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Whitney Pennington Rogers: Ajay Banga,
thank you so much for being with us today,
-
I feel like this conversation
is especially meaningful
-
as we're waiting through
this pandemic, it's late 2020,
-
and we've seen the way that inequalities
have presented themselves
-
throughout this year, through this crisis.
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And since you've been
at the helm of Mastercard,
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you have championed this idea
of financial inclusion.
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And so, could you start
by telling us a little bit
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about financial inclusion,
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what is it
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and why do you think this is something
that can change people's lives?
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Ajay Banga: Yes, look, I think
that the COVID-19 crisis
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has actually made things
worse in some ways
-
and some of the advances
that were being made
-
over the prior decade
-
on fighting poverty and fighting exclusion
-
have probably got set back a little bit,
-
just by the nature of the manner
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in which the virus has impacted
minorities and disadvantaged people
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more than they have others,
-
including, by the way,
minority-owned businesses,
-
a number of whom have had
disproportionate impact
-
through the crisis.
-
But I guess if you pull back
from the crisis,
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because financial inclusion or exclusion
-
is an underlying social problem
that dates back to well before this.
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The real issue,
here's the theory of the case.
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Of seven billion people in the world,
-
close to two billion are either
under banked or unbanked in some way.
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And what I mean
by under banked or unbanked --
-
unbanked is obvious,
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they don't have a relationship
with a banking institution of any type.
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Of any type.
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Now, under banked is, even if they do,
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they're not getting to participate
in the financial mainstream
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and do things that you and I
take for granted,
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which means being able to access credit
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when you need it, at a reasonable price,
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being able to access insurance
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of the type that's relevant to you,
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being able to do things of that nature,
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save for a rainy day in the right way.
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All that done in a form
that's good for you as the consumer.
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That's under banked.
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And so, a couple of billion
people around the world,
-
this is World Bank statistics,
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are basically unbanked or under banked,
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and most of those people
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do not have a formal identity
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that they had received
or got from their government
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and therefore, there's nothing
they can take and hold out
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to show when go to hire a car
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or live in a hotel
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or take a flight, which they don't do,
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to show that they exist in the system.
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Their opinions don't count,
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they don't get counted
in censuses very often,
-
they don't get counted for their opinion
of what government should be doing,
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they get left out, they're locked out.
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And the last part of that puzzle
-
is that this is too big an issue,
-
over the years,
-
for just a government to solve,
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or for just one bank
to solve in a country.
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It does require, kind of,
a bunch of shoulders at the wheel
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to come together,
-
it requires partnerships across
the public and the private sector
-
but even within the private sector,
-
to get to make a real
movement on this issue.
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WPR: So if I'm understanding correctly,
-
it sounds like it's just an opportunity
for people no matter where you are,
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what your socioeconomic status is,
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that you have access
to financial services,
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that you are part of the system
and you have a place,
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a financial identity.
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AB: You have identity, you have a voice,
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you have access to financial services.
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So financial inclusion
has got so many facets,
-
but the basic facet is
be counted, be included,
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be somebody, have the dignity
of your identity,
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and of being included.
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That's really what financial inclusion is.
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WPR: It seems like such a simple idea,
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that can potentially have a big impact,
-
and I know that this is something
that you've implemented
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in your work at Mastercard,
-
but also we see this
in many other organizations,
-
so talk a little bit about what does
financial inclusion look like in practice
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for a range of different organizations,
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and a range of different spaces.
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AB: First of all,
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you're absolutely correct,
there are lots of people participating
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in trying to change this.
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And honestly, without that,
we wouldn't get anywhere.
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We're doing our bit,
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but what we're doing is really
in partnership with others,
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because we're not
a direct-to-consumer company.
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There's nothing I can do
to improve your life directly
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in terms of being included
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because I don't open bank accounts,
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I don't give credit,
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I don't underwrite insurance,
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and I don't have a way
to provide you ways to save money
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in a mutual fund or anything.
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For me to do anything,
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I need to have banks,
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I need to have fintechs,
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I need to have mobile phone companies,
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I need to have governments,
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I probably need to have merchants
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and that ecosystem
of the coalition of the willing
-
is kind of what you will see represented
-
when different companies
talk about their role
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in financial inclusion.
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Let me give you a couple
of tangible examples.
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So if you're a farmer
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and you've got to go to sell
your produce when it's harvested,
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you've got to go two days' way
to the nearest village market,
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well then, everybody knows
that on the way back you're carrying cash
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from the produce you sold.
