Bringing Smart Policies to Life

The basics: Agent banking

Last update: 2010

Agent banking: Definition

In the agent banking model, retail outlets such

as shops or post offices act as agents for banks
in areas where banks and other financial
institutions do not have sufficient incentive or
capacity to establish formal branches.

• Cash-in, cash-out services are managed using new

communications technologies which electronically link
transactions to a bank, typically using a bank card and a
point-of-sale (POS) device and/or cellphone.
 Who are “agents”?

• Post Offices
• Pharmacies
• General Retailers / Stores
• Lottery Outlets
• Merchants, supermarkets
Agent banking: Benefits
• Setting up agent banks is less costly than
traditional bank branches
– Requires smaller investments in staff and
infrastructure
• It is also more flexible
– Agents have lower security requirements than brick-
and-mortar branches
• Significant potential to expand outreach,
especially in remote areas
– Cuts customers’ travel costs
– Retailers’ commissions from agent banking provide an
additional source of revenue for communities.
Broader service offering

• Initially focused on traditional payments of

utility bills and taxes
• Now increasingly moving to offer a broader
range of financial products and services:
– Withdrawals, deposits, pre-approved credit lines,
simplified current accounts, and remittances.
– Conditional Cash Transfers (CCT)
– Employees’ salaries
– Payments and transfers still dominate, with savings
deposits playing a more limited role
 Policy Question:
Setting regulatory boundaries
• Defining eligibility criteria for agents
• Determining the financial services agents can offer
• Setting disclosure requirements
• Adapting AML/CFT regulations

Mexico: Brazil’s risk-based approach:

Agents are permitted to Any institution governed by the Central
perform Know-Your- Bank can establish an agent relationship.
Customer (KYC) Banks are responsible for supervising,
verification for low- setting standards for and tracking the
value transactions. operations of their agents.
Policy Question:
Protecting Consumers

• Building consumer trust to use agents

• Ensuring transparency, especially for
commissions
• Guaranteeing privacy and data protection
• Supporting complaints resolution
• Real-time settlements
• “Float” items
• Interoperability challenges
Policy Question:
Ensuring Commercial Viability

• Laws and regulation supporting agent banking

are not enough: there must also be sufficient
business incentives for agents and financial
institutions to implement this model
– Government cash transfers can kick-start the model,
but agents must also be able to offer other services
– Maximizing the number of transactions per
customers is one way to ensure the system is
financially viable
Example: Brazil

• Brazil is a pioneer in agent

banking. Since 1999, more
than 100,000 retail outlets
have been turned into agent
banks, reaching 13 million
extra unbanked people.
• All 5,600 municipalities in
the country now have access
to banking services, many
only through the use of
agents.
 Example: Indonesia

• The Indonesian post office, PT Pos Indonesia, provides

payment services through its network of 3500 branches,
300 mobile service vehicles, and 11000 village agents.
• As an agent for its 38 bank partners, PT Pos carries out
20 million money transfers a month.
Example: Peru

• Peru’s network of agents

has nearly tripled the
proportion of districts with
access to bank services,
from 5 to 14 percent.
• Setting up an agent bank is
estimated to cost just US$
5,000, compared to US$
200,000 for establishing a
bank branch.
Thank you!

© Alliance for Financial Inclusion 2010

info@afi-global.org
www.afi-global.org