In the recent past we have seen more and more Kenyan owned banks embracing agency banking. Mobile banking is a service provided by financial institutions in cooperation with mobile phone operators. It allows customers with busy lives to conveniently do their banking using their phones anytime. It is about getting banking services to the unbanked, those who do not have bank access or bank accounts, and those who are at the bottom of the economic pyramid, often living in remote areas.
Agency Banking is governed and licensed by the Central Bank of Kenya as provided for in the Prudential Guidelines which clearly states that an institution may carry out banking services through an agent. The agent may be an entity running a commercial or non-commercial activity. This therefore means banks may engage varied businesses including, but not limited to , hardwares, mobile money agents, wholesalers and more.
Without a doubt you have noticed non-bank officers in the banking halls offering banking services like cash withdrawals, cash deposits, bill payments and account opening . These are agents that have been authorised and licensed by the banks to carry out banking services on the banks’ behalf.
On 2nd August 2017, the Daily Nation reported that Equity Bank had announced its plans to shut down 11ATM machines and instead invest more on their agency banking network. Equity Bank as a matter of fact pointed out that it is cheaper for them to engage the services of an agent than to maintain an ATM. Going by the financial results of the two key players in agency banking, KCB Bank and Equity Bank, you can not ignore that truly the future of banking is tied to agency banking. This is because of the non-funded income they are earning from agency banking. It would also be important to acknowledge that banks have gone on a retrenching spree coupled with closure of some branches as a reaction to the recent interest capping enforced by the Central Bank of Kenya.
Agency banking can be accessed through the use of either a phone or a PDQ machine at an agent. To use it through the phone a customer will need to first register for mobile banking with his bank to enable him initiate transactions while the agent is able to initiate cash deposits from his phone without the customer being registered. For withdrawals the customer will produce his card, which the agent will insert on the PDQ machine, then the customer will key in his pin just like he would do on the ATM machine.
Going my argument above it is clear that agency banking is a business that is not short termed. So how do you become an agent or what do you to become an agent? I have outlined the basic requirements for your perusal as sourced from both KCB Bank and Equity Bank who are the market leaders in agency banking:-
- An existing business at the same location for about 6months.
- Valid business permits for the business i.e KRA PIN, Certificate of incorporation etc.
- Certificate of good conduct to vouch for your moral standing
- Current bank statements for the last 6months
- Credit Reference Bureau Report
- National ID of the applicant
- Sufficient cashflow to sustain the business
- Strategic location.
Armed with the above requirements you can now approach any of the banks offering agency banking to fill in application to become an agent. Once your application is approved you will be required to open at least two accounts by the bank, a float and a commission account. The float account acts as the contra account(mirror account if you like) for the transactions that you will be performing while the commission account is precisely what the names suggests, an account for the commission collected for every transaction. At this point it is important to inform you that you need not have an account with the bank beforehand to be their agent, a certified bank statement from any other will suffice. Minimum float requirement is atmost Kshs. 20,000.00.
Is it a lucrative business?Is it worth it? This is the question any business minded individual will ask themselves. The answer solely depends on you. Just like M-Pesa agency banking relies heavily on volumes, the more transactions you do the more the commission with the minimum commission per transaction being KShs.10.00. While most agents agree that the smaller banks pay better commissions they also admit that the bigger banks have more traffic. The top three busiest agency counters in no partivular order are KCB Bank, Equity Bank and Family Bank.
As an agent you need to be reliable and consistent by ensuring that customers get the services they need everytime. It is discouraging for you to always say you have no float whenever a customer wants to transact. Always ensure you have float by replenishing the float account, have cash to pay customers doing withdrawals. Again like M-Pesa withdrawals lead to an increase to float and attract higher commissions while deposits reduces your float.
Excellent customer experience coupled with professionalism and integrity will guarantee repeat visits and customer loyalty. This in turn has a spill effect of ensuring you get customer referrals. Some rogue agents have been reported and closed down because of cash suppression spoiling the reputation of agency banking. Having at least three or more agencies at the same shop will work to your advantage. Another thing is to make sure you can access mobile banking through both the mobile and the PDQ machine.
I believe I have tackled most questions that most people have on agency banking but am open to questions, suggestions and corrections on the comments or to my email: firstname.lastname@example.org
Akinyi, the Banker.