Monday, September 25, 2017

Beyond ‘Send Money Home’: The Complex Gender Dynamics Behind Mobile Money Usage

Sibel Kusimba's IMTFI-funded project on social networks around mobile money cited by Susan Johnson in this important blogpost with Next Billion on the complexity of gender dynamics behind MM: Why and how is mobile money ACTUALLY narrowing the gender gap?

Beyond ‘Send Money Home’: The Complex Gender Dynamics Behind Mobile Money Usage by Susan Johnson, senior lecturer at the Centre for Development Studies at the University of Bath (This post originally appeared on the Next Billion Blog and is re-posted with permission) 

In spite of the rise of mobile money in sub-Saharan Africa, just 12 percent of people age 15 and older now have a mobile account, compared with 29 percent who have an account at a formal institution. But the gender gap for mobile money accounts is lower than that for formal accounts; women have 7.6 percent less access than men to formal accounts (32.7 percent vs. 25.1 percent) but just 2.5 percent less access to mobile money (12.8 percent vs. 10.3 percent). More detailed regression findings for Kenya in particular show that gender is not a significant variable in determining access to mobile money accounts in Kenya – though it is for formal financial institution accounts.

This is surprising. For information and communication technologies generally, the evidence suggests that gender gaps are significant, with the World Bank reporting that women are 50 percent less likely than men to use the internet in Africa and significantly less likely to use cell phones. So the question is: Why is mobile money different?

The standard answer is not necessarily the best

The “go to” answer for this (from groups like the Better than Cash Alliance) is that digital is solving the constraints of formal financial inclusion. Its advantages include: the proximity of agents to women whose domestic constraints render them less mobile than men; the fact that mobile money accommodates small payments with low transaction costs in ways that formal accounts do not; the fact that the technology enables money to be kept securely on the SIM card, and that digital offers a level of privacy and confidentiality that having to travel and walk into a bank does not.

However, if we are to really mind the gender gap we can’t simply presume that mobile money is succeeding by overcoming these rather conventional assumptions about the constraints to women’s financial inclusion. Indeed, from my research, these assumptions seem at best a partial explanation for why the mobile money gender gap is narrower.

Mobile money as a networked technology draws in women

To fully explain the gap, we must ask how men and women are using mobile money in these contexts and what this means for analysis and policymaking.

One obvious use is very straightforward but surprisingly not often discussed in terms of gender dynamics. The “send money home” marketing effort of M-Pesa shows us a clear gendered story of men – in this case probably well-educated, young, urban, employed men – sending funds to their rurally based mothers.

A similar gendered urban-rural story of migrant husbands was detailed by Olga Morawczynski in her early ethnographic research on M-Pesa’s use. This gives us the first dimension of our answer: Mobile money is a network technology that connects people and fits into a pattern of gender relations in which urban-based men earn and remit to rurally based women. So far, so apparently straightforward.

But the key point we must take from this is that “normal” financial services are not networked and hence do not have an impact on adoption by others – it is the networked nature of mobile money in the context of remittances that means women get included.

What’s more, it’s clear that mobile money is now far more than an instrument to enable urban-rural remittances; it has a much wider range of uses for gifts and interpersonal transfers of many types.

Family ties pay dividends

Sibel Kusimba’s detailed ethnographic analysis of the social networks around mobile money among the Bukusu in western Kenya gives us further insight. Doing well means successfully accessing extended family resources and these networks are mostly based in flows within sibling, mother and cousin relationships. Kusimba shows that women – especially mothers – are central to these networks. The contributions from men more often come from brothers and mothers’ brothers than fathers; that is, maternal kin. This is not to say that ties through patrilineal kin are not also important and institutionalized – but it is to point out that women are critical lynchpins to many of these networks.

As Kusimba puts it (page 273), “In a context of rapid social change … the hearthhold based around a woman, her relatives and her children is becoming a basis for lifelong bonds of support.” These exchanges of funds also serve to confirm the strength of relationships, transmitting affection and strengthening emotional ties (see also Johnson and Krijtenburg, 2014). Moreover, since 33 percent of households in Kenya are de jure female headed, mobilising resources for their own children through these ties to male kin is vital to their survival. Even small gifts enable investment in this woman-centric “hearthhold” over time without “disrupting widely shared ideals of patrilineal solidarity and household autonomy,” she says.

Gendered networks of resource exchange

These patterns are supported by further (as yet unpublished) analysis that we[1] have undertaken of the financial diaries dataset drawn from five locations across Kenya. This analysis involved nearly 800 low-income individuals over a period of 11 months, with data on resources received in cash, including through mobile money, and in the form of in-kind goods. We found that having a mobile phone increased the value of resources received by women through mobile money, when compared to women without a mobile phone, though surprisingly the same effect was not evident for men.

Women’s receipts were higher in total across all types of resources received and through the mobile money channel and also when they were married and household heads. Women received more via mobile money when they had more women in their network of close family sending them funds, meaning women were sending higher amounts than men, which suggests a strong woman-to-woman dimension among close family (parents, spouses, children). Yet men also gave more when they had more women in their close family network.

However, in the wider network of family (including siblings, cousins, aunts/uncles), both men and women received higher amounts when they had more men in these networks – further supporting Kusimba’s finding about the importance of male relatives. Moreover, we found that when both men and women gave to women in both their closer and wider family networks, this then raised the amounts they in turn received, demonstrating a reciprocal dynamic at work.

