Tradition and Trust: Reflections on Barriers to Mobile Payments from the IMTFI Conference

How would you describe a savings account where your money is occasionally stolen, eaten by mice, or washed away by floods? Merchants in Dharavi, the largest slum in Asia, describe it as “safe.”

That’s what Deepti KC and Mudita Tiwari found when they interviewed sellers, suppliers and buyers in Dharavi, home to 5,000 informal businesses that create goods worth more than 600 million dollars a year, in the heart of Mumbai.  

Far from being poor peddlers of trinkets, the sellers of Dharavi—particularly those who make relatively expensive leather goods—routinely move thousands of dollars in a single day. They have sophisticated financial lives, often including formal bank accounts, and many have smart phones.  KC and Tiwari—like many researchers studying financial inclusion in the developing world—posit that increasing take up of digital transactions “is essential to achieving inclusive financial growth in India.”

KC and Tiwari are funded by a grant from the Institute of Money, Technology and Financial Inclusion (IMTFI), at UC Irvine, and were among dozens of scholars who presented their ongoing work at IMTFI’s Annual Research conference which Tim Ogden and I attended a few weeks ago. The conference brought together anthropologists, sociologists and economists to talk about the impact of new technologies on the financial lives of the poor.

It’s easy to enumerate the costs of dealing in cash in Dharavi. The same leather merchants who carry bundles of $3,000 to $4,000 worth of rupees in each pocket told stories about losing money to counterfeiters, and about stacks of rupees nibbled to dust by mice, or destroyed by floods or rain.

So why is cash still so predominant in Dharavi? In hundreds of interviews, merchants insisted that they preferred cash because it was safe, convenient, and secure (even while repeating the stories about counterfeiting and mice). Some sellers said they wanted their transactions to remain informal and unrecorded to avoid paying taxes, and many expressed distrust of banks and money-transfer agents.

This theme of trust came up again in the research of Lite Nartey and Olayinka David-West, who interviewed 4,500 urban dwellers in Accra, Ghana and Lagos, Nigeria earning less than $200 a month. The researchers found that "everybody has at least three phones" because each service provider is so spotty and unreliable that three are required to get full coverage. But even with people toting around multiple phones in their pockets, many still rely on “susu collectors,” local women who collect and hold people’s money in exchange for a fee, for their savings needs. Like the Dharavi merchants, interviewees complained that susu women sometimes disappeared with their savings, but at the same time explained they used the susu service because it was safe, traditional, and trustworthy—that is, compared to the mobile operators, who they perceived as corrupt or unreliable.

The reasons why people might be reluctant to move to digital payments systems are deeply rooted (in history and culture) and diverse (from one population to another). The financial tools currently used in Dharavi, Accra and Lagos were adopted over generations, not years or months. Should we be surprised then that people are not responding quickly to mobile money? Perhaps we need to recalibrate these expectations.

Anthropological field research can help us economists understand that people perceive mobile payments systems as far less reliable than they appear to us, and it can reveal how deeply personal are these decisions about how to spend, save and manage very precious, scarce resources. If people are aware of mobile money and aren’t using it—even though it may appear to us to be in their best interest to do so—there are likely some very good reasons why they are not.

Laura Freschi recently joined FAI as the Deputy Managing Director; she concurrently directs research at NYU's Development Research Institute and is at work on an economic development history of one New York City block.