Christopher Rodrigues, chief executive of Visa International, brandished a cell phone to make his point about global expansion during a conference in London last month organized by the Economist and the Wharton/INSEAD Alliance. This, he said, was the unlikely means by which companies like Visa will penetrate new markets, particularly in developing nations. Not that Visa has designs on becoming the next Nokia or DoCoMo. The cell phone, he explained, will allow monetary transactions in even the remotest of locations, where land-lines have not yet been constructed.
Rodrigues was a keynote speaker at the conference, entitled "Delivering Profits in the Global Economy," whose participants focused on such issues as growing a global business, leadership in the global organization, branding, and decentralized vs. centralized management structures.
To illustrate the importance of WiFi transactions to growing economies, Rodrigues pointed to Asia. In the next four years, 100 million cell phones will be used in India. That number should reach 500 million in China within three years. "What we are seeing," said Rodrigues, "is a global shift from paper-based transactions to electronic payments." The benefits of electronic transactions include lowering transaction costs (by reducing the costs of handling cash and reconciling payments), moving economic activity from the informal to the official economy (by mainstreaming more individuals into the banking system) and improving financial transparency. Indeed, the World Bank has cited effective and efficient payment systems as vital elements for economic development in emerging countries.
Rodrigues likens a cash economy to walking, whereas "introducing electronic payments is akin to using the gears on a bicycle." Add in an efficient electronic payments system and you "kick [the economy] into high gear." Add better-controlled consumer and business credit and you notch up economic velocity even further. Rodrigues sees a strong role for Visa in moving cash-based economies into the global financial systems. This includes working with institutions like FINCA International and Mibanco to provide microfinancing for low-income individuals and businesses, and enabling cost-effective funds transfer to support remittance to home countries by guest workers abroad.
In developing countries and transition economies, Visa works closely with governments and lending institutions, Rodrigues said. For example, in Puerto Rico and Brazil, Visa offers card solutions for government grants and loans, thereby facilitating safer and more transparent enterprise initiatives. In South Africa, payroll, pension, and benefit cards are introducing people formerly outside of the system to banking procedures.
"If we stop thinking of the poor as victims, a whole new world opens up," said Rodrigues, citing themes from the book, The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits, by C.K. Prahalad. Rodrigues believes the way to commercial and societal improvement will require those in the developed world to re-conceive the way they deliver products and services to the developing world.
Indeed, companies that do not understand the economics of developing nations will miss out, noted Donald Hepburn, corporate economist for Unilever. He forecasts a major shift in consumer consumption between 2003 and 2010. Currently, of the $21.6 trillion world consumer spending total, the majority is in the West: $7.8 trillion in the U.S. and Canada and $6.9 trillion in Europe and Russia. South America accounts for just $1.2 trillion in consumer spending, Africa $1 trillion, and Asia $4.8 trillion (at market exchange rates).