This evidence shows the complex gendered dynamics of finance and its networked characteristics. It is not yet possible to tell a simple story from these findings, but they tell us that in order to understand mobile money adoption, we need to recognise and understand these dynamics – and to move beyond the conventional axioms regarding gendered constraints to financial access. The implications for financial inclusion analysis, policy and product design are significant. By understanding these networks, we’ll begin to understand what both men and women actually do with their money, how it connects them to others and what financial services can do to facilitate this.

[1] A team of researchers from University of Bath and University of Antwerp with support from FSD Kenya.

Susan Johnson is a senior lecturer at the Centre for Development Studies at the University of Bath. Photo: M-Pesa’s “Send Money Home” ad, courtesy of Safaricom.

Read the original blogpost on Next Billion -

Read Sibel Kusimba's recently released final report (Sept 2017), "Dynamic Networks of Mobile Money among Unbanked Women in Western Kenya"

"Hearthholds of mobile money in western Kenya" is now available for free download at Economic Anthropology until October 20, 2017.

Monday, September 18, 2017

How Nigerian ATM fraud victims are swindled

File 20170913 23162 f2971h
REUTERS/Akintunde Akinleye
IMTFI Fellow Oludayo Tade, University of Ibadan in The Conversation

It has been three years since the Central Bank of Nigeria introduced the Cashless Nigeria Policy. Its aim was to encourage the use of electronic systems for all monetary transactions.

The policy has yielded benefits: it makes many transactions simpler and safer for more people. But there has been an increase in fraud in the banking and payment systems. These crimes are carried out using the information and communications technology that has flourished in Nigeria since the early 2000s. A 2013 report by the Nigerian Deposit Insurance Corporation identified 14 types of electronic fraud (e-fraud). Automated teller machine (ATM) fraud was in prime position. It accounted for just under 10% of the total value of funds lost to e-fraud and 46.3% of the reported number of cases. The agency’s 2015 report points to an increase in the incidence of ATM fraud in Nigeria.

Despite the apparent importance of e-fraud, little scholarly attention has been paid to understanding how it affects the functioning of the financial system and its impact on victims. That’s why my colleagues and I carried out a study to examine the experiences of ATM fraud victims in south-west Nigeria. We focused on what made a person more likely to be a victim and on the fraudsters’ tactics.

Study results

We found that a number of factors predisposed people to being victims of fraud. These include illiteracy, health problems and issues of vulnerability.
An elderly illiterate man who was interviewed said:
I was given an ATM card and nobody told me how to use it. Outside the bank I gave it to a young man at the ATM to help me withdraw cash. He did it and returned my card to me. After a few days I noticed money had left my account, which I promptly reported to my bank. At the bank I was told that the young man had swapped my card.
Our study also showed that close family members sometimes exploit people’s trust to defraud them. One middle-aged man gave his son his ATM card to draw N5,000 (USD $31.25) ahead of returning to school. He later discovered that his son had instead drawn N10,000 (USD $62.50). “If my son could do that to me while I was trying to help him, who can one trust?” he lamented.

When people are ill, they can be vulnerable to ATM fraud. They depend on others because they can’t get around. A “trusted” person may take advantage.

The story of a young man interviewed during our study helps illustrate this. He was ill and gave his ATM card to a friend to help him buy medication. He was later “shocked” to discover that his friend had drawn an extra N70,000 (USD $237.50) from his account.

The coercion factor

Of course, friends and relatives are not to blame for all ATM frauds. Some occur through coercion, particularly physical attacks and armed robbery at ATMs.

One young woman told us:
I wanted to make a withdrawal on a Sunday evening. The ATM on my street was not working so I had to look for another ATM a few streets away. Unfortunately I was robbed by an armed gang. They made me insert my ATM card to confirm the PIN number and balance. They went away with my ATM card and PIN. I couldn’t do anything until Monday, by which time my account had been drained of N200,000 (USD $1,250). They took my phone so I could not even alert the bank and block withdrawals.
The success of online fraud depends on offenders choosing easy victims.

Stemming the tide

Reducing ATM fraud depends on making people less vulnerable.

For example, anti-fraud education campaigns must use indigenous languages and consider that some bank customers can’t read. Banks must show their customers how their cards work and how to get help when in trouble. Security officers who are not bank staff should not be allowed to deal with customers.

ATM users should be taught to change their passwords sometimes. They must also be cautious about when and where they withdraw money to reduce the risk of attacks.

This article was originally published on The Conversation by Oludayo Tade, Lecturer of Criminology, Victimology, Deviance and Social Problems, University of Ibadan
Read the original article.

Read his recently published article with Oluwatosin Adeniyi in Payments Strategy & Systems, "Automated teller machine fraud in south-west Nigeria: Victim typologies, victimisation strategies and fraud prevention"

Thursday, September 7, 2017

Cash is not a Crime - New IMTFI white paper finds efforts to curtail cash use hurts poor and does little to stop terrorism financing

Because it can be used anonymously, and is generally thought to be untraceable, cash has long been linked to crime: think of the image of wads of unmarked bills in a suitcase being passed between disreputable conspirators plotting evil. And while it is also commonly thought that cash is one of the primary tools to finance terrorism, recent news on the use of online platforms to fund US terror shows otherwise. Recently, there have been calls to eliminate cash altogether in favor of electronic payments systems, or at least to eliminate high-denomination banknotes.

