The dynamics of financial inclusion are shifting rapidly in Latin America and the Caribbean, as more consumers become digitally enabled and as the economic effects of the global pandemic continue to be felt.
Amid this environment, Mastercard has pledged to lift 500 million unbanked people into the global economy, and is establishing new partnerships to increase financial inclusion, drive new payment flows and keep digital finances secure.
In this exclusive interview with iupana, Kiki del Valle, EVP Market Development for Mastercard Latin America and the Caribbean, discusses the role of fintechs in financial inclusion in the region, the Tech for Good Partnership, and the gender gap.
We’ve seen a lot of progress in financial inclusion over the past year, but there are still many challenges. How is Mastercard working with fintechs to address those challenges?
Over the last five years, Latin America has undergone a fintech boom that has only deepened with the pandemic and increased demand for digital platforms. Through the end of 2020, consumer behavior shifted to leveraging new technologies like contactless as consumers became more conscientious of the use of cash. Additionally, many more consumers looked to e-commerce as a window to their everyday needs. Due to quarantine measures and the additional push of government subsidies across many markets in the region, consumers turned to cards and digital wallets to access digital services.
As such, consumers and small businesses took up digital financial offerings to access funds, make everyday payments on basic needs, and manage expenses among their friends and family. The regional and global ‘bump to digital’ accelerated opportunities for bancarizing the unbanked/underserved, moving away from cash.
On the other hand, fintechs face many challenges due to a weak economic situation including, reduced investment and funding, increased cybersecurity risks, and an increased risk of default, to name just a few. As a result, in these challenging times, financial technology companies are at risk of losing investors and consumer trust. Moving forward, fintechs need to remain agile and lean while relying on the appropriate industry partners to develop the right tools for every financial need. Throughout the past five years, Mastercard has worked with fintech partners, banks, non-governmental organizations and governments to unlock economic opportunities and bring 500 million people into the digital economy, and we’ve seen the tangible results.
While our work has made crucial inroads, more needs to be done. Last year, Mastercard announced a new global goal to bring another 500 million unbanked people into the digital economy by 2025, for a total commitment of 1 billion. Financial inclusion remains one of the region’s greatest opportunities, and fintechs could play a vital role in its progress.
What’s the role of fintech partnerships in financial inclusion?
The pandemic has underscored the challenges of being excluded from the digital economy, which can make everything from redeeming a government stimulus check to buying items online difficult. Today, one cannot drive financial inclusion without the inclusion of everyone in the digital economy.
Growing Latin America’s digital inclusion mindset in the region is essential for achieving a prosperous marketplace. In the current context, digital inclusion means access to affordable and robust internet, internet-enabled devices, digital literacy training, technical support and applications designed to enable and encourage self-sufficiency, participation and collaboration.
“Financial inclusion remains one of the region’s greatest opportunities, and fintechs could play a vital role in its progress.”
Although digital inclusion in Latin America is booming, more work needs to be done to achieve a sustainable model. Building financial inclusion by leveraging digitization means removing entry barriers like high fees and restrictions, increasing product and service value, and providing greater digital and financial education—as well as a better overall user experience—to build a foundation of trust for the future.
Fintechs are well positioned to take advantage of the new digital consumer while providing differentiated offerings including, a fully digital onboarding process leveraging multiple use cases, servicing the consumer 24/7 through new channels of engagement, and delivering a trusted solution through new cyber tools that protect and bring additional transparency to the consumer.
Why is there a gap between women and men in financial inclusion?
The World Bank’s Financial Inclusion Index (Findex) says that 1.7 billion people worldwide (~30% of adults) are currently unbanked and, therefore, financially excluded. The number is disproportionately high among women, rural populations and the unemployed or informally employed. Among the reasons that explain the gender gap in financial inclusion, Findex mentions lower phone ownership, greater illiteracy, and lack of access to funds and documentation for women, all of which contribute to gender disparities regarding access to and use of financial tools.
Thinking of women in a broader scope beyond consumers, women business owners have been hit disproportionately hard by the pandemic. To maximize the potential of women entrepreneurs going forward, findings from the Mastercard Index of Women Entrepreneurs 2020 (MIWE) indicate the power of building on gender-targeted policies to advance women’s entrepreneurial success. It also suggests a growing opportunity to course-correct inherent gender bias and invest more in women as structural progress throughout the industry removes entry barriers and access to digital and financial solutions increases. The only way we’re going to achieve inclusive growth is by building a more connected world where everyone has equal access to a better life.
How can fintechs and banks work to close that gender gap?
According to the Women’s World Bank, women are the biggest untapped market in the world. Forward-thinking financial institutions are beginning to recognize the potential of the women’s market as a business growth strategy and creating gender-neutral products is a must to ensure success. In fact, the data proves that when products are created with women’s specific needs in mind, men are just as or even more interested in them.
Market research shows that, when deciding on a new product or service, women have different needs. They require more information and ask a lot more questions than men do. Women don’t just assume that a new or innovative financial product will work for them; they place a high value on the opinions of peers. In the end, this purchase-behavior pattern benefits both genders.
What are some of the differences between the way men and women use financial services?
