Building a Viable Network of Agents - Training Module 2011
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BUILDING A VIABLE NETWORK OF BRANCHLESS BANKING AGENTS
Training Package2011
TABLE OF CONTENTSSECTION SLIDES Introduction 3-16 Agent business case (Case study of 3 agents) 17-31 Agent network managers (Brazil case study) 32-40 Supply chain revenue analysis (Revenue sharing exercise) 41-50 Structuring an agent network (M-PESA case study) 51-61 Managing agents (Exercise comparing training approaches) 62-76 Conclusion 77-80 Annex: main messages in 12 slides 81-93
“Advancing financial access for the world’s poor”
CGAP is an independent policy and research center dedicated to advancing financial access for the world's poor. It is supported by over 30 development agencies and private foundations who share a common mission to alleviate poverty. Housed at the World Bank, CGAP provides market intelligence, promotes standards, develops innovative solutions and offers advisory services to governments, microfinance providers, donors, and investors.
CGAP’s Technology Program is funded by:
www.cgap.org/technology
These training materials are produced by CGAP
How to use these training resources (1)
• This Training Package is based on CGAP’s Agent Network Management Toolkit, available at http://www.cgap.org/p/site/c/template.rc/1.9.49831/
• This Training Package enables users to train their colleagues on building a network of branchless banking agents. It is not intended to be used to train agents: we recommend providers develop their own materials for this end.
• The package includes 5 sections: (1) drivers of the business case for agents, (2) agent network managers (ANMs), (3) supply chain revenue analysis, (4) structuring an agent network, and (5) managing agents. Each section includes a lecture and interactive exercise.
• We recommend using the material in 1 of 3 ways: 1. Cover the 5 sections in sequence, including the interactive exercises
(Duration: 5 hours)2. Select 1 or several sections corresponding to topics of greatest interest
(Duration: [1 hour per section)3. Present an overview of the main messages using the 10 slide summary
in the annex at the end of this slide deck (Duration: 30 minutes)
• The comment pane for each slide provides guidance on the main message for the slide in question and additional detail useful in presenting. Presenters/trainers are advised to familiarize themselves with the Toolkit.
• When using these materials, please give attribution to CGAP as the source.
How to use these training resources (2)
Definition: Branchless Banking
POS
Phone
Agent
Branchless Banking
Delivery of financial services outside
conventional bank branches using retail
agents and technology
Definition: Provider
Bank Non-bank
Company which manages customer accounts
Agent network manager
(ANM)
Any business or individual which helps a provider identify, vet,
train, monitor and manage agents
Definition: Agent
AgentOperates the cash
service point where the customer does cash-in
and cash-out transactions. Typically
registers new clients as well.
Agents are increasingly used by all types of financial institutions to distribute financial services
Country Provider Number of agents
Brazil Banco do BrasilBradescoCaixa Economica
15,30024,20015,200
India FINO 10,000
Kenya M-PESA 20,500
Pakistan easypaisa 10,500
Philippines GCash 18,000
Sources: CGAP interviews with senior management ; for Brazilian banks see Banco Central do Brasil,; FINO; M-PESA, see Daily Nation 15 Nov. 2010; for easypaisa; GCash. Current as of time of CGAP research in each market.
