Agency Banking

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Short overview of Agency Banking / Correspondent Banking partnerships and a few examples of different flavours of implementation around the world.

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Agency Banking

  1. 1. Agency PartnershipsCollaboration with MNOs & Other Intermediaries for Banking ServicesDiscussion slides for an interactive session on Agency Banking and servicepartnerships.13 November 2012Dan Armstrongdan.armstrong@takashimobile.com+31 652 085 071
  2. 2. Agency Partnership Business Rationale Strengths Opportunities • Lower cost than building traditional bank • Tendency to leave money in bank account, branches, hiring fixed employees with easier access / more locations • Commission-based costs supports scaling • Combined behaviour (banking & agency Agency network, variable financial case location activity) can increase number of • Helps lower queues in bank halls banking moments, joint activities • Can support retailer / SME banking business • Support card usage (if using POS) line • Can generate new bill payment revenues (incl. • Can be used to sell business accounts, taxes, school fees) in some markets allowing salary disbursal for employees • Can increase customer base (more locations) Weaknesses Threats • Lack of real control of agent behaviour, cash • Bank reputational risk if things go wrong control • Partner management / CIT key to Agency • Less chance of real interaction with customers, Banking success, often requires branch up-sell/cross-sell support to ensure Agencies are supported • Requires a “partner management” programme correctly / systems / people • Will consumers accept this in some countries? • Requires careful management of float, collection accounts, etc. Distribution Conference 11/2012 – Dan Armstrong – page 2
  3. 3. Agency Banking Partner Types  Retailers (chain, independent)  Insurance Outlets  Post Offices  Lottery Outlets  Mobile Network Dealers  Pharmacies  Customers  etc. Distribution Conference 11/2012 – Dan Armstrong – page 3
  4. 4. Scope of Potential Agency Banking Partnership Bank Employees @ Agency Employees Agency Employees Non-Employees, Branded Retailer / @ Un-Branded @ Branded Retailer Un-Branded, Other Location Retailer / Other / Other Location Independent (Mini Branch/Stand) Location (Mini Branch/Stand) Operators (Cashier/Stand) • Expansion of the • Popular in the late 1990s • Most commonplace type • Usually independent airtime traditional postal bank and early 2000s with the of Agency Banking dealers, one-man model for banking US Post Office, with “co- relationship enterprises • “Shop-in-Shop” concept managed” employees (on • Usually cash-in/cash-out, • Usually no fixed location has proven successful in the grocery stores payroll, balance checking, bill infrastructure, but regular trusted retail locations, but also reporting to a payments place to be post offices, etc. postal manager) • Sometimes combination • Don‟t normally have a • Can provide a wide range • NL TNT Post has closed w/card acquiring business business license or of banking services, most post offices and (enabled payment with legitimate tax regime. account sign-up, loan implemented “branded” cash-back too) • Cash management support booking, etc. retailer locations • Additional services can be critical to assess. • Requires more investment brought by the location than simple transactions (DSA, truck banking, etc.) Distribution Conference 11/2012 – Dan Armstrong – page 4
  5. 5. Agency Banking World-Wide Distribution Conference 11/2012 – Dan Armstrong – page 5
  6. 6. Brazil  Brazil is probably the most developed market where banking agents have significantly increased financial system infrastructure.  74 institutions are currently managing around 105,000 points of sale that reach all 5,561 municipalities. The Brazilian correspondent banking locations are over 60% of all points of sale in the Brazilian financial system.  Financial institutions in other Latin-American markets such as Peru, Colombia, and Mexico have started to learn from the Brazilian experience, adjusted their regulation and established their own banking agent networks. Distribution Conference 11/2012 – Dan Armstrong – page 6
  7. 7. Sicredi Total  Sicredi Total s a “correspondent banking” programme currently running at 2.346 retailers, pharmacies, etc.  Enables direct debit authorisations, basic banking services, mobile/internet banking and bill payments in an Agency Banking model.  Core services: water and electricity bills, telephone bills and bloquetos. Distribution Conference 11/2012 – Dan Armstrong – page 7
  8. 8. FINCA Express (DRC)  FINCA, international microfinance group, is moving strongly into alternative channels since 2012.  Primarily Agents for loan repayments, but includes withdrawals and savings too (savings launching in Tanzania and Zambia soon).  Pilot in 23 locations in Kinshasa and other locations in the Democratic Republic of Congo.  FINCA pays for all transactions, pays Agent a monthly retainer and per-transaction fees.  A good example of the many Agency networks around the world focusing on loan repayments. Distribution Conference 11/2012 – Dan Armstrong – page 8
