You're listening to Ted Talks Daily. I'm your host, Elise Hu. What does it mean to be unbanked?

Well, for the vast majority of people who fall in this status, it means that for financial purposes, you don't exist. Many people are trying to change this to make sure folks have access to more than just cash money, but electronic banking.

In this conversation with Ted Current Affairs curator Whitney Pennington, Rogers MasterCard CEO AJ Bonga talks financial inclusion and how this idea can improve lives and make the world more equitable.

Well, AJ Bonga, thank you so much for being with us today. I feel like this conversation is especially meaningful as we're wading through this pandemic at Slate 20 20. And we've sort of seen the way that, you know, inequalities have presented themselves throughout this year through this crisis. And, you know, since you've been at the helm of MasterCard, you have championed this idea of financial inclusion. And so could you start by telling us a little bit about about financial inclusion?

What is it and why do you think this is something that can change people's lives?

Yes, look, I think that the covid-19 crisis has actually made things worse in some ways. And some of the advances that were being made over the prior decade on fighting poverty and fighting exclusion have probably got to step back a little bit just by the nature of the manner in which the virus has impacted minorities and disadvantaged people more than they have others, including, by the way, minority owned businesses, a number of whom have had disproportionate impact through the crisis.

But I guess if you pull back from the crisis because financial inclusion or exclusion is an underlying social problem that dates back to well before this. The real issue here is the here's the the theory of the case. Of seven billion people in the world, close to two billion are either unbanked or unbanked in some way. And what I mean by unbanked or unbanked unbanked is obvious. They don't have a relationship with the banking institution of any type of any type on the bank, because even if they do, they're not getting to participate in the financial mainstream and do things that you and I take for granted, which means being able to access credit when you need it at a reasonable price, being able to access insurance of the type that's relevant to you, being able to do things of that nature, save for a rainy day in the right way.

All that done in a form that's good for you as the consumer that's on the bank. And so a couple of billion people around the world, and this is World Bank statistics are basically unbanked from the bank. And most of those people do not have a formal identity that they have been received or got from that government. And therefore, there's nothing they can take and hold out to show when they go to hire a car or live in a hotel or take a flight, which they don't do to show that they exist in the system.

Their opinions don't count. They don't get counted in census very often. They don't get counted for their opinion of what government should be doing. They get left out. They are locked out. And the last part of that puzzle is that this is too big an issue over the years for just a government to solve, for just one bank to solve in a country. It does require kind of, you know, a bunch of shoulders to the wheel to come together.

It requires partnerships across the public and the private sector, but even within the private sector to get to make a real movement on this issue.

And so then if I if I understand correctly, it sounds like it's just an opportunity for people, no matter where you are, what your your socioeconomic status is, that you have access to financial services, that you are part of the system and you have a place and an identity, a financial identity.

You have a voice. You have access to financial services. So financial inclusion has got so many facets. But the basic facet is be counted, be included, be somebody had the dignity of your identity and of being included. That's really what financial inclusion is.

It seems like such a simple idea, but that could potentially have a big impact. And I know that this is something that you've implemented in your your work at MasterCard. But also we see this in many other organizations. So talk a little bit about what what does financial inclusion look like in practice for a range of different organizations and a range of different spaces?

Yes. So first of all, you're absolutely correct. There are lots of people participating in trying to change this. And honestly, without that, we wouldn't get anywhere. We're doing our bit. But what we're doing is really in partnership with others because we're not a direct to consumer company. There's nothing I can do to improve your life directly in terms of being included, because I don't open bank accounts, I don't give credit, I don't underwrite insurance, and I don't have a way to provide you ways to save money in a mutual fund or anything.

For me to do anything, I need to have banks. I need to have fintech, I need to have mobile phone companies. I need to have governments. I probably need to have merchants. And that ecosystem of the coalition of the willing is kind of what you will see represented when different companies talk about their role in financial inclusion. Let me give you a couple of tangible examples. So if you're a farmer and you've got a goal to sell your produce when it's harvested, you've got to go two days away to the nearest village market.

Well, then everybody knows that on the way back you're carrying cash from the produce household that normally leads to bad outcomes. Also, you've got to go to buy fertilizer or you've got to go back and forth to do all this and you're really unproductive way. You send your your spouse to do it. All that changes if I can connect you with a form into farmers, fertilizers and cooperatives, give you a cropping information rainfall information, enable you to sell your produce in a better marketplace online, receive the money into an account online that is a complete game changer, something again, that farmers cooperatives, local governments, banks and companies like yours can help facilitate in Africa.

You're doing it in India. We're doing it in a bunch of countries around the world. Again, the idea here is to take you out of the cash economy and give you access to an electronic economy. Imagine that same farmer. They now receive money for their produce. A bank can look at how they spend money of their account and could using the spending and receiving of money, underwrite you much better for a crop loan than they could if they didn't know anything about you?

