Yesterday I wrote about how most of us cheat, though just by a little bit. I also discussed the idea of how we feel more compelled to be dishonest, to cheat, to steal, when we are removed from cash. We’re far more likely to take a soda from the office fridge than we are a dollar sitting on the counter in the same office.
Cash has a major effect on us in other domains as well. Notably, the medium through which we pay for things has a strong effect on our willingness to spend. If we are at the grocery store, we are likely to spend more if we are paying with a credit or debit card than if we are paying with cash. When we are physically handing over our Thomas Jeffersons and Andrew Jacksons, there is a greater “pain of paying” than there is when we are just swiping on a machine.
As I’ve written about previously, in Kenya and other parts of the world (most notably, the Philippines, South Sudan and Tanzania), mobile money is increasingly becoming an important part of the economy. In Kenya, I could go to an “agent”, someone working at a phone kiosk, and give them cash in exchange for credit on my phone. Then, when I wanted to by something, I could pay by phone. I would enter the amount I want to pay, the phone number of the person I wanted to send the money to, and my password. They would then receive credit on their phone. In Kenya, it’s not so commonly used to pay for your rice or your motorcycle taxi. It’s more common for major transfers, like sending money to relatives, paying bills, that sort of thing.
I read a recent piece in Bloomberg Businessweek discussing one of the other uses of mobile money—sending money to others when they need to pay for major expenses, like weddings, funerals, school fees and medical bills. In Kenya, a common means of raising money is known as a Harambee. The individual needing money (for say, school fees) has everyone over to their house and serves them food and drink, and requests money. Everyone then contributes a small amount (the actual sum depends on your wealth and how close you are to the requester). With mobile money, it is possible to digitalize these Harambees. When someone I know (not especially well) needed to go to the hospital I received a text from his relatives requesting funding. Presumably, every person on his contact list received that text.
The ease of requesting money is seen as a bit of a burden to many Kenyans. With mobile money, it is much easier to transfer funds, and accordingly, they are hit up with requests for money much more often. It’s much easier to send a text than to invite people over and serve them food.
However, given the research about the pain of paying, I think the problem Kenyans are facing goes beyond this. I think Kenyans are likely feeling a greater financial burden from transfers because it is much less painful to pay when it’s through mobile money. When I’m taking money to a dinner, I am very cognizant of the burden of handing over my Jomo Kenyattas (in Kenya, the 50, 100, 200, 500 and 1,000 shilling notes all feature the face of the first president, Jomo). However, when I’m just entering a number into my phone and hitting send, I’m feeling the burden much less. I think that Kenyans are sending transfers a lot more, and accordingly, committing much more of their income to these transfers in no small part due to the reduced pain of paying.