Mideast societies moving toward a cashless society

KUWAIT: The societies in the Middle East are rapidly moving toward a cashless society. With regulators and banks supporting this shift, there is a need to educate consumers about the benefits of cashless payments for themselves and society as a whole, said Pankaj Kathuria, Area Head for Southern Gulf, MasterCard.

Talking to Kuwait Times in an exclusive interview, Kathuria gave a broad overview of the emerging trends in the payment industry spotlighting Kuwait and the region and elaborated on how Middle East and Africa remained a key focus for MasterCard.

"The importance of the region stems from the fact that consumers in emerging markets will drive value creation and growth in the global economy over the coming years, marking a major shift in global consumption from West to East," Kathuria said.

Owing to the regions' continuous economic development, steady population growth, stable outlook and large pool of young consumers entering the workplace each year, the Middle East and Africa is now becoming a very important region within the emerging economies and at MasterCard we are committed to invest our global expertise, resources and know how in the region, he explained.

"MasterCard has been investing in emerging markets throughout the globe, and the Middle East and Africa (MEA) is a key focus for us. With more than 1.5 billion people, the MEA region presents a significant long-term opportunity for MasterCard," Kathuria pointed out.

MasterCard's Insights report Consumer Spending Outlook and Value Creation in the New Global Economy shows that between 2012 and 2016, emerging markets will add an average of $1.2 trillion of consumer spending to the global economy per year, whereas developed markets will add only around $700 billion. The MEA region is becoming a very important player within the emerging economies.

In the Middle East and Africa, , MasterCard business comprises of three divisions; Middle East & North Africa (MENA), Sub-Saharan Africa and South Africa, clustering a total of 69 markets stretching from Afghanistan to South Africa and from Morocco to Pakistan. With the recent addition of Qatar, we now have eight offices in the MEA region that includes our regional office in Dubai.

Kuwait market
"At MasterCard, we are deeply committed to the Kuwait market. We work closely with our stakeholders to develop innovative products and solutions that offer consumers in Kuwait meaningful benefits. We provide support to our customers, the financial institutions by assisting with the development of products and offering a wide variety of payment solutions and technologies to appeal to all consumers," Kathuria said.

MasterCard has been tracking luxury spends and the affluent segment in the region for 26 years. The region's large affluent segment represents a sizable and significant opportunity for both MasterCard and the financial institutions.

According to Kathuria affluent consumer values are evolving from the material to the experiential. "This drives the development of new and different payment solutions. Today, affluent consumers want their cards to provide recognition and exclusivity, preferential access and treatment, as well as global acceptance and exceptional service. We are responding to these evolving needs by creating and deploying new, differentiated product solutions for consumers in Kuwait," he elaborated.

In 2012, MasterCard launched a USD denominated card with Kuwait Finance House ( KFH ) targeting affluent travelers. MasterCard worked with the bank to craft a product proposition that would help them cater to the growing affluent traveler segment as well as meet the needs of the increasing Kuwaiti population who are shopping online. The USD Card is a MasterCard only product with high limits and low foreign exchange charges and SecureCode.

In October 2012, Burgan Bank and MasterCard launched the first prepaid card that is designed for frequent travelers, students studying abroad, online shoppers, and expatriates sending money back to their home countries. The multi-currency card is the first of its kind, providing consumers with easier access to online shopping, travel bookings and allowing customers to take control of the fluctuating currency market. Customers are given a selection of the top currencies when using the card. These include US dollar, euro, British pound, Saudi riyal, UAE dirham, Egyptian pound as well as the Filipino peso.

In March 2013, The Sultan Center and Ahli United Bank partnered for the launch of the MasterCard Titanium Co-Branded Credit card. The sharia-compliant retail co-branded credit card offers double TSC Rewards card points on all purchases from all TSC stores.

Furthermore, in April 2013, the KFH Oasis Club Card- a co-branded card with Kuwait Airways was launched exclusively for Oasis Club members. The Sharia-compliant airline co-branded card was the 4th MasterCard product launched by the bank in 15 months.

"These are examples of a few of collaborations in Kuwait as we continue to work with local partners to launch new products catering to the specific interests and priorities of consumers in the country," he added.

