A Tale of Three Cedis, Mobile Money, and Fintech? User Experiences in Ghana’s Evolving Moneyscape

By Vivian Dzokoto, PhD, Virginia Commonwealth University and  IMTFI Fellow in the Merian Institute for Advanced Studies in Africa (MIASA) - Blog

A decade ago, I published “A Tale of Two Cedis”, a psychological perspective of user experiences of adjustment to a central bank-led disruption to payments in Ghana. In that and other papers, I explored how Ghanaians made sense of the old currency¹ (what became known as the Old Ghana Cedi), and its replacement, the New Ghana Cedi. The latter was a banknote and coin series more portable than its predecessor due to the elimination of 4 zeroes.

Thereafter, I published other papers, based largely on interviews with everyday consumers, examining how people made sense (or didn’t) of Mobile Money. I researched the public awareness of and reasons for the then slow uptake of Mobile Money in Ghana. (Uptake has increased dramatically since then).

My research in Ghana’s moneyscape had numerous takeaways. Here are two examples. First, the old currency remains an important part of sense-making for a seemingly large subset of Ghanaians. Currently, 10+ years post-redenomination, some Ghanaians routinely convert the cost of goods and services to the old currency to get a sense of just how pricey something is – to determine the “real value”. In technical terms, such users default to the phased-out scale rather than the rescaled calibration of the fiat currency to subjectively determine worth. Second, from the user perspective, the onboarding of mobile money was partly hampered by a focus on the tangibility of money. Simply put, at the time, people preferred money that they could touch and feel – and handle, hide, wave, toss, present, and on occasion, flaunt. Apart from initial distrust of Mobile Money in its early days, lack of a perceived distinction between Mobile Money and Ezwich (a biometric card-based payment option and financial inclusion strategy introduced by the Ghana Interbank Payment and Settlement Systems Limited (GHIPSS)), low levels of awareness and understanding of this phone-based payment tool, many of my respondents at the time were of the view that money wasn’t quite a money devoid of a physical form.

The face of payments in Ghana has changed dramatically since my “Tale of Two Cedis” was published. Yet distinct patterns prevail in Ghana’s payment ecosystem. I discuss a few of these below.

What has changed?

Today, the payment ecosystem in Ghana, while not flawless, is decidedly much more complex. While not cashless, it is certainly cash-lite. A digitally literate, bank account holder has the option of paying for goods and services via mobile phone using Mobile Money through a Mobile Network Operator. This is done via e-value in the local currency previously loaded onto their Mobile Money Wallet by a push transaction from their online banking account2, processed by a third party financial technology company aka fintech (invisible to the consumer) linking the banking system to the mobile money platform on the rails of GHIPPS products. Alternatively, the shopper could pay by cash, card (assuming the vendor has a point of sale machine), a third-party payment app, or via QR code. Ghana is the first African country to launch a universal QR code enabling instant merchant payments from mobile money wallets (GSMA, 2021). A frequently heard question today is “ Don’t you have momo? “. This is the case particularly when a vendor is unable to make the change, a perennial local cash-related problem in some sectors of the market economy. Churches, a HUGE presence in this very religious country, particularly embraced mobile money payments during the COVID 19 lockdown period. By doing so, churches have expanded beyond their significant engagement with the formal banking sector to mirror the nation’s cash lite, mobile money dominated payment preference shift.

To read the full post please visit: https://miasa.hypotheses.org/429

Featured Image: By PDPics, Pixabay-Licence, https://pixabay.com/photos/currency-note-paper-money-ghana-166846/.

Footnotes

1. The term old “currency” sounds like an oxymoron. 
2. Note: There are other ways of loading money onto a mobile money wallet, such as a push payment from someone else’s bank account or mobile money account, or by depositing cash with a Mobile Money agent.

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.

