Researcher studies mobile money system to help developing world’s entrepreneurs

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UNIVERSITY PARK, Pa. — As the son of a professor, Chris Parker had been fascinated by the academic life since he was a child. Yet it was an interest in technology, and how it can be used to improve our decision making, that ultimately brought him down a path of research and education.

Now a Penn State assistant professor of supply chain management and Institute for CyberScience associate, Parker has used those interests to study how technology can impact markets and operations management. His recent work, based on the study of mobile money operators in Tanzania, focuses on the effect recommendations and training have on outcomes in business, based off research.

But a previous study from Parker’s doctoral dissertation, which looked at the use of mobile phones to make agricultural markets in India more efficient, helped influence his idea for the study in Tanzania.

“I saw the benefit a service like that could have on people who operate at the bottom of the pyramid. They’re operating a farm that’s two acres in size; giving them an extra dollar or two could make a big difference,” Parker said. “I just want to figure out other opportunities for that and help make those services even better.”

Parker and his co-authors — fellow Smeal College of Business faculty member Jason Acimovic, as well as the Harvard Business School’s David Drake and Karthik Balasubramanian — identified the mobile money system in developing African countries as a possible lead for their study.

The system provides access to the financial system in areas where banks are scarce and physically transferring money is both costly and risky. However, cell phones are common and have turned into a valuable resource for this type of banking. In Kenya, for example, access to mobile money has lifted 194,000 households out of poverty.

One current issue with mobile money is that the agents, who work as bankers in the system and give their clients the ability to deposit and withdraw money from their phones, regularly run out of currency. Researchers can use transaction data to estimate how often agents run out of electronic currency during a business day.

Parker analyzed about a year’s worth of data starting in January 2016. In that time, he traveled three times and spent six weeks in Tanzania, making that original contact, along with trips to nail down the experiment and eventually launch it in August. The study was supported by grants from the Smeal College of Business, the Bill & Melinda Gates Foundation, and Harvard Business School.

The researchers’ observation of the mobile money agents lasted about eight weeks after that August launch. The main purpose of the study is to see how these agents perform on two metrics: whether they run out of electronic currency and how often they take an active step to trade electronic currency with physical cash to ensure they have both on hand.

The study attempts two interventions to improve those metrics: whether agents were given daily recommendations on how much money to stock or simply an indication of expected demand that day and whether or not they were trained on the idea behind the recommendations. Parker found that those who were given an explicit recommendation on the amount to stock and were also trained in-person were less likely to run out of currency on average.

In the midst of performing this experiment, Parker had to plan around his work as a professor within Smeal. A white board in his office with two sets of duties — simply labeled “teaching” and “research” — spells out his to-do list for both his projects and his work with students.

It involves a switch in mentality back and forth from research mode to teaching mode, said Parker, but it gives him a chance to better understand what preparation students need for their futures.

“It’s difficult, but it’s good,” he said. “I like teaching because I hear from people who thought the class was tough, but end up getting an email from them a year later saying ‘I get what you were trying to do.’ People a little bit down the line come back and say ‘I realize you were pushing me because you knew I could do it.’”

Parker will be presenting about his research at a CyberScience Seminar on Jan. 22. Visit the event page for more information.