In an exclusive interview with Asia Business Outlook, Raghu Malhotra, President of Global Enterprise Growth, Mastercard, shares his views on regulatory inconsistencies impacting digital payment systems, advanced security protocols to protect consumers, educational initiatives to overcome digital literacy, strategies to achieve seamless integration and more. Raghu is an international business, technology, and finance executive with a proven track record in driving organizational impact and elevating growth and profitability.   

How do regulatory inconsistencies across different Asian countries impact the standardization of digital payment systems, and what measures can be taken to harmonize these regulations to support seamless cross-border transactions?

Regulations vary by country. However, they are driven by different needs in each of the economies, so there are inconsistencies across economies when it comes to regulation. To make digital economies, the governments and private sector of Asian countries have to create digital infrastructure and digital ecosystems; upon implementation, they have diverse requirements. For instance, Indonesia is very different from India and Singapore; their literacy rates, rate of adoption and financial inclusion metrics are different. Hence, various governments have devised different regulations regarding what they need to solve. Most economies are on the path to digitization, which means better financial inclusion and better access to credit for SMEs.

If the policies were more consistent, there could be seamlessness, less friction and higher productivity. Besides, it is better for consumers as they are in a globally connected world, and the economies cannot ever be standalone; they are always interdependent. Hence, consistent regulatory policies help to some degree, which is good for consumers as it gives them the choice and seamless delivery of user experience.  

In what ways do cybersecurity threats and fraud vulnerabilities challenge the security of digital payments in Asia, and what advanced security protocols can be implemented to protect consumers and businesses?

While creating digital infrastructure, it is essential to create a regulatory framework that deals with cybersecurity differently and not merely cybersecurity. Data protection for consumers and institutions must also be considered. Once digital infrastructure is implemented, it is equally important that companies, innovators, fintech, and governments keep track of how to protect the ecosystem and remove vulnerabilities. For instance, a renowned global technology firm has invested around $7 billion into cybersecurity, which has helped to protect 140 billion-plus transactions per year while leveraging AI and Cyber technology and also helped $20 billion of fraud because of these technologies. Hence, this is how a firm can protect the entire ecosystem.

However, this is not sufficient, as a slew of new technologies are coming in that make life better. Nowadays, most consumers prefer biometric technology as it offers a better user experience and is reliable.

What infrastructural barriers are faced by rural and underserved regions in Asia that hinder the adoption of digital payments, and how can these challenges be addressed to ensure inclusive financial access?

Statistically, 47% of Asia is not covered by mobile internet; they have mobile coverage but don’t have mobile internet. There is a productivity issue, and economically, it is unable to maximize what could have been done if the people had been included. Besides, more mobile internet is needed to make financial inclusion possible. The other problem is the transparency of flows; if there is no flow transparency in the deal, the lending process becomes complicated. SMEs employ more than 80% of the world’s population. In comparison, 22% of all global finance goes towards SMEs. If exceptional lending can be done to SME’s then there can be a better job performed in financial inclusion that can progress the economy as they are the biggest employers worldwide.

The final one is literacy. People need to be both technologically and financially literate. Both go hand in hand; it doesn’t mean you cannot be financially literate if you’re not tech-literate. So, these are the three barriers related to digital infrastructure.

How does the lack of digital literacy and trust in technology among certain populations in Asia impede the adoption of digital payment solutions, and what educational initiatives can be implemented to overcome this challenge?

Mainly during COVID, the amount of technology adoption that took place is unbelievable, with the faith and ability in e-commerce activities, banking transactions, and mobile banking and internet banking going through the roof. These have changed the way the supply chain happens and shifted economies. Regarding barriers, we have pointed out financial and technology literacy, which can be overcome if performed in a very concentrated way.

For instance, putting up a tech center in every village is crucial not only in the Asian space but globally; having just one computer in a small town of 100 people can help the kids to be comfortable with technology when they are growing up. Consequently, this will lead to higher adoption rates, which can be put in with financial and general literacy. This combination can help drive that change. Indeed, this is not merely the job of the governments and private sector; the public and the government sectors should join together to create these environments.

Can you elaborate on the positive impact of accelerating digitization in payments to support inclusion, economic growth and SME enablement?

The next bastion of growth for the world will come from emerging markets, but this is just one geographic perspective. Indeed, the growth will come from the people not included in the formal economy. Around 1.4 billion people are still not financially included worldwide, which means 1/6 of the world and 80% of the world’s population is employed by SMEs. As per the Asia statistics, 97% of all institutions are SMEs in Asia, and they employ more than 70% of the SME’s across the globe. It’s a massive opportunity for the world to create an ecosystem for better access to credit for SMEs and parallelly create and give financial access to the financially excluded, bring them into the formal economy, and build layers of access to them.

What role do interoperability issues between different digital payment platforms in Asia play in creating user and merchant friction, and what strategies can be employed to achieve seamless integration and compatibility?

An open system allows better access, consumer experience and innovation to thrive. However, in the case of a closed system, creating a closed digital infrastructure stifles innovation and creates a single point of failure. Hence, creating open ecosystems seamlessly across borders, allowing people to participate and having an even playing field for all is essential. Without such things, there will be no consumer experience, the most innovative programs or even the best economics for the consumer. If there can be a seamless operation across four countries versus a single country, the economics will differ and benefit the end consumer and merchants.