Mobile Money in Tanzania

Nicholas Economides and Przemyslaw Jeziorski ()
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Przemyslaw Jeziorski: Haas School of Business, University of California, Berkeley, Berkeley, California 94720

Marketing Science, 2017, vol. 36, issue 6, 815-837

Abstract: In developing countries, mobile telecom networks have emerged as major providers of financial services, bypassing the sparse retail networks of traditional banks. We analyze a large individual-level data set of mobile money transactions in Tanzania to provide evidence of the impact of mobile money on alleviating financial exclusion in developing countries. We identify three types of transactions: (i) money transfers to others, (ii) short-distance money self-transportation, and (iii) money storage for short to medium periods of time. We utilize a natural experiment of an unanticipated increase in transaction fees to identify the demand for these transactions. Using the demand estimates, we find that the willingness to pay to avoid walking with cash an extra kilometer (short-distance self-transportation) and to avoid storing money at home (money storage) for an extra day are 1.25% and 0.8% of an average transaction, respectively, which demonstrates that mobile money ameliorates significant amounts of crime-related risk. We explore the implications of these estimates for pricing and demonstrate the profitability of incentive-compatible price discrimination based on type of service, consumer location, and distance between transaction origin and destination. We show that differential pricing based on the features of a transaction delivers a Pareto improvement.

Keywords: mobile money network; financial exclusion; transaction costs; Tanzania; banking; social network; price discrimination; location-based price discrimination; crime (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (22)

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https://doi.org/10.1287/mksc.2017.1027 (application/pdf)

Related works:
Working Paper: Mobile Money in Tanzania (2015)
Working Paper: Mobile Money in Tanzania (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormksc:v:36:y:2017:i:6:p:815-837

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