Mobile Payments: The Secret Key to Beating Economic Inequality?

On the surface, that might sound like an idea as ludicrous as looking for unicorns in a sock drawer with a metal detector.

Smartphones solving economic inequality? That’s crazy talk. A new report from The New Republic, meanwhile, suggests that it’s more likely than many may think.

The New Republic’s idea is a fairly simple one. Essentially, it suggests that in minority-heavy communities, there is often a lack of financial services. That’s also the case in working-class areas, or rural areas. With an increasingly mobile workforce, meanwhile, it’s more possible than ever to get a job regardless of physical location.

That increased mobility has brought with it a host of new technologies, from the ability to make payments regardless of location to the ability to bank in likewise fashion. With these new technologies comes new capability to conduct business, and potentially the way to revitalize areas long thought economic ruin centers.

Senator Ted Cruz is often heard remarking on Sabina Loving, a black woman who ran an inner-city tax preparation service. New regulations on tax preparers could have cost Loving her business—along with many others in a similar position—but the U.S. District Court of Appeals offered some help by declaring the IRS rules excessive.

Still, last-minute intervention by courts can’t save everyone, and that’s why many are looking to mobile devices to give such areas a leg up.

This idea has actually seen some degree of success previously. After all, look at the African market; mobile payments are taking off like a house afire in Africa because of several key points: one, most of the population has a mobile device. Two, it’s a lot easier to set up a wireless network than a wired network over that broad a range.

Three, people want quick access to goods and services and mobile payments facilitate that. So why not bring that kind of action over here to our more economically-depressed regions and let it go, getting the same kind of success?

This is where the idea of looking for unicorns in a sock drawer with a metal detector comes in. It’s based on one simple point: are you not finding the unicorns because there are none to be found, or because you’re using the wrong tool to look? Or, perhaps, because you’re not checking all the drawers.

In a roundabout way, this analogy basically describes how multiple factors can add up to a concept’s failure, or to its ultimate success. To try and say that something that worked in Africa would work well in, say, Ferguson or Detroit is a bit of a stretch. There may not be, to use the analogy, unicorns in those sock drawers at all.

There are certainly valuable points to consider with such an approach. The New Republic points out how direct deposit of certain payments like Social Security and Electronic Benefits Transfer (EBT) can have a lot of fraud cut out of the system by connecting one user to one mobile account.

It’s also worthwhile to reduce regulation and allow more such businesses to get into the fray. Yet this may not be solving the correct problem. We’ve seen how smartphones can perk up economic development in some of the most economically depressed regions on Earth. That’s a point in its favor.

Yes, there’s a substantial problem of lack of services in some regions, but many of these regions still have access via a short trip elsewhere. When I needed my wisdom teeth removed, I had about a 45-minute drive to an appropriate oral surgeon. There just aren’t that many people in my region that need such services as to support an oral surgeon’s presence here.

This is seen across several different fields; investment planning, certain medical fields, higher education; these need to be in places of sufficient population and economic density to support them.

Will mobile payments be enough to break that chain, and allow for more access? It’s entirely possible, actually. We’ve already seen it happening in some fields, and we’ll probably see it in several more before it’s all said and done.