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Product Review: Steward Bank’s agent banking model

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SUBTITLE: Finally, The Mountain Comes To Mohamed
As part of its ongoing activities, the Monthly

Omen Muza

Financial Sector Bulletin (MFSB) — which I edit — monitors new product initiatives and rates them according to set criteria namely: Novelty/innovation, inclusivity, cost effectiveness/affordability, versatility, convenience, job additiveness, collaborativeness, tech-savvy, synergistic capacity and scale.

The product which meets most of these criteria or ticks the highest number of boxes becomes the product of the month. The main objective of this initiative is to not only recognise, but also to promote product innovation in the financial services sector while helping the banking public to understand new products.

Accordingly, the Product of the Month for November 2014 is Steward Bank’s Agent Banking Model. Here is how the new platform measures up to the MFSB rating criteria.

1. Is this the first time agent banking is being deployed?
To all intents and purposes, this is the first time a local bank is deploying agents on a wide scale to distribute its services, though such a model has been actively promoted by the regulatory authorities locally and in countries such as Kenya.

On why the bank is appointing agents instead of opening more branches, Steward Bank says the world is shifting its focus from traditional brick and mortar structures to “branchless” banking with mobile banking now becoming the new frontier for product innovation and channel delivery.

2. Does the agent banking model promote inclusion?
“Now we will be able to service people in the most remote parts of the country,” divisional director Ben Muchina said. “Our intention is to be known as the champion of financial inclusion,” concurred head of retail banking Zvichapera Katiyo speaking at the launch of the agent banking model on November 26 2014. Additionally — and critically — one of the three key reasons Steward Bank advances as the rationale of the agent banking model has to do with financial inclusion: To fulfill the constitutional rights of the unbanked masses who are also entitled to access to financial services
3. Does agent banking reduce or eliminate the cost of delivering financial services?

In general terms Steward Bank aims “to provide low cost banking services to the poor who cannot afford to travel long distances to carry out banking transactions,” which is one of its three key reasons for introducing the agent banking model. Specifically, the AllSave Bank account — the primary account for individuals which can be opened and serviced through this agent network — has no monthly service fees.

4. Does agent banking currently have international utility use as well?
Steward Bank can recruit external agents to sell limited types of its services such as remittances but to the MFSB’s understanding, the full agent banking model, as currently envisaged may not be wholly applicable in external territories for certain types of banking products and services due to regulatory considerations. It is the said’s view therefore that the model is still largely for local deployment.

5. Does it enhance convenience?
Steward Bank believes that by widening the range of transaction platforms available to its customers, accessibility and ease of banking can be markedly enhanced. Naturally, accessibility and ease of banking translate to convenience.

Additionally, the agent banking model has the impact of extending banking hours since one can carry out transactions at any agent as long as they are open. Unlike conventional banks, agents tend to be more flexible and are likely to use extended hours to seek differentiation and, therefore, competitive advantage among themselves.

6. Does the agent banking model create employment?
Given the anticipated increase in the volume of transactions, agents — who are already handling EcoCash transactions — will want to ensure the increased productivity of their current staff but if existing staffing levels can’t cope, additional staff will have to be employed.

On the downside, according to Nigel Gambanga of Techzim: “This new neighbourhood bank approach which brings conventional banking closer to people accustomed to formal transactions only through the mobile money revolution has reduced the potential client market for conventional banks.”

This may cause loss of volumes for conventional banks leading to branch closures and possibly loss of employment.

7. Does the model feed/leverage on partnerships?
Steward Bank’s agent banking model is essentially built around a three-pronged partnership consisting of the bank itself, its sister company EcoCash and the agent, so it has significant partnership credentials.

8. Does agent banking make effective use of technology?
This model involves the networking of hardware equipment supplied to agents with the bank’s serves in order to ensure that real-time transactions can be carried out. The agent banking model no doubt leverages on mobile banking technology which Steward Bank argues has now become the new frontier for product innovation and channel delivery.

9. Does agent banking integrate well with other existing products?
The agent banking model is being implemented to complement the existing Steward Bank branch network and other platforms such as EcoCash which are already available to its customers, so in that respect is complements the other platforms with which it is therefore necessarily integrated.

10. Can the agent banking model potentially impact on meaningful numbers of people?

With a 15 000-strong country wide EcoCash agent network, Steward Bank’s reach is no doubt enhanced.
Additionally EcoCash, which is the bedrock of this model, has a user base of over

3,5 million subscribers who constitute a captive market which stands to benefit from this new agent or branchless banking model.

Feedback: omen.muza@gmail.com. Omen N. Muza writes in his personal capacity. You can view his LinkedIn profile at zw.linkedin.com/pub/omen-n-muza/30/641/3b8

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