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• Published: 06 July 2018

Is money going digital? An alternative perspective on the current hype

• Daniel Gersten Reiss   ORCID: orcid.org/0000-0003-1634-760X 1  

Financial Innovation volume  4 , Article number:  14 ( 2018 ) Cite this article

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Current financial discourse suggests the imminence of a cashless society, a concept that arose from the global popularization of digital financial services and the development of technologies with the potential for application in financial markets. However, claims about the impending obsolescence of paper money are neither disruptive nor a novelty. Instead, this paper argues that the conversion of money from paper to bits has been a gradual, adaptive process, and that money is already digital. Moreover, in this paper we propose that the statuses of electronic money (e-money) and banknotes have switched in the view of monetary authorities.

Introduction

Current discourse about money mainly focuses on its supply in a digital format. The wide access to technological products and the introduction of bitcoin triggered recent hype, which suggests that a disruptive transformation in financial markets and systems is imminent. However, corresponding discussions surrounding electronic money (e-money), virtual currencies, digital financial services, and mobile wallets topics commonly overlap with the discussion of the digitalization of money.

Policymakers and regulators have invested considerable effort in dealing with these mixed perspectives on the digitalization of money and catching up with market trends. In addition to hosting discussions at the national level, international bodies have undertaken several initiatives to explore these topics (CPMI 2015 ; CPMI 2017 ; IOSCO 2017 ; Pearlman 2017 ). Building on the existing literature, we analyze current perceptions of the digitalization of paper money and posit that, despite the recent hype, this digitalization is a long-term, ongoing process.

The rise of digital financial services

For the most part, what we understand as money is that it stores a quantifiable value that one expects to be traded for any other asset in the short or long run. In our minds, money usually takes the form of sovereign currencies, which are associated with physical money—that is, banknotes and coins (cash).

Digital financial services have brought financial services from bank branches to our homes and pockets. Thanks to the information and communications technology (ICT) revolution, money can conveniently be transferred from a bank account to an individual from a mobile device. Money transfers (even cross-border), bill payments, and loan requests have all become readily available through technology, bolstering the notion that money will soon go digital and paper money will become defunct.

However, this concept is neither new nor recent. Although currently presented as disruptive, digital innovations in financial services have been discussed for at least two decades. In the late 1990s, it was already suggested that electronic cash cards could eventually displace cash Footnote 1 (Shy and Tarkka 1998 ). By that time, both consumers and the industry were enthusiastic about the potential adoption of payment cards, but the economic rationale for the adoption of e-money Footnote 2 remained unclear (Santomero and Seater 1996 ). Despite their substantial potential benefits, new technologies in the payments market have typically only been adopted after a considerable delay (Berger et al. 1996 ).

The role of telecommunications in financial inclusion initiatives

This transformation process occurs both in developed and developing financial markets, even though the two markets are split in the provision of financial services through digital media. In developed markets, next-generation cell phones and wide broadband access have enabled the rise of powerful payment platforms that have allowed the digitalization of traditional services and the launch of innovative products. In these markets, the main concern has been the availability and credibility of innovative products (Dahlberg et al. 2015 ).

Innovative platforms are booming with novel technologies in developed markets, but access to novel technologies remains limited in emerging markets. In spite of this, the use of e-money has increased in these markets with the help of telecommunications infrastructure. In these markets, the financial inclusion argument is the key driver; instead of new technologies, new methods of providing financial services supported by e-money have been adopted. Since mobile services have gained more widespread adoption than financial services among poorer segments of the population, financial inclusion initiatives are heavily dependent on the telecommunications network infrastructure (Albuquerque et al. 2014 ).

Figure  1 illustrates the considerable extent to which financial inclusion is dependent on telecom coverage in developing countries. When we observed the averages of various countries’ telecom coverage, we observed that the gap between financial services accessibility and telecom accessibility was considerably lower in developed countries (right panel) than in developing countries (left). Similarly, as telecom infrastructure was increasingly relied on for e-money transfers, the use of cell phones for making small payments rose in some African countries (e.g., Kenya and Tanzania) and was adopted as a major financial inclusion policy in Latin America countries such as Peru. Footnote 3

Financial services and the reach of telecom services. Demirguc-Kunt et al. ( 2015 ), International Telecommunication Union ( 2015 ). Account at FI is the share of individuals above 15 years old who have an account at a financial institution in a country, while Cell phone is the number of mobile cellular subscriptions per 100 people. Developing and developed countries are set according to the United Nation’s statistics

E-money has flourished as a representation of national currencies. Consisting of smart cards and internet-based solutions such as PayPal, e-money and digital wallets have kept pace with traditional money storage solutions in developed markets. In developing markets, by contrast, e-money and digital wallets have emerged as the core financial solution for the previously unbanked. Footnote 4

The most usual form of money

However, e-money is not the only digital form of money. In fact, bank accounts have been digitalized since banks records were first transformed from accounting books to computer systems. Even though cash is a high-turnover commodity commonly used by people for retail payments, most money is stored in digital form. Figure  2 displays the series ratio of cash in circulation outside banks to broad money for selected countries from 2006 to 2015. Cash in circulation can be defined as the money in peoples’ hands that is used for trade or savings. When individuals stored their cash in banks, it transformed, in their view, into a digital form. In addition to cash in circulation, broad money includes digitally represented money (e.g., demand deposits, e-money, and money in savings accounts). The country series correspond to the available data from countries reported in the BIS Red Book (CPMI 2016 ; CPSS 2012 ).

Ratio of cash in circulation outside banks to broad money (M4), 2006–15%, BIS Red Book countries with available data. CPMI ( 2016 ), CPSS ( 2012 ), IMF ( 2015 ). Annual data refers to the position on the year’s last business day

The 2015 figures show that India and Russia were the countries with the largest ratio of cash in circulation outside banks to broad money, at 15%. Russia demonstrated a sharp reduction in its ratio, of almost 30% in 2006, whereas India showed a slightly downward trend. All other countries fell below the 10% ratio, with the ratio below 5% in the United Kingdom, Brazil, South Africa, and Korea. However, cash in proportion to the whole economy remained somewhat stable during the past decade in these countries. No relevant changes were observed in the other countries except for Mexico and Korea, where there was a slight increase. The most of the existing money in the surveyed countries was already in digital form.

Roughly just 10% of the global money supply is still not digital. Some reasons people continue to hold cash are Footnote 5 : (i) its potential use as a medium of exchange when no other electronic payment methods are accepted by the counterpart agent; (ii) the protection it offers against financial institutions (cash is a liability against the currency issuer, whereas all other forms of money are liabilities against other financial intermediaries, and cash is a trusted paper representation of monetary value because the central bank is a trusted certifier of the currency), and (iii) the privacy it affords in financial transactions. The analysis of the motives for behaviors (ii) and (iii) are beyond the scope of the present note. Two current discussions cover these issues: motive (ii) in the central bank digital currency (CBDC) context and motive (iii) in the cryptocurrency context. Footnote 6

The future for cash

Since online transactions are a requirement for payment transactions, Footnote 7 the availability of electronic currency that can replace cash—motive (i)—is dependent on the cost of telecommunications infrastructure. As evidenced in remote areas without widespread and reliable telecom infrastructure, e-money is not always a less expensive replacement for cash. We expect, however, that such examples will become increasingly rare as ICT advances and the cost of telecom infrastructure decreases. Consequently, the use of cash will gradually become restricted to increasingly smaller niches.

As the use of cash declines, it may become inefficient for a central bank to continue to administer its logistics. This idea reiterates the notion that the issuers of e-money are private institutions making tokens from money in circulation. In reality, the opposite behavior appears imminent)—that is, 130 monetary authorities will distribute digital money while private institutions will make paper tokens from it as a niche service. Footnote 8

E-money may be granted a higher status than cash as ICT advances. Nonetheless, money, as a representative form of a quantifiable and tradable value, has transformed from a physical representation of bullion to a digital record kept at trusted institutions. During this transformation, e-money has become more convenient and has reached a broader group of users. Money is already digital.

Going beyond the direct relationship between the cash substitution by new digital instruments, discussions on cashless societies go back to earlier times. See, e.g., the discussion between White ( 1984a , 1986 ) and Greenfield and Yeager ( 1986 ) for a debate on the increasing liquidity of bank deposits.

Typically, jurisdictions define e-money as some monetary value stored on devices or electronic systems, which allows users to make payment transactions. In addition to banks, non-financial institutions, such as card or mobile networks, can usually also issue e-money. For a contrast among different kinds of money, see CPMI ( 2015 ).

For country examples, see Jack and Suri ( 2014 ), Mas and Morawczynski ( 2009 ), and Bernal ( 2017 ).

For a more precise discussion on this definition, see CPMI Digital Currencies report (CPMI 2015 ).

Note that the usual discussed motives for holding cash, such as the precautionary and speculative

motives, are discussed in a context that includes cash and quasi cash holdings (including demand-deposit balances and certificates of deposit).

For CBDC, see CPMI and MC ( 2018 ). For privacy in cryptocurrencies, see Androulaki et al. ( 2013 ).

The infrastructure resilience also conditions the availability of electronic payment instruments, which is also subject to random shocks such as natural disasters or malicious attacks.

Indeed, this occurrence would be akin to historical systems, where banks issued redeemable claims for outside money (i.e., gold, silver, bronze, etc.). See, e.g., White ( 1984b ), Selgin ( 1988 ), Dowd (2002).

Abbreviations

Bank for International Settlements

Central bank digital currency

Committee on Payments and Market Infrastructures

Information and communications technology

International Monetary Fund

International Telecommunications Union

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Acknowledgements

The author is grateful to the anonymous referees for their useful suggestions.

This research received no specific grant from any funding agency in the public, commercial, or not-for-profit sectors.

Availability of data and materials

The dataset supporting the conclusions of this article are available in the sources’ repositories. For the share of persons above 15 years old that have an account at a financial institution in a country, see World Bank’s Financial Inclusion Data / Global Findex at http://datatopics.worldbank.org/financialinclusion/ ; for the number of mobile cellular subscriptions per 100 people, see ITU’s World Telecommunication/ICT Development Report https://www.itu.int/en/ITU-D/Statistics/Pages/stat/default.aspx ; for cash in circulation outside banks and broad money series, see CPMI’s Red Book statistics at https://www.bis.org/statistics/payment_stats.htm .

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Reiss, D.G. Is money going digital? An alternative perspective on the current hype. Financ Innov 4 , 14 (2018). https://doi.org/10.1186/s40854-018-0097-x

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Research: Can Money Buy Happiness?

In his quarterly column, Francis J. Flynn looks at research that examines how to spend your way to a more satisfying life.

September 25, 2013

A boy looks at a toy train he received during an annual gift-giving event on Christmas Eve 2011. | Reuters/Jose Luis Gonzalez

What inspires people to act selflessly, help others, and make personal sacrifices? Each quarter, this column features one piece of scholarly research that provides insight on what motivates people to engage in what psychologists call “prosocial behavior” — things like making charitable contributions, buying gifts, volunteering one‘s time, and so forth. In short, it looks at the work of some of our finest researchers on what spurs people to do something on behalf of someone else.

In this column I explore the idea that many of the ways we spend money are prosocial acts — and prosocial expenditures may, in fact, make us happier than personal expenditures. Authors Elizabeth Dunn and Michael Norton discuss evidence for this in their new book, Happy Money: The Science of Smarter Spending . These behavioral scientists show that you can get more out of your money by following several principles — like spending money on others rather than yourself. Moreover, they demonstrate that these principles can be used not only by individuals, but also by companies seeking to create happier employees and more satisfying products.

According to Dunn and Norton, recent research on happiness suggests that the most satisfying way of using money is to invest in others. This can take a seemingly limitless variety of forms, from donating to a charity that helps strangers in a faraway country to buying lunch for a friend.

Witness Bill Gates and Warren Buffet, two of the wealthiest people in the world. On a March day in 2010, they sat in a diner in Carter Lake, Iowa, and hatched a scheme. They would ask America‘s billionaires to pledge the majority of their wealth to charity. Buffet decided to donate 99 percent of his, saying, “I couldn‘t be happier with that decision.”

And what about the rest of us? Dunn and Norton show how we all might learn from that example, regardless of the size of our bank accounts. Research demonstrating that people derive more satisfaction spending money on others than they do spending it on themselves spans poor and rich countries alike, as well as income levels. The authors show how this phenomenon extends over an extraordinary range of circumstances, from a Canadian college student purchasing a scarf for her mother to a Ugandan woman buying lifesaving malaria medication for a friend. Indeed, the benefits of giving emerge among children before the age of two.

Investing in others can make individuals feel healthier and wealthier, even if it means making yourself a little poorer to reap these benefits. One study shows that giving as little as $1 away can cause you to feel more flush.

Quote Investing in others can make you feel healthier and wealthier, even if it means making yourself a little poorer.

Dunn and Norton further discuss how businesses such as PepsiCo and Google and nonprofits such as DonorsChoose.org are harnessing these benefits by encouraging donors, customers, and employees to invest in others. When Pepsi punted advertising at the 2010 Superbowl and diverted funds to supporting grants that would allow people to “refresh” their communities, for example, more public votes were cast for projects than had been cast in the 2008 election. Pepsi got buzz, and the company‘s in-house competition also offering a seed grant boosted employee morale.

Could this altruistic happiness principle be applied to one of our most disputed spheres — paying taxes? As it turns out, countries with more equal distributions of income also tend to be happier. And people in countries with more progressive taxation (such as Sweden and Japan) are more content than those in countries where taxes are less progressive (such as Italy and Singapore). One study indicated that people would be happier about paying taxes if they had more choice as to where their money went. Dunn and Norton thus suggest that if taxes were made to feel more like charitable contributions, people might be less resentful having to pay them.

The researchers persuasively suggest that the proclivity to derive joy from investing in others may well be just a fundamental component of human nature. Thus the typical ratio we all tend to fall into of spending on self versus others — ten to one — may need a shift. Giving generously to charities, friends, and coworkers — and even your country — may well be a productive means of increasing well-being and improving our lives.

Research selected by Francis Flynn, Paul E. Holden Professor of Organizational Behavior at Stanford Graduate School of Business.

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Article Contents

Some background on mobile money and its role in financial inclusion, the economics of mobile money: the micro-view, empirical research, mobile money and the economy: a review of the evidence.

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Janine Aron, Mobile Money and the Economy: A Review of the Evidence, The World Bank Research Observer , Volume 33, Issue 2, August 2018, Pages 135–188, https://doi.org/10.1093/wbro/lky001

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Mobile money is a recent innovation that provides financial transaction services via mobile phone, including to the unbanked global poor. The technology has spread rapidly in the developing world, “leapfrogging” the provision of formal banking services by solving the problems of weak institutional infrastructure and the cost structure of conventional banking. This article examines the evolution of mobile money and its important role in widening financial inclusion. It explores the channels of economic influence of mobile money from a micro perspective, and critically reviews the empirical literature on the economic impact of mobile money. The evidence convincingly suggests that mobile money fosters risk-sharing, but direct evidence of the promotion of welfare and saving is still mostly rather less robust.

