The hidden cost of crime: Tanzanians pay as much as 7 percent to protect money from theft

November 13, 2017

Key Takeaways: CATONSVILLE, MD, November 13, 2017 - "Mobile money," a checking account attached to a mobile phone number, has revolutionized the financial lives of millions of people in many developing countries without access to a banking infrastructure. Using text messages or apps on consumer phones and in partnership with mom-and-pop retailers, who serve as cash-in and cash-out points, telecom companies have created an accessbile and cost-effective virtual banking infrastructure in many developing countries.

While sending money to others is often seen as the primary value arising from mobile money, a forthcoming study in the INFORMS journal Marketing Science, a leading scholarly marketing publication, shows that in developing countries, mobile money provides another important source of value - a form of theft insurance by protecting cash from street robberies and stealing by relatives or burglars at home.

The study "Mobile Money in Tanzania" is co-authored by Nicholas Economides of the Stern School of Business at New York University and Przemyslaw Jeziorski of the Haas School of Business at University of California, Berkeley. The authors study the transaction behavior of over 1.4 million customers of Tigo, the second largest Tanzanian mobile service provider and their change in transaction behavior due to a price change.

The authors find that more than 35 percent of funds entering the network did not involve transfers or exchanges across people. These transactions fell into two types. The first type was short-duration transactions that are cashed in and out within a couple of hours, and the distance between cashing in and out is between 5 and 6 km. Here, mobile money was simply being used to transport money for short distances. The second type of transaction had cash stay longer within the network - usually a few days - but it was cashed out pretty close to where it was originally deposited. This suggests that people were using it merely for storing cash for a few days.

"If these were costless, such transactions may be easy to understand. But what surprised us was that cash-out costs are about 7 percent. This means that that the poor people of Tanzania are willing to pay Tigo as much as 7 percent to avoid being robbed when transporting money or just to store cash at home safe from relatives or burglars. Surprisingly, mobile money is seen as theft insurance by folks," Jeziorski noted.

The authors estimated how much consumers are willing to pay for a kilometer of money transportation or for a day of storage based on the response to a price change. In urban Tanzania, they found that consumers were willing to spend an average of 1.52 percent of value per kilometer of transport and about 0.8 percent per day for storage.

The authors draw implications for how the mobile money provider should price the service given these insights. But the bigger wakeup call may be for the government and policy makers in developing countries. Economides notes, "Our discovery that people in Tanzania pay about 7 percent to transport money for a few kilometers or even simply store money for a few days shows the hidden costs of crime on an economy. Clearly, mobile money has offered these consumers a new way to protect money, but our surprisingly high estimate tells us how important it is that governments focus on reducing crime to help expand the economy."
The complete paper is available at

About INFORMS and Marketing Science

Marketing Science is a premier peer-reviewed scholarly marketing journal focused on research using quantitative approaches to study all aspects of the interface between consumers and firms. It is published by INFORMS, the leading international association for operations research and analytics professionals. More information is available at or @informs.

Institute for Operations Research and the Management Sciences

Related Consumers Articles from Brightsurf:

When consumers trust AI recommendations--or resist them
The key factor in deciding how to incorporate AI recommenders is whether consumers are focused on the functional and practical aspects of a product (its utilitarian value) or on the experiential and sensory aspects of a product (its hedonic value).

Do consumers enjoy events more when commenting on them?
Generating content increases people's enjoyment of positive experiences.

Why consumers think pretty food is healthier
People tend to think that pretty-looking food is healthier (e.g., more nutrients, less fat) and more natural (e.g., purer, less processed) than ugly-looking versions of the same food.

How consumers responded to COVID-19
The coronavirus pandemic has been a catalyst for laying out the different threats that consumers face, and that consumers must prepare themselves for a constantly shifting landscape moving forward.

Is less more? How consumers view sustainability claims
Communicating a product's reduced negative attribute might have unintended consequences if consumers approach it with the wrong mindset.

In the sharing economy, consumers see themselves as helpers
Whether you use a taxi or a rideshare app like Uber, you're still going to get a driver who will take you to your destination.

Helping consumers in a crisis
A new study shows that the central bank tool known as quantitative easing helped consumers substantially during the last big economic downturn -- a finding with clear relevance for today's pandemic-hit economy.

'Locally grown' broccoli looks, tastes better to consumers
In tests, consumers in upstate New York were willing to pay more for broccoli grown in New York when they knew where it came from, Cornell University researchers found.

Should patients be considered consumers?
No, and doing so can undermine efforts to promote patient-centered health care, write three Hastings Center scholars in the March issue of Health Affairs.

Consumers choose smartphones mostly because of their appearance
The more attractive the image and design of the telephone, the stronger the emotional relationship that consumers are going to have with the product, which is a clear influence on their purchasing decision.

Read More: Consumers News and Consumers Current Events is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to