Clara Veniard, Associate Program Officer, Bill & Melinda Gates Foundation, talks about a bank-led agent model where the customer proposition and the channel are controlled by the bank.

• Definition: A bank-led agent model is one where the customer proposition and the channel are controlled by the bank.
• Incremental Approach: A bank can grow its agent network slowly, building on its existing brand, customer base, and infrastructure, reducing the “chicken and egg trap” faced by mobile money.
• Banks benefit from strategies to migrate customer transactions from branches and other existing channels to the agent channel.
• Banks already have a large network of cash in and out outlets customers can access even if the bank only has a few agents.
• In countries with low levels of financial inclusion and limited banking infrastructure, agent banking needs to achieve scale just as quickly as mobile money because of diminished opportunities to migrate customers and to leverage existing banking outlets.
• Models based on P2P transfers especially need scale quickly because senders will be less willing to send money on the service if recipients do not have nearby access to an agent, branch or other outlet.
• Banks still need to get a few things right:
• Agent economics. Scale in customer volume is still important at the local-level in order to ensure that each agent has enough incentives to promote the service. Banks can migrate customers from branches and, in new markets identify an early revenue driver.
• Agent management. Agent banking models face the same agent management issues as mobile money systems. They must ensure agents are appropriately selected and managed on an on-going basis in order to ensure the customer has a consistent experience.
• Transaction-based revenue model. In order for a bank to utilize its agent channel to reach new low-income client segments with a new value proposition, rather than to decongest its branches, it must employ a transaction-based revenue model to be profitable, instead of one based on float and monthly fees. This is because customers conducting transactions will maintain minimum balances close to zero at first, uptake of the service will be too slow if minimum balance requirements and monthly fees are required, and transaction volume will likely increase with greater agent proximity.
• Pathway to accounts. Given that bank-led agent networks allow non-account holders to use the agent channel, users do not benefit from the same network effects as mobile money and may not have an incentive to open an account. This decreases customer loyalty (customers can easily start using another bank’s outlets) and reduces the bank’s ability to generate significant additional revenue from a customer through cross-selling. Banks must design incentives for customers of the agent channel to open accounts, including through preferential pricing and simple and immediate account opening processes at the agent.
• Product cross selling. Agents are not effective at promoting specific products and cross-selling additional financial services and banks should use well-trained and motivated itinerant branch employees, third party sales forces, and marketing.
08:35 minutes