Business

Why Agent Banking Is A Win-Win

Traditional banks have great difficulty reaching consumers in emerging economies and rural areas. Traditional bank branches are generally not cost-effective to open and operate. A bank branch requires at least one teller at the front desk, a bank manager, and bank workers who specialize in mortgages and loans, as well as security. One of the reasons why banks are eliminating rural branches is because of this. Customers in rural areas must also travel long distances to visit their local bank locations.

Agent banking, which consists of a network of banking agents who operate as physical bank branches, is the solution in this situation. Telcos, e-wallet providers, merchants, and other businesses can act as banking agents.

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What is agent banking?

Agent banking is providing limited scale banking and financial services to the underserved community through active agents under a legitimate agency agreement, rather than a teller or cashier.

The proprietor of a business who conducts banking transactions on behalf of a bank is known as a teller. These retailers are increasingly being used as significant distribution platforms for financial inclusion around the world.

There are three important stakeholders involved in agent banking;

● The Bank- is able to grow its customer base by bringing on new customers who were previously out of reach. The cost of infrastructure and staff are minimized while revenues are boosted by using banking agents instead of adding physical bank branches.

● The Banking Agents- benefit because they produce more revenue, which includes sales from extra walk-ins. They can also set themselves apart from competitors due to their association with well-known banks.

● The Customers- who were previously unbanked or underbanked now have easy access to a financial institution in their area. Aside from saving time and money on travel, transaction costs are also lower.

Benefits of Agent Banking

1. Increased income through commission

When bank agents handle transactions on behalf of the bank, they are frequently paid commissions. These commissions are typically paid out when a customer deposits money, withdraws money, or establishes a bank account through the agent.

2. Increased customer traffic

Banking agents frequently have their own businesses along with the banking agency. Increased traffic from clients conducting banking transactions equates to more people learning about your company and, as a result, more purchases.

3. Easy to Access

You no longer need to travel long distances to visit your bank because bank representatives are located practically everywhere. The business premises remain open, so you can do your business. This has shown to be really useful, particularly for persons who are extremely busy during the day.

4. Cutting Costs

Banks are discovering that setting up agents is less expensive than creating a branch, which comes with additional expenditures such as staffing, rent, and power. Almost all of the costs are covered by the agent in agent banking.

To conclude

In the coming years, agency banking will be critical for financial inclusion. Agents will be providing financial services to individuals in order to boost local development and economic growth.

Agent banking is a win-win-win situation. The agents win because they can market a wider range of specialized products and services on behalf of the bank to customers in remote regions. Customers benefit from having simple access to licensed financial services providers, while banks benefit from the increased market share.

James Vince