Author:
Dvara Research
This series of blog posts documents Dvara Research’s ongoing work on the role of business correspondent (BC) networks in providing cash-in, cash-out services across the length and breadth of India.
Business Correspondent (BC) agents as instruments of Cash-In Cash-Out (CICO) services are a scalable and cost-effective way of ensuring easy access to basic banking services. However, providers have struggled to maintain and expand these agent networks in remote areas due to low transaction volumes and inadequate incentives for their agents. For consumers to have trusted, reliable, and uninterrupted access to CICO services, the BC model must enable successful agents with sustainable businesses.
There is no single point of convergence on what it means for the BC model to be successful. It requires the involvement and satisfaction of multiple stakeholders (individual agents, agent network managers, banks, regulators, etc.), which implies that there are multiple perspectives from which the success of the agent model may be defined. These perspectives can be complementary or conflicting in nature. For instance, increasing the commissions received by agents could amount to a more ‘successful’ model from the agent’s perspective, but it also creates higher costs for network managers who may then be unable to expand networks into more remote hamlets. Goel et al. (2022)[1] propose a theoretical approach to study the BC Model as a derivative of the BPO Model across six dimensions and defines agent success as the ability of the model to achieve its intended strategic, economic, and technological benefits along with satisfaction of its numerous stakeholders. The African Financial Inclusion Policy Initiative (2020)[2] suggests a regional policy framework for Africa, highlighting key aspects to be considered by regulators and DFS providers for efficient agent network management. Consultative Group to Assist the Poor’s (CGAP) Agent Management Toolkit[3] acts as a technical guide for assisting network managers who are looking to design and grow their agent network. Additionally, the Helix Institute of Digital Finance (2016)[4] has developed an analytical tool to measure success across six dimensions of agent network management. This includes network size, network distribution, network sustainability, service reliability, agent quality and demographics. There is, however, little focus on ensuring the satisfaction and protection of the end-user of branchless banking services- the customer. Since BC Agents are the closest banking touchpoints for customers in rural outposts, any hindrances faced by them directly affect their ability to service their customers.
Therefore, we postulate that any kind of examination of the factors affecting successful agent operations must not only focus on capacity building and risk management for the agent, but also incorporate its relevant impact on the customer. Building on existing literature, we propose a framework for evaluating agent success through a customer protection lens; this can potentially be deployed as a tool to determine agent success while also allowing stakeholders to identify context-specific levers to improve outcomes for the customer.
The Agent Success Framework can be understood as a consolidation of the following layers of the BC model, where each layer comprises of factors affecting agent success as well as the customer:
Layer 1: Core Business Model
The revenue and cost structure of the BC model, and the time to breakeven, just like any other business, defines its profitability, and is often the clincher in deciding continued operations of the agent. When agents are unable to recover costs incurred during their business just through commissions, this could lead to dormancy and attrition. In such cases, often, they use this revenue stream to supplement their more important livelihoods activities like running a grocery store, internet café, mobile recharge/repair shop, etc. However, due to the low volume of transactions in remote rural pockets, agents may then have to resort to charging the customers directly, in a bilaterally settled fashion, which, while meaningful to their unique contexts, would be considered a clear violation of RBI regulations[5] for BCs. Other factors such as the absence of a suitable insurance cover for cash-in-transit and the unavailability of credit for recurring expenses affect the agent’s ability to maintain adequate cash inventory and service their customers’ latent demand, thereby impacting their potential revenue stream.
Layer 2: Network Management
The relationship between the network manager and agent is defined by the degree of interaction between the two entities. In some cases, the agents have a direct line with the manager for any queries that they raise for themselves or on behalf of the customer, which allows for faster resolution. The network manager also plays a critical role in supervision, monitoring, and training the agent on the appropriate suite of services to be offered to the customer. Agents sharing a close relationship with their manager are more likely to stay active and better equipped to handle customer requests. Moreover, the manager may also support the agent in the process of account rebalancing and float management by offering cash management services, which reduces instances of service denial due to insufficient liquidity.
Layer 3: Regulatory Environment
The regulatory environment includes all kinds of subsidies, credit, and tax exemption schemes for the agent to better run their business. The regulator may also take it upon themselves to determine the price of various products offered by the agent as well as enable interoperability across platforms and providers. Unencumbered by regulatory inadequacies, the BC agent can function smoothly and provide uninterrupted CICO services to the customer.
Layer 4: External Environment
The last layer consists of several external factors that may impede the agent’s business, resulting in sub-optimal outcomes for the customer. Technological failures such as transaction failure and network downtime often lead to distress and negatively affect the customer’s trust in the agent. On the other hand, agents may get discouraged from conducting high-value transactions and reaching out to new customers due to a lack of protective mechanisms available against fraud committed by the customers (for instance, using fake currency for deposits and transfers, conducting illegitimate transactions through agents and so on). Finally, the local economic setting of the space within which the agent is operating, including competition from other providers and as well as agents, may affect their overall ability to conduct and continue their business operations.
We plan to deploy the above Agent Success Model to help stakeholders such as network managers, banks, and policymakers improve the ability of their agents to offer uninterrupted CICO services. This diagnostic tool may help determine, ex-ante, whether an agent model could operate successfully in a district or state due to the adequacy of all four layers. It may also be used to identify, ex-post, the fault lines in the current agent model, determine pathways for agent success, and improve customer outcomes.
Click here to access the Part I and Part II of the series.
[1] Goel, K., Bandara, W. & Gable, G. (2022) Banking the Unbanked: Conceptualizing Success of the Business Correspondent Model. Inf Syst Front. Retrieved from https://doi.org/10.1007/s10796-022-10345-7
[2] AfPI (2020). Regional Policy Framework To Strengthen Agent Networks For Digital Financial Services. Retrieved from https://www.afi-global.org/wp-content/uploads/2020/12/AFI_AfPI_agent-networks_framework_AW3.pdf
[3] CGAP (2011). Agent Management Toolkit: Building a Viable Network of Branchless banking Agents. Retrieved from https://documents1.worldbank.org/curated/en/898731468340143196/pdf/633350WP0Agent00Box0361513B0PUBLIC0.pdf
[4] Helix Institute of Digital Finance (2016). Successful Agent Networks. Retrieved from https://www.microsave.net/wp-content/uploads/2017/02/New-Successful-Agent-Networks-Final-Feb.-2017-2.pdf
[5] Reserve Bank of India (2010). Financial Inclusion by Extension of Banking Services- Use of Business Correspondents (BCs). Retrieved from https://www.rbi.org.in/scripts/NotificationUser.aspx?Mode=0&Id=6017
Cite this blog:
APA
Mukherjee, A. (2023). An Agent Success Framework- Part III :Arriving at an ‘Agent Success’ Framework. Retrieved from Dvara Research.
MLA
Mukherjee, Abhishek. “An Agent Success Framework- Part III :Arriving at an ‘Agent Success’ Framework.” 2023. Dvara Research.
Chicago
Mukherjee, Abhishek. 2023. “An Agent Success Framework- Part III :Arriving at an ‘Agent Success’ Framework.” Dvara Research.
