Institute for Money, Technology & Financial Inclusion

As financial transactions are increasingly digitized, old and new kinds of intermediaries are only expanding in importance. Intermediaries, mediators and brokers sit at critical junctures and operate between diverse financial arenas and pathways. We argue that mapping the intermediate entails identifying how different kinds of actors—human and non-human, objects and interfaces, institutions and practices—delimit or reify but also stitch together and overcome spatial and temporal differences in people's financial lives, while taking on varying burdens of risk. Mapping the intermediate is both an empirical and methodological exercise. Empirically, it requires following the agents and traders, brokers and material objects that facilitate transactions and add, extract, or re-work different kinds of value. Methodologically, intermediaries and the intermediate are not only the objects of analysis but act as analytical tools in their own right, making the process and politics of transactions visible and tangible. Attending to the intermediate in our inquiries around money, currency and new digital financial technologies, thereby, offers new directions for grounding finance in politics and history and better connecting micro and macro and local and global economic processes.

This white paper by Dr. Ursula Dalinghaus, Visiting Professor of Anthropology at Ripon College and affiliated scholar at the Institute for Money, Technology & Financial Inclusion (IMTFI) University of California, takes a close look at the role of cash in society and the specific characteristics making it a public good, citing relevant studies, scholars and field experiments.

"Cash in circulation is growing on a global scale by approximately 3% per year; 80% of all payments worldwide are cash transactions. Cash is an essential part of every stable financial and economic system", stated ICA Chairman Wolfram Seidemann. "This paper demonstrates that cash is more than just a means of payment. It is a public good, part of modern life and vital for people's everyday lives."

Key takeaways

Cash is a public good that guarantees ease of use, accessibility, privacy, and many other unique qualities in local, national, and global monetary systems. Cash fulfills both criteria for a public good: it is non-excludable because its function as a means of payment, of transfer of value, works without compensation. And it is non-rivalrous because its use by one person does not preclude its use by another.

Cash is public – the only form of money not controlled by a private, profit-driven entity. Once in circulation, it is the only form of payment independent of its issuer. It is deployed not to make a profit on its transfer but to support and sustain value transfers free of charge. There may be costs associated with cash, but cash itself is a means of value transfer that settles at face value with no fees involved.

Cash enables personal freedom and self-determination – state-issued physical cash is a distributed public infrastructure that allows citizens and users to create a space outside the state. At the same time, cash acts as a claim upon central banks and, ultimately, states to ensure good governance of monetary and payment systems.

The materiality of cash is vital to many social practices. The role cash plays in social relationships often hinges on the physical design of cash, such as denomination, which makes cash particularly useful for budgeting, accounting, gifting, or saving.

Introduction to Money at the Margins. Book description: Mobile money, e-commerce, cash cards, retail credit cards, and more—as new monetary technologies become increasingly available, the global South has cautiously embraced these mediums as a potential solution to the issue of financial inclusion. How, if at all, do new forms of dematerialized money impact people’s everyday financial lives? In what way do technologies interact with financial repertoires and other socio-cultural institutions? How do these technologies of financial inclusion shape the global politics and geographies of difference and inequality? These questions are at the heart of Money at the Margins, a groundbreaking exploration of the uses and socio-cultural impact of new forms of money and financial services.

Over the last decade there has been a revolution in payment technologies. Digitization of bank accounts, new digital payment applications, and an array of new kinds of financial products and services have opened up a wide range of choices for storing, saving, sending, and receiving money. Digital finance has become an important tool in efforts to facilitate formalfinancial inclusion across the globe.

And yet, cash has also remained an essential tool for people’s financial practices and lives alongside these new payment forms. Evidence from both developing and developed payment markets shows that while digital payments may have increased exponentially, the demand for physical banknotes and coins has kept up with the pace of digital finance. Physical currency or physical accounting devices are ancient and crosscultural technologies, in continuous use since at least 1600 B.C. Aside from risks and benefits, they are wedded to an incredibly durable set of behaviors and social practices.

People use diverse payment methods (from cash, to cards, to payment applications and other alternatives) together. However, the ability to move between diverse payment forms, especially cash, has also featured prominently in criminal activities, including money laundering, tax evasion, and terrorist financing. This has led government authorities, law enforcement, and other entities to target cash in particular as the supposed core method – and problem – in such activities. The European Commission proposes to institute a cash transaction limit across the EU, claiming that it will prevent money laundering, terrorism, and crime. This follows the decision by the European Central Bank to end issuance of the 500 euro note beginning in 2018.

In IMTFI's PERSPECTIVES blog series, IMTFI fellows take on the recent demonetization move in India through 7 posts on the IMTFI Blog from January-February 2017. This synthesis serves as a collation of the 7 blogposts.

The series aims to foster an open dialogue on issues around money, technology and financial inclusion for the world’s poor. Individual contributions reflect contributors' own reflections on recent events - based on their research and areas of expertise. The topic of demonetization will conclude with a curated commentary by IMTFI on key themes, important questions, and what we can learn from these contributions for digital financial inclusion going forward.

