Why agent banking is a win-win, Case study Co-op Bank

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In emerging markets and rural areas, traditional banks have a hard time reaching customers. Opening and operating traditional bank branches are often not cost-effective.

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Operating a bank branch entails having at least one teller at the front desk, a bank manager and bank employees specializing in areas such as mortgages and loans, and security.

It is one of the reasons why banks are closing rural branches. Rural customers also have to travel extensively to visit their respective bank branches. For instance, an average rural customer in Kenya has to travel around 8-20 km to the closest branch.

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Benefits of Agent Banking to Agents (retail outlets)

1. Increased income through commission 

Bank agents are usually awarded commissions whenever they perform transactions on behalf of the bank. These commissions are mainly awarded when somebody deposits cash, withdraws cash, and when somebody opens a bank account through the agent. This is a nice way of generating extra income for a retail outlet

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2. Increased customer traffic hence more business to the retail outlet

Bank agents usually conduct their normal businesses in addition to being bank agents. For instance, a hardware shop that acts as a bank agent will continue conducting its main business (sale of hardware materials) in addition to being a bank agent.

The increased traffic brought about by customers performing banking activities also translates to more people getting to know your business hence more sales.

Benefits of agent banking to the customer

Agent banking has literally brought banks to the villages and this has come with it many advantages to the customer. What are some of these advantages?

1. Ease of access

With bank agents almost everywhere, you no longer need to travel long distances to visit your bank. Your nearest retail shop could be operating a “KCB “Mtaani” or a “Co-op Kwa jirani” as they are locally known.

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2. Flexible hours

Most banks close their doors by 4 pm, but with bank agents, for as long as

the business premise remains open, you can do your transactions. This has proven to be very convenient especially for people who are busy during the day.

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Benefits to the Banks

Local banks have recorded an increase in their profits and agent banking is one of the main attributes to such huge profits. So, how does a bank benefit from its agents?

1. Cutting Costs

Banks are finding it cheaper to set up agents as opposed to opening a branch where they will incur extra costs of staffing, rent, electricity etc. With agent banking, the agent incurs almost all the costs. 

Increased Product penetration

Agent banking has made it possible for bank products and services to penetrate areas that at first seemed impossible. With agent banking banks have reached even the smallest of villages.

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