New Book: Reimagining Money: Kenya in the Digital Finance Revolution by Sibel Kusimba

Reimagining Money: Kenya in the Digital Finance Revolution, Stanford University Press by Sibel Kusimba

JANUARY 2021

240 PAGES

FROM $28.00

Hardcover ISBN: 9781503613515

Paperback ISBN: 9781503614413

Ebook ISBN: 9781503614420

Abstract

Technology is rapidly changing the way we think about money. Digital payment has been slow to take off in the United States but is displacing cash in countries as diverse as China, Kenya, and Sweden. In Reimagining Money, Sibel Kusimba describes the rise of M-Pesa, and offers a rich portrait of how this technology changes the economic and social landscape, allowing users to create webs of relationships as they exchange, pool, borrow, lend, and share digital money in user-built networks. These networks, Kusimba argues, will shape the future of financial technologies and their impact on poverty, inclusion, and empowerment. She describes how urban and transnational migrants maintain a presence in rural areas through money gifts; how families use crowdfunding software to assemble donations for emergency medical care; and how new financial groups invest in real estate and fund weddings. The author presents fascinating accounts that challenge accepted wisdom by examining the notion of money as wealth-in-people—an idea long-cultivated in sub-Saharan Africa and now brought to bear on the digital age with homegrown financial technologies such as digital money transfer, digital microloans, and crowdfunding. The book concludes by proposing a new theory of money that can be applied to designing better financial technologies in the future.

About the author

Sibel Kusimba has conducted over twenty years of ethnographic research and archaeological fieldwork in Kenya. She is Associate Professor of Anthropology at the University of South Florida and is the author of African Foragers (2003).

Excerpts and more

• Sample Chapter 1: "A Central Banker Talks Money"
• Book Contents
• Purchase book at Stanford University Press - USE CODE Winter21 for 40% off until Jan 25, 2021
• View Kusimba's recent publications and projects here.

Do women need their own financial services?

by Erin B. Taylor and Anette Broløs

Historically, few financial tools have been developed with women in mind or marketed to them directly[i].  Today, however, new financial services are appearing on the market that respond to practical everyday economic needs including design and marketing. Currency converters, financial management apps, investment apps, and alternative credit sources, are now being developed specifically for women, or primarily marketed to them. A plethora of websites, blogs and podcasts for women offer advice, information, and educational courses on finance. Many of these are community-based initiatives and aim to create a dialogue with women. 

But do women really need their own financial services? What can these new fintech products offer women that gender-neutral products can’t? We explore these questions in two new publications. One is a book chapter called “Financial technology and the gender gap: Designing & delivering services for women” (in Malefyt and McCabe 2020), and an industry report called Female Finance: Digital, Mobile, Networked (EWPN/Keen Innovation 2020). 

The financial gender gap exists for many reasons, including income inequality, women taking time off for child-rearing or caring for a family member, fewer investment opportunities for women, and the tendency for women to manage daily budgets while men tend to take care of long-term financial management[ii].  Lower (or different) financial literacy, lack of confidence in financial knowledge, and differences in investment behavior can limit women’s ability to achieve financial security[iii].  And in some areas of the world poverty, limited access to technology and legal restrictions hinder women’s access to financial tools and confidence in using them[iv]. 

However, to our surprise, we discovered that there is neither an overview of existing financial solutions offered to women, nor an overview of research on women’s engagement with their finances. Through our work as co-organizers of research activities within the European Women Payments Network (EWPN), we also noticed that industry professionals are not very aware of what the market in fintech for women looks like. Few professionals could name any fintech products designed specifically for women. 

So we set out to discover what this market consists of, how extensive it is, what kind of women it serves (as well as where they’re located), and – most importantly – how fintech products claim to serve women. Along with the EWPN and Keen Innovation, we identified as many fintech products for women as we could. This is a very new field: most of the companies we found were founded during the last 5-10 years). The resulting report not only maps out these products, but also begins to analyse how they serve women in five areas: payments and credit, financial management, insurance, investment, and capital for entrepreneurs.

