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How can payment systems be made more accessible to the underbanked?

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Payment systems are the backbone of modern economies, enabling people to exchange goods and services, save, invest, and access credit. However, not everyone has access to formal financial institutions, such as banks, credit unions, or mobile money providers. These people are often referred to as the underbanked, and they face many challenges and risks in managing their money. How can payment systems be made more accessible to the underbanked, and what benefits would this bring to them and society?

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Jean Jacques Kajuga

COO| Digital Transformation| Payment Service Operator| Financial Services| Instant Payment| Banking| Fintech | Digital…
Edgar Horacio Esquivel Martínez

PhD | Director de la red de sucursales en Telecomm México
Manish Jeloka

Co-Promoter & CEO. Helping You To Make Smart Financial Decisions By Simplifying The Complex World Of Finance, Insurance…

1 The barriers to financial inclusion

The underbanked are typically low-income, rural, or marginalized groups, who lack the identification, documentation, or trust required to open and use formal financial accounts. They may also face high fees, long distances, or limited options to access payment services. As a result, they rely on cash, informal lenders, or unregulated intermediaries, which expose them to theft, fraud, loss, or exploitation. Moreover, they miss out on the opportunities and security that formal payment systems can offer, such as digital records, lower costs, faster transactions, and access to other financial products.

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Jean Jacques Kajuga

COO| Digital Transformation| Payment Service Operator| Financial Services| Instant Payment| Banking| Fintech | Digital Payments| Switch | Remittance| Cross border| Interoperability| DFS| Financial Inclusion
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The key to including underbanked individuals in financial services is to make these services accessible, affordable, and easy to understand. Providing financial and product literacy also plays a crucial role, ensuring everyone can make informed decisions about their finances. Another effective approach is to create multiple touchpoints, such as agency banking and mobile services, making it convenient for underbanked individuals to access financial services. Additionally, making financial institutions interoperable meaning they can work together seamlessly and ensures a broader and more integrated financial network, further enhancing accessibility for everyone.

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Edgar Horacio Esquivel Martínez

PhD | Director de la red de sucursales en Telecomm México
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In my case, what we have implemented is the oferr of Financial services such as remitances, saving products, loans and payment of services through an App. This is way to reduce the cost of services for low income people. As an example, the traditional way to send money from US to Mexico costs 14 USD. Using our App only costs 3.99 USD. Another example is CETES DIRECTO, a saving gouvernamental product. It pays the highest rate, around 12%, compare to a rate of 4% which is a common rate in the financial market. The purpose is to offer better products for low income people and get them unto the financial market.

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Leilani Doyle

SVP | Trusted Advisor & Payments Solution Expert
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Banks need depository products for consumers with less than stellar credit rating. These need to be priced fairly and depository risk managed without limiting access to funds. With today’s real time solutions there are fewer barriers to achieving this vision.

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2 The potential of digital payment systems

Digital payment systems are payment services that use electronic devices, such as mobile phones, cards, or computers, to store, transfer, or receive money. They have the potential to overcome some of the barriers that the underbanked face, by reducing the need for physical infrastructure, lowering the operational costs, and increasing the convenience and reach of payment services. For example, mobile money platforms, such as M-Pesa in Kenya, allow users to send and receive money using their phones, without having to visit a bank branch or agent. Digital payment systems can also enable the underbanked to access other financial services, such as savings, insurance, or credit, through their digital wallets or accounts.

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Manish Jeloka

Co-Promoter & CEO. Helping You To Make Smart Financial Decisions By Simplifying The Complex World Of Finance, Insurance & Loans.
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India's UPI (Unified Payments Interface) system has been making massive strides in achieving financial inclusion. Here are some of the contributing factors that enhanced accessibility: 1. Vernacular language support and voice support 2. Lite apps accessible on various devices 3. Multiple banking partnerships 4. Actively spreading awareness in tier-2 and tier-3 cities 5. Ease of use with voice-enabled features, free QR code display stands, and more. The rapid growth of the digital payments system in India serves as a great case study for making the digital landscape more accessible to the underbanked.

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3 The challenges of digital payment systems

Digital payment systems are not a one-size-fits-all solution for financial inclusion. They come with a range of challenges and risks that must be addressed, such as regulatory and legal frameworks that need to be balanced to promote innovation, inclusion, consumer protection, and financial stability. Interoperability and integration between digital payment systems and other financial systems are essential to enhance convenience and choice for the underbanked, but require technical standards, business agreements, and governance mechanisms that can be difficult to establish. Additionally, digital literacy and trust are barriers for the underbanked who may have low levels of education or limited exposure to technology. Therefore, digital payment systems need to provide adequate information, education, and support to ensure security, reliability, and transparency.

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4 The role of design and architecture

Design and architecture are the processes and principles that shape how digital payment systems are built and delivered. They can play a key role in making payment systems more accessible to the underbanked by considering their needs, preferences, and constraints, and designing solutions that are user-friendly, inclusive, and sustainable. Aspects such as user interface and experience, business model and value proposition, and ecosystem and network can all be addressed. For example, design and architecture can improve the user interface by making it simple, intuitive, and consistent, with familiar symbols, languages, and formats. They can also optimize the business model and value proposition by understanding the pain points of the underbanked and creating solutions that address their problems. Additionally, they can foster collaboration among stakeholders to enhance the ecosystem and network, as well as leverage network effects to increase adoption. Ultimately, these processes can help make digital payment systems more accessible to those who need them most.

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5 The future of payment systems

Payment systems are constantly evolving and innovating, driven by advances in technology, changes in customer behavior, and opportunities in the market. Cryptocurrencies and blockchain, artificial intelligence and machine learning, and internet of things and smart devices are some of the trends and developments that are shaping the future of payment systems. Cryptocurrencies offer some advantages for the underbanked, such as lower fees, faster transactions, and greater control over their money. AI can enhance the efficiency, personalization, and innovation of payment systems. IoT and smart devices can expand the functionality and accessibility of payment systems. Payment systems are essential for the economic and social well-being of the underbanked. To make payment systems more accessible to the underbanked, a holistic approach is needed that addresses barriers, potential, challenges, and opportunities. This approach should leverage the role of design and architecture to create user-centric, inclusive, and sustainable solutions. What best practices or examples of payment systems that are accessible to the underbanked exist? How can we learn from them to apply to our own contexts?

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6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

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Skander L.

Linkedin Top voice | Core Banking Expert | Cloud & AI Enthusiast
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The key to making payment systems more accessible to the underbanked is a blend of technological innovation, regulatory flexibility, financial education, and community-focused solutions. By understanding the unique challenges and needs of the underbanked, financial institutions and fintech companies can develop inclusive payment systems that extend financial services to underserved populations.

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How can payment systems be made more accessible to the underbanked?

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6

1 The barriers to financial inclusion

2 The potential of digital payment systems

3 The challenges of digital payment systems

4 The role of design and architecture

5 The future of payment systems

6 Here’s what else to consider

Financial Technology

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How can payment systems be made more accessible to the underbanked?

1

2

3

4

5

6

1 The barriers to financial inclusion

2 The potential of digital payment systems

3 The challenges of digital payment systems

4 The role of design and architecture

5 The future of payment systems

6 Here’s what else to consider

Financial Technology

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