Mastercard plans to displace cash

Read time 4min 10sec
Mark Elliott, Division President for Southern Africa at Mastercard.
Mark Elliott, Division President for Southern Africa at Mastercard.

A large majority of transactions that take place in the world today are still done in cash, causing a massive drain on the economy and the people using cash, says Mastercard.

The global payments technology company's strategy is to move transactions in cash over to a digital platform and it has already done so in some areas locally.

The solutions and plans were discussed at the Mastercard Digital Indaba, which recently took place at Sun City.

The invitation-only event brought together players from across the payments industry to share insights, promote the exchange of ideas, and engage in discussions about payments innovation from a global and Southern African perspective.

This year, Mark Elliott, Division President for Southern Africa at Mastercard, discussed how displacing cash is fundamental to the company's digital strategy.

"Our narrative often talks to the cost of cash. We have done studies on the indirect cost of cash, which is typically between 0.5 to 1.5 percent of GDP. In South Africa, it costs consumers R23 billion per year."

He says an example of the indirect cost of cash would be someone who wants to make a payment at their local convenience store. To do that, they have to pay for a taxi to get there from their village, pay to withdraw the money from a bank, and pay to get back home again.

There are smarter solutions to delivering that experience, says Elliott, like through an app where the person could make the payment or purchase items without having to go to the convenience store.

"The funny thing is, in 2010, the world was 85% cash transactions. As of today, nine years in, it is still 85% cash transactions and in Africa, that figure is around 95%."

Cash is not only bad for the consumer because it costs them more money in the long run, but also bad for business because there is no digital record of the transaction.

Gabri"el Swanepoel, vice president for business integration and innovation at Mastercard South Africa, says over the last three years, Mastercard has been focusing on building a digital payments acceptance environment in cash-heavy channels, such as airtime and bill payments.

One of the ways Mastercard is achieving this is through Masterpass, a digital payment service that allows users to load their credit and debit cards into an app and make payments using a QR code. The service is interoperable, so it will work with SnapScan, Zapper and their own Masterpass QR code, so users only have to download a single app. The company launched Masterpass in SA in 2014.

Swanepoel says when Mastercard first started its digital journey, it didn't foresee the very specific ways Masterpass is being used for today.

"One of the unique use cases, and this is true for both Zapper and SnapScan and, in some instances, Masterpass, is that churches have started to stick Perspex QR codes to the back of pews so people can scan and donate, instead of someone walking around asking for cash donations."

He says Mastercard knows of many churches in South Africa that are doing this: "It's a great example of cash displacement. The other example is food markets, where QR payments have had a profound effect, and people don't have to take their wallets with them or worry about how much cash to withdraw."

In September, Mastercard partnered with EasyPay to allow South Africans to pay around 600 local bill issuers and buy prepaid utility services. Elliott says bill payment was one of the cash-heavy areas the company planned to address. Instead of people queuing at retailers or at municipal buildings to pay with cash, they can now use the EasyPay app.

The next area where Mastercard sees opportunity for displacing cash is person-to-person, or P2P, payments.

Swanepoel says the majority of wage earners today use retail networks to send cash. But, he says, this is in the absence of having any other inter-bank solution that allows for person-to-person payments.

"For example, miners who are going home from Rustenburg may deposit their bonus at a shop and then take a bus to Mthatha to withdraw it on the other side because they don't want to carry cash.

"P2P will solve this pain point because it allows consumers to easily send money to anyone digitally, no matter who they bank with," he says.

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