It’s all about cash in the end...for now.

by Andrew Crawford, Doctoral Researcher (GIGA, Universität Hamburg) and IMTFI Fellow

News about a political upheaval often includes a story about frantic citizens desperately trying to get cash. Recent cases in point are events in Afghanistan and Myanmar. In Afghanistan, the departure of US forces and subsequent Taliban takeover led to a banking crisis with long lines for the limited number of functioning ATMs. Traditional informal money transfer agents, known as hawaladars, faced similar shortages with excess demand for cash that they could not satisfy.  Behind the scenes, the Taliban pushed central bank and finance ministry officials to get to work on solutions, a difficult task considering the brain drain caused by the hundreds of thousands that have already fled the country.   

People line up outside a bank to withdraw cash in Yangon, 5/15/2021 (Photo: Reuters)

Meanwhile, Myanmar faces similar skills shortages as state employees refuse to assist the military junta that deposed their democratically elected government in February and has since killed more than 1000 civilians. Government limits on branch and ATM withdrawals were implemented and in late August the government closed numerous bank branches, under the pretence of COVID-19 safety.  To enter open branches customers had to line up for tokens that later emerged for sale on Facebook. Informal bank account markets also evolved online where people could sell their bank account access data in exchange for physical cash at commission rates of 7-15%.  Even retailers sitting on cash revenue began offering money exchange services rather than try to bank their company takings.

The Taliban inherits a central bank with depleted USD and local currency reserves
(Photo: Elmer Laahne/johan10/Adobe Stock)

Considering the scramble for cash you may be surprised to learn that both Myanmar and Afghanistan had, until recently, digital payment systems. Their provision of mobile money led financial inclusion proponents to suggest that both countries could ‘leap-frog’ traditional banking infrastructure. But the unrest immediately ended this dream and demonstrated the fragility of fintech when government institutions fail. Mobile money agents continued to operate but needed to increase fees to 10 - 12% to compensate for the difficulty of obtaining cash for withdrawals. Myanmar mobile money companies, such as Wave Money, were left desperately trying to provide cash to their agents to stop them charging egregious fees to their 1.3 million clients.

Why not print more cash? The Myanmar junta tried to until the German company supplying their ink and materials for printing, Giesecke & Devrient, suspended their deliveries citing it as “a reaction to the ongoing violent clashes between the military and the civilian population”. This further compounded the sense of panic and desperation for cash and left the junta pleading with other foreign banknote companies, so far to no end.

Myanmar has smartphone penetration of over 80%, a rate comparable to many European countries (Photo: Sasin/Adobe Stock)

So, what happens when people give up on cash? Well cryptocurrency has always been viewed by its proponents as the game changer for such crisis situations. Cuba, for instance, has recently seen the growth and legalisation of crypto currency to facilitate remittances, overcome US sanctions, and prevent inflation.  But the recent legalisation of cryptocurrency in Cuba may not mainstream its use due to unreliable internet access and geo-blocking by crypto exchanges.  

The recent adoption by El Salvador of bitcoin as legal tender may provide one way by which cash shortages may later be avoided. If many Salvadorans keep their funds in bitcoin, they could continue to trade and will not lose their life savings in the case of political upheaval. Whether this happens may depend on how much Salvadorans are willing to put into the volatile cryptocurrency. Additionally, if the Salvadoran government felt threatened, they could still hit the internet kill switch preventing users from trading bitcoin. The security of the government backed Chivo cryptowallet also remains untested. 

Overcoming the internet kill switch is tough and would require satellite internet technology like that offered by Elon Musk’s Starlink (although Starlink is currently not available in countries such as Cuba, Myanmar or Afghanistan). Does this mean the combination of satellite internet, solar generated electricity, and cryptocurrency (along with the knowledge of citizens on how to use all of them) will free people from relying on cash? Well, the missing ingredient that no technology can provide is trust. With such complex technology it may be difficult to have citizens willing to depend on cryptocurrency to protect their life savings. Another barrier may be an innate behavioural instinct to grab something physical and dependable during a crisis (like the hoarding of toilet paper in many countries during COVID-19 lockdowns). Until citizens in an institutional vacuum are willing to trust complex, intangible, hi-tech solutions to both transact and protect their wealth, it will remain all about cash in the end.

‘No cash, no ritual’: the intersections between cash shortages and ritual enactment in north-western Zimbabwe

By guest blogger Joshua Matanzima, La Trobe University

Introduction

This article examines the impact of the ‘cash crisis’ bedevilling Zimbabwe since mid-2016 on the enactment of the Masabe ceremony within the BaTonga community, (Sinakatenge Chiefdom, Eastern Binga, North-west Zimbabwe). The article argues that the cash crisis has negatively affected Masabe ritual processes. The paper argues that traditional ceremonies have in contemporary times adopted use of ‘cash’ to facilitate their conduct. Hence, the liquidity crisis resulted in decreased cash in circulation has thus witnessed ceremonies being postponed, delayed or even avoided. In the quest to further understand the negative consequences of cash crisis on ritual engagement, the study analyses BaTonga traditional culture and religious practices. It highlights the importance of religion and ritual in fulfilling individual and societal needs and discusses how disruptions in ritual engagement can affect the psychological needs of individuals or the integration and cohesion of the society/group. The study utilizes cases from BaTonga villages in Sinakatenge Chiefdom. Oral testimonies were ethnographically collected from BaTonga villagers pertaining to the challenges being faced in conducting the Masabe ceremonial practices.

