What Might the Rise of Mobile Banking in Developing Countries Mean for Payment System Design?

CFSP Launches Unique Workshop
June 13, 2011

CFSP Faculty Director Robert M. Townsend and M-PESA expert and CFSP Member Tavneet Suri organized a unique workshop at MIT in May titled “The Optimal Design of Payment Systems.” The workshop began examining the potential implications of the rise of mobile banking on monetary policy and payment systems. The workshop raised new questions and revealed many policy and practical take-aways.

“As we have seen in Kenya with (mobile banking giant) M-PESA,” noted Townsend in his opening remarks, “Cellphones have literally taken over the country and piggybacking on cellphones is a payments system. As you consider these systems, the questions that arise are not only about how they work, but also whether they could be improved. It raises issues that are common to payment systems historically in the United States, which is why we have this wonderfully diverse group here together.”

The workshop, which was the first of an ongoing series and represents one of CFSP’s three workshop efforts to advance knowledge in important sub-fields of development economics and poverty. It featured presentations by six experts, including Warren Weber of the Federal Reserve Bank of Minneapolis; Will Roberds of the Federal Reserve Bank of Atlanta; Cyril Monnet of the Federal Reserve Bank of Philadelphia; David Mills of the Federal Reserve's Division of Reserve Bank Operations and Payment Systems; Fernando Alvarez of the University of Chicago; and Tavneet Suri of MIT.

CFSP Member Tavneet Suri discusses the rise of Kenya's M-PESA.