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The rise of the agent banking model

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“The launch of FML’s franchise business could signal a shift in the attitudes of players in the mainstream financial sector towards partnering smaller players in their service delivery initiatives, a model used to great effect in mobile money services,” said the Monthly Financial Sector Bulletin (MFSB) in the editorial comment of its July 2014 issue.

Omen Muza

Then, First Mutual Life (FML) had just launched its inaugural Franchise Business — known as Dunamis (Pvt) Ltd and owned by former FML employee Madzishe Chipunza.

FML managing director Ruth Ncube said the franchise model would add value to their insurance products since it allowed the business to manage capital effectively through selected shared costs with the franchisee.

Under the model, FML provides financial assistance to set up the franchise, whose model enables the franchise holder to operate with lower running costs and penetrate areas where FML cannot do so in an economic manner.

The franchise is supported with a real-time administrative system which is linked to the mainframe of the business’s operating system in order to ensure efficient service delivery.

This article reviews some recent developments which validate both the MFSB’s view and the growth of the agency model as a viable option for the delivery of financial services.

On November 26 2014, Steward Bank launched an agent banking model aimed at increasing convenience and accessibility as well as to reduce the overall cost of banking.

The agent banking strategy was implemented to complement the bank’s existing branch network and other platforms already available to its customers.

“This new service distribution channel is a very important part of our growth strategy and it goes without saying that the appointment of agents across the country significantly widens our reach. Now we will be able to service people in the most remote parts of the country,” divisional director Ben Muchina said then.

Under the new model, which uses the existing EcoCash platform, selected agents are equipped with ICT equipment enabling them to connect to the bank’s servers using virtual private networks or other suitable data connections to facilitate real-time banking transactions.

Agents offer a wide range of services including delivery of account opening application forms to the bank’s branches for processing, card-based and cardless deposits as well as card-based withdrawals.
Agents also offer bill payments, accept debit and credit card applications, balance enquiry, card collection and mini-statement.
The bank said it targeted to set up about 100 agents for the financial year 2015 in Harare alone.

In mid-December 2014, ZB Bank invited interested individuals and companies willing to operate as ZB Bank agents financial services in line with ZB Bank’s services and products that include banking, e-Wallet and ZETDC Powerplus payments, among a host of other services.

FBC’s agency arrangements with TelOne & Zimpost
Recently, FBC Bank advised current and prospective customers that it had added nine new outlets for purposes of reloading its FBC Prepaid MasterCard-branded cards.

At the same time, the bank reminded its customers of the existence of 10 Zimpost outlets where they could also reload and buy FBC Prepaid MasterCard cards.

Attendant trends
The rise of agency banking is not happening is isolation; it is accompanied by other trends which we now examine.

Branch rationalisation and job losses

In December 2014, there was market speculation that Standard Chartered Bank intended to close up to six branches in Zimbabwe, while retrenching about 100 employees as it sought to rationalise its operations in the country.

In a related matter, on December 11 2014, Barclays Bank advised its customers and stakeholders of the closure of its Rusape branch.

Going digital
Although Standard Chartered Bank declined to specifically discuss the issue of branch closures, head of corporate affairs Lillian Hapanyengwi was quoted as saying: “As our clients and the world go digital, our branch traffic is decreasing, so we are evaluating how we should reformat our current branches to deliver to our aspiration. In cities where the opportunity is long-term, we may restructure to be more efficient.”

Her sentiments resonate with Standard Chartered Bank’s international strategy to trim its consumer business as it focuses on key cities and accelerates a switch to digital banking.

The bank reportedly shut 22 branches in the second half of 2014 as part of a previously announced target of 80 to 100 closings, which will help cut costs by about $200 million in 2015.

Announcing the closure of its Rusape Branch, Barclays noted that the automated teller machine (ATM) at the branch would remain operational.

Additionally, the bank said: “Barclays digital channels such as Hello Money Mobile Banking and Internet Banking will continue to give you the transactional convenience that you require.”

Death of Old Banking Models
As the operating environment continues to toughen up, it cannot be business as usual for banks.

Old models which were premised on large networks of brick-and-mortar branches are surely on their way out, if not already on their deathbeds.

“The universal banking model is dead,” declared Anthony Jenkins, Barclays chief executive officer, citing tougher regulation and capital requirements.

Accordingly, Jenkins highlights the need for vast investment in technology to stay ahead of the rapid wave of digitalisation sweeping the industry.

“It is not all about capital. It is also about investment in technology. We believe that technology is going to drive
competitive advantage in this industry and you can’t afford to invest in every place – so you have to pick where you have that competitive advantage.”

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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