While the important role payments play in financial inclusion is increasingly recognized, this report moves the conversation forward by uncovering insights into how to advance electronic payment acceptance at the base of the pyramid. While some payment use cases have gained traction, namely P2P and bill payment, there is a considerable opportunity to drive progress with others. In fact, consumer behavior indicates robust opportunities with merchant acceptance (P2M). Expanding the digital acceptance footprint to achieve a critical mass of small merchants at the base of the pyramid will expand the utility of payments and drive corresponding increases in digital liquidity.
The report identifies four critical barriers to the expansion of electronic payment acceptance that need to be overcome. These include:
• Economic factors such as the cost of acceptance and value provided to merchants;
• Risk such as the financial and process risks associated with the onboarding of merchants;
• Distribution challenges of driving acceptance with base of the pyramid populations; and
• Friction, stemming from the merchant payment acceptance experience and the infrastructure available to support payments.
It then details effective ways to address the challenges of building the ecosystem for payment acceptance among SMBs at the base of the pyramid:
• Make useful additions to product propositions to make electronic payment solutions attractive and relevant to SMBs;
• Design new business models to reduce costs and increase the viability of business models serving SMBs. These models can focus on driving collaboration among payment service providers (PSPs) as well as deploying new partnership models; and
• Invest in market development initiatives through collaboration with the public and private sectors in order to overcome structural barriers to acceptance and to incent market participation and innovation.
Building acceptance for the base of the pyramid will not generate immediate returns. In fact, there is a need to invest ahead of the curve to build scale in middle and low-income markets. The challenge is to find ways to stay committed to the longer-term investment horizon by involving those who stand to benefit. New approaches and business models as well as partnerships for collaboration are all important considerations. In the end, the business and social dividends of enabling SMBs to accept electronic payments can outperform the investment.