“ Leapfrog ”: to improve a position by going past others quickly or by missing some stages of an activity or process.” [Cambridge Business English Dictionary, CUP]

Mobile money is novel : it was barely heard of a decade ago. 1 Yet it has transformed the landscape of financial inclusion, spreading rapidly in developing and emerging market countries (see figure 1 ), and “leapfrogging” the provision of formal banking services. The poor are especially vulnerable to risk (e.g., from illness, unemployment, death of family members, or natural disasters). Enhancing financial inclusion of the unbanked urban and rural poor—a goal of the G20 group of countries—can help to diversify risk. Financial inclusion policy has focused on extending access to formal banking services, but progress has been thwarted by cost and market failure challenges.

Number of Live Mobile Money Services for the Unbanked by Region

Source : Data from the GSMA State of the Industry Report ( 2017 ).

Note : The first mobile money system was launched in the Philippines in 2001, and M-Pesa was launched in 2007.

The new technology helps overcome problems from weak institutional infrastructure and the cost structure of conventional banking. Small size, volatility, informality, and poor governance place constraints on the commercial viability of financial institutions in developing countries ( Beck and Cull 2013 ), see figure 2 . The poor mostly cannot afford the minimum balance requirements and regular charges of typical bank accounts. Mobile phone technology has the advantage that consumers themselves invest in a mobile phone handset, while the (scalable) infrastructure is already in place for the widespread distribution of airtime through secure network channels (see figure 3 ). By adopting mobile money, under-served citizens gain a secure means of transfer and payment at a lower cost, and safe and private storage of funds. Mobile money has filled a lacuna, and has “changed the economics of small accounts” ( Veniard 2010 ). 2

Provision of Banking Infrastructure

Source : G20 Financial Inclusion Indicators database, World Bank and IMF Financial Access Survey.

Note : This shows the position shortly after the adoption of mobile money in Kenya.The first five regions refer to “developing only”.

Fixed Telephone and Mobile-cellular Subscriptions: 2005 and 2017

Source : ITU World Telecommunication, ICT Indicators database.

Note : Subscriptions are per 100 inhabitants. “Mobile phone subscribers” refer to active SIM cards rather than individual subscribers.

The technological innovation has helped ameliorate the perennial asymmetric information constraint faced by conventional banks in lending to the collateral-less poor. 3 The movement of cash into electronic accounts gives a record, for the first time for the unbanked, of the history of their financial transactions in real time. By using algorithms, these records can provide evolving individual credit scores for the unbanked. 4 After a designated period of usage and once a score is available, registered users of mobile money may obtain a pathway to formal banking services accessed only through a mobile phone: to interest-bearing savings accounts that can protect assets; to credit extension to invest in livelihoods; and insurance products that reduce risk.

Apart from reducing asymmetric information, the impact of enhancing transparency through electronic records is far-reaching. Tax collection could be improved by the rise of more visible spending, quite apart from the greater ease of tax collection via mobile money payments. The increased transparency of records protects customers’ rights and fosters trust in business, promoting the growth of efficient payments networks. Mobile money should make international transactions more readily traceable and therefore facilitate identification and better control of money laundering. If the high cost of remittances were reduced by mobile money, this could attract more official remittances, and re-channel “informal” remittances through official channels, raising recorded remittances. 5 In essence, mature mobile money systems and the records they produce help foster the “formalization” of the economy, integrating informal sector users into business networks, formal banking and insurance, and linking them to government through social security, tax, and secure wages payments. However, there are legal data privacy considerations concerning access to and use of mobile money records which have barely begun to be addressed.

The channels through which mobile money can affect the economy are many and complex, and not necessarily well-understood. A burgeoning body of empirical literature has attempted to quantify the possible economic gains for different countries of access to secure financial services through mobile money (e.g., improved risk-sharing, food security, consumption, business profitability, saving, and use of cash transfers), and the factors driving the adoption of mobile money. Demonstrating welfare and risk-sharing gains from mobile money across countries could bolster the case for significant government and donor support, as well as investment.

Unfortunately, interpreting the evidence on the economic impact of mobile money is not straightforward. The empirical literature is burdened by a range of sometimes serious problems with data, methodology, and identification, which some authors underestimate or choose to ignore. Work on mobile money faces “selection” problems since both the “roll-out” of mobile money by Mobile Network Operators (MNO) and their agents and the adoption or usage of mobile money by individuals may be influenced by other factors such as education, wealth, and changes in technology preference. There is mixed success using various methods and data sets in dealing with the resultant ambiguous causality. Although various studies establish statistically significant relationships, they frequently do not test the robustness of their results to different model specifications, measurement errors, and bias due to the possible omission of variables. Furthermore, in practice it is difficult to generalize from these models.

This article introduces the phenomenon of mobile money and its role in financial inclusion. It examines possible channels for the economic influence of mobile money, and reviews the new empirical literature on mobile money, both to obtain a better understanding of the linkages involved and to critically assess the sometimes strong claims made by the authors. Lessons are distilled for improved practice in the future empirical analysis of mobile money.

In economies with deep financial markets like the United States, mobile payments or transfers are predominantly linked with pre-existing bank accounts; mobile payments are rapidly gaining market share after a slow start, catalyzed by new technology and commercial partnerships (e.g., Apple Pay). This is distinct from mobile money payments or transfers in largely cash-based developing or emerging countries, where most users are unbanked. Yet as mobile money systems evolve and smartphones become ever cheaper in less advanced countries, the range of financial services could expand to link with products managed by formal financial institutions such as banks and insurance companies. This will ultimately blur the distinctions between mobile banking and mobile money. Survey evidence suggests that security concerns about mobile payments have diminished in the United States, shaped by industry efforts to enhance security (e.g., Federal Reserve 2016 ). There may be a technological spillover to less advanced economies, and biometrics may allay security concerns (though there are caveats about their use in poor countries). This could catalyze a transformation to a virtually cashless economy, and possibly a new role for some banks beyond traditional payments. 6

The term “financial inclusion” is of recent vintage, and has gained currency with policymakers, most prominently in the Maya Declaration of 2011, when 80 regulatory institutions from 76 countries collectively endorsed a set of financial inclusion principles. The G20 has backed the Maya declaration, promoted indicators to measure “financial inclusion”, and the G20 Summit in 2017 prominently endorsed digital approaches to financial inclusion. Mainstream definitions of financial inclusion share the goal of participation in the formal financial sector, which has severely constrained progress to inclusion. Until recently, the use of electronic mobile money has not been counted as part of financial inclusion under most definitions. Mobile money's role is seen as a pathway for registered users to formal sector financial inclusion via products (insurance, credit and a bank savings account) accessed through a mobile phone.

Aron (2017) argues that a revised definition of financial inclusion should encompass tiers of semi-formal inclusion, and not focus on comprehensive formal banking sector inclusion. Mobile money has transformed the lives of poor consumers who can hold recorded cash privately in non-bank electronic accounts and perform financial transfers easily and cost effectively. Fast-spreading and cheaper smartphones (and recycled smartphone handsets) potentially offer access to sophisticated features and a spectrum of financial services for huge numbers of illiterate people through well-designed applications ( Villasenor 2013 ). Such users may not embrace the formal sector products even if they become available, for example, if they qualify for credit, the loans may be small and not adequate to purpose, creating a disincentive to participate. Moreover, the actual number of informal users may be far higher than is formally reported. South Asia has close to 90% of the global unregistered mobile money customers, using an over-the-counter (OTC) model where the challenges and costs of establishing identity in registering were circumvented in favor of a drive for early market share ( Scharwatt et al. 2015 ). 7 In practice, the proliferation of mobile money services and the sheer numbers of new users actively signed up has become integral to achieving ambitious targets under the 2011 Maya Declaration. A revised set of G20 indicators in 2016 has raised the prominence of mobile money, reducing the bias to formality.

In box 1 , the Kenyan mobile money system M-Pesa is summarized and serves to explain the “nuts and bolts” of a profitable mobile money system. Instead of bank branches, mobile money systems rely on a large network of agents. These are linked under various contractual arrangements with a parent MNO, usually in partnership with a prudentially-regulated bank. 8 The nature of agent network structures and the design of the individual agent contracts are crucial for the successful development of mobile money systems ( Aron 2017 ). The typical authorized agents of the mobile money services provider are shops or outlets staffed by small business owners. 9 Mobile money systems were initially dominated by domestic money transfers, but have expanded into a broader payments platform for utility bills, rent, taxes, school fees, and retail payments. Business usage is expanding rapidly through special networks for the payment of suppliers, wages payments, and potentially pensions. Government usage for the payment of wages and social security has lagged, though the cost savings or reductions, especially in insecure environments, could be significant.

Kenya's mobile money system originated in 2005 as an experiment for loan payments via mobile phones in micro-credit schemes, in a public-private partnership between DFID (UK), the Kenyan Government, and Vodafone. In March 2007, Safaricom, the Kenyan subsidiary of Vodafone, launched a commercial payments service, M-Pesa, with the slogan “send money home”, exploiting the proliferation of mobile phone ownership. A decade later, there were six operators, though Safaricom controlled 65% of the market. The FinAccess (2013) survey revealed that 67% of the adult population used financial services in 2013 versus 41% in 2009, driven by mobile money. There were 27 million registered M-Pesa customers by 2017, of whom 19 million were (30-day) “active”. M-Pesa revenue grew by 33% to Kshs 55bn (US$536m) in the year to Mar. 2017, over one-quarter of Safaricom's total service revenue. The Bank of Kenya recorded in 2015, for all operators, a monthly value of transactions of Kshs 227.9bn (US $2.2bn), or about one-half of average monthly GDP.

In August, 2014, the National Payment System Regulations were issued under the National Payment System Act, providing a legal framework for mobile money. These regulations formalized and extended prudential and market conduct requirements for mobile money providers as previously articulated in simple letters of no-objection from the Central Bank of Kenya (CBK). The CBK has duties of oversight, inspection, and enforcement. There are mechanisms for consumer protection, redress, and confidentiality of data.

In Kenya, banks and non-banks, including mobile network operators (MNOs), may provide mobile money services. The net deposits from customers have to be invested in prudentially-regulated banks for safe-keeping in “Trust” accounts, which back 100% of the money of the participants in the mobile money service; the banks are required to satisfy fiduciary responsibility in all transactions concerning the Trust funds ( Greenacre and Buckley 2016 ). No investment of Trust funds is allowed; the funds are strictly separated from the service provider's own accounts and safeguarded from claims of its creditors. Safaricom's Trust account interest income is covenanted to charity.

The early agent exclusivity arrangement for M-Pesa was formally outlawed in July 2014; the CBK ordered Safaricom to open the agent network to other operators to improve competition and to lower fees for customers. Interoperability of platforms was implemented in April 2018; before this, users of mobile money services had to affiliate with multiple mobile providers.

By 2017, there were 136,000 M-Pesa agents countrywide (compared with about 2.43 commercial bank branches per 1,000 km 2 in 2013, or 1,410 total branches). Establishing an agency network and the training and payment of agents is a considerable early investment by operators to develop the market. Retail cash agents transact with their own cash and electronic money in their own M-Pesa accounts to meet customer demand. Wholesale agents (banks or non-bank merchants) are allowed higher limits on electronic money stored in their M-Pesa accounts; they perform a liquidity management service for retail agents, who typically transact daily with wholesalers. Retail agents open accounts observing identity checks required by anti-money laundering legislation, and the cash provision function spans in-store cash merchants to street-based merchants. M-Pesa agents are compensated from transaction fees charged to customers.

Mobile phone users purchase a SIM card with the mobile money “app” for their phone, register with a retail agent using a national identity card and acquire an electronic mobile money account. They deposit money into the account by giving cash to the agent, and receive, in return, equivalent value “electronic money” via their mobile phone. To withdraw money, they transfer electronic money via their mobile phone to the cash merchant's mobile money account, and receive cash in return. Electronic money can be transferred instantly from a customer's account to any other individual, whether registered or not, without using formal bank accounts. The transactions are authorized and recorded in real time. A secure text message (SMS) with a code is sent to the recipient, authorizing a retail agent to transfer money from the remitter's account into cash for the designated recipient. The maximum allowed account balance is Ksh 100,000 (US $970), the maximum daily transaction is Ksh 140,000, the maximum per transaction is Ksh 70,000, and the minimum allowed transfer is Ksh1 (US 10cents). The main transactions are non-bank payments services such as buying airtime, paying bills and school fees, and domestic transfers.

Depositors do not receive interest on their electronic accounts and bear the risk of loss of value through inflation. They pay the cost of transferring and withdrawing money, but there is no charge for depositing money. The graduated withdrawal fee pays for the cost of the M-Pesa account, ranging from about 0.5% for large transfers to 20% for the smallest. The costs of transfer are 10% for the smallest transfers, falling to 0.5% at transfers of Kshs 20,000, and to 0.16% for Kshs 70,000. Costs are greater to transfer to unregistered users.

Safaricom has pioneered a business payments platform and this is an important growth area for the company. The “Lipa na M-Pesa” business network has built a critical mass of consumers using retail payments providing dedicated business till numbers and low transaction fees, and it enables bulk disbursements such as promotional payments or salary payments. For Safaricom, customer-to-business payments accounted for 10.5% of the average monthly value of all payments in 2016.

M-Shwari is a savings and loan product operated entirely from the mobile phone, launched in 2012 by partners Safaricom and Commercial Bank of Africa. By 2016, (30-day) active customers numbered 3.9m, with Kshs 8.1bn on deposit. Customers can move funds between their M-Pesa account and M-Shwari bank savings account (with no minimum balances or charges, and paying graduated interest rates of 2% to 5%). The new Lock Box service pays higher interest rates for fixed deposits. M-Pesa subscribers of 6 months standing can apply for an M-Shwari loan without fees or paperwork. An initial credit score and loan limit is calculated using an algorithm from the stream of recorded financial actions. Loan disbursement and repayment is via M-Pesa, without loan interest charges, but with a facility fee of 7.5%. Loan sizes range from US $1 to US $235 with a 30-day term but can be rolled over at a monthly fee of 7.5% (this resembles an interest rate at a high annual compounded rate of 138 percent). Progressively larger loans can be extended when a loan is successfully repaid. By 2016, there was Kshs 7.4 bn on loan; non-performing loans numbered 1.93% of the portfolio, with an average loan size of Ksh 4,000 ($39).

In 2015, an M-Pesa health micro-insurance product, launched during the previous year, was discontinued through failure to gain traction. The annual premium (Kshs12,000) had bought family cover worth Kshs 290,000 for maternity, dental and optical care, and hospital and funeral expenses. In late 2015, M-Tiba (“mobile care”), a dedicated health savings “wallet” to pay for care at selected affordable health providers, was launched by Safaricom with two partners, enabling users to save and pay for healthcare. Donors and insurers can use M-Tiba for targeted products including vouchers, managed funds, and low-cost health insurance.

Kenya received an estimated US $1.7bn of international remittances in 2016 (World Bank Migration Brief 27). In 2014, Safaricom partnered with MoneyGram to enable remittances from over 90 countries worldwide to be sent to M-Pesa users, and now has similar agreements with Western Union and several other partners. In 2015, Vodafone and MTN announced an interconnection of mobile money services enabling affordable regional remittances between M-Pesa customers in Kenya, Tanzania, Democratic Republic of Congo, and Mozambique, and MTN Mobile Money customers in Uganda, Rwanda, and Zambia. In 2016, Vodafone partnered with HomeSend (a joint venture created by MasterCard, eServGlobal and BICS) to extend remittances for M-Pesa users in Africa, Albania, and Romania.

