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Agent Banking

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A short note on Agent Banking

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Agent Banking

  1. 1. Presentation On………… Agent Banking
  2. 2. What is Agent & Agent Banking? An agent is an entity that is engaged by a financial institution to provide specific financial services on its behalf using the agent’s premises. “Agent banking” is the provision of financial services to customers by a third party (agent) on behalf of a licensed deposit taking financial institution and/or mobile money operator. “Agent banking” is an additional delivery channel that can enhance the convenience and outreach of quality and affordable financial services particularly to the underserved in a more cost-efficient manner.
  3. 3. Purposes of Agent Banking: Cash Deposits Cash Withdrawal Foreign Remittance Disbursement Utility Bill Payment Local Fund Transfer Purposes Agent Banking
  4. 4. Agent Banking Model: Agent banking, also known as correspondent banking, is a model for delivering financial services to locations for which bank branches would be uneconomical. It is a delivery channel that holds high potential for closing the delivery gap. Agent banking is a branchless banking model outside the traditional brick and mortar bank premises. It is opening up new windows of opportunity for financial institutions to reach out to more people, especially in remote, rural. First and foremost, agent banking allows financial institutions to establish physical presence in rural areas, remote areas or low population density where the cost of opening a branch may not make business sense. Secondly, it allows customers to access financial services in a more familiar way than in a branch as the unbanked are not familiar with the procedures of a traditional bank branch. Thirdly, it increases the sales from customers seeking banking services while increasing the income source for the agents through the commissions or fees they get from banks. Last but not least, agent banking contributes to a more efficient and inclusive financial system by extending financial services to a wider population.
  5. 5. Agent Banking Services 1. Collection of small value cash deposits and cash withdrawals 2. Inward foreign remittance disbursement; 3. Facilitating small value loan disbursement and recovery of loans, installments; 4. Facilitating utility bill payment ; 5. Cash payment under social safety net program of the Government ; 6. Facilitating fund transfer; 7. Balance inquiry; 8. Collection and processing of forms/documents in relation to account opening, loan application, credit and debit card application from public; 9. Post sanction monitoring of loans and advances and follow up of loan recovery. 10.Receiving of clearing cheque. 11.Other functions like collection of insurance premium including micro‐ insurance etc
  6. 6. Required Qualification for performing as Agent: A n agent should have some qualification. They are- 1. Permanent resident (As per as NID/Passport). 2. Enough infrastructures for conducting. 3. Financially solvent. 4. Have ability to hard cash transaction. 5. Ability to meet commitment with customer under adverse situation. 6. Knowledge and ability to handle Technology based financial services. 7. All deeds/transaction’s record should be preserved for internal audit with enough securities 8. Cannot be engaged with any subversive activities. 9. Ability to perform his/her responsibility properly 10. Concerned about the reputation of the institution 11. Not be a loan defaulter and not penalized by any civil or criminal court.
  7. 7. Agents & agents’ selection criteria: 1. Non Government Organization‐MFI‟s regulated by Micro credit Regulatory Authority of Bangladesh; 2. Other registered Non Government Organizations; 3. Cooperative Societies formed and controlled/ supervised under Cooperative Society Act,2001; 4. Post Office and its branches; 5. Courier and Mailing Service Companies registered under Ministry of Post & Telecommunications 6. Companies registered under „The Companies Act, 1994‟; 7. Agents of Mobile Network Operators; 8. Offices of rural and urban local Government institutions; 9. Union Information and Service Centre (UISC); 10.Educated Individuals capable to handle IT based financial services, agents of insurance companies, owners of pharmacies, chain shops and petrol pumps/ gas station
  8. 8. Process Flow: Bank Branches of Bank Agent Agent Agent Agent Agent
  9. 9. Working procedures of agents: 1. Agents will have a device connected with bank’s core banking software to do real time transaction; 2. Banks will do the branding of agents so that people understand about their services; 3. Agents will deposit a certain amount of money get the limit from the bank and up to that approved limit they can do their transactions with customers; 4. Agents will not be allowed charge any bank customers directly; 5. An outlet can be agents of four individual banks but they need to have separate premises for each of the banks; 6. An agent will operate under a designated and nearest branch of a bank; 7. Agents will work on fixed commission basis, after a certain interval the commission will be credited to their account;
  10. 10. Functions of an Agent: 1. Cash deposit and cash withdrawal 2. Collection of bill (Utility, tax, subscription fee) 3. Foreign remittance payment 4. Fund transfer 5. Balance inquiry 6. Issue of mini statement 7. Collection & preservation of A/C opening Form & others receipts copy 8. Facilitating small value loan disbursement and recovery of loan installments. 9. Cheque receive for clearing 10.Cash payment under government social safety net program 11.Collection & preservation of necessary banking E-mail & letters 12.Beside these other facilities directed by Bank Asia Limited 13.Passport fee collection
  11. 11. Responsibilities of a bank agent: 1. Agent must be honest, professional & ethical to his / her duties; 2. Agent must have proper knowledge about Agent Banking Products and services 3. Agent should take care of electronic device (Computer, POS Printer, Finger print machine etc.) and Ensures proper maintenance and security; 4. Agent preserves all paper / documents, transaction record, evidence & deeds. 5. Agent will display bank charge of agent banking services in a visible place for the notice of customers. 6. After a certain period of Agent submit regular/daily activities to respective officer. 7. Agent must comply the rules & regulation; 8. Agent is cordially cooperating to Bangladesh bank and bank officials during audit and inspection of Agent Banking activities.
