Archive for: Agents
 Photo courtesy of MicroSave India is undergoing a significant expansion in the use of agents (Business Correspondents) to offer a range of financial services. There are many questions about whether this present expansion can be sustained. A new publication from MicroSave highlights reasons for optimism. To understand this perspective, Greg Chen, CGAP’s Regional Representative for South Asia, asked Graham A. N. Wright, the founding Director of MicroSave, a series of questions about branchless banking in India (note: MicroSave uses the term electronic/mobile-banking or “e/m-banking” to describe this field, while we at CGAP tend to use “branchless banking”). MicroSave has a large presence in India with over 80 staff and a large practice focusing on: e/m-banking; microfinance; SME; private sector development and responsible finance.
Question: MicroSave’s latest discussion paper on branchless banking in India portrays a decidedly optimistic picture. How did you arrive at this and what are some of the positive conditions you see?
Graham Wright, MicroSave: India has huge opportunity to leverage the potential of e/m-banking and build a cash-light economy. In addition to its cutting edge information technology industry and relatively dense population, the Government of India is clearly determined to achieve financial inclusion through digital money and is taking aggressive steps to see this happen.
The gradual regulatory evolution to support business correspondent network managers (BCNMs) and banks in their outreach efforts continues – and the results are beginning to emerge. While the emphasis continues to be on numbers, the targets are such that large scale outreach infrastructure is being built in a short time frame, with an agent covering every village with a population greater than 2,000. This, coupled with the government’s resolve to move to cash-based subsidy transfer and social security payments systems, will ensure transactions. Institutions such as the Unique Identification Authority of India (UIDAI) could greatly ease customer KYC and authentication, and the National Payments Corporation of India (NCPI) has already built a national switch for inter-bank mobile transactions. This infrastructure could play expanded roles as systemic back-bones that support different players and bring about interoperability.
Question: The services necessary for financial inclusion are much broader and so what are the anchor or lead products for building agent-based branchless banking systems in India?
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by Sarah Rotman : Thursday, January 26, 2012
I think it is safe to say that the financial inclusion world has started to get used to the idea of thinking about financial service providers more broadly than traditional microfinance institutions, rural banks and financial cooperatives. With the recent growth of mobile network operators, technology providers and agent network managers, it’s evident that financial inclusion encompasses a broad set of providers. But even I am sometimes surprised to learn about some private companies that seem to have a very tangential link to the unbanked financial sector taking advantage of new opportunities in branchless banking.
Take OXXO as an example. OXXO is the largest convenience store in Mexico (comparable to 7-Eleven in the US) opening a new store every 8 hours…yes that’s 8 hours! 7.5 million people come through their stores every day, most of whom are looking for things that a normal convenience store would offer…food, snacks, paper goods, etc. But OXXO is diversifying its products to offer its wide customer base the “convenience for everything you’d need in life any time of day.”
In this video, Aiko Fujimura, Manager of Financial Services for OXXO, explains how this added convenience extends now to financial services offered through the OXXO e-wallet. She admits that there are certain challenges. “It is easy to sell soda and snacks, but not as easy to sell financial services.” Training a huge network of employees and convincing people to trust the store with their money are two issues OXXO is currently facing.
Few companies have the scale of OXXO, but convenience stores and other retail outlets are still being used to build up branchless banking agent networks. In this video, Johannes Kling of the agent network company DD-DEDO talks about the role that convenience stores play in Colombia in expanding the outreach of banks. As he explains, Colombia is still very early on in the growth curve when it comes to branchless banking. But as we all know, a strong agent network is one of the early pieces of the puzzle in building a branchless banking ecosystem.
Next week, we’ll share two more videos from more traditional players – a bank and a mobile network operator – but each with an interesting take on their new business model to reach the unbanked.
- Sarah Rotman
This is the third post in our series on interoperability and related issues in branchless banking and mobile money. Read the first post that presented the overall framework for the discussion and the second post that looked at the interconnection of mobile money platforms. Today, we discuss interoperability at the agent level as it relates to agent exclusivity. We include agent exclusivity in the topic of interoperability because it raises many of the same issues as platform interoperability.
Agent exclusivity revolves around the ability of a customer of one provider to use the agent of another provider for cash-in and cash-out services related to that customer’s account. Non-exclusive agents can expand financial access by providing more access points to a greater number of customers, while limiting the rise of a dominant actor which could ultimately reduce competition. But as with platform interoperability, regulators are cognizant that prohibiting exclusive agents could deter private actors from entering the market. What service provider would invest in identifying, training, and equipping agents if competitors can piggyback off their investment?