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That normally leads to bad outcomes.
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Also, you've got to go buy fertilizer.
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Or you've got to go
back and forth to do all this,
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and you're really unproductive,
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or you send your spouse to do it.
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All that changes if I can connect you
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with a phone
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into farmers, fertilizers
and cooperatives,
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give you cropping information,
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rainfall information,
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enable you to sell your produce
in a better marketplace, online,
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receive the money into an account online,
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that is a complete game changer.
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Something again
that farmer's cooperatives,
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local governments,
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banks and companies like ours
can help facilitate,
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in Africa, we're doing it in India,
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we're doing it in a bunch
of countries around the world.
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Again, the idea here
is to take you out of the cash economy
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and give you access
to an electronic economy.
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Imagine that same farmer,
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they now receive money for their produce,
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a bank can look at how they spend money
out of their account,
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and could, using the spending
and receiving of money,
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underwrite you much better
for a crop loan
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than they could if they
didn't know anything about you.
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So the same example, another one,
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is for small and micro businesses.
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Take a woman in Kenya
or in India or in Mexico in a village
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who opens a small shop outside her home
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when a husband and children are away.
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And it runs for a few hours in a day,
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and she stocks a little baby food,
and soap and toilet paper
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and whatever else people buy there.
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Well when the company van comes,
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the Nestle van, the Unilever van,
the local Bimbo Bread van,
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comes to sell produce to her
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on a Monday or a Tuesday
or a Wednesday at a certain time,
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she buys what she can in cash.
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Typically, she's int he cash economy,
nobody’s given her credit,
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she runs out of cash
for that produce that she's buying
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before the week is over.
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She's out of stock.
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She loses sales.
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Imagine if she could then be underwritten,
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digitizing that supply chain,
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what she bought, what she sold,
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underwrite her in a bank
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with actual transaction history,
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you could lend her the 500 dollars
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to enable her to be smarter
about what she buys,
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educate her on how to use her credit,
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that's financial inclusion.
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WPR: And so one thing
that's really struck me
-
as you're talking through
what financial inclusion looks like
-
and how it works,
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is the dependency on technology,
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on smartphones, on internet access,
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and we know that this is something
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that a lot of people
struggle to have access to this
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in developing nations,
even in developed countries.
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Talk a little bit about how this might
in some ways increase the digital divide,
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and sort of, how you respond
to people who might criticize
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this idea in that way.
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AB: There a re two topics
you just came across,
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the digital divide,
which I think is a real issue.
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But just to be clear,
all the examples I gave you,
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they work on smartphones
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and they work on old flip phones as well.
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That QR code, if you have
a camera on your smartphone,
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you can take it,
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but there's a numerical number there,
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you could enter that number
into your finger phone
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and get it across as well.
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Examples like that in Egypt,
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where we've opened
mobile wallets on phones,
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they don't have to be on a smartphone,
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it could be on a old phone.
-
So to be clear, these financial
inclusion examples
-
do not depend on smartphones,
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they do not depend on just
internet access in your house,
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you do need a phone, a cell phone,
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in a number of the examples I gave you.
-
But in the case of the micro and small
credit enterprises,
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you don't even need a phone.
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That actually is just
the transaction history
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of the produce you bought
and what you sold getting digitized,
-
and a bank being able to underwrite.
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There are other problems
of infrastructure in those
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that we can talk about.
-
But to be specific
about the digital divide,
-
I think that's another real big issue
-
and again, COVID-19
has actually, unfortunately,
-
exposed what was already
sort of an issue in society.
-
So whether it's rural parts of America,
-
let alone African or Indian
or Indonesian or Guatemalan example,
-
in America, in rural parts of America,
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broadband access is a problem.
-
Disadvantaged children in New York City,
-
who may not have access
to the same bandwidth capacity
-
or computers that they need
to be able to participate in education,
-
that's a problem.
-
And so, that's a separate issue, Whitney,
-
from the issue of some
of the examples I gave you,
-
which I think can actually
be operated equally well
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with old-fashioned phones.
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WPR: It seems like a precursor to this
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is in talking about these partnerships
with governments, perhaps,
-
is making sure people do have
even access to a flip phone
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or some sort of way
that they can communicate
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so they can participate
in these initiatives.
