The End of Money

by David Wolman

  “But here is the key,” says Mas, referring to the fate of cash specifically. If the capacity to convert tactile money into electronic money is widespread enough, cash’s coveted status will diminish. “People will come to see that they don’t need it. And because of its costs, they won’t want it.” They won’t want it for many of the same reasons that people living in stronger economies don’t walk around town carrying fat rolls of banknotes, and don’t usually store their life savings in kitchen cupboards.

  The primary barrier that has always prevented the poor from having electronic money is the old-school bricks-and-mortar bank. Traditionally, banks have had little or no interest in addressing poor peoples’ needs: the deposits of the poor don’t add up to much, and it will never be profitable to put bank branches in the slums and rural villages where poor people live. “But cellphones are everywhere!” says Mas, holding up his Blackberry. Phones are the solution to getting financial services to the masses—to the roughly one billion people who already have a phone but who don’t have a bank account.3 In the near future, establishing a bank account should be as easy as buying lettuce, transferring money as easy as sending a text message, and carrying cash as unreasonable as toting around a chest full of silver coins.

  THE MORNING AFTER my arrival in Delhi, I hire a taxi and head west through perpetually harrowing city traffic to visit a few pharmacies and shops that offer mobile banking services. Staring out the window, the deluge of stimuli dazzles and puzzles the senses to the edge of overload. Pigs and toddlers rummaging through a trash pile, wildly painted trucks belching and honking, women in immaculate saris scooping muddy water into buckets, layers of grime on every horizontal surface, impossibly cluttered stores selling chairs, toasters, bicycles, and Lay’s Magic Masala potato chips. Emerging middle-class consumerism sprouts up on every square inch of the cityscape not occupied by roads, rundown apartment buildings, cows, tractors, panhandlers, green and yellow three-wheeled taxis, mangy dogs, and vendors squatting in the dirt selling limes, old shoes, and weary carnations. Savory smells one moment, rancid odors the next, and the overlapping sounds of engines, laughter, coughing, music, and the occasional snort of an elephant walking down the side of a ten-lane highway.

  On nearly every street in Delhi I spot at least one, if not four, retailers selling cellphone airtime minutes. Whereas in the United States most mobile service is based on a monthly subscription, the rest of the world buys talk time like buying gas for a car: fill your account with minutes, or just get a few dollars worth. When you’re running low, stop at a retail shop to refuel. (You can also top up online or via text message, but only if you have some form of electronic money with which to do so.)

  Literally millions of shops in India sell airtime minutes. Coca-Cola may be the global distribution success story of the twentieth century, but the new coverage masters are telecom companies. In less than a decade, they have extended cellphone service and retail operations to the far corners of the planet. There are now an estimated 4.6 billion mobile phones in use worldwide, with 80 percent of new connections made by poorer consumers in developing countries.4 In India alone, cellphone adoption rates have grown from nominal usage a decade ago to nearly 700 million connections today, and millions of new accounts are opened every month.5

  For people in the developing world, the phone embodies opportunity. In parts of Africa, farmers now receive text messages with weather updates that enable them to make more strategic decisions about what to plant or when to harvest crops for maximum yield. Another service in the works provides free healthcare advice via mobile phones to people who are unable to get to a medical clinic, and researchers in Ohio are trying to rig cellphones so that they can be used to test children for ear infections.6 Taxi drivers throughout the world can be in touch with customers (I kept two drivers’ phone numbers on me in Delhi), fishermen use their phones to negotiate with buyers, and text alerts about mudslides, elections, or civil unrest can help people stay informed and safe. That is, as long as ousted Egyptian President Hosni Mubarak doesn’t shut off the network.