Common features in services for women 

• Storytelling in a language that speaks to women's life contexts 
• Accessible solutions that are digital and mobile 
• Learning opportunities (blogs, support, "academies") 
• Social features (mentors, events, networking, communities) 

Through our analyses of the concrete product and service offering, we realized that women tend to engage with finances differently to men. They value financial services that understand their life situation (young professionals, young families with housing and children on their minds, single parents or women establishing their own company to allow more flexibility in their daily lives). They prefer services that are readily available, uncomplicated to use, and provide a fast overview of economic transactions and decisions. Women are increasingly investing money, and their investment decisions are often based on a broader range of criteria than investment advisers usually take into account.  They look to understand how their wealth can best be invested to ensure fulfilling their wishes over time, and tend to focus on social issues such as sustainability, local development and inclusion. 

Indeed, this social aspect of finance is critical to understanding how women can differ from men. Women appreciate being able to work and learn with experts and like-minded people. We suspect that is a reason why Voleo, a new investment club app that allows users to interact, has 40% female customers while not even being directed particularly at women. Similarly, Nav.it, a money management app, tries to harness women’s preference for social proof to encourage women to engage more with their finances. The app’s founder, Erin Papworth, claims that women lack the “financial vocabulary” to talk about money in ways that are relevant to their lives and goals. The financial system is still geared towards men and tends to exclude women, who, Erin says in a Nav.it podcast,  are not confident discussing things like investing and compound interest. Thus the goal of the app is not only to help individuals manage their finances, but change the ways women engage with finances and build a system “that has the feminine experience integrated into the overall system”. Women’s socioeconomic situation is rapidly changing, she says, and women now have the “power of the purse” to effect broader change.

So, do women need their own financial services? The answer is both ‘yes’ and ‘no’. The financial gender gap is persistent across cultures and income groups. While financial services designed for women are unlikely to increase women’s incomes and close the gap, they can provide some very useful tools to help women manage their finances better and a way that suits their preferred modes of engagement. Women need their own financial services because existing solutions do not cater to their economic needs and expectations. And delivery is just as important as design: a financial tool may be theoretically perfect for women to use, but if it isn’t delivered in a way that speaks to women’s needs it will likely fail to reach its target market. 

However, we should warn that women are a very diverse group and experience both the financial gender gap and financial services themselves in diverse ways. Women’s financial practices therefore cannot be studied without taking into account the surrounding cultural, economic, legal and educational factors that make up the context of women’s lives. Moreover, what counts as “women’s lives” is in a constant state of change. For example, women’s investments are rising much faster that men’s. Women increasingly start their own companies or raise crowdfunded capital for their projects. Family patterns and job circumstances are also changing fast. When designing financial services for women we cannot treat women as a static, homogeneous group. We need nuanced research to feed into the intelligent design and delivery of financial services. 

There is plenty more to be done. We plan to develop new empirical research on women’s engagement with finances, covering issues such as how women engage with finances on the move, what services and products they use to grow their wealth, and how the digitization of ‘financial inclusion’ services such as microfinance impacts women. We particularly encourage companies and researchers to engage with women in practice by providing well-designed research that can contribute to the design of financial services that fit with women’s preferences, values and contexts. 

We also plan to update the overview of financial services for women to follow progress and changes in the market over time. A more complete analysis of financial services from different perspectives, focusing on factors such as economics, digital development, education, history, religion, consumer behavior, and more would be useful to build a more nuanced picture of women’s needs and the differences between women. 

And, most importantly, we need to be having broader conversations about these issues. Join us at the EWPN Research Network LinkedIn group to share your own ideas with industry professionals and academics who are working on these issues. You can also share your favorite books, articles, and white papers on the subject, or suggestions for companies we should look into and to include in our overview of the market. Above all, let us know if you agree with us or not. The more diverse and dynamic the conversation, the better placed we will be to understand why, and under what circumstances, diverse women may need their own financial services. 

