The whole idea of corporate philanthropy is pretty straightforward: A large company becomes profitable enough that it sets aside a certain sum each year to funnel toward the charity or cause of its choosing. Despite the fact that this formula has come under fire for serving as a cover-up for companies whose supply chains and manufacturing practices do far more damage to society and the environment than a couple cool millions can rectify, businesses persist in following it.
Through its Center for Inclusive Growth, an independent subsidiary of the company launched in 2013 to support financial inclusion in the developing world, Mastercard is experimenting with a new type of philanthropy: data donation. Mastercard is one of the largest payments companies in the world, and Shamina Singh, president of the Center for Inclusive Growth, says that when the Center was founded, it was with a mandate from the company’s board of directors to “think about Mastercard’s assets broadly, and then think about how those assets can be applied for social good.” And with a company like Mastercard, Singh says, “you realize very quickly that data is an enormous asset.” Through its data philanthropy program, Mastercard offers governments, nonprofits, and other private companies “data grants” that allow their proprietary insights to be put toward furthering research and programs advancing social good.
“We wanted to take a longer-term view than just achieving financial inclusion, and look to how we can support long-term sustainable growth.”
The initial idea behind the Center for Inclusive Growth, Singh says, was to commit to bringing 500 million of the world’s 2 billion people living outside formal economies into the fold. Though 85% of the world’s transactions are done in cash, it comes with a societal cost–in cash-based countries like India and Nigeria, the expense of producing, distributing and safeguarding paper money can result in as much as a 2% loss to GDP. But it’s not enough, Singh and her colleagues at the Center understood, to implement a digital payments system in a country, step back, and hope that economic growth follows. “We wanted to take a longer-term view than just achieving financial inclusion, and look to how we can support long-term sustainable growth,” Singh says.
Data is at the heart of achieving economic growth, Singh says, and cashless payments systems are major collectors of information around spending patterns, revenue growth, and individual creditworthiness. As a private company, Mastercard quickly realized that it was privy to a wealth of data that could do more good publicly than it would sitting in Mastercard’s private holdings. “The real power of this data is how it can illustrate what being included in the formal economy allows you to do, versus when you were not included,” Singh says.
Mastercard has the “ability to collect data to understand transaction behavior, and model alternative ways to assess credit.”
Take the issue of credit. Access to capital via credit is one of the main avenues by which businesses can grow, but the system of scoring creditworthiness, Singh says, is not designed to be inclusive. “There’s no FICO score in countries like Ethiopia,” she says. But what the concept of credit comes down to, she says, is a person’s ability to pay back a loan. “And when you’re a company like Mastercard, operating a technology payments network in over 200 countries, you have an ability to collect data to understand transaction behavior, and model alternative ways to assess credit,” Singh says.
Mastercard’s Center for Inclusive Growth is launching a partnership with Unilever and a network of Kenyan shop owners in the fall around this very principle. Unilever, one of the world’s largest consumer goods suppliers, contracts with around 40,000 small shop owners in Kenya, who sell Unilever products. By equipping those shop owners with digital payment capability, which tracks what they purchase from Unilever, what they sell, and how they pay back loans, Mastercard will be able to collect the data aggregated on the platforms and analyze it in such a way that it will be able to serve as a proxy for a credit score that shop owners can show to a local bank, instead of having to rely on informal lenders.
Some of Mastercard’s other “data philanthropy” initiatives have involved donating transaction data from several countries to Harvard’s Center for International Development, which was conducting a study on how businesses develop and expand across the world, and working with Barack Obama’s Data-Driven Justice Initiative to quantifiably examine how high crime rates in Baltimore and Oakland impact local small businesses and job opportunities. “When crime hits a certain percentage, you can clearly see a drop-off of commerce in a particular neighborhood,” Singh says. “That was using transaction data at the very local level, but also using publicly available crime data.”
The Center for Inclusive Growth will soon be launching a data philanthropy leadership program, in which researchers in areas of social good and economic growth will be able to come into Mastercard’s offices and access the company’s complete data sets. One of the main difficulties of facilitating data grants is ensuring the information can be transferred and shared securely; by inviting researchers into Mastercard, it creates, Singh says, “a sandbox environment where people can dive into the data in a safe space.”
The idea of data philanthropy is still extremely new; Mastercard “is just now scratching the surface when it comes to understanding its potential,” Singh says. Though income inequality and financial inclusion are the most pressing issues facing the global economy right now, Singh maintains that information inequality, if we don’t start to tackle it proactively now, will only become more difficult to address. “We have an enormous opportunity, but also an enormous responsibility, to close the information gap, or at least make sure it doesn’t become as wide as income inequality,” Singh says.