  Almost overnight the phone has evolved from one-trick pony—connecting two voices—into a Swiss Army knife of do-good power. (Yes, there is do-bad power too. We’ll get to that.) It may sound intellectually precarious to hoist a gadget onto such a high pedestal, yet researching the ascent of the mobile phone and its potential to improve peoples’ lives—in contrast to, say, the steady stream of gloomy stories about ineffectual foreign aid—makes it hard not to catch the fever. The phone has “become as essential to human functioning as a pair of shoes,” declared The Economist in 2010.7 Finally owning one has been likened to a get-out-of-poverty card.r8

  The most dramatic impact from cellphones may turn out to be services that turn the phone into a mini bank branch in your pocket, thus replacing the need for material money. By 2010, there were 150 mobile money transfer or mobile banking services active or readying for launch all over the globe, and by some estimates the volume of transactions made via mobile will be $250 billion in 2012.9 Remittance needs alone are massive, with nearly half a trillion dollars moving between family members and friends every year.

  In wealthier countries, we’re already seeing mobile payment tools used at Starbucks and elsewhere. In the spring of 2011, Google unveiled a service called Google Wallet. It’s an app for paying—wave your phone at a retailer’s terminal instead of using your credit card. This isn’t the first such product of its kind, but a big push from a giant like Google gets attention and underscores the fact that a race is underway to move more commerce out of our wallets and into our phones. This exploding market will put pressure on cash. But it’s people in the developing world, where the only other option has always been cash, who could deliver cash its lethal blow.

  The early success story that has development experts doing backflips is a service in Kenya called M-Pesa (the M is for “mobile” and pesa is Kiswahili for “money”). It’s run by a subsidiary of the huge telecom company Vodafone, and the first thing you need to know is that M-Pesa isn’t a bank. It’s a transfer service akin to PayPal, but you don’t need an Internet hookup.

  To the people of Kenya, the benefits of this service have been staggering. Instead of spending two days on buses to deliver money to grandma back in the village, you can go to a local shop—any one of the 23,000 tied into the network of M-Pesa agents—plunk down the cash you want to convert and send, and then type in the necessary codes on your cell phone. Grandma receives a text that says money has been flashed to her account, and she goes to her local shop to redeem the cash. She could also decide to keep it “in” the phone for the time being, or she could redeem a portion of that electronically stored value, in the form of purchased fruit, flour, and batteries. The shopkeeper’s account is credited the corresponding amount for the groceries.10

  After less than four years of operation, M-Pesa counted thirteen million users—more than half the adults in the country. In contrast, it took a century for the conventional banking industry in Kenya to reach five million customers. Stores offering M-Pesa are in virtually every community, with the logo advertised in windows, on flags, or hand-painted on cinderblock walls. More money already passes through the M-Pesa system in Kenya than all the Western Union transactions worldwide.11

  Kenya’s central bank has reported a drop in cash usage, and M-Pesa payments are now being accepted by a few of the country’s major retailers and the national airline.12 Other Kenyans, such as taxi drivers, load up their accounts whenever possible, so that they don’t have to hold on to cash. In the earliest days of the M-Pesa experiment, an anthropology researcher interviewed a man who put money on his phone while visiting one side of Nairobi, and then, just forty minutes later, took it out again in a shop on the other side of the city. When asked why, he said he was traveling through a dangerous part of town and was leery of having cash on him.s13

  The benefits of this kind of program extend beyond individual finances. There are signs, for example, tha
t it could strike a huge blow against corruption. In 2010, in the central Afghanistan province of War-dak, local policemen began receiving their monthly salary as an electronic payment. When payday came and they accessed their accounts via their cellphones, many of them thought there had been a mistake. Nobody gets a generous raise out of the blue—and a 30 percent raise is preposterous. But it wasn’t a raise or a mistake. Under the old system, crooked higher-ups skimmed so much off the top of the cash payments that the policemen never actually knew the true amount of their salaries. (One brazen commander complained that he was no longer getting his cut.)