Governments could securely pay policemen and other officials their wages; the national revenue authority could accept payments for taxes, licenses, and fines, and municipalities for parking payments; and public transport could use mobile money payments. Delivery of social welfare or aid with mobile payments could reduce “leakage” and ghost recipients. Some of these are a reality in Kenya, with M-Pesa and Airtel, through pilots or fully-functioning systems, but government salary and social payments have lagged relative to Afghanistan, Tanzania, and Malawi. Donor and commercial initiatives increasingly use the technology; for example, affordable solar energy-powered electricity systems in rural areas can be fully purchased remotely on a pay-as-you-use basis using mobile payments (M-Kopa Solar launched in 2014 in Kenya).

Vodafone has concentrated on the proliferation of its mobile money platform in markets that are heavy cash users. M-Pesa is used in several countries other than Kenya, by order of roll-out: Tanzania, Fiji, South Africa, Fiji, Democratic Republic of Congo, India (launched in 2013), Mozambique, Egypt, Lesotho, Romania (2014), Albania (2015), and Ghana (2015).

A fast-growing product is international remittance through mobile money channels. The size of officially-recorded remittance flows to developing countries and the high transactions costs suggest that the potential gains from transparent and cheaper methods of remittance are significant. 10 Security concerns present a challenge because of poor compliance to international law at the receiving end. If the local compliance challenge can be overcome, mobile money (bound by “know your client” legislation and electronic recording of transactions) should facilitate remittances to war-torn countries with weak governance and limited or no functional banking, like Somalia.

The novelty of mobile money and its recent introduction in many countries means few studies have examined the economics of mobile money. 11 The mobile money storage and payments system, and its further linkages to bank savings accounts, micro-insurance, and credit via algorithmic credit scores, could affect households and businesses through several different channels. Mobile money potentially helps ameliorate several areas of market failure in developing economies. 12

Reducing Transactions Costs

Mobile money reduces the transactions costs of sending and receiving money, especially given the inadequate and expensive transport infrastructure. Jack and Suri , (2014) observe that in Kenya, where families and social networks are widely-dispersed from internal migration, remittances on average travel 200 km. 13

Transactions costs include the transport costs of travel, for example, to a bank, utility company, or government office; the travel time and the waiting time in long queues; the coordination costs between individuals, between firms and suppliers or customers, and between government and individuals, which can be extensive in time and money lost; and the costs of delays and “ leakages ” through corruption or middlemen, acting like a tax (or complete loss through theft from insecure methods of money transfer) . There is also an opportunity cost to lost money and time. The money could have been invested, spent, or saved; the time could have been spent in productive activities. The automated delivery of cash transfers, wages, social security funds, and private remittances by electronic transfer increases the certainty of the timing of cash receipts, which helps planning. This further reduces coordination costs, the costs of delays, and hence the opportunity costs.

Reducing Asymmetric Information and Improved Transparency

Recording financial transactions creates greater financial transparency and reduces asymmetric information. Asymmetric information and the fixed costs of servicing an account lie at the heart of the failure of the formal banking sector to advance credit to poor customers who lack collateral and financial histories. Moving cash from under the mattress into an electronic account turns it into recorded cash. Every deposit, withdrawal, transfer, or payment transaction through mobile money creates a recorded financial history. Linking algorithmic credit scores and the granting of small loans was discussed above (see box 1 ).

An electronic record of payments potentially protects consumers against theft, fraud, and misinformation. Such protection can reduce transaction costs for consumers and increase the use of business through trust. For example, Radcliffe and Voorhies (2012) note how the “anonymity of cash” may inhibit trust between traders and new vendors. Greater transparency through records can help regulate the service, including the dissemination and posting of information on transactions costs to promote competition. Recorded transfers with appropriate ID documentation (“know your customer”) also facilitates cheaper international remittance transfers.

Changing the Nature of Saving and Increasing Savings through Digital Means

There are several motives for saving. Life-cycle motives compensate for differences in timing between income and expenditure streams, and these include saving for education, leisure, marriage, consumer durables, housing purchases, retirement, and funeral expenses. Precautionary motives (buffer stock saving) reflect the uncertainties of future income and expenditures, and include saving for unemployment, illness, accidents, natural disasters, and risks associated with old age. Finally, there is saving for a bequest motive, to give gifts in one's lifetime or to leave a legacy to heirs. Saving thus helps to allocate consumption over time, and to reduce risk.

For the unbanked poor, their “immersion in physical cash creates considerable frictions in their financial lives” ( Radcliffe and Voorhies 2012 ). Cash-based households have informal saving options, which carry risks of theft or “liquidation”: cash under the mattress; accumulation of assets such as jewelry or livestock; and storing savings with informal savings groups. The loss of savings in this manner is common. Mobile money electronic accounts offer the safe storage of cash, though without the payment of interest.

Another advantage is privacy. Compared with cash receipts, the reduced observability of the timing and sizes of mobile transfers and the accumulated electronic balances could protect savings for the recipient ( Aker et al. 2016 ). Moreover, in an economic psychology literature on how the poor could be encouraged to accumulate savings, for example, the use of “commitment” savings accounts ( Dupas and Robinson 2013 ), mobile money accounts offer a practical template.

Risk and Insurance

Living standards of the poor are at risk of multiple communal shocks including flooding, droughts, pestilence, other natural disasters, sometimes conflict, and medical epidemics, as well as idiosyncratic shocks including theft, damage to the homestead, illness, and death in the family. There are very limited opportunities for insuring against these risks. Formal insurance is typically absent, but family, clan, and network ties can create informal insurance networks, ameliorating such risks by periodic transfers and monitored by trust relationships amongst members of the network ( De Weerdt and Dercon 2006 ). Jack and Suri (2011) suggest several ways by which mobile money can facilitate risk-spreading. For example, the geographic reach of networks can enlarge, while timely transfers of money can arrest serious declines that may be impossible or hard to reverse. The mobile money technology allows small and more frequent transfers of money that allow a more flexible management of negative shocks. Thus, informal insurance networks may function more effectively. In turn, more efficient investment decisions can be made, improving the risk and return trade-off. Where mobile money develops sufficiently to allow access to micro-insurance (see box 1 ), there is potentially an additional buffer against negative shocks.

Incomplete Property Rights, Changing Family Dynamics and Changing Social Networks

Women or minority groups may face limitations in their opportunities and their access to property, an aspect of inequality often resulting in more widespread economic inefficiencies. Mobile money could change bargaining power within the family. Greater privacy may influence both inter-household allocations ( Jakiela and Ozier 2016 ) and intra-household allocations ( Duflo and Udry 2004 ). If the nature of expenditure by gender differs ( Chattopadhyay and Duflo 2004 ), there could be welfare changes in the household ( Aker et al. 2016 ).

Little research has been done on network formation or dissolution, or on migration and remittance decisions using network data ( Chuang and Schechter 2015 ). Mobile money could change the nature of social networks. The cohesion of a network could be strengthened or weakened. The size of networks could be expanded with the greater geographical reach of the transfer mechanism. Morawczynski and Pickens (2009) note the greater autonomy of rural Kenyan women as they can more easily solicit funds from their husbands and other contacts in the city. The reduced transactions costs of remittances might create a more liberal attitude to migration from the homestead ( Jack and Suri 2011 ), though distant migrants are also less observable and accountable. Johnson (2014) stresses the continued importance of rotating credit schemes for perpetuating trust and coordination in communities. There is evidence of substitution away from these schemes due to mobile money ( Mbiti and Weil 2016 ), but also evidence that the schemes themselves use the mobile money transfer and storage mechanism ( Wilson, Harper, and Griffith 2010 ).

Improving other Aspects of Economic Efficiency

The combination of better communication and coordination with mobile phones and instantaneous mobile payments could improve business planning and efficiency. Indeed, mobile payments facilitate trade. Access to credit, informally and through banking services linked to mobile money, can improve investment decisions. Improved risk sharing and cheaper, secure, long-range remittances can expand the scope of labor decisions to encompass higher-risk but higher-return occupations, or migration to higher-return labor markets ( Suri and Jack 2016 ). There could be better allocation of savings and labor within the household and in businesses, and more efficient investment decisions affecting agriculture and business, and education and skills. Returns to investment could rise, with a feedback to greater savings.

“Perhaps the ‘holy grail’ of demand side data is the impact question. How can we understand whether branchless banking services are making a positive difference in client's lives?” McKay and Kendall (2013) .

The rapid global growth of payments, transfers, and international remittances speaks of mobile money providers satisfying a demand for financial services not previously adequately met. This revealed preference suggests a net welfare improvement. Moreover, positive externalities imply a larger total than private benefit, as greater connectedness in the system occurs with each adoption. But are empirical studies able to measure economic benefits, as well as local if not system-wide externalities?

Given its novelty, few academic studies have examined the economics of mobile money. The bulk of empirical work employs survey data at the household- or firm level. To reach robust conclusions on the economic benefits, the bar is set very high for empirical analysis. First, it is important to analy z e the appropriate data , but often this is hard to achieve. Second, there are considerable methodological challenges in the empirical work, so that results need to be carefully assessed, and not taken at face value. An analytical typology table summarizes the empirical studies ( table 1 ). A more in-depth analysis of the studies is presented in Aron (2017) .

A typology of Micro-empirical Studies on the Economic Effects of Mobile Money

Source : Constructed by the author from sourced papers in column 1.

Notes : 1. Disentangle technology/service: Some RCT studies are able to disentangle the mobile money services delivery from ownership of a mobile phone by providing new phones to both treatment and control groups, or by considering only participants with a mobile phone number. Other studies achieve this by introducing a dummy for ownership of a mobile phone into regressions. 2. Definition of M-money usage: For the unwary, there are definitional ambiguities using both telecoms and self-reported data, see section on Challenges for Data. If individuals own multiple, valid SIM cards with different providers, this will exaggerate users. If registered customers are inactive (and globally two thirds of registered accounts are inactive with a generous 90 day definition), this will exaggerate the participation. On the other hand, there is undercounting of overall usage where unregistered customers intensively use an over-the counter service, as in South Asia.

Challenges for Data

Definitional ambiguities could cause mis-counting when measuring mobile money “usage”. If the precision of the variable is compromised, measurement bias is introduced into regressions (see table 1 , column 1). Using the number of mobile money accounts or the number of registered customers may induce multiple counting of the same individual if several accounts are held with different providers. If registered customers are inactive (and globally two-thirds of registered accounts are inactive with a generous 90-day definition), this will exaggerate the true participation (see figure 4 ). Where unregistered customers intensively use the service, as in over-the-counter (OTC) services, overall usage will be underestimated.

Registered and Active Total Accounts

Source : Data from the GSMA State of the Industry report ( 2017 ).

Some data are unobservable. Empirical regressions will be mis-specified when omitting hard-to-measure variables linked to mobile money, such as spillover learning effects in the community, and technological and quality changes. Important

“observables”, such as education (where quality is not assessed) and wealth are typically poorly measured in household surveys, which may exacerbate the biases.

Institutional and political regime changes also affect the uptake of mobile money. For example, adoption is enhanced with more liberal registration requirements below a low threshold of use. In Côte d'Ivoire, the cessation of conflict and onset of greater growth and stability from 2012 was a key to driving mobile money adoption ( Pénicaud and Katakam 2014 ). There are likely to be shifts over time in the relevance of particular determinants, for example, cheaper, more capable smartphones widen access and ownership. Shifts can be proxied by carefully-dated dummy variables; interaction of these dummies with explanatory variables introduces non-linearities and tests whether the effects of the variables alter with regime changes.

Data may be proprietorial, and it may be difficult to design surveys optimally in advance. Against these difficulties, if privacy concerns can be overcome, new access to a rich seam of “big” data on the administrative mobile money transactions from both businesses and individuals presents an enormous research opportunity. Mobile money transactions data could have a wealth of potential applications of which four examples follow: to help forecast hard-to-gauge household assets and expenditure that otherwise rely on self-reported data (this has been done using mobile phone data, see Blumenstock, Cadamuro, and On 2015 ); to derive proxies for migration patterns from geotagged data ( Blumenstock 2012 ); to link GPS data with administrative data to examine price discrimination schemes ( Economides and Jeziorski 2016 ); and to explore evolving social networks with changing remittances ( Aron 2017 ; Aker and Blumenstock 2015 ).

Challenges for Empirical Methods

The quantitative empirical work on mobile money falls into two categories: studies which assess the determinants of the adoption of mobile money (i.e., where a proxy for usage of mobile money is the dependent variable) and studies of the effects of mobile money on micro-economic outcomes (i.e., where usage of mobile money is not the dependent variable). Examples of the latter include whether mobile money promotes improved risk-sharing, food security, consumption, business profitability, saving, and effective use of cash transfers.

Research on mobile money faces two “selection” problems, raising the problem of endogeneity in empirical analysis. 14 The “roll-out” of mobile money by MNOs and their agents may not be random if they select into areas on the basis of household and village characteristics. For instance, there will be an upward bias on the effect of mobile money on consumption if the wealth of a village determines agent selection into that village (and that wealth is not controlled for in regressions). It is difficult to disprove self-selection by the agents toward more profitable locations. Several authors contend there is little statistical correlation between agent “roll-out” and household observable characteristics that might have been associated with future outcomes; but they use partial correlates only, which is not decisive. In Jack and Suri (2014) , such bivariate correlations between agent density at 1 km, 2 km, or 5 km and a range of observables also include location-by-time and rural-by-time fixed effects. 15 But this is rather different from trying to explain agent density with a full range of the variables and all relevant interaction effects to prove it is exogenous or “unpredictable”. Moreover, it does not rule out correlation between agent roll-out and unobservables or poorly-measured observables (such as wealth) that also affect outcomes.

One factor suggesting that roll-out may have been non-random is that Jack and Suri (2014) themselves suggest the following: “. . .many of the agents had business relationships with Safaricom prior to the advent of M-PESA, and about 75 percent report sales of cell phones or Safaricom products as their main business.” As Aker and Blumenstock (2015) imply for the prior telecom infrastructure, “. . . decisions regarding expansion of ICT infrastructure and ICT-based programs are typically driven by private sector or policy criteria.” Thus, even if the bias is likely to be low for Kenya, there may be greater selectivity biases in countries such as Niger, Tanzania, and Uganda, with relatively less developed technological infrastructure.

A second selection problem is undisputed: the adoption of mobile money by individuals is influenced by factors both observable (e.g., education, wealth, urban dwelling, and the use of banking services) and unobservable (e.g., susceptibility to risk, community learning spillover effects, and changes in technology preference) that may be correlated with mobile money use.

Given the selection problems, the dominant empirical methodologies are Randomized Controlled Trials (RCT), quasi-experiments with a Difference-in-Differences estimation strategy or the non-parametric method of Propensity Score Matching, and Instrumental Variables (see box 2 ). The choice amongst methods is not uncontroversial. The methods have differing degrees of success in dealing with heterogeneity at the individual or household level. 16 A consideration is whether results can be “scaled-up” or “transported” to allow generalization to other contexts. Since institutional structures, regulation and demand patterns differ across countries, generalizations of evidence need to be made cautiously (e.g., generalizability may depend on the extent and quality of the agent network). Econometric modelling difficulties imply that the conclusions drawn are often suggestive only.

