Agency banking is one of the models being used by commercial banks to reach the unbanked across the nooks and crannies of the country. But it is facing new challenges like poor quality of network in accessing digital services and exorbitant cost to their customers, writes COLLINS NWEZE.
There is a new banking model that interests everyone because of its closeness to its customers. It is agency banking, a mechanism being used in emerging economies to expand demand for banking services, decongest bank branches, reduce the cost of serving and achieving financial inclusion. It also holds a promise of a low-cost means of market penetration by banks and other financial institutions, especially into the rural areas.
Agency banking is not only accessible to everyone because of its closeness to people’s homes and markets, but its networks are also sited at close intervals to ensure more people are reached.
The Central Bank of Nigeria (CBN) encourages banks and other financial institutions to explore the benefits of this model to bridge financial exclusion gaps.
This is because access to financial services by a large number of the population, especially the unbanked and underbanked, enlarges the productive base of the economy and accelerates the pace of development.
That explains why the financial service providers, government and policymakers, regulators have found new ways to get financial services closer to the people.
They have been making efforts at global, sub-regional and national levels to increase access of excluded populations to finance. And one of the shortest routes to achieving this is agency banking.
The model, which the CBN and banks have been promoting, is cheap, easy to embrace and attracts low costs to serve. Agency banking takes financial services to customers through a third party (agent) on behalf of a licensed deposit taking financial institution and/or mobile money operator.
It, however, requires the deployment of right technology to achieve desired results. There are about 307,000 Point of Sale (Pos) machines in Nigeria, 30,000 Automated Teller Machines, and over 6,000 bank branches but only 167,000 of the PoS are active and agency banking helps to bridge the gap.
According to the CBN Governor, Godwin Emefiele, the objective of agency banking is to, through the different agent channels, enhance financial inclusion, make financial services delivery channel efficient and take banking to the grassroots. A sole agent does not delegate powers to other agents, owns outlets and conducts banking transactions on behalf of banks using a configured channels. The super agents are payment facilitators while the sub-agents handle tasks assigned to them by the super agents.
According to him, commercial banks have continued to embrace agency banking to improve their customer base and support their cost-saving strategies.
For instance, within its first 100 days, Polaris Bank’s agency banking initiative, SurePadi, serviced over half a million customers impacting directly an estimated two million households across the seven business regions of the bank nationwide.
Beyond the direct impact on customers and households in Nigeria, the sheer volume and value in financial numbers on the gross earnings of the bank has been significant as the agency recorded giant strides in the number of services and transaction volumes it processed which was valued N10 billion.
Its Chief Digital Officer (CDO), Dele Adeyinka, explained that, in the first 100 days of introducing SurePadi, it had carried out over 500,000 services, and transaction volume above N10 billion servicing over two million households, giving them easy access to cash for businesses and family needs.
According to Adeyinka, “As a result of this milestone, SurePadi was ranked fifth in Q1, 2020 by the Shared Agent Network Expansion Facility (SANEF) report-an indication that it is bridging the gap and helping people to meet their needs of accessing funds; as well as sending money to their loved ones”.
Access Closa provides access to financial services right within the neighbourhoods. Access Bank’s authorised agents process transactions quickly and easily via platforms such as PoS terminals or mobile phones, helping customers to carry out transactions without visiting a branch.
Speaking at one of the Access Bank’s ‘Compliance Engagements with Agents’ in Lagos, its Deputy Group Managing Director, Roosevelt Ogbonna, said the bank is, through agency banking, setting standards for sustainable banking practices and delivering value to customers.
He lauded the agents for believing and partnering with the bank, adding that the lender will also ensure that the business relationship remains mutually benefiting. Ogbonna described the agents as credible partners who will continue to support the lender in realising its financial inclusion target.
Despite the benefits that come with agency banking, operators are expected to follow set rules. The agents are not allowed to operate or carry out any transaction when there is communication failure with the financial institution or carry out a transaction where a receipt or acknowledgement cannot be generated.
Also, the agents are not allowed to charge the customer any fee, give any guarantee, offer banking services on its own accord, continue with the agency business when it has a proven criminal record involving fraud, dishonesty, integrity or any other financial impropriety.
They are not to provide, render or hold itself out to be providing or rendering any banking service which is not specifically permitted in the contract. Also, they are not to undertake cheque deposit and enactment of cheques, transact in foreign currency, provide cash advances and be run or managed by a financial institution’s employee or its associate.
– The Nation