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AB: So I think a phone is transformational
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and the fact is that there are many
people in the world with a phone,
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but there's still a billion people
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who do not have the right kind
of phone or internet access.
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That's a different topic.
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So that said, you've got to find ways
to reach them too.
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You can't only do it by phone.
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So the example of those micro SMEs
I was talking about,
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they've got nothing to do with a phone.
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Or for example, in South Africa,
-
with the social security administration
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where the government gives them
a certain amount of money every year
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for their being not employed,
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you can actually reach them
through a biometric card,
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which is what we've done,
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with the government,
the government collects your identity,
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your biometrics on a card,
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and we can load the card remotely
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with the amount they want to transfer,
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take out the middleman in the process,
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and allow that person
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to then use that card to go to an ATM
to take out their cash,
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or go straight to a shop to shop.
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And I think that changes everything.
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So we've done that in many countries.
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And so if you go to where Syrian refugees
were coming in to Lebanon
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and Greece and the like,
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every aid agency there
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would require them to have
an identity with them
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to get access to whatever form of aid
they were dispersing.
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One of the things we're doing
is to convert that
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into a very simple
biometric-enabled identity
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which will be read across aid agencies,
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so you or I don't need to get
our identity verified separately
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each time.
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There is a statistic in the world
that 40 percent of the dollars
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that governments want to spend
to reach their citizenry
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for social benefit programs
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never reach them.
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They are called leakage.
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Leakage means administrative costs
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and I call it theft.
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Because it's 40 less cents on a dollar
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for the person who cannot afford
even one cent less.
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That's the issue.
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That's what we're trying to solve for.
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Take out middlemen,
use technology to help,
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enable a direct government
to citizenry operation,
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allow banks and NGOs and foreign companies
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to intervene in the right way,
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as in the example of this refugee crisis.
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The World Food Programme distributes food
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in those very refugee camps.
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And we actually help them
to take the food,
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they would buy grain somewhere
and ship it across,
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and lose of it along the way,
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we put the dollar value on a card,
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the card can only be used by the refugee
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in a shop that the World
Food Programme certifies.
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So it cannot be used for anything
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other than what the World
Food Programme wants it used for,
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which is grain and food
and vegetables and fruit and milk.
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And that enables the World Food Programme
to save money on leakage.
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What I'm trying to tell you
is it's not about technology,
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it's about using what you have
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and using the technology you do posses
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and applying that in a smart,
commercially sustainable way
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to real world problems.
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If you have good technology as well,
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well let's do it even better.
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But let's not use technology
as the excuse to not do it.
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WPR: OK.
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It makes a lot of sense now.
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It seems like underlying all of this
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is this move towards a cashless society.
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This move to sort of create
this way for people to exchange money
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without the need for cash.
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I'm curious to hear from you a little bit
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about what does that actually look like,
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you know, a society without cash.
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What are some of the challenges
that is presents?
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AB: Yeah, I think cashless actually
is something we are not going to get to,
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and we probably shouldn't.
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Because just as we have a digital divide,
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do you really want a world
where people who rely on cash
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because it makes them comfortable,
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I'm not talking
about illegal transactions,
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I'm talking about somebody
who just wants to deal in cash,
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they may be older and uncomfortable
with today's technology.
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My Dad, when he was alive,
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you know, he never wanted to use a card.
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He always wanted to use a cash and check.
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And this is my father,
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when I worked in banking
-
and was by then the CEO of Mastercard,
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and he would look at me
very indulgently and say,
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"Son, now I have a Mastercard
because of you,
-
but could you please go away"
kind of thing.
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And I understand that.
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And I think you've got to deal
with therefore "cashless,"
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in inverted commas.
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Reducing cash in the economy
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is to me a good objective.
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Taking it to zero?
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I'm not there.
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Why do I say it's a good
objective to reduce it?
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Because cash actually is the friend
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of the person who has something to hide.
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If you want to not pay your full taxes,
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or you want to do something with the cash
-
which is not quite kosher,
-
well guess what, here's your chance.
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But if you're electronic,
you are transparent.
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Electronic forms of money
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benefits and transfers in utilization,
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create transparency in an economy.
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Poorer people,
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they don't have access to cash,
-
and therefore, they
don't indulge any of this.
-
But even other than that,
even other than all this,
-
there is a cost of cash in society
-
which many people have computed,
central banks, universities,
-
somewhere between one to two
percent of GDP
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is the cost of printing, securing,
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distributing and using that cash.