Common in medical research, RCT was little used in economics before 2003, and has generated heated debate. This critique is pertinent to the reliability and generalizability of mobile money RCT studies. An RCT evaluates whether a specific, controlled change has a discernible impact on a treated group relative to a control group. RCTs focus on small interventions that apply in certain contexts so that inferences for other settings, or even scaling up based on the results, may be invalid. Identifying a causal connection in one situation might be specific to that trial and not a general principle; even the direction of causality can depend on the setting. Deaton (2010) argues that there are actually two stages of selection. In the first, a group is chosen from the entire population that will in the second stage be randomly divided into the treated and control groups. The first stage is not random, but may be determined by convenience or politics, and therefore may not be representative of the entire population. Deaton and Cartwright (2016) further argue that randomization does not guarantee that the treatment and control groups are identical except for the treatment, that is, it does not guarantee that other causal factors are balanced across the groups at the point of randomization. a The studied populations in RCTs are typically very small, so an outlier in the experimental group can have a large distortionary effect. Further, the trial or intervention itself ( Gillespie 1991 ), and the nature and quality of information provided about the intervention, can affect behavior. Standard errors are often erroneously computed and spurious inferences are made, as t-statistics for estimated average treatment effects from RCTs do not in general follow the t-distribution.

A second approach, more widely-used in mobile money research, tests specific theoretical hypotheses using a Difference-in-Differences (DD) estimation, which mimics an experimental approach by comparing differences in the changes of a control and a treated group after an intervention (here, the adoption of mobile money). The restrictive assumption is made that in the absence of the intervention, the average change in the outcome for the affected and control groups would have been the same. This is the “parallel or common trends” assumption. The DD estimates typically derive from an Ordinary Least Squares (OLS) regression for repeated cross-sections or for a panel of data on individuals (appropriately sampled to avoid selection bias) for one or more periods before and after an intervention. A dummy variable is included for the intervention and a set of control variables. The method has the appeal of simplicity, and when the interventions are approximately random, conditional on the time and location fixed effects, and also on household fixed effects in the context of household panels, it can reduce the (time- invariant ) endogeneity problems from comparing heterogeneous individuals. b What remains is time- variant , unobserved household heterogeneity. This may be partially mitigated with appropriate controls for time-variant household characteristics (demographics, for instance) and location-by-time fixed effects (accounting for only part of the time- variant , unobserved heterogeneity, since these dummies average over households in a location). c Further problems arise when the intervention is not random, when the linear assumption under OLS is inappropriate, and from serial correlation problems exaggerating levels of significance in standard errors when several years of data are involved ( Bertrand, Duflo, and Mullainathan 2004 ). One useful test of the DD strategy is the placebo test; it uses data from prior periods before the intervention, and the DD is redone aiming for a close-to-zero placebo effect for the included intervention.

Several mobile money studies present supplementary evidence from Propensity Score matching methods. These methods mimic characteristics of an RCT in the context of an observational (or non-randomized) study, using non-parametric rather than regression techniques to estimate the effects of an intervention (e.g., use of mobile money) on outcomes between treated and control groups. Where baseline characteristics of treated subjects often differ systematically from those of untreated subjects, Propensity Score matching can match samples of subjects who are as similar as possible on observed (pre-treatment) characteristics. Differences in post-treatment outcome variables between the matches are averaged and are attributed to the treatment. There are two crucial assumptions for the validity of the technique. There should be no hidden bias from unobserved heterogeneity and the criteria for adequate balance should be clear and satisfied. However, conditioning on the Propensity Score need not balance unmeasured covariates; and even the balance-checking between measured co-variates is problematic because the criteria for adequate balance are ill-defined (see Hill (2008) on the “rampant lack of good practice”, and Austin (2011) ).

IV can be used for consistent estimation when correlation between explanatory variable/s and the error term is suspected. An endogenous variable is replaced by the predicted value from a set of instruments that are strongly correlated to the explanatory variable (informative or strong), but uncorrelated with the errors (valid or exogenous). Finding credible exogenous instruments for mobile money usage is a challenge. Several instruments have been used in the mobile money empirical literature but statistical tests tend to find them weak, which may introduce bias. d Instruments based on agent density and network connectivity assume that the roll-out of mobile money and network coverage itself was “random”.

See a non-technical version at: http://voxeu.org/article/limitations-randomised-controlled-trials , Nov. 2016.

A dummy variable is included for every household or entity (bar one entity).

A national time effect is a common effect across time experienced by all regions , for example, from macro-fluctuations. But disaggregating to two regions, North and South say, where North is less affected by drought, then interacting both regional dummies with time allows their differential response over time to be captured. With location-by-time fixed effects (without a national time effect), there is a location (e.g., district, region, or country) dummy for each year (bar one location and one year).

Instruments used for mobile money usage ( table 1 ) are as follows: the log of the distance to the closest agent and the number of agents within 5 km of the household ( Jack and Suri 2014 ), the distance to and cost of reaching the nearest mobile money agent ( Riley 2018) , and the log of the distance to the nearest mobile money agent ( Munyegera and Matsumoto 2016a ); the fraction of respondents in the sub-location registered with M-Pesa ( Demombynes and Thegeya 2012 ) and the proportion of households using mobile money and for those owning a mobile phone at the village level ( Kikulwe, Fischer, and Qaim 2014 ); household-specific mobile phone network connectivity and the size of the information exchange network of the household ( Murendo and Wollni 2016 ); and 2006 survey responses (before M-Pesa was introduced) about riskier, slower, and more costly transfer methods ( Mbiti and Weil 2016 ).

Many studies fail to “disentangle” the adoption of the technology (the phone) from adoption of the service (mobile money) it provides ( Aker et al. 2016 ). How and whether the different studies address this to reduce bias is explicitly clarified in table 1 (column 4). Whether clustered standard errors are reported ( Bertrand, Duflo, and Mullainathan 2004 ) is noted in column 3 of table 1 .

To explore the factors that determine the adoption of mobile money (i.e., where a proxy for usage is the dependent variable), Probit or Tobit regressions or OLS regressions are commonly used. The principal empirical problem is the identification of causal relationships. This encompasses biases introduced by poorly measured determinants, omitted observable variables, and omitted unobservables. Examples of hard-to-measure unobservables are the following: spillover effects; technological and quality changes of the handset and services; the quality of agents and trust in the system; and the effects of advertising campaigns and incentives to register. 17 , 18 Non-linearities are crucial in adoption empirics (e.g., adoption can be catalyzed by the cessation of conflict), but are typically ignored. Network effects also matter since a critical mass of users and a critical mass of reliable agents fosters sustainable adoption.

Given these challenges, it is unsurprising that studies of adoption in different countries have been conducted by non -economists focused largely on qualitative aspects, or have examined mobile money adoption correlations with firm and household surveys ( Aker and Mbiti 2010 ). 19 These studies find that adopters of mobile money are more likely to be younger, wealthier, better educated, have a bank account, own a mobile phone and reside in urban areas. One convincing econometric study has supported these links ( Munyegera and Matsumoto 2016a ) and deserves attention; this panel study removes time-invariant household heterogeneity with household fixed effects and some time-variant household heterogeneity with location-by-time dummies in a panel context in rural Uganda. 20 These authors include many individual controls (e.g., control for ownership of a mobile phone, distance to the nearest mobile money agent and a migrant worker in the family) further helping to reduce endogeneity. 21 The authors find no gender effect or age effect for rural adopters, but distance to the nearest mobile money agent proved important, as did education and wealth; both the dummies for the ownership of the phone and the migrant worker are significant (all with a 1% significance). It is still possible that there is some time-variant household heterogeneity that is not controlled for, as location-by-time dummies only address an average over households in a location. 22

Private Mobile Money Transfers and Risk Sharing

Amongst the most convincing analyses of the impact of mobile money are the panel data studies using a Difference-in-Differences approach that explore how mobile money has fostered improved risk-sharing amongst informal networks after large shocks. The proposed mechanism operates via lower transaction costs (compared to alternatives) for money transfer, influencing the size, frequency, and (sender) diversity of domestic remittances. The intervention is a negative shock, and such shocks are probably random. 23 The focus is not on the direct effect of mobile money usage on outcome variables like consumption, but rather on the interaction of mobile money usage with the shock (while controlling for household characteristics to interact with the shock). This puts less emphasis on the endogeneity of the mobile money usage dummy. The best of these studies fully exploit the panel data to remove sources of unobserved time-invariant household heterogeneity using household fixed effects (see box 2 ), include location-by-time dummies and rural-by-time dummies to help control for time- varying heterogeneity according to location or the rural-urban divide, and (mostly) include appropriate controls.

All the reviewed risk-sharing studies disentangle the impact of the mobile phone technology from the transfer mechanism, either by considering only participants with a mobile phone number (though this introduces a new selection criterion), or by introducing a dummy for ownership of a mobile phone into the regressions.

A sophisticated study by Blumenstock, Eagle, and Fafchamps (2016) uses a Difference-in-Differences approach to analyze the transfer of airtime: the authors call it a “rudimentary form of mobile money” but it is not convertible for cash. These authors exploit the random timing and location of earthquakes in Rwanda in a natural experiment to identify covariate economic shocks. 24 Their study relies solely on administrative telecoms data and lacks survey measures of welfare or wealth. 25 The link between risk-sharing and money transfer is instead implied, given the consistency between observed patterns of transfers and the characteristics of their theoretical models of reciprocal risk sharing. All regressions include a shock dummy and time fixed effects. Location fixed effects in regional-level regressions are replaced by recipient fixed effects in individual-level regressions, and by a fixed effect controlling for the average intensity and direction of transfer flows between two users in dyadic regressions. In extended regressions these authors allow for heterogeneity between individuals and different types of sender-recipient pairs, and cross the characteristics with shock dummies (see table 1 ).

Blumenstock, Eagle, and Fafchamps (2016) find, perhaps surprisingly, that as well as geographical proximity, transfers to victims near the epicentre after the Lake Kivu earthquake of 2008 are determined by a past history of reciprocity between individuals, and the transfers decrease in the wealth of the sender and increase in the wealth of the recipient. The opposite would be obtained in the case of charity or altruism. There are possible selection issues. Selection is induced because wealth itself determines the ownership of phones in Rwanda in 2008 ( Blumenstock and Eagle 2012 ). Further, the wealth of the recipient is likely be correlated with the size of his or her geographical network. Ideally, the differences in such networks should be controlled for, as airtime does not in this sense have the same utility in times of disaster for the wealthy and the poor.

A path-breaking study by Jack and Suri (2014) exploring risk sharing and mobile money finds total consumption of Kenyan mobile money users is unaffected by a range of negative (self-reported) income shocks, while that of non-users drops by 7% (with 10% significance). 26 The effect is more evident for the bottom three quintiles of the income distribution. A similar result is found when isolating the impact of health shocks on total consumption. 27 A Difference-in-Differences approach is applied to a panel specification controlling for household fixed effects, location-by-time dummies, and rural-by-time dummies. There is a dummy for a negative shock to income in the last six months, and a dummy for an M-Pesa user in the household, and the two dummies are crossed to test whether M-Pesa users are better able to smooth risk. An included vector of controls (though not including wealth, see table 1 ) is crossed with the shock dummy to help control for correlations of M-Pesa with observables that might help smooth risk.

For Tanzanian mobile money users, a very similar set-up by Riley (2018) takes matters a stage further by examining the potential beneficial spillover effects (local externalities) of mobile money to the village community (which includes non-users) following an aggregate shock (either a self-reported shock such as droughts or floods, or a measure of rainfall deviations from a long-term mean, see table 1 ). 28 The regressions include a dummy for mobile money use by an individual in a village, and one for the proportion of mobile money users in a village, so that there are three interaction effects with the shock dummy, including its interaction with the vector of controls. Unlike in Jack and Suri (2014) , wealth, expected to be time-varying, is here included as a control.

Riley (2018) finds that there are spillover effects in the absence of a shock, as mobile money users share remittances with the village, resulting in per capita consumption of everyone in the village increasing. After an aggregate shock, however, households using mobile money benefit from an 8% to 14% increase in consumption (with 5% significance) compared with non-users, cancelling the effect of the negative shock on users; but there are no spillover effects to the community of non-users. The benefits to users and to communities (in the absence of a shock) are found to be highest in rural areas and to decrease sharply with distance to the nearest mobile money agent. The included district-by-time dummies are important in helping to control for heterogeneity from the self-selection into districts by mobile money services providers, for localized spillover effects, and for unobservable differential effects of rainfall (e.g., for different occupations by district).

All three studies conduct placebo tests supporting the common trends assumption of the DD specification. In Riley (2018) , Propensity Scoring was used to try to match users and non-users with similar characteristics, confirming results. Attempts by both Riley (2018) and Jack and Suri (2014) to apply the IV technique (see box 2 ) and instrument the usage dummy and its interaction with the shock are less successful, typically with weak instruments based on agent rollout data such as agent density (see box 2 ). The IV regressions do not contradict the conclusions, but in Riley (2018) , although a Sargan-Hansen test determines the instruments are valid (exogenous), they are found by Cragg-Donald Wald F statistic tests to be statistically weak, which may potentially introduce a large bias. The former test is missing in Jack and Suri (2014) .

Using data from a survey of nearly 7,700 M-Pesa agents, Jack and Suri (2014) also compare consumption responses in reduced-form panel regressions with fixed effects, substituting “access to an agent” for M-Pesa usage, and claim that the results reinforce their conclusions. However, the crucial assumption of exogeneity of the agent density proxy rests only on bivariate correlations, discussed critically above.

It remains possible that time-variant household heterogeneity (e.g., changing risk preference or changing technology preference) may still confound the results. One specific example of time-variation in characteristics would be where in the first wave of the panel, a fifteen-year old is not in work, but by the second wave, three years later, she is working, which affects her ability to purchase a mobile phone and use mobile money. It would be important to control properly for age structure in this case. More difficult to deal with is systematic unobserved heterogeneity from interaction effects. If there are missing interaction effects from time-varying unobservables or time-varying excluded observables (e.g., wealth) that could help households to smooth risk, then the effect of M-Pesa in smoothing consumption could be exaggerated. For instance, there could be an upward bias if a household that is wealthier in the second period is better placed to withstand a negative income shock; or if households wealthier in the second period than the first tend to experience smaller negative income shocks.

Mobile Money Transfers and Welfare

Far less satisfactory are the (non-RCT) welfare studies reviewed, where results are generally judged unreliable by this survey. Endogeneity problems for the usage dummy are center stage, and the use of instrumentation and other methods to mitigate it by removing as many sources of heterogeneity as possible are not always convincing.

Of the six studies, only three disentangle the impact of the mobile phone technology from the transfer mechanism by including a dummy for ownership of a mobile phone into regressions: Munyegera and Matsumoto (2016a) , Murendo and Wollni (2016) , and Sekabira and Qaim (2016) . One cross-sectional study faces serious problems of controlling for unobserved heterogeneity ( Murendo and Wollni 2016 ). Two panel studies use inappropriate linear specifications that are likely to introduce heavy biases ( Sekabira and Qaim (2016) and Kikulwe, Fischer, and Qaim (2014) ), see discussion in Aron (2017) . A fourth study employs propensity scoring with a very small cross-sectional sample, but is subject to unobserved heterogeneity ( Kirui, Okello, and Njiraini 2013 ). The full critical analyses of these studies can be found in Aron (2017) , and details are summarized in table 1 .