So the same example, another one is for small and micro businesses, take a woman in Kenya or in India or in Mexico, in a village who opens a small shop outside a home when a husband and children are away and it runs for a few hours in a day and she stalks a little baby food and soap and toilet paper and whatever else people buy that will run. The company ran comes the Nestlé van, the Unilever and the local bimbo van comes to sell produce to her on a Monday or Tuesday.

On a Wednesday at a certain time, she buys what she can in cash. Typically, she's in the cash economy. Nobody's giving her credit. She runs out of cash for that producer she's buying before the week is over. She's out of stock. She loses sales. Imagine if she could then be underwritten digitizing that supply chain, what she bought, what she sold under the return on the bank with actual transaction history, you could lend us the five hundred dollars to enable her to be smarter about what she buys.

Educate on how to use her credit. That's financial inclusion. I mean.

And so one thing that's really struck me is as you're talking through what financial inclusion looks like and how it works is the dependency on technology on smartphones and Internet access. And we know that this is something that a lot of people struggle to have access to this in developing nations, even in developed countries. Talk a little bit about how this might in some ways increase the digital divide and sort of how you respond to people who might criticize this idea in that way.

So the two topics we just came across the digital divide is I think is a real issue. But just to be clear, all the examples I gave you, they work on smartphones and they work on old flip phones as well. That QR code, if you have a camera on your smartphone, you can take it. But there's a numerical number that you could enter that number into your your fingerprint, your finger form and get it across as well. Examples like that in Egypt, where we've opened mobile wallets on phones, they don't have to be on a smartphone.

It could be on an old phone. So to be clear, these financial inclusion examples do not depend on smartphones. They do not depend on just Internet access in your house. You do need a phone, a cell phone in a number of the examples I gave you. But in the case of the micro and small credit enterprises, you don't even need a phone. That actually is just the transaction history of the products you bought and what you saw getting digitized and a bank being able to underwrite.

There are other problems of infrastructure in those that we can talk about. But to be specific about the digital divide, I think that's another real big issue. And again, covid-19 is actually unfortunately exposed what was already a sort of an issue in society. So whether it's rural parts of America, let alone of African or Indian or Indonesian or Guatemalan example in America, in rural parts of America, broadband access is a problem. Disadvantaged children in New York City who may not have access to the same bandwidth, capacity or computers that they need to be able to participate in education, that's a problem.

And so that's a separate issue with me from the issue of some of the examples I gave you, which I think can actually be operated equally well with old fashioned forms.

It seems like this sort of a precursor to this is in talking about these partnerships with governments, perhaps is making sure people do have even access to a flip phone or or some sort of way that they can communicate so they can participate in these initiatives.

So I think a phone is transformational. And the fact is that that there are many people in the world with a phone, but there's still a billion people who do not have the right kind of phone or Internet access. That's a different topic. So I said you've got to find ways to reach them, too. You can't only do it by phone. So the example of those micro Assamese I was talking about, I've got nothing to do with the phone or, for example, in in South Africa with the Social Security Administration, where the government gives them a certain amount of money every year for their being not employed.

You can actually reach them through a biometric card, which is what we've done with the government, where the government collects your identity, your biometrics on a card, and we can load the card remotely with the amount they want to transfer, take out the middleman in the process and allow that person to then use that card to go to an ATM to take out the cash or go straight to a shop to shop. And I think that changes everything. So we've done that in many countries.

And so if you go to where Syrian refugees were coming into Lebanon and Greece and the like, every aid agency there would require them to have an identity with them, to get access to whatever form of aid they were disbursing. One of the things we're doing is to convert that into a very simple biometric enabled identity, which will be read across agencies. So you are I don't need to get our identity verified separately. Each time there is a statistic in the world that 40 percent of the dollars that governments want to spend to reach their citizenry for social benefit programs never reach them.

They're called leakage. Leakage means administrative costs. And I call it theft because it's 40 cents on the dollar for the person who cannot afford even one cent less. That's the issue. That's what we're trying to solve for take out the middleman, use technology to help enable a direct government to citizenry operation, allow banks and NGOs and and phone companies to intervene in the right way. As an example of this refugee crisis, the World Food Program.

Distributes food in those very refugee camps, and we actually help them to take the food, they would buy grain somewhere and ship it across and lose some of it along the way. We put the dollar value on a card. The card can only be used by the refugee in a shop to the World Food Program certifies. So it cannot be used for anything other than what the World Food Program, what's it used for, which is grain and food and vegetables and fruit and milk.

And that enables the World Food Program to save money on leakage. I'm trying to tell you it's not about technology. It's about using what you have and using the technology if you do possess and applying that in a smart, commercially sustainable way to real world problems if you have good technology as well. Well, let's do it even better, but let's not use technology as an excuse to not do it.

But it makes a lot of sense. I mean, it seems like to underlying all of this is this this move sort of towards a cashless society and this this move to sort of create this way for people to exchange money without the need for cash. And, you know, I'm curious to hear from you a little bit about what what does that actually look like, a society without cash? What are some of the challenges that it presents?

