Tax Cash

Cash is bad in so many ways. The average consumer, suppliers and retail, manufacturers and government all, are detrimentally impacted by cash economies. Reduced tax collection, the ability to launder money, relative ease to counterfeit money, cost of printing and handling of cash, direct impact in the reduction of growth are all reasons to get rid of cash. There has been many initiatives to reduce cash in many countries with relative success.

Some years back, the Republic of Korea (South Korea), implemented a scheme where retailers would pay a reduced VAT rate for payments received electronically (compared to cash). The effect of this arrangement was that Korea is one of the countries with the most advanced electronic payment infrastructure. Cash transactions, constitute a smalerl percentage of retail payments. By making electronic transactions more attractive from a tax dispensation perspective, will change behaviour towards electronic payments, reducing cash and indirectly leading to growth.

Governments should consider schemes to make cash payments unattractive from a tax perspective. This can be done in many ways, but will indirectly eliminate the bad effects of a cash economy.

Mobile payments are poised to redefine the fibre of society

Sanlam is a major South African financial services company. Listed on the JSE, the company has interests in insurance, asset management and health and operate in many emerging markets. Sanlam was one of first investors in Fundamo and I have got to know them well. I found many parallels with the founding of Sanlam in the 1920's and the start of the mobile payment industry.

Sanlam was started as a co-operatibe insurance company, with products designed for the poor and a distribution model utilising local representatives. These representatives sold the Sanlam products in rural areas, but also provided client services and support. This created the opportunity for many people in rural areas to start businesses as representatives (agents) that contributed to the development of the region. The Sanlam products encouraged saving, with many secondary benefits and lastly, the assets raised through these long-term savings products were invested in local industry. In this way much infrastructure was built and large and famous South African companies were founded with investments collected through the premiums of relatively poor people.

I find many similarities with the current roll-outs of mobile money for the unbanked in emerging markets:

• The distribution of the product through agents in rutral areas 
• Getting subscribers to effectively save by changing their financial behaviour
• Converting cash into electronic assets that can be invested in industry.

Considering the impact that Sanlam had on the South African economy, the potential of mobile money to redefine the fibre of society seems very plausable.

Greenwich white paper highlights strategy to growth for mobile money schemes

Greenwich consulting is a boutique consulting firm with a good track record in providing advisory services to the telecommunication industry. Jean-Marie Letort and his colleagues have done many assignments, but have made a special impact in the deployment and operations of mobile money.

A recent white paper produced by the firm, highlights some of the challenges in making mobile money deployments successful and is worth a read. (See here). The report emphasise the fact that mobile money projects do not deliver on their potential.

A structured approach is described with the objective to boost take-up and usage. The white paper emphasise seven elements that should be considered and then describe a case study where the performance of a mobile money deployment was spectacularly improved in three months. The report is a must read to highlight the importance to not just think about the platform and deployment, but to focus on the operations and profitability.

Why the Indian Mobile Payment market is like a regatta

I have written about the Indian mobile payment market quite a few times. (Read here, here, here and more), but this is such an important market that it cannot be ignored. Recently, Nokia withdraw out of the market (I will write a blog on this later) and Airtel launched a service with a lot of media. Much has happened since the first RBI guidelines were published and a fresh look at the market is probably overdue.

The Indian Mobile Payment market reminds me of the start of a sailing boat race. The key is to cross the starting line just after the starting gun. Those boats that crossed the line early have to either go round, or withdraw. Boats getting up to speed before the starting gun, may have to tack sails and slow down, so not to run the risk of having to come round. There is a lot of traffic and jostling at the starting line to try and find a good position out of the starting blocks.

The question is if the starting gun has already sounded in India and if not when. What is clear though, is that many players are lining up and getting ready to join the race. Some are big and have a lot of resources... it is going to be a very competitive race.

Re-inventing the Euro with digital currency

It is an interesting exercise to consider how important the role of printed notes is in the creation of a new currency. A decade ago, it was unthinkable that a country could have a viable currency without printing a lot of bank-notes. The process of designing bank-notes, the inherent meanings in the symbols, the security considerations incorporated in the physical bank notes; all of these were important considerations in creating a new country currency.

It has been shown with the invention of schemes like DigiCash, Bitcoin and others that it is conceivable to have a currency backed by some sort of structure or organisation without having any physical representation. With advances in mobile payments and new forms of acquiring, is it possible that a country some-where may have a currency with no printed notes available? (For cash transactions, notes and coins from another country could be used as an interim arrangement at a premium - but the fundamentals of the new currency could all be managed digitally).

That is why I found a recent article (Read here), quite interesting on the possibility of some countries potentially leaving the Euro. Maybe Greece can be the first country offering a cash-less (digital-only) currency. Naw! there will be huge protests in the streets...