Ursula Dalinghaus
Photo by Frank Cancian, UCI
In a new white paper published online this week, however, Ursula Dalinghaus, a postdoctoral scholar at the Institute for Money, Technology & Financial Inclusion (IMTFI) at the University of California, Irvine, demonstrates there is little to no evidence to support the claim that eliminating high-denomination banknotes or restricting cash payments will prevent terrorist attacks. The study finds that targeting cash as a terror financing mechanism misidentifies the problem.

“Curtailing cash will do little when criminals already make use of a diverse portfolio of payment technologies and types,” she says. "Increasingly, electronic forms of transmitting and converting value are just as essential, if not more so, in supporting criminal as well as terrorist activities.”

In addition, she argues that legal tender – in the form of cash – is a public good that guarantees ease of use, accessibility, a certain level of privacy, and many other unique qualities.

“Restricting cash payments entails the criminalization of legitimate payment activities when reliable data on the full scope of cash usage of any kind is scarce,” she says. “More research on payments and cash usage is therefore essential.” 

Key findings include the importance of the interplay between multiple payment tools and jurisdictions. People use diverse payment methods together, and the movement of value across jurisdictions is subject to different regulatory environments and payment cultures. Targeting cash in isolation does not take into account this interplay, and risks displacing criminal activities involving cash to other tools and jurisdictions. Multiple methods of interdiction are therefore needed to address money laundering and terrorist financing.

Drawing upon a range of institutional, legal, scholarly, policy, news media and other sources, in collaboration with experts drawn from criminology and terrorist financing, banking, industry, and the social sciences, the report documents how digital forms of payment are also subject to abuse and do not necessarily guarantee transparency in accounting that many believe could aid in the tracking of financial crime. In addition, the shift to digital away from cash exposes people to new risks. Researchers studying the impact of demonetization in India and capital controls in Greece are observing that cash restrictions entail new social and economic burdens and are shifting the costs of making payments onto small businesses and disadvantaged groups in society.

Findings from this study have been entered into a EU-wide consultation to be used by the European Commission in Brussels to determine the policy implications of cash restrictions.

Dalinghaus concludes that there is little to no evidence that limiting cash will effectively target the financing of crime and terrorism.

“IMTFI research around the world has consistently demonstrated the complex interplay of different forms of money and payment, so we shouldn’t be surprised that the bad guys also take advantage of diverse payment options. Criminalizing cash therefore won’t solve the problem,” says Bill Maurer, UCI anthropology and law professor and IMTFI director. “This new study also reminds us that criminalizing cash may criminalize the fact of being poor and living in a cash economy.”

Funding for this paper was supported by the International Currency Association (ICA) and its Cash Matters movement. 

Read Q&A with author here: 

About the Institute for Money, Technology & Financial Inclusion (IMTFI): Established in 2008 with funding from the Gates Foundation, IMTFI is a research institute based out of the University of California, Irvine. Its core activity has been supporting original research in the developing world on the impact of mobile and digital financial services, focusing on developing grounded, nuanced perspectives on people’s everyday financial practices and the impact of new technologies. To date, IMTFI has supported 147 projects in 47 countries involving 186 different researchers. These researchers have produced 12 books and 100+ articles in scholarly and other venues, and have been mentioned in the media 170+ times, in venues ranging from Bloomberg Businessweek and the Guardian to Forbes, India.

About the University of California, Irvine: Founded in 1965, UCI is the youngest member of the prestigious Association of American Universities. The campus has produced three Nobel laureates and is known for its academic achievement, premier research, innovation and anteater mascot. Led by Chancellor Howard Gillman, UCI has more than 30,000 students and offers 192 degree programs. It’s located in one of the world’s safest and most economically vibrant communities and is Orange County’s second-largest employer, contributing $5 billion annually to the local economy. For more on UCI, visit 

About the International Currency Association (ICA): Founded in 2016 as a not-for-profit organisation, the ICA represents the currency industry across the whole spectrum. It currently has 23 members and 5 associate members;  all members are suppliers of currency, or suppliers of products, technologies and equipment used in the design, production, handling and circulation of currency. The ICA is working to ensure that its members drive innovation and offer the best commercial and technical practices to their customers, promote the highest ethical standards, do everything in its members’ power to ensure that cash is secure, efficient and effective  and support and promote currencies worldwide as universal and inclusive means of payment. For more on the ICA visit  

Cash Matters, an ICA movement: Cash Matters is a pro-cash movement, funded by the ICA, which supports the existence and relevance of cash as an integral part of the payment landscape now and in future. Cash Matters will support and initiate campaigns on a global level, taking current issues and upcoming legislative changes into account. The Cash Matters website offers authoritative and to accessible facts, figures, and news for consumers, journalists and industry experts alike. For more on the Cash Matters visit 

Original post by UCI School of Social Sciences can be accessed here.

