Digital payment systems have significant potential to expand access to financial services for poorer consumers while boosting revenues for financial services providers, a report from the Bill & Melinda Gates Foundation and McKinsey & Company argues.

Based on an analysis of payment systems in more than thirty countries — including China, India, Kenya, Nigeria, the Netherlands, and the United States — the report, Fighting Poverty, Profitably: Transforming the Economics of Payments to Build Sustainable, Inclusive Financial Systems (115 pages, PDF), found that digital payment systems like mobile money and electronic account deposits can reduce transaction costs by as much as 90 percent and offer the greatest potential for financial inclusion. Given that 84 percent of the 2.5 billion people living on less than $2 a day have no access to formal bank accounts — which makes it difficult for them to receive payments, pay bills, or send money to relatives — expanding access to financial services is a key element in fighting poverty. And while there is little economic incentive at the moment for financial providers to serve the poor, lessons drawn from developed countries suggest that digital payments are cheaper, more efficient, and ultimately more sustainable.

Among other things, the report recommends that a solid economic baseline be established for any digital payment system already in use as a way to improve oversight and better guide further development of those systems; that "best of breed" payment systems be embraced as a way to foster competition and lower costs; that innovations from other markets be applied to existing systems; and that private sector players, policy makers, and regulators should focus on the digital payment ecosystem rather than just individual institutions or systems.

"We are encouraged because we see opportunities to make payment systems more efficient and more accessible to poor people," said Rodger Voorhies, director of the Bill & Melinda Gates Foundation's Financial Services for the Poor program. "With better access to a broad range of financial tools and services that really meet the need of the world's poorest, they can take control of their financial lives. The results would be a dual win for people and providers."