Agents fulfill 3 important functions in a branchless banking service
Verify client identity•Comply with KYC standards•Guard against fraud
Make cash available •Enable clients to withdrawal
and deposit on demand
Act as face of the service•Educate clients about the
service•Troubleshoot clients’ problems
Compliance risk
Continuity risk
Concentration risk
Agents and ANMs highly motivated
Business split across many partners
Massive consumer
uptake
Adequate revenue to
share
Many agents
and ANMs
National presence
Marketing
Product
Healthy supply chains with many motivated participants will help manage risks and drive massive consumer uptake
To produce the Toolkit, CGAP analyzed agents in 3 markets
BRAZIL
INDIA
KENYA
Karnataka
Bihar
Delhi
In-depth interviews with
466 agents
Data on 16,000 agents
Interviews with 24 providers and agent managers
Analysis focused on 5 branchless banking services
NONBANK-BASEDBANK-BASED
Safaricom (MNO)
AGENT MANAGERS
(Top Image, superagent banks,
aggregators)
21,000 agents
Bradesco
6,000 outlets
State Bank of India
500 agents
State Bank of India
10,000 agents
TELECOM SERVICE
1,000 agents
Agent Toolkit Part I:Economics of the Supply Chain
1. Agent Business Casea. Upfront Capitalb. Liquidity Managementc. Rigid Staff and Space Costsd. Security Riskse. System Interruptionsf. Effect on Agent’s Other Line of Businessg. Adequate Revenue at Start-uph. Major Costs Related to Growthi. Fragmenting Demand Across Too Many Agents
2. Agent Network Managersa. Roles of ANMsb. ANM Business Case
3. Supply Chain Revenue Analysisa. Revenue Sources in the Supply Chainb. Enhancing Revenues in the Supply Chain
Agent Toolkit Part II:Building an Agent Network
4. Structuring an Agent Networka. Three Agent Network Structuresb. Implications of Structure on Overall Servicec. Example: M-PESA’s Changing Structure over Time
5. Managing Agentsa. Selecting Agentsb. Getting Agents Startedc. Paying Agentsd. Managing Liquiditye. Ongoing Monitoring and Managementf. Reducing Impact of Theft, Fraud and Abuse
6 . Annexesa. Financial Model with M-PESA Case Studyb. Analyzing Agents in the Fieldc. Useful Documents (sample contracts, applications,
monitoring instruments, job descriptions, commission structures)
Available online http://www.cgap.org/p/site/c/template.rc/1.9.49831/
SECTION 1:AGENT BUSINESS CASE
How do we make sense of vastly different agents?
HasitaSchool librarian in rural Karnataka, India
Agent profits: $0.91/day
Transactions: 34/day
CynthiaOwns 2 agent locations specializing in M-PESA in downtown Nairobi, Kenya
Agent profits: $8.53/day
Transactions: 152/day
JoãoOwns pharmacy in small town 40 km outside Fortaleza, Brazil
Agent profits: $1.96/day
Transactions: 40/day
It is useful to picture a risk/return curve for agents, set initially by direct costs and remuneration for acting as an agent
DIRECT COST
0
0
x
xDIRECT
REMUNERATION
Cost of capital
Liquidity management
Staff and
space
Won’t participate
Will participate
Capital has 2 elements. The first is the amount required.
1. Amount of capital
access
cost of capital
Cost of Hasita’s minimum capital of US$ 107 = 84 days of profit/year*
* Calculated at prevailing MFI interest rates. In actuality, Hasita’s bank does not require her to put up capital.
What can providers do?
Agent Most MNO-led schemes
Provider aids
Colombia: AVV Villas provides zero interest loans to agents, with risk-sharing by ANM (DDDedo)
Provider funds
Brazil: client funds become bank’s responsibility upon receipt at agent. Same with FINO agents (India).
ANM aids
Afghanistan: M-Paisa ANMs often lend start-up capital, for added 50% of commissions (instead of usual 30%)
Typical small shop devotes US$1200 to M-PESA capital
The second element of agent capital is liquidity management (i.e. the cost to convert cash to e-float, e-float to cash)
2. Liquidity management
trips/ day
cost/ trip
What can providers do?
- Daily rebalancing in most high-volume services
Graphic shows rebalancing transactions (orange) and cash balance (blue) of M-PESA agent, Martin.
Establish network of “agents of agents”
- Cambodia: WING sets up well-established stores as “master agents”
- India: FINO pays well-off “super clients” to have liquidity ready to
deposit
- Kenya: M-PESA uses banks as “super
agents”
- Distance to exchange point drives cost
Staff and space costs create different break even points
Vincent Cynthia0
20
40
60
80
100
4.11 4.2610
87
Profit/day/tillTransactions to breakeven
- 40 trans/day- $0 staff- $0 rent
- 152 trans/day- $6.25 staff- $1.48 rent
What can providers do?
