Read A New Perspective on Bill Payment- A Demand Based Path to Financial Inclusion by Amit Jain and Gidget Hall. Summarize three topics you found to be most noteworthy in this reading.

Summary

If asked to name a consumer payment category with billions of transactions globally, one that touches nearly every household and is still primarily cash-based, not many would come to mind. If then asked which of those listed could transform the financial and payments market, probably a very small number would remain on your list, and bill payment would not likely be one of them. This is not surprising. Very few people think of transformation when they think of bill payment. This study tries to change that mindset by illustrating how bill payment can be a potential path to financial inclusion, thus transforming the payments and financial industry.

Financial inclusion is seen as a key path to poverty alleviation and therefore is widely embraced by both developed and developing countries across the globe. The threshold to financial inclusion is typically understood to be the ownership of a payment transaction account, but achieving active usage of non-cash payment methods represents a major challenge worldwide. This paper shows that to address this challenge, financial inclusion should start with promoting non-cash methods of bill payment. This is a new way of thinking about both bill payment and financial inclusion that has not been explored before. 

A key distinction is defining financial inclusion as a hierarchy of financial needs starting with the most basic needs versus a binary state encompassing all financial needs. Bill payment is one of the most basic financial needs because it generally represents the essential living expenses of consumers, payments that every household has to make to survive. Therefore, financial inclusion should start by addressing the consumer’s need for better alternatives to cash for bill payment. There are four reasons discussed in this paper (the large scale of bill payment, the potential for electronic bill payment to create value for all stakeholders, the ability to drive electronification of other payment categories and the potential to achieve greater financial inclusion by accelerating lending) as to why bill payment is well positioned to initiate financial inclusion and drive it forward. 

This is a new way of looking at bill payment and one of the many ways in which bill payment could transform the payments and financial industry. It also approaches financial inclusion from the demand side by addressing consumers’ financial needs, which, when joined with the product/supply-side view (e.g., prepaid cards, mobile phones), could be a powerful combination.

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