Figure 1. Researcher and local informants: women holding their smoking pipes. 

Field Notes

In 2017, I conducted ethnographic research among the BaTonga speaking people of Sinakatenge Chiefdom, north-western Zimbabwe. Sinakatenge is part of Binga Rural District. It lies along the margins of the nation-state at the Zimbabwe-Zambia border. The research examined the Masabe (alien) spirits ritual process. The Masabe ritual process is the means by which an alien spirit possessing a victim and causing illness is made to manifest itself and then depart the body of the victim, restoring the possessed person to health. Masabe possession as an ‘organized cult of affliction which addresses itself to the individual instead of the community’. Masabe can take over and speak through human vehicles and causes sickness to its victim. Masabe have desires which are made manifest through their victims and are pacified through a dance performance in which the victim enacts these desires. The research involved participant observations and semi-structured interviewing.  I attended a total of 5 Masabe ritual ceremonies and interviewed 24 elders, both men and women, regarding the Masabe ritual process. The centrality of ‘money’ in the entire process was emphasized by the elders interviewed and formed part of my personal observations. 

At a time when this research was conducted Zimbabwe faced serious economic crises characterized by high unemployment, high inflation, food shortages and cash crises. Many Masabe ritual ceremonies were delayed, procrastinated, and even avoided due to the costs involved and challenges encountered in purchasing the material required for the ritual to be successfully enacted. The material required for the Masabe ritual ceremony includes a black cloth, beads and black goat, as well as sugar, mealie meal, sorghum, and yeast for beer brewing. In the absence of these items the Masabe ritual ceremony cannot be enacted. Consequently, the affected families often delay, procrastinate, and, at worst, avoid conducting these ceremonies. 

Following the early to mid-2000s liquidity crunch, in 2009, the Zimbabwean economy was dollarized. Dollarization meant resorting to the use of the US dollar as a result of local currency devaluation. Dollarization helped reduce inflation rates and also stabilise the economy. However, from 2013 cash shortages re-emerged and by April 2016, much of the US dollars were reported to be externalized at an alarming rate, thereby causing the cash crisis. In a bid to address this cash crisis, the Reserve Bank of Zimbabwe introduced ‘Bond Notes’ of 2 USD and 5 USD denominations, and the 1 USD ‘Bond coin’ which were said to be equivalent in value to the real US$2, US$5 and US$1 respectively. These new notes and coins were introduced alongside the increased emphasis on the use of plastic money and Ecocash/OneWallet (mobile phone-based money services, or mobile money) for transactions. Indeed, plastic money and Ecocash/OneWallet proved somewhat effective for those living in urban areas. But it did not have the same impact for those living in marginalised or remote communities. 

Local transactions in Sinakatenge were mainly based on barter trade at the time. Sadly, such materials as cloth, beads and yeast were unavailable in local stores where barter was tolerated. People had to purchase these from urban areas, where either cash or mobile money was required. Sugar was available in local stores, but its price of 3 USD per 2kgs, was steep for the local people, who could not afford the sugar needed for the ceremony. Many, if not all, people in Sinakatenge had no bank cards, were cashless, and had no Ecocash/OneWallet. The unavailability of mobile network coverage in the area discouraged people from owning mobile phones. Thus, the villagers found it difficult for them to purchase these materials needed for the Masabe ceremony. Before the liquidity challenge, purchasing of these items locally and in Gokwe was not a major challenge. The US dollar introduced during the Government of National Unity era had in a way solved inflation and currency devaluation problems.

The Masabe ritual process and costs

At first, the person possessed by Masabe normally is afflicted with ‘illness’ or ‘sickness’. The ‘sick’ person sought clinical medical attention in local clinics where consultation and medication were free of charge. It is the norm that every sick person must seek clinical medical attention before visiting bun’anga (traditional healer). However, some people were referred to hospitals in Gokwe or Binga, (which are the nearest town centres), especially when the ‘sickness’ becomes more serious. This, indeed, is done at some significant costs. If the kinsmen of the ‘sick’ person have bank cards or mobile money access, they might purchase and pay for medication using such platforms. But, this is usually expensive to them due to transaction charges. 

Furthermore, if the illness persists, despite modern medication uptake, then the ‘sick’ person is taken to traditional healers. Traditional healers also require payment, which also now is in the form of cash whether the Masabe is diagnosed or not. The ‘sickness’ is thus considered to be the ‘arrival’ of the Masabe which in this case is only diagnosed by traditional means than modern systems. Once the Masabe spirit discloses its identity through the traditional healer it awaits a performance to be held for it so that it manifests itself.

