In an interview with Daily News Egypt, Stephen Kehoe, Senior Vice President for Financial Inclusion at Visa Inc., revealed the strategy for Visa Egypt in 2016 and the obstacles in achieving financial inclusion in Egypt.
What is Visa’s financial inclusion strategy for 2016? How does the company plan to realise this strategy?
Visa is powered by a vision to connect people everywhere to exchange value — transcending borders, languages, and currencies. In that sense, from the very beginning, Visa has been about financial inclusion. Today, more than 55 years later, that vision is working. Visa links together more than 2.4bn accounts in more than 200 countries and territories. Our network is capable of processing 56,000 transaction messages per second for people all over the world reliably, conveniently and securely. Now, our job is still about connecting people and a key part of that is bringing more people into the financial system.
In Egypt, we are working with the government and various partners to accelerate financial inclusion. Our recent cooperation with our partners on issuing payroll cards and with the Egyptian Banking Institute to increase the awareness of payroll cardholders are testament to that. We will continue to work with the government to identify areas where we can accelerate the conversion of cash payments to digital payments, as a first step towards providing unbanked consumers with a transaction account. We also plan to roll out mVISA in 2016, which will accelerate the provision of mobile payment solutions.
How can Visa’s products and solutions play a role in achieving this strategy?
Visa has various solutions from convenient, secure payment processing for merchants and banks to products that enable people to conduct transactions with more security than cash. Our Prepaid and Debit products are highly flexible payment tools, which can be used to convert cash payments into digital form and to connect consumers and merchants to banks and vice versa.
Furthermore, while these products today come in the form of a plastic card, we plan to bring mobile solutions in 2016. As the payment industry shifts from plastic to digital, we are supporting our clients to offer consumers a safe, simple, and consistent purchasing experience regardless of where they are and what device they are using.
Visa Token Service enables financial institutions to issue tokens – essentially digital accounts that can be used for purchases online and with mobile devices. The new service can help prevent fraud by offering financial institutions, merchants, and third-party payment providers, such as digital wallet providers, a secure way to enable mobile, and online payments without sharing sensitive account information.
In your opinion what are the obstacles in attaining financial inclusion in Egypt and what is the role of the central bank and local banks in realising it?
The main problem is ensuring reliable access to financial services via locations that are convenient for consumers, which is why mobile solutions offer great prospects for the future. However, we also need to design services that are appropriate for people’s specific needs and to educate them on how to use them. The central bank plays a critical role in terms of ensuring the regulatory framework for the provision of services by different actors is up and running and working across government departments to develop an integrated approach to financial inclusion.
Does financial inclusion require banks to open branches in remote areas to reach more customers?
This is one route but there are many others, including greater use of the Post Office to provide basic services plus enabling small merchants, convenience stores, and pharmacies, where people go every day. The use of mobile solutions will make it much easier in the future to extend services to different organisations, including non-banking organisations. We are also working with partners to reach as many people as possible through the innovative products we are offering to our clients.
As one of the world’s largest payments technology company, Visa has an essential role to play in reaching these people and providing services they want, can afford and will use. Our mission to provide financial access to everyone everywhere will only become a reality when we are serving people at the bottom of the economic pyramid, as well as the top.
However, we cannot do it alone. We need partners. We can use our network to enable people all over the world to exchange value but it will take new kinds of partnerships to enable that network to reach consumers who have been excluded due to the challenges of remoteness and infrastructure connectivity. Therefore, our job is to work with merchants, banks, central banks, legislators, NGOs, mobile operators, micro-finance institutions, and others to develop and bring useful products and services to people, along with the education on how to use them effectively and responsibly.
What precise steps did Visa take to expand access in countries similar to Egypt and in emerging markets?
Visa has been working in the area of financial inclusion for many years. In fact, it is part of our core business: enabling everyone, everywhere to have access to a basic transaction account that connects them to a bank. There are many ways in which we enable financial inclusion at the bottom of the economic pyramid, including making government disbursements more effective, providing financial literacy to consumers, extending acceptance locations in remote locations, and using market research to help banks develop products that are most appropriate for poorer consumers. Lately, we have launched mVisa with our partners in India and the early results show that around 1,500 merchants have adopted the solution while the next few months will see more and more merchants enrolled in the programme.
What are the successful examples in such markets?
In India, we work with different micro-finance institutions to digitise their payment and repayment services to millions of customers. In Colombia, we enable coffee growers to receive agriculture subsidies and crop payments onto a prepaid card, which accelerates the speed of payments and gives them a payment product they can use in stores. In Nigeria, we have enabled banks to develop low-cost bank accounts for market sellers where access is enabled via mobile phones. In Mexico, we have provided new technology solutions to enable merchants to receive and make payments to consumers who do not have access to a bank.
In your opinion, how can we encourage more people to use electronic payments?
We need to provide them with a reason not to use cash, which at the end of the day is still very convenient. One important way to drive usage is to enable government social payments to be made on a card or on a mobile rather than in cash. This obligates the recipient to use the card at a merchant instead of cash and our experience tells us that when this happens and they see over time how convenient and secure it is to pay this way, other services can be bolted on. However, we also need to stress the importance of raising awareness about the products and educating people on how to use them.
What is the fraud rate both globally and in the MENA region, specifically?
Visa and the payment industry have made enormous investments in data security and fraud prevention. With technological innovations and advances in risk management, we have reduced fraud to near historic-lows, with less than six cents per $100 transacted, during a time when Visa’s card transaction volume has grown dramatically. In fact, for the Middle East and North Africa region, it sits lower at three cents per $100 transacted.
Has technology contributed to decreasing fraud rates? And what are the tools that Visa deploys to guarantee security and privacy?
Security has always been the priority at Visa. We invest more in security than any other area of our business. Our Information Security programme is designed to protect Visa data across our global technology footprint and through ongoing investments and enhancements, prevent, detect, and respond to key threats. Visa leads the financial services industry in the deployment of an intelligence-driven cyber defence strategy. In addition:
- Our information security architecture is divided into zones where Visa software, hardware, and payment applications are segregated and protected through stringent access controls.
- Visa deploys hundreds of internal and external intelligence sources to detect and stop potential malicious activity.
- The data centres are protected by using multiple layers of advanced physical security, including biometric scans.
What are the most important projects in Egypt in the upcoming period? Are there any mobile applications that will be launched to facilitate expanding access?
We are currently working with our clients to launch Visa in Egypt. We believe Visa will present the country with a new opportunity in terms of financial inclusion since it contributes to expanding the acceptance footprint and providing more people with an easy, safe, and convenient method of payment. Visa will enable people to use their mobile phones to purchase goods and services, while capitalising on the widespread mobile penetration in the country.
What are the implications of expanding access on decreasing the parallel economy and how can financial inclusion be attained while there is a large number of people who live under poverty and are unemployed?
Accelerating the use of digital financial services has multiple benefits; reducing fraud, increasing transparency, increasing tax receipts, improving the financial health of consumers, and enabling merchants and small businesses to grow through access to more affordable credit and other services, such as insurance. Of course, those people without any income at all will continue to struggle, no doubt about that. But if we can provide those people with ways to save even tiny amounts of money for the future, it will help in some way to smooth out income flows and enable them to not be so subject to unexpected expenses. However, poverty alleviation requires multiple policy interventions and financial inclusion is just one.