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Can banks come up out of the abyss of agent banking?

John Paul Ssemyalo Agent banking
Assisted Payment Solutions - Africell Airtime

By John Paul Ssemyalo

The introduction of agent banking on the Ugandan market has created a lot of excitement and opportunities for SMEs. A move not foreign to telecom companies has raised the level of competitiveness among Uganda’s commercial banks and has seen telecom companies re-visit their commission rates in order to remain relevant to the huge number of customers who by now, maybe questioning the relevance of having mobile money wallets vis-a-vis having bank accounts.

Agent banking has enabled a vast majority to easily make their banking transactions for the sole reason of convenience.

With the central bank playing a key role in regulating this service, Equity Bank, Uganda’s fastest growing commercial bank in 2017, pioneered agent banking today and inevitably other banks have also embraced this model of banking.

Today, Centenary Bank and Stanbic Bank have gained momentum in the past months and through their aggressive sensitization coupled with marketing strategies have managed to amass a good number of agents countrywide.

The fundamental questions to explore still remain; Is agent banking going to increase bank revenues in terms of profitability? How will banks survive the inflated operational costs involved in agent banking? And most importantly, who will dominate the agent banking industry?

Needless to say, running and managing an agent banking network countrywide is costly but of course cheaper than opening up a local bank branch in a remote region where the locals are reluctant to consume their services.

The promise of great commissions to SMEs will entice them to invest in this form of service business but getting customers to utilize all the other bank services besides making bill payments will be their greatest challenge.

Plausibly, the 3 giants; Centenary Bank, Stanbic Bank, and Equity Bank will remain at the top of the agent banking tier making it challenging for the other players to infiltrate the industry as the already established agents will alienate them because taking them on as clients will not be a smart business move since they attract a very limited number of customers.

Equity Bank Kenya’s success in Agent banking was due to the dominance they already had over the majority of microtransactions business owners and had a prior appreciation for a product service of a similar nature.

In Uganda, Centenary Bank has the highest likelihood to take the lead in the agent banking business over all the other banks, with Equity bank closely in tow.

Evidently, already exhibiting local networks such as Pebuu Africa have over 3000 agents way more than what the biggest bank has.

Such networks already have proved and tested systems that are already carrying airtime for all telecoms, data, utilities and school fees.

Agent banking would be an extra service Pebuu provides and would surely save the commercial banks late in the race the hefty operational expenses they would have to incur and achieve similar goals.

Without commercial banks working with already existing networks, agent banking will only work for the big banks leading the small players down into a dark abyss.

The writer is the Director of Innovation & Strategy at Pebuu Africa

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