The second step is, after the ‘sickness’ has been found to be Masabe related, when beer is brewed. Beer brewing for Masabe ceremony is done by women from the possessed person’s matrilineage. This is so because the society is a matrilineal. The day at which sorghum is soaked in water, the possessed person is supposed to commence sleeping in a chidumba (a house made of poles and grass) until the process of beer brewing is over. The construction of the chidumba requires labour and meeting the costs of gathering the needed construction material, such as poles, grass and stones. To hire the labour for construction and gathering building material needs money. In many cases, these labourers demand cash rather than goods such as grain, soap, salt and so on. So, the kinsmen of the possessed usually wait until they obtain cash to pay for the material and constructors, thereby prolonging the duration of the illness of the victim. Beer for mizimu (ancestors) and the possessed person is brewed in a small pot separate from bigger containers (in which that of attendees is brewed). This is so because the beer for mizimu does not have yeast added into it, whereas that of the invited guests needs yeast. The explanations for putting and not putting yeast on the two different containers were not quite apparent. Sugar is also added in the beer.

 

Figure 2. An old woman beer brewing.

Purchasing these items from local stores its expensive, thus, villagers opt to purchase the aforementioned items in Gokwe where the prices are generally low. The cost of 2kgs sugar, for example, in Gokwe at the time of the study was US$1.90 and in their local shops was US$3.00. With the prevailing cash shortages purchasing sugar in Gokwe was a major challenge as it also involved transport costs to and from Gokwe. Villagers opted to exchange grain for sugar in local stores where they incurred heavy losses. In this case, barter trade is disadvantageous to the consumer as it is obvious that the measure of goods he/she obtains in return is usually inequivalent to that which he/she would have exchanged. 

Figure 3. Men constructing chidhumba.

When the possessed person sleeps in the chidumba, he/she is expected to ‘sleep’ together with a ‘black’ goat. Every morning the person and the goat are let out, the goat must not forage far from the chidumba. If the goat goes missing that implies that the person is not possessed. When the beer is ready for drinking, local people are invited to attend the Masabe ceremony. The goat is significant during the Masabe ceremony as it is part of the ritual. The purchasing of a goat is thus not necessarily regarded as a major challenge since most families own goats. The possessed person may own goats from which one may be used in the ritual. Those with no goats are bound to purchase one, and acquiring a goat due to cash shortages can be a challenge. The fact that the goat must be black forced those without black goats to either buy or exchange with others for a black one. 

The third and the last stage is the enactment of the ritual ceremony. The Masabe ritual ceremony is enacted during the night. It usually involves drum beating, dancing and traditional beer (Bugande) drinking especially by invited guests. The performance of the ceremony brings together all possessed by that particular form of Masabe to support the new victim as she/he expresses the nature of the possessing force. During the ceremony, the goat is cut on its neck and its blood (musiye) is drained and put into a bowl made of wood. The full goat meat is given to a close friend of the family (sahwira). The possessed is then given the musiye to drink it. It is alleged he/she must not vomit. If he/she vomits it simply means the person is not possessed by Masabe. A senior member of the family appeases to the alien spirits on behalf of the possessed person, at the same time drum (butimbe) beating and singing commences until the Masabe possessing the sick manifests itself. The manifestation of the spirits shows the kind of Masabe the person is possessed with. The possessed must act as the spirit behaves. For example, if one is possessed by a baboon spirit, he or she must behave or act like a baboon during that night. He/she must climb trees and roof tops etc. as baboons do. Thus, although Masabe spirits, like all other Tonga spirits, are considered as formless and bodiless before they afflict a person, they change their identity in the course of the ritual process from an immaterial being into a spirit of “something” which can take a great variety of embodiments. After the Masabe ceremony, the ‘sick’ person will then automatically get healed from her/his illness.

Figure 4. The chidhumba (a temporary shelter for a possessed person).

 

Case example: In Siachimupa Village, Mukuli’s (who had her Masabe ceremony enacted on the 5th of September 2017) illness, for instance, took about eight months. This period involved people having to consult medical practitioners and local prophets pertaining the cause of disease and its suitable medication. At which, no cause of the disease was detected. The final solution was to visit traditional healers who discovered that she was possessed by a dancing Masabe spirit and for her to be healed a Masabe ceremony was supposed to be held. Traditional healers had discovered this four months before 5 September 2017 when the ceremony was eventually conducted. The 4 months delay was because there were no funds to conduct the ceremony. Here we see the ways by which macro-economic hardships can negatively influence ritual processes. At this time, the Zimbabwean economic downturn coupled with cash crisis made it difficult for her kinsmen to acquire funds to purchase a black cloth, beads, black goat, and ingredients for beer brewing on time. Hence her ‘sickness’ was prolonged. Observing her skin, it had developed blistered. She had significantly lost weight, her legs were swollen and she could not even walk on her own.

Conclusion 

Cash crisis in Zimbabwe has not only impacted on the economy and politics of the country, but it has also impacted on ritual enactment. In modern day rituals enactment require materials and money is needed to purchase these material items. In the case of the Masabe ritual- ceremonies discussed above, the purchase of black goats, black cloths, beer ingredients became difficult due to the cash crisis. Purchasing these using mobile and plastic money in the nearest towns of Gokwe and Binga was even more expensive due transaction charges. Due to these challenges Masabe ceremonies were often delayed, procrastinated and avoided. The delay or temporal avoidance of these ceremonies impacted on the possessed individual as well as the entire community. Delays prolonged the sickness of an individual which further impacted on the psychologically. If a person by a ‘water’ spirit, they have the power to predict and intercede for rains; so if their ceremonies are delayed or avoided it means that the community as a whole is affected as it benefits from the person’s rain spiritual forecasts and rainmaking intercessions. 

