Wednesday, 30 November 2022

In Finance

Mastercard: Investing in the Future of African Money

In Banking and Finance in Africa, many look at big brands, continental banking giants, but none looks at subtle but strong contenders like Mastercard. Mastercard is on an investment drive in the world next great thing in finance and banking - Africa. This is not happening in public spaces and media, but in one deal to the next, one key investment to the next.

MasterCard is a global bank card payment transaction processor, whose portfolio of brands and products include Maestro, Cirrus and MasterCard PayPass. It partners with financial institutions that issue credit cards, and with merchants who accept those cards.

Currently, MasterCard's acceptance footprint, its network of ATMs and Point of Sale (POS) terminals, has increased significantly to reach more than 58,000 ATM locations and 438,000 POS terminals across Africa

According to Aurtz Africa, Mastercard invested in a Mobile operator in Africa recently. The $100 million investment from global payments giant Mastercard in the mobile money business arm of Airtel Africa announced this week is a sign of the rapid growth and optimism in Africa’s digital payment sector. The transaction values the subsidiary, Airtel Mobile Commerce, at $2.65 billion. Imagine that Mastercard does the same in other key African markets, acquiring mobile operator stock, in order to have a foothold in the digital payments platform. "The African market is really untapped with a lot of room for growth", said Raja Miah, partner, Airtel Africa. "We will also work closely with MasterCard to bring in more technology and use their expertise."

Caiyin Miao, President of Mastercard in Africa, said that Mastercard will help transform digital payments in Africa. "Mobile commerce is growing at an unprecedented pace in Africa and consumers are demanding a convenient way to pay for their purchases using their mobile devices. This investment will enable us to offer increased network coverage as well as better services," she added.

Africa has potential for bold investors with vision, that take financial inclusion to another level, as Mastercard is doing. Alternative delivery channels pioneered by MasterCard such as m-commerce, e-commerce, contactless technology and digital wallet services, are helping financially-underserved consumers gain access to formal financial services.

The history of financial services in Africa has been a complex one, yet possessing potential. 

Exchange and credit formed an integral part of the economic activities of African societies. Traders, rulers and financiers wove a network of interlocking relationships that facilitated trade, exchange and wealth accumulation. Trading networks served as the intersection of culture, power and wealth. Financial services developed alongside commercial sophistication and global expansion. African systems of finance and credit provision were confronted by European systems of financial services as soon as colonial penetration linked Africa to the wider world of commercial and imperial expansion in the eighteenth and nineteenth centuries. European banks introduced new concepts of money, credit and savings, which formed a corollary to the economic changes on the continent. Trade, mineral extraction and emerging industrialisation encouraged a closer relationship between emerging business in mining, industry and trade. The banking system that developed in Africa during the second half of the nineteenth and twentieth century marginalised traditional savings and credit systems, while presenting entrepreneurial opportunities to the participants in the second wave of globalisation.

The company’s collaborative approach and emphasis on innovation, safe and secure payment services, extending financial inclusion, and partnering with governments resulted in the conclusion of several partnerships across the continent since January 2013:

A multi-country licencing contract recently signed with Ecobank, the broadest deal of its kind for MasterCard in Africa, will provide access to MasterCard’s payment solutions for Ecobank’s customers in 28 African countries, including the seven new markets.

In Zimbabwe, the country’s first EMV cards were rolled out as a result of MasterCard’s collaboration with Metbank.

In Kenya, the company announced a partnership with Equity Bank to roll out five million EMV, contactless-enabled debit and prepaid cards. This partnership will extend into Uganda, Tanzania, Rwanda and South Sudan.

Still in Kenya, MasterCard and Equity Bank announced the introduction of Mobile Point of Sale (MPOS) technology, a partnership with leading MPOS provider Ezetap.

Also in Kenya, MasterCard and Kenya Commercial Bank announced a partnership to roll out five million EMV, contactless-enabled prepaid, debit and credit cards.

In Nigeria, the Nigerian National Identity Management Commission (NIMC) also announced last year that MasterCard technology would power the National Identity Card.

In South Africa, MasterCard celebrated a remarkable milestone as 10 million citizens now receive their grant disbursement payments electronically through the SASSA MasterCard Debit card.

In Tunisia, the Central Bank of Tunisia selected MasterCard payment technology for a government travel card designed specifically for its employees.

In Morocco, Banque Marocaine du Commerce Extérieur (BMCE) and Prepaid Solutions Company Vantage Payment Systems (VPS) launched a MasterCard Payroll Prepaid Program to address the financial needs of interim workers, in addition to extending the cards to local security agencies and cleaning companies.

In Egypt, MasterCard and Etisalat, along with National Bank of Egypt (NBE) launched the mobile payment wallet titled “Flous”, bringing Etisalat Egypt’s subscriber base safe and convenient payment services through the power of their mobile phones.

Also in Egypt, MasterCard, NBE, Fawry and the Egyptian Banks Company announced the launch of “Phone Cash”, an innovative mobile payment service that operates independently from the network of any specific mobile company.

Mastercard has a master plan to be a giant in financial services in Africa. If we look at the country by country in Africa, it seems that most markets have not yet realised the true potential of digital financial services.

It is a matter of time before markets start to see the value of this new financial infrastructure. As more markets adapt with reliable and convenient payment options, what will be left is the competition for Mastercard and its counterparts.

"MasterCard’s continued focus on innovation and working closely with governments throughout Africa, will ensure us long-term plans to compete successfully with foreign competitors". says Mohamed Jawara who is also CEO for Mastercard Middle East & Africa operations. More firms are joining hands to offer services such as mobile money solutions across different African countries.

According to recent estimates, retail banking in sub-Saharan Africa is projected to grow by 15% per annum by 2020, bringing the sector's contribution to GDP to 19% from 11% in 2009. High growth African countries posted the largest demand for retail banking services between 2004 and 2010. Banking in the future has nothing to do with a bank as much as it has to do with the payments processing and accessibility of international markets through digital means; and Mastercard is a market leader in payment platforms. 

New ways or models of banking must be created and utilised because according to the World Bank, African enterprises and households are less likely to use financial services than their peers in other developing countries.

In these subtle territories, is the domain of giants like Mastercard, whose growth strategy is relationship based. The bank has partnered with over 500 financial institutions in more than 200 countries and territories, by forming alliances with a wide range of partners to enable acceptance of Mastercard products across the globe.

Mastercard’s goal is to be the preferred partner for consumers, governments, businesses and banks. They aim to enhance economic opportunity by delivering secure, inclusive and sustainable financial solutions. 

The world’s second largest payments company handles about 2 million transactions every minute globally. This is one of the reasons why Mastercard ranks on the Fortune 500 companies and makes it among the most elite business enterprises in the world.

Source: AFDB, Mastercard

Cabanga Media Group publishes of thoughtful economic and business commentary magazines and online media, in several African markets, that include South Africa, Botswana, East Africa Community, Ethiopia, Egypt, Nigeria, and Zambia.