Fighting Poverty Profitably Full Report

I. Payment systems: An overview
To focus us on ways to enable dialogue and drive impact in creating payment systems that
will serve the poor, we need a simple but holistic approach to analyzing payment system
economics. Here we introduce such an approach – the ACTA framework. This framework
breaks the payment system into four core elements – (A)ccounts, (C)ash-in-cash-out,
(T)ransactions, and (A)djacent opportunities for profit. We focus on the portion of the
system involving individual consumers – consumer accounts, consumer cash-in-cash-out,
transactions for which a consumer either pays (e.g., a purchase at a store), is paid (e.g.,
salary payment) or both, and adjacent opportunities for profit involving consumers. This
breakdown enables us to analyze potentially profitable models for overall payment system
economics, revealing several key findings. The framework also has natural extensions for
analyzing the economics of the full payment system (including all business-to-business
transactions), the economics of individual payment instruments or players in the value
chain, as well as the economics of serving different customer segments. These extensions
indicate avenues for further work.
To define payment systems and isolate their core elements, it is important to understand
both what payment systems look like from a user’s perspective as well as to understand a
full system view.
From the perspective of a user, a payment system provides ways to hold money in an
account and then transfer it, to withdraw or deposit cash, and to receive funds from other
accounts. Both a current account at a bank and mobile phone-based mobile money are
examples of such accounts. Users with a current account, for example, can withdraw and
deposit cash at bank branches or at ATMs and they can make or receive payments either
with a cheque, a debit card or via an account-to-account transfer. Mobile phone-based
mobile money – M-PESA in Kenya is a well-known an example – has similarities, particularly
from a user perspective. A consumer stores mobile money credit with a mobile
money provider – often a mobile network operator. She can withdraw and deposit cash in
return for this credit with an agent or possibly at an ATM. She can also transfer money to
or from a different account using an interface on her phone.
From the full system view, a payment system is a set of instruments, banking procedures,
and, typically, interbank funds transfer systems that ensure the circulation of money. The
full payment system in a country is the collection of all ways these things can happen.
This full picture is complex, involving many players (e.g., banks, mobile-money operators,
processors), channels for accessing cash or making transactions (e.g., ATMs, point-of-sale
terminals, on-line interfaces, mobile phones) and payment instruments that can be used to
make transactions (e.g., credit transfers, debit cards, credit cards).
Financial characteristics of the payment system elements
Despite the complexity, all payment system activities fall under the four core elements:
accounts, cash-in-cash-out, transactions, and adjacencies. Providers make money by
1 Some costs will be caused by regulatory or other requirements not directly associated with revenue generating activities
(e.g., banks have processes to detect money laundering)
FIGHTING POVERTY THROUGH PAYMENTS I SEPTEMBER 2013 www.gatesfoundation.org 15