Link to research article in African Identities, "Religious rituals and socio-economic change: the impact of the Zimbabwe ‘cash crisis’ on the BaTonga Masabe (alien spirits) ceremony."

Photo credit: All photos by author.

Apo-cash-alypse Now!

by Andrew Crawford, Doctoral Researcher (GIGA, Universität Hamburg) and IMTFI Fellow

It’s embarrassing to admit as a finance academic but I’m bad with money. Not bad like I’d lose it all on a blackjack table, or have no money to buy lunch, but bad with payments. I have bank accounts in different countries, multiple Paypal accounts, a cryptocurrency hardware wallet and various ATM cards that lurk around my bedroom. I have only a vague awareness of how much money is in each and mostly go with the flow when I pay for things. Needless to say, I am being shafted by a bunch of payment providers in terms of fees, but I neglect to resolve the issue. Usually, apart from wasting money, this constant state of organised chaos never causes problems. But sometimes things go wrong, and my fragile payment ecosystem spirals out of control. This happened during my recent trip to Cambodia. 

I’m in Cambodia for 4 months working on a research project to measure the effect of COVID-19 on the microfinance sector. Two months in, I realised that it was time to pay my semester fees at the German university where I am doing my PhD. Thanks to the inexpensive nature of German universities this only amounts to 360 euro. I logged into my German online banking to do the bank transfer (the only means of payment accepted). The bank requires two-step authorisation so I brought with me an old Samsung phone with my German simcard set to roaming. I submitted the bank transfer and stared at my old phone, but then nothing. There was cell signal and the phone seemed to work fine. I asked online banking to resend the code then to my delight an SMS came through. I entered the code and it was rejected. Oh, maybe I made a typo. I entered it again. Still wrong. How could I type this wrong twice? I very thoroughly entered it one more time. Wrong. Then my phone beeped again. A second message had come through with a new code. The first message was the first code so it was no longer valid after I asked for a second code! I quickly went to enter the second code but my German account was now blocked due to three wrong codes. Crap. To reactivate the account I would need to take ID to my local branch in Hamburg. Sigh. As an alternative I transferred money from my Australian account (that I’ve had since I was 12 years old). This turned out to be 10% more expensive but at least the semester fees would be paid! 

The next day the Cambodian government suddenly announced that due to the spike in COVID cases a hard lockdown and curfew would operate from 8pm that day. It was sudden so I rushed to supermarket. Chaos. Like most countries panic buying was in full force so I decided I would go to my local convenience store instead.[1] Before I left, I took a video of all the panic buying because ‘hey it feels dramatic and I need to video it’. At this point you need to know that I keep all my ATM cards in a ‘card sock’ in the back of my phone. This is because I’ve been pickpocketed before and thought why do I need a wallet? I’m always conscious of my phone and never lose phones. If I never lose phones and my cards are attached, I will never lose my cards. Smart. While I was recording the panic buying I dropped my phone. Not so smart. It crashed onto the pavement and the screen cracked. I was so annoyed with myself I picked up the phone and quickly left while looking at the damage. I arrived home at 7.50pm and went to watch a movie, specifically Hunger Games, since the three-finger salute used in the Myanmar protests had reminded me of the film. I went to rent it from Amazon using my Australian ATM card and realised it was gone from my phone’s ‘card sock’. Damn. It must have fallen out when I dropped the phone. There was only 10 minutes left until curfew so I couldn’t leave, lest I be beaten with sticks by the Cambodian police which is their punishment for breaking curfew. Since my German account was also blocked all I had left was PayPal. Of course, Jeff Bezos doesn’t like PayPal so to rent the movie I bought an Amazon gift card from an online gift card website with PayPal. They charged $23 for a $20 gift card which was another hit to my hip pocket.

I cancelled my Australian ATM card and had a new one ordered which would go to my mother’s house in Australia and she would express post it to me in Cambodia. But for now, I had no ATM card. What would I do? You need cash in Cambodia![2] Apple Pay is here but it’s not so common yet. Thankfully, I still had a Cambodian bank account that I’ve had for years due to being paid consultant fees in Cambodia. I knew there were a few hundred dollars left. But I didn’t have the ATM card for this account (I assume it’s lurking in my room in Germany) but I did have the good ole passbook. All the local branches were closed during lockdown so I ventured to the head office to withdraw the money. This meant crossing 4 roadblocks and trying to explain to police my predicament. After finally making it to the head office I had my hands disinfected, temperature checked and wore my face mask to head inside the deserted bank and withdraw my money at the friendly teller. Relief. I had cash again. I was safe.

My brief experience not having cash made me concerned about some others in Phnom Penh that could no longer work. Specifically, I was worried about my friend and regular Tuk Tuk driver Ara who was completely dependent on his Tuk Tuk income. I called him and offered him some money but he lived in a part of the city that was too difficult to visit. Thankfully, Cambodia has an extensive mobile money network, named Wing, so I went to the Wing office on my street, opened an account, deposited some cash then transferred him some money that he very much appreciated. I didn’t realise at the time but using Wing would be my saviour in the end. 

