Network Set Up and Expansion

Almost any retail outlet with a cash drawer can potentially become a banking agent. Each bank needs to define its own agent selection criteria based on its own commercial strategy and its risk management rules and systems. However, from our observations, the following general categories of criteria seem to be the most widely used: 

Trusted by clients—history of the business, personal reputation, and leadership of the store owner within the community; level of the population’s awareness about the store; nature of the business of the store; safety of area where store is located.

Convenient for clients—size, location, and cleanliness of the store; number and friendliness of staff; range of client needs the store can fulfill.

Trusted by the bank—credit history; track record of store’s commercial operations; store owners’ police record; quality of existing cash handling and control mechanisms.

Ease of installation for the bank—store already has bank account; staff’s comfort with technology; availability or possibility of telephone line or other communication link; availability of suitable space within store; openness to bank’s co-branding preferences.

Existence of potential synergies between store’s existing business and new agent business—potential for generating additional foot traffic and triggering additional sales (this helps ensure commitment and might help the business case as well).

The main instrument that governs the bank–agent relationship is the contract between them and the technology platform through which all transactions occur.

The introduction of banking agents opens the door to outsourcing some branch operations to frontline retail outlets which brings potential efficiencies.  Consider the following examples: 
Retail chains or franchises. Rather than selecting individual outlets one by one, a bank would do well to seek out established chains or franchises through which it can contract a collection of outlets. These chains will have widespread name recognition (which helps in advertising where the agents can be found), a loyal clientele (which helps deliver immediate foot traffic to the agent), and a host of prime locations in the areas they serve. 

Agent network managers. Daily management and development of the agent network includes selecting, setting up, and training individual agents; monitoring the technical platform and each store’s POS devices and providing technical support in the event that a POS terminal breaks down; checking cash levels at each point and running after agents that have reached their cash limit but have not deposited funds at the branch. Rather than developing such expertise in-house—not a core activity for a financial institution—most banks choose to outsource agent management to network acquirers. 

Retail distributors. Banks may also consider partnering with others to fulfill much narrower roles in support of agent networks. Distribution companies have fleets of trucks traveling frequently to the kinds of stores that are likely to be bank agents. These distributors can offer knowledge of the stores, and can serve as cash delivery mechanisms, solving the vexing problem of how to transport excess cash from isolated agents to the nearest branch.

Ultimately, scale and ubiquity are best achieved by tapping into shared or interoperable networks of agents that serve multiple banks, much like a POS-enabled store today can accept cards from VISA or MasterCard issued by any bank in their respective associations. Mas [2008] describes a system whereby the agent has a contract with at least one bank, but may service customers of other banks with which it does not have a direct contract as long as the agent transactions for these other (“issuing”) banks are governed by (i) the contract between the agent and its own (“acquiring”) bank and (ii) a separate agreement (either bilateral or through a common payments network) between the issuing and acquiring banks..