The two remaining studies use panel data. Of these two, one fully exploits Ugandan panel data to control for heterogeneity where possible (see table 1 ), and claims an increase of 9.5% (with 5% significance) in the monthly real per capita household consumption for mobile money users ( Munyegera and Matsumoto 2016a ). The Difference-in-Differences specification requires the mobile money intervention to be random, which is questionable. Their IV regression to address this problem shows the above coefficient in the regression for consumption increasing four-fold , which casts doubt on the results. Similar to Jack and Suri (2014) , the authors rely on bi variate correlations only to validate the agent density-based instrument. Using fixed effects regressions, the authors find a similar coefficient for food consumption as for total consumption, but greatly higher coefficients for non-food. Given the ambiguous results, propensity score methods are applied to try to match comparable households, and weighted regressions are run for total and food consumption. This recovers a coefficient of around 7% (at the 5% level) for overall consumption, but the coefficient for food consumption is poorly measured. Too little information is given to properly evaluate the method, however (see box 2 ).

The other panel study, by Suri and Jack (2016) , argues strongly for a causal role for mobile money on welfare. 29 The effect of mobile money in Kenya is explored for categories of outcomes, measured in 2014 (see table 1 ). Unlike the other studies in this sub-section, these authors use the change in agent density between 2008 and 2010 to proxy or substitute for mobile money usage (i.e., they are not using agent density as an instrument in an IV regression). 30 By pre-dating the proxy relative to 2014 outcomes, the authors hope to make their proxy exogenous. There are two problems with this. First, the measure may not be highly correlated with later usage (which is like having a weak instrument in an IV regression). Second, the crucial assumption of exogeneity of the agent density proxy rests on bivariate correlations conducted in Jack and Suri (2014) . That being said, placebo tests support the common trends assumption of the DD specification.

To estimate the marginal effect of an increase in agent density for females, a gender dummy and the change in agent density are crossed. The change in agent density is also crossed with household (or individual) characteristics to rule out cases where the gender effect was in fact driven by these other characteristics.

Suri and Jack (2016) do not use household fixed effects or location-by-time dummies, but control only for location fixed effects—upon which a great deal then rests to try to mop up household heterogeneity. There are controls for age and gender, but controls such as dummy for ownership of a mobile phone, household physical and financial wealth, education, and possession of a bank account are excluded. Their analysis is at its most convincing in a differenced specification for consumption (their table 1 ), which at least then effectively excludes household time-invariant fixed effects through differencing (the level regressions are likely to have considerable unexplained heterogeneity). Nevertheless, even in the differenced specification, time-varying heterogeneity from unobservables (and omitted wealth) may still introduce bias. With these caveats in mind, we present their results for consumption. These authors find that for households using mobile money, consumption growth for male-headed households was negative, while that of female-headed households was positive and statistically significant. They suggest that the latter could be driven by increased labor or capital income, or by transfers between individuals with different propensities to consume. They draw implications for the reduction of poverty (affecting 2% of Kenyan households), and shifts in occupations out of farming, particularly for female-headed households. However, if there is unobserved heterogeneity of the type discussed above, for example, if wealth which is not controlled for is correlated with mobile money services, then they may be over-estimating the reduction in poverty.

Of the few RCT studies reviewed, see table 1 , some deal with very small transfers and small and specialized samples, and results are not easily generalizable. Two papers exploring the impacts of public or employer mobile money cash or wages transfers are Aker et al. (2016) and Blumenstock et al. (2015b) . Both identify cost savings from reduced transactions costs for the disbursing party. But there are different results for the recipient: there are cost savings in Aker's study based in Niger, and possible cost increases in the Blumenstock et al. study in the more insecure environment in Afghanistan. Both studies disentangled mobile money delivery from ownership of a mobile phone, providing new phones to treatment and control groups.

The impressive RCT study on household welfare by Aker et al. (2016) finds improvements in household welfare after drought for the recipients of cash transfers through mobile money accounts in Niger, one of the world's poorest countries. Intra-household bargaining power for women was promoted and their productivity improved through reduced transport costs, and reduced travelling and queuing time. 31 Recipients were more likely to cultivate and market cash crops conventionally grown by women, and had fewer depleted durable and non-durable assets. Household and child diet diversity was 9% to 16% higher among households who received mobile transfers, mostly due to increased consumption of beans and fats (1% significance level), and children consumed one-third more of a meal per day (5% significance level). These authors emphasize that the mobile money “infrastructure” has to be working well to reap the benefits. Repeating such RCT studies across many locations, cultures, continents, and time periods may help reinforce the conclusions and generalizability.

Given the short time period of observation and the small sample size, the Blumenstock et al. (2015b) study, which was able to distinguish changes in the saving behavior of recipients of wage transfers in Difference-in-Differences estimates of the treatment effect, was not able to find improvements in welfare indicators such as consumption and self-reported satisfaction.

Analyses of Savings Behavior

There are several qualitative studies with localized implications for saving behavior. For instance, Wilson, Harper, and Griffith (2010 ) describe how members of informal savings groups in Nairobi find it cost- and time-effective to move their cash (especially with larger savings) into a group M-Pesa account each week from the deposit collector's own account. Further, Jack and Suri (2011) find that by 2009, 90% of early adopters used M-Pesa for saving (amongst other savings instruments and use of cash) for reasons of improved security, greater privacy, increased ease of use, reduced transactions costs, and precautionary saving against emergencies.

Three non-RCT studies encompassing a variety of techniques all suggest the beneficial influence of mobile money on reported savings by method, and on saving flows ( table 1 ). Two of these studies use cross-sectional survey data ( Demombynes and Thegeya 2012 and Munyegera and Matsumoto 2016b ), and one makes a balanced panel of locations, not individuals ( Mbiti and Weil 2016 ). None of these studies disentangles the technology from the service it provides by controlling for the ownership of a mobile phone. Attempts to instrument the mobile money dummy are not successful in these studies, but an approach employing the residual of an adoption regression by Munyegera and Matsumoto (2016b) is supportive, though in a cross-sectional context. No robust and conclusive results are reached, therefore. There are serious concerns with how the saving flow is measured and from the implications of the use of log specifications (see details in Aron (2017) ).

Probit regressions for saving by Demombynes and Thegeya (2012) with various controls ( table 1 ), find reported saving by any method is more likely for older individuals who are male, rural, married, and with higher levels of education, reported income, and wealth. With these controls, and instrumenting for M-Pesa usage, M-Pesa users are 20% more likely to report having savings (1% significance). The instrument (the fraction of respondents in the sub-location registered with M-Pesa) averages over individuals within locations, and eliminates only some unobserved district-level heterogeneity. This caveat suggests that the result is indicative only. The authors also apply IV estimation to the log of average monthly saving (a flow) on similar controls and with the same instrument (see table 1 ). The coefficient for M-Pesa usage is not statistically significant. It is unclear whether the endogeneity is severe and the instrument is so successful in dealing with it that mobile usage is not relevant to saving, or whether it is simply a poor instrument for M-Pesa usage.

A related exercise for Uganda using Probit regressions for reported saving yields no significant variables at the 1% significance level, save for the mobile money usage dummy ( Munyegera and Matsumoto 2016b ). The specification is not comparable to that of Demombynes and Thegeya (2012) , which included log income (highly significant), wealth quintiles, and marital status for a far larger survey ( table 1 ). Whether the significance of mobile money usage for Uganda is indeed important or whether the coefficient is biased strongly upwards as it proxies for unobservables is unclear. The log of annual saving (a flow) is modelled in Tobit regressions, with similar controls. 32 Two approaches are adopted to help address endogeneity (though not the IV approach). A residual from a first-stage Probit regression for mobile money adoption is added to the Tobit, and is significant at the 1% level. The coefficient on the mobile money usage dummy remains fairly stable, and is positive and significant, which is a supportive test. Second, to reduce observable (time-invariant) household heterogeneity, propensity-score matching is applied (though with scant information on methods used and robustness). These authors run OLS regressions weighted by the propensity score with various controls ( table 1 ), but nothing proves significant except the mobile money usage dummy and the value of assets (at the 5% level). The authors suggest this is because heterogeneity has been successfully removed and suggest a role for mobile money in encouraging saving. The conclusions require the proverbial “large pinch of salt” because despite the authors’ heroic attempts, in cross-section it is very difficult to control for unobserved heterogeneity, and the propensity result is also subject to unobserved heterogeneity concerns (see box 2 ).

A potentially interesting finding from the quantitative work of Mbiti and Weil (2016) is that adopting M-Pesa reduces both the use of informal savings groups and the need to hide cash in secret places. These authors use a first-differenced IV regression for saving methods with various controls ( table 1 ), the differenced specification removing biases due to any time-invariant unobservables. However, it is difficult to draw firm conclusions as the set of instruments used is not intuitive (see Aron (2017) ); and biases might arise from correlation with unobserved, time- varying characteristics of households.

Two RCT studies were the only saving studies that disentangled the mobile technology from the service it provides ( table 1 ). One RCT experimental study ( Batista and Vicente 2016 ) uses cross-sectional data and narrows the type of population tested in its selected sample; it is subject to the problem of interpreting a treatment effect when the intervention depends also on the type of training information provided. Both aspects limit the generalizability of the finding that mobile money increases the willingness to save, though the narrowing of selection helps deal with heterogeneity. A second RCT panel study controlling for individual and survey wave fixed effects, based in Afghanistan ( Blumenstock et al. 2015b ), was applied to a small and specialized sample. Increased usage of mobile savings differed by the prior banking status and size of salary of recipients, and liquidity preference and savings withdrawal rose with perceptions of physical insecurity. However, recipients had to incur the costs of finding liquid agents (where adequate mobile network and agent coverage actually existed), and some had privacy concerns for security reasons. Again, the results are suggestive but not generalizable.

One cross-country study tries to relate “enabling” regulation to the usage of mobile money for 35 countries. Gutierrez and Singh (2013) use self-constructed ( de jure ) regulatory indices in a logit regression controlling for both country characteristics and individual (micro-) characteristics. 33 , 34 By using location (country) fixed effects to reduce omitted variable bias, these authors are unable to include the indices themselves, but only their interaction with individual characteristics. 35 The interaction effects nevertheless yield some plausible insights. A regulatory framework that supports interoperability appears to promote higher usage among the poorest. Stronger consumer protection appears to reduce usage by the poorest, perhaps through raised costs, while amongst the educated, greater consumer protection promotes usage. But heterogeneity remains present in the cross-section, and the direct effect of regulation could only be tested if a panel of Global Findex usage data should become available.

The main contribution of this survey has been to explore the channels of economic impact and to critically survey a new body of economic research in order to answer the following question: Are empirical studies able to measure the economic benefits and local if not system-wide externalities? As a reality check for policy-makers, there is an important role for micro-studies in evaluating the often optimistic assumptions underlying macro-studies that link digital finance and economic growth and inequality. These include assumptions about the barriers to adoption, the welfare impact, the uptake of diversified services including credit, and the government's tax take. For instance, a highly optimistic study by McKinsey (2016) applies a proprietary general equilibrium macroeconomic model to macro-data for seven countries and extrapolate the results globally for all emerging market countries; these authors predict that adoption and use of digital finance (banking in general) could increase the GDP of all emerging economies by 6%, or $3.7 trillion, by 2025.

The survey has distilled lessons for improved practice in the empirical analysis of mobile money. Studies should demonstrate that they take the data issues seriously, including correctly measuring the usage of mobile money, or else providing caveats. It is important to disentangle phone ownership from usage of its services, such as mobile money. The survey suggests that studies do grapple with unobserved heterogeneity but often not sufficiently. The wary policy-maker should give the greater weight to micro-studies using balanced panel data , and which apply their considerable potential advantages for control of time-invariant and some time-variant (e.g., by location) heterogeneity (see box 2 ). Ideally, these should include appropriate controls for potentially time-variant household characteristics (e.g., demography, wealth , having a migrant worker in the family, and being formally banked) and location-by-time dummy proxies. Such a panel approach is probably “as good as it gets” in terms of ameliorating biases from unobserved heterogeneity. Some residual time-variant unobservable heterogeneity may still confound results, but in shorter time periods the bias is likely to be small. In areas where mobile money is fairly new, panel survey data collection should be encouraged. Controlling for heterogeneity and finding exogenous instruments in cross-sectional studies is a heroic exercise: these studies are likely to be compromised and unreliable.

Finding credible exogenous instruments for the endogenous mobile money usage measure in instrumental variable (IV) methods has proved highly challenging. Most are based on agent density and network connectivity, assuming the “random roll-out” of mobile money, and of network coverage. Statistical F tests often find the instruments weak, leading to potentially biased results. An increasing trend is to present propensity score analysis to reinforce the results when IV results prove ambiguous. However, more detail and clarity on evaluation and assumptions is required given the debate and controversy in the literature, so that the propensity score application is transparent and not a black box result.

Given drawbacks with all the techniques, it would be most satisfactory if studies could apply and contrast a range of techniques. 36 Applying a best practice approach to panel data both with and without fixed effects can ascertain the size and direction of the bias of OLS methods. The bias may be positive or negative; authors need to consider the direction of the bias, since then OLS methods can provide useful upper or lower bounds on estimates. Not controlling for unobserved heterogeneity and a lack of instrumenting or weak instruments probably results in an upward bias of the importance of mobile money for the level of consumption or saving. But, if looking at interactions with a negative shock, there is more likely to be a bias to zero; hence, the micro-studies could be under-stating the absolute size of the beneficial effect of mobile money on risk-sharing. 37 And while Suri and Jack (2016) characterize the risk-sharing result as more short-term in nature, if illness and death are prevented by improved insurance of this type, then there are long-term implications as well. With a range of techniques, the potential biases of IV methods and of the propensity score matching can also be ascertained. Where there is an under-statement of the bias, this qualitatively strengthens policy conclusions from noisy micro-studies.

Another problem, universally neglected by the surveyed studies, is non-constant parameters, e.g., because of spillover effects and technological improvements. By its nature, the evolution of mobile money entails regime changes. These shifts introduce potential non-linearities that need to be tested for in both micro- and macro-work. The changes could result in earlier estimates being an underestimate of later effects. Structural breaks can mean the findings of studies can be hard to generalize. The micro-studies ignoring spillover effects may be picking up only part of an effect, and hence may be a poor guide to the economy-wide effect of a policy.

Robustness testing and testing of the validity of instruments (their strength and exogeneity) are patchy over the studies. 38 Researchers should try harder to illuminate those dimensions where welfare improvements are greatest by checking for differences in responses between more and less affluent households and other types of non-linearity (e.g., urban versus rural, by occupation, and by education level), and by gender ( Suri and Jack (2016) ). Areas for future research, where there has been little quantitative work as yet, include building on Riley (2018) in exploring community spillover effects, and on Jack, Ray, and Suri (2013) and Blumenstock et al. (2016) on little-studied network effects, as well as on timely investigation of the new products of digital credit ( Francis, Blumenstock, and Robinson 2017 ) and insurance through mobile money channels.

