Agent Business Case

Providers need to understand the costs and risks associated with the role agents are asked to bear, and calibrate agent compensation accordingly. It is important for providers to compare the characteristics of being a branchless banking agent against other opportunities agents have for their time and capital.

For example, take the case of a small store selling prepaid airtime. The demands on the merchant from selling airtime are considerably less than those associated with mobile money agency for a service like M-PESA.

• Capital required: CGAP’s research shows the minimum amount of float and cash required of an M-PESA agent (US$ 1600) is 12 times greater than the typical stock of airtime scratch cards held by the same merchants (US$ 129).
• Merchants will also find they must wait longer for branchless banking profits. With airtime they recoup their investment immediately upon sale of the scratch card to a customer, whereas with M-PESA, Safaricom pays mobile money commissions at the end of the month
• Selling airtime is also comparatively quick and trouble-free: selling a card may only take a few seconds of the merchant’s time, and there are rarely questions from clients. Branchless banking customers may have many concerns about new services, or they may even ask agents to complete the transaction for them.
• The distribution network for airtime is comparatively well-developed. There are thousands of wholesalers from which a merchant might buy airtime. But even in the most advanced branchless banking services, agents may need to devote time and money to travel to a place where they can exchange cash for electronic float.

Safaricom managed to convince great numbers of merchants (21,000 at latest count) to take on this business. Looking at M-PESA with the advantage of hindsight, we now understand that volume of transactions generated by wildly enthusiastic response by consumers was instrumental in bolstering what, on pure percentage terms, could have come across to merchants as a weak business proposition.

There will be variation between countries and even between different agents for the same branchless banking service, whether small owner-operated stores, large retail chains, or the postal network, among other types of potential agents. Providers need to understand how the business case will look to each type of agent.

Based on CGAP’s research in Brazil, India and Kenya, we have identified nine factors that drive the business case for agents. Click on the links below to find out more about each driver:

Nine Drivers to the Agent Business Case

Role-related
1. Up-front capital
2. Liquidity management 
3. Rigid staff and space expenses

Exogenous
4. Security risk
5. System reliability
6. Effect on other line of business

Time-specific
7. Adequate revenue at start-up
8. Major costs with growth
9. Fragmented demand across too many agents