Yeah, I think cash less actually is is something that I'm going to get to. And we probably shouldn't, because just the idea of a digital divide, do you really want a world where people who rely on cash because it makes them comfortable? I'm not talking about illegal transactions. I'm talking about somebody who just wants to live in cash. They may be older and uncomfortable with today's technology. My dad, when he was alive, you know, he never wanted to use a card.

He always wanted to use a cash and check. And this is my father when I worked in banking and was by then the CEO of MasterCard. And he would look at me very intelligently and say, Son, I have a MasterCard because of you, but could you please go away kind of thing.

And I understand and I think you have to you've got to deal with that for cashless in inverted commas, reducing cash in the economy is to me a good objective, taking it to zero. I'm not there. Why do I say it's a good objective to reduce it? Because cash actually is the friend of the person who has something to hide. If you want to not pay full taxes or you want to do something with the cash, which is not quite kosher.

Well, guess what? Here's your chance. But if you're electronic, you are transparent. Electronic forms of money, benefits and transfers and utilization create transparency in an economy. Poorer people, they don't have access to the cash and therefore they don't indulge in any of this, but even other than that, even other than all this, there is a cost of cash in society which many people have computed. Central banks, universities, somewhere between one to two percent of GDP is the cost of printing, securing, distributing and using that cash one to two percent of GDP.

I'm certain that efficient use of that GDP that we could put into play by reducing the role of cash relatively in the economy. In the process, you take out these middlemen who are in positions of power when social benefits are distributed, when refugees are met. That's what I'm talking about. That, to me is a good thing. Transparent budget, tax realisations, lower money laundering, that kind of stuff I'm all for. And I've been talking about that for years.

But zero cash.

I'm not that. I mean, do you think there's a point where when you do get there or we get there as a society where that does feel possible, we could we could.

I mean, if you took countries in the Nordic states, Sweden, Sweden, South Korea, these are at the cutting edge of having reduced cash in their economies. And in Sweden, essentially, everybody uses electronic forms of payments, either a card or app on their phone that they can switch through or things of that nature. Consumer payments. I'm talking about even public toilets on the street in Sweden. You can you can pay by on your phone entering a court which comes back to you.

Having deducted that money from your account. You enter the court on a pin pad and I call that stop and go kind of you go into the public toilet with that tap. That's how far it's advanced in Sweden. So cash is very low there. But even they are having a regular continuous public conversation about not disadvantaging those parts of Sweden who still want to deal in cash. You've got to be careful because remember, how does cash rich distributed points in a country through banks, through ATMs?

If if those become unprofitable to run and people start closing ATMs down, that's a problem in itself. So you have to enable cashback and retailers in some way. So you could still go and get cash from a distribution system. Maybe not Evanthia, but a retailer. There are some ways to do this well, but you've got to be conscious of it. You know, we haven't reached it yet, but we could reach there.

And, you know, of course, when you think about this, about moving to a cashless society or at least having that as the goal, that there creates this concern around data and privacy. And, you know, you said in the past that there's really an importance behind putting the consumers in control of their own data and their own privacy. And, you know, how is that something that we can actually achieve? What does that what does it look like to do that when?

It's a terrific question. I actually believe that is at the core of a lot to do with the next 10, 20 years of technology, the Internet of Things, 5G data. This is all coming together at warp speed. Right. If you think about the number of devices that are going to be connected over the next five, 10 years and what 5G could do to moving intelligent computing to the edge right near you, this is going to generate enormous amounts of data from your fridge, from your car, from you walking around, from your connected glasses, from your watch already, all that from your shoes if you're a runner.

So you've got to get to a stage where we take a responsibility of how your data is used and interpret it. And so MasterCard, we with a bunch of companies, we've laid out a set of data principles. The first one is exactly what he said. It's your data. You should control it, meaning you should know what's been collected. You should be able to say, I don't want that to be collected in simple language, not in a twelve page legal agreement that you cannot comprehend.

And you should you should be able to benefit from that data of yours that is used either directly or indirectly in some way that you comprehend. And if I as a company, I'm collecting your data to enable me to do business with you, I should collect the minimum amount I need to do my job with you and I should keep order what I collect safe for you and allow it to be deducted or removed when you want it. This is not complicated things.

Your data, you're in control. You should be able to delete it when you want. You should know what's being collected. If I do anything with you, collect the minimum, keep it safe. Consumers will vote with their feet on this topic as they get more knowledgeable, as they get more educated. And that's the right thing to do. They need to say, I don't want you to use my data for the following things. I want to know what it's being used for.

Putting consumers back in control of that data is going to be mission critical in the data driven economy of the next ten, twenty years. Thank you so much.

Actually, this was a great conversation and I appreciate you being with us today.

Thanks a lot. See you again. Good luck. Ted Talks Daily, is hosted by Elise Hu and produced by Ted, the music is from Allison Layton Brown. In our Mixu is Christopher Fazi Bogon.

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