Delivering services to the underbanked - what will PayPal's TIO deal mean?

By : Andy Brown

June 27, 2017 12:00 PM

For many financial institutions, improving their offerings to deliver better services to the unbanked and underbanked remains a top priority.


Around two billion people worldwide currently fall into this category - and it is not just in emerging economies where banking infrastructure is less developed where there is potential for growth. In the US, for example, it's estimated around 24.5 million households are classed as underbanked - defined as having a checking or savings account, but also obtaining financial products and services from outside of the traditional banking system.


It is these people that PayPal is aiming to reach with its recent purchase of TIO Networks, a payment processing firm that specializes in providing bill payment services to underbanked citizens in North America.


Offering more options for bill payments
The company serves 14 million consumer bill pay accounts, and in 2016 its network of point-of-sale, kiosks, web and mobile channels processed some 60 million transactions. It works with more than 10,000 billers including some of the US' largest telecoms and utilities providers.


Dan Schulman, president and chief executive of PayPal, explained this network allows financially underserved citizens easier and faster ways to pay their bills, which helps them avoid issues such as missing payment deadlines, service interruptions and penalties.


"Bill payment is ripe for innovation, and helping people pay their bills more conveniently is a significant step towards achieving PayPal's goal of providing essential financial services for our customers," he continued. "It is fully aligned with our mission to expand access and participation in the financial system for those who have been underserved."


The impact on the payments industry
For PayPal, the move may be seen as a key part of its efforts to expand its range of services and position itself as a key player in driving innovation for the underbanked.


In a recent interview highlighted by, Mr Schulman noted that by 2020, 90 percent of the world's population will have a phone, which will give them "all the power of a bank branch in the palm of their hand".


Therefore, PayPal clearly sees an opportunity to tap into this in order to help make payments easier and more convenient for the estimated two billion people worldwide who do not have access to adequate banking capabilities.


By combining TIO's platform and user base with its digital and mobile payment options, PayPal may look to become a first choice for those who currently find making everyday bill payments a hassle.


Mr Schulman said: "It is almost like a part-time job to pay your bills. You are driving, you are waiting in line, it is a terrible experience. But it is the daily reality for those two billion people in the world that are not well served by traditional financial institutions."


The move into this area could therefore act as a signal to traditional banks and payment providers that they need to re-evaluate their approach to financial inclusion. PayPal is increasing the number of ways citizens can use its service to pay bills, so it is something the rest of the industry should be looking at closely.

Andy Brown

Marketing Director, Payments

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Andy has nearly 30 years experience in e-payment systems from the delivery and support of systems in the Far East and Europe and in the product management and marketing perspective. Based in the UK, Andy is responsible for marketing NCR payment solutions.