One attribute of mobile payments that is rarely explored is the audit trail – each and every transaction is recorded. Whether you’re paying for a chocolate bar, a mobile app, a phone call, a ride on public transport, settling a bill, donating to charity, paying your taxes, cashing in an m-coupon, transferring money or gaining entry to an event with an m-ticket it’s all recorded.
If you are purchasing all of these via a mobile wallet service, it is all recorded in one place, by one provider. In the cash economy, there wouldn’t be a record of any of this (except various mostly anonymous till receipts, tickets etc). In a cash and cards economy, there are records of non-cash transactions, but they are likely to be spread across various payment providers.
On the positive side, this audit trail means it is harder for corruption, theft or fraud to occur, and more difficult for people to avoid paying tax on income or sales. One of the reasons that corruption is more prevalent in developing countries is their economies are dominated by cash. As Barry Coetzee iVeri points out in this interview on mobile money in Africa: “cash is the greatest driver of corruption”.
The way to reduce the cash economy is to give people an alternative way to pay. For people that have previously had no access to banking services, the mobile wallet provides that alternative. And as proved by the 13 million Kenyans that use Safaricom’s M-PESA service to deposit, withdraw and transfer money, pay bills or buy goods, people will readily embrace mobile money.
This audit trail makes mobile an attractive channel for NGOs to deliver aid direct to the beneficiary. For a taste of what is to come, see how the UN World Food Programme feeds Iraqi refugees using mobile vouchers.
Developed nations also suffer with corruption, theft, fraud and tax evasion. And while for most people there alternative options for payment, the cash economy is still substantial. In the US, for example, a staggering 7.7 percent of households are unbanked and 17.9 percent are underbanked, according to this FDIC Survey of unbanked and underbanked households .
If a substantial proportion of this cash economy switched to mobile payment (which is by no means certain) then the anonymity of cash transactions are removed.
On the negative side, there are bound to be privacy concerns with records being kept of an individual’s entire purchasing and travel history. To some extent, this data is recorded for consumers who use payment cards, Web-payment systems, loyalty cards and use electronic travel passes (available in some Western cities), but few consumers will make all payments electronically and never will so many records be stored in one place as they potentially will be with the mobile wallet.
Whatever company controls the consumer’s mobile wallet – whether that’s a bank, mobile operator or third party – will be in a very powerful position and one that requires the full trust of the customer, not just that the money will be kept safe, but that the data is stored and used appropriately. The mobile wallet provider will know more about that consumer’s behavior than anyone – possibly more than the consumer him/herself. To what extent could this data be used (legitimately or illegitimately) by the provider or a third party to market to the consumer and under what circumstances could police or government departments demand to see the records?
In a world where some people are concerned about being tracked as they surf the Internet [see the US Federal Trade Commission proposals on do not track] and others are concerned by the data held on them by mobile operators [see this story on the German politician that sued Deutsche Telekom to find out how much information they kept on him], you can see this worrying privacy campaigners.
• How mobile money is changing Africa
• The insider’s guide to banking the unbanked
• Mobile money will make the world go round
• UN World Food Programme feeds Iraqi refugees using mobile vouchers
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