Basic Guide to Agency Banking (1)

Olusegun Odebiyi

 

According to a report by the World Bank, around 1.7 billion adults in the world remain unbanked as they don’t have a bank account. Back in 2014, this number was 2 billion. To fight this grim reality the governments of many countries have started to aggressively focus on financial inclusion.

At the same time, it’s also important to understand that availing banking services is not easy for all. Almost 59% of unbanked adults have stated the lack of affordable banking service as the major reason for them to not have an account. In addition to that, the exhausting documentation process makes the matter worse for the unbanked people. But with the latest Fintech developments, banking is all set to change forever.

The combination of internet and smartphone penetration has served well for the financial industry, especially the banking sector. It has empowered banks to offer their services to a person irrespective of his location. This new phenomenon is called branchless banking or agency banking. In this article, we will see what agency banking is and how it is impacting banking all over the world.

As a registered agent with various banks and fintech in Nigeria with over 3 years of business experience in Agency or Retail Banking, I will like to state that anyone who wish to venture into Agency banking must be equip with the necessary information before venturing into the business. The business is lucrative and profitable but at the same time it volatile and exposed to a lot of risk. A single mistake or carelessness can land an agent in Police custody or irredeemable loss.

 

What is agency banking?

Agency banking is a type of branchless banking that allows the traditional banks to extend their network of branches and services in a cost-efficient manner through authorized agents. Agency banking is gaining popularity due to various reasons like product availability, risk management, improvement in financial inclusion, and many more.

 

How does agency banking work?

To provide agency banking services, the banks need to have an advanced agency banking solution that facilitates seamless banking experience to the customer along with establishing smooth coordination among all the components of agency banking mentioned above. Below are the steps as to how branchless banking works.

Get authorization as a banking agent

In the first stage, the retailer gets authorized as a banking agent by his respective bank or financial institution to perform various financial transactions such as listed below:

Create mWallet

Once the authorization process is completed, the banking service provider creates mWallet for the banking agent. Once the mWallet is created, the banking agent deposits a prepaid balance in it.

Customer opens his bank account

Customers can open their bank account by simply visiting the nearest banking agent with a valid ID and utility and the Agent will help the customers in necessary documentation and filling of the documents in the bank without the customers necessarily visiting the Bank. The Agent take away the stress of queuing up at the Bank from the customers. The bank then reward the Agent with a commission after a successful opening of the account.

Cash in (deposit money)

To deposit money, customers have to pay cash to the banking agent. The banking agent then transfers the same amount of money from his mWallet to the customer’s account. The agent then issue a receipt to the customer as evidence of transaction

Cash-out (withdraw money)

Customers can transfer money from their account to the agent’s mWallet by using the USSD menu on their phone. Afterward, the agent pays the same amount to the customer in the form of cash.

The banking agent can access various banking services and perform different actions via a user-friendly agency banking solution.

Advantages of agency banking for banks

Reduced costs

Agency banking is a very cost-effective way for banks and financial institutions to extend their services in the areas that have lower penetration of banks. With agency banking, banks and financial institutions don’t need to set up a physical branch thus reducing operational, infrastructure, maintenance, and other high-capital investment costs.

With agency banking, the banks can kill two birds with one stone. First, they can save the cost required to set up a new physical branch as maintaining a physical branch on average is 25% costlier than managing the network of agents. Second, they can increase their profitability by driving business from the areas which were previously untapped.

 

Increasing customer base

With the help of banking agents, the banks and financial institutions can finally offer their services to the large section of unbanked and untapped customers. This huge surge in the number of customers increases the profits of banks in many folds.

Similarly, with agency banking, the banks can have a large number of agents under them which can, in turn, bring more customers to the bank and financial institutions.

Asset quality maintenance

Banking agents are usually familiar with the clients as they have good relations with them. Agents are aware of their repayment capacity, financial stability, and many other factors that help banks to make decisions on loan lending. With such key insights, the banks can maintain their asset quality.

 

Build trust and awareness

Banking agents provide a human touch to the formal banking system. Users find comfort in interacting with someone they know. That’s precisely the reason why users trust agents more than the formal branches.

