Mobile Money as Innovation Diffusion Laurence Harris School of Finance and Management SOAS University of London Presentation at Project Workshop, SOAS University of London, 3rd-4th March 2017 Funded by DFID-ESRC grant: ES/N013344/1 “Delivering Inclusive Financial Development and Growth”

‘The Miracle of Mobile Money !’ That is the claim in much writing on the spread of mobile money systems globally since the start of M-PESA e.g. GSMA State of the Industry Report on Mobile Money 2006-2016 (Feb 2017) …

… but Miracles are Difficult Here I question whether the miracle has spread beyond Kenya I review the cases where the introduction of mobile money has failed And report on studies of the causes of failure Models of innovation diffusion provide a framework for such analyses

MPESA is indeed… Miraculous speed of adoption coverage volume of transactions types of money transfer development of savings functions effects on economic activity Speed of adoption was crucial for obtaining network benefits and further evolution of M-PESA

But other countries struggle They fail to achieve high speed of adoption. ‘nearly four years on, operators across the globe are still struggling to capture the mass market for payments, and are now coming to grips with the operational complexity and marketing challenges associated with new payment systems’ (Heyer and Mas 2011) ‘Whereas the Kenyan M-PESA had 2.7 million users by its 14th month following its launch, the Tanzanian M-PESA only had 280,000 users by the same time’ (Ngugi, Pelowski, Ngembo, 2011) ‘[In Ghana] Despite all the promotion and direct publicity [by MTN], the adoption of the service was very low with only 10% claiming to have used the service. More than 18months after MTN’s launch and there is still no signs of significant uptake of the service’ (Tobbin, Kuwornu, 2011)

Why? What ingredients do MM miracles need? Facilitating regulations Available infrastructure (scaled or scalable phone network) Existing vector of potential agents Marketing design (e.g. targeting early adopters as network builders) Consumer receptiveness

Consumer Receptiveness Some factors influencing consumer receptiveness: Spatial demographics Cost Reliability Potential positive effects (e.g. business opportunities) Potential negative effects (e.g. reduced family visits) Social and cultural norms Trust

Technology Adoption Models Diffusion of Innovation model (Rogers 1995) Technology Acceptance model (Davies 1989) UTAUT model (Venkatesh et al 2003) Provide systematic frameworks for analysing the factors influencing user adoption. Frameworks suitable for quantitative investigation. For example, for Ghana (Tobbin, Kuwornu, 2011)

(Triability, Relative Advantage) Perceived Trust (PT), Transactional Cost (TC) Perceived Risk (PR) Reliability and Perceived Privacy identified as antecedents of Perceived Trust

What does PCA tell us? Principal Components Analysis Perceived ease of use (β 0.30), Perceived usefulness (β 0.27), Perceived Risk (β -0.20) Perceived Trust (β 0.19)

M-PENA Adoption: Role of Trust Morawczynski & Miscione (longitudinal study) Institutional trust (for safaricom) high in early stages Interpersonal trust (for agents) low in early stages Interpersonal trust increased through use over time

Aspects of Trust in Ethiopia Community based studies in rural communities in Ethiopia (2014-15 Jimma University) Yields ‘political trust’ hypotheses: Lack of trust in foreign systems Lack of trust between communities: ‘each community is sceptical about a new banking service when considering the possibility that the system under consideration is directly or indirectly controlled by the other tribes … they do not see financial services as purely economic systems, but as political tools that are being introduced to undermine their tribally controlled local authorities’

Planned fieldwork Micro and SME enterprise adoption of MMT Survey based study of trust in (non-) adoption Urban and rural communities in Oromia Hypotheses on role of ‘political’ trust

Next stage: Refinement of innovation adoption framework for mobile money adoption Design of Ethiopia surveys

Watch this space Thank You!