Taking banking to the people – Agency Banking

According to the World Bank, only 31% – 60% of adults across Southeast Asia and Africa have a formal bank account. Low-income people fare worse with only a mere 18.9% receiving access to financial services. Agency banking could be the answer to these worrying statistics.

But also each region has some of the highest rates of mobile penetration in the world.

Traditional approaches to banking have held back mass adoption of through onerous KYC and AML processes. However, times are changing and governments are creating a more relaxed regulatory environment.

Rural populations that live in remote areas suffer the most from regulatory due-diligence requirements. For example in some places like Vietnam, individuals are required to physically present national identity cards in order to access key services.

This is where technology comes in.

Banks can use agent networks to provide groups like these with financial services.

Simply put, Agency Banking allows banks and financial institutions to reach underserved communities at a fraction of the cost.

Agents can deliver financial services using devices such as card readers, POS terminals and mobile phones to process transactions in real-time.

For example in a basic agent network, an agent would receive a POS device or terminal that is connected online in real-time with the financial institution’s back end system. This terminal allows agents to offer basic financial services on behalf of the financial institution such as:

  • account registration
  • deposits and withdrawals
  • loan and bill payments
  • fund transfers

The benefits of this model for banks and financial institutions is clear, as they gain the ability to provide their services to new and existing customers in remote areas in a much more cost-effective way.

In addition to being a lower-cost alternative to building bank branches and ATMs, Agency Banking creates much more exposure.

Agency banks benefit from this mechanism equally, as they receive additional income from commissions earned for the transactions conducted on behalf of a financial institution.

Moreover, they attract higher numbers of customers to their premises, and generate more sales for their core business.

The agency banking model has consistently proved to be an effective vehicle for financial inclusion. Malaysia serves an ideal role model in this respect.

  • In 2011, only 46% of sub-districts had access to financial services
  • In 2015, after three years of agency banking implementation, 97% of the country’s sub-districts have access to financial services.

As Southeast Asia and Africa continue to stabilise and grow, each region is uniquely positioned to effectively implement agency banking as a means of fostering financial inclusion for consumer and as a means of building to the future for banks and financial institutions.

Want to learn more about how agency banking would benefit your business?

Get in touch with our expert team today.

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