The agent networks of digital financial service

Thu 06 Jun 2019

According to the GSMA, there were nearly three million mobile money agents operating worldwide at the end of 2017. These agents play a key role in the operation of mobile payment services. Formerly the preserve of telecommunications operators, independent agent networks are now also being set up by their competitors. Given the growing competition in the digital financial services market, differentiation will come in two forms: value creation by the distribution network and value creation for the agents themselves.

Agents collect deposits and convert notes and coins into electronic money, and are therefore the primary supply channel for mobile money ecosystems. They are also the main physical points of contact for users: as such, they play a crucial role in customer recruitment, support and advice.

Furthermore, agents are a key component of the value proposition of mobile money. The local service they provide delivers a powerful competitive advantage over traditional financial institutions: no expensive and time-consuming journeys for users, extended hours of business, and considerably shorter waiting times than in banks.

How can the service quality of agent networks be improved?

The quality of a mobile money agent network relies on a now familiar set of fundamental factors: extensive territorial coverage, a comprehensive network adapted to the potential of individual areas, availability of e-money and cash, initial and further training for agents, implementation of network management tools, and an attractive commission scheme.
New management tools have been developed to boost the performance of agent networks and, ultimately, increase the value created for users. These tools are based on extensive analytical capabilities. They can be used, for example, to optimise agent recruitment and hence prioritise high-potential areas.

Agents will be therefore be placed in money transfer corridors, based on criteria related to the specific socio-economic characteristics of the country concerned (rural/urban areas, primary/secondary sector, etc.). The most advanced management tools can also be used to support sales operations and generate action plans. Based on the analysis of performance indicators and directly “pushed” on sales teams, they explain in detail the actions to take on the ground.

The management of cash and e-money reserves is a major area for improvement. Sofrecom has observed that depositing and withdrawing large sums of money is still a challenge in several countries, especially in rural areas. Some tools can predict demand or anticipate stock shortages by analysing usage trends and external data. Mobile money operators who can guarantee that their agents have a ready supply of cash or e-money will have a decisive competitive advantage.

Agent training and information are still key to network performance and user satisfaction, given that agents are on the front line of user contact. The majority of mobile money operators are only just starting to explore the new forms of interaction enabled by technology in this area. Interactive media especially can provide more effective training. Therefore, some operators are experimenting with video tutorials, social media, chatbots and voicebots (interactive vocal servers) to inform, train and assess their agents.

Agent recruitment and retention strategy is likely to play an increasingly important role given the growing number of digital financial services being launched. The Helix Institute estimates that, in 2015, around two thirds of digital financial services agents in Tanzania, Uganda and Senegal were working with more than one provider (the median value was three).

To attract agents and secure their loyalty, digital financial services providers must develop a convincing value proposition.

This will necessarily require effective support for agents. The replenishment of cash and e-money reserves, for example, is one of their main concerns (insufficient reserves may result in unnecessary travel, the temporary closure of sales outlets and therefore a loss of earnings). Some providers have engaged in major discussions on this issue, and companies like Airtel Uganda1 have set up mobile teams to replenish the network. Operators are also exploring so-called “multi-CU” (currency unit) models, which may be offered to agents who sell both mobile money services and prepaid telephone credit. Under these models, agents no longer have to “stock” both e-money and telephone credit: they have a single e-money account, and the e-money is instantly converted to telephone credit when prepaid airtime is sold.

Besides straightforward loyalty programmes, a high value-added service package will also be needed to ensure agent loyalty. The provision of credit on preferential terms will no doubt be a powerful tool. In fact, working capital requirements are often a hindrance to agents (who tend to run a parallel business). Mobile money operators are able to grant credit based on a precisely documented level of risk, which is calculated using agent activity data. Examples of such arrangements include the loans offered to business owners by Kopo Kopo in East Africa, Equity Bank in Kenya, and Airtel Money - in partnership with Jumo - in Uganda. Coupled with other value-added services (inventory, order, invoice management), these solutions will be effective retention levers, encouraging agents to conduct their financial transactions through a single service.

Compensation is still a key factor in agent motivation. In addition to an attractive commission scheme, digital financial service providers may explore opportunities to generate additional earnings for their agents. Thus, the skills and tools used in the distribution of mobile money services could be extensively monetised: customer registration on behalf of non-competitor third-party players, parcel collection points for distance selling services, etc.

1 Distribution 2.0: The future of mobile money agent distribution networks, GSMA 2018.