For all of the talk about the mobile payments revolution, most of the world still deals in cash. About 85% of world retail transactions are still done with paper currency, while payment processors are smacking their lips at the prospect of increasing their share.

The problem with digital payments in emerging markets is most people do not have proper bank accounts. However, they are likely to have mobile phones. So today, MasterCard announced a partnership initiative to turn those phones into payment processors. Walk into a store anywhere in the world and use your phone to make a purchase. The combination of currency with telephony holds great promise, one that MasterCard thinks will net it a billion new customers.

“In the majority of emerging countries the percentage of the population that has access to normal banking accounts as you and I have with a normal bank is limited. It is well below 100% of the population,” said Mung Ki Woo, group executive for mobile and emerging payments at MasterCard. “On the contrary, penetration of mobile telephony has increased massively. To the point where in those countries, even the poorest, have 50%-60% penetration rates. This means that most adults can have access to mobile phones. Out of this this discrepancy was born mobile money services.”

The MasterCard Mobile Money Partnership Program is intended to help 2.5 billion people in emerging markets gain financial services through their mobile phones. MasterCard is partnering with Sybase 365, Utiba and Comviva to bring transactions through telephony to brick and mortar and online merchants across the world.

The target locations for the partnerships will be in Africa, the Middle East, parts of Asia and Eastern Europe. All that will be needed to make a transaction between two parties is that each have a cellphone.

“What we have been doing over the last 10 months is reaching out to this world of mobile money services and building bridges to enable transactions between this world of mobile money services and the existing world of MasterCard accounts,” Woo said. “For us we think that it is about getting the next billion customers and consumers connected to the MasterCard network.”

Here are the specific services offer by the MasterCard Mobile Money Partnership Program:

  • Prepaid companion cards that account holders can use at merchants that accept MasterCard cards.
  • Virtual card accounts that can be used for e-commerce payments with a user’s mobile money account.
  • Person-to-person payments between subscribers of two different mobile money services.
  • Face-to-face or remote payments using mobile phones for goods and services at merchants that do not have traditional point of sale systems.

Visa also announced a payments model in an emerging market today, teaming with a company called Monitise to bring mobile payments to India.

Imagine all the world’s transactions as one giant river. Right now that river flows with physical currency and a small stream of digital transactions. Companies like MasterCard and Visa see emerging markets as the key to digitizing more of that flow.

dan rowinski