The metro, no?
The metro is…
The crowds…
We are talking, only Mexico City, 6 million people getting into Metrobus and Metro a day
Most of them are poor people.
It’s a cash economy, no?
They don’t have a checking account or a savings account
For Rosa and her daughter, Sandi, being part of Mexico City’s massive cash day-to-day economy
means joining the millions of people who commute into the city center
through Mexico City's Metro, one of the largest in the world
And recently, the immense cash-filled Mexico City has started to look very interesting
to one financial company in particular.
It is Mastercard’s global vision to go after cash
Cash is actually our biggest competitor, in Latin America
Cause it’s like 85% of the transactions that people make, at least in Latin America
are cash based.
Of the estimated 22 million people living within the Greater Mexico City Area, about
55% of them live in the informal economy, and don’t have a bank account.
Even for those who do, it’s still a city that runs on cash.
Lines form at ATMs on payday, so you can withdraw enough to pay your bills,
and using credit cards to buy everyday things, like in one of Mexico City’s busy public markets,
is only slowly catching on.
Mastercard is working with the government to increase the amount of vendors accepting
credit cards, but they also want to increase the amount of people who have cards in the first place
What we want is more Mastercard cards in the market
That’s what we want.
We are going to bring more cards into the market, using the transportation as an excuse
Remember those millions of daily riders?
They all pay for their Metro rides with one method
Mexico City’s Metro is one of the most subsidized in the world.
It only costs 5 pesos, about 25 cents, but you can only pay in cash.
You can either buy a paper ticket, or buy a refillable card
But there are no automatic vending machines
You have to line up, at a staffed ticket booth, and fill up your metro card, in person,
in cash
There are long lines just to reload your transit card
So Mastercard approached Mexico City for a partnership, saying look: “How about instead,
we just get everyone Mastercards that are recharged automatically from your bank account?”
It would mean no more lines
For the metro, this sounds like a great deal
When it launches, it would just be like Apple Pay or other tap-and-go services
Tap into the Metro with your debit card from Mastercard, and the money comes right out
of your bank account
But in order to tap in, you need a bank account to start with, and alot of regular metro riders,
like Rosa and her daughter Sandi, simply don’t have one
Which is also why this whole Mastercard initiative sounds like a win
for the Secretary of Economic Development,
who is trying to bring millions of people out of the informal economy
and into a place where the government can see them
We need to make it easier for people to be included and people to see the benefits and
not the risks, because for many people, there risks are becoming part of the formal sector.
Well, you have to pay taxes.
The City signed onto the deal in May 2017, and the first varieties of debit cards
should arrive in November
Mastercard hasn’t provided alot of details about how these cards will be issued,
but they’re hoping that eventually, like perhaps by mid 2018, everyone from a fruit vendor
to government payrolled employee, might have some version of a metro-enabled debit card,
and that they would be using them for everyday purchases too
So what we’re getting in return:
The more the card is used, at the restaurant, at the pharmacy, at the supermarket,
that's our business model
We make money out of that transaction.
Mastercard is paying to upgrade Mexico City’s Metro because they want people to use the
card outside the Metro
The transaction fees that Mastercard would collect in bulk would definitely pay off
They’ve succeeded with this in Colombia, with Bogotá’s express bus system,
where Mastercard introduced a similar debit card, targeted towards
people whose paychecks are directly deposited into their bank accounts
This is a perfect product for payrolls
Money comes in every 15 days.
So nobody needs to think about reloading the card, because money will be there
But this highlights the larger divide in Mexico, and in Latin America, between economic classes,
and the Catch 22 of going cashless
In this digital economy, you need a financial ID.
The only way to have a financial identity is to have a bank account
So that’s the fundamental problem with cash
To get a bank account though, you need to have enough cash in the first place
to even convince a bank of giving you a debit card
And for Rosa, that’s not so easy to do.
You have to understand how big the informal sector is
The restriction for this type of program is the income level of the people
We are a very unequal country.
The Mexican minimum wage today is $4 a day.
It is ridiculous by all terms.
So as MasterCard targets cash in Mexico, the reality is that, because so many people
live on so little of it,
a cashless economy is still a ways away
Oh sure!
Maybe 2030, something like that.
Most modern cities in the world are moving for that.
And Mexico City is not going to be the exception.