A growing body of research on mobile money has a lot to say about its potential to smooth risks and facilitate transfer programs, but a definitive experimental study on what it means for the financial lives of the poor remains undone – a gap we would like to fill with our future work at the Financial Access Initiative.
In recent years, mobile technologies have rapidly expanded in the developing world, bringing information and other transformative services with them to the previously isolated and the poor (Aker and Mbiti, 2010; Aker, 2010; Jensen, 2007). Rapidly adopted in most developing country contexts, mobile technologies have the potential to serve as a broad-distribution platform for other services and products. For example, a growing literature looks at the potential for mobile technologies to serve as a vehicle for the delivery of information and reminders in a variety of contexts, including for loan repayment and health.
In addition to this, one notable adaptation of mobile technologies has been to provide broadly accessible banking services through the mobile platform. These services have the potential to penetrate markets previously unreached by traditional banks due to the relatively high costs of bank branching, particularly in rural areas. As exemplified by the popular M-PESA product in Kenya, introduced in 2007 and one of the first of its kind, mobile money allows individuals to deposit, transfer, and withdraw funds to and from electronic accounts or “mobile wallets” based on the mobile phone network.
Jack and Suri (forthcoming, AER) provide the first very compelling evidence that mobile money may substantially improve the lives of the poor, in a panel data study finding that households with users of mobile money were substantially less likely to be hurt when experiencing negative economic shocks than households without users of mobile money. Still, the study is context specific and non-experimental, raising the question of whether biases due to unobservable relationships in the data may drive their estimates.
In addition to its straightforward and direct effects on the financial lives of the poor, people often wonder whether mobile banking may be able to serve as the door to a broader suite of financial services. Using two waves of the FinAccess surveys in Kenya, Mbiti and Weil (forthcoming, NBER African Successes Volume) find tantalizing results that suggest that mobile money use may lead to a higher probability of being banked, and a lower likelihood of saving through informal means. Similarly, Batista and Vicente (2013) find some lab-experiment-in-the-field-based evidence that mobile money may cause individuals to substitute away from traditional or informal finance.
More than one ongoing and in-progress study asks whether mobile money can serve as a more cost-effective and safer carrier for transfer programs of various kinds, both governmental and non-governmental in origin. For example, in a randomized controlled trial, Aker et al (2013) explore whether delivering cash transfers in mobile money or cash affects program costs and benefits, while Johannes Haushofer and Jeremy Shapiro recently released initial results of an evaluation of the GiveDirectly program, which provides cash transfers through a mobile platform.
A small number of randomized evaluations explore the potential of extensions to existing mobile money platforms to deliver new services. Suri and Jack, along with Christopher Woodruff, are in the process of implementing a field study to test whether trade credit can be implemented over mobile platforms, in partnership with Coca Cola and Equity Bank of Kenya. Karen Grepin and James Habyarimana, also with Suri and Jack, implemented a study of mobile-based savings accounts for birth in Kenya, finding unexpectedly low demand for the product. Emily Breza, Martin Kanz and Leora Klapper will test whether direct deposits of wages into bKash accounts promote better financial management among garment workers in Dhaka. Catia Batista, Pedro Vicente, and Dean Yang are implementing a study to see whether a commitment savings product can increase appropriate fertilizer use in Mozambique. An in-progress study by Cynthia Kinnan and colleagues will ask whether the provision of mobile-based savings accounts changes risk-sharing and social networks in Zanzibar.
Finally, and excitingly, Tavneet Suri and William Jack are implementing a study to see whether mobile payments systems can be leveraged to facilitate pay-as-you-go financing for solar powered lighting for small businesses in Kenya (p. 21).
In addition to these studies, a host of mixed-methods and broader studies of mobile money perceptions and use are available through the website of the Institute for Money, Technology, and Financial Inclusion, based at the University of California – Irvine (upcoming conference website here).
We have tried to do a comprehensive job here of reviewing what we know to be out there in the mobile money research landscape, but please do comment below if you know of other new research of note in the area.