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

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  • Porteous, David

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.

Suggested Citation

  • Porteous, David, 2015. "Low-balance bank accounts — Part 1: Is there a pathway towards profitability?," Journal of Payments Strategy & Systems, Henry Stewart Publications, vol. 9(3), pages 305-310, September.
    • Handle: RePEc:aza:jpss00:y:2015:v:9:i:3:p:305-310
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    Cited by:

    1. J. Michael Collins & Madelaine L’Esperance, 2023. "What do students gain from banks in schools? A field study," Review of Economics of the Household, Springer, vol. 21(2), pages 567-590, June.

    More about this item

    Keywords

    low-balance bank accounts; business case;

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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