A mobile money agent in Sierra Leone. Photo courtesy of Ben Lyon

Ben Lyon is the Founder and Executive Director of FrontlineSMS:Credit, an organization committed to bringing financial services to the entrepreneurial poor in 160 characters or less (the length of a standard text message).  Ben specializes in informal economics, microfinance and mobile payments and is especially interested in where the three subjects converge.  Learn more about FrontlineSMS:Credit at http://credit.frontlinesms.com.

Agents are the face and frontline of any mobile money system.  Often termed ‘human ATMs’, agents are present every time a user wants to put cash in, or draw cash out, of a system.  Given their critical importance, it only seems prudent to ask “What are the incentives that govern agent behavior?” A review of Splash Mobile Money Limited (Splash) and Zain Zap in Sierra Leone is instructive.

As background, Sierra Leone has a population of roughly six million, a cell phone penetration rate of 13 percent and an illiteracy rate of 65 percent. The Africell, Comium and Zain networks each claim approximately one-third of the GSM  market (the state-owned SierraTel is CDMA and Tigo was recently acquired by Africell).  Unlike Safaricom in Kenya, which has a market share in excess of eighty percent, the Sierra Leonean market is highly fragmented.  Customers own multiple subscriber identity modules (SIMs) and readily switch between network operators as prices change and special offers become available.

Both Splash and Zap are new entrants to the market.  Splash, a third party service that works across every major carrier, uses the short message service (SMS) format.  Zap runs exclusively on the Zain network and utilizes a closed SIM toolkit (STK).

Agents for either service are relatively difficult to find, especially outside of Freetown.  In Makeni, for instance, three out of four Splash agents refused to honor Splash transactions and the only Zap agent said “Zap is out of business”.  Since agents receive a commission – albeit small – on every transaction, why were both Splash and Zap agents refusing business? The best answer appears to be a chicken-and¬egg dilemma: agents only value the service insofar as it brings in customers, and customers only use the service if there are enough agents to make it more convenient than cash.

Hitesh, a Splash agent in Freetown, says that his company participates, not because of the agent commission, but because they view mobile money  as a loss leader.  Whenever a Splash user goes to Hitesh, he knows they are likely to see something they want and make a purchase.  Splash & Zap also give customers more ways to pay for products, he says.

Guaruanteed Trust Bank and Zenith Bank provide agent services for Splash and Zap respectively.  Like Hitesh, they view mobile money as a way to attract new customers and often recommend that users open a bank account.  If successful, they get both the agent commision and interest on the float.

Despite the positive social impacts of mobile money, it’s important to remember that agents – like any other business – are focused on the bottom line.  In order to enlist and retain a critical mass of agents, mobile money providers have to present a clear business case, especially during the first few months of operation while customer volume is low.

-Ben Lyon, Founder and Executive Director of FrontlineSMS:Credit