Focusing on the studies that apply best practice, the most convincing evidence is from the panel studies of Riley (2018) and Jack and Suri (2014) , suggesting that mobile money fosters improved risk-sharing amongst informal networks in Kenya and Uganda after large shocks, through lower transaction costs of domestic transfer. On mobile money adoption, the Ugandan panel study of Munyegera and Matsumoto (2016a) deserves attention, supporting widespread qualitative evidence that education and wealth matter, but these authors found no gender or age effect for rural adopters. Generalizability of all these results may depend on the extent and quality of the agent network. Though all the non-RCT studies claim the beneficial influence of mobile money on reported savings (by saving method), and on saving flows, the results are compromised by a lack of balanced panel data and appropriate instruments, and no robust and conclusive results can be reached. RCT studies in Mozambique and Afghanistan suggest that saving did not increase, though the saving method switched to mobile money; these studies use small and specialized samples and are probably not generalizable. Far less satisfactory are the (non-RCT) welfare studies reviewed, where results are generally judged unreliable by this survey. A Ugandan panel study suggests an improvement in consumption for mobile money users ( Munyegera and Matsumoto 2016a ); the IV regression casts doubt on the claimed result, but it is supported by a propensity score analysis. A panel study for Kenya by Suri and Jack (2016) is at its most convincing in a differenced specification for consumption; consumption growth for male-headed households was negative and of female-headed households was positive with access to mobile money, but the result is tempered by probable bias from the limited control of heterogeneity. The RCT study by Aker et al. (2016) found the receipt of cash transfers through mobile money accounts promoted intra-household bargaining power for women and their productivity in Niger, with reduced transactions costs. Child nutrition improved and increased diet diversity for the household, with fewer depleted durable and non-durable assets than for control groups. The generalizability of this study is uncertain and depends on a functioning agent network. Repeating such RCT studies across many locations, cultures, continents, and time periods may help reinforce the conclusions and generalizability. 39

Digital finance is one of few areas where there has been a real revolution in services and leapfrogging over deficient traditional infrastructure. However, improved access to financial services is compromised by economic obstacles, significant amongst which are corruption, a lack of electricity generation, and appalling road infrastructure. 40 Complementary action is required to address such problems. The micro-studies show how difficult it is to quantify outcomes accurately and to extrapolate from individual studies of different countries, scaling up the effects to make policy pronouncements. Given the lack of complementary inputs, there could be strong returns to scale in the short-run from mobile money, but not in the long-run, given the constraints. On the other hand, the micro-benefit established by several studies could be multiplied greatly through spillover effects in the presence of well-functioning general infrastructure and transparency (lack of corruption)—especially if mobile money itself reduced corruption.

Atkinson (2015) has argued that economic inequality is often aligned with differences in access to, use of, or knowledge of information and communication technologies. This author stressed that researchers, firms, policymakers and governments have the possibility to shape the direction and path of technological change. Aid agencies, other donors, charitable foundations, and international agencies have played a key role in the beneficial growth of mobile money and the associated financial inclusion ( Aron 2017 ). Creative coalitions and the investment in multi-stakeholder partnerships can prompt deeper change, learning, and practical action. An important application is for academic research on mobile money. Poor quality data and sub-optimal data collection and analysis severely compromise the conclusions that can be reached from empirical work. A concerted attempt by donors, regulators such as central banks, the regulated MNOs, and academics could harness the appropriate data for timely best practice analysis. If anonymizing procedures were accepted, then the benefits from research analysis using anonymized disaggregated data could be reaped. The survey has highlighted the best practice techniques that when applied to empirical analysis could reach more reliable conclusions and bolster the case for significant government and donor support, and commercial investment.

Janine Aron is a Senior Research Fellow at the Institute for New Economic Thinking at the Oxford Martin School, University of Oxford, UK; Centre for the Study of African Economies, Department of Economics, Manor Road Building, Oxford OX1 3UQ. This work was supported by the Gates Foundation (grant number MQRYDE00), the Open Society Foundations and the Oxford Martin School. Special thanks go to John Muellbauer (Nuffield College, Oxford University). The author also thanks Chris Adam (Oxford University), Tony Atkinson (Oxford University), John Duca (Federal Reserve Bank of Dallas, USA), Colin Mayer (SAID Business School, Oxford University), Ggombe Kasim Munyegera (IGC), David Porteous (Bankable Frontier Associates), Emma Riley (Oxford University), Federico Varese (Oxford University) and Sebastian Walker (IMF) for their helpful comments.

The phenomenal growth since 2007 of Kenya's M-Pesa system has brought mobile money to international prominence (“M” is for mobile, and “pesa” is Swahili for money), see box 1 .

Prior to mobile money in Kenya, there were fewer than three bank branches per 100,000 people. Saving was mostly in the form of cash under the mattress. Domestic transfers used scarce post office branches, or insecure intermediaries such as bus-drivers. International remittances were received expensively via money transfer companies or Hawala.

Rotating savings and credit associations and cooperatives address the problem of asymmetric information, allowing small accumulated sums by groups to help individual members spread risk. The related micro-credit movement offers collateral-free loans to marginalized borrowers at near-market interest rates. However, assessing such micro-finance in a long-running evaluation in India, Banerjee et al. (2015) conclude it has had limited success.

The FICO scores in the United States, decisive in 90% of U.S. lending decisions by 2015, are created in a similar manner (Financial Times 2015).

The official remittances statistics would improve as well as the economic management of remittances. In highly dollarized economies (see Corralesa et al. (2016) for the extent of this phenomenon in Africa), mobile money through lower transactions costs may reduce currency substitution, thereby deepening their financial systems.

On the merits of a cashless economy, including fighting corruption and money-laundering, see Rogoff (2016) .

Registration aids financial inclusion toward formal sector products. By contrast, an OTC transaction is conducted through an agent's account on behalf of the customer.

Regulation of mobile money is discussed in detail in Aron (2017) , especially prudential regulation by the central banks; see also Di Castri (2013) .

Third party merchants are not “agents” in a strict legal sense of having the legal authority to act for the service provider—this depends on the local regulation requirements.

Remittances to developing countries are projected to reach US$444 billion in 2017. The true size of remittances, including unrecorded flows, is likely to be significantly larger (World Bank Migration and Development Brief no. 27).

The following authors have examined aspects of the economics of mobile money: Mas and Klein (2012) , Jack, Suri, and Townsend (2010) , Jack and Suri (2011) and Weil, Mbiti, and Mwega (2012) .

See Karlan et al. (2016) on market failure in a more general context of financial services.

Mobile money halves the cost of sending compared to Western Union, and is about a third lower than the postal bank or bus delivery cost, excluding transportation or time costs (see also Morawczynski (2009) ).

An endogeneity problem in econometrics occurs when an explanatory variable is correlated with the error term as a result of simultaneous causality, omitted variables, and/or measurement error. There are several statistical methods that aim to correct the resulting bias in the regression estimates (see box 2 ).

The log of wealth is one of the observables and there is weak evidence for a correlation with wealth.

Heterogeneity refers to variation across individual units of observation, some of which can be observed (e.g., age and education), and some of which is difficult to measure (e.g., changing technological preferences). Thus, omitted heterogeneity is an omitted variable, and hence a kind of endogeneity (see box 2).

On agent quality, see Balasubramanian and Drake (2015) .

Work in progress by Blumenstock and co-authors explores the negative effects of violence on the adoption of mobile money in Afghanistan. Available at: http://www.jblumenstock.com/ .

Not on adoption per se but with implications for adoption, Economides and Jeziorski (2016) match administrative transactions data with GPS data in Tanzania, quantifying motivations for usage, such as willingness to pay to avoid walking with cash or to avoid storing money at home to alleviate criminal risk.

These authors take two approaches, and find similar results, using first a Probit regression, and then a linear probability model with fixed effects. The mobile money “usage” measure in the dependent variable does not match the preferred definition of active (90-day) users, however, and this could bias the results.

Note that agent density may not be exogenous.

The results of a related study on adoption by Weil, Mbiti, and Mwega (2012) should be regarded as suggestive, and of supporting correlations, see Aron (2017) and table 1 . The study cannot control for individual fixed effects and suffers from an omission of controls.

This is a reasonable assumption if unexpected shocks are reported, and not systematically correlated with most household characteristics. Though unlikely in a short time frame, if shocks are correlated with changes in unobservable household characteristics then they would not be random.

Idiosyncratic shocks affect individuals or households; covariant shocks affect groups of households, communities, regions, or even entire countries.

The average amount transferred over the two-month period is small at around US $1; the total additional influx (explicit transfers to all 15 cellular towers within 20 km of the epicentre) measured about US $84.

Food consumption, however, appears to be equally well-smoothed by both users and non-users in the sample.

User households can finance health care expenditures from remittances without compromising other consumption, but non-users must reduce non-medical spending for this; see also Suri, Jack, and Stoker (2012) .

A broadening of networks is likely ( Chuang and Schechter 2015 ), but Riley (2018) more restrictively assumes the sharing social network is village-wide, rather than across villages by lineage, for instance, and that it is constant over time.

“…Thus, although mobile phone use correlates well with economic development, mobile money causes it,” ( Suri and Jack (2016) , my italics).

Agent density is defined as the number of agents within 1 km of the household. This change variable approximates to the level of agent density in 2010, as agent density would have been low in 2008.

Cash-transfer recipients were temporarily able to conceal the arrival of the transfer, increasing bargaining power.

This technique serves to censor observations at zero as the lower limit since households not using financial services will not yield an outcome.

De facto rather than de jure regulations should enter an index, so that it is the quality or performance of the existing regulations that matter rather than merely their existence ( Aron 2000 ).

The data are from Global Findex, and regulatory categories favor openness and certainty ( Porteous 2009 ).

The indices may be correlated with omitted country characteristics; most possible instruments have the same problem.

Several authors apply a range of techniques, for example, Riley (2018) .

For instance, if wealthy households are more likely to adopt mobile money but have less need of the insurance than the poor when a negative shock strikes or are less likely to experience a large negative shock than the poor, then there is a bias toward zero.

Riley (2018) , Blumenstock et al. (2016) , and Jack and Suri (2014) are amongst rarer examples that test robustness, and present clear assumptions and caveats for the techniques.

The challenge of scalability for RCT studies is addressed in Banerjee et al. (2016) . Deaton and Cartwright (2016) recommend a route to precision through prior information (which is excluded by randomization) and controlling for those factors that are likely to be important. Then, they argue, there is a better chance of “transporting” results more generally to other contexts.

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Can you answer these 3 questions about your finances? The majority of US adults cannot

The EU and the US are under-performing in terms of financial literacy. Image:  Unsplash/Angie J

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• In the US, financial literacy is hovering at around 50%, according to an annual survey, with the EU also under-performing.
• The World Economic Forum’s Future of Capital Markets initiative is promoting responsible investing across the retail investor ecosystem.
• April is Financial Literacy Month in the US, so here’s the latest on why our understanding of money needs to improve – and how.

Money is deeply influential in all our lives. It affects where we live, our education, our health, our careers, our romances, our families and our retirement – plus myriad other junctures along the way.

Yet, while the world of finance is always growing and changing, it appears our grasp of it is not. Surveys reveal that significant numbers of US and EU adults are financially illiterate.

Have you read?

3 insights for more successful digital and financial literacy initiatives, how boosting women’s financial literacy could help you live a long, fulfilling life , is cryptocurrency the future of finance here's what a new study shows , financial literacy in the us.

One in-depth barometer of personal finance knowledge is 28 questions given annually to US adults, known as the P-Fin Index. The index explores eight functional areas across finance, such as earnings, savings, insuring and comprehending risk.

Data from the 2024 index reveals how financial literacy in the US has hovered around 50% for eight consecutive years , with a 2% drop in the past two years.

The results also show that Americans appear most comfortable with financial knowledge on borrowing, saving and consuming, and the least confident around comprehending financial risk.

To better understand Americans’ financial literacy, Professor Annamaria Lusardi and Professor Olivia Mitchell designed three multiple-choice questions, known as the Big Three. You can test yourself on these, below, and find out the answers here :

1. Suppose you had $100 in a savings account and the interest rate was 2% per year. After five years, how much do you think you would have in the account if you left the money to grow?

2. Imagine that the interest rate on your savings account was 1% per year and inflation was 2% per year. After one year, with the money in this account, would you be able to buy…

3. Do you think the following statement is true or false? Buying a single company stock usually provides a safer return than a stock mutual fund.

In 2021, just under 30% of Americans answered all of them correctly . Even more concerning, points out Professor Lusardi in a Cambridge University paper, was the fact that this knowledge gap was compounded by a false sense of financial knowledge by survey respondents, who gave themselves an average rating of 5.1 out of 7. “These findings raise concerns that the gap between perception and reality can cause overconfidence when it comes to critical financial decision-making,” she said.

Financial literacy in the EU

The US is not alone in having a significant financial knowledge gap. In the European Union (EU) a quarter of respondents scored low for knowledge in the 2023 Eurobarometer survey on financial literacy, with 18% at a low level of financial literacy.

“This first ever EU survey on financial literacy is a wake-up call for us and Member States ,” said Mairead McGuinness, Commissioner for Financial Stability, Financial Services and the Capital Markets Union. “Together we need to do more to improve levels of financial literacy in the EU. Equipping people with the confidence and skills to make informed decisions about their money is in everyone's interest.”

The World Economic Forum’s Centre for the Fourth Industrial Revolution Network has built a global community of central banks, international organizations and leading blockchain experts to identify and leverage innovations in distributed ledger technologies (DLT) that could help usher in a new age for the global banking system.

We are now helping central banks build, pilot and scale innovative policy frameworks for guiding the implementation of DLT, with a focus on central bank digital currencies (CBDCs) . DLT has widespread implications for the financial and monetary systems of tomorrow, but decisions about its use require input from multiple sectors in order to realize the technology’s full potential.

“Over the next four years, we should expect to see many central banks decide whether they will use blockchain and distributed ledger technologies to improve their processes and economic welfare. Given the systemic importance of central bank processes, and the relative freshness of blockchain technology, banks must carefully consider all known and unknown risks to implementation.”

Our Central Banks in the Age of Blockchain community is an initiative of the Platform for Shaping the Future of Technology Governance: Blockchain and Digital Assets.

Read more about our impact , and learn how you can join this first-of-its-kind initiative.

Comprehension of financial risk is particularly low

The world of money is changing significantly , so knowing how to benefit from financial markets while avoiding risk is very important. Yet, results from the P-Fin Index show that people’s comprehension of risk in the US has fallen further behind, sliding by 4% since 2017, to just 35% this year. This is a far-reaching problem, as not being alert to financial risk appears to span generations, as the chart below shows.

Being able to navigate risk is crucial, especially as we live through one of the most dynamic chapters in the history of finance. Around 1 billion people could be using cryptocurrencies by 2028 , Statista data shows, and revenues in the fintech industry could grow almost three times faster between now and 2028 than those in the traditional banking sector, according to McKinsey.

The state of retirement fluency

The global economy is also struggling, which directly impacts inflation levels and therefore risk for the general population. This year is expected to be “another tough year” with “ sluggish global growth ”, says António Guterres, the Secretary-General of the United Nations, in the latest World Economic Situation and Prospects 2024 report.

And people are living longer than ever, which means the traditional retirement plan for nearly 2 billion people may need adjusting. By 2050, the proportion of the world's population over 60 years will reach 22% , according to the World Health Organization (WHO). For this reason, the P-Fin Index included five questions specifically aimed at retirement fluency in the US for the first time this year.

How to be financially savvy

Like any learning, understanding the ins and outs of mortgages, investments, risk profiles and other financial options takes time. But there are ways for people to develop their own financial toolkits.

The P-Fin Index recommends financial education in primary and secondary schools. Denmark already has mandatory financial education for students ages 13-15 , covering budgeting, saving, banking, consumer rights and more, while the UK has incorporated it into its national curriculum . These efforts are paying off: Denmark and the UK rank first and sixth , respectively, in financial literacy worldwide, according to Standard & Poor’s Ratings Services Global Survey.

