Raghu Malhotra, President, Mastercard Middle East & Africa talks about the importance of innovation and creativity, and why leadership is all about empowering employees and partners.
What are your views on innovation, especially around encouraging staff to share ideas? How does Mastercard foster a culture of innovation?
Companies are increasingly starting to realise the importance of innovation throughout the different levels of an organisation and I have seen this first hand at Mastercard. A lot of companies understand that many potentially lucrative ideas can come from the bottom up rather than always from the top down. The best companies understand how to empower their staff to generate and share ideas and select the best ideas for further development. It’s also important to be able to spot ideas that are not going anywhere and move on from them quickly.
Where do most of the ideas stem from?
Innovation really comes from trends that are shaped by the needs of people around the world; it is driven by the needs of different countries, different segments and different industries. That’s why innovation is about much more than what happens in Silicon Valley; when innovation takes place in areas where there is great diversity, it ultimately results in solutions that are tailored to the local market. Some of those solutions can be adapted for global markets and others not, but it provides us with a far broader base of solutions.
Our ideas around innovation also stem from having boots on the ground across the region and having strong working relationships with financial institutions, merchants and governments. We have a really solid understanding of local challenges and customer and consumer pain points. By putting them at the center of our innovation, we are able to focus on solving real problems and having a real impact. We aren’t just innovating for the sake of innovating.
Our mix of global scale and ability to develop from the ground up in a market is a great advantage. It enables us to develop some really powerful ideas and bring them to life.
How do you go about encouraging staff to come up with new ideas?
Intra-prenuership is critical to our DNA. We have a number of key programmes that are aimed at driving employee led innovation. Our flagship programme to create and incubate ideas from employees is called ‘Idea Box’. Every year we receive more than 300 employee-generated ideas that go through structured evaluation and mentoring. We invest in and incubate ideas that show promise and potential to solve a real market pain point. Additionally, we organise and host the annual ‘Take Initiative’, a global innovation challenge in which more than 1,500 Mastercard employees participate – a number of offices across MEA joined in for the 2018 event. In the last two years, the global winning teams have been from our region and are now working with our Labs team to take their ideas forward.
What are some of the challenges that SMEs face around the world?
To understand the challenges, you first need to understand the huge importance of SMEs – they form the backbone of MEA’s economy. They account for 90 percent of all businesses worldwide, and create four out of five new jobs in emerging markets. And the opportunity for SMEs has never been greater, as governments, international organisations and companies such as Mastercard increasingly focus on empowering SMEs through technology, financial and payments services, knowledge and data insights, and other tailored solutions.
SMEs are the largest employers in many low-income countries and communities, therefore addressing the financial inclusion of SMEs is a great way to boost job creation, raise income, reduce vulnerability and increase investments in human capital for the most vulnerable segments of society.
So, when people talk about financial inclusion and how we help enable it, I see access as the first step, because if you don’t have that in place, you are going nowhere. We have made good progress here by providing access through secure accounts to receive and hold funds.
I find the biggest pain-point is how to lend. Working capital is critical as SMEs are often vulnerable to cash flow and the timing of the payment of dues is a critical factor in their survival. We are developing products to help address these needs. For example, the Mastercard Farmer Network digital marketplace and Kionect digital supply chain platform are providing smallholder farmers and micro-retailers with the transparent flows needed to access mobile-based lending, and enabling financial institutions to develop data-driven savings and loans products.
If we can make a marketplace for SMEs with more transparent flows, irrespective of the channel you are in, it is far easier for SMEs to partner with a lender, whether that’s a micro lender, a bank or something else. Then it’s also easier to show prospective lenders what the opportunity is. In just a few years from now, I believe something like this is going to be in place, and will probably happen in the local market.
What technologies are really driving change in this industry?
I think there is a whole convergence taking place and the world is coming together in various aspects. Technologies are changing by leaps and bounds, partly driven by the evolution of consumer expectations – the demand for complete security and trust in every transaction and by the convergence of payment rails, our recent acquisition of Vocalink is a good example of this.
We are looking closely at technologies like Tokenisation and Artificial Intelligence to help drive greater digital acceleration. Consumers who were not willing to go digital have now gone digital, the world is now ready for a different technology experience.
Data aggregation and processing capabilities are also allowing us to begin the drive towards creating new efficiencies in the world by displacing physical cash. About 85% of transactions globally are still in the non-electronic form. But cash is less efficient than people think. Paper money costs countries anything up to 1.5% of their GDP, a dramatic figure especially when you put the spotlight on emerging economies in the Middle East and Africa.
Digital infrastructure and technologies are helping us expand the economy, reduce corruption and mobilise domestic resources in ways that help everyone at every level move forward. Putting people on a pathway to prosperity sets us all up for stable growth. We have some great examples of how we have partnered to create digital ecosystems to drive greater inclusion. In Egypt, we helped to create the country’s first interroperable mobile ecosystem, meaning that the country became one of the first worldwide to embrace a solution of this kind. This has accelerated financial inclusion and now more than 30% of the Egyptian population are enabled for electronic financial services. With this partnership, the Government now has the foundation to roll out a digital ID programme to link citizens’ national ID to the existing national mobile money platform to enable 54 million Egyptians to contribute to the formal economy.
In Kenya, we partnered with Unilever to develop ‘Jaza Duka’, a digital ordering and micro-credit programme to support micro-entrepreneurs across Africa. It is designed to help them overcome the cash constraints that limit their ability to buy and sell more products, enabling them to grow their businesses. The target is to provide 20,000 kiosks in Kenya with a digital solution by end of the year.
These are just a couple of recent examples, but they really demonstrate the role of digital technology in driving meaningful change.
How do you see Blockchain technology?
Mastercard has filed more than 80 blockchain-related patent applications to date – this actually puts us in third place globally for blockchain patent submissions.
There continues to be a lot of excitement around Blockchain, but I think it is important to consider that yes it has its applications, but it also still needs to overcome some of the basic challenges which will enable it to scale, namely transaction speed and security. If we look at the development of the internet, the reality is that it really took off between 1991 to 1997. By 1997, it had really scaled. Blockchain has been around for more than 7-8 years now and it is nowhere close to the level of adoption where the internet was in 1997. There is still a lot to be done in this space.
From an application perspective, we see there being a number of primary use cases for Blockchain emerging across financial services, including, supply chain and proof of provenance, digital identity, capital markets and trade finance.