Why We Shouldn’t Put Mobile Money On A Pedestal…Yet.
Mobile money initiatives have exploded throughout the developing world. We’ve been hearing a lot over the past few years about its ability to provide access to savings, cash transfers, bill payments and other money management tools to unbanked populations. Yet given the dearth of cautionary literature on the topic, it appears it’s been a bit harder for development enthusiasts to pause and consider the possible pitfalls. What happens when a population — the one that is most likely to benefit from its services — rapidly adopts a new technology, like mobile money?
First, a brief primer on mobile phone proliferation. Nearly 4/5ths of all mobile subscriptions come from developing countries, that’s about 3.8 billion subscriptions. Mobile money is now used by over 110 million individuals worldwide, with a penetration of over 50% in rapid growth markets. Domestic money transfers using mobile devices in Kenya even outstripped Western Union’s global transactions last year. In other words, mobile money is here to stay.
But this post isn’t aimed at touting its benefits – mobile money has received so many plaudits recently that it deserves a healthy dose of skepticism.
I’m not saying that mobile money is inherently bad – far from it. But as we click away on our smart phones, iPads, and other tech devices, it’s easy to forgive their flaws and look past the potential dangers they create (speaking of which, if you’re reading this while, say crossing the street, save it for later – it won’t be useful to you when you’re in the path of a city bus…).
Mobile money is a tool and, much like we have seen activists and repressive governments alike use social media platforms to spread information or incite action, it can both positively and negatively affect large numbers of people with the tap of a single button.
There are several aspects of mobile money that should give us pause. First and foremost, mobile money requires financial literacy in order to successfully utilize it. Even with seamless training tools, it can be intimidating to first-time users. In most countries, mobile money is also controlled by for-profit businesses. This means that fees can be attached to each transaction making the service prohibitively expensive for low-income users.
Even the instant accessibility that makes mobile banking so attractive is not as dependable as advocates contend. Mobile towers are often the targets in conflicts. As witnessed in Afghanistan, this can lead to regular disruptions in mobile service and render mobile money inaccessible. Mobile service can also be affected by weather and technological glitches that make a virtual purse somewhat unreliable. Even in mobile money crazed countries like Kenya, 65% of M-PESA users continue to hide money in their homes, demonstrating a hesitance to fully rely on virtual cash.
It remains to be seen if the widely successful implementation and frequently cited M-PESA program in Kenya can be replicated in other developing countries. We aren’t the only skeptics, one takeaway from a recent tech salon in New York was the question of how to even evaluate whether such technologies are even working. Until more evidence and research into the wholesale benefits of mobile money can be documented, let’s remember that even tools for good can have their weaknesses.