#1 - Demonetization and its Discontents (1/24/2017) by Janaki Srinivasan

#2 - The Recent Indian Demonetisation and Cash Exclusion (1/26/2017) by Debashis Acharya

#3 - The Dangerous Liaisons between Demonetization and the Indian Informal Economy (Part 1) (1/30/2017) by Isabelle Guérin, Santosh Kumar and G Venkatasubramanian

#4 - The Dangerous Liaisons between Demonetization and the Indian Informal Economy (Part 2) (2/13/2017) by Isabelle Guéin, Santosh Kumar and G Venkatasubramanian

#5 - The Recent Indian Demonetization and Cash Exclusion (Part 2) (2/1/2017) by Debashis Acharya, V V Subbarao, and T K Venkatachalapathy

#6 - Before Money isn't Money Anymore....(2/7/2017) by Vivian Dzokoto

#7 - Insights, Challenges, and Ways Forward (2/22/2017) by Ursula Dalinghaus, Nima Lamu Yolmo, and Janaki Srinivasan

Over the past decade, mobile phone-enabled financial services, such as those made famous by the Kenyan mobile money platform M-Pesa, have been heralded as a means of poverty alleviation andfinancial inclusion. The mobile platform represents an exciting possibility as a delivery channel fordigital financial services and as a technology that, like money, connects people with one another. Yet mobile money deployments around the world have not had unequivocal success. In this working paper, we survey lessons from the first decade of research into mobile money, focusing on anarchive of studies produced by fellows funded by the Institute for Money, Technology and Financial Inclusion (IMTFI), based at the University of California, Irvine. We describe mobile money’s primary use case—P2P money transfer—and argue that both the “Ps” and the “2s” of this model (mobile money’s “peers” and the technological and social infrastructures that intermediate them) must be understood in context. We then outline ten insights from the IMTFI research archive that demonstrate the contextual complexities involved in introducing and scaling mobile money,including discussions of: agent networks; physical infrastructure; location, place, and space; kinship and family; gender and gender inequality; class, caste, and rank; religion and ritual; time and tempo;government and regulation; and the persistence of both cash and non-currency stores of value. We conclude by raising issues that promise to be critical provocations for the next decade of mobile money research, making an argument for methodological diversity, and interrogating the limitations of the “financial inclusion” frame within which mobile money has been situated as a development intervention. If mobile money is, at its core, a technology of communication and circulation, it is also a central means of distribution and redistribution. What would it mean, then, to shift the conversation from debates over financial inclusion to questions about financial justice?

Are you curious about how to design a research project on Bitcoin?

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This synthesis features IMTFI projects in Nigeria, Kenya, Ghana, India, Mexico and the Philippines, exploring the theme of trust across four broad categories –Channels, Intermediaries, Accounting, and the Source. One of the key takeaways is that trust in new money technology grows when it can be one among many reliable channels for storing and transferring value.

Think back to 2008: the first iPhone had just been released. M-Pesa, Safaricom’s mobile transfer service, was just beginning to hit the Kenyan countryside. The extent of the global financial crisis was becoming known. At the University of California, Irvine, south of Los Angeles, researchers had just begun thinking about the collision between mobiles and money. Founded that same year, the Institute for Money, Technology and Financial Inclusion (IMTFI) was in the process of supporting its first set of research projects, in countries ranging from Nigeria to Indonesia. When it funded its first cohort of 17 researchers from around the world in 2009, only a handful were exploring the expansion of mobile money technology. Three of the projects were in sub-Saharan Africa–in Kenya, Botswana and Nigeria. The other projects focused largely on alternative currencies, informal savings practices, programs. Five years later, in 2014, almost all of IMTFI projects involved research on mobile money, and 50% were being conducted in countries in Africa.

The article is part of the January 2016 issue on "The Poverty of Development Strategy in Africa" and provides a comprehensive look into IMTFI's research findings in Sub-Saharan African from 2009-2104. It traces shifts in the mobile money landscape and also discusses patterns that endure by highlighting the role of deep histories, rank and hierarchy, ritual and religion and the stickiness of trust in understanding user interaction and uptake of new technologies. The article further emphasizes the role of  locally embedded rich qualitative research and offers suggestions for new future directions in mobile money research in the region.

Why do financial intermediaries persist, despite the promises of disintermediation that accompanied the diffusion of digital technologies?Through a comparative qualitative study of financial intermediation in rural markets in Shan State, Myanmar, and Kerala, India, we map out and make visible official and unofficial roles played by different types of brokers (traders, hundi, transport companies, etc.), and different financial  tools (cash, gold, land, banks, etc.), and look at how information and communication technologies  (ICTs) fit in the interactions between the two. ICTs and human brokers perform functions that are sometimes  complementary, sometimes in conflict, and sometimes simply different from each other. In examining the range of roles that (human and non-human) actors and material practices that are involved in  conducting financial transactions have, we show the central role that historical legacies and politics play in explaining why both cash and financial intermediaries persist in the digital age. Focusing on the different values that human and non-human intermediaries bring to financial encounters helps explain what characteristics make each resilient or replaceable in a time of change, and furthers understanding of which of the many functions embodied by humans can be replaced or supported by digital technologies, and which ones are likely to remain the domain of humans. We conclude that the “expertise” inscribed into technological artifacts such as mobile phones tends to be fixed, whereas human expertise can be more flexible and quicker to react to changing political or economic situations.