MasterCard and the Inter-American Development Bank have recently signed an agreement, as announced at the World Economic Forum in Davos, Switzerland, to work together in an effort to improve economic inclusion, transparency and financial formalization through the expansion of electronic payments in Latin America and the Caribbean.
The five-year public-private partnership is intended to enhance access to information and promote the transition to electronic payment services in the region, which can help reduce transaction costs and increase the efficiency of financial disbursements.
Replacing cash-based systems for electronic ones also can potentially reduce leakages, increasing the likelihood that payments and benefits end up in the hands of intended beneficiaries and recipients, helping to improve the lives of the underserved.
“This initiative takes a two-pronged approach to promote financial transparency and formalization in the region,” said IDB President Luis Alberto Moreno. “First, we intend for it to enhance access to information and accountability among governments in Latin America and the Caribbean.”
“Second, in partnership with banks, microfinance organizations, development organizations and the private sector, we plan to extend electronic payment and financial services to the underserved as a vehicle for families and businesses across the region to overcome poverty,” he said.
With this agreement, MasterCard becomes the IDB’s first corporate partner in transparency, making the company a pioneer in this type of public-private partnership.
“With this new public-private partnership, we intend to demonstrate the impact we can have when sectors come together to formalize local economies and extend the payment ecosystem,” said MasterCard CEO Ajay Banga.
“By offering financial tools that enable and empower underserved consumers and merchants, we could potentially create greater efficiency, transparency and inclusion for all,” he added.
MasterCard will join the IDB and the Government of Norway in providing strategic advice to the IDB´s Transparency Fund. The Fund is the bank’s primary source of grant financing for transparency-related projects and initiatives in Latin America and the Caribbean.
As part of the bank’s public sector management agenda, the fund has been a key catalyzer of investments in this area, creating synergies between projects in an $800 million portfolio (2008-2012) to help governments in the region.
To date, the fund has supported 11 governments in transitioning to more efficient and transparent systems, and will support four additional governments in 2014.
In his role as official MasterCard representative to the fund, Gilberto Caldart, MasterCard President for the Latin American and Caribbean, expects to bring MasterCard’s full expertise in the technology and payments industries to help governments identify leakages, analyze cost savings of electronic systems, and develop action plans to implement more transparent systems, the company said.
“We strongly believe that this effort will help to promote government transparency, efficiency and accountability within the region,” Caldart said.
Through the agreement, MasterCard and the IDB will actively collaborate in annual events such as the IDB Annual Meeting, FOROMIC, the MasterCard LAC Payment Innovation Summit, and other key forums to promote thought leadership efforts and the dissemination of best practices in transparency, economic inclusion and electronic payments.