Unlocking the potential of the digital economy

After more than 35 years in the UAE, Mastercard has become deeply embedded in the region’s dynamic payments landscape.

J.K. Khalil, Cluster General Manager, MENA East at Mastercard, sits down with Business Technology Review to explore the company’s role in driving digital transformation and how the technology giant is harnessing the power of technology to create a sustainable and inclusive future for all.

How is Mastercard contributing to accelerating digital payment adoption in the region?

For more than three decades, Mastercard has shaped the regional payments landscape, powering economies and empowering people. To do this, we are constantly evolving our payments matrix across new rails and supporting new ecosystem players.

This matrix has three dimensions – markets, segments, and rails. Across the region, our different markets have various segments that are spearheading digital transformation and the development of the digital commerce space.

This means that different rails are required, and as a multi-rail player, Mastercard can enable those different segments from Pakistan to Morocco in different ways, shapes, and forms.

For instance, in the UAE, banks are leading the charge in digital payments, and you’ll see this from the front end of the consumer perspective. But there are also a lot of fintech companies that are coming into the picture, as well as telcos and a few merchants bringing their digital prowess to the fore.

To accelerate this movement, Mastercard is partnering with companies such as e& that has recently launched e& money, the first digital wallet licensed by the Central Bank of the UAE. In markets like the UAE, our partners are using our more classical rails, such as card rails, remittance rails and e-commerce rails.

How has been the growth of digital payment in the post-pandemic period?

Between last year and this year, the growth of digital payments has reached a new high at 20 per cent. For example, digital remittances are growing way faster than corporate ones.

High awareness, adoption and openness among consumers are driving the shift to emerging payment methods in the region. According to Mastercard’s 2022 New Payments Index, 85 per cent of people in the Middle East and North Africa used at least one emerging payment method in the prior year. 64 per cent of consumers in the region increased their use of at least one digital payment method in 2021, including digital cards, SMS payments, digital money transfer apps, and instant payment services. On the other side of the equation, 19 per cent of the surveyed used less cash.

The reason is that Covid-19 has increased people’s comfort levels with digital payments as a secure but also a convenient medium to pay. It was like a perfect storm, because pre-pandemic, Apple Pay, Samsung Pay and Google Pay were already available in the Middle East, and when Covid-19 came, it accelerated the adoption. The market has expanded significantly. Almost everyone who had a purely physical channel or brick-and-mortar business model has migrated to digital, realizing the benefits of better access to customers and an improved customer experience. We expect the share of e-commerce and digital payment spending will continue to grow, while physical spending will shrink.

How does Mastercard leverage partnerships to advance digital transformation in the region?

As part of our multi-segment approach to coverage, we have different models for each segment, market and partner that are tailored to their needs. We have a long-standing traditional model of partnership with most banks in the region that goes back 30 years from when we started operating here.

Then we have the more recent models that we apply to large merchants – telcos, retailers and airlines. It depends on whether these merchants are working with a bank to launch new products or whether they are working directly with Mastercard as a payment technology enabler to launch their product directly B2C.

We have also developed different partnership models for startups and fintech. At the very early stages, we include them in our global Start Path programme, which assists them in fast-tracking their growth and provides them with access to our network of 25,000 banks and 90,000 partners. Sometimes we end up choosing to invest in those startups.

Meanwhile, with governments, our partnership focuses more on enablement from a technology perspective to help accelerate their transition to the digital economy.

In 2021, Mastercard pushed forward its deadline to reach net-zero emissions across its operations from 2050 to 2040. How is the company working towards achieving this ambitious goal?

At Mastercard, we are mindful of our environmental footprint because we believe we owe it to our planet. Our dedication to adopting a more sustainable approach to growth calls first and foremost for reducing the environmental and climate impact of our operations. This means accelerating active steps to reduce our carbon emissions and working with our suppliers to make similar commitments. But our impact can be even more substantial when we engage our customers and partners worldwide to drive collective climate action. To realize this vision, we are developing products and solutions that harness the power of our global network to encourage environmentally conscious consumer behaviour.

For instance, to reduce plastic consumption, we have a mandate to use 100 per cent of cards made from sustainable materials across our global network by 2028. Some markets have better access to this kind of materials than others, so for this region, we’ll be able to hit that target much sooner. We’re trying to aim for a nice surprise by COP28.

As another example, we developed the Mastercard Carbon Calculator in partnership with the Swedish fintech company Doconomy, in which we have also invested. With this handy tool, banks enable their customers to track the carbon footprint of their purchases.

To reduce waste produced during our operations, we have joined the TRUE (Total Resource Use and Efficiency) portfolio program, a comprehensive zero-waste certification program led by the Green Business Certification Inc. (GBCI). Our Dubai office achieved TRUE precertification, making it the first TRUE project in the UAE.

Our ESG framework also involves other initiatives, like our Priceless Planet Coalition, which works with many NGOs, nonprofits and other partners globally to restore 100 million trees by 2025. Here in the UAE, this project is undertaken in partnership with Conservation International, Emirates Nature-WWF, and the World Resources Institute with the support of the Red Crescent, and supports the country’s goal to plant 100 million mangroves by 2030.

Mastercard has pledged to connect 1 billion people and 50 million MSMEs, including 25 million women entrepreneurs, to the digital economy by 2025. Can you tell us more about the company’s efforts in this space?