A few days later I had a Zoom presentation of Loy Loy: The Financial Literacy Board Game that I co- created at IMTFI. The presentation was to the Beall Center for Innovation and Entrepreneurship and I was nervous. We expected at least 60 people to attend, possibly, some very important folks. Plus, it was midnight in Cambodia time and so I was worried about staying alert. I sat at the laptop and joined the zoom call. Internet can be patchy in Cambodia and as more and more people joined the meeting I could see my home connection become more and more unstable. I had planned for this and my phone was ready to hotspot with its faster cell network connection. I switched to the hotspot and felt safe just asthe meeting was to start. Then I received a message, “your data for the  month is about to be consumed”. CRAP. In Cambodia you usually buy cellphone credit from shops through the little scratch cards where you scratch off the number and enter the code. But it was midnight, shops were closed, and police with sticks were patrolling the streets. What could I do? I opened the Cellcard app and saw a small Wing logo. Ah perhaps I could connect the accounts. I hurriedly went through all the pins, SMS confirmations and fingerprint scans to connect the two, topped up and renewed the data plan, just as they were calling my name to present. Phew!

So, what have I learned from this whole experience? Well, firstly, be patient with two-step authorisations when you’re overseas, don’t film panic buyers because that’s mean, ‘card socks’ are not foolproof, mobile money accounts are useful during a pandemic, and it’s even handier to have lots of cash when all else fails. I mean with cash I bet I could have paid the policeman to not beat me with a stick and instead lend me his phone for a hotspot.

[1] Panic buying in Cambodia mainly involves eggs, rice and canned fish. Toilet paper is not essential thanks to ubiquitous bidet bum guns.

[2] Cambodia runs on both US dollars and the local currency – the Riel. This is due to the central bank being destroyed by the Khmer Rouge in 1975, with all currency then eliminated and a lack of faith in the reintroduced local currency ever since.

GovExec Daily: Physical Cash and the Pandemic

Dr. Bill Maurer of University of California, Irvine joins the Government Executive Daily podcast  by Adam Butler and Ross Gianfortune to discuss what cashless payments look like, in light of the pandemic.

Access GovExec Daily: Physical Cash and the Pandemic

With the COVID-19 cases spiking and online shopping following, the argument for ending physical money has come up again in the public conversation. But, a cashless existence is not our reality yet. 

Bill Maurer is dean of University of California, Irvine's School of Social Sciences, a professor of anthropology and director of the campus’s Institute for Money, Technology & Financial Inclusion (IMTFI). He joined the show to examine why the conversation about the end of physical cash is probably premature, even during the pandemic

The comfort of cash in a time of coronavirus

(Financial Times)

Bill Maurer cited in "The comfort of cash in a time of coronavirus" by Brendan Greeley | Financial Times JULY 16, 2020 | 7:49 PM

Bill Maurer, an anthropologist at UC Irvine who studies payments, calls the decision to withdraw cash “contextually rational.” It’s not that people are worried about how the Fed distributes cash, he says. It’s that, as in any disaster, people are worried about everything else — the electrical grid or the mobile network. … Holding on to a stack of bills, says Maurer, is “the recognition that in a pinch I can use cash and it will work with anybody.

For the full story, please visit Los Angeles Times: https://www.latimes.com/world-nation/story/2020-07-16/cash-coronavirus-covid19

What’s next: The future of cash - The death of dollars has been greatly exaggerated

by Pat Harriman, UCI | July 8, 2020

Contrary to popular belief, COVID-19 does not mean the end of cash. Although there was some concern during the early stages of the current crisis that paper money might transmit the virus, its demise had, in fact, been heralded by many people even before the pandemic began. Despite the convenience of plastic, the sense of safety with contactless online payment systems or the allure of cryptocurrency, however, there are still situations where dollar bills are best.

Bill Maurer is dean of UCI’s School of Social Sciences, a professor of anthropology and director of the campus’s Institute for Money, Technology & Financial Inclusion(IMTFI). Here, he provides expert insight into the driving factors behind – and implications of – eliminating physical currency, the changing uses and social relations of money, and the enduring appeal of cash.

The general public has been hesitant to handle cash during the pandemic. What does this mean for its future?

The King James version of the Bible uses the phrase “filthy lucre” five times, so money has long been associated with base motivations. While all kinds of germs and bacteria can survive on bank notes, they are not an efficient means of transmission. My concern is that if people associate dollar bills with disease, they’ll stigmatize those who – out of necessity – use cash. These tend disproportionately to be poor people, recent immigrants and refugees, people of color, the homeless, the elderly and the disabled.

As far as other payment methods are concerned, there’s some evidence to suggest that coronaviruses survive longer on plastic and metal. If you think about all the fingers that tap on point-of-sale terminals or hand-held wireless devices, those might be a greater risk. The epidemiological advice is the same as for everything: Wash your hands after you touch stuff.

If the pandemic isn’t the catalyst for all the talk about eliminating paper money, what is?

The drive toward cashlessness is mostly driven by two factors: fiscal concerns over revenue collection and industry interest in capturing additional data about people’s lives. If you’re a state tax authority, eliminating physical currency means that transactions have to pass through a bank or other institution. Despite secrecy rules and privacy regulations, if they have due cause, officials can still peer into people’s financial affairs.

