Agency Banking and its immense financial possibilities in the emerging markets

With massive growth, reach and extent of the financial services taking place in the emerging markets, traditional banks are posed with serious challenges. With numerous semi-urban and rural regions facing a perennial problem of no banking set-up or infrastructure, there has been a rise in third parties such as agencies to encroach these markets to promote and spread the wings of financial services and products. Banks tend to depend on agents in order to define financial inclusions and opportunities. In the last decade we have witnessed the massive growth of agency banking. Developing nations in Asia and Africa have greatly benefited from the agency banking model. With the new dawn of cashless transactions and e-wallets setting in, banking agents are fast becoming initiators in increasing electronic banking habits and enabling people to increase their habit of using electronic money.

What do we understand by Agency Banking?

An agent is an individual, an organization or a group of individuals having easy access to the local community. These volunteers take advantage of their local knowledge, reach and expertise to gain praiseworthy client bases for banks.

Agents become important financial advisers to their clients. They take forward banking services and heighten the business reach in numerous regions.
Advantages of Agency Banking

In the current line of action, banking agents take care of signing up new clients, extending sales and support services on behalf of the banks. This quickens banks’ reach.

However, as technological advancements take place, the current role of agencies will go through dynamic changes and variations. Banks would be able to offer numerous services such as deposits, loans and mortgages to its wide client bases without having to invest on bank branch set-ups.

Huge infrastructure and set up costs would be curtailed with technological inclusions in agency banking. Investing on agents will be a huge leap of faith. Emerging markets will give rise to more entrepreneurs as agents will receive better training, education and support. Clients will enjoy a more personal communication with certified financial services providers. Individuals will be able up-sell products and services in the local markets. Communities will benefit greatly from highly skilled agents providing new-age financial products.

This will improve the overall economy of a region thus ushering complete growth and improvement of a nation in the long run.

With increased extent of agencies in the financial market, banks will have increased market share that will form a brighter local economy. As we all are aware of the fact that without self-sustained local economies bigger economies do not work efficiently. With advanced economic growth we will have an open market for emerging trends.

Problems Faced

There have been several impediments in agency banking’s path. One of the most common problem is its non-integrated status as a banking platform. This creates a massive problem for banks who have to invest on multiple local representatives to engage in providing services to their customers. Interoperability is a growing need for smooth running and improvement of economies.

Banks must provide all necessary support and training to its agents in order to have substantial growth. Investment from banks’ end must not be taken lightly, nor should the power of agency banking. Proper assistance provided to agents will ultimately help bring in business for banks.

The process of money distribution must be improved as it will help agents work more efficiently. There are mobile apps being developed by banks to improve distribution procedures. Currently agents have to rely on core banking. Without technological innovations banks are falling short of introducing new products and catering to the growing market needs.

Agents suffer from low-liquidity. Banks must be able to improve liquidity issues in order to serve customers during national holidays and religious celebrations. Banks must support cash inputs to help agents have a balanced operation even during ‘cash-out’ scenarios.
Probable Solutions

An inter-operability model must exist for agents. This will be able to sophisticate the entire process of agent performance, calculation of agent collections, overall monitoring of functionality, agent commissions and distribution of financial services and products. Inter-operability among agents will also make way for an easy solution market wave.

With ever-changing trends (and shifts) taking place in the financial markets, traditional banks need to come up with faster and better technological innovations to introduce and expand new products with the help of agents.

Technology can give rise to better client support

Localities having zero access to main roads and communications need to have technological support. This will help agencies to grow their networks. Banks (will have numerous e-branches for better distribution and configuration of its services and products) will benefit greatly along with the benefits of agencies.

With proper technological support and integrations, agency banking will be more than a mere cash deposit, withdrawal and client listing system. Accuracy in technological support systems will usher a new era for agency banking as agents will have better growth with the help of specialized e-commerce oriented products and services.

Benefits of agency banking will ultimately benefit banks as the latter will win significant market shares.

Immense possibilities of Agency Banking in the Future

Emerging markets are untapped territories of immense financial possibilities. Agency banking has potential bright future as various communities will be empowered with a wide variety of financial services.

According to recent industry reports, there are ten times more registered agents spread across numerous areas than bank branches in some of the world’s topmost mobile money markets. This gives us a clear picture as to what the complete potential of the advantages of agency banking can lead us to. Banks need to invest on technological innovations in order attain greater heights in the fast-changing market needs.

Agencies will become ‘proxy banks’ in the near future. Technological innovations are already in place and with time there will be a time when agents will be the direct selling point for specialized businesses and products. Local development is important for overall stimulated economic growth.

People living in geographically challenged regions will have no need to travel distances in order to get to bank or perform any kind of crucial banking.

Banks will definitely have heightened importance and a scaled business presence with the help of properly structured agency banking. People will enjoy banking in the comforts of their homes, without having to go to a bank. Agency banking will also heighten the use of electronic money.