Advise Advise on the impact of taking on staff and space expenses
Consider Consider special remuneration for strategic agents
Exogenous factors shift the risk/return curve positively or negatively
DIRECT COST
0
0
x
xDIRECT
REMUNERATION
Won’t participate
Will participate
EXOGENOUS COST
RobberySystem
reliability
EXOGENOUS BENEFIT
Foot traffic
Allied with brand
1 robbery can collapse the business case
Average robbery loss:
US$ 8100
US$ 540
Agent liability =
6.66%
Equal to 72 days of
profit
What can providers do?
Require Require security improvements
Share Share cash insurance costs
Set Set cash-on hand limits
5. Agent profitability is highly sensitive to service disruptions
A Brazilian agent has her POS terminal down for 2 days. She loses 88% of her monthly profit
Monthly revenue (USD) Monthly expense (USD)1000
1025
1050
1075
1100
1125
1150
1175
1200
1065
1038
1162
- 88%
Foot traffic benefit can be a substantial exogenous benefit
73% of Brazilian agents report
increased foot traffic
Average foot traffic increase = 37% more customers
Agent profits Increased sales Total profit0
2
4
6
8
10
12
$1.96
$9.25*
$11.21
4.7x
* Assumptions: ¼ of clients for agency services make additional purchase. Each incremental sales yields average profit of US$ 1
What can providers do?
Document Document foot traffic benefits
To complete the picture, we must recognize that certain factors create “jumps” in the agent’s risk/return curve
DIRECT COST
0
0
x
xDIRECT
REMUNERATION
Won’t participate
Will participate
EXOGENOUS COST
EXOGENOUS BENEFIT
Minimum required to
start
Growth-related costs
Fragmenting demand
The agent business case presents a multi-faceted puzzle. Understanding and tracking its evolution requires a dedicated entity
DIRECT COST
0
0
x
xDIRECT
REMUNERATION
Won’t participate
Will participate
Cost of capital
Liquidity management
Staff and
space
Minimum required to
start
EXOGENOUS COST
RobberySystem reliability
EXOGENOUS BENEFIT
Foot traffic
Ally with brand
Growth-related costs
Fragmenting demand
Exercise: let’s look at 3 agents
Hasita CynthiaJoão
Trainer’s guide for Session 1 Exercise
Microsoft Office Word Document
- Distribute copies of the handout (embedded at right) to participants to read.
- Divide participants into groups and ask them to discuss the questions within their group. Then reconvene and ask groups to report back their answers to the questions.
- The trainer can use the next slide to draw attention to key takeaways.
How do the key features of the business case stack up?
Question Hasita Joao Cynthia
Provides capital?
Liquidity management costs?
Staff and space costs?
Is security a major issue?
System reliability issues?
Positive exogenous benefit?
Which of the 3 agents should be paid the most per
transaction?
Which type of agent would work best in your market?
Worst?
SECTION 2:AGENT NETWORK MANAGERS
Most providers use one or more Agent Network Managers
Selecting Agents
Training Agents
Identifying agents and helping them get
started
Regular Monitoring Visits
Support in Rebalancing &
Liquidity Management
Managing Agent Operations
Contribution to overall strategy
Influence pricing & product design
Key interface with customers
for marketing and other functions
How does M-PESA use Agent Network Managers?
M-PESA
Top Image Super agent Banks Aggregators
• Vet applicants• Provide training • Identify potential applicants
• Develops eligibility criteria & manages recruitment process
• Monitor fortnightly • Special facility for rebalancing
• Variable role in monitoring and rebalancing
• Area Sales Managers do some direct monitoring
• Runs agent call center
• Defines all aspects of business strategy
• Has influenced business decisions like pricing and eligibility
ANM pay must be linked to responsibilities they are taking on
M-PESA AGGREGATOR ANM IN BRAZIL
Selecting Agents ✔ ✔✔✔
Maintaining Equipment
✔✔
Training ✔ ✔✔✔
Rebalancing ✔
Monitoring ✔ ✔✔✔
Contribution to business strategy
✔✔
Share of Commissions = 20% 60%
ANM Business Case: Mr. Sinha from India
EKO Agent Network Manager: Sinha
REVENUE
Number of agents 35Accounts opened per agent 57
commission / account opened 0.54Volume of Transactions per agent 1,322
commission/transaction 0.10%Total Revenue 1,133
EXPENSES Transportation 109Wages 413Total Expenses 522
MONTHLY PROFIT (US$) 611
Mr. Sinha makes $4,300 from other distributor business and $611 from EKO. If he can reach EKO’s target of 100 agents, he will be making
$1,800 and this will be his single most profitable product.