For the Big Four platform companies and smaller digital services, going cashless offers a view into users’ offline spending. If you use cash at a physical till, there’s no data capture; but if you tap and pay with your watch or phone, platform companies all of a sudden know a lot about what you’re doing in the physical world. That’s a treasure trove of personalized information to use in targeted marketing, risk assessment and pricing for things like loans, as well as for predictive models to identify trends.

Can currency be completely replaced by plastic – credit and debit cards?

In the U.S., it’s not going away anytime soon. We have a very high level – 15 to 30 percent – of people who have no bank account or have difficulty maintaining a minimum balance, cycle in and out of formal banking services, or rely on check-cashing services. As a result, they live in a cash economy. Another reason is that when there’s a natural or manmade disaster, paper money becomes absolutely essential to community resiliency. When all other infrastructure goes down, dollars still work as a store of value and means of exchange.

And ironically, with every new digital or mobile payment innovation, we’ve seen cash demand go up. Apps linked to bank accounts make it easy to buy something or split a restaurant bill, so many people who use these apps withdraw money from ATMs as their “savings” because they can lock it in a drawer and eliminate the temptation to spend it.

What are the disadvantages of eliminating paper money and metal coins?

The biggest disadvantage will be the economic exclusion of the poor and underserved. Another implication is that eliminating paper money will more easily allow central banks to lower interest rates below zero. When the interest rate is close to zero or below, people start taking their money out of the bank and put it under the mattress, which acts as a kind of brake on further lowering the interest rate.

While eliminating cash would give the central banks more tools to deal with monetary and financial crises and also allow for relief payments to be made much easier via digital channels – so long as the government provides one for all people to use, like the FedAccounts proposed in an early version of the CARES Act – it also concedes a lot of power to them.

Do you think widespread concern about cash and germs will boost the credibility and popularity of cryptocurrencies such as Bitcoin?

Interestingly, as stay-at-home orders were being issued and the extent of the pandemic was becoming clear in early to mid-March, Bitcoin investors dumped their crypto and converted it into U.S. dollars. There have been ups and downs since then, but the overall trend has been to dump cryptocurrency, along with a more general flight to more liquid assets like the U.S. dollar. And I bet a good many of the people who sold their crypto ultimately converted it to cash.

Read original post in UCI News: https://news.uci.edu/2020/07/08/whats-next-the-future-of-cash/

The Use of Money to Maintain Connection (and Toilet Paper)

Pandemic Insights
Bill Maurer in Anthropology News, American Anthropological Association(AAA)

When I received an email containing one of the first Covid-19 payment memes—“How do you wish to pay?”, with an image of Visa, MasterCard, and a roll of toilet paper—I thought, OK, there might be some interesting payment and money things I should pay attention to during this pandemic. Students and colleagues sent me lots more toilet-paper themed memes and made jokes: about scenes of barter, the transactors trying to determine an exchange rate; toilet paper on a golden platter; stores accepting toilet paper rolls for one cup of coffee or one scoop of ice cream (“must be new; one roll per visit”). A satirical (I think!) account of a churchgoer placing a roll of toilet paper on the collection plate. One Sunday afternoon my family ordered delivery. Every order over $40 came with a free roll of toilet paper.

In between all the new kinds of work involved in transitioning a large university to fully-online operations, I filed away the toilet paper stuff in a special email folder. Toilet paper economies.

But when the University of California, Irvine Graduate Division announced that it would henceforth accept scanned forms and digital signatures (it has long been a preserve and holdout of paper) and more than that, suspend all fee payment associated with those forms—which heretofore had to be paid with paper check—I thought, game on! This pandemic is changing payment.

Some establishments—my local ice creamery, for instance—have suspended all in-store payments and require customers to pay online for curbside pickups. Some places ask you to Venmo. CNN aired a segment on cash as a possible vector for viruses, and a company offering contactless tap-and-pay card readers has launched a marketing blitz. But cash is still there, too. In fact, cash demand is way, way up. It is at the restaurants offering take-out whose proprietors prefer the one-way transmission of cash to the back-and-forth passing of card or card terminal between customer and vendor. It is in the cash stashes people are starting to build up. A reporter from the Financial Times called me asking why people are stockpiling cash (not just toilet paper) when the cash distribution system is not likely to be disrupted the way it has been when hurricanes and floods knock out servers or the electricity grid.

Continue reading original post here:
https://www.anthropology-news.org/index.php/2020/04/09/the-use-of-money-to-maintain-connection-and-toilet-paper/

Because money makes the world go 'round

Bill Maurer, PhD, IMTFI Director, Dean, UCI School of Social Sciences explains money's many meanings, particularly amid the COVID-19 pandemic and times of crisis, in this piece for the Consortium of Social Science Associations (COSSA).

I often get asked questions like, “What is an anthropologist like you doing studying money? I thought that was the domain of economists!” The archaeological and ethnographic record is full of objects, texts, and records of promises humans have used for millennia to mark transactions with one another and figure value. It’s true that I enjoy working with and thinking about those objects, and among my favorite places are the money galleries in museums around the world and at the regional branches of the U.S. Federal Reserve. But the anthropology of money is more than an archive of the arcane. Understanding practices like bridewealth, involving objects like the tevau of the Santa Cruz Islands, can shed light on how contemporary money is far more than a neutral medium of exchange. This matters for product design, financial literacy programming, and macroeconomic policy, too.