With such comfort and convenience, clients feel safe to perform all the financial operations that they need. Such trust in banking agents encourages the whole community to utilize agency banking in their regions.

Enhanced customer experience

Agency banking provides users with enhanced customer experience. Branchless banking has brought banks to the doorsteps of users. Now, instead of traveling and waiting at the bank branch for hours, the clients can simply visit their agents which are located at their proximity.

Users can perform various banking operations through their agents such as withdrawing/depositing funds, paying bills, loan payments, and many more without any formal ID or biometric.

Agency banking is an easy platform for the users as it delivers various banking solutions for the unbanked populations with the use of phones, card readers, POS (point-of-sale) terminal, and many other cutting-edge technologies for processing real-time transactions.

Point of Sale (POS) terminal business has become an acceptable means of financial transaction in our environment especially at this time of Epidemic and the stress and time it takes to queue at the banks for transaction.

Customers were the one scared of being scammed by an agent through their ATM card when the business was new in Nigeria until now that agents have gain the trust of customers overtime.

Situation is now the other way round, POS agent are now to be careful of being get scammed or robbed by their customers or prospective customers hence the need for the security tips for agents in this article.

 

Six important security tips for POS agent

 

  • Don’t collect transfer for Cash: To avoid the issue of fake transfer, or transfer from a scammed victim it’s better not to collect transfer from your customer that want a cash in return. A Customer may claim that he forgot his ATM card at home and requested that he should transfer money to your account and collect cash in return whereas he might have a bad agenda. He might send you a fake transfer or send your account number to his prospective scam victim if he is a scammer and expect cash in return from you when the scammed person send money into your account.

This might lead you to get involved in police negatively and even if you will be later found not guilty, you would have loose some things. You will also have to part with your hard earned capital if you are a victim of fake transfer. So it is better not to receive transfer for cash from a customer.

 

 

 

  • Always re-check your programmed amount by checking the receipt or your balance: For timely notice of a re-programmed withdrawal amount, always re-check the receipt before giving out the cash to your customer.

Some customers know how to operate the machine and the one with an evil agenda might re-program the amount he told you to a bigger amount whereas you already have the amount he told you in mind and thereby innocently give out the said amount.

Therefore it is advisable to always check your receipt or Balance before dispensing Money to your customer.

 

  • Don’t rush to answer a question of availability of bigger amount: A customer might ask you if a large amount is available for withdrawal (e.g Do you have 120,000 on ground or Can I withdraw 150,000) in order to know your financial capacity and to know if it worth it to rob you.

In this case, be wise and study the person well and consider his seriousness before you answer especially if he is a total stranger to your environment even if you have the money.

 

  • Remain calm and stand your ground for pending transfer issue: Some customers are impatient when a transfer is pending and you have already been debited but they become furious because they have not get alert immediately.

At this state, you just have to calm them down and explain it to them. Since your shop is stationed and you are not running away, just tell them to come back if they didn’t receive alert in few hours/minutes time. If you refund them and the pending transaction become successful, you might not see them again and you will be on the losing side.

 

  • Don’t do the business in front your of residence: Doing the business in front of your house is not advisable if there’s not a tight security because you are dealing with cash and everybody will know that you are sleeping and waking up with the cash at your house.

 

Imagine this, a customer might come to deposit 150,000 naira at your shop around 7pm and still be the same person to come and rob you of it at night because he knows that is your house and that you can’t finish the 150,000 before the end of that day since he came to deposit around 7pm when the day is almost over.

 

  • Don’t close too late: Evil are mostly perpetrated at night, remember you are dealing with cash so stay safe by closing early. Early is relative to environment.

 

The level at which different areas are busy are different from one another so study your environment and determine the best earliest time to be closing.

Olusegun Odebiyi is the CEO of Fuse Computer Solutions, a business specialized in CCTV installation, LAN Setup, Radio Deployment and Mobile Banking Agency

He can be reached on Whatsaap: 08170290909 and fusecomputersolutions@gmail.com

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