Cash is an expensive financial instrument. Because it is physical, it must physically change hands, be aggregated, moved over space, and protected from theft both in small and large values. All of this – transportation, processing time, security, and the need for physical storage – entails costs. Electronic payment systems represent what could be a dramatic upgrading of the basic infrastructure of commerce. Such systems could slash transaction costs on many different layers of economic activity, potentially yielding major gains for consumers, business owners, and the macro economy at large.
With cutting edge services, like M-PESA and agent banking, Kenya could be poised to make the transition to a “cash-lite” society. But to lay out a roadmap for that transition, we need to understand current payments patterns and how cash actually circulates geographically to identify opportunities to eliminate costs associated with heavier cash usage – notably its collection and movement in bulk, across large geographical distances.