Organizations can also step forward to orchestrate learning platforms, such as the work done by partners in the World Economic Forum’s Future of Global Fintech Research Initiative . They conducted a series of multi-stakeholder regional roundtables to explore lessons learned from ongoing and recent public-private efforts to advance literacy.

Financial literacy is a journey with no end; as the world changes, so too must our knowledge. But embracing the ‘ABCs’ of money management today can help billions of people worldwide enhance their bank accounts – and in turn, their lives.

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The Cost of Money is Part of the Cost of Living: New Evidence on the Consumer Sentiment Anomaly

Unemployment is low and inflation is falling, but consumer sentiment remains depressed. This has confounded economists, who historically rely on these two variables to gauge how consumers feel about the economy. We propose that borrowing costs, which have grown at rates they had not reached in decades, do much to explain this gap. The cost of money is not currently included in traditional price indexes, indicating a disconnect between the measures favored by economists and the effective costs borne by consumers. We show that the lows in US consumer sentiment that cannot be explained by unemployment and official inflation are strongly correlated with borrowing costs and consumer credit supply. Concerns over borrowing costs, which have historically tracked the cost of money, are at their highest levels since the Volcker-era. We then develop alternative measures of inflation that include borrowing costs and can account for almost three quarters of the gap in US consumer sentiment in 2023. Global evidence shows that consumer sentiment gaps across countries are also strongly correlated with changes in interest rates. Proposed U.S.-specific factors do not find much supportive evidence abroad.

The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research, the IMF, its Executive Board, or IMF management. The authors thank Jonas Poulsen, Neil Shenai, and Suzanne van Geuns for detailed comments and suggestions.

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The Invention Of Paper Money

Jacob Goldstein

Stacey Vanek Smith

For more than a thousand years, economies around the world operated on coins. Gold, silver, and bronze coins were the primary way people exchanged goods and services.

Then in China, there was a breakthrough: Paper money.

Today on The Indicator , Planet Money host Jacob Goldstein tells the story of paper money — why it was created, how it transformed China, and why it (temporarily) went away.

It's a story Jacob tells in his new book, Money: The True Story of a Made-Up Thing .

Music by Drop Electric . Find us: Twitter / Facebook / Newsletter .

Subscribe to our show on Apple Podcasts , PocketCasts and NPR One .

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The 5 best research paper writing services: reviews & rankings.

Looking for the best research paper writing service? It's a bit like searching for a needle in a haystack, isn't it? Our expert review directly compares the top five services, identifying the best in speed, quality, and value so you can make an informed decision quickly.

Top-Rated Research Paper Writing Services

Best Value: PaperHelp (4.92/5)

Best for Speed: BBQPapers (4.90/5)

Best for Balancing Cost and Quality: EssayPro (4.88/5)

Best for Precision and Professionalism: EssayNoDelay (4.85/5)

Best for Comprehensive Support: SpeedyPaper (4.82/5)

When it comes to finding the top research paper writing services, these options stand out for their unique features and benefits.

Why These Websites?

After checking out more than 20 different research paper services, I've managed to sort out the real gems based on what matters most: reliability, quality, affordability, and the ability to hit those deadlines without cutting corners on quality.

I’ve been using paper writing websites for two years now, and having spent a lot of time exploring different websites, I've really seen how they’ve changed over time. I didn't just pick these five services out of a hat for my review; I chose them after a lot of careful thought and based on my own experiences.

Selection Criteria

So, what made me pick these services? Well, a few things stood out during my search.

Reliability

First up, reliability. There's nothing more reassuring than a service you can count on over and over again. The ones I've chosen have proven themselves reliable time after time, with loads of positive feedback to back them up.

Research Paper Quality

Then there's the quality of the content. This is the heart of any writing service, right? The services I recommend have some seriously talented writers on their teams. They're not just churning out papers; they're crafting well-researched, beautifully written, and completely original pieces of work. It's clear they have strict quality checks in place, and it shows in every paper they deliver.

Affordability

Affordability is another big deal. As a student, I know all too well the juggling act between getting quality help and not blowing your budget. The services I've picked strike the perfect balance. They offer great quality without making you empty your wallet, which is pretty awesome.

Adherence to Deadlines

In the academic world, missing a deadline is a big no-no. The services on my list get this. They've consistently shown they can meet even the tightest deadlines without compromising on the quality of their work.

PaperHelp – Best Research Paper Service Overall

As a student on a tight budget, I found PaperHelp to be a great option. I ordered a research paper from them and I wasn't disappointed. The paper was well-structured, the research was thorough, and the writing style was spot on. It followed all my guidelines and came in before the deadline, which was a nice bonus.

PaperHelp is known for delivering top-notch academic writing services, and from what I've seen, they live up to the hype. Their range of services is pretty wide, covering everything you might need for school or college — think essays, research papers, even the big project like dissertations and thesis writing.

One thing that really stands out is their team. They've got these expert writers who are not only well versed in their subject areas but have the degrees to back it up. This means the research and writing quality is top-tier. Plus, they're serious about making sure your work is original. No worries about plagiarism here, which is a huge relief.

Their customer support is another highlight. They're always there, ready to help out, no matter the time of day. It feels good knowing that support is just a message away, especially when deadlines are looming.

Wrapping up, PaperHelp really sets a standard for what paper writing services should be. They've got a strong focus on quality and customer satisfaction, which is probably why I'd rate them so highly, like a 4.92 out of 5 . Definitely worth checking out if you're in need of some academic help.

BBQPapers – The Speedy Service for Urgent Deadlines

Having used BBQPapers when faced with a looming deadline on my research paper, I was impressed by the speed at which they completed my paper. The quality did not suffer despite the 6-hour turnaround time. However, I did find that the cost for such speed was on the higher side.

BBQPapers offers a wide range of writing services, covering everything from essays to complex research papers, and they really prioritize speedy delivery without cutting corners on quality.

It’s safe to say that they're great at meeting tight deadlines, which is perfect for someone like me who tends to leave things until the last minute but still expects high-quality work.

The writers at BBQPapers are top-notch, no doubts. They quickly understand what's needed and adapt to different types of assignments with ease. The support team is always there, ready to help, no matter when I've reached out. This has been a huge relief during those last-minute scrambles.

In a nutshell, BBQPapers is a great website for anyone needing quick and reliable writing services. I'd rate them a 4.90 out of 5 because they excel at delivering speedy, high-quality work.

EssayNoDelay – Precision and Professionalism Combined

EssayNoDelay is mostly known for their essay writing, but don't let that fool you. They do a fantastic job with research papers too. They're really good at digging deep into a subject and bringing out new insights, all while making sure everything is original and covers a wide range of topics.

As for what they offer, it's not just essays they're handling. They also take on other academic writing tasks like term papers and dissertations. So, if you're swamped with assignments, they've got you covered.

It seems that the writers at EssayNoDelay try to bring creativity and depth to their work, which is something I appreciated. Additionally, if you're worried about deadlines, they've got your back. They're known for being on time without compromising on quality.

After using EssayNoDelay, I was really impressed by a bunch of things. First off, placing my order was super easy. The paper I got was top-notch, and it was clear the writer really got what I was trying to say.

They did their homework, too, because the research was on point. The professionalism and the whole customer experience were just great. With all that in mind, I felt like the cost totally made sense.

To wrap it up, EssayNoDelay is a solid choice for anyone looking for well-written essays and research papers. I'd rate them a 4.85 out of 5 , especially because of their specialization in essay writing and their ability to deliver on time.

EssayPro – Balancing Affordability and Quality

They offer a bunch of services aimed at students, covering everything from research papers, essays, to term papers. What stands out to me is their dedication to getting writers who are experts in various academic disciplines. This isn't about getting just any writer; it's about matching you with someone who gets the ins and outs of your specific study area.

We're talking about writers who aren't just book-smart. They have hands-on experience in their fields, which makes a huge difference. I’ve also noticed that they’re pretty strict about making sure each paper is just right. It's reassuring to know they've got a solid quality check in place.

My experience with EssayPro was positive overall. The quality of work was excellent, and the pricing was competitive. However, I found EssayPro’s bidding system less convenient than writer-assigned system that most other websites use. Because of the bidding system, it’s hard to get the exact price quote before placing an order.

Wrapping it up, if you're on the hunt for writers who know their academic onions and don't skimp on research, EssayPro is a fantastic pick. From what I've seen, they're all about quality and expertise. I'd give them a solid 4.88 out of 5 . They really do go the extra mile to get it right.

SpeedyPaper – Comprehensive Writing Support with a Personal Touch

SpeedyPaper really stands out because of how well they tailor their services to fit exactly what you need. I've noticed that they really listen to what each student wants, giving it a nice personal touch.

SpeedyPaper is all about individual approach and customization, so they really make sure each assignment is just right for you, taking in all your special requests and preferences. They're pretty flexible with how they do things too, like formatting and research, and you can even ask for specific writers.

From what I’ve seen, their team of writers is super diverse, which means they've got someone perfect for any subject or style you need. If something's not quite right, they offer free revisions. This means they keep working until it's exactly what you were looking for.

My experience with SpeedyPaper was a pleasant one. The comprehensive writing support was helpful, and the ability to communicate directly with the writer ensured my order requirements were met.

In conclusion, SpeedyPaper is fantastic at creating personalized writing services. They're great at making sure the content fits what you're looking for, earning them a 4.82 out of 5 from me.

Side by Side Comparison of the Top Research Paper Services

Each service caters to different needs and preferences, from budget considerations and speed to specialization and personalization. Whether you prioritize cost, deadline, or a personalized approach, there's a service here that aligns with your academic writing needs.

PaperHelp stands out for its budget-friendly cost without compromising on quality, making it an excellent choice for students who are mindful of their spending. It excels in delivering a wide range of academic writing services with a particular emphasis on quality and originality.

The slight downside is its potential to miss the mark on the highest academic standards, but it compensates with its overall value, rating a strong 4.93 out of 5.

BBQPapers is the go-to for those tight on time, prioritizing rapid execution without sacrificing paper quality. While it commands a premium for its speedy service, the trade-off is worth it for students who need urgent help.

With a comprehensive service offering and a knack for handling tight deadlines, BBQPapers rates a 4.83 out of 5, marking its position as a reliable service for high-quality, fast-turnaround needs.

EssayNoDelay combines professionalism with punctuality, offering high-quality work with a strong commitment to deadlines. Its user-friendly interface simplifies the process of ordering high-quality essays and research papers.

While revisions may come with terms and conditions, the service's overall performance and specialization in essay writing make it a solid choice, reflected in a 4.85 out of 5 rating.

EssayPro balances affordability with quality, offering competitive pricing across a wide range of paper types. The potential for slower turnaround times and language proficiency issues are minor concerns when considering the expertise of its writers and the overall quality of work. The bidding system may be a drawback for some, yet the service's focus on academic expertise grants it a 4.88 out of 5 rating.

SpeedyPaper differentiates itself with comprehensive writing support tailored to individual needs, allowing for direct communication with writers. It stands out for its personalized approach and flexibility in handling assignments, backed by a diverse team of writers.

Without significant drawbacks identified, SpeedyPaper's commitment to customization and customer satisfaction earns it a 4.91 out of 5.

Four Things to Look for in a Research Paper Service

First , the expertise of the professional writers who write research papers, including a research paper writer, is critical. Professional paper writers should have relevant knowledge in your subject area, ensuring they can handle your topic proficiently. The best research paper writers will make a significant difference in the quality of your work.

Second , assess the quality of the research papers provided by the service. This can be done by reviewing samples or reading feedback from previous clients. It’s also important to verify the service’s commitment to content originality and the availability of originality reports to uphold academic integrity.

Third , consider the flexibility of the service regarding revisions and the presence of a reliable customer support system. Timely assistance can be invaluable when you’re working against a deadline.

Lastly , ensure the service offers prompt delivery and has stringent confidentiality policies to protect your information.

Getting the Best Value for Your Money: Understanding the Prices

Understanding the pricing structure of research paper services is key to getting the best value for your money. Prices typically depend on the turnaround time, number of pages, and your academic level.

For instance, prices may start at $10 per page for a research paper with a 14-day deadline, and go up to $40 per page for a 3-hour delivery.

Promotional offers, discount codes, and loyalty programs provided by academic writing services, including essay writing services, term paper writing service, and online paper writing service, can substantially reduce costs.

These can provide better value for money, especially for regular customers. Establishing a long-term relationship with a research paper writing service can lead to personalized discounts and favored rates over time.

Opting for services with clear, upfront pricing structures helps prevent additional, unexpected costs. Choosing those offering free revisions can enhance the value received without extra charges.

However, the quality of academic writing should not be compromised for affordability. Verifying writer qualifications and reading customer testimonials can help determine the capability of services to deliver high-quality research papers within your budget.

Research Paper Writing Websites: FAQ

Who are the research paper writers.

Research paper writers are essentially experts with advanced degrees who have a knack for diving deep into various academic subjects. From my experience, they usually come with an impressive stash of knowledge, thanks to their master's degrees or even PhDs, and they know the ins and outs of academic research and writing like the back of their hand.

They're the type of people who are not just smart in their fields but are also ace researchers and writers. They have this ability to craft papers that are not only well-researched but are engaging and insightful.

Whether you're an undergrad or working on your PhD, these writers can switch up their style to match whatever academic level or format you need, be it APA, MLA, or Chicago.

And let me tell you, they take their work seriously, especially when it comes to ethics. They're all about creating original content and steering clear of any academic no-nos.

In my time working with them or benefiting from their work, I've seen how their expertise and dedication to quality can really make a difference for anyone looking for a bit of help with their research papers. They're pretty much the unsung heroes of the academic world, making life a bit easier for students and professionals alike.

What is the cheapest research paper writing service?

The most affordable service is definitely EssayPro. The prices per page at this website start at $10.80, but urgent deadlines are not that costly as on other websites. For this reason, EssayPro is the most cost-efficient option, especially for urgent deadlines.

How much does it cost to pay someone to write a research paper?

It can cost as little as $10 per page to pay someone to write a research paper. This can be a cost-effective option for getting quality help with your academic work. However, keep in mind that the more urgent is your order, the more you’ll have to pay.

Other than that, the price depends on your level of study, so graduate papers are generally more expensive than undergraduate ones.

Can I hire someone to write my research paper for me?

Yes, you can definitely hire someone to write your research paper. It’s safe as long as you're using a reputable service.

You've probably seen that many research paper writing services are upfront about being for research and educational purposes. They're kind of like study buddies or tutors, offering you examples and guidance rather than something you just turn in with your name on it.

They usually make it clear that their work shouldn't be submitted as your own. It's a clever way to navigate the legal landscape, providing a helpful resource while making sure everyone knows the rules of the game.

What is the most reliable research paper writing company?

PaperHelp is recommended as the most reliable paper writing service today. You can also consider PaperCoach, Extra Essay, EssayPro, and SpeedyPaper based on their specific strengths.

Do all research paper writing services offer originality reports?

No, not all research paper writing services offer originality reports, at least not for free. EssayPro and BBQPapers deliver plagiarism reports for free with every order, but most other websites charge you for it. It's advisable to confirm this with the service before making a decision.

Summary: How to Pay For Research Paper Writing Online

In summary, research paper writing services can be a valuable resource for students balancing academic and personal commitments. The five services reviewed here each excel in specific areas, from speed of delivery to affordability, and from professionalism to comprehensive support.

