3 ways agent banking has redefined how unbanked are served

With the advancement of technology, the scope of providing financial services to the people has widened. However, in developing nations like India, masses based in rural and semi-urban areas remain unbanked even in this age of digital banking. Many regions are continually facing challenges availing banking facilities because of the lack of bank branches and poor infrastructure.

Though new initiatives such as the Pradhan Mantri Jan Dhan Yojana (PMJDY) have been put in place and over 28.38 crores new accounts opened as on April 2017, there are several households who are devoid of basic financial services. To serve the rural and under-serviced population, some banks have adopted the business correspondent (BC) or agent banking solution. This practice of hiring third parties as agents (or agencies) has helped them explore the undiscovered market and promote their offerings while helping people manage their finances. In an effort to go cashless, the banking agents also become the mediators to incorporate digital banking and e-payment habits in public.

Let us look at these statistics denoting the soaring number of BCs (agents) in India and the deposits made through them over the years.

What exactly is agent banking?

When a bank or financial institution employs an agent (or an agency) to reach out to the people and extend banking facilities to them, it is known as agent banking. The agents are generally individuals, organisations, panchayats or NGOs who have access to the local people and exploits the knowledge and network about the area, customer behaviour etc. to have the local people avail banking amenities.

How is Agent banking beneficial?

1. Cost-effectiveness

Agent banking is an extension of financial services to the areas having a lower penetration of banks, at a very low cost. It may be referred to as branchless banking that minimises the need to set-up a branch physically in each of the localities, thereby reducing the overheads associated with operations, infrastructure and maintenance. It thus increases the bank’s profitability by driving more business from the areas that are otherwise untouched.

2. Relationship management

All the banking facilities can be made readily available to the people at the convenience of their homes (doorstep banking) helping banks in building a rapport with the customer. The facility enables the agents to collect deposits in the savings account, allow cash withdrawal, recover instalments or disburse small loan amounts on behalf of the bank. This aids in attracting and retaining customers through enhanced levels of customer satisfaction.

3. Quality of assets

As the agents (or agencies) are familiar with the clients and maintain a personal relation with them, they are aware of related factors like financial stability, repayment capacity and other factors that are of key concern to the banking institutions. This helps banks in taking better decisions on lending loans and therefore maintain their asset quality.

Summing up

Banks can scale the reach of their services and maximise their progress on implementing a well-structured agent banking software. Customers too will be able to avail the benefits of banking at the convenience of their homes. And finally, the agents will find an extra source of earning and feel motivated to contribute towards a growing economy.

If you wish to have your bank’s penetration in the rural and unbanked zones through an all-inclusive BC/agent banking system, contact Sesame. We promise to delight you with an experience that we specialise in delivering to all our associates. For more details, send us your contact details now!

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