  It’s true that cash is still part of this whole picture. The Afghani cops, like relatives in rural Kenya, still have to convert electronic money on the phone into cash in hand so that they can then buy goods from local vendors who don’t accept electronic payment. But if more of their customers start asking about this method of payment, it won’t take long for vendors to get on board. Remember, this technology is in its infancy. The idea for an ATM first emerged in the 1930s, but the machines weren’t really a regular part of our lives until the 1980s. Likewise, credit cards took more than a generation before they went mainstream. Anyone who doubts that the overlapping worlds of telecom, apps mania, and finance aren’t going to become even more creative and integrated in the coming decade is probably snorting a little too much cocaine from tightly rolled banknotes.

  And counterintuitive as it may sound, Mas says the persisting role for cash in the shorter term will actually help catalyze its downfall. “Cash is a centuries-old army that you can’t fight with a frontal assault. You need to infiltrate. Make everyone think what you’re doing is distributing it, because that is what you’re doing, pushing it out to those villages.” That’s what mobile money can do, by way of so many thousands, even millions, of stores throughout the world providing the conversion service to people in the countryside, who receive payments from relatives or customers in cities, where wealth is disproportionately concentrated. That in turn brings business and prosperity into rural areas that badly need it.

  What that also does, however, is further marginalize cash. Before long, the baker where the Afghani cops buy bread, the store where the Kenyan farmer buys seed, and the pay-as-you-go medical clinic in the mountains of Mexico will all accept payment via mobile money. They will prefer it, for the same boatload of reasons about cash’s costs and risks that so infuriate Dave Birch. When that day comes, says Mas, our wallets may become as obsolete as pay phones.

  Already the race is on to imagine what that will look like, or at least to predict what country will be the first to completely quit banknotes and coins. Top seeds, perhaps not surprisingly, are Japan and South Korea, where technophiles willingly adopt the latest innovations faster than you can say “new model.”14 Government officials in the dispersed-islands nation of the Maldives are also taking a hard look at killing cash. The 2004 Indian Ocean tsunami literally washed many residents’ life savings out to sea, and Maldivian people sometimes have to take daylong trips by boat to obtain cash to buy basic provisions. Since the 2010 earthquake in Haiti, development and technology groups have been hurrying to implement mobile banking there, and Thailand’s central bank has made public proclamations in favor of cashlessness.15 Kenya has a strong head start with M-Pesa, and of course in Sweden there’s the bankers-led campaign against cash, backed by the full faith and trust of Abba.t16

  No one is predicting that India could be first. It’s too massive, too variable, and, despite ballistic economic growth, too poor. Yet if mobile money systems really are going to help curb poverty and marginalize cash the way evangelists predict, they must become as diffuse and pervasive as physical money. “The whole premise is to make it really, really big,” says Mas. Big means “widely accepted,” because new forms of money have to be if they’re truly going to challenge cash. It also means big business.

  Without operating on huge scales, there’s little incentive for banks or telecom companies to invest in these systems, because the users themselves have little money. Collecting tiny fees from 10,000 customers and ten million are markedly different business propositions. “Because it’s so massive, and the need so pronounced, India is the ultimate proof of principle for mobile money,” says Mas. If it can work there, the impact and long-term viability of this technology will be undeniable. That is where Abhishek Sinha comes in.

  “I AM THE ASSASSIN OF CASH,” Sinha tells me in his office in a quiet suburb of Delhi. He sits opposite a framed photo of his spiritual guru, a swami by the name of Niranjanananda Saraswati. The bookshelf next to me is full of back issues of Fortune and books about the ascent of Google, leadership lessons from Jack Welch, and marketing strategy.

  For a guy who not long ago had all of his credit cards rejected at a Pizza Hut—while on a date with the woman of his dreams, no less—Sinha is doing pretty well. In 2009, Bill Gates paid a visit to the offices of his startup company, Eko India Financial Services. In 2010 U.S. Treasury Secretary Timothy Geithner and New York Times columnist Thomas Friedman visited. That fall, during President Obama’s visit to India, Sinha was a guest at a reception for the president and a small group of Indian entrepreneurs.

