Laundry bills

[Dave Birch] I’m looking at the tension between financial inclusion and KYC/AML (financial exclusion), specifically in the context of launching new mobile payment schemes in developing countries. My thinking is summed up well here:

Strict KYC norms present a big hurdle: The very people who have most to gain from mobile banking are excluded because they don’t have identity cards, proof of address and other credentials.

One way to deal with this problem would be to allow “KYC- lite” that restricts the amounts per transaction to minimize risks while ensuring that the poor aren’t left out.

[From Bloomberg.com: Opinion]

I’ve argued before — in other fora — for a much stronger KYC/AML break at the low end of the market since it would provide a low-cost means to improve the lives of a large number of the poorest people. The main argument against this, naturally, is that the break might then be exploited by criminals, terrorists and so on. I don’t buy this at all, but do need to address it.

Cashlessness and futures

[Dave Birch] Chris Skinner was talking about cashlessness over at FinanSer but says that we’re not going in the direction. In fact,

instead we have rising levels of cash in the economy
[From The FinanSer: But cash is better than cashless]

I don’t think that’s true, or at least true everywhere. In Iceland, 93% of all retail transactions are non-cash. Recent data by the Bank of Japan showed that the number of coins in circulation dropped 0.25 percent to ¥91.45 billion in June, the largest year-on-year decline ever, due largely to the spread of e-money. In Hong Kong, the Octopus transit card has replaced 1% of the cash in circulation. In Singapore, the government has been considering Singapore Electronic Legal Tender (SELT). In Japan, unlike all other developed countries, the number of coins in circulation has started to fall (because of mobile phone-based payments). In Kenya, the new mobile payment system M-PESA has more than a million customers. In the UK, debit cards have overtaken credit cards and cheques will certainly vanish in our lifetimes. It seems as if the trend toward electronic payments is accelerating around the world.
How far will this trend go? Since the social cost of cash is high, and the associated transaction costs fall disproportionately on the poor, we might all be better off once the shift to e-paymemnt (m-payment, actually, for most people in most of the world) is complete. But we need to explore to be sure: there are some aspects of cash (such as anonymity) that are valued and we need to understand how and why some characteristics might need to be preserved. Is a cashless economy realistic? Or desirable? How might such an economy emerge and is it possible to imagine the impact of the end of notes and coins?


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