To be clear, when we speak of agent exclusivity, we are only referring to the cash-in and cash-out services performed by agents – not other services (where permitted) such as customer enrollment, related KYC, and processing of loan documents. Agents providing only cash-in and cash-out services are often called “cash merchants”. We distinguish the cash merchant services from other services because cash merchant functions arguably present less risk to the financial service provider since agents typically transact against their own accounts. Think human ATMs.
We identify at least four different ways to share cash merchants:
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by Sarah Rotman : Wednesday, January 4, 2012
One of the exciting and yet challenging aspects of the branchless banking industry is how fast things change. Topics discussed just 3 months ago can seem out of date today. That’s why it’s fun to look back over the topics we blogged about in 2011 starting from last January to see how the discussion has evolved over the last 12 months. Here are just a few of the blogs you may have missed or you may be interested in reading again:
by Sarah Rotman : Thursday, September 29, 2011
 One of many Brazilian agents that move people outside of bank branches I’m blogging from Dakar, Senegal where I had a stark reminder of why innovation in financial services is so necessary. A colleague of mine had a check to cash, so after one of our meetings we made our way to a “to-remain-unnamed” bank in the city center. Good thing I decided not to wait in the car because this relatively simple transaction took well over an hour to complete. First we had to wait about 30 minutes for our number to be called behind all the people waiting ahead of us. But once he was at the teller, it still took my colleague about 45 minutes to finally walk away with his cash.
My intention is by no means to bash banks…the computer system seemed to be running slowly and the check was for a couple thousand dollars, so he was sent to another desk for some sort of extra authorization. But it was a good, and admittedly frustrating, reminder of the potential of branchless banking, technology and innovative business models to transform the way people, especially the unbanked, access financial services…outside of bank branches.
This experience aside, the Senegalese market is full of exciting initiatives and inspiring energy from banks, MFIs, mobile network operators, technology companies, various government institutions and the central bank. In perusing my Google feed of news on branchless and mobile banking, there are plenty of things around the world to get excited about. Here are just a few that caught my eye:
One of the banks that has a regional presence in the West African Economic and Monetary Union (WAEMU – of which Senegal is a part) is Morroccan-based Attijariwafa Bank. Wafacash, a specialized subsidiary of Attijariwafa and leader in international money transfers, announced the launch of a new mobile money transfer corridor in partnership with Belgacom subsidiary BICS between Belgium and Morocco.
A new study reports on the first randomized evaluation of a cash transfer program delivered via the mobile phone – Zain’s Zap service in Niger (now Airtel’s Airtel Money). The report highlights several benefits of this new delivery mechanism and we’ll be profiling this experience in more depth on our blog in the coming weeks.
Also related to cash transfers, a new report by UNCDF examines Fiji’s experience in leveraging government-to-person (G2P) payments as a mechanism to enhance financial inclusion and provide savings to government and social welfare recipients via a savings-linked electronic payment system.
In Bangladesh, the Bangladesh Bank has just published new guidelines on mobile financial services and the Financial Express reports that nearly a dozen banks are preparing to introduce such services, in addition to those services that are already in the market.
In Pakistan, the largest mobile network operator Mobilink, a subsidiary of Orascom Telecom, was recently granted a license by the State Bank of Pakistan to initiate microfinance activities, seen as their foray into branchless banking.
But I admit that what excited me the most when I looked through my Google feed was the fact that I read more than 20 headlines before finding a story that mentioned M-PESA. The rest of the world is catching up!
- Sarah Rotman
In this third post in the series on Brazil, we discuss another recurring issue about the agent business in Brazil. Read our first two posts on Brazil here.
In a country where agents have existed for close to 10 years nationwide, we would expect that by now banks would have found business reasons to share agents. From a consumer perspective, it is clearly attractive to be able to access banking services for multiple providers at a single agent. Yet agents in Brazil are still exclusive to banks and branded exclusively. Regulation in some markets requires agent exclusivity, but that is not the case in Brazil which makes this largely a business decision. After all these years, why hasn’t it made business sense to banks to share agents? Why haven’t retailers and agent companies struck partnerships with multiple banks and been more aggressive as they have in Mexico?
