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Raghu Malhotra

UAE, DUBAI - Finance

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Division President, Middle East & North Africa, MasterCard


Raghu Malhotra has been with MasterCard since 2000. Prior to his current position, he held a variety of leadership roles, spanning Marketing, Business Development, and Public Relations across multiple international geographies. Most recently, he was MasterCard’s General Manager for the Middle East. Prior to joining MasterCard, he worked for American Express, ANZ Grindlays Bank, and Citicorp Credit. He also held a number of advisory positions to industry committees within the payment and technology sectors, including being a founding member of a committee that established the first industry-wide initiative that led to the formation of a credit bureau in India.

Almost 85% of the world’s transactions still take place with cash, although MasterCard itself is synonymous with plastic. What are the key opportunities going forward for processing networks regionally? Economies […]

Almost 85% of the world’s transactions still take place with cash, although MasterCard itself is synonymous with plastic. What are the key opportunities going forward for processing networks regionally?

Economies around the world, as well as central banks and governments, are increasingly looking at this sphere as they realize that cash transactions are actually fairly inefficient. We have conducted global studies and found that it costs a government or an economy between 50 and 150 basis points just to use cash. This is not taking into account what banks spend in terms of just putting the cash into people’s wallets. If one looks at the true cost of cash, it starts to be upward of 150 basis points. In other words, cash can cost a country about 1.5% of its GDP; this is a substantial amount of money that could be saved if electronic payment solutions replaced cash transactions. In this part of the world, only 10% of payments are electronic, while 90% are still cash or checks. I think that we have now reached the cusp where paper might give way to electronic transactions. This could not have been the case 20 years ago, in the absence of the necessary infrastructure to carry out the transactions securely, but the situation has now improved significantly to pave the way for an evolution to replace cash with a more efficient and a much more transparent system.

What kind of new technology are you bringing to the local market?

Technology comes in different forms. One is platform services, an example being the enablement of e-commerce around the world. This is not a new concept, but it is growing substantially and we are enhancing MasterCard’s platform services as consumer preferences change and new e-commerce channels are opened. If you are booking airline tickets online, it is likely that you’ll be going through MasterCard’s channels whether or not you used a MasterCard product.

In developed consumer markets, debit cards have now overtaken credit cards in terms of popularity. Are the same trends being seen here?

Clearly, debit cards have come to the forefront in this part of the world, but debit cards use is actually determined by several factors. One of these is the savings habits of consumers. If one looks at developing markets such as India, saving rates tend to be extremely high, and consumers tend to opt for debit cards that are linked to their savings accounts. This is one reason and example why debit cards take off in some markets.

A second factor impacting the use of debit cards is the acceptance infrastructure. Some markets, such as the US, have been developing their infrastructure for 30 years, and thus every shop now accepts cards. This is not yet the case in a lot of developing markets.

Another factor is consumer habits. Consumers tend to take out cash for very small, low-cost purchases out of sheer habit. When more places accept cards, consumers stop taking cash out with them, instead preferring to spend on their cards. Of the 90% of payments made in cash, around 50% might be small-value payments. This begins to show the sheer volume of the market, and could lead to debit cards overtaking credit cards in some markets.

Therefore, the use of credit or debit cards depends more on saving rates, what sort of infrastructure is available, and consumer tastes and preferences, but we believe that both cards have their specific uses and that there is a place for both in consumers’ wallets.

How are local consumer habits changing in terms of online payments?

A recent MasterCard survey found that 42% of UAE shoppers accessed the internet for online shopping in 2011 (this does not, however, indicate that all of them made purchases). That is an extremely high percentage, growing from 33% in 2010.

Different industries have responded to the digital age in their own ways. The airline industry is one sector that has revolutionized how it sells its products. A few years ago, consumers would book their tickets through a travel agent. Now, the airlines have gone completely digital. The same thing has also happened with hotels and holiday packages. I suspect this trend will also move into the retail side.

In summary, given the change in consumer habits and the rapidly evolving online payment infrastructure, we expect online shopping to grow at a much higher pace than traditional ways of shopping. We expect this trend to continue in the foreseeable future.



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