Understanding Agent Banking Strategy

The financial industry, particularly the banking sector, has benefited from the combination of internet and smartphone usage. FinTech is causing a paradigm shift in the financial business, by allowing banks to provide services to anyone, regardless of their location. Branchless banking, often known as agency banking, is a novel concept. 

What is Agent Banking?

Agency banking is a sort of branchless banking in which traditional banks use authorized agents to expand their network of branches and services at a relatively low cost. The popularity of agency banking is growing for a variety of reasons, including product availability, risk management, and increased financial inclusion.

Components of Agent Banking

To understand how agency banking works, it’s necessary to first comprehend the participants in the agency bank ecosystem.

  • Agent banking service provider

Agent banking service providers are in charge of overseeing a variety of banking agents. They are also in charge of customer service, marketing, cash management, branding, and a variety of other tasks.

  • Financial institutions

Both consumer and agency accounts are managed by banks and financial institutions. These are the entities that carry out the actual cash flow.

  • Banking agents

These are the businesses that have been given permission by banks and financial institutions to conduct various banking services on their behalf. They are in charge of banking services like:

  • Cash-in
  • Cash-out
  • Balance inquiry
  • Generate mini statements
  • Collection of document
  • Microloans

  • Super/sub-agents

Banking agents can also build a network of agents under them and earn a commission on each transaction they complete.

  • Mobile Operators

Mobile carriers make their networks available to make mobile transactions, USSD connectivity, SMS, bill payments, and a variety of other procedures possible.

  • Consumers

Consumers are the ultimate beneficiaries of agency banking. These are people who do not have access to a bank account but do have access to mobile phones.

Advantages of Agent Banking

Reduce Costs

Agency banking is a low-cost alternative for banks and financial institutions to expand their services in areas where banks are underrepresented. Banks and financial institutions do not need to open a physical branch with agency banking, which lowers operating, infrastructure, maintenance, and other high-capital investment costs.

Increase customer base

Banks and financial institutions can now offer their services to a huge number of unbanked and untapped customers thanks to banking agents. This massive increase in client numbers boosts bank earnings by a factor of ten. Similarly, with agency banking, banks can have a huge number of agents working for them, bringing in more consumers for the bank and other financial organizations.

Enhanced customer experience

Users can have a better customer experience using agency banking. Banks have come to their customers’ doorsteps thanks to branchless banking. Clients can now visit their agents, who are conveniently positioned near them, instead of travelling and waiting for hours at a bank location.

Users can use their agents to undertake a variety of banking operations, including withdrawing and depositing funds, paying bills, making loan payments, and more, all without the need for a formal ID or biometric.

To Conclude

Banks, retailers, and customers can all benefit from agency banking. It enables banks to spread their services to locations where they previously would not have been able to. Similarly, it benefits banking agents because it allows them to earn more money; also, the increased walk-ins enhance their sales. Finally, unbanked customers have easy access to financial institutions in their area.