Payments

‘In my world, it’s called theft’: How Ajay Banga wants to change inclusion

  • Mastercard CEO Ajay Banga wants business leaders to rethink how they see capital and open up more to the “enormous” money-making opportunity of financial inclusion
  • There isn't enough trust between the public and private sectors to push forward business that brings change, Banga says
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‘In my world, it’s called theft’: How Ajay Banga wants to change inclusion

Count the CEO of Mastercard among those who think in-kind donations and financial aid systems are corrupt.

“We are in the business of killing cash. And so, who is the single biggest generator of cash in an economy? It’s the government paying its citizens and giving social benefits,” he said. “During the distribution of those social benefits globally, 30 to 40 percent of what’s distributed does not reach the citizen. In the NGO world that’s called leakage, in my words it’s called theft.”

Banga wants business leaders to take economic development more seriously; to stop looking at financial inclusion through their short-term returns lens, rethink how they see capital and open up to the “enormous” money-making potential of bringing people out of poverty, he said Wednesday on the main stage at the Bloomberg Global Business Forum in New York.

“I’m through with ticking the boxes in the corporate sphere,” Banga said. “That’s not what brings change… the more we talk about the long-term and we say ‘Ajay, I’m not making more money at this and I’m doing for the long-term,’ nothing is going to change.”

Mastercard is currently working with Western Union to create a digital infrastructure model for refugee camps focused on mobile money, digital vouchers and cards, with Kenya as their test bed. The point is to remove the intermediaries and losses associated with in-kind donations, brings funds directly to beneficiaries and give people some control over their financial health.

The work is still in an exploratory phase, but the plan is to use Mastercard’s digital voucher program to provide chip cards to refugees and host community members. The cards would be loaded with points they can spend on everyday purchases and are designed to work on or offline so participating agencies such as the International Rescue Committee can monitor different programs.

“We’re using technology and getting them to record their payments on an electronic mail, so that they can go to a bank and say, ‘You can see I have this much revenue everyday,’ and the bank can make a better decision on lending,” he said of the company’s efforts in Kenya. “By their using it, I make money from their transaction. The bank makes money. The [small businesses] are happy. That, to me, is a business opportunity that is connected to our core competencies.”

First step for business leaders: know the difference between “so-called poverty alleviation” and taking people from poverty to prosperity. The former is only the first step toward prosperity and legitimizes the idea that there isn’t enough of a business incentive in this work, he said.

But there isn’t any trust on this topic between governments and private companies, and that’s a huge problem, he added.

Banga said his company spends a lot of time in developing countries trying to convince governments and other groups about the importance of applying technology to drive inclusive growth or give people identities (because if someone doesn’t have a formal identity it’s “kind of like being in prison”), he said. Mastercard has committed to pulling 500 million financially excluded people onto the financial grid; he said it’s currently at 330 million.

“The first reaction from government and multilateral institutions is: why is this guy doing it and what’s in it for him?” he said.

A spokeswoman for the International Rescue Committee said the it “welcomes the investment and innovation from the private sector to build up the digital infrastructure that would make the delivery method faster, more versatile and transparent and lead to the delivery of better aid.” “Cash relief” is one of the most efficient and effective forms of aid, she said, specifying that cash can be digital cash as well as hard cash.

But the reality, to Banga, is that when business people see money in it, change tends to actually take place.

“My only anthem is, ‘Look, there’s money in this.’ At the risk of sounding mercenary: when you want change, you want return.”

Image via Bloomberg

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