The Responsibility of Mobile Money Intellectuals

The narrative for the underlying adoption of cashless payments in developing countries is that of financial inclusion: mobile phones are a widespread and thus, with a little push, more people would escape the tyranny of the cash and join the financial system heaven (with the alleged benefits this entails such as greater liquidity, possibilities for greater indebtedness and of course, the privilege of paying charges and fees to financial institutions). For 30 years or so the likes of the World Bank and the Bill & Melinda Gates Foundation have supported mobile banking initiatives as well as their predecessors, namely microfinance institutions.

But as Kevin Donovan reminds us in his brief paper, a long term review of microfinance and mobile payments questions whether outside of specific examples, either has had an impact on development. Moreover, there is a lack of critical evidence to support the millions of dollars provided to these initiatives during the last 30 years. He also reminds us of the term Mobile Money Intellectuals (coined by Bill Maurer at UC Irvine’s Institute for Money, Technology, and Financial Inclusion) or the “community of scholars and practitioners from academia, business, government, and philanthropy” that should be the base of a critical discussion around micro finance and the cash free economy.

This is not, lets us emphasise, a negation of financial inclusion or mobile payments but a call for a balanced assessment of the way forward (including different technological solutions). A case in point is PayPal, the online payments intermediary owned by eBay Inc., who has prevailed through adaption: by copying Square’s white dongle with a blue triangle; establishing a strategic alliance with Discover whilst foregoing a mobile wallet application. PayPal retains a major market share of electronic payments (as poignantly noted in this article by

Donovan’s view is that:

There are certainly developmental benefits to technologically enabled finance, but it would be a shame to ignore the downside or fail to address the type of foundational questions that challenge and advance our understanding of innovations such as microfinance and mobile money.

Indeed we need a conceptual and empirical body of knowledge that looks beyond fads and into what works better for society. This is what this blog and indeed, our cashless society project is all about. We are happy to count Kevin as one of the key members of our growing network.

New Working Paper: Mobile Payments in Turkey

One of our primary activities here at the Cashless Society Project is to develop working papers that examine the idea of a cashless society from historical, contemporary, and international perspectives. In keeping with that, I’m thrilled to announce that we’ve recently posted a new working paper on Mobile Payment Systems in Turkey, written by Nurdilek Dalziel and Can Ali Avunduk. Both Nurdilek and Can Ali have spent time working in the Turkish banking sector, so their paper provides a insider perspective on how the Turkish banks and mobile telephony providers are currently approaching electronic payment services.

The paper opens with a brief overview of Turkish electronic payments in general, but then quickly dives into what they refer to as “direct carrier billing (DCB).” DCB is an approach to mobile payments where the mobile network operator (e.g., Turkcell, Vodafone, etc) manages the accounts and plays the central clearing role instead of a bank or bank-owned service organization. With this approach, anyone with a mobile phone can send and receive electronic payments, even if that person doesn’t have a bank account. The authors estimate that of Turkey’s 74 million inhabitants, 27 million (37%) do not currently have bank accounts, but most of those do own some kind of mobile phone. Thus, DCB could be one method by which this “unbanked” section of the population can gain access to electronic payments.

Of course, DCB also has the potential to cut the Turkish banks out of the payments game if they are not careful. So far, the authors report, the growth of DCB schemes is quite small, their networks are limited, many consumers don’t seem to be aware of their existence, and the overall payment volumes are actually restricted by the system for fear of fraud. Thus, DCB systems do not yet pose any kind of serious threat to the Turkish banks, and the authors see them more as supplements to the existing banking system rather than substitutes.