The Value of Connected Savings


This page in:

The business case for low-balance savings is tough, as the margin on float may not amount to much. In much of South Asia, the economics of savings for the poor has been buttressed by microcredit – the notion that the account anchors the customer relationship and the loan gives it profitability. But financial inclusion premised on credit is always going to leave some people behind: those who do not feel like credit is the right financial tool for them or who simply do not have the ability to commit to future payment streams.

A new vision is emerging around integrating the savings proposition into a broader payments network. Offering “connected savings” accounts rather than stand-alone accounts helps the economics of low-balance savings in three ways:

First, it adds value to the account beyond the mere store of value, hence increasing customer use and willingness to pay. If I can use my savings to instantaneously send money home, pay school fees or buy goods at the store, I am more likely to shift my savings into that electronic format. And if my payments and wages are deposited electronically into my account, I may be more tempted to leave the money in electronic form. But if all these payments can only be made in cash, I am more likely to remain in the cash world.

Second, by connecting banks to retail shops, electronic payment systems allow banks to delegate “last mile” cash handling functions to retail outlets. This is the branchless banking or Business Correspondent (BC) vision, which allows basic deposits and withdrawals to occur at much lower unit cost for the bank and at much more convenient locations for customers. But stores would like to serve the cash in/cash out needs of any of their customers, not just those who are with a particular bank or mobile operator. To do this, stores must be able to make and receive inter-bank transfers (to offset the cash exchanged with customers) instantaneously at low cost. This level of convenience could unleash significant customer willingness to sign up and pay for “connected savings” accounts.

Third, the infrastructure costs of operating banking and payment platforms can be amortized over a much larger pool of transactions that go beyond savings.

These possibilities are now moving to the center of the debate in India, with the recent launch of the Interbank Mobile Payments Switch Services (IMPS) by the National Payments Corporation of India (NPCI). IMPS is a 24x7 real-time payments switch enabling low-value transactions between any two bank accounts. Customers can send and receive payments using their mobile phone. With IMPS, the 690 million mobile phones in India could be used as a payment instrument very much like a debit card. That’s a world first.

Indian banks now have the possibility of working together to offer their customers a convenient, low-cost way to send money to anyone with a mobile phone and a bank account. This should be a big hook to drive take-up and usage of accounts. To make this possible, banks will need to agree to very low interchange fees on IMPS transactions and provide a simple and secure mobile interface to their customers.

Will banks seize this opportunity, or will they give the game to the mobile operators who, sooner or later, will find a way to assemble these payment networks among their own customer bases?


Ignacio Mas

Consultant on Mobile Money

Srinivas Bhoosarapu
February 11, 2011

IMPS will be the role model for the World of payment system as it's emerging and reaching the people's payments.

February 11, 2011

IMPS is not Interbank Mobile Payments Switch . It is Interbank Mobile Payments Service

February 11, 2011

Good Thought

February 11, 2011


Dilip Bilurkar
February 11, 2011

IMPS - has a great potential in reaching the un-banked and underbanked population in India the another tool which may prove to be equally transformative is UID based financial transactions.

To ensure faster adaptability of these really fascinating tools, there has to be an all-round product awareness and training efforts and commitment from top managements of all Banks, FIs, MFIs and as also BCs. The employees, of these organizations must be provided awanreness training not only on the usage of these tools but also training them how to train the ultimate beneficiaries/users.

These tools and made as simple as possible and efforts are on to make these tools simpler so that it does not affect customer adaption rates.

Wish NPCI all the best and we are sure this organization will take all stakeholders into confidence and work shouulder to shoulder to assist the Banks to spread awareness and well usage and influence faster adoption rates.

Dilip Bilurkar

Daniel Radcliffe
February 11, 2011

Thanks for the correction. IMPS is indeed Interbank Mobile Payment Service. Apologies for the mistake!

M Balakrishnan
February 21, 2011

Essentiallty, IMPS has many aspects that would make it successful.. Some of them are:

- Interbank and Intra Bank funds transfer instantly - 24*7
- It rides on the existing infrastructure of ATM switching - Very easy for banks to adopt
and implement quickly
- Completely inter operable service - It does not matter what kind of handsets
customers have, what communication service provider they choose, which mobile
solution providers the banks choose, what ATM switching solution the respective banks
have, what kind of core banking applications banks have - the transactions will flow and
and get completed.. I believe this is the beauty of this product/service
- This product/Service is co created by the bankers for themselves and their customers
and therefore, takes care of many aspects of bankers and cutomer's requirements.
- The next generation customers in India - predominantly youth and mobile savvy - will
demand this service from banks.
- This is a bank lead model of mobile payment and therefore, has trust of people of India.
- A micro payment mechanism for small value payments - thus ability to move some of
the cash transactions to electronic transactions

Needless to say, a lot would also depend on the banks in promoting this product. I guess since a substantial percentage of the mobile subscriber base in India have low end mobile phones, SMS based transfer capability would be key to the success of this program if it has to reach rural hinterlands.

Kiran Kumar A
June 01, 2011

I am very happy to know..
Definitely IMPS will make the miracles in the mode of Payment Systems,But NPCI/Banks have to educate about this service in a big manner,