The Puzzle of Mobile Money Markets: An Example of Goldilocks Conditions

This paper investigates the supply-side and demand-side factors that explain the success of mobile money markets. Namely, we argue that there exists a set of Goldilocks conditions that best supports mobile money services. A population must have exposure to financial services to understand mobile money and have a high enough level of income to have a use for these services. However, the population must also not have access to highly developed banking architecture, such that their banking needs are already satisfied. By comparing El Salvador and Kenya, countries in different stages of development, we find empirical support for our hypothesis. Our evidence suggests that low income regions and households with some exposure to financial services are more likely to use mobile money than fully banked people who enjoy a higher income.