There is considerable research on gender differences in financial decision making. Women control upwards of 85 percent of day-to-day buying decisions, yet too much of our world was designed without their needs in mind, and without them involved. This results in missed opportunities that hold us all back. We now have the opportunity and responsibility to reverse this by better understanding their goals and aspirations and developing solutions with women in mind. Today, women are taking greater control of their finances and seeking greater simplicity and stability.
“Forward-thinking financial institutions are beginning to recognize the potential of the women’s market as a business growth strategy and creating gender-neutral products is a must to ensure success.”
Generally, they also are more risk-averse than men, which creates an opportunity for financial service providers to help them feel in control with solutions like insurance protections, for example. Additionally, they are more likely to use tools to help them get the most value out of their purchases, so ensuring that there are relevant offers and benefits might help drive loyalty. As pragmatic selectors of technology, they will adopt digital solutions when useful or necessary, but are usually not the first to try something new.
How is Mastercard helping women entrepreneurs?
We believe that the road to financial security means moving beyond access and ensuring people have the tools and support to grow and succeed over the long term. An example of this is the support we provide to women entrepreneurs.
Mastercard has always been a champion of women in business and has created programs and research studies to support their advancement. Our 2020 Mastercard Index of Women Entrepreneurs (MIWE) serves as a centralized source for analyzing the broad set of variables affecting the advancement of women internationally. It shows how committed the brand is to provide a bedrock of information which will enable governments, businesses and individuals to take decisive action by implementing targeted gender-specific support that will foment greater gender parity in the workplace.
This annual report is one component of our broader mission to drive the disconnected and disadvantaged forward. Our goal is to provide 25 million female entrepreneurs around the world with the solutions that can help them grow their businesses through cross funding, mentoring opportunities and the development of inclusive technologies. We also hope to continue promoting their advancement efforts through programs like Start Path shedding light on female founders for greater investment opportunities, and Path to Priceless.
Tech for Good is a new initiative. What are your long-term goals for the alliance?
The Tech for Good Partnership is a partnership program created for the Latin American and Caribbean region. It is focused on digital and financial inclusion efforts to support leading representatives in banking, fintech and technology sectors, and it aims to improve financial inclusion and business recovery post-Covid. The program is in alignment with Mastercard’s global commitment to financial inclusion, which has pledged to bring a total of 1 billion people and 50 million micro and small businesses into the digital economy by 2025.
To make it happen, the initiative is looking to expand partnerships amongst the members, so that the infrastructure required to push financial inclusion can be deployed, private-sector commercial efforts can be accelerated, and there can be greater commitment to increasing investments that would support financial inclusion in LAC. With Mastercard’s reach and connectivity, we believe we can unite organizations, and integrate currently fragmented initiatives under a single movement for the greatest impact. The Partnership can inspire others to get involved by sharing best practices and showcasing examples of how innovative financial inclusion creates growth opportunities.
Are there some early achievements of Tech for Good that you can highlight?
Since its inception in September, the Tech for Good Partnership has been focused on designing initiatives with the banking, financial services, and technology sectors. Today’s partners include Bancolombia, Banco Galicia, Citibanamex and fintechs like Mercado Libre and PayPal.
“Through the Tech for Good Partnership, there is an opportunity to continue addressing key pain points in 2021 such as, access, usage and education of financial and insurance products, as well as increase savings rates and influence financial behaviors that can strengthen resiliency against future economic shocks.”
We’ve collaborated across partner members to develop new business models and solutions that are focused on expanding and providing basic financial services and resources in the region, including: access to credit, providing financial aid and building educational tools for the millions of Latin Americans who have been left in a vulnerable situation after the pandemic. As we continue to improve and expand the scope of the Tech for Good Partnership across the industry, it is our hope that the program will serve as an example for other institutions to follow while, most importantly, strengthening the communities and consumers we serve.
What will be priority areas and strategies for Tech for Good in 2021?
The Tech for Good Partnership will continue to leverage its collective expertise and assets across member partners to address the challenges of the four key target segments: women, recipients of government subsidies, gig workers connected to digital platforms, and micro, small and medium enterprises (MSMEs). These groups have experienced a variety of challenges exacerbated by the COVID-19 pandemic. Through the Tech for Good Partnership, there is an opportunity to continue addressing key pain points in 2021 such as, access, usage and education of financial and insurance products, as well as increase savings rates and influence financial behaviors that can strengthen resiliency against future economic shocks.
A recent example stemming from our continued work in this space is a partnership between Mastercard and the United States Agency for International Development (USAID), through which Start Path Empodera, a business accelerator that promotes female entrepreneurship and financial inclusion in Colombia, was launched. Through the program, we’re providing our Start Path award-winning global model, expertise and brand to stimulate the growth and sustainability of early-stage female entrepreneurs who are focused on solving problems that require unique technology, target a large market with potential for high growth and have a repeatable business model.
What are your priorities for digital partnerships at Mastercard in 2021?
We’re laser focused in driving commercially sustainable solutions developed alongside our digital partners to continue making a positive impact to communities in 2021. As part of our collaboration model, we leverage our technology and expertise to secure the ecosystem, allow new payment flows, and accelerate financial inclusion. We remain committed to building an inclusive future, one in which everyone benefits from the digital economy for the betterment of society through new innovative business models, different technologies, and an active participation of different stakeholders like fintechs, governments, merchants, and banks, amongst others.
This interview is part of a series on digital finance, conducted in conjunction with Mastercard. Explore the full series here.