The war on cash is also a war on corruption

In the perfect future, the world will operate without cash. At least this is how Matthew Driver, president of Southeast Asia for MasterCard Worldwide, would like it to be. People will be paying for everything with their plastics or their smartphones  with anything but cash.

“Cash is expensive to produce, to store, to transport,” says Driver. “It’s just relatively inefficient. One of the key things for us is to facilitate electronic payments to ensure we are really attacking cash, not only to get plastic into the hands of people but to look at different ways to take cash out of the system.”

Here’s another reason to take cash out of our system: government personnel cannot be bribed with a credit card, and if nobody is carrying around cash, those “fixers” and minor bureaucrats that stand between you and a government permit will be out of business.

MasterCard Philippines country head Poch Villa-Real says, “Government should see that as a positive thing even if it is not exactly incremental revenue. Cash is the friend of corruption. If you think about it, in an environment where government wants to stamp out corruption, this is a good thing. The moment you try to put much of money in electronic form, you are effectively creating paper trails.”

This is the environment in which MasterCard finds itself in, in Southeast Asia, particularly the Philippines: the technology is there, the interest is there, but the “ecosystem” in which NFC (Near Field Communication, which enables your cell phone to make payments  in public transportation, supermarket, stores, cinemas, and other merchants  without contact) is still finding its balance.  

Imagine, you can just go through the turnstile at the MRT at North Avenue where it takes half an hour to get to the ticket dispenser without having to take your wallet out of your bag  and without having to tap it either to the terminal.

Driver says contactless payment will be more popular over time. “We need to ensure that the ecosystem is ripe, that merchants and issuers believe in the system and are willing to support its development.”

Driver has over 20 years of experience in business development, consulting product management and marketing in financial payments and business services across more than 25 countries around the world. He is responsible for the markets of Singapore, Malaysia, Thailand, Indonesia, Indochina and the Philippines. Driver is, in fact, very familiar with the Philippine business environment as he has been in and out of the country for the past 20 years.

He looks at Southeast Asia as a critical growth driver for MasterCard. “We are speaking about very robust economic conditions, not only for the core business but also working on mobile and contactless payments with our business partners. We’ve seen tremendous growth in ecommerce. It’s an exciting time to be in Southeast Asia as we’re engaging in the sectors we need in the development of payments.”

While Singapore and Hong Kong may be more successful in getting people to pay with their credit cards, the Philippines still has a long way to go with more than 90 percent of transactions using cash.

But Driver points out, “If you look at the Philippines, there’s a large penetration of mobile phone users and an intensity of their use.”

Indeed, the global payments market is one of the fastest growing with Juniper Research predicting growth by 300 percent in 2014 at US$630 billion against 2010’s $170 billion.

Villa-Real says the challenge is finding a model in which “everyone in the value chain receives positive contributions or reduces existing costs. You have to take the technology in context of everyone else. The challenge and the difficulty is that people have to see the value on their own volition. You cannot really sit down with people for 10 hours to lecture them about NFC and then they leave the room convinced.”

It all sounds good especially for Filipinos whose mobile phones are practically glued to their bodies. So who takes the lead in getting all the participants  government, banks, telcos, merchants and consumers   going in one direction?

Driver says, “That would be us. We’re looking into bringing the parties together and creating a multi-lateral environment that makes sense. At the end of the day the customer convenience has to be there, it has to be a frictionless transaction, there has to be enough value to beat the swipe if you will.”

Villa-Real says that even though some telcos already have their own forms of electronic wallets (prepaid or debit), a partnership with the banks and MasterCard will give their customers added value, and the merchants, added revenue since they will be reaching out to a broader market. “Telcos are in the spectrum of providing telecommunication, banks on the other hand are in the business of providing financial guarantee. The bank essentially guarantees the merchant that when you get up from having lunch, they will get paid. Yes, the telcos have their own wallets, but if they want to access a more diverse population of cardholders, you will have to meet somewhere in the middle because as a telco you’re not in the business of providing financial guarantee, the banks are. Obviously, on the merchant side, they need to feel that they will get paid, and on the card issuer side, that they will be generating value directly to their customers.”

And for consumers? A more convenient way of paying for things. No need to queue up for 30 minutes for a train ticket, or to stop at a toll booth on SLEX and pay with cash, or  hopefully in the foreseeable future, pay for your pedicab ride mobile to mobile.

Poch says about 90 percent of transactions are still on a cash basis in the Philippines. “Even for developed markets like the US, cash is still a significant component of life. As you increase the sophistication of technology you break into what you call the innovation space, which is normally a space where not everybody is into  yet.”

Villa-Real points out, however, “We have RFID implemented domestically, except they’re very fragmented. When you pass through SLEX, the ePass is RFID, but then you have to have a different one when you go on NLEX. Pretty soon consumers will refuse to take five or 10 cards. They will say, I just want one card for all.”

Driver explains that with an NFC mobile phone, you will be able to access an electronic wallet and choose which card to pay with. “It’s a convenient and secure platform with at least two levels of security on your phone.”

Driver is very optimistic about the growth potential in Southeast Asia. In ecommerce alone, transactions for MasterCard grew by 46 percent; in debit MasterCard recorded a 47 percent increase in the Philippines.

MasterCard has also conducted NFC trials in India (with Citibank) that enables consumers to use their mobile phones to purchase at retail outlets. In Singapore, MasterCard worked with DBS Bank, EZ-Link and StarHub to enable their cardholders to make payments for retail and transit with their StarHub phones, while a pilot trial in Singapore uses the iCarte, a sleeve embedded with NFC technology enabling the iPhone 4 to be used as a mobile NFC PayPass payment device.

Maybe Driver will get his utopian cashless society. It would be cool if we get flying cars, too.