Telenor’s Shared Agents: Digital Finance Catalyst for Bangladesh?
Building and managing a sustainable agent network is not easy and certainly not cheap. In fact, the largest expense digital financial service providers worldwide incur is distribution. Aside from the cost necessary to achieve scale, building a successful agent network is something that requires highly specialized expertise and efficient agent management.
New business models for agent networks are emerging, which may offer new incentives to customers, agents and financial service providers to participate and thrive in the mobile financial services (MFS) business. One new category is “shared agent networks,” which serve more than one provider. Shared agent networks in countries like Bangladesh, Nigeria and Peru are similar to now-standard models of shared ATMs that can dispense cash for the clients of many different financial institutions. MobiCash is a shared agent network that has begun operations in Bangladesh, established by mobile network operator Grameenphone (GP) majority owned by global MNO Telenor.
How does MobiCash work and add value to the Bangladesh market?
“MobiCash” is a platform that customers of any mobile network operator can use for mobile financial services. MobiCash processes account openings, cash in/out and bill pay for the customers of five participating banks. Grameenphone manages the agents and provides the unified infrastructure that “talks” with a wide variety of other mobile financial service providers.
MobiCash was established on the strong distribution foundation built by Grameenphone, leveraging its current network of 600,000 airtime reseller and other mobile communication products and infrastructure throughout the country, as well as its seasoned experience managing these resellers. MobiCash has been able to quickly build its own network of 61,000 agents around the country, operating with strong technical and financial support from the GrameenPhone distribution network.
The five banks that MobiCash currently serves have a total of six million mobile-enabled client accounts. These partner banks maintain their own individual agent relationships in addition to enabling their customers to use agents provided through MobiCash. Through MobiCash, participating banks increase the range of touch points available to their clients, while reducing the need to invest in building their own agent networks. For individual agents, the platform simplifies the need to maintain separate systems for each bank it serves.
The MobiCash shared agent network has interesting implications for these partner banks as well as other mobile financial service providers. bKash, the country’s mobile money sprinter, has established 15 million clients in four years. Before MobiCash entered the market, bKash offered a distinct advantage over other MFS provider – a strong network of more than 150,000 agents. However, now that MobiCash extends its shared agents to other financial service providers, the shared agent network could help other MFS providers gain scale and provide competition to bKash’s dominant market position.
What business and regulatory questions emerge from MobiCash?
Shared agent networks worldwide are still working out core business model issues. For example, in Bangladesh, participating banks have to weigh carefully the strategic dependency on GrameenPhone for access to communications (USSD, SMS) and reliance on MobiCash agents. MobiCash agents are also managed by Grameenphone, which can complicate matters for banks needing to monitor fraud or risk management. The shared agent environment also means that banks may have lower visibility to market directly to existing or new potential clients. The business model in Bangladesh is also challenging because fees for basic payments are among the lowest globally, leaving thin margins for partners to share. However, there is scope for more revenue generation and expansion through the platform and through other MNOs in Bangladesh now in early stages of offering shared agents as well.
The innovation of shared agent networks may also require rethinking elements of regulations. The regulations so far have not fully considered how a large agent aggregator like MobiCash might work with several different providers. As these models mature, such issues are addressable with thoughtful examination and stakeholder dialogue.
Where do the future opportunities lie?
Shared agent models build the ubiquity of access necessary for digital financial services to expand. They can also potentially ease market entry barriers for new providers and enable competition, enhance cash management and improve ability of participating financial service providers to reach scale. Shared agent networks potentially help reduce the largest cost in mobile financial services – the distribution costs required to pay commissions to agents.
It is natural that with any new innovation, especially those involving complex partnerships, that business model and regulatory questions emerge. CGAP continues to watch how these models develop in markets worldwide. We think they may be critical enablers to more sustainable, competitive and efficient mobile financial services in countries where financial access and poverty alleviation remain significant challenges.
CGAP interviewed MobiCash stakeholders and participated in field research in late 2014 to better understand the MobiCash shared agent network in Bangladesh.
The necessary(from MNO) of agent network sharing came when Bangladesh regulatory board restricted Telco led MFS model. Still few of MFS providers(Bank led) with very low customer base facing challenges while maintaining separate Technology infrastructure for MFS in parallel with CBS. There are not even getting ROI(return of investment) after running operation for couple of years. In such situation those MFS providers(bank led) can use MNO Technology infrastructure(like mobicash) to leverage their IT infrastructure cost also.
Hi Muhammad, thank you for your comments! As you point out, we think the MobiCash model could potentially be a strong enabler for participating bank's mobile financial services to reach scale, which is great since some banks in Bangladesh have so far struggled with their own MFS offerings. As you rightly point out, MobiCash is not just about getting access to a strong agent network, but also the MNO technology infrastructure that could reduce participating banks IT infrastructure costs. As the platform is still quite new, we are keen to see how relevant stakeholders in Bangladesh engage with it over time, and how the overall MFS landscape of Bangladesh could be altered as a result. Do you see any particular risks/challenges with MobiCash down the road?
Bangladesh Bank has not permitted Mobicash to provide agent service as a brand. it just allowed to pay utility bill and purchase of train ticket etc. As MNO are key infrastructure provider for MFS, so central bank would not allow them to provide MFS or Agent service as a brand to prevent monopoly in long run. same agents are now working for both MNO and MFS separately for commission. Regulating MNO would not be easy for central bank. There are many tools of regulating commercial banks and that's why Bangladesh Bank would not allow greater role of MNO in financial service.