Choosing the right service requires considering several factors, such as writer expertise, quality of work, originality guarantees, service flexibility, and customer support. Understanding the pricing structure and taking advantage of promotional offers and loyalty programs can also ensure you get the best value for your money.

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With Inflation This High, Nobody Knows What a Dollar Is Worth

Strong reactions to rising prices and misunderstandings about the value of money are rampant, our columnist says.

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By Jeff Sommer

Jeff Sommer writes Strategies , a weekly column on markets, finance and the economy.

Rising prices have made people grumpy. They have depressed consumer confidence , despite a growing economy and low unemployment.

But exactly how inflation is hurting, helping and confusing people is hard to understand. Everyone knows that the cost of living has increased. Yet unless you’re constantly pulling out a calculator, you’re unlikely to know whether your wages are keeping up with inflation, whether the stock market has actually hit a real peak or whether a lottery jackpot is as sweet as the marketers claim.

There’s a fancy name for the common human failure to see past the gaudy prices largely created by inflation. This widespread inability to recognize what money is really worth is known as money illusion.

Irving Fisher, a Yale economist, wrote a book about it nearly a century ago. John Maynard Keynes , the British economist, popularized the idea. Behavioral economists have studied it extensively. But their insights tend to be forgotten when prices are fairly stable, as they were in the United States until three years ago.

When inflation increases annually at 2 percent or so, who really cares about it? You can function well without thinking about the slowly eroding value of your money — although old-timers notice it because even at a 2 percent annual inflation rate, prices double every 36 years.

But now that we’ve been living with high inflation for a while, everyone is prone to money illusion, to one extent or another.

Consider that a March 2021 dollar is worth less than 85 cents today, according to the government’s Consumer Inflation Index calculator . When I keep that number in my head, the dollars in my bank account look especially unimpressive. (And I’ve been working full-time since the summer of 1977. The calculator says that every dollar I earned in my first job is worth only 19 cents in 2024 money. Yikes!)

Of course, everyone knows by now that the purchasing power of the dollar has dropped. When the price of products you see every day has gone up — a gallon of gasoline, a loaf of bread, a cup of coffee — you know prices have risen.

Even so, it’s easy to slip back into thinking a dollar is simply worth a dollar, and that it always has been.

Stocks and the Lottery

Certain aspects of inflation’s toll on the markets are extensively chronicled — yet, I think, the profound effects of inflation on stocks and bonds are still widely underestimated.

First, a few things about inflation’s costs are clear. Because the Federal Reserve has been fighting inflation, short-term rates are high. And several consecutive months of bad inflation readings have made it unlikely that the Fed will cut rates soon. In the bond market, which responds to the Fed’s signals and to traders’ judgments about inflation and economic growth, yields have surged. As a result of all this, a range of consumer credit rates steepened. These include mortgages, credit cards and personal loans.

In addition, the dawning realization this month that the Fed is in no rush to lower interest rates stalled the stock market.

I wrote about a less well-known aspect of inflation recently. The frequent exuberant references to new peaks in the S&P 500 during the recent bull rally didn’t take rising consumer prices into account. (They used what economists call nominal prices, not real ones.) On an inflation-adjusted basis, the stock market only in March approached a new peak for the first time in years. I relied on an analysis by Robert Shiller, a Yale economist, who has long used inflation-adjusted data to pierce the veil of money illusion. Because of setbacks in the past few weeks — high inflation and a faltering stock market — the market has fallen below peak levels in real terms.

Using nominal returns in an inflationary era can lead you to the erroneous conclusion that market is generating phenomenal returns.

Here’s another product of money illusion, one that state governments are exploiting relentlessly: lottery jackpots. As I wrote in March, a spate of recent huge jackpots have been artificially pumped up by questionable marketing practices, high interest rates and inflation.

When used by skilled marketers, money illusion can make unwary humans so excited that they will pour hard-earned money into chimeras, like lotteries and frothy stock markets.

Unhappy Workers

The old refrain, that the rent is too damn high, is resonating now. Steep housing costs are embedded in government indexes and account for a substantial part of recent official inflation increases.

Wages are another nagging problem. Numerous surveys show that many working people believe their wages haven’t kept up with the cost of living. Whether they actually have kept up is debatable. The official data on average wages is volatile and difficult to interpret.

Meticulous research by the economists David Autor, Annie McGrew and Arindrajit Dube shows that for lower-income people, real wages have risen, erasing nearly 40 percent of the longstanding wage gap between richer and poorer workers in the United States.

Even so, because inflation in essentials like food, housing and transportation stresses lower-income people more acutely than the rich, it’s not clear that those wage increases are well appreciated.

In fact, research by Stefanie Stantcheva, a scholar at Harvard and the Brookings Institution, building on earlier work by Professor Shiller, finds that it’s not.

People tend to blame the government for the pain of inflation, and to give themselves credit for raises they have received — even while feeling angry that those raises don’t seem to be keeping up with the cost of living.

That’s a core issue when inflation is high. “Money Illusion,” a classic 1997 paper by the economists Eldar Shafir and Peter Diamond and the psychologist Amos Tversky, found that in periods of high inflation, employers can get away with giving workers raises that amount to substantial wage cuts on an inflation-adjusted basis.

Say inflation is rising at a 4 percent annual rate, and you get a 2 percent raise. You’ve just received a real wage cut. If there’s no inflation, and your wage is cut by 1 percent, you’ve also gotten a wage cut — but you’ve lost less money than in the case of high inflation. What’s odd is that workers tend to view the bigger real wage cuts as fairer.

This makes sense, the authors say, when you factor in money illusion.

Where We Are Now

At the moment, consumer sentiment surveys are skewing lower than they have in periods that were similar in economic growth and employment. Neale Mahoney and Ryan Cummings , two economists at Stanford, think inflation, and lingering dissatisfaction with price levels, may well be the cause.

Looking back at past periods of high inflation, they have done some rough calculations that show that the negative effects of inflation on consumer sentiment erode 50 percent each year. In other words, they have a half life of about one year.

Professor Mahoney updated the research at my request. In the three years through March, prices rose 17.9 percent. According to his model — and, crucially, assuming the rate of inflation drops immediately to the Fed’s forecast of 2.5 percent annually — there would be an eight percentage point increase in consumer sentiment by November. There happens to be a national election then.

Mr. Mahoney and Mr. Cummings both served in the Biden administration. If they are right — and, if inflation really drops quickly and stays low — the improvement in the national mood could tilt the outcome of the election.

But inflation has defied economists’ prediction efforts over the past few years. I make no assumptions.

Certainly, I hope inflation will fall and it will be safe to live an ordinary life without thinking about money illusion. But it will take a long while for me to unsee the shrinking dollar.

An earlier version of this article misspelled the surname of one of the economists who conducted research on wage trends. She is Annie McGrew, not McGraw.

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Jeff Sommer writes Strategies , a weekly column on markets, finance and the economy. More about Jeff Sommer

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Please note you do not have access to teaching notes, a review of money laundering literature: the state of research in key areas.

Pacific Accounting Review

ISSN : 0114-0582

Article publication date: 18 March 2020

Issue publication date: 2 April 2020

The purpose of this study is to review the literature on money laundering and its related areas. The main objective is to identify any gaps in the literature and direct attention towards addressing them.

Design/methodology/approach

A systematic review of the money laundering literature was conducted with an emphasis on the Pro-Quest, Scopus and Science-Direct databases. Broad research themes were identified after investigating the literature. The theme about the detection of money laundering was then further investigated. The major approaches of such detection are identified, as well as research gaps that could be addressed in future studies.

The literature on money laundering can be classified into the following six broad areas: anti-money laundering framework and its effectiveness, the effect of money laundering on other fields and the economy, the role of actors and their relative importance, the magnitude of money laundering, new opportunities available for money laundering and detection of money laundering. Most studies about the detection of money laundering have focused on the use of innovative technologies, banking transactions or real estate- and trade-based money laundering. However, the literature on the detection of shell companies being explicitly used to launder funds is relatively scarce.

Originality/value

This paper provides insights into an area related to money laundering where research is relatively scant. Shell companies incorporated in the UK alone were identified to be associated with laundering £80bn of stolen money between 2010 and 2014. The use of these entities to launder billions of dollars as witnessed through the laundromat schemes and several data leaks clearly indicate the need to focus on illicit financial flows through such entities.

• Money laundering
• Shell companies
• Illicit activities

Tiwari, M. , Gepp, A. and Kumar, K. (2020), "A review of money laundering literature: the state of research in key areas", Pacific Accounting Review , Vol. 32 No. 2, pp. 271-303. https://doi.org/10.1108/PAR-06-2019-0065

Emerald Publishing Limited

Copyright © 2020, Emerald Publishing Limited

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Our new research: Enhancing blockchain analytics through AI

Elliptic Research

• Elliptic researchers have made advances in the use of AI to detect money laundering in Bitcoin. A new paper describing this work is co-authored with researchers from the MIT-IBM Watson AI Lab.
• A deep learning model is used to successfully identify proceeds of crime deposited at a crypto exchange, new money laundering transaction patterns and previously-unknown illicit wallets. These outputs are already being used to enhance Elliptic’s products.
• Elliptic has also made the underlying data publicly available . Containing over 200 million transactions, it will enable the wider community to develop new AI techniques for the detection of illicit cryptocurrency activity.

At Elliptic we have always pushed the boundaries of blockchain analytics, to enable our customers to more accurately and efficiently assess risk in cryptoassets. Part of this innovation has been exploring how artificial intelligence can be leveraged to improve the detection of money laundering and other financial crime on blockchains. 

Blockchains provide fertile ground for machine learning techniques, thanks to the availability of both transaction data and information on the types of entities that are transacting, collected by us and others. This is in contrast to traditional finance where transaction data is typically siloed, making it challenging to apply these techniques.

Machine learning on the blockchain

We first published research on this topic in 2019, co-authored with researchers from the MIT-IBM Watson AI Lab. A machine learning model was trained to identify Bitcoin transactions made by illicit actors, such as ransomware groups or darknet marketplaces. The training data, compiled by Elliptic and containing over 200,000 bitcoin transactions, was made publicly available to encourage further experimentation and collaboration within this emerging field. That paper has now been cited nearly 400 times by researchers around the world, which demonstrates the impact it has had and continues to have in the fields of machine learning and anti-money laundering.

We have now released further research , applying new techniques to a much larger dataset, containing nearly 200 million transactions. This work is again co-authored by researchers from the MIT-IBM Watson AI Lab. Rather than identifying transactions made by illicit actors, a machine learning model is trained to identify “subgraphs”, chains of transactions that represent bitcoin being laundered. By identifying these subgraphs rather than illicit wallets, this approach allows us to focus on the “multi-hop” laundering process more generally rather than the on-chain behavior of specific illicit actors.

Testing our results

We worked with a cryptocurrency exchange to test whether this technique could be used to identify money laundering attempts through that business. Of 52 “money laundering” subgraphs predicted by the model and which ended with deposits to this exchange, the exchange confirmed that 14 had been received by users who had already been flagged as being linked to money laundering. On average less than one in 10,000 of these accounts are flagged as such, suggesting that the model performs very well * . Importantly, the exchange’s insights were based on off-chain information, suggesting that the model can identify money laundering that would not be identifiable using traditional blockchain analytical techniques alone.

We also investigated the types of money laundering patterns that the trained model was identifying. This revealed known money laundering patterns such as “peeling chains”, which can already be automatically detected in Elliptic’s transaction and wallet screening tools. However it also identified novel patterns such as the use of intermediary “nested services” in specific ways. Knowledge of these money laundering behaviors is of value to AML practitioners, and can be added to the suite of behaviours that can be detected with Elliptic’s tools.

The machine learning model can also be used to help identify previously-unknown illicit wallets. When the model predicts that a given subgraph is an instance of money laundering, it implies that the funds have potentially originated from some type of illicit activity. Directed research can then be performed on these wallets to try to identify them. This approach has already enabled us to identify a number of previously unknown wallets used by illicit actors including ponzi schemes and darknet markets. 

Sharing our data with the community

As well as releasing our research, we have also made the underlying data publicly available . The largest public dataset of its kind, “Elliptic2” will enable the development of new techniques for the detection of illicit cryptocurrency transactions by the wider community. It will also aid the development of the underlying graph neural network methods, used in applications including drug discovery, physics and computer vision.

This novel work demonstrates that AI methods can be applied to blockchain data to identify illicit wallets and money laundering patterns, which were previously hidden from view. This is made possible by the inherent transparency of blockchains and demonstrates that cryptoassets, far from being a haven for criminals, are far more amenable to AI-based financial crime detection than traditional financial assets. We have barely scratched the surface of what is possible in this domain, but this work has already led to benefits for Elliptic’s users. Further collaboration and data-sharing will be key to advancing these techniques further and combating financial crime in cryptoassets.

You can read the research paper in full here , and the Elliptic2 dataset is now available to access. To discuss the research, and find out more about how we are applying these new techniques to enhance our products, get in touch . 

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Blockchain Sleuth Elliptic Explores AI and Anti-Money Laundering Using 200M Bitcoin Transactions

• The Elliptic2 dataset is orders of magnitude bigger than the one used when the team began using machine learning to detect money laundering with bitcoin back in 2019.
• The research made use of 122,000 groups of connected nodes and chains of transactions called "subgraphs" with known links to illicit activity.

Blockchain analytics firm Elliptic said it detected potential money laundering patterns on the Bitcoin blockchain after training an artificial intelligence (AI) model using a record 200 million transactions.

The work is an extension of a program carried out back in 2019 that used a dataset of only 200,000 transactions. The much larger "Elliptic2" dataset made use of 122,000 labeled "subgraphs," groups of connected nodes and chains of transactions known to have links to illicit activity.

AI becomes more insightful the larger the dataset available to train the machine-learning algorithms, and cryptocurrencies like bitcoin offer a plentiful supply of transparent transaction data on the blockchain. Elliptic used the transactions for learning the set of "shapes" that money laundering exhibits in cryptocurrency and accurately classifying new criminal activity, Elliptic said in a paper co-authored with researchers from the MIT-IBM Watson AI Lab.

"The money laundering techniques identified by the model have been identified because they are prevalent in bitcoin," Elliptic co-founder Tom Robinson said in an email. "Crypto laundering practices will evolve over time as they cease being effective, but an advantage of an AI/deep learning approach is that new money laundering patterns are identified automatically as they emerge."

Many of the suspicious subgraphs were found to contain what are known as "peeling chains," where a user sends or "peels" cryptocurrency to a destination address, while the remainder is sent to another address under the user's control. This happens repeatedly to form a peeling chain.

"In traditional finance this is known as 'smurfing,' where large amounts of cash are structured into multiple small transactions, to keep them under regulatory reporting limits and avoid detection," Elliptic said in the paper.

Another commonly occurring technique was the use of so-called "nested services," businesses that move funds through accounts at larger cryptocurrency exchanges, sometimes without the awareness or approval of the exchange. A nested service might receive a deposit from one of their customers into a cryptocurrency address, and then forward the funds to their deposit address at an exchange.

"Nested services are known to frequently have less stringent customer due diligence checks than the cryptocurrency exchanges they utilize, or sometimes have no such anti-money laundering checks at all, resulting in their misuse for cryptocurrency laundering - potentially causing them to feature in subgraphs deemed by the model as suspicious," said Elliptic.