Today technology can transform any merchant or even a post office into a bank. It is no surprise that third-party agents have become a crucial part of the digital financial service ecosystem, especially in emerging markets.
Agents have become the channel of choice for many communities due to their proximity and convenience. The growing acceptance of the agency banking model and self-service channels has even led to the closure of ATMs and bank branches.
Financial institutions have started expanding agents portfolios' beyond basic cash-in/cash-out into customer onboarding, digital loans, and much more.
But what is agency banking?
What is Agency Banking?
A cost-effective go-to-market strategy for financial service providers to scale their points of service via a network of 3rd party agents.
With the help of agency banking software and mobile devices with biometrics, financial institutions enable agents to deliver services on their behalf - such as cash-in/cash-out, balance enquiries, loans, bill payments and more.
The benefits of the agent banking model
Branchless reach into unbanked and underserved markets
1.6 billion people and 200+ million MSMEs around the world do not have access to basic financial services, according to the World Bank.
At the same time, current financial services do not adequately meet the needs of many in terms of convenience, proximity, and affordability, leaving them financially underserved and excluded.
In emerging markets, the landscape is fragmented and a large part of the population is dispersed. Financial literacy is still low, especially among low-income segments, branch penetration is scarce and credit data is insufficient.
Financial institutions realise the lack of sufficient self-service points in remote and rural markets, but new branch ATM infrastructure is costs are prohibitive, especially once the high-volume, low-value nature of the transactions are taken into account.
The consequences are congested branches and limited scalability opportunities.
These are some of the challenges which a local trusted agent network could meet, aiding financial organisations in their successful outreach endeavours.
Cost-Efficient Distribution Channel
Gone are the constraints of physical infrastructure.
With agency banking, financial institutions can expand their business while avoiding the capital intensive investment and complexity involved in opening and running new branches or ATM networks.
Operational costs can be reduced further by limiting paper-based processes and decreasing fraud and cash-handling risks.
Maintaining a physical branch is on average 25% more expensive than maintaining an agent networkInternational Finance Corporation (IFC) - World Bank Group
Thanks to agents, financial service providers can compete smartly and efficiently, cross-sell new value-added-services, and achieve competitive pricing based on economies of scale.
Enhanced Customer Experience
Agents are a natural extension to a financial institution's business.
Instead of travelling for hours to a branch, previously unbanked or underserved customers can now safely visit agents in their own proximity and convenience, at extended service hours.
The ability to deposit and withdraw funds, to make loan repayments, pay bills, even with no formal ID thanks to biometrics, could be critical for customers at the bottom of the pyramid.
Located in bustling business areas and operating at convenient hours, agents become customers' go-to financial service partner. They help acquire new customers, drive awareness about services, and provide when needed.
With an agent nearby, customers will be more willing to secure their savings at a formal financial institution.
The cost savings derived from lower transaction fees and shorter travel times could encourage people to increase the usage of their accounts.
Consistent deposit mobilisation is beneficial for financial service providers as it helps them lower the cost of funds and eventually decrease the cost of credit for end customers.
With the help of the agency banking model, banks and microfinance institutions can realise benefits from lower distribution costs and improved operational margins.
Brand Awareness and Trust
Agents are often even more trusted than formal branches, because of the comfort of interacting with a familiar local person.
With consistent user experience at every trusted agent touchpoint, clients feel satisfied and safe to perform the financial operations they need.
Trust in agents boosts overall community trusted towards financial institutions, and speeds up their outreach results.
Accessible, reliable and quality services earn long-term customer satisfaction and loyalty with the financial institution.
Relevance and Fast Go-to-Market
In the face of a fast-changing market, increasingly challenged by mobile money providers, telcos and fintech competitors, it is critical to stay relevant to the needs of different customer segments.
Thanks to digitalisation, financial institutions can quickly respond to demand for new financial services by making them available across their agent network via mobile devices.
While digital products and processes are clearly the future, customers still seek convenient channels to convert their digital funds to cash, a service delivered by agents.
Ready to seize the branchless banking opportunity? Contact us today.