Case studies and numbers about mobile payments in the developing countries.
Tavnet Suri is an Associate Professor of the Applied Economics at the Massachusetts Institute of Technology Sloan School of Management. She is an author of a series of papers that explore the effects of mobile money and mobile payments in Kenya, which have very similar functionality to cryptocurrencies, cryptocurrency ATMs and payments.
Suri’s study of what happened in Kenya has in part been financially supported by the Melinda and Bill Gates Foundation.
By 2015, mobile payment users had over 400 million accounts in over 90 countries, with about 250 companies offering mobile payment services.
In all her papers, Suri shows that exchanging money with each using phones helped the residents of Kenya save money and go through difficult financial times. Suri also shows that mobile money had very positive effects on the decreasing rates of poverty in the country, especially when it comes to households with a woman in charge. These effects show that mobile payments are more than just a daily convenience and can have a profound effect on the life of people and life of a country. This is extremely important because using the figures from the study, regulators in various countries across the world can make better decisions about how to regulate mobile payments and peer-to-peer blockchain payments. Currently, when it comes to cryptocurrencies and cryptocurrency ATMs, many of the countries all around the world prefer to ban the technology or not pay attention to it, because they simply do not understand what the blockchain technology is and how it can change the lives of people.
According to the figures from the papers, starting from 2008, mobile financial services have lifted out of extreme poverty, defined for Kenya as living on less than USD$1.25 a day, close to 200,000 people, or about two percent of the total households in Kenya.
Suri’s papers focus on M-PESA, the most popular mobile payments system in Kenya. The service has launched in 2007, two years before Satoshi Nakamoto introduced the world to the Bitcoin network and blockchain technology. Eventually, M-PESA service has grown to over 25 million users and over one hundred thousand agent locations all around the country. The function of agent locations is to collect deposits and process withdrawals, which is similar to what a cryptocurrency ATM would do if a lot of residents in a country started to use cryptocurrencies. The benefits of a cryptocurrency ATM compared to an agent location are obvious. They are lower costs compared to having to hire and employ people, higher levels of security and less accounting mistakes and errors.
In 2010, Suri published a study together with William Jack, who works at Georgetown University. In this paper, Jack and Suri showed that M-PESA was more than just a convenience and that it also helped Kenyans to save and borrow money easily.
In a paper from 2012, Suri showed how mobile payment systems helped Kenyans handle financial uncertainties better in cases of health problems or farming issues such as crop failures. The paper shows that using a mobile system provides a person with a wider network of support of relatives, friends and donors who can quickly help in case of an emergency. Yet again, in this scenario there is nothing about M-PESA that a cryptocurrency network couldn’t do. For instance, if a country had a network of cryptocurrency ATMs where residents could buy and sell cryptocurrencies and most of the residents of the country were using Bitcoin or some other cryptocurrency, then they would be able to help each other very quickly by sending money to a cryptocurrency address.
The third Suri’s paper, published in 2016, wraps up her work on the subject. For this final work, Suri has surveyed over 1,500 households across the country multiple times over the years per household. The researchers asked the participants the same questions several times, including the questions about average spending and consumption.
Instead of simply looking at the number of users of the M-PESA payments system, researchers have studied the number of M-PESA locations within 1 kilometer of the households that participated in the survey. Then, they compared the households in the areas with high densities of M-PESA locations to the households with low densities of M-PESA locations. Obviously, because of the similar functionality, it is possible to assume that effects in areas with a high concentration of cryptocurrency ATMs would be very similar.
What the scientists have found was that a household in an area with a high concentration of M-PESA agents has increased its consumption by 6%, which was enough to get about 60% of the households in the survey out of the poverty levels. Mean consumption of the households in Suri’s survey has been USD$2.50 per day.
Households where a woman is in charge saw the biggest changes, with consumption going up about 18%. Another interesting result of the study that Suri said she could not foresee was that the increase in the number of M-PESA locations in an area led to about 3% of the participants of the study abandoning farming for some other occupation, typically business or retail. Such a business would typically be a sole proprietorship in which a person in making and selling goods. Obviously, having access to a mobile payment system and knowing that potential customers in an area also use mobile payments a lot was a significant part of the decision to abandon farming.