Insight: Trust continues to be eroded. Providers with reliable platforms and reliable liquidity management systems will carry the day.

Approaches to Liquidity Management Are Evolving

Providers are beginning to use creative approaches to respond to liquidity management challenges, including:

–         Dedicated rebalancing counters at banks to provide agents faster service;

–         Liquidity “runners” to deliver liquidity in the form of both cash and e-float;

–         Credit lines/overdraft facilities for float;

–         The use of analytical tools to predict demand; and

–         Providing in-depth liquidity management training to Master Agents.

Insight: We still need more solutions for liquidity management, especially to get cash to rural areas. Advanced data analytics, the “uberisation” of agents and creating better digital ecosystems to keep money digital can all help.

Agent Viability Remains a Problem

Profits from the DFS agency business are modest, between US$143 and US$190 per month, (adjusted for cost of living differences). The highest agent profits were reported in two markets plagued by illicit OTC transactions, frequently performed by agents for an unofficial, unauthorised fee. Unauthorised fees or overcharging is common, enabled by lack of transparency (many agents do not display approved or current pricing schedules for their services). As a result, customers are unsure of service fees and often convinced that they are being over-charged, undermining trust and reducing service uptake and usage.

Unauthorised fees, of course, create real additional costs for customers but are increasingly accepted as part of the fee-for-service – particularly where agents are conducting OTC transactions and thus reducing the risk of sending money to the wrong number. Given some of the losses that can result from sending money to the wrong number, perhaps we should not be surprised that people are willing to pay a premium to protect themselves against this risk.

However, this clearly a suboptimal solution for both consumers (who confine themselves to agent-assisted transactions, limiting the opportunities for cross selling additional products and services), or the provider (which becomes dependent on agents and thus limits profitability) in the long run. Safaricom has sought to address this with the Hakikisha system that enables M-PESA customers to stop erroneous transactions within a window of 25 seconds and allows up to five such instances per day

Insight: DFS agency remains a low-profit business, a reality that may be driving unauthorised charges. Agency therefore is generally better as an add-on (non-dedicated) business, especially outside urban areas at the head of remittance corridors.

Agent Training and Monitoring Associated with Better Performance

Providers tend to delegate induction training to Master Agents and third parties – only a minority of agents report being trained directly by the provider. Likewise, too many agents are being left to their own devices and never receive monitoring or support visits. This is likely to suppress their profitability. As a recent Harvard Business School research demonstrated, the presence of tariff sheets increase demand by over 12%, while agents’ ability to answer a difficult question about mobile money policy increases demand by over 10%.

We have seen some evidence that training is associated with improved compliance and increased profitability. This association is clear in Bangladesh, Senegal and Uganda, but much less pronounced in other countries surveyed under ANA programme.

Insight: Training may be associated with better compliance, transaction volumes and profitability of agents, yet providers continue to outsource this function.

Robbery and Fraud are Increasing

Agents are struggling in the face of rapidly growing problems with robbery and fraud. This is a challenge that needs concerted and coordinated efforts to resolve. Providers and agents are beginning to address this problem, but more can be done. In our expert group meeting, providers, software platform vendors and consultants recommended a three-pronged approach: 1. training of agents; 2. the monitoring of fraud trends and proactively informing agents; and 3. collaborative fraud monitoring and reporting frameworks. A recent in-depth analysis of options to address the growing scourge in Uganda highlighted five different fronts on which fraud can be tackled.

Insight: Insecurity and fraudulent activities are growing – this could increase agent churn and to further undermine trust in digital financial services.

The ANA surveys have given us deep insights into the behaviour and evolution of agents across 11 countries. Many of the issues and challenges are now well-known, and the surveys quantify them in ways that have not been previously done. As a result of these surveys and the associated training, many providers have taken important steps to improve the quality of their agent networks, but much remains to be done. Agent networks remain the most costly and complex part of any DFS deployment, and successful providers are invariably those that get this crucial piece of their business right.