Financial Cryptography

I'm a little confused about both the source article and this post. Are we arguing that cashless payments can't work because they don't support corruption? Why don't the policemen accept Beba? Who is "deliberately and systematically sabotaging" anything anywhere? I see a new payment system that's not universally accepted. Surely you've tried to use a credit card to make a small payment in a continental European country. Does the fact that store owners will refuse your Visa and insist on cash mean that credit cards are doomed and useless?

This is a rough approximation of how it works: in Kenya there is no transport operated by government, it's all private enterprise. And, there are a lot of very low income people who need to get around; call these our Clients. Then there are the Drivers*, they rent a matatu from our Leasers, the owners of the matatu.

The Client tries to get places as quickly as possible, for as little money as possible (she cares about the money).

The Drivers try to transport as many Clients as quickly as possible and for as much money as possible. And pay as little 'rent' for the matatu as possible.

The Leaser buys the matatu and wants to get as much 'rent' for it as possible.

Drivers have some negotiated, but fundamentally fixed cost for renting the matatu, and there is some approximate market price for a fare from place X to Y. The fare is negotiated though. But this is pretty standard for Kenya, everything is negotiated.

So, what does BebaPay do? It relies on some hardware to collect the fare, which is now fixed, and then that money is given to the Leasers directly. It cuts out the Drivers by removing their ability to negotiate the fare, and to collect money per passenger.

The Leasers are turned from owners of the physical matatu into owners of the transport business with absolutely no extra work on there part. The Drivers are turned from entrepreneurs into some sort of approximation of western bus drivers. The police stop receiving their ready supply of bribes as the Drivers can't pay, but the government can now tax the rides.

And then there are the Clients. Kenya has cheap, efficient public transport. Will it stay that way if you cut out the Drivers?

To take your continental store: it is as though the government issued a mandate that all the shops use a payment system that deposited the money not in the shopkeeper's account, but in the landowner's (who owned the physical shop) account. The visa machines wouldn't last very long.

*Drivers: this is a very rough approximation of what is going on. There is actually a team of three: a driver, a conductor, and a fare collector.

Let's take Google's point of view for a minute.

Google is not in the business of 'doing it right', 'justice' and 'government tax collection' - it's in the business of making itself a profit, whatever it takes.

So, why bother with Africa?

1. It's a cheap and unregulated playground for experimentations.

2. Given Google ties with the US Governement, anything working in Africa will be ready to roll in the 'civilized world' (the US and its NATO affiliates).

3. Cutting off the middlemen and creating a new market is decent business - especially if you consider the related user tracking activity (Google's core revenues).

And suddenly the details of how well the stuff has been engineered counts far less than the initiative for what it is in reality.

Hi Pete, just assuming this was your premise:

>> "why bother with Africa?"

Well, that's a slam-dunk. It's the home of mPesa, the greatest success in payments in the last decade. In Kenya, they like private sector payments, they call it financial inclusion. In contrast, in the rest of the world, the banks regulate the payment systems business with quasi-governmental power.

So if you're on the money in point 1 and google wants to run an experiment, then that's the place to do it. That's the place I'm doing it.

But the point of the post goes a bit beyond. It's more about your point 3 -- having figured out there are middlemen, you should get to know them before deciding to cut them out.

Developments in Kenya continue apace:

Public service vehicle operators who will have not complied with the cash-lite payments system by December 1st risk being prosecuted by the National Transport and Safety Authority. Speaking to stakeholders in the sector in the central rift, NTSA's chief executive officer John Muya insisted that the deadline will not be extended and that stern action will be taken against defaulters. Six money transfer service providers have already been approved to collaborate with the matatu industry in implementing the cashless payment system. The NTSA CEO says that transporters who have embraced electronic payment of fares have been realizing profits compared to the ordinary collection of transport fees

What do 4 Police Officers, a Payment Tech nerd, & Taxi driver have to do with each other? Arriving back to the paradise of my beloved Miami, after nearly a week of freeza burn NYC, during NRF, I took a taxi from the airport to my house. Everything was going great, until we arrived, and I attempt to use my credit card to pay. The drivers starts telling me, "It's broken, you need to pay me cash". I respond by saying its not broken. An argument begins. It got pretty heated, and the police had to be called. Not one, or two, or even three, but four Cops had to come to settle things. So after a half hour of back and forth with the taxi driver, me, and the four police officers, I decide to make the police an offer. I told them, here is the cash, and I'll pay no questions asked, but i want 30 seconds to try and fix this credit card reader, and if it doesn't work, I'll pay him the cash and that will be that. The police agree to my terms. So this is where it gets interesting. The cab driver made the mistake of telling a guy who knows payment tech inside and out, that a payment system was broken. Well i get into the cab, quickly repair what was purposefully tampered, and then swipe my card, in front of the officers. Guess what happened next. Yup, the payment was processed!!!!! Then I get out of the cab, walk to 6 inches from the cab drivers face and said, "you still think its broken?"
I turned to the police officers and said, bookem danno, for lying to the police, and trying to put one over on the wrong passenger. I Ieft with a huge grin, as the police circled the cab driver. I could have easily paid the $25 dollar cab ride, but the principle of it, and not accepting that someone was going to take advantage of future customers, just made me snap. Sure I could have been shot, or worse, it is florida. But then again, we payment tech nerds are a tough breed.
Thought you'd enjoy the lively tale.

by Bedah Mengo NAIROBI (Xinhua) -- "Cash payment only", reads a sticker in a matatu plying the city center-Lavington route in Nairobi, Kenya. The vehicle belonging to a popular company was among the first to implement the cashless fare payment system that the Kenya government is rooting for.

And as it left the city center to the suburb on Monday, some passengers were ready to pay their fares using payment cards. However, the conductor announced that he would not accept cashless payments.

"Please pay in cash," he said. "We have stopped using the cashless system."

When one of the passengers complained, the conductor retorted as he pointed at the sticker pasted on the wall of the minibus. "This is not my vehicle, I only follow orders."

All passengers paid their fares in cash as those who had payment cards complained of having wasted money on the gadgets. The experience in the vehicle displays the fate of the cashless fare payment in the East African nation. The system is fast-fading from the country's transport barely a month after the government made frantic efforts to entrench it. ...

This is the last time we are talking BebaPay, the guys at Google Kenya couldn't help save it as any techies so Google will on March 15th, 2015 be off the streets...