For us, it’s all about connecting people and organizations to opportunities. We want to power economies and empower people. The big transformational question we’re trying to crack is how to enable digital commerce in the future. We feel there’s no point in pursuing ambitious goals if we’re not going to have a real impact on people. In this part of the world, for instance, we have taken on a huge chunk of that goal. For us, financial inclusion means you can pay and get paid, not that you open a bank account. There’s a major shift taking place across the region, where we believe we can improve people’s lives through that inclusion.

A prime example is our partnership with Jingle Pay, a UAE-based financial super-app, to provide innovative digital payment solutions that drive financial inclusion. Through this partnership, Jingle Pay will launch physical and virtual cards to facilitate everyday transactions for people, whether or not they have a bank account. Another example is our collaboration with Kamelpay which seeks to boost financial inclusion among the labour force and micro-SMEs in the UAE by digitising everyday transactions through PayD card and Centiv card.

We also curated The Entrepreneur’s Odyssey specifically for the micro, small, and medium business (MSME) community. This first-of-its-kind digital education platform brings together a range of world-class academic and business resources to help small enterprises learn and thrive. And together with Tradeling, the Middle East and North Africa’s dominant e-marketplace that focuses on B2B transactions, we offer benefits to small enterprises in the UAE that facilitate their access to the digital economy. Our SME customers can now receive a 5 per cent discount on all products bought on Tradeling’s platform.

In the field of women’s empowerment, we recently introduced the Social Innovation Incubator for Women’s Employment which aims to create one million jobs for women across the Middle East and North Africa. This is a collaborative effort with Women Choice, an international organization dedicated to advancing women’s personal and professional development.

Mastercard’s iconic Priceless campaign is celebrating its 25th anniversary this year. What are the most memorable recent initiatives that you hosted in the region as part of the campaign?

We know experiences matter the most, as more than 60 per cent of people value them over material things. That’s why our Priceless platform seamlessly connects our cardholders to experiences, benefits and to their passions. Priceless pioneered emotional and experiential marketing long before it was even a category to call, and it’s going from strength to strength.

For us, Priceless is such a wonderful creation. At the start, it was one small campaign. It’s kind of like the Eiffel Tower, which was supposed to be taken down, but people loved it so much that now it’s there forever. Priceless was also originally built for a campaign, but it went so viral that we said: Wait, maybe there’s something behind this. And that’s when our CMO Raja Rajamannar realised it wasn’t about the word Priceless but about the feelings it evokes. That meant we were engaging people’s senses, which led us to embark on a whole new multi-sensory journey, which has seen us evolve our logo, introduce our sonic ID, two bespoke macaron flavours as taste and two world-class perfumes as fragrances. So now, after 25 years, Priceless is focused on the vision quest for this journey.

Are you satisfied with the growth and evolution of fintech in the MENA region?

We must understand the canvas that the region is operating on, as the MENA market is very fragmented, with small countries and small populations but very active and conservative regulators. This creates a complex regulatory environment that fintech companies seeking to expand to other markets may find challenging to navigate. This applies more to the B2C than to the B2B space. To unlock the full potential of fintech and build the next Silicon Valley here, we need regulatory passports and a lot of enablers from an ecosystem development perspective. Another important point is that collaboration, not competition, is the way forward. All things considered, fintech in the region has great growth potential.

At Mastercard, we support this growth by bringing innovation and technology to fintech companies and using our scale and expertise to drive digital payment adoption. From our best-in-class APIs and data assets to our trusted ecosystem of partners, we provide the services and tools fintech innovators need at every stage of their journey. We co-create solutions and offer access to our network, expertise, technologies, markets and customers so fintech companies can build, launch and grow.

We introduced the global startup engagement program Start Path which provides later-stage fintech startups with a single entry point to our fintech portfolio and access to everything they need to grow quickly. We started a significant collaboration with NymCard that marked the first time a fintech company in the UAE was licensed to issue cards by Mastercard. We have also partnered with Astra Tech’s PayBy, a fintech company licensed by the UAE Central Bank, which has obtained a Mastercard principal membership license. Astra is issuing branded Mastercard digital and physical cards to millions of users on top of its platforms BOTIM and PayBy, providing authorisation services and prepaid multi-currency cards. Astra is also licensed to act as an acquirer. The company can now offer BIN sponsorship services, enabling fintech third parties to issue prepaid cards and connect with Mastercard’s card scheme network. Our latest collaboration with Dubai International Financial Centre (DIFC) aims to drive digital transformation through partnerships with innovative fintech companies, aimed at creating new payment solutions and digital services as well as enhancing existing ones.

Is cash still king, or is it history?

Historically, there have been different kinds of trade models. In some places, people used shells as currency, while elsewhere they traded by carving into a rock to keep score – until a better model came along in the form of the first coins. Today, we already have a better model – digital payments, it’s just not universally accepted yet. So, I wouldn’t say that cash is king, but it’s a legal tender that will be necessary as long as there are sellers who don’t accept digital means of payment. In the future also, people may adopt new forms of digital cash in the form of value tokens, or even loyalty points.

Our job at Mastercard is to make people’s lives easier by creating as many convenient and safe technologies to power digital transactions while including as many forms and means of payment as possible. We aim to simplify and digitize transactions so that people can engage in enjoyable, seamless, and secure value transfers and exchanges anyhow, anywhere, anytime.