Channel Strategy
A branch is usually a “one-stop shop” for financial services. Customers can come in to perform transactions, buy new products, solicit financial advice, or record a complaint. Branches often also house an outbound team for sales or credit recovery. An ATM, on the other hand, is purely a transactional channel. A banking agent is closer to the ATM setup in that it fulfills a primary role of transaction processing. Yet, in all but the first model of agents, the strategic intent is to roll out agents as part of a broader strategy— to target new customer segments, to serve new geographies, or to avoid having to set up own points of sale and service.
Decongesting branches. Retail agents can be viewed merely as “human ATMs” whose role is to provide greater customer convenience and lower cost to the bank. According to this rationale, agents are likely to cater to existing bank customers and to be placed in reasonable proximity to the bank’s existing branch network. For the bank, the agent is purely another channel that requires little or no adaptation to its commercial strategies.
Targeting a new customer segment. The lower operational cost the agent channel offers relative to other existing channels might induce banks to use this vehicle to cater to new customer segments that were previously not sufficiently economically attractive, for instance lower income customers in periurban areas. In this case, banks would need to develop their agent strategy within an appropriate, consistent proposition for new customer segments. Having a channel is not enough: the bank is likely to need to develop a particular product set that meets the needs and economic means of the new segment, marketing messages that appeal to them, and effective sales development and debt collection procedures.
Expanding geographic coverage. Retail agents can be conceived as branch substitutes in areas in which transaction numbers and volume might be too low to support a full-fledged branch. By piggybacking on existing retail infrastructure, agent networks can be a viable solution for banks planning to expand their coverage. Rural populations that previously did not have access to financial services or depended on long bus trips to reach the closest branch can now transact in their neighborhood. Because these agents are likely to be in locations where there is little or no banking presence, cash management by agents will pose much bigger operational problems than in the previous cases.
Creating a virtual bank without own infrastructure. A bank may seek to completely outsource client contact to retail agents, following a low-value, high-volume strategy. Such a bank is likely to target lower income customers who have little demand for more sophisticated financial products and for whom transacting at a local store without the formality of a branch is actually more appealing. The bank will need to emphasize marketing and branding. It will need to design very simple products that are easy to understand to minimize reliance on agent staff. These scenarios illustrate that the purpose of the retail agent network will affect the value both banks and their customers draw from the agent channel. It also conditions the requirements for the agent and, more important, the adjustments the bank will have to make to its existing operations and product range to take advantage of the new agent channel.
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