The book chapter: Taylor, E.B. and A. Broløs. 2020. Financial technology and the gender gap: Designing & delivering services for women. In Women, Consumption and Paradox: Towards A More Humanistic Approach to Consumption, pp.103-128. Edited by Timothy de Waal  Malefyt and Maryann McCabe. Routledge.

The industry report: Broløs, A. and Taylor, E.B. 2020. Female Finance: Digital, Mobile, Networked. EWPN and Keen Innovation.

Endnotes

i Burton, Dawn. 1995. Women and financial services: Some directions for future research. International Journal of Bank Marketing 13(8): 21-28; Roderick, Leonie. 2017. Financial services brands ‘ignoring’ women in advertising. Marketing Week, 17 October, https://www.marketingweek.com/financial-brands-ignoring-women-ads/

ii E&Y. 2017: Banking on Gender Differences: Similarities and Differences in Financial Services Preferences of Women and Men in a Digital World; Hira, Tahira K. 2008. Gender differences in investment behaviour. In Handbook of Consumer Finance Research. Jing Jian Xiao, ed. 253-270. New York: Springer; Liébana-Cabanillas, Francisco José, Juan Sánchez-Fernández, and Francisco Muñoz-Leiva. 2014. Role of gender on acceptance of mobile payment. Industrial Management & Data Systems 114(2): 220-240; Morsy, Hanan, and Hoda Youssef. 2017. Access to Finance–Mind the Gender Gap. EBRD Working Paper No. 202.

 iii Almenberg, Johan and Anna Dreber. 2015. Gender, stock market participation and financial literacy. Economics Letters 137 (2015): 140-142; Bannier, Christina E. and Milena Schwarz. 2018. Gender-and education-related effects of financial literacy and confidence on financial wealth. Journal of Economic Psychology 67: 66-86; Driva, Anastasia, Melanie Lührmann, and Joachim Winter. 2016. Gender differences and stereotypes in financial literacy: Off to an early start. Economics Letters 146: 143-146.

 iv Morsy, Hanan, and Hoda Youssef. 2017. Access to Finance–Mind the Gender Gap. EBRD Working Paper No. 202; Servon, Lisa. 2017. The Unbanking of America: How the New Middle Class Survives. Houghton Mifflin Harcourt.

Consumer Finance Research Methods Toolkit - 2020 Update

by Erin B. Taylor and Gawain Lynch, Canela Consulting

The Consumer Finance Research Methods Toolkit (CFRM Toolkit) presents cutting-edge approaches and methods being done across different sectors of finance. We give practitioners a starting point to think about how they can improve their research and prepare their organisations for the future.

CFRM Toolkit 2020

ABOUT THE CFRM TOOLKIT
This toolkit was produced as part of the IMTFI’s Consumer Finance Research Methods Project. It demonstrates how different methods are being applied in finance research to help both for-profit and not-for-profit organisations cope with rapid changes in the sector. It is designed to help researchers and managers to:

• Learn about innovations taking place in consumer finance research
• Understand how to use research to improve their organisation’s strategy
• Facilitate connections between researchers and organisations with complementary expertise

Just as consumers have an ever-increasing choice of financial products, researchers have an ever-increasing array of methods at their disposal. This Toolkit provides readers with inspiration for ways they can develop their research, either by themselves or in collaboration with others. Readers can choose to learn about applications that are familiar to them, or discover entirely new methods and professionals who practice them.

WHO IS THIS TOOLKIT FOR?

The CFRM Toolkit is intended for use by anyone who needs to adapt to the new global finance market:

• Innovation specialists
• Research and design teams
• Organisations and companies
• Individual professionals
• Instructors and students

User insight specialists, designers, NGO workers, policy specialists, and academic researchers are among those who may benefit from the Toolkit’s descriptions of how different methods are applied to a wide range of problems around the world.

