INTERVIEW- ‘It is imperative that businesses address faith-based needs’ - MasterCard’s Safdar Khan
Payment networks American Express, Diners Club, JCB, MasterCard, UnionPay and Visa generate billions of purchase transactions every year. In the Asia Pacific alone, these networks processed $9,380.92 billion in purchases in 2014, according to payments industries experts The Nilson Report.
Of all these global payment networks, MasterCard has been the most focused on Muslim markets and the Shariah-compliant payment infrastructure. Safdar Khan, MasterCard’s Group Country Manager for Indonesia, Malaysia and Brunei, and Group Head, Islamic Payments, Southeast Asia, tells Salaam Gateway that businesses cannot afford to ignore the Islamic Economy as more Muslims place importance in meeting their faith-based needs and become more discerning in their purchasing decisions.
Salaam Gateway: What are the biggest sectors of the Islamic Economy for MasterCard’s Islamic payments business?
Safdar Khan: The Islamic Economy as a whole is important to MasterCard. Two areas that are particularly significant are Islamic finance and travel:
Islamic finance has huge growth potential given the massive market of over 1.6 billion Muslims worldwide. We continue to collaborate with various Islamic financial institutions to offer innovative Shariah-compliant payments solutions in growing Islamic finance markets in the Middle East and Southeast Asia.
This also extends to the non-banking sector including collaborations with Tabung Haji, the pilgrims’ fund board for Malaysian Muslims, and Zilzar.com, an e-commerce Muslim Lifestyle Marketplace.
We’re constantly seeking new ways to offer more payment innovations to ensure safe, secure, efficient, and transparent transactions among businesses, merchants, issuers and consumers to meet the growing demands of e-commerce.
Travel is also a big sector given it is one of the fastest-growing markets in the world with 150 million Muslim travellers expected to have a total spend of $200 billion by 2020.
MasterCard together with CrescentRating, the world’s leading authority in halal travel co-develops the MasterCard CrescentRating Global Muslim Travel Index to track the health of the travel segment and provide valuable insights for the industry.
Salaam Gateway: Where’s the consumer spend? If an entrepreneur or business was new to Muslim markets which sector of the Islamic Economy would you tell them to enter, and where?
Safdar Khan: Consumer spend in the Islamic Economy is highest in the Islamic finance sector.
Globally, the Islamic finance market is estimated to reach $4 trillion in 2019 compared to $1.21 trillion in 2013, according to the State of the Global Islamic Economy Report 2014-2015.
Given the sheer size of the Islamic Economy, it also offers opportunities for entrepreneurs in many other sectors - food and beverage, travel, fashion, media & recreation, and pharmaceuticals and cosmetics.
Most importantly, it is not just about the opportunities but whether entrepreneurs are well-positioned to adapt and cater their offerings to the Muslim consumer and are able to build a competitive edge to stand out in their chosen sector.
Salaam Gateway: How is Muslim consumer spending changing?
Safdar Khan: As many Muslims place importance in meeting their faith-based needs, they are becoming more discerning in their purchasing decisions. They are proactively exploring and perusing goods and services that not only meet their individual lifestyle needs, but are also in line with Islamic principles.
The typical Muslim consumer is now younger and more highly educated and as such is more perceptive to the latest lifestyle trends and technology. There are definitely opportunities in the technology and mobile space that have yet to be fully tapped.
Salaam Gateway: As a payment network, you obviously want to see the growth of e-commerce in Muslim-majority countries. What are the biggest challenges for e-commerce in the big Muslim economies such as Indonesia, the GCC and North Africa and what is needed to overcome these challenges?
Safdar Khan: Faith is increasingly influencing purchasing decisions and as a first step, it is imperative that businesses address faith-based needs in products and services they offer.
Building trust is also important in shaping users’ acceptance and willingness to participate in e-commerce activities.
Apart from looking for products and services that meet Shariah principles, Muslim consumers value the source of products – whether it comes from a credible and reputable merchant. Businesses can address this challenge by ensuring they have the right certification where needed and be transparent in their dealings with consumers.
Trust in online payments security is also critical. According to our Online Shopping survey, security is a key consideration for Indonesian consumers when shopping online, with 92 percent citing security of payment facility as one of the most important factors impacting online purchases. Merchants, payment processors and banks need to ensure payment facilities provided meet the highest standards of safety to increase peace of mind among consumers when shopping online.
Additionally, there is currently no unified or single globally-recognised regulatory framework that governs Islamic Economy sectors. Different countries have different regulatory bodies and practices. There is a need for closer cooperation within the sectors in developing such a framework – which can enhance efficiency, productivity and transparency within the e-commerce segment.
Salaam Gateway: There is a very large unbanked population across Muslim-majority countries of the Organisation of Islamic Cooperation (OIC). Is it possible to develop and innovate within the non-banking sector to facilitate the growth of Islamic Economy entrepreneurs and companies?
Safdar Khan: Yes, it is possible. Technology is an important driver for innovation – the right technology can enhance security, increase efficiency and heighten productivity. Awareness of the value of technology to business growth is integral in pushing adoption of technology among entrepreneurs. Entrepreneurs can employ technology to their advantage and in doing so, will be better prepared to meet the demands of consumers.
In relation to payments, state-of-the-art technology that is used to power e-payments infrastructure allows transactions to be made safely and seamlessly, enabling entrepreneurs to conduct business with ease and expand their reach to a larger online audience.
We have collaborated with Zilzar.com, an e-commerce Muslim Lifestyle Marketplace, to offer our expertise in world leading payment technology to support their infrastructure and provide safe, secure and scalable payments capability which can grow with the marketplace as consumer and business needs in this segment evolve.
Salaam Gateway: We hear a lot about the rise and potential of Financial Technology, or FinTech. How can institutional players such as Islamic banks and MasterCard innovate with FinTech to serve the needs of the Islamic Economy entrepreneur, company and consumer?
Safdar Khan: MasterCard has been proactively investing efforts in FinTech and this is reflected in our suite of innovations in financial services that are reaching a wide range of consumers and businesses.
In Malaysia for example, our collaboration with Tabung Haji, the pilgrims fund board for Malaysian Muslims has seen the development of the world’s first non-banking Islamic debit card. Over 8.6 million Malaysian Muslims that are depositors with Tabung Haji can now easily access their funds wherever they are, be it travelling for business, leisure or during their Umrah or Hajj pilgrimages.
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