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One to two percent of GDP.
-
I'm certain there are efficient
uses of that GDP
-
that we could put into play
-
by reducing the role of cash
relatively in the economy.
-
In the process, you take out
these middlemen
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who are in positions of power,
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when social benefits are distributed,
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when refugees are met.
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That's what I'm talking about.
-
That to me is a good thing.
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Transparent, better tax realizations,
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lower money laundering,
-
that kind of stuff I'm all for,
-
and I've been talking
about that for years.
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But zero cash, I'm not there.
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WPR: And do you think there is a point
where you do get there,
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or we get there as a society,
-
where that does feel possible?
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AB: We could.
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I mean, if you took countries
in the Nordics, take Sweden.
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Sweden, South Korea,
-
these are at the cutting edge
of having reduced cash in their economies.
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In Sweden, essentially everybody uses
electronic forms of payments,
-
either a card or app on their phone
that they can swish through
-
or things of that nature,
-
consumer payments I'm talking about.
-
Even public toilets
on the street in Sweden
-
you can pay by on your phone
entering a code,
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which comes back to you,
-
having deducted that money
from your account.
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You enter the code on a pin pad
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and I call that tap and go,
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you go into the public toilet
with that tap.
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That's how far it's advanced in Sweden.
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So cash is very low there.
-
But even they are having a regular,
continuous public conversation
-
about not disadvantaging
those parts of Sweden
-
who still want to deal in cash.
-
You've got to be careful,
-
because remember how does cash reach
distributed points in a country?
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Through banks, through ATMs.
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If those become unprofitable to run
-
and people start closing the ATMs down,
-
that's a problem in itself.
-
So you have to enable
cash back in retailers in some way,
-
so that you could still go and get cash
from a distribution system.
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Maybe not an ATM, but a retailer.
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There are some ways to do this well,
-
but you've got to be conscious of it.
-
You know, we haven't reached it yet,
-
but we could.
-
We haven't reached it yet.
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WPR: Of course, when you think about this,
-
about moving to a cashless society
-
or at least having that as the goal,
-
there creates this concern
around data and privacy
-
and you've said in the past
-
that there's really an importance
behind putting consumers in control
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of their own data and their own privacy.
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How is that something
that we can actually achieve,
-
what does it look like to do that?
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AB: Whitney, it's a terrific question.
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I actually believe that it's at the core
-
of a lot to do with the next
10, 20 years of technology,
-
the internet of things, 5G, data,
-
this is all coming together
at warp speed, right?
-
If you think about the number of devices
that are going to be connected
-
over the next five, ten years,
and what 5G could do
-
to moving intelligent computing
to the edge right near you,
-
this is going to generate
enormous amounts of data.
-
From your fridge, from your car,
-
from you walking around,
from your connected glasses,
-
from your watch already, all that.
-
From your shoes if you're a runner.
-
So you've got to get to a stage
where we take a responsibility
-
of how your data is used and interpreted.
-
And so, Mastercard,
-
we with a bunch of companies,
-
we have laid out a set of data principles.
-
The first one is exactly what you said.
-
It's your data, you should control it.
-
Meaning you should know
what's being collected,
-
you should be able to say,
"I don't want that to be collected,"
-
in simple language,
-
not in a 12-page legal agreement
that you cannot comprehend.
-
And you should be able to benefit
from that data of yours that is used,
-
either directly, or indirectly
in some way that you comprehend.
-
And if I as a company
am collecting your data
-
to enable me to do business with you,
-
I should collect the minimum amount I need
-
to do my job with you
-
and I should keep
whatever I collect safe for you,
-
and allow it to be deducted
or removed when you want it.
-
These are not complicated things.
-
Your data, you're in control,
-
you should be able
to delete it when you want,
-
you should know what's being collected,
-
if I do anything with you,
collect the minimum, keep it safe.
-
Consumers will work
with their feet on this topic.
-
As they get more knowledgeable,
-
as they get more educated,
-
and that's the right thing to do,
-
they need to say, "I don't want you
to use my data for the following things.
-
I want to know what it's being used for."
-
Putting consumer back
in control of their data
-
is going to be mission critical
in the data-driven economy
-
of the next 10, 20 years.
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WPR: Thank you so much, Ajay,
this was a great conversation
-
and we appreciate you being with us today.
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AB: Thanks a lot, see you again.
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Good luck.