MasterCard at European Business Summit 2015: A focus on innovation will drive inclusive economic growth for Europe

Written by Ann Cairns, President of MasterCard, International Markets

Mrs Ann Cairns is President of MasterCard, International markets (MasterCard)

This year’s European Business Summit’s entitled “Europe 4.0 – Delivering a vision for the future of Europe” falls on the same day as the general elections in the UK which could prove crucial for the future of both, the UK and Europe. At a time when the European identity has never been more blurred to its citizens, Europe seems indeed, as the title suggest, to be in need of a vision. A slow economy that has struggled to get back on its feet across the continent and economic hardship in many European countries have called into questioned the added value that Europe brings.

So, this is not just about a vision. It is also about getting the economy back on track and laying the foundations for a competitive and innovative environment. I believe by building an environment that will deliver on its economic promise, Europe can regain the confidence and trust of most of its people.

At the same time, there are still sectors that are doing well by being both competitive and innovative. In an era, where the way we live our lives and interact with each other is profoundly influenced by new technologies, consumers also adapt their expectations and demand businesses solutions that are compatible with their new lifestyles.

The payments industry in Europe for instance has been remarkably resilient despite the regulatory uncertainty over the past years and through its constant focus on better and safer payment solutions, it has also been extremely innovative. Whether it is in-App payments that no longer require the consumer to leave their mobile app to complete a payment or new biometric authentication methods, which may replace the oh-so-easily-forgotten password, innovation is very much alive and competition fierce. For me, these are the two key ingredients to ensure success.

I truly believe that electronic payments are one of the key drivers to economic growth. Innovative payment solutions have the power to ensure that small businesses get paid on time, that no payment gets lost, that governments can introduce efficient tax collection systems and thereby reduce the costs of fraud or tax evasion – money saved that can be re-injected into the economy. The retail industry faces such competition every day and is very much aware of the need to innovate and rethink their old business models. Omnichannel is the buzzword in the industry. Make sure that it is as easy to shop in your physical store as on your online platform. A study MasterCard commissioned with InnoValue, and published today, actually found out that if a retailer focuses on only one sales channel or does not integrate its offline and online offering they risk disconnecting with their customers and can actually lose revenue in an environment where a competing retailer is just a click away.

But electronic payments are also a key driver for inclusive growth. And the role that innovation in the sector can play to increase financial inclusion among the un- or under-banked is phenomenal. This is hugely important from a societal point of view. Financial inclusion matters because without it, large swaths of people are left behind. Around the world over 2 billion people do not have a bank account and millions more do not use their bank accounts regularly. That is not far off half the world’s adult population. Financial inclusion is not just a developing market issue. Here in Western Europe, around 100 million people are un- or under-banked. Of the 2 billion who are financially excluded, nearly 40% are young people. Nearly 50% are women. Half are urban. Half have jobs. In many ways, these are people just like us. They are mothers, fathers, refugees, students, and farmers. They are left without the things we take for granted –a way to save money for a rainy day, to get loans, or to insure themselves.

In the future with the Internet of Things, where every device will be connected to the Internet, what kind of life will those who are financially excluded have? We’ll have the Internet of Everything but not the Inclusion of Everyone. We cannot talk about financial inclusion without talking about cash. Think about having to pay a bill in cash and standing in line for hours – when you get paid by the hour. And you cannot pay that bill over the phone or online. Think about having the social benefits you just got in cash stolen as you make your way home. Or worse by relatives at home. Yet, 85% of the world’s retail transactions are still done in cash and so we need to move beyond it if we want that inclusive growth. This is also why MasterCard has recently made a commitment to reach 500 million people previously excluded from financial services by 2020.

Innovative payment solutions can address these challenges and many more. They can speed-up checkout lines if one no longer has to fumble for change. Contactless payments can make getting on a train or tube a much more seamless experience and reduce waiting lines substantially. Through the use of smart (payment) data, they can even contribute to a more sustainable urban development. Consumers’ enthusiasm for these new payment methods – in the last quarter of 2014 contactless transactions in Europe grew 174% year on year – is testimony to the fact that innovation is alive and well here in Europe.

For all of us to participate in building an innovative and inclusive Europe that is future ready we must work together, drive the technology that will keep us at the leading edge of the global economy and do so in a way that no one gets left behind.