The Committee on Payments and Market Infrastructures (CPMI) and the World Bank Group today issued a consultative report on Payment aspects of financial inclusion. The report examines demand and supply-side factors affecting financial inclusion in the context of payment systems and services, and suggests measures to address these issues.
Financial inclusion efforts – from a payment perspective – should aim at achieving a number of objectives. Ideally, all individuals and businesses should have access to and be able to use at least one transaction account operated by a regulated payment service provider, to: (i) perform most, if not all, of their payment needs; (ii) safely store some value; and (iii) serve as a gateway to other financial services.
Benoît Cœuré, member of the Executive Board of the European Central Bank (ECB) and CPMI Chairman, says that, “With this report, the Committee on Payments and Market Infrastructures and the World Bank Group make an important contribution to improving financial inclusion. Financial inclusion efforts are beneficial not only for those that have no access to financial services, but also for the national payments infrastructure and, ultimately, the economy.”
Gloria M. Grandolini, Senior Director, Finance and Markets Global Practice of the World Bank Group, comments that, “This report will help us better understand how payment systems and services promote access to and effective usage of financial services. It provides an essential tool to meeting our ambitious goal of universal financial access for working-age adults by 2020.”
The report outlines seven guiding principles designed to assist countries that want to advance financial inclusion in their markets through payments: (i) commitment from public and private sector organisations; (ii) a robust legal and regulatory framework underpinning financial inclusion; (iii) safe, efficient and widely reachable financial and ICT infrastructures; (iv) transaction accounts and payment product offerings that effectively meet a broad range of transaction needs; (v) availability of a broad network of access points and interoperable access channels; (vi) effective financial literacy efforts; and (vii) the leveraging of large-volume and recurrent payment streams, including remittances, to advance financial inclusion objectives.
In summary, The CPMI-World Bank Group Task Force on the Payment Aspects of Financial Inclusion (PAFI) started its work in April 2014. The task force was mandated to examine demand and supply side factors affecting financial inclusion in the context of payment systems and services, and to suggest measures that could be taken to address these issues. This report is premised on two key points: (i) efficient, accessible, and safe retail payment systems and services are critical for greater financial inclusion; and (ii) a transaction account is an essential financial service in its own right and can also serve as a gateway to other financial services. For the purposes of this report, transaction accounts are defined as accounts (including e-money accounts) held with banks or other authorised and/or regulated payment service providers (PSPs), which can be used to make and receive payments and to store value.
The report is structured into five chapters. The first chapter provides an introduction and general overview, including a description of the PAFI Task Force and its mandate, a brief discussion of transaction accounts, and the barriers to the access and usage of such accounts. The second chapter gives an overview of the retail payments landscape from a financial inclusion perspective. The third chapter forms the core analytical portion of the report and outlines a framework for enabling access and usage of payment services by the financially excluded. Each component of this framework is discussed in detail in the report.
The fourth chapter of the report describes the key policy objectives when looking at financial inclusion from a payments perspective, and formulates a number of suggestions in the form of guiding principles and key actions for consideration. In this context, financial inclusion efforts undertaken from a payments angle should be aimed at achieving a number of objectives. Ideally, all individuals and micro- and some small-sized businesses – which are more likely to lack some of the basic financial services or be financially excluded than larger businesses – should be able to have access to and use at least one transaction account operated by a regulated payment service provider:
(i) to perform most, if not all, of their payment needs;
(ii) to safely store some value; and
(iii) to serve as a gateway to other financial services.
The guiding principles for achieving these objectives of improved access to and usage of transaction accounts are the following:
• Commitment from public and private sector organisations to broaden financial inclusion is explicit, strong and sustained over time.
• The legal and regulatory framework underpins financial inclusion by effectively addressing all relevant risks and by protecting consumers, while at the same time fostering innovation and competition.
• Robust, safe, efficient and widely reachable financial and ICT infrastructures are effective for the provision of transaction accounts services, and also support the provision of broader financial services.
• The transaction account and payment product offerings effectively meet a broad range of the target population’s transaction needs, at little or no cost.
• The usefulness of transaction accounts is augmented by a broad network of access points that also achieves wide geographical coverage, and by offering a variety of interoperable access channels.
• Individuals gain knowledge, through financial literacy efforts, of the benefits of adopting transaction accounts, how to use those accounts effectively for payment and store-of-value purposes, and how to access other financial services.
• Large-volume and recurrent payment streams, including remittances, are leveraged to advance financial inclusion objectives, namely by increasing the number of transaction accounts and stimulating the frequent usage of these accounts.
Finally, the fifth chapter of the report addresses a number of issues in connection with measuring the effectiveness of financial inclusion efforts in the context of payments and payment services, with a particular emphasis on transaction account adoption and usage.
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