Monday, August 28, 2017

MONEY AT THE MARGINS: Global Perspectives on Technology, Financial Inclusion and Design

IMTFI is pleased to announce the forthcoming publication with Berghahn Books - MONEY AT THE MARGINS - bringing together research by IMTFI fellows & postdoctoral scholars with commentary from leading experts:

Global Perspectives on Technology, Financial Inclusion and Design
Edited by Bill Maurer, Smoki Musaraj, and Ivan Small
304 pages, 22 illus., bibliog., index
ISBN  978-1-78533-653-9 $130.00/£92.00 Hb Forthcoming (February 2018)
eISBN 978-1-78533-654-6 eBook Forthcoming (February 2018)

“This very important collection adds unique ethnographic case studies from a wide variety of geographic contexts to the growing literature on financial inclusion.” · Anke Schwittay, University of Sussex

Mobile money, e-commerce, cash cards, retail credit cards, and more – as new monetary technologies become increasingly available, the global South has cautiously embraced these mediums as a potential solution to the issue of financial inclusion. How, if at all, do new forms of dematerialized money impact people’s everyday financial lives? In what way do technologies interact with financial repertoires and other socio-cultural institutions? How do these technologies of financial inclusion shape the global politics and geographies of difference and inequality? These questions are at the heart of Money at the Margins, a groundbreaking exploration of the uses and socio-cultural impact of new forms of money and financial services.

The book is Volume 6 of the Human Economy Series, edited by Keith Hart and John Sharp.

Bill Maurer is Dean of Social Sciences and Professor of Anthropology and Law, University of California, Irvine.

Smoki Musaraj is Assistant Professor of Anthropology at Ohio University.

Ivan Small is Assistant Professor of Anthropology and International Studies at Central Connecticut State University.


Introduction: Money and Finance at the Margins by Smoki Musaraj and Ivan Small


The Question of Inclusion by Ananya Roy

Chapter 1. A Living Fence: Mobility and Financial Inclusion on the Haitian-Dominican Border by Erin B. Taylor and Heather Horst

Chapter 2. Capital Mobilization among Somali Refugee Business Community in Nairobi, Kenya by Kenneth Omeje and John Mwangi

Chapter 3. The Use of Mobile Money Technology among Vulnerable Populations in Kenya: Opportunities and Challenges for Poverty Reduction by Ndunge Kiiti and Jane Wanza Mutinda


What do Value and Wealth DO? “Life” goes on, whatever “life” is. by Jane I. Guyer

Chapter 4. Dhikuti Economies: The Moral and Social Ecologies of Rotating Finance in the Kathmandu Valley by Sepideh Bajracharya

Chapter 5. Chiastic Currency Spheres: Postsocialist “Conversions” in Cuba’s Dual Economy by Mrinalini Tankha

Chapter 6. Carola and Saraswathi: Juggling wealth in India and in Mexico by Magadalena Villarreal and Isabelle Guérin


Infrastructures of Digital Money by Jenna Burrell

Chapter 7. ‘Financial Inclusion Means Your Money Isn’t With You’: Conflicts over Social Grants and Financial Services in South Africa by Kevin Donovan

Chapter 8. Social Networks of Mobile Money in Kenya by Sibel Kusimba, Gabriel Kunyu and Elizabeth Gross

Chapter 9. Accounting in the Margin: Financial Ecologies in between Big and Small Data by José Ossandón, Tomás Ariztía, Macarena Barros and Camila Peralta


Design and Practice by Josh Blumenstock

Chapter 10. Understanding Social Relations and Payments among Rural Ethiopians by Woldmariam F. Mesfin

Chapter 11. Delivering Cash Grants to Indigenous Peoples through Cash Cards versus Over-the-Counter Modalities: The Case of the 4Ps Conditional Cash Transfer Program in Palawan, Philippines by Anatoly ‘Jing’ Gusto and Emily Roque

Chapter 12. Effects of Mobile Banking on the Savings Practices of Low Income Users: The Indian Experience by Mani A. Nandhi

Chapter 13. Betting on Chance in Colombia: Using empirical work on game networks to develop practical design guidelines by Ana María Echeverry Villa and Coppelia Herrán Cuartas

Afterword by Bill Maurer

Available at Berghahn Books (Feb 2018):
EBook available on Kindle through Amazon (Feb 2018):

Tuesday, August 22, 2017

Financial Inclusion: Integrating the Poor into the World Economy – A Look at Migrant Laborers in a Karachi Marketplace and How They Move Money

by IMTFI Fellow and International Board Member Noman Baig, Habib University

Vendor at Jodia Bazaar, Karachi 
My interest in money stems from the incidents of 9/11 in the United States. After the attacks in the US, all major governments and international organizations passed stringent laws against informal money transfer channels labeled as funding terrorism all over the world. In Pakistan, the state curtailed the illegal funds transfer channel known as hawala by arresting prominent currency dealers and passing the Anti-Hawala Act. A hawala channel is a monetary network/practice that relies on centuries-old kinship bonds for transferring value without moving physical cash from one place to another. In place of these informal and embedded monetary channels, the state opened up a market for multinational corporations such as Western Union and the branchless banking sector to integrate hitherto unbanked people into the gambit of modern finance under the national strategy called “financial inclusion.”

Despite the state’s coercive crackdown on moneychangers and moneylenders in the country’s local bazaars, the lower-income labor class continues to depend on such informal money channels to send and receive money. These personalized networks allow them to feel secure that the money will reach its destination safely. I conducted ethnographic research in Karachi’s marketplace, Bolton Market, the largest wholesale bazaar of a variety of commodities such as skin care, spices, fabric, steel, medicine, etc. While the merchant community was under the direct surveillance of the state security agencies, the laborers were freely moving their funds.