  12. 12. Restriction of Agent activity: 1. Agent shall not ask any charge to the customers for its services, in addition to the charges fixed by the Bank; 2. Agent cannot provide any products or services 3. Agent are not allowed any transaction by cheque except finger print & card; 4. Agent should refrain from asking any personal information including account details and PIN number of customers; 5. Without getting any written permission, agent cannot engage any other banking business. 6. Agents are not allowing to appointing another sub-agent to provide banking services on their behalf. 7. Dealing with Loans and Financial appraisal 8. Encashment cheques dealing in Foreign Currency 9. Giving final approval of opening of Bank account and issuance of cards.
  13. 13. Agent Banking Application: 1. Able to support host validation for PIN/Password/ biometrics authentication; 2. Able to provide device authentication during session activation and transaction processing at host level; 3. Has availability of limit management features for agents, customer transaction and other limit requirements; 4. Has transaction and system audit trail; 5. Able to provide auto reversal features for incomplete transactions, transactions acknowledgement and receipting; 6. Able to support time out features; and 7. Able to display sufficient error message to customer; 8. Able to handle error processing.
  14. 14. The main target customers 1. Rural families having one member working in different cities 2. Rural families having one member working in abroad 3. Rural families have members studying in the city 4. Farmers who buys fertilizers and seeds from distant market 5. Farmers who normally do contract farming 6. Rural families who receive funds from different national and international NGOs 7. Freedom fighters and other group who receives grant from the government 8. Workers participating in food for work program of Bangladesh Government
  15. 15. Agent Banking delivery channels: 1. POS-enabled bank agent – This is an agent managed by a bank that uses a payment card to identify customers. 2. Mobile phone-enabled agent – This is an agent managed by a bank that uses a cell phone to identify customers. 3. Mobile wallet – This is an agent that is often managed by a telecom, uses a cell phone to identify customers, and provides store-of-value accounts called mobile wallets that are backed by bank deposits. Customers can use mobile wallets to send, receive, and store electronic monetary value. 4. Bank-provided account linked to a mobile wallet – This is a bank account that is linked to a mobile wallet. The bank does not manage the agent and pays a fee to the telecom for deposits and withdrawals.
  16. 16. Regulatory Issues 1. Without having approval from Bangladesh Bank no bank shall be allowed to undertake agent banking business. 2. Transaction currency will be taka only. 3. Banks shall have to submit copies of agreement(s)/MOU(s) signed between banks and their agents to Bangladesh Bank before launching the product. 4. The inward foreign remittance transfer arrangement through designated agents will be used only for delivery in local currency. 5. The system should not be used for any cross border outward remittance of funds. 6. Banks shall submit overall report on agent banking annually to its Board as well as to Bangladesh Bank. 7. Bangladesh Bank may withhold, suspend or cancel approval for providing agent banking services if it considers any action by any of the parties involved in the system is detrimental to the public interest. 8. Bangladesh Bank can amend the guidelines as and when required.
  17. 17. Challenges to the Profitability of Agent Banking 1. Banks cannot rely on agents to cross-sell financial products. As a result, in order to increase overall customer profitability, banks may need to incur additional costs in marketing and deploying sales forces, including branch employees, to cross-sell additional financial products to agent customers. 2. Bank-office and technology costs may vary depending on the delivery channel, since a bank may lean towards more complex and higher-cost core banking systems than a telecom would because of increased regulatory requirements and more complex procedures and product offerings. 3. Fees on transactions through agents are not higher than in traditional banking channels.
  18. 18. Agent Banking Service Limitations:  Giving final approval of opening of bank accounts  Giving final approval of issuance of bank cards/ cheques  Dealing with loan/ financial appraisal  Encashment of cheques and  Dealing in Foreign currency.
  19. 19. Agent Banking Scenario In Bangladesh (cont.):  More than 62% of the population still lacks access to the formal financial service. Agent banking is comparatively a new idea that can help the formal banking sector reach out to the marginalized people through their agents.  In Bangladesh, 12 banks are licensed to provide agent banking, although there are currently two market leaders actively engaged in expansion  Bangladesh Bank, the Central Bank of Bangladesh, has issued licenses to four private commercial banks for running agent banking operations- I. Bank Asia II. Dutch-Bangla Bank III. South-Bangla Agriculture IV. Commerce Bank & NRB Bank
  20. 20. Agent Banking Scenario In Bangladesh:  There are more than 50 commercial banks including the government-owned specialized banks and many other financial intermediaries actively performing in the market.  Despite efforts of commercial banks to promote SME (small and medium enterprises) banking, less than 10 per cent of the population lack access to formal credit.  Loans offered by agent banking are often at lower interest rates, ranging from 10%-15%, compared to 25% - 30% for MFIs, depending on the repayment terms.
  21. 21. Agent Banking SWOT Analysis Strengths Support from Ministry Interoperable between Banks Supported by the core bank All payments are traceable Opportunities Emerging market Positive Environment New banks are involving Weaknesses Rural people are not tetchy People have trust issue System or power failure Threats Fraud practices Source of funds
  22. 22. Thank You
  23. 23. ANY QUERY???