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Cash as Social Infrastructure

posted by Bill Maurer & Stephen Rea

Sticker in San Francisco: "Of course it's cash-only, it's the Mission."

Overheard: "Oooh, yeah, no, we don't take cards. Because the coffee is, like, local?" (both items courtesy Lana Swartz)

The word “cash” derives from Latinate words referring to “a chest or box for storing money,” not the money itself. The term originally meant the practices of storing, and the objects used to store items of value – not just money -- as well as the act of going to those storage devices to receive money (to “cash” a bill of exchange,, meant to go to the specific box where the money was). Cash as we know it today is more than a store of value and a medium of exchange; it has symbolic, pragmatic and artistic functions. In the US, even before Durbin, small merchants placed an extra surcharge on credit or offered discounts if customers used cash. Research being conducted at the Institute for Money, Technology and Financial Inclusion (IMTFI) is bringing to light a host of social, ritual and religious uses of cash and coin beyond their economic functions. What's their relationship to, say, mobile money? For us, they are design challenges more than anything else (see, e.g., the Royal Canadian Mint's MintChip, or discussions among developers about Google Wallet). Building an infrastructure for digital payments, especially in places that have been cash-only, entails some connection to the existing social infrastructures of cash.

As Janet Arnado, one IMTFI researcher, notes: "Informal wealth storing strategies exclusive of formal or informal financial institutions may always be practiced by the rural poor in the developing world, side by side with people’s utilization of financial institutions, because these practices have social dimensions as much as it has economic significance." At a Buddhist temple in Seattle, devotees build money trees to raise funds; in Ghana, brides are showered with money on their wedding day (they used to use Ghanaian currency but when it was redenominated, they could no longer afford bills. Rather than pelt the bride with coins, they switched to Nigerian naira).

Mobile money has not obviated or eliminated the use of cash in any of the places that it has been implemented. Instead, people have incorporated mobile money into their monetary pragmatics alongside the use of cash. They use mobile money as a means for short-term value storage and P2P value transfer, mostly of small sums, i.e. as a “bridge” to cash, as Ignacio Mas et al. have put it. Curiously, mobiles and money both represent modernity and tradition. For people accustomed to transacting in shells, pigs and state issued currency, the latter is "modern." But when people incorporate cash into ritual practices, it becomes a symbol of "tradition." The mobile phone is a high-tech marker of having a modern identity; but it's also a link to others, to distant kin, and its workings partake of a magical aura sometimes symbolically associated with the gods and other spirits. Put mobile and money together and you get some interesting results: whereas mobile money makes gifting sums of money more easy, say, to pay for the costs of a religious holiday celebration, it also makes it harder to make those gifts secretly and anonymously according to tradition. Mobile makes traditional practices such as pooling cash and the social interaction surrounding those activities different as well.

We think Mas and company are on to something when they describe mobile money services as offering a “bridge to cash.” A bridge is an infrastructure that permits a passage without regard to the freight carried over it. It is an intermediary that permits any kind of person or thing over it and to the other side. In most mobile money systems, human agents, sometimes dubbed “cash merchants,” facilitate the exchange between cash and e-money stored in mobile money systems and themselves become “bridges” to and from cash and e-money. The benefits of e-money for branchless banking are indisputable: financial inclusion on the scale of M-PESA would not be possible without mobile. Yet at the end of the day, for the people that use mobile money it all comes back to cash: sending it, obtaining it, saving it. As Sarah Rotman has noted , from a financial inclusion perspective all of the excitement about going cashless for cashlessness' own sake doesn't really help financially excluded people who need to be able to access cash for their everyday purchases.This gets us back to the heart of USAID's Better Than Cash challenge and its chief differences from Bitcoin or other such endeavors--the financial inclusion imperative. It's important to treat this with the same seriousness as we give privacy or criminality. Doing so also adds another element of consumer protection into the mix, especially for very poor, illiterate or otherwised disadvantaged people.

With mobile money, there's a potential to harness the cash side of the equation to aid in consumer protection and financial literacy (we're being a little pie-in-the-sky here, but bear with us!). Consider how the agent network for mobile money has turned kiosk vendors into “cash merchants.” This turns cash into a kind of commodity it might not have been before (I am "buying cash" the same way and at the same place I buy rice, but with e-money in my mobile wallet instead of paper currency). But it also situates agents as one of the key components of a new financial infrastructure: a social infrastructure. We believe that cash, too, is a social infrastructure, evidenced in its use in solidifying social, religious, and other relationships.

Now, the bridge metaphor also suggests a new means of tolling, a potential privatization of currency—something lurking not too far underneath the surface for some anti-cash proponents—an enclosure of the commons and culture of payments. The task is to hold that part of the metaphor at bay, while taking a more careful look at what digital platforms for payments--with the lessons learned from our decades of experience with card networks--may actually afford. We'll take that up in our final post.

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