Recent years have brought significant innovation in financial services, with traditional banks rising to the challenge set by fintech and “Big Tech” players who transformed and enhanced the customer experience – often at better value. The pandemic has only accelerated the proliferation of solutions and driven their adoption. In theory, this is fantastic news. With a card for this and an app for that, you can pay anyone, anywhere, at pretty much anytime.
But there is such a thing as too much choice. It can be overwhelming. “When people have no choice, life is almost unbearable,” psychologist Barry Schwartz wrote in his book The Paradox of Choice. As the number of choices increases, initially we get autonomy and liberation. But, as that number keeps rising, we get overloaded and stressed. “Choice is great,” says Paul Stoddart, president of New Payment Platforms at Mastercard. “But creating an environment where you're bombarded with different providers of the same thing makes it very difficult to know which is the best one for you.”
But help is on its way. Open banking and more applied use of data could soon revolutionise choice by bypassing it altogether. It gives consumers and businesses the ability to securely share their bank account data with trusted financial service providers, including their neighbourhood bank to retailers, utility providers and fintechs, in exchange for more bespoke financial services that make intelligent decisions on your behalf. “It really changes the rules of the game,” says Stoddart.
Imagine being able to view all your accounts in one place and move money between them with a simple swipe or tap. Better than that, an AI assistant manages your money for you, helping you to avoid overdraft fees and maximise your savings and rewards. It frees up more of your time, does away with the headaches of manual tasks, and ultimately leaves you financially better off.
This type of invisible banking requires a lot of data, which in turn requires a trusted go-between, which is exactly what Mastercard does within this ecosystem. “We facilitate secure access to that information,” says Stoddart, “and then give control of it over to you.”
That “you” is everyone, not just fintech-savvy twenty-somethings or wealthy businesspeople. In fact, Mastercard is working hard to widen access to these kinds of services for those currently excluded from the system. That includes providing access to affordable credit for people who otherwise wouldn’t qualify, such as immigrants, students or anyone else without a long credit history.
For example, through open banking platform Finicity, now a Mastercard subsidiary, Rocket Mortgage is using data supplied from users about their spending, income and employment to help them get a loan to buy a home. “By aggregating that information together, we can help financial services companies make a decision around lending you money, or get you a better rate,” says Stoddart. “With this new data, we can present a more accurate view that shows that you are a lower credit risk than if they didn’t know anything about you.”
Digital banking has the potential to have an everlasting impact on anyone and everyone’s lives, no matter their starting point. But in order to do that, it needs to be accessible. According to Mastercard research, 85 per cent of people have tried at least one new payment type in the past year and 63 per cent said they’d tried one they wouldn’t have tried otherwise. But while the pandemic was a catalyst for adoption it also revealed a digital banking divide.
Mastercard has already brought 500 million financially excluded people into its digital economy and has committed to doubling that number by 2025 to include 50 million small and micro merchants with a direct focus on providing 25 million women entrepreneurs through multiple programmes around the world. One example is its Nobody in the Dark programme in the UK, which helps people build up their digital confidence so they can properly use the online tools at their disposal. Becky, a mother who couldn’t figure out how to turn on her children’s tablet to start with, ended up swapping out her weekly food parcels for digital vouchers so she could bulk shop online and save on travel costs. Becky’s story doesn’t boast the same type of innovation as open banking or AI-initiated payments, but the impact on her life is astounding. Another example is Strive UK, an initiative that will empower 650,000 British micro and small enterprises to thrive in the digital economy through tools and personalised support over the next three years and beyond.
Broadly, Mastercard is evolving its capabilities to put convenience, flexibility and control in the palm of anyone’s hand. One solution, Mastercard Send™, makes it possible to send money near instantly to more than one billion people from a banking app, a gig platform or a What’s App chat; its platforms connect 90 per cent of the world’s population to send and receive money at home and abroad using a bank account, card, digital wallet or cash. Mastercard has even begun supporting select cryptocurrencies on its network this year, to enable customers, merchants and businesses to pay and get paid in the way that suits them best.
Mastercard and its partners are innovating for trust and inclusion across the whole breadth of the banking system, and as we move into 2022 that has never been as important. As Stoddart says, “Whether people want to pay with cash, card or a digital currency, we’ve got to ensure that our bank and fintech partners can provide flexibility, security and control to people and organisations, whatever their level of financial literacy and however they choose to interact.”
For more information, visit mastercard.com/startwithpeople
This article was originally published by WIRED UK
