MANAGING AND GROWING AGENT BANKING NETWORK IN NIGERIA’S DYNAMIC ECOSYSTEM.

Tochukwu Okwuanya (PMP)

How Fintech Organizations can position for growth in a future of uncertainty.

FinTech sounds cute and is particularly exciting for practitioners who are wowed by its sheer capacity to change the way financial services are offered and accessed. Currently, one can request for loan online and get funded in minutes. In Nigeria, this is revolutionary. This is the most handy instance of FinTech innovation disrupting financial services. However, we will be isolating ourselves from the realities if we do not confront the applications of this innovation especially from the perspective of its impact. We must not fall into the trap of appreciating FinTech for its own sake.

According to the CBN, less than 5% of the loans disbursed were done digitally. What this means is that the product is still not being used for certain reasons. One can posit that there are trust issues, knowledge gap, ineffective marketing but the chief of all is that regulation is yet to decide on an approach to this innovation that will enable agents drive it while mitigating the militating risks.

Within the Nigerian context, Agent Network is most critical because they function as a low-cost distribution channels into the mass market. This is typified by the forays and investments made by the big organizations into it. Opay has invested a better part of their $50m into aggressively growing their agency and claim to have over 80,000 agents within a year of its operations. Techeconomy.com posted that MTN’s MOMO, that recently got Super Agency License from The Central Bank of Nigeria has grown its Agent Network to 108,000 in just 5 months. Commercial banks are onboarding Super Agents and Agent Network managers as they strive to have a retail outlet for their product into the mass market. Transsion holdings of Tecno Mobile fame has also thrown their hats in the ring with PalmPay.

The value in agency needs no further evangelism. The Commercial Banks see it as a low-cost route into the market, the FinTech companies knows that they can be clustered and be used as an innovation sandbox to test their ideas and guage a larger market response, brands see them as free ambassadors for their brands. With value thus being unequivocally established, it has metamorphosed into a segment that everyone wants to take a bite from. Currently there are 20 Super Agents on SANEF’s list, over a dozen licensed mobile money operators, about 25 commercial banks and other fintech companies that have found ways to enter the space and aggregate agents for them.

There is now a surfeit of operators recruiting and aggregating agents, competing on identical products, in the same niche, differentiating only in service efficiency and pricing. This reality has evolved into what I have opted to call ‘the commoditization of Agent Network proposition.’

This commoditization starts from the lowest barriers to entry. Competitors can emerge literally overnight by simply partnering with a licensed PSSP/PTSP and leveraging Open APIs or simply having proof of N50m of shareholders’ funds unimpaired by losses as requested by The CBN. This low barrier to entry is exacerbated by a restricted product line of cash in, cash out transactions which makes agent banking a POS affair and does little to push total digitalization of money.

Thus, we have almost a hundred competitors, rolling out the same product and competing in pricing as if they are on the race to zero. Indeed, some companies have started experimenting with zero. Average price of interbank transfers in Agency business have dropped by over 500% in the last two years. In recent times, price leaders have started to compete with zero with an operator announcing ‘free transfer’ in a bid to capture market share. Merchant Service Charge has dropped to 0.55% and there is a possibility that it will be driven down further.

What this means is that profit margins will progressively shrink until there will be no further business justification for agency business. In light of this future, Agent Network Management should be approached as both an art and a science.

In the past five years, I have led and worked in teams that recruited, managed and grew agent networks in urban, peri-urban and rural communities. I have also been privileged to conceptualize and oversee the deployments of certain products we believed would be critical within the space. Having participated in the deployment of at least 10000 agents across 3 organizations, I will advise that operators and investors in the agent banking space take cognizance of the following realities.

1. Your product is not special: I have been to over half-a-dozen product launches, listened to fintech enthusiasts rave about how a particular product would change the market and wow agents and customers. Chances are that the product will either facilitate deposits into bank accounts, withdrawals from a bank account or the payment of a myriad of bills. UI and UX are good turfs to perfect and attempt a differentiation but across the ecosystem, agents wants it solid and simple. Therefore, your product will not exactly distinguish you. You can build a super app but you will still compete with the rest if your niche is agent banking.
2. No one will win this current price war: As operators shrink margins to stifle their competitors and the competitors adjusting to stay competitive, the market will start adapting to the changes as status quo. It is best that players within the space begin to imagine their survival in the ecosystem where their margins will continue to shrink. If there is money in agent banking business of the future, it must be made somewhere else and that place is…
3. Look towards VAS and vertical products: You can actually differentiate your product in the way you package VAS. Microinsurance, consumer finance for agents, digital credits etc. There are a lot you can smartly layer on top of your offering. This will justify agents paying a premium on your products.
4. Invest in Agent loyalty schemes: Agents can be loyal. Some players in the space have proven that. However, operators should make deliberate efforts to make their agents feel like a part of the bigger picture of the business. Some companies actually invite agents to contribute when they are trying to push updates and reward Agents for good ideas that was converted to products.
5. Always Learn: Do not assume that you know it all already. Leave room for the industry to shock you. The shock can come from the regulators or your competition. Listen, prepare for possible scenarios and articulate how your organizations.
6. Compete only if you must, partner wherever you can.