Fighting Poverty Profitably Full Report

II. Accounts: Establishing secure
and affordable payments
Chapter summary
Accounts are the first element in the four-part ACTA framework of payment system economics
1 . This element – allowing users to create accounts that they control and that can
hold money – is foundational for payment system activities. Account activities include
opening new accounts and maintaining existing ones. Common examples of accounts
include current accounts with banks 2 and mobile money accounts.
A successful payment system that fosters financial inclusion requires access,
trust, and sufficiently low price. A user needs to be able to access his account easily, trust
its security enough that he is willing to hold money there, and know how to use it. In
order for prices to be low enough for low-income users, providers must push their costs
down to a minimum.
Our economic analysis of accounts across a broad set of markets yields several
major insights:
• Account providers generally charge users less than the costs of creating
and maintaining accounts. Therefore, nearly without exception, accounts themselves
lose money. Annual costs range from about $50 to $150, and annual account
fees paid by users range from zero to about $80.
• In most developing countries, mobile money providers can provide accounts
at roughly 60% lower costs than banks. Average annual costs for
current accounts in developing countries range from $20-to-$30, while mobile money
accounts (not available in most developed countries) can cost as little as $6-to-$15.
The bulk of the costs are driven by manual processes, user-driven support, account
security measures and IT system maintenance.
• Improvements to system design and operations together can help lower
costs by as much as 70%. Eliminating paper for statements and in the back office
may reduce current account costs by as much as 30% -to-40%. Shifting to lower-cost
channels, increasing process automation and improving process efficiency will be the
highest-impact methods for lowering current account costs by an additional 30% or
more. Moreover, process automation and efficiency can both contribute to lowering
costs for mobile money accounts.
• Costs for both current accounts, held by banks, and mobile money accounts
could be cut to as low as $5 per year. Banks have potential to lower
their account costs to $5-to-$10 per year. Providers of mobile money (often
telcos) could cut their annual account costs to slightly below $5, but this reduction
potential will be limited by requirements for fraud and system reliability.
1 ACTA stands for: Accounts, Cash-in-cash-out, Transactions, and Adjacent opportunities for profit
2 Known as chequing or cheque accounts in some countries
FIGHTING POVERTY THROUGH PAYMENTS I SEPTEMBER 2013 www.gatesfoundation.org 23