An archeology of funds transfer methods in Karachi’s Bolton Market

Bolton Market, Karachi 
During my research in these markets, I have discovered an archeology of funds transfer methods. I call it an archeology because there are layers of channels, often superimposed on each other, cross-cutting in many cases, and undermining each other at various intervals. It can be called a gradation of financial channels. For example, an informal hawala transfer made through a local money changer passes through a kinship channel, but at some point in a long chain the same transaction will intermingle with the formal banking system. If the transaction raises a suspicious activity report, then the Federal Investigation Agency (FIA) will examine it before the funds reach their final destination.

Jodia Bazaar, Karachi
Financial practices in Karachi’s marketplaces are a lattice work, convoluted, and rhizomatic, making the location of the sources of a transaction by the researcher a dizzying task. In just a single transaction the number of actors involved can include a number of players, such as banks, moneychangers, security agencies, merchants, etc. Sometimes transactions may include shrines, mosques, and charity organizations by virtue of the mere fact that the gift economy and commodity exchange are so tightly knit. Thus it becomes extremely difficult to neatly categorize and differentiate one method of financial transfer from another. In fact, it is also incorrect to use labels such as “informal market,” which according to recent estimates is 75-90% larger than the size of the “formal economy.” To be very clear, “informal” does not mean that the market operates haphazardly, randomly, or irrationally, though it is the kind of impression we generally get when we hear the word informal. In fact, the informal market, if it can be neatly categorized as informal, does not operate outside of the formal market. Both domains intermix with each other at multiple locations.

Bhandari’s story – Considering migrant laborers in Karachi

The research I conducted engages with these multiple methods of funds transfer. One of the channels often used by laborers in Bolton Market involves a kin-based network of largely Pakhtun migrant workers in Karachi.  One of the laborers who I became friends with is called Khan Zareen, also known as Bhandari in the market. Bhandari arrived in Karachi as a porter in the early 1980s. He started working in the city’s vegetable market (sabzi mandi) loading and unloading vegetables and fruit on his back. After the resettlement of the vegetable market to the outskirts of city, Bhandari decided to work in Bolton Market, where he started hauling heavy boxes to and from the warehouse.

Vendor at Jodia Bazaar, Karachi
My encounter with Bhandari was sudden and unexpected. One day while loading boxes on the cart to take it to bus station, he came to hear, rather incorrectly, from a shopkeeper that I was a journalist writing a story about the markets. Bhandari came rushing into the office and instructed me to write about his suffering and condition. “Our houses have been destroyed in Bajaur, and we never got any compensation from the government, while the landowners (malik) are constructing new palatial houses,” he said.  These were the first words that Bhandari uttered to me bluntly. Initially I responded to him by saying that I would tell his story, but that he would have to give me more details. As the days passed, we became friends. Every time I would visit Bolton Market, we would go to a chai dhabba (tea shop) for a cup of tea.

One day Bhandari showed me how he transfers money to his home in Bajaur. He took me to another Pakhtun porter, who is known as Laal Zeb. Bhandari handed over cash to Zeb and told him to deliver rice, ghee, wheat, and sugar to his home. Laal Zeb took the cash and called his brother in Bajaur who owns a food ration shop in the village. The next day, Zeb’s brother delivered the goods at Bhandari’s house. There were no fees or charges for any part of the entire transaction. Bhandari was able to buy food items for his family from Karachi, while Zeb collected the cash for his brother’s shop in the village. However, when Bhandari sends cash to the village via a moneylender/shopkeeper, he has to pay Rs. 30 for every Rs. 1000 (which is still half of what branchless banking services such as Easypaisa charge their customers). These are personalized networks operated mainly by village communities who are spread across rural and urban Pakistan. Porters such as Bhandari never go to the bank. Several years ago, with the aid of the state officials, he managed to open a bank account in a local bank branch in Bajaur to receive government compensation for the reconstruction of his house, but after several years the bank account is still waiting to receive funds from the government.

I asked him why doesn’t he use new services such as Easypaisa—Pakistan’s largest branchless banking network—to send money. He replied, “Easypaisa charges Rs. 60, while I pay Rs. 30 on every Rs. 1,000. Also nobody in my home can get to an Easypaisa shop, which is outside of the village.” In conservative tribal areas women are not allowed to go outside alone. Bhandari has no male family members living in the village; his two sons who are 22 and 14 also work in Karachi.

Although Easypaisa has become a phenomenal success among the laboring classes in Karachi, and in Pakistan in general, Pakhtun laborers in Bolton Market continue to use the old ways of sending and receiving money. They use personalized channels such as Laal Zeb not only to transfer value, but also to solidify affective bonds, social relationships, and ethnic ties. These symbolic values play a determining role in maintaining community boundaries. In an Easypaisa store, affective and ethnic relations are rendered unnecessary, while the rationalized market ethos of efficiency, security, and instant transaction takes precedence.

Vendor at Jodia Bazaar, Karachi
Laborers such as Bhandari constitute the majority of Pakistan’s working class who survive on less than $2/day. It is this sector of the population that is seen as existing outside of the “real” economy, the domain of modern, “formal,” rational, and bureaucratic finance propelled by identity cards, paperwork, written records, and a survivalist ethos. The recent financial sector development policies and practices are an effort to bring laborers like Bhandari under the umbrella of the state and the corporate economy through giving them easier access to savings, loans, and credits. One of the ways proposed to implement this is to initiate a network of branchless banking or retail agent banking. The state and corporations justify these efforts as a favor to laborers, a remedy for alleviating their so-called “miserable” conditions through the cure of financial inclusion.