Whether you work in the field, in a lab, or at home on your notebook, this Toolkit covers methods that are relevant to your research context.

FOREWORD by IMTFI Director Bill Maurer

When the first edition of this Toolkit was released in 2016, I asked, in my prefatory remarks, “Why a consumer finance research toolkit, and why now?” I wrote mainly of the explosion in new payment, financial and insurance technologies being introduced into social systems and markets around the world, often with unintended consequences, and often with little forethought on the part of their developers as to how these new technologies would impact the human side of money and finance. 

While I could easily make the same case today, three years later, it is striking how some things have changed quickly, and others, not at all. “Fintech” is now a word, and a business and investment space. The term was still relatively new in 2016 (and it wasn’t used once in the first toolkit!). 

But payment is still … boring, despite all the hype and new technology “deployments.” How many readers of this report have used Apple Pay a few times only to abandon it because of its lack of general availability, ease of use relative to cash or cards, or force of habit? How many have re-adopted it since purchasing a smart watch? And how has the cost of such devices pushed new payment technologies ever further up the socioeconomic hierarchy, leading many at the bottom back to cash? 

Cash, meanwhile, has been under assault, even as its continued use makes it seem more resilient than ever. In countries like the US and the Netherlands, for example, more and more merchants have gone cashless and celebrate their status as such. Realizing the exclusionary impact of refusing cash at the point of sale, municipalities and some states in the US have been pushing back, banning cashless stores. Cryptocurrencies have reached record valuations, only to plummet again, firing up the speculative imagination as well as generating much-needed skepticism. 

On the horizon: artificial intelligence is increasingly being used to predict consumer behavior and price risk—and will potentially unleash new forms of discrimination and injustice. The presuppositions of the post-World War II liberal order are under assault and the regulatory frameworks guaranteeing fairness and accountability are being rolled back at a rapid pace, making more urgent than ever the responsibilities of the business community to ensure fairness, equity, and even financial justice.

Money and payment have opened up for political and social discussion as never before. Since the dawn of agricultural states in the ancient Near East thousands of years ago, accounts-keeping has been central to the allocation of resources in complex societies. You know something interesting is afoot when respectable journalists or government officials question the long run viability or existence of physical banknotes, or even state issued currency itself. In the United States, we have not seen such enervated discussion over the nature of money since the greenback/goldbug political conflicts of the late 19th century.

It is curious, then, that we still have to remind those working to create and introduce new money, financial and payment systems into the world that such systems are used by…. people! And people use them in systems that are simultaneously social and technological, systems that they use by choice or necessity to meet their basic day to day needs, while also using the technologies of money—from cash to Venmo to WeChat Pay—to make social connections, honor the dead, fulfill religious obligations, or make political statements. 

How people do money is often more significant than what money is, and the debates over what it is are almost always grounded in the ways that people use money and its associated technologies to get by and make do.

This updated toolkit provides a roadmap for a deep and nuanced understanding of the ways people do money, and the ways technologies are complexly integrated into existing sociotechnical arrangements. Approaching these questions requires guides to careful research, like the ones presented herein, and a small degree of hubris. 

The future is hard to predict—but it is surely a future of humans making meaning and social relationships with one another through consumer financial technologies and systems. The methods provided in this toolkit help us get a handle on how they do so, and to what ends. 

Access CFRM Toolkit 2020 at the following LINK. 

The Lessons of Fintech Apps: Design Matters for Personal Finance​

by Bill Maurer, UCI; Melissa Wrapp, UCI; Chandra L. Middleton, UCI; Vivian Dzokoto, Virginia Commonwealth University; and Jenny Fan, UCI

This research report from Filene's Center of Excellence, the Center of Emerging Technology at UC Irvine provides lessons to credit unions that may help ​improve how their services are​ perceived and that may help ​activate deeper engagement ​with younger members.

