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MasterCard Area Head – South Asia Vikas Varma is very bullish on Sri Lanka – and with good reason. While a substantial $ 50 billion of Sri Lanka’s
$ 70 billion GDP is spent on personal consumption expenditure, only 3% of that money is spent in
electronic form right now.
With its vision of a world beyond cash, for MasterCard Sri Lanka – which has been in Sri Lanka through thick and thin over the last 25 years – the country provides a significant growth opportunity, given the available space for growth of electronic payments and
Sri Lanka’s strong development indicators.
“World Bank estimates suggest that by 2017,
Sri Lanka will be a middle income economy, which means $ 4,000 per capita GDP, making it the
highest in the region. I see Sri Lanka reaching that, clearly. Therefore, there will be greater spending power at a consumer level and our aim would be to harness that away from cash-based spending into electronic spending. I am very bullish on that front,” asserted Varma, in an interview with the Daily FT on Wednesday in Sri Lanka.
In the course of the interview, Varma also outlined upcoming solutions for the local market and initiatives taken by MasterCard to drive growth in the country.
Following are excerpts:
By Marianne David
Q: MasterCard has been active in Sri Lanka for over 25 years now. Could you tell us about recent market trends/spending habits, merchants’ growth, etc.?
A: If I were to look at the top five or six areas where we see a lot of tailwinds for the growth of payments space in Sri Lanka, not in any particular order, the first would be the growth of affluence. Sri Lanka is well on its way to become what we call a middle income economy, which is $ 4,000 per capita income. It’s the highest in South Asia.
The second would be the Government’s focus on tourism. There are plans by the Government to grow tourism arrivals to 2.5 million tourists by 2016 and that clearly drives a lot of consumer spending for the Sri Lankan economy.
The third would be around the penetration of mobile and mobile internet in this market. Mobile penetration is 95% plus; mobile internet penetration is growing dramatically in this market and I see a lot of that being translated into e-commerce or mobile-based payment opportunities for the market.
One of the other trends would be the fact that you have a very low median age population, which is just 31. This essentially means there are many young people in the population, typically a great segment for trying new things and they are more comfortable with picking up new technology, whether it is to do with mobile-based applications, using the mobile for making payments, prepaid cards and all of that.
Another aspect is that inward remittance is a key driver of growth for Sri Lankan GDP. There are opportunities for us to work in the remittance space as well and help drive greater economic growth and greater inflows of monies through electronic means for the market.
Having said all of that, from a total spending perspective, we believe there is immense headroom for growth. The reason is that out of Sri Lanka’s GDP of about $ 70 billion today, personal consumption expenditure, which is what end users and consumers spend on a discretionary basis, is about $ 50 billion, but only 3% of that money is actually spent in electronic form today.
So while you have a whole host of factors that will drive the uptake of electronic payments, there is huge headroom, and over the medium and long term we see the growth of electronic payments in Sri Lanka actually accelerating over time.
We’ve been present here for 25 years – we’ve been here through thick and thin – and there are many initiatives we’ve taken over the last six months.
We’ve seen a lot of outbound spending because affluence has grown after the war and we’re seeing a lot people travelling overseas as well. We’ve launched some products like the Chip and Pin based Travel Card with Nations Trust Bank and we recently launched a ‘Spend and Win’ promotion and so on.
In relation to merchants’ growth, our estimate is that there are about 24-25,000 merchants who accept card payments in this market and while that has grown and is growing steadily, there is a significant growth opportunity for merchant card acceptance, especially in the more semi-urban areas – the tier two and tier three locations.
Given the potential, there is a large opportunity for substantially growing this number. One of the ways one could look at that is through ecommerce, where you can have merchants who are in remote areas but want to offer a digital storefront; there is an opportunity for them to become ecommerce merchants and have people access them without necessarily being in the city.
The second one is where we can deploy mobile-based acceptance solutions, especially given the increasing penetration of smart phones. We have already certified and developed solutions where you can use your mobile phone to accept payments that will enable small businesses, self-employed professionals, small outlets and people who travel to be able to use their mobile phones for accepting payments on-the-go.
We see significant potential for growth of merchants and these are some of the ways in which it can be achieved. We will launch these solutions in Sri Lanka very soon, within the next few months.
Q: Could you outline MasterCard’s vision for the market, including plans for expanding the partner network?
A: Our vision for the market is what it is globally – a world beyond cash. Our enemy is cash. There is a cost of cash, it is full of hassles and there are safety and security issues. There are studies to show that cash can cost up to 3.5-4% of the GDP of a country. That’s a lot of money. Cash has to be manufactured, stored, transported, and again destroyed and remanufactured; and there is pilferage which has to be safeguarded against. When you move to electronic, you face none of these issues. So our focus is a world beyond cash.
Globally 85% of all consumer transactions are still on cash. Only 15% of global consumer transactions are electronic. Compare that to Sri Lanka, where we’re saying it’s 3% that’s electronic. Emerging markets like Sri Lanka still have a way to go before reaching the global average and that’s our focus.
From a partner network perspective, we’ve been here 25 years and have all major banks as our partners who issue our cards and also accept MasterCard cards through their merchant network.
Q: What are the solutions that MasterCard plans to introduce to the Sri Lankan market?
