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Small businesses and individuals having a hard time entering the digital economy are getting a boost from Mastercard as the need to receive funds electronically and make digital and contactless payments has been underscored by the COVID-19 pandemic.
The payment processing company is pledging to connect 1 billion people and 50 million small businesses to the digital economy by 2025. This commitment is an extension of its 2015 promise to bring 500 million people who don’t have ready digital access to financial products into the system.
Nationally, 6.5% of households in 2017 did not have bank accounts, and 18.7% had accounts but also used financial services outside of insured institutions, according to the FDIC. Households with no bank accounts are considered “unbanked” while households with bank accounts who use products such as payday loans, check cashing and money orders are referred to as “underbanked.”
Mastercard’s pledge also includes delivering stimulus payments to millions of Americans who have reloadable prepaid cards, including those who participate in the U.S. Treasury’s Direct Express program, which helps people who are unbanked receive federal benefits, such as Social Security. Mastercard’s initiative could help vulnerable communities that are unbanked or underbanked stay safe by not having to go outside and deposit paper checks, and instead receive it in prepaid cards.
“This crisis has underscored how vulnerable individuals and small businesses are to an economic shock,” Mastercard Vice Chairman, Mike Froman, told USA TODAY. “This would help people in the base of the pyramid achieve more financial security.”
The company also said it aims to help 25 million women entrepreneurs transition to an electronic transaction model. Previously, Mastercard helped low-income women entrepreneurs digitize their operations and get access to microloans. During the current coronavirus crisis, digital payments have enabled them to continue disbursing same-day loans to women entrepreneurs in need, the company said.
Besides providing small businesses with the technology to make the transition to the digital economy, Mastercard said it will provide training in financial literacy and the proper use of technology to achieve better financial security.
“There are still over a billion people all over the world who are unbanked, who have no formal relationship to the financial system. They operate in gray areas and an informal economy, which makes it very difficult for them to access the kind of tools that they need to achieve greater productivity and to put themselves on a path to greater prosperity,” Froman said.
In addition to the pledge, Mastercard said it would commit up to $25 million to establish the COVID-19 Therapeutics Accelerator to fund clinical trials to identify highly potent immunotherapies for the COVID-19 pandemic. This initiative is in partnership with the Bill & Melinda Gates Foundation, The Chan Zuckerberg Initiative and others.
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