The future of digital payments and financial ecosystems is evolving on a daily basis. As the use of cash declines and smartphones transform into digital wallets, the very notion of currency is being redefined.
In the latest episode of AB Majlis, J.K. Khalil, Division President for East Arabia at Mastercard, paints a vivid picture of a future where loyalty points might buy your morning coffee, AI safeguards transactions across global networks, and a digital identity could carry more weight than a passport.
“My children are now asking me to open a bank account for them and how to store the card on their phones. They don’t want a plastic card. In our generation we were asking for allowances and legal tender and traditional fiat currency, I wanted to know exactly how many papers and coins I had. They don’t want to play Monopoly, they want a card on a phone,” he said.
Khalil addressed the common fear of credit cards in some markets, arguing for a more nuanced understanding of credit. “Credit is actually good because it allows us to enhance our quality of life,” he stated. “Credit is bad if you don’t know how to manage it.”
He used examples from the U.S. market to illustrate how credit cards can provide benefits beyond just delayed payment, such as discounts, points, and the ability to make larger purchases that improve quality of life.
“The US is a place where people are very comfortable with the concept of credit, you learn that it does not make sense to use cash to do everything. And they show you the importance of credit and how you accelerate and multiply your efforts and your funds,” he said.
“For instance, can you buy a house without credit? It’s impossible. We buy a house and we pay it from the earnings of our future work and income. Can you buy a car without credit? It’s impossible,” he added.
A ‘simple’ principle in a ‘complex’ market
Khalil, who recently took on his new role as part of Mastercard’s refreshed organisational design, emphasised the company’s focus on being “closer to market and closer to customers” in an increasingly complex business landscape.
“It was led by a very simple principle, closer to market and closer to customers,” Khalil explained. “As the nature of the business becomes more complex, we noticed that there is a greater need for our delivery capabilities from a product innovation, product delivery, and even co-creation perspective to be closer to our customers.”
This restructuring reflects Mastercard’s recognition that payment solutions need to be tailored to specific markets. Khalil highlighted the diverse challenges and opportunities across the region, from high-GDP markets like the UAE to large-scale markets like Pakistan, where financial inclusion remains a key priority.
On the topic of emerging technologies, he discussed how Mastercard is leveraging AI to enhance payment experiences and security. While noting that Mastercard has been using AI “for more than 15 years”, he emphasised that recent advancements and cost reductions have made AI more accessible and powerful.
“What we are trying to do now is to productise and expose some of it to our customers through our services, through our data platform, but also through AI companies that we have outright bought out,” Khalil explained. He highlighted Mastercard’s acquisition of Brighterion, an AI company that can create machine learning algorithms to solve various business problems, particularly in fraud detection.
Khalil stressed the importance of connecting AI systems to global data pools to improve fraud detection and adapt to new threats. “When a creative guy comes along and does something new that looks like some bad actor whom we caught in another market, we catch them not because of your data, but because of somebody else’s data,” he said.
The future: Interchangeable digital assets and new form of currency
Looking ahead, Khalil painted a picture of a world where physical and digital lives are increasingly blended, enabling new forms of value creation and exchange. His most intriguing prediction was about the future interchangeability of digital assets and currencies.
“I think for me, the biggest thing would be the interchangeability of digital assets,” Khalil said. “Imagine being able to pay, let’s say, with your Bonvoy points from Marriott for your next ticket… Imagine also being able to buy coffee with them. I think that interchangeability of digital assets and currencies is something that is very powerful.”
This vision extends beyond just loyalty points to encompass a broader reimagining of currency and value exchange. Khalil suggested that as corporations take on greater roles in shaping societal values, customers start identifying with them.
“The rise of digital identity is also shaping a new concept of identity,” he explained.
Khalil envisions a future where individuals might choose to use certain digital currencies based on their affinity for particular brands or agreement with corporate values. This could lead to a more fluid and personalised economic ecosystem.
“I think the biggest innovation is that our phygital lives – digital physical lives – are enabling us to do things and stand for new values above nations and maybe above corporations and create an economy of one,” he said.
As traditional financial boundaries blur and new forms of value exchange emerge, Khalil’s vision suggests we may be on the cusp of the most significant transformation in the history of money and commerce.
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