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Financing small-to-zero transaction costs – The main question when offering savings accounts to poor people is how to finance small-to-zero transaction costs. Banks with clients who are operating money only as small balance savings businesses are facing the challenge whether such businesses would need to be cross-subsidised by loan businesses or higher-value deposits, or whether they would be sustainable if they have a certain number of active customers. We developed a model to assess the sustainability of bank accounts. This found that accounts are sustainable at a monthly balance of less than $25 if the bank has more than one million active customers.

Balancing affordability and sustainability – To amortise banks’ upfront investment in digital channels, they need to service a high volume of customers, as this will reduce operating costs and allow agents to work at maximum capacity. It is not uncommon for up to 80% of teller time not to be spent serving the customer at full capacity. By lowering the price of banking to make it more relevant to lower-income clients, banks can use this existing productivity slack to serve customers at virtually no extra cost.

Partnerships with the informal and the competition can bring down costs – Both transaction costs to the customer and financial institutions setup costs. Linkage banking with village groups has enabled sustainable business growth in East Africa.