Cash is still king in many markets. It is the payment mode that fulfills both the need for a quick transaction and the cost requirement of the merchant.
Agency banking, the channel where 3rd-party agents perform transactions on behalf of institutions, enables customers to translate e-money to physical cash for use.
When the cost of setting up and running brick-and-mortar branches is prohibitive, an agency network is a cost-efficient strategy to reach remote, underserved markets.
Financial institutions, though, still lag behind in adopting the agency model, despite the regulatory ease-up.
Here are some unconventional ways to look at the benefits of agent banking and why financial institutions should consider to adopt the agency channel:
1. Keeping It Personal
Customers are increasingly becoming overindulged. If banks want to show that they care, they should make sure that customers are offered services at a convenient spot nearby.
A customer of Software Group conducted a survey where customers expressed preference for a local vendor as opposed to a bank branch for financial services.
Adopting the agency model allows a regular businessman at a local shop to offer personalized banking services while the customer is making other purchases. This is done while exchanging pleasantries and discussing matters of mutual concern between the store owner and the customer.
2. Investing in Brand Evangelism
A marketing strategy known to work effectively especially with FMCGs is making the brand human and familiar. The brand sticks to the mind of the customer because a certain person or experience gets associated with a certain company.
The same strategy can work for banks aided by the network of agent shops set up close to customers. Similarly to a trusted agent, the bank brand becomes acceptable, therefore implying safety because of familiarity. In the end, this persuades customers because they identify with the brand.
3. Appetite for Data
The increased footprint at agent shops gives banks the opportunity to gather unconventional data based on customer transactions and purchase habits. Data can then be used to create unique financial products for both end customers and merchants.
This is why it is key for an agency banking software to collect data and offer data reporting and analytics capabilities. Software Group’s Agency Banking Solution provides embedded analytics, supercharged with AI to help our clients unleash their agent network's full potential.
Our client Baobab is one of the leaders in the microfinance sector in Africa, and a good example of the power of data in agency banking. Baobab use behavioral data from their platform to run proprietary algorithms and establish the eligibility of clients for pre-approved loan products. The customer is then able to take a pre-approved loan from their local agent. The use of data has enabled Baobab to make their services much more relevant and accessible for clients and to increase their revenue from the agency channel.
Another example from the industry is Safaricom, the largest virtual bank in Africa. Safaricom has introduced a new product called ‘Fuliza’ which is a Swahili word meaning 'continuously flowing'. Fuliza is an overdraft facility that enables M-Pesa customers complete a transaction when they have insufficient funds in their wallet accounts. Published results show that $810 million was disbursed within 6 months of rolling out Fuliza. This product was developed out of data on the number of transactions that are incomplete due to insufficient funds.
While offering convenience to the customer, such products can be new revenue streams for financial institutions.
4. Achieve Sustainable Development Goals through Financial Inclusion
1.6 billion people and 200+ million MSMEs around the world did not have access to basic financial services in 2017, according the World Bank’s Global Findex Database.
Financial inclusion is tied up to each one of the sustainable goals for development. And financial institutions have a critical role to play in ensuring that the majority of people have easy access to financial services.
Software Group’s customer Fidelity Bank Ghana has laid the foundation of inclusive ﬁnance in Ghana with a long experience in the inclusive ﬁnance ﬁeld. Today, Fidelity has 75 branches and an agent network of 1800 agents spread all around Ghana. The bank served a total of 1 million customers in 2018 and would like to increase this number to 5 million by 2020.
To achieve this goal, Fidelity relies on innovative technology, including an Agency Banking Solution by Software Group and the right marketing strategy to get their products out on the market and reach more customers. Growing the agency network is one of the key acquiring tools in their plan to reach the 5 million-customer target.
Embrace Success in Agency Banking with Software Group
Software Group’s Agency Banking Solution helps banks and microfinance institutions scale their points of service with a low upfront investment. It is based on our best practices and lessons learned from deploying agency in the last 10 years in more than 15 countries.
The power of the agency channel can be strategically combined with other digital channel solutions, such as Mobile Wallet and Digital Field Application for a more holistic approach to digital service distribution. Just like our client Botswana Post did – combining agency service points with a wallet app for end customers. The digitally-enabled channels allowed Botswana Post to serve the widely dispersed in the country government pensioners, saving them time and increasing convenience tremendously.
Interested in adopting branchless banking? Contact Software Group today.
The Kenyan Wall Street, 'Fuliza hit Ksh 81 billion lending mark at the end of June 2019', August 24, 2019.
World Bank’s Global Findex Database 2017.