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Platform, Infrastructure, Utility?

posted by Bill Maurer & Stephen Rea

While we’ve been blogging, Stevie has begun his dissertation fieldwork in Korea. He emailed Bill the other day: “Yesterday I opened a bank account here in Seoul, and conducted the entire interaction in Korean. For some reason, I don't get an ATM card, which is really strange. But in all likelihood I had no idea what the teller was trying to say to me, so I might end up getting a card in the mail next week or something. As ‘technophiliac’ as this culture seems to be, cash is still king; outside of the large department stores and global restaurant chains, I don't see any POS terminals.”

There’s hype, there’s reality, and there’s possibility around all the cashlessness claims that follow on the heels of mobile and other digital payment platforms. We want to conclude our guest blogging with a gesture toward some of the possibilities of mobile money--and a challenge for the Credit Slips community.

The other day, Bill received an email from a colleague at a large philanthropic organization:

"I heard you speak a while back at the foundation and was excited to see your blog reference to BTC."

At first Bill was confused—Bitcoin? He’d never written a blog about Bitcoin. Maybe she'd read his piece here.  But then he realized: BTC = Better Than Cash (see our first post). This is a useful little object lesson. When some people hear "digital currency" and "toward a cashless society" they immediately think, oh no, here come the money nutters wanting to end the Federal Reserve and put us on a gold standard. Or they think, hooray! Let’s end fractional reserve currency once and for all! But that's the BTC/Bitcoin side of the conversation. The BTC/Better Than Cash side is different, and it's important to stress those differences.

In a recent blog post at CGAP, Ignacio Mas and David Porteous make a case not for freedom from cash, but alternatives alongside cash--for everyone. They envision a world of “LiFi” – liquidity with fidelity – in which “every person has an electronic store of value which they can easily use to make and receive payments in real time” (our emphasis). They compare this to the electricity grid. And, yes, they argue “the payments grid in developing countries has to function more like a utility.” They argue that oversight of such a grid should fall to payment regulators. Mas and Porteous’s proposal is roughly in alignment with the Bill and Melinda Gates Foundation’s Financial Services for the Poor unit’s new strategic focus, which includes “concentrating on connecting poor people to digital payment platforms and enabling them to access savings, credit, and insurance services over those platforms.”

What might mobile money as a payments platform that explicitly works as an enabling and inclusive technology that works with cash actually look like? It all hinges on two key elements that help mobile money interface with cash, and help mobile money services interface with other services and applications: 1) the agent network, which we've called a social infrastructure in our earlier posts, and 2) application programming interfaces (APIs): "You often have to rely on others to perform functions that you may not be able or permitted to do by yourself, such as opening a bank safety deposit box. Similarly, virtually all software has to request other software to do some things for it. To accomplish this, the asking program uses a set of standardized requests, called application programming interfaces (API), that have been defined for the program being called upon. Almost every application depends on the APIs of the underlying operating system to perform such basic functions as accessing the file system. In essence, a program's API defines the proper way for a developer to request services from that program" (from Computer World). So whereas agents facilitate the interoperability of cash and mobile money by acting as "cash merchants," APIs facilitate the interoperability of a mobile money service with other mobile money services or with applications that are built upon the mobile money platform like savings and insurance practices built on M-PESA (see Kendall et al. or this earlier version). Both agents and APIs extend the potential of mobile money, the former by connecting mobile money up with local social networks and the latter by encouraging the uptake of the mobile money platform by programmers and developers interested in designing new applications for that platform. A role for regulation here? or a sort of Underwriters Laboratories??

Our take-home message is threefold: (1) The genie is already out of the bottle, and it’s not going back. We’ve got a telecommunications network that is already—with prepaid airtime—functioning as a payments network. (2) The potential here is for mobile money to be “more” than a card on the phone. The potential is for mobile money to be a financial service suite on the phone. And to serve financial inclusion goals. (3) But let’s remember Mas and Porteous’s point: the payments grid has to function—and be regulated—more like a utility. So that’s the challenge for the Credit Slips community: regulators, policy makers, academics and lawyers with decades’ expertise dealing with other payment networks: how do we do this? What are the lessons learned from other payment networks, other infrastructures: social, technological, legal and everything in-between? That's an open question and we look forward to continuing this conversation!

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