Indeed, now that the world is in a global pandemic caused by the rapid spread of the COVID-19 virus, what people do with money and its technologies has acquired a new kind of significance. Although the virus apparently does not survive for long on fibrous materials like cloth and paper, reports have surged of Chinese and other officials ordering the disinfecting of banknotes to prevent its spread. The fintech industry conference organization Money 2020, promoting its (almost certainly to be cancelled) next event, proclaimed in an email that the pandemic would usher in the end of cash and the era of digital payments—despite the fact that most in-person digital payments (at your local take-out restaurant now, for example) rely on plastic and metal cards and point of sale devices, touched by many hands, on which the virus can survive for several hours. And in Kenya, the authorities are recommending all Kenyans use mobile phones to pay—about which, more below.

Economic uncertainty is leading many to horde cash, which may intensify a trend that had already been in motion given historically low interest rates—now even lower—and shifting behaviors related to digital payment. The Federal Reserve reports a steady increase in cash demand, despite a decline in cash transactions. Since the rich are putting their money in things like money market funds and CDs, however, this cannot be due to their behavior. With all the ways to pay via laptop, mobile phone or smart watch, why should the Fed need to supply banks with more and more banknotes? We found a clue in some recent research on young people’s use of budgeting apps like Mint. We set out to understand what financial literacy lessons—if any—such apps taught their users. But along the way we discovered that some of our subjects were withdrawing cash from the ATM on payday and stashing it away, because services like Venmo had made it so easy to spend the money in their bank account. Whereas, for me, the money in the bank is my store of value, for them, Venmo had turned bank money into current-use funds. Storing cash was a means of controlling spending. Cash is not dead or dying—its uses are just changing.


Read the full piece, courtesy of COSSA: https://www.whysocialscience.com/blog/2020/3/24/because-money-makes-the-world-go-round

Why Social Science? is a project of the Consortium of Social Science Associations, a 501(c)(6) non-profit organization based in Washington, DC. Our goal is to share the benefits and contributions of federally-funded social and behavioral science research with the public and encourage its widespread use for tackling challenges of national importance. To learn more about COSSA visit www.cossa.org. #whysocialscience

Virtual Currencies and the State - B. Maurer, Money at the Zero Lower Bound

Bill Maurer in Just Money's Roundtable 2: Virtual Currencies and the State

I picked up a copy of the Financial Times in the Munich airport on my way home from keynoting the Bundesbank’s biannual International Cash Conference. The lead article, headlined “Draghi calls for urgent spending as he relaunches stimulus,” reported that the European Central Bank had lowered interest rates deeper into negative territory, to -0.5%. In the opinion pages, anthropologist and regular columnist Gillian Tett observed that negative interest rates were constraining policy options to stimulate growth, which might compel central banks to coordinate more directly with fiscal policy makers—thereby lessening, if not abandoning, central bank independence. Lack of monetary policy options was  leading to a “changing zeitgeist,” she wrote.

At the Bundesbank conference, attended by people affiliated with the cash payments divisions of central banks and others, researchers presented data on the increase in cash demand despite the decline of cash transactions at the point of sale. People are increasingly paying with their mobile phone or cards, but at the same time, negative interest spotlights the cost of bank deposits, suddenly making cash a smarter option for savings. At the conference, lighthearted disagreements over whether to call this “cash hoarding” gave way to more insistent pleas for what some called “non-transactional” cash to be recognized as a rational response to negative interest with consequences for commercial banking and banknote design. If people are going to hoard cash, then perhaps banks need to get into the business of building vaults. And if people are going to want cash as a store of value resistant to negative interest, perhaps innovative banknote design should support hoarding: the cash should be more durable, stackable, maybe smaller than a standard banknote, and able to be kept in a cupboard and easily stashed in a backpack, should one need to escape a natural disaster, political instability, or war.

These were European designers, talking about European banknotes. This is a changing zeitgeist indeed.

Cash limits just how low interest rates can go, unless governments find a way to levy and enforce a tax on cash. Cash holdings are an alternative to paying the bank to hold your deposits—at least until the cost of storage, security and insurance approach the cost of paying negative interest. Hence: vaults. If for everyday transactions cash serves as a control mechanism for consumption (the pain of seeing your cash go away introduces a mental speed-bump in your spending), at the monetary policy level cash is a control mechanism defining a limit to the “innovative” monetary policies we have seen since the global financial crisis.

To read the full discussion, please visit https://justmoney.org/b-maurer-money-at-the-zero-lower-bound/.

Cash as a Public Good - the Expert View

Currency News™ interviewed IMTFI Director and Professor Bill Maurer and Dr. Ursula Dalinghaus about the role of cash as a public good and the IMTFI following the release of Cash Matters white paper, "Virtually Irreplaceable: Cash As Public Infrastructure", authored by Dr. Dalinghaus, affiliated scholar at the IMTFI.

L: Maurer, UCI/IMTFI; R: Dalinghaus, Ripon College/IMTFI

Q: What is the main focus of the institute?

BM: We want to understand how people’s diverse interactions with money are being reshaped by new technologies, from new payment platforms to things like artificial intelligence in providing financial advice or in creating alternatives to traditional credit scores.

But, again this is crucial, we focus on the user side of the equation, on people’s actual interactions with money and these technologies, down to the level of questions like, where do they keep their money, and why? What does their daily transactional life look like? What are the diverse systems and beliefs that inform their money practices?