  A mustachioed Delhi native, Sinha, thirty-four, wears glasses and a bland button-down shirt tucked into jeans. He speaks in the calm tones of an academic, and on his right wrist he wears a rosary from a famed Indian yoga school. His daily dealings relate to software, financial regulations, and antipoverty lingo; not exactly the stuff of high-stakes intrigue. Yet behind the business jargon and staid executive speak is some serious brashness.

  The first computer in Sinha’s home didn’t show up until 1998: his father’s bulky work-issue laptop. The family’s Internet connection at the time was a lumbering dial-up modem, but Sinha was instantly captivated by the Web. He opened a Yahoo mail account and was online for hours at a time, taken especially, he confesses, by the endless variety of adult content. “This is something, as you know, really sought-after by a twenty-one-year-old guy.”

  The Internet may have been stimulating, but it didn’t cross Sinha’s mind that he could have a tech career. After graduating from college, he landed a job with a reputable manufacturing firm, but he felt like taking the job was more like checking predetermined boxes than living his life. So he bailed on orientation and, in 2000, moved to the high-tech boomtown of Bangalore.

  He slept on the couch in a friend’s apartment, took recruitment tests given on the weekends by huge technology companies, and hoped to land work before regret and shame kicked in. In 2001 he was hired to work at Satyam, a top Bangalore firm. Yet it wasn’t long before he got the itch to exit. “I suppose something about the corporate world didn’t fit with my personality.”

  Around this time, Sinha was noticing that cellphones could do more than just connect voices and send quick text messages. He guessed correctly, and relatively early, that whoever found a way to make useful apps for phones was going to make a killing. “I would bounce ideas off of my friends and we would joke about developing one and then selling it,” says Sinha. Then he decided to do it, or try, even though he didn’t have anything to sell. This was Sinha’s second insight: you don’t need to have a product to be valued. You only need to create the perception of value—faith, as it were. Later, you can scramble to come up with the goods.

  Before quitting Satyam, Sinha took out a bank loan and as many credit cards as he could. Together with his younger brother, he began scheduling meetings with tech-sector executives, pitching nonexistent products. One firm eventually said yes. Suddenly Sinha was the co-founder and CEO of a company that now had to design and deliver software.

  What kind of product, exactly? “One was a solution for pumping out huge numbers of SMS messages.” SMS, short for Short Message Service, is what most people use when they text one another. An estimated 75 percent of all people who subscribe to a mobile voice service also use the phone to punch out short messages, usually with this technology. Behind these simple c
ommuniqués lie the minutiae of networks and programming, geeky details like digital cellular standards and SS7 protocol.

  It took little time for the Sinha brothers and their freelance hires to burn through the bank loan and max out their credit cards. The humiliation at Pizza Hut was a low point. Worse were the groveling letters he wrote to loan officers and only being able to afford a one-day visit to an amusement park for his honeymoon. Then he had to ask his father-in-law for help to cover the rent. In India, says Sinha, people do not ask their in-laws for money. Full stop. “But I had no choice. That experience really gave me a purer understanding of the ego,” he says, which I’m pretty sure means, I felt like a complete failure. Still, Sinha thinks anyone would have done the same. “If you were in a corner, wouldn’t you go to any extent?” he asks. I tell him I don’t know. I’ve never tried to sell nonexistent software while dodging a swarm of creditors.

  Finally, in 2005, their company, 6D Technologies, was delivering a real product to a few customers. They turned a profit, and Sinha settled up with lenders and paid employees who had gone months without a paycheck. But soon, in that insane yet admirable way entrepreneurs do, he again got the urge to abandon comfort for the frontier. First, though, he needed a fresh idea.

  The seed was planted by a customer in Oman who asked if Sinha could come up with a program for topping up cellphone minutes at places like ATMs or supermarket checkout counters. It was a logical proposition: if you need to buy airtime minutes, why should you have to convert electronic money into cash via a bank withdrawal, only to hand it to someone who turns it right back into a different kind of electronic value, in this case airtime minutes?