Bill Payment: A Demand-Based Approach to Financial Inclusion

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Photo credit: Earl-What I saw 2.0, Flickr Creative CommonsWith over 50% of world’s population lacking proper access to payments and financial services, closing the global gap in the access and the use of payment services remains a challenge. Underdeveloped or missing payment services infrastructure has often resulted in high transaction costs and low penetration of payment services for lower income populations, mainly due to a large number of low value of payment transactions conducted by the underserved segments. This in turn has resulted in the lack of investments in appropriate payments infrastructure to satisfy the payment needs of people at the base of the pyramid. 

The underserved segments have payment needs that are similar to other consumers. Evidence has shown that even very poor people save small amounts, send and receive money from relatives, pay bills and school fees, and borrow from suppliers and others to meet obligations or take advantage of financial opportunities even in the absence of bank access. To satisfy their payment needs, most low income people end up using informal mechanisms that may be convenient but are not safe or efficient. Those who do have marginal access to payment services, usually endure high transaction costs and poor service.

In my previous blog – Promoting Financial Inclusion: Is Mobile Money the Magic Bullet?-I discussed the importance of developing a needs based approach to develop solutions and services for the underserved. In this blog, I bring attention to a recently published paper that elaborates the idea further: How a demand side view of financial inclusion that starts with consumers' most basic and foundational needs of bill payment when joined with a product/supply-side view of new emerging payments solutions like mobile payments and prepaid could be a really powerful combination to accelerate financial inclusion.

The paper in reference is A New Perspective on Bill Payment – A Demand Based Path to Financial Inclusion. The main emphasis of the paper is :“Why bill payment is well positioned to initiate financial inclusion and drive it forward”. Four key points discussed here are: the large need for bill payment regardless of a person’s socioeconomic status; the potential for electronic bill payment to create value for all stakeholders; the ability to have positive externalities for other payment categories; and the potential to achieve greater financial inclusion by accelerating lending.


Hemant Baijal

Senior Payment Systems Specialist

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