Expanding the Discourse on Financial Inclusion

The agenda of financial inclusion to offer easy access to savings, loans, and credit to the masses, is fraught with inequalities and injustices. This is not to say that the laborers should cease using branchless banking. But to charge heavy fees for the services owned by a foreign corporation proves how terms of trade set during the colonial era continue to extract surplus value from the bones and flesh of the laborers. Most importantly, if international developmental organizations such as the World Bank are seriously interested in improving the financial conditions of the poor by bringing them inside of modern finance, then they should start by identifying the actual root causes of their exclusion. If they want to include these people, then the governments need to start a radical program of wealth redistribution through policies that allow its more even distribution. In other words, the poor masses all over the world are excluded because the wealthy few hold the wealth of 99 percent of the people. The majority will always stay excluded, and any financial inclusion program will fail miserably, unless a just economic system comes into place.

Laborers near Urdu Bazaar, Karachi
The discourse of financial inclusion therefore demands a critical scrutiny in light of the developmental ideology propagated in the postcolonial world. With the beginning of modern colonialism in the mid-eighteenth century, such efforts at integration and inclusion have resulted in an imbalanced power structure and income inequality at a global scale. For instance, in British India, colonial rule forced the integration of the vast land of the Indian subcontinent, and its markets, its weavers and peasants, into the international markets. The outcome was horrendous, and resulted in the siphoning of wealth and resources from the colonies to the metropolis. Thus this is not the first time that a serious effort at integrating the masses into the world economy has been undertaken. The postcolonial world has been experiencing such programs of integration for at least the last two hundred years, often with disastrous consequences.

Stay tuned for a blogpost insights from "Financial Inclusion of the Poor workshop" in Karachi, Pakistan.
Photos credits: Noman Baig 

Wednesday, August 16, 2017

From the wallet to the refrigerator: why in the future machines will pay for everything

Experts point out that a multitude of Internet-connected devices will begin to take care of small daily transactions

by Andrés Krom from LA NACIÓN (The NATION, Argentina) 

About 8,000 years ago, the first farmers began to use part of their crops as exchange goods. For practical reasons, people later leaned more towards precious metals, which were not only easier to divide up, but also to carry. Paper money began to be used during the eleventh century, one of the many inventions attributed to medieval China.

Over the last 50 years, the state of available means of payment—cash, checks, credit cards—remained relatively stable. However, the proliferation of Internet access, the rapid adoption of mobile phones, and the emergence of new technologies have opened a window to a radically different future in many aspects, including economically.

So, if we were to travel a few years ahead in time, what kind of means of payment would we see from the slightly tarnished window of our DeLorean?

Probably none.

Invisible future

Unless you are in the habit of going everywhere with printed photos of your family, traditional leather wallets will become a museum artifact in the coming years.

The reasons? There are several, but we might start with the future dematerialization of the more than 1 billion credit cards currently in circulation. "I think the format of credit cards is likely to change," Bill Maurer, Director of the University of California, Irvine's Institute for Money, Technology and Financial Inclusion (IMTFI), tells LA NACIÓN. "We see a gradual migration towards a more virtual space, which is already beginning to be seen in online shopping," he adds.

Rubén Salazar Genovez, Senior Vice President of Visa Products in Latin America and the Caribbean, agrees that there is a need to move from plastic to an invisible environment in which payment credentials are maintained. "Connected devices are changing everything we know about shopping and payment. The web and mobile payments are just the beginning," he adds.

The expansion of mobile payment platforms and the consequent digitalization of money will also put banknotes and coins in check, but will not be enough to extinguish them. "I do not think cash will disappear," Maurer augurs. "Coin, in particular, is one of the oldest technologies in use that exists. It's incredibly durable."

According to this academic, the use of cash will endure among the lower classes, where access to financial services is limited. Even Anuj Nayar, Director of Global Initiatives at the electronic payment company PayPal, thinks that cash will withstand the digital onslaught. "There are still spaces for outdated technologies," he says. "The problem is the discomfort that comes with its use, its deterioration, what happens when it is lost."

In this context, it is estimated that this partial dematerialization of the means of payment will be tied to a noticeable drop in the role of human beings in some transactions, which will begin to be automated.

Things that talk to things

If Gartner's predictions are met, the Internet of Things (IoT) will be an established reality in the next four years. There will now be around 20.4 billion Internet-connected devices, from coffee machines to streetlights.

In this new world, diverse elements connected to Internet will have the capacity to transact with each other continuously and without the permanent supervision of users—a phenomenon that Maurer calls "ambient payments." "In the world of IoT, we will see some payments that happen in the background, especially at the level of micropayments," he indicates.

Gregorio Trimarco, of the Global Products and Digital Channels division of Mastercard, agrees with this vision. "We see that payments are going to be convergent. We believe that every connected device can be a payment device. The technology already exists for this to happen."

Imagine, for example, having a smart refrigerator with sensors that allows it to detect when a product begins to run out. Through a simple Internet connection, this appliance can put itself in contact with a supermarket every time it is necessary to replace the out-of-stock food.

Connected and autonomous vehicles might also be a determining factor in the expansion of this new economy. A system built into the automobile will allow, among other possibilities, to automate the payment of a series of services, like fueling, parking meters, and even automotive insurance.

