Tag Archives: agents

Agent economics: profit-per-transaction-minute

This post is written by Debbie Watkins, bKash Resident Advisor in Dhaka, Bangladesh.

One part of the Alternative Delivery Channel (ADC) financial modelling equation is paying commission to agents.  When considering the share of revenue to give to agents, don’t just think about the amount they receive, but how much of their precious time they have to dedicate in order to get it. I call this the profit-per-transaction minute (PPTM) ratio, and it’s calculated in much the same way as the dollar-per-wear equation I use to justify buying a really expensive pair of shoes (but enough about that).

Here’s roughly how it works. In order to motivate an agent, they need to be offered a good ROI (return on investment), and a good ROT (return on time) – as this is how their existing business works. A small shopkeeper needs to do two things at a basic level in order to make profit: invest in stock, and invest in the time required to sell that stock. So, let’s say he’s an orange seller:

  • He buys 100 kg of oranges for $50 = $0.50 per kg (comprising roughly 10 oranges)
  • He sells them for $0.60 per kg = $0.10 markup per kg (or 20%)
  • The average transaction (weighing the oranges, putting them in a bag, taking the money) takes 1 minute
  • The average weight he sells per transaction is 2 kg
  • Therefore his PPTM is $0.20

This equation changes drastically if the markup remains the same but his average sale is only a single orange – the PPTM goes right down to $0.01 (so it takes him 20 times as long to sell the same amount and make the same profit as before).

This can be one way to guide that “how do I select agents?” discussion. Here’s an example, comparing a cash-in transaction to our orange seller’s PPTM. Continue reading →

Technology is only as good as the people who use it

This post is written by Veena Krishnamoorthy, an SBI Project Manager in India.

The last couple of years have seen a greater focus on reaching the underserved through the use of technology.  Alternate Delivery Channels (ADC) are considered a solution that will bring in efficiencies, bring scale and increase outreach at a relatively lower operational costs.  What we forget that ADC is nothing but a delivery mechanism!

When we talk about banking, we all know and realize that following systems, policies and procedures is extremely critical for success of banking.  While introducing a new delivery channel, such as mobile phones to provide access to savings or payment platforms, it is important that we do not forget to follow these basic rules.  It is important to bring in better control mechanisms to monitor and control the image of the bank.  The neighborhood kirana store (local retailer), which is where the banking agent is based, will become the new face of the bank.

For instance, during field visit of a partner bank branch, we were with an agent who was responsible for collecting savings.  The customer had a requirement of Rs. 200 that he wanted to withdraw from his savings account.  The field agent gave him the money without the customer signing a withdrawal slip.  The field agent was trying to keep his customer happy.  He did not realize the implications of that simple transaction and the impact on banking.  If the bank had given sufficient training and also ensured that the agent understood the implication of each transaction, then this would not have happened.

Let us not assume that the agents know what banking is or what the bank’s policies and procedures are.   This is where it is extremely critical to have a well documented policies and procedures manual for an ADC platform, a guideline and a rule book or a Bible, which can be used as reference by field staff as well as an agent.  Technology will help only if there are well trained and knowledgeable agents.  It is also important to ensure that a fraud and risk mitigation strategy and control mechanisms are in place well so that the agent does not have to worry about risks and issues.  This helps in building the agent’s confidence when he is sure that if he follows the guidelines, he will be able to serve his clientele better and thus increase his credibility.

To successfully bank beyond branches, there is a need to have well documented polices and guidelines, and a well trained agent network.  Like Warren Buffet said, “It takes 20 years to build a reputation and 5 minutes to ruin it.”

Charging the channel: How are we keeping the wallets on?

This post is written by Sam Grant, an SBI consultant based in Brisbane, Australia

Original Drawing by Sam Grant

Low Battery, beep beep beep, power down. It has happened to all of us, out and about during our busy daily lives, conversing with friends or business colleagues, when all of a sudden our mobile phone battery dies, and with it our ability to receive the latest tweet, SMS or Facebook status update. Now imagine that your cell phone is also your wallet and when it turns off so does your access to cash.

One of the benefits of a traditional wallet is that it will never display a “low battery” message and does not require an electrical outlet. A vital, if somewhat peripheral input in every alternative delivery channel (ADC) system is electricity. Without reliable, affordable access to electricity the advantages offered through mobile enabled financial services is severely restrained. If the path to improving access to financial services is tied to portable electronic devices then this path must also encompass issues surrounding access to energy.  Cell phone ownership has permeated most urban environments around the world but growth in rural areas is constrained by network coverage and access to energy. In rural areas where population density is low, villagers often must walk great distances to charge their mobile phones. Many of these cell phone users only turn on their phones when a specific need arises. In order to tap into the expansive amount of activity and innovation taking place in the “banking beyond branches” ecosystem, rural populations and financial service providers must find a way to overcome the charging challenge.

Continue reading →

Potential branchless banking agents in Bangladesh

Photo credit: Muhymin Chowdhury, bKash Deputy Resident Advisor, SBI

Small but trusted local stores, like this one in Rangpur, Bangladesh, are ideally placed to be branchless banking agents. The store is centrally located, and due to its popularity will typically have the level of cashflow necessary to ensure it is able to meet the needs of customers.