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Agent Network Evolution: From License to Live

Posted on by MSC

When the champagne bottle is popped for the successful launch of a digital financial service (mobile money/ agent banking) agent network, nobody – hopefully, with the exception of the agent network manager (ANM) – seems to appreciate the efforts behind ensuring the product launch is premised on an immediate start in transactions.  This is paramount because most new roll-outs stumble here and never recover.

So once the milestone ‘No Objection Letter’ (or license, depending on the jurisdiction) is received from the authorities, what is your short-list of priorities that must be executed to ensure your launch party is not the last party you throw? The answer to this question will depend on an initial examination of the maturity level of the market in which you are operating and the target demographic your roll-out has chosen to target first.

These considerations will determine how you cross items off your list, but the top four items that you need on it, are fundamentally the same everywhere.

 

1. Strategic Clarity on Agent Quality & Qu antity: You will need to understand how your business model projections and target market affect the spread and quality of your agents.  Lowering float requirements might drive agent applications in the short term, but lead to agents being unable to transact at high volumes or values.  Will that conflict with your vision of success?  Other trade-offs will affect how/if your agents become located in areas that align with your business model and provide service to the quality that your demographic expects.  These trade-offs include how much marketing materials will be provided, the amount of training provided at inception and the KPIs you set for opening rural locations. Avoid common pitfalls like thinking that mass market demographics do not want high quality service; and that if one heavily favours low quality, high growth at the beginning of the roll-out that they will easily be able to shift that back to high quality later.

2. Aligned Incentive Schemes: One of the most – if not THE most- challenging task for the agent manager is building a business case that will appeal to prospective agents.  Often pricing structures are designed for the customers, but forget that everyone in the ecosystem “has to eat”, and in this sense, agents are customers too.  The manager has to balance attracting the most desirable set of agents with an exciting Return on Investment (ROI) structure, with ensuring that the business breaks-even sooner rather than later.

It is essential that you have an incentive scheme that is aligned with your business plan, and rewards the agents based on the quantum of efforts made.  Furthermore, programme some flexibility into it, so that the structure can evolve fluidly with shifts in your business model. For example, in the first year, customer on-boarding will be the most important to the business. Therefore, you may want to skew a lot of the incentives to customer on-boarding, but later-on taper this off and increase rewards to alternative growth areas, like P2P or pay-bill transactions. Further, you may keep the network management in-house right after launch when the network is small, but if you plan to scale, most will bring in a mid-level master agent structure later, and the incentive structure will have to be able to accommodate this seamlessly.

3. Below-the-Line (BTL) Marketing & Communications Strategy: Many providers spend a fortune in above the line (ATL) marketing ignoring on-the-ground activities where the rubber-meets-the-road.  From my own experience, whereas ATL is important to build product awareness and mass credibility, below the line (BTL) activities have the most impact. This is mainly users must have a much higher level of trust to send their hard earned money through a digital financial services system than to use voice or SMS services.  That trust is built on the ground, face to face, with new users. Therefore, the more feet and dollars you have on the ground, the more impact you have with the masses.

The most important focus of BTL is training. You will need to train, retrain and keep training the agents until they sing your song in their sleep! Agents are anyways the face of your business in the market place. And while at it, please generate as much chemistry as you can develop lasting relationships with these agents.  Agents have been known to be more empathetic to providers that maintain good relationships with them, and this can ultimately determine the success or failure of your business.

4. Support Structures: Finally with any new roll-out, problems will arise constantly and agents need to know that you will be there to help them work through them.  Will you have a private helpline for agents?  How often will you visit them, what level of support will you provide alerting them of fraudsters, and helping them manage their liquidity?  Remember your back-end system will tell you how much e-float they have but how will you consistently determine their cash levels and predict when they will have issues? The more support you are able to give them, the higher quality service they are able to provide for you. And if you are looking to evolve your network in the future to handle more sophisticated banking products, this is something you want to put in place from the start, so you can ensure optimal performance, and encourage agent retention.