Challenges, opportunities
"Despite the increasing competition, there are huge opportunities. MasterCard studies have highlighted that Gulf countries are almost 85 to 90 percent cash-driven society, compared to 50 percent in the US. Despite this, the region's exposure to international travelers has led to a very credit-centric market in terms of electronic payments," Kathuria said answering a specific question.

According to him, the societies in the Middle East are rapidly moving toward a cashless society. With regulators and banks supporting this shift, there is a need to educate consumers about the benefits of cashless payments for themselves, and the society as a whole, he said.

"With this in mind, in particular the increasing costs of cash, and the negative impact this has on any economy, governments across MEA have realized the importance of modernizing the payment industry and incentivizing the move towards a cash-lite society," he elaborated.

"For example, in the United Arab Emirates, MasterCard has participated in the Ministry of Labour's Wages Protection System (WPS). The system allows agencies that arrange laborers for large contractors to transfer wages electronically via prepaid cards. As of April 2010, over 1.8 million workers were receiving wages through WPS," he explained.

In Egypt, MasterCard launched the Ministry of Finance MasterCard Prepaid Program through state-owned local financial institutions to drive issuance of Government Payroll & Pension Payments in Egypt. The program is the largest Public Sector Payroll program in the Asia Pacific, Middle East and Africa region as of November 2010.

"Competition is a healthy element in every industry, encouraging the development of innovative products for consumers, and mutually beneficial collaborations with customers. This is a robust environment for all companies operating within the payments sphere," he opined.

Emerging trends
Giving a snapshot of the emerging trends in payments solutions, Kathuria said, "Credit card segmentation is very popular in the Middle East as it is a very useful way to reach out to a diverse consumer base. It targets different kinds of consumers in various categories and offers payment cards such as premium and affluent cards, debit cards, Sharia-compliant cards, lifestyle cards and corporate cards. In addition, MasterCard continuously strives to support its customer banks through innovative payment solutions such as EMV Chip and contactless payments," he said.

Affluent consumer values are evolving from the material to the experiential, and this drives new and different credit card needs. Today, affluent consumers want their payment solutions to provide recognition and exclusivity, preferential access and treatment, as well as global acceptance and exceptional service. MasterCard is responding to these evolving needs by creating and deploying new, differentiated product solutions, Kathuria stated.

"As a global leader in innovation, we have created MasterCard contactless, which is ideal for traditional cash-heavy environments where speed is essential. This has opened new opportunities for use including the expansion of contactless payments to the world of mobile devices and computers. The innovative contactless payment feature provides consumers with a fast, safe and smart way to pay for everyday purchases and can be added to any MasterCard or Maestro account," he mentioned.

Talking about MasterCard's contactless technology, he said it makes payment and checkout easier. "It's faster than using cash or waiting for change and lets you make everyday purchases without waiting to enter a PIN, signing a receipt or handing a card over to a clerk. Whether enabled via a phone, card, key fob, mobile payment tag or other device, MasterCard's contactless technology offers consumers a simple, easy and convenient way to pay by simply tapping on a specially equipped merchant terminal," he clarified.

In addition, mobile contactless which uses near field communications (NFC) enables consumers to make fast, convenient and highly secure payments by simply tapping their NFC enabled smartphone anywhere contactless payments are accepted. Contactless is ideal for quick payment environments where speed and convenience matter most - from major retailers and quick service merchants to convenience stores, gas stations, grocery stores, pharmacies, vending machines, parking lots, mass transit and taxis.

Consumers who use a contactless enabled card or device enjoy the same protections from fraud as they would with conventional MasterCard payments. MasterCard's contactless solutions are supported by multi-level security protections, including the advanced encryption of contactless radio frequency transaction transmissions and the state-of-the art security protections of the MasterCard payment system, he informed.

Kathuria also spoke about the advisory services being offered by MasterCard currently. "MasterCard Advisors, the professional services arm of MasterCard, provides real-time transaction data and proprietary analysis, data-driven consulting, and marketing services solutions to help clients optimize, streamline, and grow their businesses," he said.

MasterCard has three divisions-information services, implementation services and consulting services - that provide distinctive approaches, which when combined offer comprehensive solutions for measurable improvements, Kathuria added.  Zawya