Agent Turnover kills the ANM Business Case
Series10
50
100
150
200
250
300
350
400
450
200
400
Average transactions per month
For the ANM to break even, theoretically each agent must do an average of 200 transactions
per month
In reality, 50% of agents are not active so those that are must do 400 transactions per month for
ANM to break even
Impact of Agent Inactivity on ANM Business Case in Brazil
Who might be an ANM?
Businesses already doing the following might be good agents:
CASH TRANSPORT
• Armored cars• Companies who
maintain ATMs
DISTRIBUTION OF CONSUMER
GOODS
• Distributors of FMCG, airtime and other products which have extensive reach
MARKETING & PROMOTIONS
• Companies that do events, distribute marketing materials, etc.
Microsoft Office Word Document
TRAINER NOTES:
• Divide participants into groups of 3-4 people and have everyone read/discuss case study
• If useful, provide brief background to branchless banking in Brazil (see notes below)
• Use the following slide to ensure key messages come through
Trainer’s guide for Session 1 Exercise
Trainer’s guide for Session 2 Exercise
GROUP EXERCISE:Business Case for an ANM, BancoCenter
CHALLENGES
• Fraud and Theft
• Faulty Technology
• High agent
turnover
CHANGES MADE BY ANM
• Large investment in technology – for agents and HQ MIS
• Introduction of high margin payroll loans
SECTION 3:SUPPLY CHAIN REVENUE ANALYSIS
Supply basics: everyone must be happy
Revenue must be adequate to support all firms:
- Provider- ANMs- Agents- Others (e.g. partner banks)
Yet many struggle to meet this requirement:
-The agent network itself-Unstable transaction platform-Cumbersome sign-up- Inadequate marketing spend-Poor choice of product
M-PESA set expectations unrealistically high for others
M-PESA Monthly Revenue mid-2010
US$ 12 million in revenue/mo
Safaricom shares 42% with supply chain partners
Average small store earns 3.2x more from M-PESA than airtime
ANMs typically earn >US$ 5000/month in commissions
Customers provide 85% of revenue generated
Most branchless banking services see less aggressive uptake from the market
What if we “discount” M-PESA to be more similar with other pioneers in branchless banking?
Registered users
Active rate
Trans per month
M-PESA (Kenya)
13 mil 70% 5.3
7 others 5.2 mil 53% 2
Typical MM service
<1 mil 20% 1
7 services with good data:
- Banco Postal (Brazil)- FINO (India)- GCash (Philippines)- M-PESA (Tanzania)- Smart Money (Philippines)- WING (Cambodia)- WIZZIT (South Africa)
7 others
M-PESA
0 5000000 10000000 15000000
1500000
12000000
$2.71
Agent revenue at discounted level
Contribution to revenue
1.5%
Providers have 2 primary options to generate additional revenue
1. Intensify transactions per client
– Additional payments– Additional products
(savings, credit and insurance)
2. Realize benefits to core business
– MNO: churn reduction, airtime distribution
– Merchants: Foot traffic– Banks: reduced
cost/transaction
For more, see Section 3 of CGAP’s Toolkit: http://www.cgap.org/p/site/c/template.rc/1.9.49831/
A financial model is also available:http://www.cgap.org/p/site/c/template.rc/1.9.49775/
Providers facing limited revenue may be tempted to squeeze the supply chain. This is usually a mistake.
Low uptake by clients
Limited revenue
Provider cuts commissions
Agents and ANMs unhappy
Clients unable to find transaction
points
Trainer’s Guide for Session 3 Exercise
- Distribute copies of the handouts (embedded at right) to participants. It will be best if they have access to laptops for this exercise, but it is possible to do it with pen and paper as well.
