Interesting Investments: Cell Phone Airtime

Avery-Taylor Phillips  |

We’ve covered the bizarre worlds of real estate, in-game items, and in-game currency of video games, so let’s keep going in the technology sphere. Let’s dive into the world of cell phone airtime as currency, and how it was used to launder money.

First, some history. Most of this story takes place in Africa. In place such as the Ivory Coast, Egypt, Ghana, and Uganda, cell phone minutes — airtime — is exchanged as a currency as a way to combat hyperinflation.

Take, for example, Zimbabwe. In 2014, the Zimbabwean government decided to drop their official currency, the Zimbabwean dollar. The reason was simple: Much like what Venezuela is facing now, their dollar slipped compared to the US dollar. It slipped into a freefall and never recovered, at an exchange rate of a whopping 250 trillion to $1 USD.

But why airtime? It was far more stabile. Airtime doesn’t rely on the government’s currency. It’s technically a usable good instead of a currency, yet still acts as a pseudo currency. Unlike a bank account, an ID was not required to purchase a phone and minutes, and was instant instead of taking a few days. It could be done totally anonymously —something we’ll revisit later.

A phone could be loaded up on with minutes, and used to pay for goods, or traded to another mobile user. As it was, with coins being essentially worthless, shops would pay in chocolates or condoms to make up the difference in payment.

Instead, shops started handing out airtime, adding minutes to pay-as-you-go plans. Thus a system of bartering minutes started.

In Kenya, Safaricom offers the M-Pesa program. When it started in 2007, it was an instant hit.

“In Kenya, there are more than 100,000 small retailers involved in the selling of mobile-phone airtime, generally in the form of scratch cards,” wrote former US Treasury agent John A. Cassara for SAS. “The small retailers can also register to be mobile-money agents, taking in and paying out cash. Tens of thousands of them have already signed up as M-Pesa agents – far outnumbering Kenya’s approximately 1,000 bank branches.”

While M-Pesa isn’t minutes, it’s essentially the same use: a virtual wallet. Unlike minutes, however, there’s a 3 to 5 percent fee on converting hard cash to virtual currency.

While minutes and virtual currency are certainly an interesting investment, much like cryptocurrency, there is an underlying dark side. In this case, it’s money laundering, transferring minutes from a phone in one country to another. As previously noted, it’s easily possible to buy a prepaid phone anonymously, without any need for an ID.

If bought with dirty money, a prepaid phone card or minutes can be transferred, laundered across borders, making the dirty money hard to trace and easy to use.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not necessarily represent the views of Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to:

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