There is also room for new payments in the virtual reality sector. Just this May, the payment processor Worldpay presented a proof of concept for a solution that allows consumers to buy items available in a simulated reality context.

Security, the last frontier

With new technologies come new problems. Any of the elements connected to the Internet will be vulnerable to cyberattacks, so ensuring the protection of privacy will become essential, especially when the financial integrity of users is at risk.

That is why multinationals like Visa, MasterCard, and PayPal are already preparing for a world in which passwords and payment voucher signatures will be nothing but distant memories. Among the technologies they are exploring geolocation and biometrics stand out, in their various facets: facial recognition, fingerprint device authentication, etc.

"The more complex the systems become, the greater the challenges," says Maurer. "It only takes one weak link to complicate the whole chain."

Translated by Taylor C. Nelms. Read original post (Wednesday, August 09, 2017) in Spanish here -

Wednesday, August 9, 2017

Barriers to a single European payments market: Cultural-economic feedback loops

PERSPECTIVES By Erin B. Taylor, Canela Consulting, former IMTFI Fellow and co-creator of the IMTFI Consumer Finance Research Methods Toolkit

Look into the average traveller’s pockets today and you will find evidence of multiple means of payment. Debit cards, credit cards, traveller’s checks, several currencies, cryptocurrencies, and payment apps are now so common that it seems impossible to run out of ways to pay. Wherever we buy things—on the street, in shops, restaurants, at ticket machines—we have a way to pay. 

As cash falls out of favour, foreigners must switch between different debit 
and credit cards in order to pay. Photo By Erin B. Taylor.

Or so it would seem. In fact, as many travelers can attest, it is still possible to run out of ways to pay. 

Let me give an example. One fine winter’s day in early January 2016, I stopped at a kiosk at the University of Amsterdam to buy a coffee. It was the beginning of my six-month stint as a visiting academic, and the environment was brand new to me. 

I handed the teller some cash to pay for my coffee and croissant, and she looked at me in surprise: “We only accept PIN,” she said. She meant that the kiosk exclusively accepted payment via a Dutch debit card: no cash, no foreign cards—not even European ones. 

I was astonished. Not accepting foreign cards is bizarre enough, but who doesn’t accept cash? As it turns out, a growing number of retailers in northwestern Europe are turning away from hard currency, citing cost and safety reasons. Some stores don’t accept cash, but they accept virtually all foreign cards (debit and credit). Others accept cash and local debit cards, but not foreign cards. And a minority (like my kiosk) exclusively accept local debit cards. 

The unsuspecting traveller may encounter inconveniences not only when trying to pay in the odd kiosk, restaurant, or shop, but also when simply trying to get from A to B. In the Netherlands, an unusually cash-averse society, some parking meters and train ticket machines only accept Dutch cards, and many a traveller has been caught out trying to return to the airport but unable to pay for the fare. Even the simple act of making a meal can involve a complicated series of transactions (see text box at the end of this post, "A Recipe in pan European Payments"). 

This is not just a Dutch peculiarity: payments are a Europe-wide problem. The European common market is meant to deliver the “four ‘f’s”: freedom of movement in people, goods, services, and capital. Theoretically, this should endow people with far more choice as consumers, workers, and citizens. 

Yet despite decades of financial market integration, many consumer finance products and services cannot be readily used across national borders within Europe. This situation could worsen when Brexit is implemented. A diversity of financial systems and a willingness to experiment means that the consumer can never be quite sure what to expect when crossing national borders. Consumers who live, work, and socialize across Europe’s borders can encounter problems using a wide range of finance products and services (e.g., payments, mortgages, taxes, and pensions). Why is this the case?

Some ticket machines in the Netherlands only accept cash or
Dutch debit cards. Photo By Spoorjan (Own work)  CC BY-SA 3.0 

Barriers to integration

One major problem is that the process of financial integration is far from complete. Generally, this integration process is conceptualized as being primarily technological and regulatory. The Single European Payments Area (SEPA) has been largely rolled out across the continent, and the Target Instant Payment Settlement (TIPS)  service promises to abolish waiting times for transfers between European banks. European regulators are working to create legal solutions, such as developing Europe-wide pension schemes, and the Payment Services Directive 2 (PSD2) is due to be implemented next year, further deregulating payments and opening up the market to new players and products. 

However, there are also barriers to integration at the level of the firm and the consumer market interactions, and our understanding of these is threadbare. Some of these relate to market structures, such as pricing. For example, in some European countries, credit cards are not widely accepted because merchants consider the cost to be prohibitive. Other barriers have socio-cultural leanings, such as consumers’ preference for local services, which dissuades them from shopping around the EU, or a preference for using cash in Germany.

These barriers might appear to be either economic or cultural, but closer inspection often shows them to be both. Let me illustrate by way of an example. In an ECB Report, Kokola argues that the Dutch tend to be more averse to credit card debt than their neighbors, whereas Germans are more risk-averse. This kind of cultural heterogeneity influences how financial products and services are developed, marketed, and consumed. 

Such cultural predilections can have deep historic roots. In the Netherlands, there is a longstanding aversion to credit due to historical attitudes towards indebtedness, but bank cards were adopted early on. Because the Dutch are averse to credit, but used to debit cards, credit transactions are relatively rare compared with other countries. And because the Dutch don’t use credit cards much, the cost of credit card transactions remains expensive. Because they’re expensive, merchants don’t accept credit cards, and this reinforces the Dutch aversion to them. 