Executive Summary
Fintech-based personal financial management (PFM) apps are providing new ways for budgeting and investing. In an effort to attract or retain Gen Z and Millennial members, financial institutions have been quick to adopt products similar to Mint or Acorns. In the race to provide these services, few financial institutions have reviewed and explored the value that such products provide, and how people interact with and feel about budgeting and investing with these new apps.

What Is the Research About?
Filene piloted a study that tested three PFM apps for budgeting (Mint, Wally, and You Need A Budget) and two for investing (Stash and Acorns). Twenty-seven participants between the ages of 18 and 34 used an assigned app for one month. Each participant was interviewed before and after using the app. Focus groups were held to provide additional insights.

We set out to learn three things from this study:

• How do people use these apps? And how does the design of the apps shape the user experience?
• What are the apps really teaching users? Are there conflicting messages to “buy” in budgeting apps? And how do users’ behaviors change as a result of using the apps?
• How effective are the apps at getting people to improve their financial behaviors?

Surprisingly, we learned that traditional financial institutions are still preferred over PFM apps. Although the apps have their benefits, people still want access to actual people in their financial institutions. In terms of design shaping the user experience, good design begets credibility. Poorly functioning or shoddy-looking apps eroded trust in the financial institution.

The apps tended to raise awareness of participants’ budgeting or investing behaviors rather than change behaviors. For some, using the apps reinforced preexisting frustration or stress participants felt about their financial lives. With investment apps, some participants felt that the gamification of the apps promoted addictive behaviors.

Read additional takeaways, download the full report, and view summary slides here: https://filene.org/487

Fintech apps: Shaping the future of financial literacy?

UC Irvine researchers conduct study with five popular fintech apps to determine how Americans interact with financial advising apps

UCI students share their experiences with fintech apps in focus group.
Photo credit: Jenny Fan

We all know we should be saving for the future. But what does that mean? Should we be contributing to a retirement plan? And if so, what type of retirement plan?  Or should we just be putting money into a savings account? And how much should we be saving each month? What if there is nothing to save?

As Kristin Wong, personal finance journalist, wrote in the New York Times, “Many of us grow up learning that money is one of a few topics — like politics, sex and religion — that you should avoid in polite company. You don’t brag about your net worth. You don’t share your salary with colleagues. You try not to ask your friends about their rent, even if it helps put your budget in perspective.”

April is Financial Literacy Month, and it so happens researchers in the School of Social Sciences have been asking whether new smartphone apps are actually teaching people about better financial habits.

FINANCIAL ILLITERACY IN AMERICA

Without a trusted resource to learn about financial literacy people often feel overwhelmed by budgeting, debt management, and trying to meet savings goals. The Federal Reserve Board's 2018 Report on the Economic Well-Being of U.S. Households found that 40 percent of Americans say they cannot cover a $400 emergency expense, or would do so by borrowing or selling something.

Those who are interested in managing their personal finances often turn to apps and robo-advisors from financial technology companies, commonly called fintechs. Popular apps, such as Mint, claim to help users learn about budgeting and establishing personal financial goals. Since 2008 the number of new fintech companies in the US, and around the world, has soared.

DECIPHERING THE ROLE OF FINTECH

Building on a rich portfolio of research on how people interact with money and financial technology, the Institute for Money, Technology and Financial Inclusion (IMTFI) and the Filene Center of Excellence in Emerging Technology at UC Irvine conducted a study to dig deeper into fintech apps, the experiences they offer, and how users respond to them.

“With the unbundling of banks, there are a lot of fintech companies popping up and taking on roles traditionally held by banks. Many are providing personal financial advice through these new technologies, but we know very little about actual user interactions with them,” says Melissa K. Wrapp, a graduate student in the Department of Anthropology at UC Irvine. “An app on a phone to budget or invest can be tremendously helpful, but you also have to be wary of what other information or sales motives could be imbedded within apps.”

