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> Posted by Innocent Ephraim, Ignacio Mas, and Daniel S. Mhina
The following post was originally published on NextBillion and has been re-published with permission.
Like their counterparts in countries across Africa and around the world, a large number of Tanzanians have flocked to emerging mobile payment solutions, whether it’s to send money home, facilitate informal business transactions, pay bills or buy pre-paid electricity. The reality, however – in both Tanzania and many other markets – is that most digital accounts are empty and serve mainly, if not exclusively, as a pass-through for such payments. This limits the transformational potential of mobile money.
In a recent Financial Sector Deepening Trust (FSDT) Focus Note, we point out several factors that make digital accounts an illogical store of value for people who live precariously on low and uncertain incomes, and face health or weather-related shocks which can easily overwhelm their means. From it we derive six ways in which providers can help make digital storage of value more attractive.
PROVIDE BOTH FRICTION AND FLOW
First, digital accounts need to deliver both fast and convenient payments (“flow”) as well as illiquidity features to support people’s mental hierarchies for different kinds of money, based on their origin or purpose (“friction”). How can one savings account or mobile wallet deliver both friction and flow? Features need to be introduced that give users more of a sense of control over when they need flow and when they want friction. Only then can digital accounts play a significant role in helping people manage their money tensions, which, unlike day-to-day payments, play out in time.
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