- Divide participants into groups. One group will be a provider launching a new mobile money service. Each of the other groups is an ANM company bidding to win a contract to set up and manage an agent network for the provider. The ANM companies must each put together a proposal, from which the provider will choose a winner.
- Use the next slide for discussion, beginning with the provider, but inviting ANM companies to contribute their thoughts as well.
Microsoft Office Excel Worksheet
Discussion Guide: Exercise
• Provider: tell us which proposal you have selected as the winner, and why?
• Provider: were there some proposals which took very different approaches than the others? What were the strong and weak features of these?
• ANM companies: what was the most difficult part of this exercise?
• What lessons should we draw from this exercise?
SECTION 4STRUCTURING AN AGENT NETWORK
When thinking about agents, many providers start with the details
How much should I pay my agents?
What kind of agents should I select?
Does CGAP have
training curriculum for agents?
3 Structures for agent networks
1. Existing retail chains
2. Build network from scratch
3. Leverage existing distribution system
EXAMPLE:Bradesco Bank in Brazil uses postal network
Trade-offs in agent structure:Operational Readiness
Systems and processes that need to be in place before service can launch:• Hiring/training staff• IT• Cash Transport• Monitoring
Post office infrastructure already established throughout country – outlets, utilities, computers already in place
READINESS = HIGH
Quantity and location of outlets• Rural vs. urban• Sending/receiving
corridors• Target customer
Trade-offs in agent structure:Reach
• 6,000 outlets• Rural outlets can do
more than 10,000 transactions a month
REACH = HIGH
1. How much control the HQ has over outlets (e.g., quality control)
2. How much control or leverage provider has over network as a whole and agents(e.g., incentivizing front-
line staff, power balance)
• Banco Postal high bargaining power compared with individual agents
• Commissions are 5-10 higher than those of individual merchants
CONTROL= MEDIUM
Trade-offs in agent structure:Control
Using existing retail chains offers high readiness, less control
HQ should have good control.
Provider minimal control over
outlets.
Depends on network but usually limited to urban areas
Very high
Each provider needs to find structure that fits needs now, and in the long-term
TRAINER NOTES:
• Divide participants into groups of 3-4 people and assign each group to focus on one particular ‘phase’ of M-PESA’s growth
• Use the following slide to ensure key messages come through
Microsoft Office Word Document
Trainer’s guide for Session 4 Exercise
GROUP EXERCISE:M-PESA’s changing structure over time
PHASE 2 Build own network (and still some leveraging)
MEDIUM HIGH LOW
NETWORK STRUCTURE
OPERATIONAL READINESS
REACH CONTROL
PHASE 1 Leverage existing distribution system
MEDIUM/HIGH LOW(Adequate for
start-up)
HIGH
PHASE 3 All 3 – mostly build own network of small stores
MEDIUM HIGH MEDIUM
SECTION 5MANAGING AGENTS
6 areas of agent management
1. Selecting Agents
2. Getting Agents Started
3. Paying Agents
4. Managing Liquidity
5. Ongoing Monitoring and Management
6. Reducing Impact of Theft, Fraud and Abuse
1. Selecting:Qualities to look for in prospective agent
QUALITY
1. Ability to maintain sufficient cash and float balances
2. Customer profile suitable to target clients
3. Age, education, and experience of proprietor
4. Strategic Location
5. Proximity to banks/ATMs
6. Trust of Community
7. Business Activity
8. Literate staff
9. Willingness and motivation to try new product
2. Training:M-PESA agents receive 6 hours of initial training
1. M-PESA Basics
3. Float Management
2. Anti-Money Laundering
4. Store Management Till
5. Customer care
3. Paying:5 decisions to make regarding agent pay
1. What is the balance between registration and transaction commissions?
3. How should commissions be calculated?
2. Which transactions should agents get paid for?
4. Should agents be allowed to set the final price?
5. How often should agents get paid?
4. Managing Liquidity:Start-up Capital
Agents Transaction Provider
PROVIDER OF START-UP CAPITAL
Rebalancing cash and e-float
• In Brazil, many agents have full responsibility for rebalancing, at great cost in time, money and safety. AGENT
• M-PESA agents are responsible for rebalancing, but superagents and ANMs provide support. Superagents are bank branches with special facilities and queues for M-PESA agents.