Wrapp works as a researcher for Bill Maurer, anthropology and law professor and dean of the School of Social Sciences at UC Irvine. He’s also a Filene Fellow who performs research for the Center for Emerging Technology to look far into the future to connect credit unions with the most impactful technology and drive forward-thinking business decisions.

“It’s important to understand how people use these apps because we just don’t know if they encourage better financial behavior or lead people down the wrong path,” says Maurer. “My hypothesis going in was that these apps are almost like training wheels—and that people would graduate from them after a time and seek financial advice from more traditional sources like a bank or credit union.”

PUTTING FINTECH APPS TO THE TEST

In a pilot study, twenty-seven participants used one of five fintech apps for 30 days and reported their experiences. Some apps were personal budgeting apps and others were for investment management. The group included UC Irvine undergraduates, graduate students, and staff. Several participants were completely new to financial management apps, while others had some previous experience with fintech apps.

"We started the project with preliminary interviews, then held a focus group half way through the study to see how the experience of using the app was going," Wrapp says. "During the exit interviews, many participants mentioned that the focus group conversations were as valuable to them as using the app itself because, for many, it was the first conversation they've ever had with people about how to manage their personal finances."

While many participants indicated that they are now actively seeking out more personal financial education, Maurer and Wrapp will be presenting the complete research results at the Center for Emerging Technology and Filene's Spring i3 "The Future of Trust: How Technology Will Make it or Break it for your Credit Union" meeting in Seattle, WA on May 29-30. Their discussion will examine behavior and patterns of younger consumers’ use of financial apps to manage their money, and how credit unions can identify best practices to shape their own mobile apps.

-Megan Boettcher for UCI School of Social Sciences

See original post at: https://socs.ci/financialliteracy2019

How Software Ate the Point of Sale: Or, why paying for stuff is so complicated now

By ALEXIS C. MADRIGAL in The Atlantic

Photo credit: Adam Hunger/Reuters

I’m standing at the counter of a Vietnamese restaurant in Berkeley, ordering a pork bun. There was a time when I knew exactly what would happen next. I’d hand over my card, the cashier would swipe it, a little receipt would curl out of a machine, I’d sign it, and I’d crumple the bottom copy into a pocket. Easy.

Now all kinds of things can happen. I might stick my card directly into a point-of-sale (POS) system. Maybe I swipe; maybe the cashier does. Perhaps a screen is swiveled at me. I could enter my PIN on a little purpose-built machine; I could sign with my finger on a screen; I could not have to sign or enter a PIN at all. I could tap my phone on a terminal to pay. Usually, there’s a chip reader for my no-longer-new chip card. When I put the card in one of the machines, sometimes it takes four seconds; other times, I have time to pull out my phone and stare at it, which means I forget about the card until the reader begins to beep at me, at which point I pull it out, mildly flustered, as if I’d caused too much ice to pour out of a soda fountain. Ah! Okay. Sorry.

The act of paying for stuff is undergoing a great transformation. The networks of machines and code that let you move your imaginary money from your bank account to a merchant are changing—the gadget that takes your card, the computer that tracks a restaurant or store’s inventory, the cards themselves (or their dematerialized abstractions inside your phone). But all this newness must remain compatible with systems that were designed 50 years ago, at the dawn of the credit-card age. This combination of old and new systems, janky and hacky and functional, is the standard state of affairs for technology, despite the many myths about how the world changes in vast leaps and revolutions.

If some areas of financial technology, or Fintech, promise a new elegance, the point of sale serves as a reminder of the viscosity of the everyday technologies on which most Americans rely. If you want to divine the future of transportation, you’d probably learn more thinking about the bus than the rocket. If you want to know how money is gonna change in the future, you need to look at the cash register as much as the blockchain.