Kimathi Githachuri is Head of The Helix Institute of Digital Finance. As an expert in digital financial services, he previously worked as: Head of Mobile Money at Warid Telecom in Uganda (GSMA Sprinter), Mobile Money Channel Development Manager at Airtel Kenya and Area Sales Manager at M-PESA where he helped build the M-PESA network.

Extra Reading:

Risk Management in Digital Financial Services

Posted on by MSC

With the gradual move towards digital financial services, risk in this space is also growing. In this video, MSC’s DFS expert, Soumya Harsh Pandey, highlights different types of risks being faced by digital financial service providers and clients; and possible mitigation steps. This video is therefore, an attempt to raise awareness about these risk so that digital service providers and clients become more aware and take suitable steps to mitigate these newer types of risks.

Index-based Microinsurance for Disaster Risk Reduction

Posted on by MSC

Index insurance has emerged as a disaster management tool for the poor because of its effectiveness in assisting poor people to deal with catastrophes. Focusing on the benefits of Weather based index insurance, MSC’s Microinsurance expert, Sunil Bhat, talks about the features and scope of weather based index insurance and how it helps the poor in dealing with disasters such as drought, heavy rains, cyclones, storms, typhoons, earthquakes etc.

The Curious Case of Missing Agents in Rural India

Posted on by MSC

In order to ascertain the real presence of CSPs and their activity levels, MicroSave conducted a survey covering five districts of Uttar Pradesh and Bihar. According to official records, these districts have a total 1,141 CSPs. Of these, data could be found for 923 CSPs, and 862 could be visited. The findings from the survey are startling. Total “transaction ready” CSPs were present in only about 6.6% (194 against 2,932) of the villages. Further, only 117 villages had CSP available for transaction every day, implying that only 4% villages can really be considered to have proper CSP coverage. Until this changes, we can safely assume that neither Aadhaar-enabled benefit transfers nor financial inclusion will take off.

Using Mobile/Agent Channel for Insurance/Pension

Posted on by MSC

Insurance delivery through mobile phones and agent banking channel has started to excite the insurance and digital finance community alike. Though some initial researches have tried to assess the landscape of mInsurance (insurance through mobile phone or agent chanel), success of the sector will depend on alignment of values across the distribution chain. At the recently concluded conference in College of Agriculture Banking, RBI, MicroSave’s insurance expert Premasis Mukherjee presented on the emerging business models in mInsurance and the apparent value of stakeholders in each of the models. This presentation raises questions on value alignment, challenges of mInsurance models and an abridged strategic tool to launch voluntary mInsurance products.

Optimising Commissions and Payout Mechanism For G2P Payments Under Electronic and Direct Benefit Transfer

Posted on by Parul Tandon

Over US$ 45 billion is spend every year by the Government of India on cash-based welfare schemes such as MGNREGA, social security pensions, JSY and scholarships.  Over the years, efforts have been made to improve the delivery efficiency by disbursing many of these schemes electronically, instead of in-cash, employing enhanced methods for identification and authentication of beneficiaries. The infrastructure of India Post and banks (including Business Correspondents (BCs) and Customer Service Points (CSPs)), has been extensively leveraged for these Government to Person (G2P) payments. There is, however, great variability in the fees paid by the governments to banks for disbursing these funds. Some states pay between 1.0% to 2.0% of the value disbursed, while others do not pay anything. Moreover, there is no standard basis for determining an appropriate fee that should be paid; and no norms defining how the banks should share the fees with the BCNMs and the CSPs.

If the Electronic and Direct Benefit Transfer (EBT and DBT) programmes have to be scaled up nationwide, viability of the service providers managing the last mile disbursement to beneficiaries is inevitable. This Policy Brief tries to address the two fundamental questions of (1) what should be an appropriate fee for disbursal of G2P payments? and (2) what can be the norm or mechanism for division of the payout between banks, BCNMs and CSPs?