Branchless banking services: Agent-sharing limiting outreach, says regulator
In a practice that has already slowed down the pace of financial inclusion in the country, branchless banking (BB) services providers – as opposed to expanding agent network – are increasingly focused on agent sharing.
“The combined agent network of BB players has increased to 168,615 agents largely owing to the agent sharing phenomenon,” State Bank of Pakistan said in the Branchless Banking Newsletter for the April-June quarter.
However, the regulator of BB service providers also highlighted the downside of the industry’s increased dependence on agent sharing or the existing network of agents that serve the end user.
“While agent sharing has increased consumers’ choices, it has also limiting physical outreach of agent locations,” the central bank said. “Another significant observation is the agent commission, which is seeing rapid changes, revealing that few players are steering the agent preferences largely through agent incentivised.”
Besides hindering network expansion, the practice seems to have irked the established players, such as Easypaisa and UBL Omni, which invested heavily in developing a vast network of agents in the first place – especially because the latest entrants benefited from an already established network by offering higher commissions.
“This is not agent sharing, I call it agent riding,” Telenor Pakistan’s Head of Strategy, Financial Services for Easypaisa Omar Moeen Malik said in a recent interview with The Express Tribune.
While briefing a select group of journalists about the current challenges facing mobile financial services sector, Malik said they trained these agents and invested in them but the new players offered higher commission.
The Easypaisa’s strategy head even disputed the SBP’s figure of combined agent network. “The actual number of agents will be around 60,000 to 70,000 if no agent is count multiple times,” Malik said.
A joint venture of Telenor Pakistan and Tameer Microfinance Bank, Easypaisa is the largest player in mobile banking, accounting for more than half the market. In 2013 alone, it moved $2.2 billion in transactions, mainly in domestic remittances.
Giving background of mobile banking segment, Malik said the branchless banking segment had been dominated by Easypaisa and UBL Omni for a while. The market was growing but they were not competing directly because of their different strategies. Easypaisa was more a consumer-centric product offering person to person (P2P) money transfers and payment of utility bills for example, while Omni was more inclined towards government payments (G2P).
With the agents getting incentives to serve multiple players, even established one, companies such as Easypaisa have to put off their expansion plan fearing the new agents they trained would also be incentivised by other players in a similar way. “This further slowed down the growth of financial inclusion to the rural areas of the country, which remain unbanked,” Malik said.
Asked if the regulator is doing something to discourage this practice, Malik said, “We have proposed the SBP to come up with new regulations in this regard.” He further said that they have proposed the central bank to increase the transaction limit, use a biometric verification system to open mobile accounts and help migrate over-the-counter (OTC) customers to mobile wallet customers. OTC transactions still account for 80% of the total BB transactions whereas share of m-wallet transactions remained at 14%, as of June 2014.
“The government should open government payments to private sector, which will not only help the industry grow but also increase customer convenience,” Malik said.
Published in The Express Tribune, October 26th, 2014.
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COMMENTS (4)
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@pervez Mobile Money is a whole new ball game. The problem lies in Pakistan relying too much on OTC and not encouraging wallets. The agent network is the core of telcom distribution and they use it for branch-less banking as well. The success story starts from Kenya which now runs more than 50% of their GDP on mobile money.
Agents or merchants are the same; the customer will come to them to get cash as they don't have a bank account so they will be teh people distributing cash.
The success of mobile money business relies heavily on the cash/e-Money balance at the agent.
The solution to Mobile Telecos spending money and effort to build agent network can be tackled by state bank introducing a fee (initial) on telecos using the already trained agent payable to the Teleco who trained the agent.
Kenya has hot an exclusivity contract with the agent to tackle this which creates monopoly
@adnan: I do understand. Telenor did all the hard work and now the others are taking advantage of that so telenor is miffed. Doesn't change that they did the wrong kind of work in the first place. Signing up agents to disburse cash is foolish when we all know that electronic payment systems are far more efficient. They should have signed up merchants instead. It's like aiming for black and white TV in a world of colour television.
@pervez With due respect i don't think you understand what the article is talking about
Investing in a branch network is a waste anyway. They should be focusing on internet banking and payment processing. Banks around the world are shutting down branches because the majority of transactions are conducted online. In Pakistan they are figthing over agents that disburse cash when really they should be trying to sign up shops to accept payments via mobile accounts for goods and services so that people don't have to exit this system at all.