We developed the concepts of monetary ecology and monetary repertoires to capture this people-centered approach to money and technology.

Q: IMTFI was initially funded by the Gates Foundation, major supporters of the Better than Cash Alliance. The IMTFI is neutral when it comes to payments; however, there is an increasing focus on cash. What caused this development?

BM: We realized pretty quickly that there were a couple of very general things going on, almost everywhere around the world.

First, most of the new mobile money systems in which the Gates Foundation was initially interested as potentially banking the unbanked were in fact serving as payment rails – not as means of saving but as a means of moving money. This made us focus more and more on payment systems as a distinctive area of research.

Second, pretty much universally, we found that new systems were not replacing old ones; they were instead being added into the mix. People would use one payment method for one kind of transaction, and other payment methods for others. But nothing was replacing anything else. I think a lot of people initially thought that things like mobile money would displace cash. Instead, mobile money became a way for people more efficiently to move money and access it in the form of cash.

Q: What is the key takeaway of your white paper on cash as a public good?

UD: That physical cash will continue to have a vital and complementary role to play alongside digital well into the future, not only as a method of payment but also as a democratizing force – an important form of power-sharing between issuer and user that is distinct from digital-based money.

One reason is that people value the ability to choose from multiple payment forms. Another, even more substantial argument for cash, is that the cash infrastructure serves a vital public role since cash can circulate independently of its issuer and it can work offline.


Read full interview in this excerpt of Currency News, Vol 17 - No. 8/August 2019.

Read original post, "Bill Maurer, Director of the Institute for Money, Technology & Financial Inclusion (IMTFI), talks about the ongoing relevance of cash"

The Director of the IMTFI is Professor Bill Maurer, Fellow of the American Association for the Advancement of Science, Fellow of the Filene Research Institute, Dean of the School of Social Sciences and Professor of Anthropology at the University of California, Irvine. He will also be one of the keynote speakers at the ICA’s Global Currency Forum 2020 in Barcelona.

Dr Dalinghaus, Visiting Professor of Anthropology at Ripon College, is also an affiliated scholar at the Institute for Money, Technology & Financial Inclusion (IMTFI), University of California at Irvine, which has made itself a name as one of the leading institutes when it comes to the role of money in people’s daily lives and practices, and to the best way to go about financial inclusion.

Virtually Irreplaceable: Cash as Public Infrastructure

New study, "Virtually Irreplaceable: Cash as Public Infrastructure", substantiates the case for how and why cash must be regarded as a public good.

Click to download white paper

The paper by Dr. Ursula Dalinghaus, Visiting Professor of Anthropology at Ripon College and affiliated scholar at the Institute for Money, Technology & Financial Inclusion  (IMTFI) University of California, takes a close look at the role of cash in society and the specific characteristics making it a public good, citing relevant studies, scholars and field experiments.

“Cash in circulation is growing on a global scale by approximately 3% per year; 80% of all payments worldwide are cash transactions. Cash is an essential part of every stable financial and economic system”, stated ICA Chairman Wolfram Seidemann. “This paper demonstrates that cash is more than just a means of payment. It is a public good, part of modern life and vital for people’s everyday lives.”

Key takeaways

• Cash is a public good that guarantees ease of use, accessibility, privacy, and many other unique qualities in local, national, and global monetary systems. Cash fulfills both criteria for a public good: it is non-excludable because its function as a means of payment, of transfer of value, works without compensation. And it is non-rivalrous because its use by one person does not preclude its use by another.

• Cash is public – the only form of money not controlled by a private, profit-driven entity. Once in circulation, it is the only form of payment independent of its issuer. It is deployed not to make a profit on its transfer but to support and sustain value transfers free of charge. There may be costs associated with cash, but cash itself is a means of value transfer that settles at face value with no fees involved.

• Cash enables personal freedom and self-determination – state-issued physical cash is a distributed public infrastructure that allows citizens and users to create a space outside the state. At the same time, cash acts as a claim upon central banks and, ultimately, states to ensure good governance of monetary and payment systems.

• The materiality of cash is vital to many social practices. The role cash plays in social relationships often hinges on the physical design of cash, such as denomination, which makes cash particularly useful for budgeting, accounting, gifting, or saving.

Download white paper - US Letter (8.5" x 11")

Download white paper - A4 Size (8.27" x 11.69")

Read interview with author here.

This is the second study by Cash Matters, a movement by the International Currency Association, ICA. The first study, “Keeping Cash – Assessing the Arguments about Cash and Crime” was published in September 2017. 

No change to spare? That’s no longer a problem for buskers.

IMTFI Director Bill Maurer, Anthropology, via MarketPlace Morning Report, May 8, 2019  (Audio)

 

Bill Maurer is an anthropology professor at UC Irvine who studies financial technology. “There’s really no good solution for folks in the informal economy.” Good old-fashioned cash on the other hand? “I don’t need to have a bank account to make it work, I just need the cash in my hand and as soon as I give it to you, it’s yours.” He says none of the payment services we have at the moment can really do that. (Segment starts at 4:04, Bill Maurer starts at 6:08)


For the full story, please visit https://www.marketplace.org/shows/marketplace-morning-report/05082019-markets-edition/