Delivering services to the underbanked – what will PayPal’s TIO deal mean?

2018 is expected the be the year in which the likes of Google and Facebook make major moves into financial services. What effect could this have on the industry?

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 33.5 million households

are classed as unbanked (where no one had a checking or savings account) or underbanked – defined as having a checking or savings account, but also obtaining financial products and services from outside of the traditional banking system.

With its recent purchase of TIO Networks, a payment processing firm that specializes in providing bill payment services to underbanked citizens in North America, PayPal is trying to broaden its reach specifically into the underbanked market.

Offering more options for bill payments

TIO Networks 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.”

PayPal has obviously identified a gap where customers are not served well by existing mechanisms.  Many banks have mobile banking offerings that can enable bill payment functions.  The challenge for banks will be ensuring their service is as easy and convenient to use as those from providers like PayPal.  Clearly one option for some banks is partnering with local Fintechs who have the innovation edge.  

Of course other challenges exist to take up of these services from changing customer habit to legal requirements for a paper receipt which all need to be addressed before these mechanisms for paying bills are really adopted by the underbanked.  Paying a bill is one of the key requirements of anyone making use of a bank account, so anything that improves that experience is good for the consumer.


Written by Andy Brown

Andy Brown

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

Read more articles from Andy Brown