A: In terms of solutions for the Sri Lankan market, one would be a platform called In Control. It is a MasterCard solution that enables cardholders to define how, where and how much they will spend. It’s an app on the mobile or the net which allows cardholders to set spending limits, spending alerts and spend controls for their cards and cards of their family members.
For example, if you have to travel overseas, to say Singapore, you could then, using your mobile application on a real-time basis, allow transactions to happen in Singapore only and shut all other geographies so there can be no misuse of your card in any other place while you are away. Similarly, you could set a spend alert for yourself to say ‘in a month, should my grocery shopping cross Rs. 25,000, send me an email alert’.
At a cardholder level, you are given the power as an end consumer to define these parameters. That’s the ultimate freedom. That’s clearly an opportunity for the Sri Lankan market and we’re working with our customers.
The second is, we see a lot of growth in the modern trade and organised retail formats in Sri Lanka. People are getting increasingly comfortable with shopping at organised retail outlets. We have a platform called Pay Pass, a tap-and-go feature on your card, which means you don’t have to take your card out of your wallet, you don’t have to swipe your card, and you don’t have to hand your card over to anybody else. You just wave the card in front of the reader and within a millisecond it does the transaction. It reduces the checkout time at the store, it cuts the queues, and more importantly it offers security because your card is not moving out of your wallet.
Another thing is on gateway space. As I said, mobile phone and mobile internet penetration is increasing and to enable people to be able to shop wherever they are on-the-go, we plan to deploy a platform called Master Pass. This is a technology solution, a mobile wallet, which allows you to use your mobile phone for one-click shopping.
We hope to launch these solutions in a few months. Meanwhile, apart from offering these solutions to our bank partners for them to offer to their consumers and customers, Priceless is how we build our brand relevance with the end user.
Q: Is there a Priceless campaign for Sri Lanka at the moment?
A: We have a Priceless campaign running in Sri Lanka. The tie-up with the Sri Lanka Tourism Promotion Bureau uses a Priceless campaign. We are promoting Sri Lanka as a destination in India, China, Singapore and European countries. That’s on the back of the Priceless campaign.
Q: How is MasterCard promoting Sri Lanka as a travel destination?
A: We entered into a strategic five-year MoU with the Sri Lanka Tourism Promotion Bureau, which we signed last year. As a part of that, we are working with the Tourism Board to realise its vision of 2.5 million tourists into Sri Lanka by 2016.
Since we have over 25,000 customer banks on a worldwide network across 210 countries, we are working with select focused destinations across our network to inform customers and consumers about Sri Lanka as a destination and promote it there. To build greater attractiveness, we are also doing merchant offers which are relevant to the travel and entertainment space, so when these tourists come here, they get a lot of offers and benefits and they spend more in Sri Lanka.
Q: How has MasterCard expanded its engagement with Sri Lankan consumers and trade/merchants in terms of offers that complement cardholders’ lifestyles?
A: Recent highlights for MasterCard in Sri Lanka include the ongoing ‘Diners’ Delight’ campaign launched during the Avurudu season, offering 15% savings till the end of the year at over 20 of the country’s finest dining establishments for Platinum and World MasterCard cardholders. The number of partner restaurants is set to expand.
MasterCard also launched the country’s first Chip and PIN USD Travel Card together with Nations Trust Bank to meet the needs of the growing number of Sri Lankans travelling abroad.
MasterCard carried out a well-received ‘Spend and Win’ campaign, offering Rs. 8 million worth of stay vouchers at select properties of Cinnamon Hotels and Resorts. MasterCard debit and credit cardholders and Maestro debit cardholders stood a chance to win the vouchers by simply spending Rs. 1,000 or more in a single receipt/transaction between 25 November 2013 and 31 January 2014.
Q: Any investments in the pipeline?
A: We are constantly investing; all of these are investments that we are making that are in the pipeline. We will be investing in this market both to bring in new technology platforms as well as build brand relevance and awareness and drive consumer confidence. I am not able to put a figure on the investments, but we are essentially here for the long term.
Q: Your views on South Asia’s growth, trends and opportunities?
A: I would say all of South Asia is still in the emerging space as far as payments are concerned. Sri Lanka has some very strong development indicators, which make it very much more attractive. You have a very young population and young people are keener to try new things. You have a lot of outbound spend – people are travelling overseas and they are connected to the wider world. From women and education standpoints, the indices are very good and with the 95% literacy rate, there is a far greater opportunity for you to drive financial education, financial literacy and responsible spending across the width of the population.
Sri Lanka, compared to other economies in South Asia, has a greater involvement of women in driving GDP growth. Women’s penetration in banking is amongst the highest in South Asia comparatively. There is a greater opportunity and we see Sri Lanka probably leading in the space where women’s empowerment and women’s financial independence is concerned.
Q: Would you rate Sri Lanka’s growth among the highest in Asia/South Asia or how would you rank it?
A: World Bank estimates suggest that by 2017, Sri Lanka will be a middle income economy, which means $ 4,000 per capita GDP, which would be the highest in the region. I see Sri Lanka reaching that, clearly. Therefore, there will be greater spending power at a consumer level and our aim would be to harness that away from cash-based spending into electronic spending. I am very bullish on that front.
