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5 Unconventional Benefits of Agency Banking

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Reaching customers in urban localities is both convenient and feasible for a bank. With innumerable customers, the multiple branches of a bank and its ATM’s can generate enough ROI to cope with the high CapEx & OpEx. However, banks have exhausted the urban areas as most of the households have multiple personal accounts leading to limited number of potential customers.

On the contrary, rural areas are the untapped market for the banks. Then again, opening branches and ATM’s in rural areas can be costly for many financial institutions as numerous still rely on cash for all transactions. Therefore, due to lack of adaptability and awareness in rural areas, tapping the rural market may not be profitable for a bank.

Catalysing Financial Inclusion with Agency banking
Banks are combating this issue with the help of a system led by agents in such remote areas. With the support of agency management systems, 3rd-party agents perform transactions on behalf of financial institutions and enable customers to translate e-money to physical cash for use. This method of banking is not only beneficial to the banks but also the economy as it promotes financial inclusion. With financial inclusion, government can reach out to the rural/undeserved areas in the times of crisis.

Banks can implement agency banking through an agent in remote areas in 3 different ways:

Through kiosks set up in remote/rural areas
Through an individual who makes doorstep visits in rural areas with a handheld device equipped with an agent management system to perform banking transactions
Through supermarket/retailers/post offices/NGO’s/specialized microfinance institutions (MFIs) etc in remote areas
By implementing a well-structured agent management solution, banks can scale the reach of their services and maximise their market share. Acting as ‘proxy banks’, these agents are also promoting local development and economic growth as individuals and small businesses have access to the essential financial services.

5 Unconventional Benefits of Agency Banking
According the World Bank’s Global Findex Database, in the year 2017, 1.6 billion people and 200+ million MSMEs around the world did not have access to basic financial services.

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