A Lemonbank agent in Brazil
I know… I know… it took me longer than planned. But here it is: The continuation of my previous blog “Microfinance Institutions and Alternative Delivery Channels (ADCs)” which was based on the presentation by Mark Flaming and Joseck Mudiri “Microfinance Institutions and Mobile Financial Services Channels”. I briefly listed a few points on the business model of an agent network. In this blog, I wanted to convey the strategic channel options, Mark and Joseck provide:
MFIs are primarily operating in markets where payment service providers (PSPs) are offering e-wallet services that MFI customers are beginning to adopt. However, these MFIs have no connection to the PSPs, and MFI customers cannot transact between their MFI and e-wallet accounts.
Option 1 – BACKEND – LINKUP: MFI creates a communication link between its core banking system and other PSP platforms. This enables the e-wallet customer to transfer money between his or her e-wallet and MFI account. In this scenario, the MFI has to rely on the e-wallet customer’s interest and ability to navigate the e-wallet ecosystem to do business with the MFI.
–> Difficult to attract new clients in this scenario
–> MFI depends on e-wallet customer´s interest and ability to navigate the e-wallet ecosystem to do business with the MFI.
Option 2 – SEPARATE ECO-SYSTEMS: In this set up, the MFI develops its own mobile app and sets up its own agent network.
–> MFI customer still has to be customer in the PSP ecosystem
–> MFI stays in control of the ecosystem in which the customer transacts, which is however, small and isolated
Option 3 – SWITCHED ECOSYSTEMS: The MFI links its own ecosystem with the PSP system. MFI customers will still have to have e-wallets to use the agents and services of the PSP system.
–> Confusing for clients having to navigate through 2 systems.
–> MFI customer still needs e-wallets to use the agents and services of the PSP system.
Option 4 – INTEROPERABLE ECOSYSTEMS: MFIs would link their system to the PSP so that clients can make Over-the-counter transactions into their bank accounts. In this scenario there is no need for e-wallets by the MFI clients.
–> MFI keeps its clients, but gives them the convenience of using cash agents in other systems.
–> MFI can work with agent network of PSP system without the need to implement its own agent network.
Ok…. Evidently the last option is the most favorable for the client, but as we hear from many MFIs the negotiation with MNOs or PSPs is highly challenging for MFIs which often come with low transaction numbers and low volumes.
Once the technology is decided upon, the MFI will selects its agents either going for individual ones, or even choosing a chain of supermarkets, pharmacies, or other retail outlets which will serve well the MFI´s clients. Agent management which reaches from selection, training, management, supervision of the agent network will be the topic in a future blog. So stay tuned.
