Low-balance bank accounts — Part 1: Is there a pathway towards profitability?

Abstract

There is a business case for banks to issue basic transactional
accounts, although most individual low-balance accounts are
probably loss making for most large banks — profitability is more
likely at the level of the client segment, in which other products
cross-subsidise the overall returns from the target group. Banks’
use of agent networks for account opening and cash handling
transaction will help but not solve the conundrum of account-level
profitability. Reaching breakeven at this level will happen only as
clients move away from a cash-based world towards more digital
transactions in the future. This paper reaches these conclusions
based on cross-country evidence from five large emerging market
retail banks involved in the GAFIS project, which completed in
2014.