AGENT, WITH SUPPORT
• In India, ANM FINO takes full responsibility for rebalancing. Full-time staff are dedicated to visiting agents whenever they need cash delivered or picked up.
AGENT NETWORK MANAGER
• In Colombia, the bank AV Villas outsources the rebalancing function to a security company. PROVIDER
Calculating agents’ liquidity management costs & upfront capital
5. Ongoing monitoring:Methods of monitoring vary greatly
Top Image staff monitor M-PESA agents by personally visiting each
agent once every two weeks
Telecom Services monitors its agents remotely via an MIS system and only
visits once every two months
Keep monitoring instruments simple and consistentM-PESA Monitoring Example
AVAILABILITY OF:
1. Float 1
2. Cash 1
3. SIM replacement cards 0
4. Log books 1
STANDARDS FOR:
5. Assistants 1
6. KYC 1
7. Recording of transactions 0
VISIBILITY OF:
8. Thematic advertising 1
9. Pricing poster 1
10. Agent Number 1
TOTAL 8
If score is below 7,
agent is not in compliance and receives a ‘red flag’
Some indicators to consider measuring
LIQUIDITY M-PESA 2009
1. % of customers unable to withdraw 5%
2. % of customers unable to deposit 4%
3. Average number of rebalancing trips per day 1
4. Total Capital (cash and efloat) $1,200 actual
5. Total times previous day’s largest deposit/withdrawal required in cash/efloat
1.5
VOLUME OF TRANSACTIONS
6. Number of transactions per day per agent 86
7. Average profit per day per agent $5.01
6. Reducing theft, fraud and abuse:4 steps to reduce theft
1. Require secure premises
3. Use armored vehicles
2. Lower cash limits
4. Purchase insurance
Limiting the impact of fraud and abuse
AREA OF FRAUD/ABUSE
RECOMMENDATIONS
Money Laundering • Comply with regulations and seek to influence effective, proportionate regulation
Customers are defrauded
• Providers can educate customers (e.g., do not disclose PIN, always wait for confirmation SMS)• Have a call center for customer complaints
Agents and customers defraud system
• Develop rigorous MIS to monitor transactions• Examine pricing and commission models for vulnerability for fraud
Customers (thieves posing) defraud agents
• Invest in rigorous agent training• Design user interface so messages from provider are distinctive and not easily imitated• Consider compensating defrauded agents
TRAINER NOTES:
• Divide participants into groups of 3-4 people and have them read and discuss the case study
• Use the following slide to ensure key messages come through
Microsoft Office Word Document
Trainer’s guide for Session 5 Exercise
Training is adapted based on factors like regulations, product offering and agent responsibility
FINO GCASH M-PESA TELECOM SERVICE
Regulations • Regulations originally required all agents to be trained in Manila by Central Bank
Product Offering and Delivery
• Savings account requires some financial education and lots of follow-up by agents
• Remittance product requires special training (see above)
• Focus on liquidity management and customer care due to high volumes
• Basic bill payments very simple but method of delivery (POS) requires training
Agent Responsibility
• Agent has full responsibility of selling product to customers and training them on it
•Agents do not have to sell but do have a lot of responsibility (e.g., liquidity management)
• Agent just conducts basic transactions – minimal training required
CONCLUSION
Key takeaways
1. The agent business case can be thought of as a risk/return curve driven by (1) direct costs and remuneration of being an agent, (2) exogenous factors and (3) drivers which kick-in at certain points in time.
2. The most critical factors tend to shift over time. Provider’s must constantly update their understanding, which is one reason that a dedicated ANM is valuable.
3. Most providers will need a dedicated ANM – either in-house or outsourced – to help identify and manage agents. Some ANMs also contribute to business strategy.
