Commercial banks seem to be enjoying agency banking as seen by its growth since its establishment in May 2010. The banks have continued to contract varied retail entities to offer basic banking services on their behalf and the returns are handsome.
The contracted entities include, security companies, courier services, pharmacies, supermarkets and post offices who act as third party agents to provide cash- in -cash-out transactions and other services in compliance with the laid down guidelines.
Data from the Central Bank of Kenya (CBK) indicates that as at 30th June 2015, there were 17 commercial banks that had contracted 36,080 agents which had facilitated 175.4 million cumulative transactions valued at sh930.1 billion.
As at 31st March 2015, 16 commercial banks had 34,381 cumulative agents since the rollout which had facilitated 149.4 million transactions valued at sh817.5 billion. The number of banking transactions undertaken through agents increased from 13.4 million in the quarter ending March 2015 to 25.9 million transactions in the quarter ending June 2015. Similarly, the value of banking transactions undertaken through agents increased from sh74.7 billion to sh112.7 billion over the same period.
Agent banking is the provision of financial services to customers by a third party (agent) on behalf of a licensed deposit taking financial institution and/or mobile money operator (principal).
The dividends accrued from it spans from its unique positioning which offers several advantages. First, it is a distribution strategy. Several economic factors driven by competition and demographics, it offers the opportunity to reach poorly distributed locations but also the customer is nearer requisite financial services instead of going to a bank branch.
Secondly, it has improved banking penetration as customers can choose multiple channels to do transactions or make inquiries. This also provides an opportunity for banks to learn more about customers and what else they can offer in order to maximize on their profits.
Thirdly, it is cost effective. In some places in Kenya, one needs to travel long distances to reach a bank. Here is, that same hardware where you buy other things also acting as your bank. The convenience to the customer and reduction of costs to banks who may want to open a branch in that area is eliminated as they will just need to choose which institutions to work with.
Perhaps its continued growth will entice other banks, not part of the 16 to also embrace it to realize more profits amidst stiff competition.