as is often the case, have exploited uncertainty and global events to perpetuate malicious activity. According to a McAfee report, with global spending on cybersecurity expected to have exceeded $145bn in 2020, cybercrime is now a $1 trillion drag on the global economy.
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