Mastercard’s digital proposal for Latin American governments

RIO DE JANEIRO, BRAZIL – An agreement between the Panamanian government and the multinational payments company Mastercard aims over the next five years to digitize payments in state entities, fight against cyber fraud and expand financial inclusion, needs exacerbated by the pandemic.

This is the first country in Latin America and the Caribbean to join Mastercard’s “Digital Country Partnership”, a partnership that emphasizes digital security, infrastructure, education, regulation, and inclusive financial growth, according to Darren Ware, the company’s vice president of government relations in the region.

The idea of the agreement, signed last week with the administration of President Laurentino Cortizo, is to create a digital ecosystem capable of addressing the latest technological challenges and improving public services for citizens.

Ware stressed that the company is working with the Panamanian government, as it has been doing with several other countries, to reach people who lack a bank account, who in turn are the “most vulnerable” amid the Covid-19 pandemic and the recipients of government subsidies.

“We are working with financial institutions in the national government of Panama and in other countries to try to reach those people, include more people in the financial system, and also do it with a digital payment or a prepaid card,” he explained.

Ware regrets that the number of unbanked people in Latin America is “very high”. In upper-middle-income countries, 73% of the adult population has a bank account, while on average in Latin America and the Caribbean it is 55%, and in Panama, it drops to 46%, according to the 2017 Global Findex study.

“Every government has the challenge of reaching the people in the country who are unbanked,” Ware added.

He stated that just as people were forced into digital payments due to Covid-19, governments, and specifically Panama’s government as well, want to do so both to distribute social benefits and to receive tax payments. “We want people to have options to reduce the use of cash,” emphasized Mastercard’s vice president of government relations for Latin America and the Caribbean.

COORDINATION, KEY TO CHANGE

However, Ware stressed that the great challenge of the region and Panama for digital transformation is “coordination” between the government, citizens, and small and medium-sized businesses. “It only solves half the battle” if someone accesses a prepaid official aid card, but then has no businesses in their neighborhood that receive it, he detailed.

“There has to be coordination on all sides of the equation to maximize the benefit and really have a balanced approach,” he said.

For the executive, small and medium-sized businesses need to be able to accept these payment solutions. He also noted that in the last year, “the most resilient companies have been those that are able to accept digital payments, have an online presence and participate in online commerce”.

Mastercard will thus make available the digital allies platform for micro, small and medium enterprises, including the agricultural and industrial sectors, as well as a financial education plan, to ensure greater acceptance of digital payments, even in remote and hard-to-reach areas.

According to Ware, the Panamanian government has its own digital coordination strategy: they “want to bring together the different national ministries and national financial institutions so that they all work together.” “That’s why I think they were also interested in working with us,” he said.

“Governments can’t do it all by themselves. We can’t do it all by ourselves. We have to work together to develop the solutions that the government needs for all the people or for small and medium-sized businesses,” he abounded.

The agreement also establishes that the company is committed to working with Panama’s Authority for Government Innovation (AIG) to provide security, the Mastercard ID Digital personal identification service, as well as to create an educational strategy for the national cybersecurity plan.

These are initiatives for the simplification, standardization, and modernization of government processes.

Ware expressed that a large part of this agreement “focused on cybersecurity, digital security, transaction security, all the different parts, plus we have an educational component”.

In that sense, he specified that both individuals and companies that are just being included in the financial system and government employees should be educated about the security of their transactions.

TRANSPORTATION, AN ACCELERATOR

As part of the agreement, the company will implement payment technologies throughout the public sector, including transportation, tourism, commerce, and economic development.

Ware said the transportation experience is very interesting because once you digitize payment for the subway, bus, or a toll road, either through a cell phone or a contactless card, the passenger is going to increasingly use this digitization in their daily life, in restaurants or stores.

“Transportation is really key. It is an accelerator, it is the first time it establishes a daily habit to use it later throughout the day,” he said.

The executive pointed out that partnerships with countries, in this case, Panama, reflect the company’s strength when it comes to “coordinating multiple entities to make something happen for the good of the citizen and the government.”