And so a cultural-economic feedback loop is created.

This lines up with what we know about the interplay between economy and culture globally. Social researchers have long observed that economy and culture are analytically inseparable, no matter what kind of economy people live in. This is easiest to observe in pre-capitalist societies, such as in the use of shell money in Melanesia. 

But economy and culture are intertwined everywhere. In Dreaming of Money in Ho Chi Minh City (2014), Allison J. Truitt discusses how money culture influences what banknotes people will accept (dirty or broken notes are rejected), how money is used for ritual purposes, and many more phenomena that cross the culture/economy divide. In Liquidated: An Ethnography of Wall Street (2009), Karen Ho describes how the decisions of investment bankers are  shaped by their sociocultural beliefs. Nobody, anywhere, is immune.  

The diversity of cultural-economic feedback loops has significant implications for the integration of consumer finance markets in Europe. It suggests that there are hard limits to what can be achieved through technological and regulatory means alone. As Sander, Kleimeier & Heuchemer note, “cultural distance limits international financial integration over and above what can be expected from economic trade and transaction costs.” Even if full integration is achieved, consumers will continue to face limits to their freedom of choice as they live, work, and socialize across European borders.

To understand why there is still no single market for financial services in Europe, it is not enough to look at technical or regulatory matters. But nor can we simply shift the blame to culture. Rather, a cultural-economic feedback loop comes into existence when an economic practice and a cultural practice reinforce each other’s existence. 

The standard EFTPOS machine is fast
being replaced by other POS devices.
Photo By Erin B. Taylor.

The EU’s problem is global

The globalization of payments and other financial services is also creating an imperative to figure out what happens when money cultures meet. Given that so many consumer finance products and services are now available over the Internet, consumers are no longer limited to what is available in their home town or country. Today, we can research and buy an increasingly wide range of savings, transfer, investment, credit, and money management services from anywhere around the world. 

Let’s stop for a moment to consider the irony here. A resident of one European country cannot use their bank card in a second European country, even though there is a single currency and theoretically an integrated payments system. But that same person can buy travel insurance from the U.S.A., invest money in a fund in India, exchange currency using a mobile app based in the United Kingdom, and trade cryptocurrency based in—well, anywhere really.

The problem we face is twofold. First, the integration of financial markets globally is proceeding at different rates in different places. This means that consumers are facing a rapid expansion of choice on the one hand, and the same old limitations on the other. (In fact, these limitations are becoming more problematic because people are more mobile across borders than they were before, and so they encounter these problems more often.) Regulators and financial services providers are over-providing services in some areas, and under-providing them in others. Corporate and government strategies for integrating financial markets need to find a balance between these extremes. 

Second, we have little idea what consumers do when faced with this strange situation. How do consumers work around obstacles to making financial transactions? Do any of the new products and services available globally fill gaps in local services? Why are some people willing to experiment and become “early adopters” of new digital finance products and services, while others remain “laggards” dependent upon traditional banks? And what will a more mature global market for financial goods and services look like in the future? 

Since consumers can now use financial services from around the world, we cannot assume that it is sufficient to approach any of these questions from a local or European angle. In the future, consumers are likely to care less and less about whether the financial services they use are local or not. This is particularly the case when brands that are already globally popular (such as Google, Apple, or PayPal) develop their own range of payments solutions, such as digital wallets. 

A Dutch ATM, fast becoming a rare commodity. 
Photo by Canadian Pacific CC BY-NC 2.0

Mixing methods to understand changing markets

Our challenge is not to get everyone using exactly the same tools, but to create a global ecosystem in which multiple tools and avenues are accepted. To do this, we need to first understand the market. This means we need to design research that investigates how a variety of factors–cultural, economic, regulatory, technical–shape market practices. This holds even if we are trying to specifically understand consumer behaviour. 

Due to the complexity of markets, relying on one single research method (e.g., a survey or interviews) is unlikely to be sufficient for many research questions. Just as financial markets for consumer services are diversifying, so must our research methods also diversify. Understanding consumer choices requires analysis of both qualitative and quantitative factors that influence behaviour, including price, market structures, personal preferences, social structures, and cultural norms. 

This is not news: product developers, designers, and marketers know well that in order to sell something, the offering must hit the right price point and the right “tone” with the consumer. But the shift to Internet-based and mobile consumer finance services presents a challenge because the transition is incomplete and the market is highly complex. 

While little can be done to predict how regulations will change, it is certainly possible to improve our understanding of changing consumer behaviour and thereby generate more robust market knowledge. As we discuss in the Consumer Finance Research Methods Toolkit (CFRM Toolkit), researchers from both industry and academia are innovating new ways to record and analyze the financial behaviours of individuals and households. 

Ethnography, interview methods, financial diaries, online/offline studies, experiments, and so on, are all being reconfigured and combined with other methods to account for the increasing mobility products and services through accessible digital spaces and technologies. Adapting and combining methods offers substantial potential to generate detailed data on a variety of cultural and economic problems. This is because they either include ways to collect qualitative and quantitative data simultaneously, or because they can be easily incorporated into mixed-methods research. 

Combining interdisciplinary thinking with mixed methods gives us a chance to understand the cultural/economic feedback loops that are shaping the emergence of a new generation of consumer financial practices and markets, not only in Europe, but around the world. Regulators, service providers, and researchers are best placed when they take this range of factors and geographies into account.