 Does the new Elo brand indicate future plans to share agent networks? It is important to note that there is already “sharing” of agents at some level. Credit agents are already shared between the small and medium banks, like Banco Cacique and Banco BMG, which specialize in offering payroll-consigned loans. Sharing credit agents turns out to be an attractive situation for these banks which often don’t have bank branches. New regulation recently restricted tiering for these types of agents — you can only outsource one level — but that will not stop the sharing (it should decrease however, the actual number of agents). Transactional agents, on the other hand, while exclusively branded and contracted with one bank can handle transactions for multiple banks. Just as it is with interoperable ATMs, transactional agents of one bank can process boletos (see here again on background) of another bank with differential charges. At least when it comes to processing boletos, which as discussed in an earlier post cover a range of payment transactions and are most likely 70%+ of transactions at agents, there is some form of interoperability at agents. Read the rest of this page »
In this post, Dalberg colleague, Matt Shakhovskoy, identifies some internal challenges at MNOs that prevent them from delivering success with mobile money.
 An airtime seller in Colombia. But who really makes the best agents? Mobile financial services delivered by MNOs require a contribution from all parts of the business. As a result, integrating delivery of a mobile financial service into an MNO’s existing operations is not easy. These internal dynamics often add costs to delivery, turning potential advantages into disadvantages. In our work with MNOs, my colleagues and I at Dalberg have identified some common issues on how to internally structure a mobile money business for success.
Create an empowered team with strong connections across the MNO
Put together an independent team with clear management talent – check. Align the full organization around cooperatively supporting and delivering mobile financial services – wait, align the full organization? In our experience, MNOs have learned to set up an independent team on mobile money (not buried in their value-added services and/or strategic initiatives) but then underestimate the coordination needed across the organization to achieve the full potential of mobile financial services. An optimal mobile money unit both leads the initiative and also plays the role of a coordinator, bringing together the various parts of the MNO business to deliver the service. To be successful at this type of collaboration, this unit needs support from the top, a respected senior manager, and the dedicated time and support from within the IT, Distribution, Marketing, Finance and Customer Care Departments.
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It’s often said mobile network operators (MNOs) have the advantage over banks in creating agent networks from their dense carpet of prepaid airtime sellers. But is this true?
As we first blogged about last year, MNOs outsource much of their airtime distribution to multiple layers of wholesalers and dealers. Do they really have much of a connection to the last mile shop owner to be able to convert him or her into a mobile money agent? One might argue their wholesalers have the connection, but what if they balk at pushing mobile money for the MNO? This isn’t so far-fetched: a shrewd airtime wholesaler might intuit that mobile money could eventually cut them out of the picture entirely, if MNOs gain the capacity for direct sales to consumers. The virtual sales channel would kill the physical one. (This is part of why M-PESA took so long to take off in Tanzania, for example.)
And even where existing airtime wholesalers are willing to help, it’s obvious that convincing merchants to distribute mobile money is very different than airtime, which we’ve talked about in CGAP’s recently published Agent Management Toolkit. The amount of capital can be much greater: the average M-PESA agent in CGAP’s field research held USD 1200 in combined cash and e-float, nearly 10x more than the typical stock of airtime scratch cards (USD 129). Payment operates differently, too: a merchant recoups their airtime investment plus a margin as soon as they sell a scratch card, but often waits to month end to receive mobile money commissions. Even the time per transaction is dramatically different: a few seconds for scratch card and cash to change hands versus typically one minute to complete a mobile money transaction (and longer if networks are clogged). Also, being an effective agent for most mobile money implementations requires more advanced skills in selling, training and customer care than is required to sell a scratch card.
So converting an airtime distribution chain is not the same as flicking a light switch on. Unlike 2009 and even 2010, we’re now seeing MNOs put some money, muscle and thought into crafting their agent networks.
But we see radically different approaches unfolding. We can separate them into 3 categories: totally integrated into airtime distribution, bespoke management, a hybrid.
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In this second post in the series on Brazil (read the first one here), we answer the first of the following two recurring questions about the agent business in Brazil: (1) Will agents become a channel for a wider range of financial services for the poor? (2) Will banks share agents and why has that not happened already?
 Banco do Brasil agent in Brasilia The prevailing wisdom about Brazil’s vast agent network (largest in the world, 4x that of Kenya and the Philippines combined!) is that it is used mainly for bill payments. This network appears to be a missed opportunity to also make credit, savings, and other products available to low-income people in an affordable way. Is this channel being underutilized for poor people? (See here for agent numbers and here for coverage maps.)
