What is agency banking?
Agency banking can be thought of as a peer-to-peer network for financial services. It differs from traditional banking because it does not involve a central service but rather works through a mutually agreed-upon provider network.
Agency banking provides many benefits over traditional banking, such as lower interest rates, larger account sizes, and the ability to engage in the retail bidding process on products and services offered by third-party providers.
Components of agency banking
Below are the components of agency banking-
1. Agent banking service provider
Agency banking service providers provide assistance and services to their bank agents, such as marketing and cash handling. They operate services through the use of licensed agents and business partners.
2. Banks/Financial institutions
The bank and financial institution interacting with consumers and agents respectively is the central unit of agency banking. It is a medium through which the flow of capital takes place.
3. Banking agents
Banking agents specialize in different services and are responsible for executing the specific jobs given to them by their respective banks or financial institutions. They work under the manager supervision and are given specific tasks by the bank based on their duties and responsibilities. The main objective of a banking agent is to provide customers with good service, which helps them maintain their good standing with the financial institutions.
They are responsible for all banking activities, including; withdrawing cash, paying bills, receiving deposits, paying clients with loans, etc.
Super/sub-agents can give you access to their banking agents and take a cut of the profits.
5. Mobile operators
Mobile operators represent one of the most organized forms of communication on the planet. They offer mobile subscribers the chance to communicate on a grand scale through SMS, voice calls, MMS, and USSD. Mobile operators also enable transactions via the mobile phone that include buying airtime, paying bills over the internet, and sending money to relatives overseas.
Agency banking allows consumers to access their bank accounts using a mobile phone. It is beneficial for those who do not have a bank account or live in deprived areas.
How does agency banking work?
To begin providing agency banking services, branchless banks need to be equipped with a customized agency banking solution that allows for a smooth transition from the web channel to the agent channel. The first step for a successful onboarding process is integration with each customer’s banking app. This integration allows client bank balances and transaction histories to be available on any agent or the client’s mobile device. In addition, clients can make payments, pay bills, check balances, and view statements.
Below are the steps of working of agency bank-
Get authorization as a banking agent
The retailer establishes its relationship with the bank or financial institution.
Once both parties complete the authorization process, the banking services provider creates a mWallet for the agent. The agent can deposit their prepaid balance, enabling them to deposit money on behalf of their clients.
Customer opens his bank account
Customers can open their bank account by visiting the nearest agency location, providing valid identification (ID), and completing the required account application.
Cash in (deposit money)
Customers have to pay cash to their agent in order to deposit money. When the agent logs in, he will access the digital money in his Business Mobile Wallet, then convert it into cash that he deposits into the customer’s account.
Cash-out (withdraw money)
A mWallet password grants the agent access to the mobile wallet app on his phone. The USSD menu on this phone transfers funds from customers’ mobile money accounts to the agent’s mWallet. The agent then takes the cash amount to the customer in exchange for their mobile money.
Advantages of agency banking for banks
1. Reduce costs
Agency banking is a highly cost-effective way for banks to increase their presence in areas that traditionally have low penetration of banks. It enables banks to service customers without setting up physical branches in these areas, thus reducing investment costs.
2. Increasing customer base
Running an agency will grow your bank’s reach into nearby markets, positioning you to reach ambitious growth targets. Banks and financial institutions who partner with banking agent companies will increase their profitability, as they can reach out to more customers in remote areas.
3. Asset quality maintenance
Without agents, banks cannot get familiar with individual clients. In other words, they may not have a clear picture of the client’s repayment capacity or financial stability. They need to get such necessary information and insights from banking agents to maintain their asset quality.
4. Build trust and awareness
Banks using an agent network can retain greater customer goodwill by providing a human touch in their banking services. Banking agents work with the community to bring a sense of security and trust into the world of formal banking. With such a positive influence on their local community, bank agents generate more business and profit for the banks.
5. Enhanced customer experience
Agency banking helps the bank in improving branchless services and providing efficient customer experience in an advanced manner. Banks can easily navigate and access payments and agents in a seamless manner. This, in turn, benefits banks in eliminating inefficiencies, enhancing control over payments and customer service, and reducing costs.
6. High security
Apart from convenience, agency banking can also provide increased security and privacy to customers. Clients can utilize a magnetic stripe card and a personal pin for authentication purposes. When compared with traditional cash management services, agency banking offers increased privacy to customers.