An Introduction to Financial Inclusion via Agency Banking
“With around 8,000 bank branches — most of them in big cities — in a country of 200 million people, formal banking services remain out of the reach of most Nigerians”, a TechCabal article read.
In 2020, despite an increase in the overall transaction volume and value, Nigeria failed to meet its National Financial Inclusion Strategy (NFIS) target. Compared to her expected 80%, data by EFInA shows that only 64.1% of the population were financially included.
Financial inclusion means that individuals and businesses have simple access to valuable and affordable financial products and services that meet their needs — transactions, payments, savings, credit and insurance.
According to another 2021 EFInA study, while only 71% of urban adults in Nigeria have bank accounts, only 40% of those in rural areas have formal accounts. 60% of the rural communities surveyed do not even have a bank branch, ATM, or other alternative access to essential financial services.
Yet, despite a slight improvement in its financial inclusion rate — moving up to 64.1% in 2020 from 63.2% in 2018 — it remains apparent that there is a significant gap in Nigeria’s journey to financial inclusion. However, one of the ways organisations — banks and FinTechs — have tried to close this gap is through agency banking.
About Agency Banking
Agency Banking is a type of branchless banking that allows financial organisations to extend the network and reach of their products and services cost-effectively through authorised agents.
An agent is someone who offers simple banking services like deposits, withdrawals, transfers, and bill payments to customers without the need of a bank branch.
It has grown popular worldwide in the last decade, especially in countries with low financial inclusion rates like Nigeria. Countries like India, Brazil, and Kenya have drastically improved how people access financial services by introducing agency banking.
In Nigeria — heralded in 2013 by the CBN as part of its financial inclusion strategy — commercial banks have made it crucial to make their banking services reach a more significant number of people than their branches can accommodate. For example, last year alone, First Bank recorded $16.2B in agency banking transactions.
FinTechs are also not left out. Startups like TeamApt, Nomba (previously Kudi), OPay and Paga are also some of the leading agency banking networks in the country, with TeamApt recently recording $3.5B in monthly transaction value with over 100,000 agents across the country.
Nigeria has about 4 bank branches and 15 ATMs for every 100,000 adults.
Agency Banking has slowly infiltrated our banking culture.
For the everyday user, instead of going to a bank branch or ATM, it is easy to walk up to their neighbour (who is an agent) and perform their basic transactions with them. For the banks, it significantly reduces the traffic at their branches and makes expansion cheaper when they no longer have to build new branches to penetrate more locations in rural and urban areas.
Rural communities no longer get excluded because of the lack of bank branches or ATMs; one kiosk at the edge of town brings banking to their doorstep. Depending on the provider, financial services like lending, deposits/withdrawals, bill payments or savings are closer than ever before, at no extra cost to the customer or the provider.
How does Agency Banking work?
It is easy for anyone to be an agent. More so, because of the expensive cost of setting up and maintaining a branch for expansion, these financial organisations invest a lot of time and effort in recruiting agents as an alternative.
Typically, you sign up with a Super Agency, complete all their requirements as defined by the CBN regulations, receive your account details, set up your POS device, and you’re set to go! Attracting customers to perform transactions with you then becomes your day-to-day job.
A Super Agent refers to any organisation that recruits, onboards, and manages agents to offer agency banking services to customers.
Like every other financial initiative in Nigeria, becoming a Super Agent is heavily regulated. To be a Super Agent, you must be licensed and permitted by the CBN to offer agency banking services.
Commercial and Microfinance Banks are licensed with their CBN-issued banking license. In contrast, FinTechs like Global Accelerex and TeamApt are licensed with a Super Agency license or a Payment Solution Services (PSS) license.
According to the CBN, it costs ₦50M to acquire a Super Agency license and ₦250M to acquire a PSS license.
Alongside being compliant, agency banking relies heavily on a reliable tech infrastructure to work adequately. Deposits, withdrawals, transfers, bill payments, POS issuance, etc., are made possible with a complex set of API integrations across multiple parties in the ecosystem.
A new player would need to invest a great deal of time and spend an outrageous amount of capital on hiring and setup a tech team to build this infrastructure from scratch — increasing the time to launch by a great deal.
A big problem, we know! So, we solved it for you.
About Bloc Super Agency Tool
Built on our suite of APIs, Bloc offers licensed banks and companies a fully-featured no-code tool to help you get started with their agency banking services in less than two weeks.
With the Bloc Super Agency Tool, you can build an agent network that is well equipped to help customers withdraw cash, deposit cash, perform bill payments — all from a POS.
Operated by a CBN-compliant onboarding process, you no longer have to bother about building your tech infrastructure from scratch. Save money; save time; launch faster.
With our tool, we provide you with the opportunity to scale your financial services beyond the constraints of your branch, available staff and capital. Gain access to automated settlements, detailed tracking and reporting of all your agents, 24/7 customer support, POS issuance, and free technical support on all devices issued from us.
To get started, sign up here.
In conclusion, agency banking will continue to expand at scale because it solves a pain point for the unbanked and financially excluded community in Nigeria.
By connecting more people to simple financial services, it has the potential to evolve into use cases and opportunities far beyond the current trend. And as an infrastructure company, our responsibility at Bloc is to ensure that we make it possible for you to leverage these opportunities easily and fast.