  9. 9. Vision Banco Ñande Bank - Network of Correspondents (PY)  Capabilities: Loan Applications & Repayments, Credit Card Collection, Collection Services, Deposits & Withdrawals, Balance Inquiries, Cash Advances, Remittances (soon).  Transactions are 100% free for all customers  Requirements: • Must be a commercial establishment open to the public • Must have a good reputation, experience and service attitude • Must be recognized representative in the community or sector • Must have credibility with customers • Must have adequate conditions / physical space for the location of a cash box and a customer queuing capability  Any results or input from Banco Regional? Distribution Conference 11/2012 – Dan Armstrong – page 9
  10. 10. PEP Intermedius (KE) & EKO/- (IN) – agency aggregators  These companies aggregate services and float in a formal manner with owned or franchised locations.  PEP Intermedius • Network of cash merchants Agency aggregator for MPESA, Airtel Money, KCB Mtaani, Yu Mobile (Essar Telecom), Orange Money • Aggregated float, 36 own agents & 140 franchise agents • Also in all 29 Kenyan Nakumaats  EKO/- • Banking and Money Transfers, Payments, SimpliBank Platform and Cash Management (CIT). • EKO/- agents provide services for State Bank of India, Yes Bank, ICICI Bank. Distribution Conference 11/2012 – Dan Armstrong – page 10
  11. 11. Smart HAPINOY & MicroVentures (PH)  SMART Hapinoy (launched in 2007) is an interesting paradigm wherein they‟ve created an M-PESA-like (strong branding) and allowed all sorts of small shop-owners (“sari-sari” stores) to take part.  Microfinance funding for store development is included.  Hapinoy is functioning as a prepaid airtime sales tool, money remittance and payments mechanism (SMART Money) and provides direct loans to customers – with MFI partner MicroVentures Inc.  ~20.000 “micro-entrepreneurs” using Hapinoy across The Philippines and joining the follow-up “Path to Prosperity” programme designed to increase all member‟s sales volumes to USD 10.000 per month. Distribution Conference 11/2012 – Dan Armstrong – page 11
  12. 12. Zanaco Xpress & Zampost (ZA)  In addition to their Bank POS programme, Zanaco has established a partnership with ZamPost for Bank POS at 121 post office locations and 9 independent retailers (130 ZamPost locations in total).  Services during the pilot: • Balance Inquiry • Deposit • Withdrawal  Dedicated central team, with regional support in the branches.  Some cash management issues with individual ZamPost locations. Distribution Conference 11/2012 – Dan Armstrong – page 12
  13. 13. Australian Post  Provides banking services on behalf of 70+ banks/financial institutions at 3.200 outlets.  Deposits, withdrawals, account balance inquiries, bill payments, etc. No fees for any of these services.  “Bank@Post” partnership with Rural Bank for account opening.  All-services payment concept with remittances, prepaid VISA, PostPay online e-commerce product (pay on delivery) & Pay it @ Post (accepting cash for online payments) in combination with SecurePay (online payment product). Distribution Conference 11/2012 – Dan Armstrong – page 13
  14. 14. Banks & Post Offices in Supermarkets (US)  The US has been working with these collaborative models for years.  Primarily “shop-in-shop” models for services, leveraging large retailers (Walmart, K Mart) or super markets.  Some examples: • Post Office () • Banks () • Mobile Network Operators () • Health Care / Medical Check-Ups () • Opticians () • Coffee / Food Services () – however, often “retailer-owned” • Pharmacy () – could be “retailer-owned”, depending on the U.S. state  Some services (like post office) in retailers are being phased out based on lack of traffic/customers. Source: Rabo Development research Distribution Conference 11/2012 – Dan Armstrong – page 14
  15. 15. United Bank Ltd. “Omni” Branchless Banking (PK)  Pakistan‟s popular United Bank Ltd. “Omni” Branchless Banking program, the bank will be available in full-service “kiosks” (for the 580+ plus Omni locations in Pakistani “Dukaans”) at partner locations.  Only CNIC number and mobile phone number are requirements, with the mobile phone number becoming the bank account number.  For UBL Omni, the link between mobile phone number and bank account has also helped support the penetration of financial services „down the pyramid‟ to individuals who would not normally choose to access financial services, who cannot afford card-based banking product or who do not live anywhere near a traditional bank branch.  Major support for UBL Omni doing disaster relief dispersal during the last round of floods.  Non-UBL Omni customers can also make utility and postpaid phone payments, send/receive funds, and buy prepaid airtime at UBL Omni Dukaans. Distribution Conference 11/2012 – Dan Armstrong – page 15

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