Agents or Mobile: What’s the channel of choice?

This post is written by Khurram Sikander, SBI’s Resident Advisor for UBL Omni in Karachi, Pakistan

Photo credit: Ryan D'Mello

In most emerging markets, the term “mobile banking” tends to be used interchangeably with that of “branchless banking.” As a result, branchless banking service providers may have overestimated the importance of the mobile channel while underestimating the importance of the agent channel when rolling out solutions.

Service providers have tended to dedicate significant efforts to developing the mobile aspect of their branchless banking propositions. For instance, in markets with a pervasive presence of smart phones, the mobile device has a significant impact on user experience and preference. As such, it ends up being a key consideration when a customer signs up for the service. By contrast, in less developed markets with low literacy rates, a face-to-face interaction with an agent is preferred. Human assisted transaction is paramount to the success of a branchless banking deployment whereas the role of a mobile essentially narrows down to a transaction authorization and alerts channel.

In Pakistan, the role of the mobile phone in expanding financial access to the poor has been relatively limited. The number of branchless banking accounts opened compared to active accounts remains low. Moreover, analyzing the transaction behavior of BB account holders shows the use of the mobile account is primarily for mobile airtime purchase. Clients retain small amounts of cash in their accounts in case they need to purchase airtime in emergencies or during late hours when vendors are inaccessible. SBI’s interactions with un-banked people have revealed an apparent demand for diverse BB products and services. The most pronounced need was for a facility that stores money in an account or instrument where a client’s daily or monthly earnings could be safe from criminals. Another need that was latent was saving money in traditional methods like community ‘saving and rotating committees’. Branchless banking propositions in Pakistan are primarily developed to facilitate transactions, such as bill payment, domestic remittance, and mobile account top-ups. Without a large gap in fee structure clients and non-clients find it easier to simply use the agent location to conduct transactions. In addition, agents have an edge in that they provide customers a printed confirmation which can facilitate disputed payments with utility companies.

For standard banking transactions, the prevalent culture in emerging markets is to prefer human interaction over “faceless” technology. This primarily owes to lack of awareness and a weak trust-based environment. Since domestic money transfer transaction is a one-off payment per month for most walk-in or existing customers, there is less inclination to open a mobile account for such a transaction. Walk-in customers prefer to add, for example, a bill payment to their grocery list and are able easily conduct this transaction while buying bread. Simply entrusting the transaction to the agent is more convenient than understanding how a new service works. The agents are glad to facilitate this transaction instead of selling the mobile account or transaction as this means less effort and more commission. In a country like Pakistan where the conventional banking technology infrastructure has substantively upgraded in the last ten years we can feel the impact of a shared electronic financial transaction gateway. With all major banks interconnected to each other, most banked customers are receptive to considering alternative channels to brick and mortar banking. Consequently, with the right incentives for both customers and agents, banks are successfully shifting transactions to various delivery channels. It is in fact quite common to witness customers pushing other customers or businesses to use channels for collections and payments primarily due to the convenience factor.

So what is the way forward? The key will be to proactively encourage agents to divert incoming traffic to open accounts and use mobile or any other channel for day to day transactions. This will be possible by designing an above-the-line marketing campaign that amply demonstrates the value of the product to the masses. This awareness campaign needs to be coupled with extensive below the line activities that show customers how to use the product. The right mix of attractive commissions and BTL efforts will enable agents to effectively sell the value of the account and make customers comfortable and accustomed with this new technology.

Over the short horizon, the agent and over-the-counter transactions will dominate the financial landscape until a system emerges where all the banks, MFIs, telcos, government agencies, and service providers become open to interoperability, creating a universe where mobile money is considered the norm rather than a choice.

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6 thoughts on “Agents or Mobile: What’s the channel of choice?

  1. Whether its the agents or the mobiles the choice of channels I think will be more dependant on the image of the Institution at the back-end (in-case) we are talking about about opening of deposit accounts and maintaining them.

    Little use of the BB accounts for the sake of keeping larger deposits as witnessed by Khurram other than those meant for mobile air time top-ups, etc may be attributed to this.

    I will entrust my money only with a Bank of a good standing whether the channel to transact with it is a BB or a conventional one.

  2. Very well put indeed. The terms ‘Mobile banking’ and ‘Branchless Banking’ indeed are so synonymous in Pakistan at least, that I never realized this business could be conducted in any way other than through the m-payment gateway.

    As you have suggested, I also agree that the usability of this infrastructure in terms of what all possible services be offered/ availed by the masses is a critical juncture for the progress of BB in Pakistan. I think its a battle that will be won or lost not in the metropolises but in the rural towns in the country where the un-banked market lies.

  3. The observationsand opinions are very true.

    The discussion is attempting the long outstanding issue of financial literacy and capacity building. Technology can only be an aid to that effect

    I have got the opportunity of getting involved with multiple financial inclusion projects in India. Most of them found it challenging to scale up beyond the acquisition level

    Usage is a habit which can only be built in through education which comes through interaction.

    Agent recruitment, agent retention and financial literacy are the key drivers for the future success of Financial Inclusion/Branch less banking

  4. @ Raja — I beg to differ Raja Sahib, Consider your self a person without a car, living say 100 miles from nearest urban area and want to receive your payment for your produce you sold to some one on credit who lives in the city (far, Consider public transport cost of Rs.50 for this distance). There is a branchless banking service provider with an agent location 20 feet from your house. This service may not be backed up by the biggest names of the banking industry, but I am sure will definitely be a consideration for you to open an account because of the value it provides you. You will be one good experience away from getting hooked. And that is the nut to crack. Creating the drive in people who need this service to find out about its value and delivering them that one good experience to get hooked.

    The value is pretty clear…. but resources need to be channeled towards educating as rightly pointed out by Saurabh Kanti Dev

  5. Good analysis 🙂

    You have rightly concluded that need of the hour is interoperability. Banks and Telcos who have taken lead in this space need to work out how to achieve interoperability without focussing too much on the Mobile channel only.

    Since most of the telcos in Pakistan have invested heavily on infrastructure there is a tendency to keep the telco infrastructure accessible only to their own mobile banking and branchless banking initiative customers. An example in this case is USSD channel. In short term this works fine but to take branchless banking to next level using mobile as a channel, telcos will need to open up their infrastructure

    Unless fee structures are compelling enough Agents wont be too much inclined to encourage customers to open up branchless accounts. Generally an agent’s mentality is that if the customer walks in regularly he is earning from each transaction made over the counter and if the customer opens up an account, he will be doing self-service transactions (for payments and transfers) and hence Agent won’t be earning anything on a regular basis.

  6. Thank you all for the insightful comments. The challenge I might foresee in suggesting inter-operability at this stage of the branchless banking development is that Banks or Telco’s might become less inclined to move into this space. It is important to build scale and have multiple players competing with each other for market share and once the concept matures and the infrastructure is developed (even in silos) the regulator can step in. Is the local market at the stage where we should talk about inter-connectivity? Maybe , maybe not. However I do feel it is the right time to start planning for it.

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