4. Implementations must generate – and share – sufficient revenue to support all companies in the supply chain.
Key takeaways
5. Agent networks can be constructed from (1) large retail networks, (2) individual, unaffiliated stores, or (3) distribution chains.
6. Each of these 3 structures offers trade-offs between (1) operational readiness, (2) reach, and (3) control. Providers often use a combination to obtain the optimal network configuration.
7. Providers and ANMs will need to develop tools and strategies to select, train, pay and monitor agents. They also need to develop systems to manage liquidity and reduce the impact of theft, fraud and abuse.
Advancing financial access for the world’s poor
www.cgap.org
www.microfinancegateway.org
ANNEX: MAIN MESSAGES IN 12 SLIDES
“Advancing financial access for the world’s poor”
CGAP’s Technology Program is funded by:
www.cgap.org/technology
This material is produced by CGAP, and based on its Agent Network Management Toolkit
CGAP’s Agent Toolkit is available online http://www.cgap.org/p/site/c/template.rc/1.9.49831/
To produce the Toolkit, CGAP analyzed agents in 3 markets
BRAZIL
INDIA
KENYA
Karnataka
Bihar
Delhi
In-depth interviews with 466 agents
Data on 16,000 agents
Interviews with 24 providers and agent managers
It is useful to picture a risk/return curve for agents, set initially by direct costs and remuneration for acting as an agent
DIRECT COST
0
0
x
xDIRECT
REMUNERATION
Won’t participate
Will participate
The agent business case presents a multi-faceted puzzle. Understanding and tracking its evolution requires a dedicated entity
DIRECT COST
0
0
x
xDIRECT
REMUNERATION
Won’t participate
Will participate
Cost of capital
Liquidity management
Staff and
space
Minimum required to
start
EXOGENOUS COST
RobberySystem reliability
EXOGENOUS BENEFIT
Foot traffic
Ally with brand
Growth-related costs
Fragmenting demand
Most providers use one or more Agent Network Managers
Selecting Agents
Training Agents
Identifying agents and helping them get
started
Regular Monitoring Visits
Support in Rebalancing &
Liquidity Management
Managing Agent Operations
Contribution to overall strategy
Influence pricing & product design
Key interface with customers
for marketing and other functions
How does M-PESA use Agent Network Managers?
M-PESA
Top Image Super agent Banks Aggregators
• Vet applicants• Provide training • Identify potential applicants
• Develops eligibility criteria & manages recruitment process
• Monitor fortnightly • Special facility for rebalancing
• Variable role in monitoring and rebalancing
• Area Sales Managers do some direct monitoring
• Runs agent call center
• Defines all aspects of business strategy
• Has influenced business decisions like pricing and eligibility
Supply basics: everyone must be happy
Revenue must be adequate to support all firms:
- Provider- ANMs- Agents- Others (e.g. partner banks)
Yet many struggle to meet this requirement:
-The agent network itself-Unstable transaction platform-Cumbersome sign-up- Inadequate marketing spend-Poor choice of product
Providers facing limited revenue may be tempted to squeeze the supply chain. This is usually a mistake.
Low uptake by clients
Limited revenue
Provider cuts commissions
Agents and ANMs unhappy
Clients unable to find transaction
points
3 Structures for agent networks
1. Existing retail chains
2. Build network from scratch
3. Leverage existing distribution system
Each provider needs to find structure that fits needs now, and in the long-term
6 areas of agent management
1. Selecting Agents
2. Getting Agents Started
3. Paying Agents
4. Managing Liquidity
5. Ongoing Monitoring and Management
6. Reducing Impact of Theft, Fraud and Abuse
Keep monitoring instruments simple and consistentM-PESA Monitoring Example
AVAILABILITY OF:
1. Float 1
2. Cash 1
3. SIM replacement cards 0
4. Log books 1
STANDARDS FOR:
5. Assistants 1
6. KYC 1
7. Recording of transactions 0
VISIBILITY OF:
8. Thematic advertising 1
9. Pricing poster 1
10. Agent Number 1
TOTAL 8
If score is below 7,
agent is not in compliance and receives a ‘red flag’