[The future of money-like things]

But the most powerful and ambitious companies in the world have tremendous incentive to take interest in the cash register. It’s there where the two great data streams of the modern world flow together: what people do on their phones and what they buy in the physical world. In the first stream, the tech one, the rule is that data becomes money, after it is fed into machine-learning systems tuned to show you better ads. In the other, the data is money. If these two streams fully merged, a company could have a perfect ledger of what you saw and then everything you bought. The ads would get better, so you’d buy more stuff, and in buying more stuff, you’d make the ads better. Online, Facebook (and others) can already track all kinds of activity. But about 90 percent of purchases are still made IRL. Imagine the vast sums of money that could be made if every transaction became part of the ledger. Unsurprisingly, the big tech companies want a piece of this action—as do the banks, as do many start-ups and established, niche players.

So Americans are living through what Bill Maurer, the director of the Institute for Money, Technology, and Financial Inclusion at the University of California, Irvine calls the “Cambrian explosion in payments.” The “point of sale”—once a poky machine or just a person with a calculator or a pencil—is now a computer like everything else, tied deeply into the operations of the restaurant or store. The labor of making a payment could fall to the cashier, as in the old days, or to me, the customer, but we’re both accessing a complex, evolved system of reckoning between banks and their attached remoras, feeding on whatever money ends up in the water.

For the full story, please visit:
https://www.theatlantic.com/technology/archive/2018/07/when-software-ate-the-point-of-sale/565919/

Remittance Channels & Regulatory Chokepoints

By Ivan Small in Limn Magazine, Issue 10: Chokepoints

The bells jingled on the door as I entered a small store tucked in a New England Vietnamese shopping center. Specializing in transactions between the United States and Vietnam, the store is representative of many small operations providing travel and financial services, including plane tickets, visas, box shipping, and remittances. Discussing her business, the owner Kelly gestured to a wall covered with children’s pictures. She explained they were extra passport photos of her customers’ kids, many of whom were now grown up and customers themselves—a testament to the store’s enduring role in facilitating transnational ties for the Vietnamese American community. 

Bitcoin ATM in Ho Chi Minh City, 2017. Blockchain technologies offer
a potential remittance channel that may circumnavigate
regulatory checkpoints, for now. Photo credit: I. Small.

Yet when our discussion turned specifically to remittances, Kelly lamented that it was becoming more difficult for small businesses like hers to compete. In the past, she handled remittance transfers herself, via a bank account. Now, according to her, “banks don’t allow it.” As an informal remittance service provider operating in a gray area to facilitate small transfers, her company had become visible to the expanding reach of the formal financial world—most notably, as a potential “black market” operation. Kelly recently contracted financial-transfer services to an external provider but noted that, at $1.25 per transaction, “It’s hardly worth it anymore. Nonetheless, our customers need to send money and expect us to do it for them, so we continue as long as we can.” 

The informal money-transfer sector has been integral to the Vietnamese community in the United States, but during the past ten years its share of the U.S.-Vietnam remittance market has fallen from one-half to one-third. Kelly’s operation was one of many affected by remittance oversight regulations put in place after the 2008 financial crisis. Specifically, regulations associated with Dodd-Frank require low-value transfers of more than $15 to comply with disclosure, consumer protection, and error-resolution rules requiring more steps and paperwork for remittance providers. Such regulations were emerging as a problematic chokepoint, disrupting and diverting the long-standing channels of her financial-transfer services. Kelly experienced this regulatory chokepoint as a slow but significant shift, pressuring her to diversify from remittances to other services. Writ large, “not being allowed to do it anymore” signaled a significant shift in the financial infrastructures linking diasporas and homelands—Vietnamese and otherwise. 

Reforms of international remittance infrastructures since 2008 have impacted transnational banking, financialization, and payments. By highlighting these transitions—as well as the stories and histories of money-transfer operators like Kelly, who facilitate not only financial connections between Vietnam and the United States but also other material and bodily mobilities—we gain insight into how emerging chokepoints in the international financial system are experienced and navigated. Doing so draws attention to the practical, technical, and affective value of such services in framing and maintaining economic and social relations.

Read full original post - https://limn.it/articles/remittance-channels-regulatory-chokepoints/