The truth is that credit, savings and insurance have been made available via agents. Government benefits are also disbursed via agents. At the ~160,000 transactional agents, which include stores, the postal and lottery networks, customers make a variety of payments, deposit into and withdraw from accounts. Even though the role of transactional agents in the account opening process is restricted by regulation to ID check, document collection and forwarding, banks still use them to start the account opening process. In addition, there are ~500,000 credit agents, which are individuals on foot who sell payroll-consigned loans. While all banks use credit agents, small and medium banks rely on them for their core loan business. Both transactional and credit agents are covered by the same set of regulations.
While research indicates that the majority of transactions at transactional agents (70%+) are “bill” payments, the bills against which payments are received cover a range of services, not just utilities. Any service provider can issue a bill or boleto which can be paid at any agent (more on boletos here). The payments part of any financial product could be issued as a boleto. A lender can issue a boleto to borrowers for repayment. An insurance company can issue a boleto for premium payments.
While products are available at agents, it is also true that banks have not systematically developed products for the poor via the agent channel. A few factors are likely to play a part in how exactly banks end up using agents moving forward:
- Lawsuits. The banking employees unions are suing banks and agent companies arguing that agents should be treated like bank employees and paid accordingly (read this basic FAQ on these lawsuits). Banks argue that agents do a lot less than bank employees and their role is similar to a basic teller. If this line of argument allows banks and agent companies to win lawsuits (they have had some favorable rulings already), it will mean that while banks may not be able to develop the agent channel to do more (into a sales and service channel, for instance), they can continue to use agents to process boletos.
- Regulations. New regulations that came out four months ago have very nearly eliminated any business from doing just the banking agent business. The regulations prohibit agents whose sole function is that of a transactional agent from receiving and forwarding account opening proposals and processing receipts, payments and electronic transfers for bank deposit and payment orders. As a result, banks will continue to face natural time and bandwidth restrictions on how much an agent does.
- Viability. An implication of these new regulations and lawsuits is that transactional agents can perform nothing more than a basic teller function. Will banks and agents find this limited role economically attractive moving forward? Historically, banks have paid little to agents to handle transactions and agent companies stay in business only because banks pay more for account opening and for loans offered by credit agents. Moreover, at higher transactional volumes, fixed cost infrastructure like ATMs is more economical for banks. In fact, banks are exploring ATM-like alternatives to agents especially in higher volume urban areas where most Brazilians reside anyway.
- Channel strategy. Large banks in Brazil already own large acquiring networks and with boletos becoming electronic (read here), the difference between payments at those networks and agents disappears. While a number of municipalities in the most economically poor areas of the North and Northeast are serviced only by agents today, banks have been known to open mini-branches and install ATMs on the heels of agents, and they may do more of that. More importantly, a couple of banks in the process of developing services for lower-income segments are not necessarily restricting themselves to agents but considering leveraging all their channels.
- Kabir Kumar & Yanina Seltzer
Building a viable agent network is a critical success factor for any branchless banking service. But the industry is in a state of creative chaos with widely divergent approaches (and performance) to rapidly setting up a dense, liquid carpet of agents adhering to service quality standards.
In February, CGAP released an Agent Management Toolkit which aims to demystify the process. The toolkit is based on 500 interviews with agents, agent network managers and financial institutions in Brazil (Banco do Brasil and Banco Postal), India (EKO and FINO), and Kenya (M-PESA). All told, CGAP analyzed data on more than 16,000 agents for the Toolkit.
We’ve distilled the Toolkit into an Agent Management Training Package to enable you to train your own colleagues and service partners about key steps in building a robust agent network.
- Section 1 looks at the business case from the agent’s perspective. This includes an exercise comparing the business drivers for 3 agents from Brazil, India and Kenya.
- Section 2 looks at the role of Agent Network Managers, with a case study of a Brazilian ANM’s journey towards profitability.
- Section 3 looks at options to generate adequate revenue to satisfy all partners in the supply chain, and an exercise where participants will discuss a hypothetical branchless banking service.
- Section 4 looks at structuring an agent network, with a case study showing how the supply chain has evolved for M-PESA in Kenya.
- Section 5 looks at lessons from Brazil, India and Kenya for managing agents, with an exercise comparing training approaches in these and other markets.
The package can be used in multiple ways, from a 30 minute rapid review of key messages, a day-long training, or selecting one of the modules matching your interest. The package includes detailed notes for trainers on how to present each slide and key takeaways to highlight. Feel free to use with attribution.
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