An essential component of the payment ecosystem is Agency banking. This has evolved since 2013 when the Central Bank of Nigeria (CBN) launched the regulatory framework for agent banking in Nigeria. The goal is to achieve last mile banking delivery and expands financial inclusion.
These, and its potential for driving entrepreneurship are some of the factors responsible for the rapid adoption of agent banking in Nigeria. Thus, increasingly, young people are embracing the concept to become self-employed and create jobs within the agency banking value chain.
In this post, I highlight what agent banking is, different types or categories of agent banking and how you can start your small business within the value chain.
What Is Agent Banking
Agent Banking is an arrangement in which a bank or other approved financial institution uses third parties to deliver common banking services to its customers. Some the common services that a bank can use an agent to render include: deposit and withdrawal of money, local funds transfer, account opening and bills payment.
With the agent banking business models banking services can easily get to remote areas thar banks ordinarily cannot open physical branches. Thus, bringing financial services closer to the people and increasing the number of people who have access to common banking services is the primary goal of agent banking. This is what is called financial inclusion.
Agent banking, particularly, targets people living in the rural areas, semi-urban centers and the unbanked and under-banked segments of the urban population.
Commercial banks now leveraged on agency banking to its retail banking operations. Rather open more branches, they recruit more agents in areas where ordinarily they cannot reach. This way, they are able to serve more people at reduced cost.
Who can be a bank agent?
Any body including entrepreneurs with existing small businesses, school levers, graduates, professional people, retirees, etc. The small business opportunities created by agent banking in Nigeria is enormous and can be found at different levels in the value chain.
At the basics are the POS Operators you see on every corner of the street. With an investment of less than 100,000 you can start your mini banking business with just a POS machine and your mobile phone leveraging on the agency banking framework.
Agent Banking Categories
There are three categories of agents in Agency banking, namely: super agent, sole agent and sub agent.
Super-Agent
The super agent is an agent who has the authority to recruit other agents (sub-agents) and manage them in a network. To do business as a super agent, the company must first be incorporated by the Corporate Affairs Commission, be in business for at least 12 months and apply to the Central Bank of Nigeria (CBN) to be licensed as Super-Agent Banking organization.
Licensing of super-agents is rigorous, requires a lot of paper work and can take upto 8 months to conlcude.
The super agent recruits, trains and manages sub-agents, provides them with POS and other relevant equipment and supervises their activities. He also ensures that sub-agents carry out agent banking functions in line with prevailing regulatory guidelines.
This services is usually referred to as agent network management. The super-agent doesn’t hold bank customer funds. Rather he partners with licensed commercial banks or mobile money operator who are authorised to hold funds.
Some of the popular super-agents include: Monipoint, OPay, PayCenter, MoMo, etc.
Sole Agents
A sole agent is an agent with a direct agency relationship with a chosen bank or other financial institutions but does not have the power to recruit sub-agents.
In discharging his responsibility, the agent bank must adhere to important banking guidelines such as the anti-money laundering laws and the Know Your Customer KYC rules.
Each bank will usually prescribe the amount of money the Sole Agent will need to commence the relationship.
Sub-Agents
Sub-agents work under a super agent in an agency network. You see them everywhere in their kiosks or under umbrellas on the roadsides with their POS. These are the people you popularly call POS operators or POS business owners.
How to start agent banking business
The process you take to start this business will depend on the category of agency banking you want to play at. Let’s take a brief look at the different options.
Super-Agent
To be a super-agent is more rigorous as it requires direct licensing from the CBN.
To be licensed as a super agent, the operator is required to have a minimum capital of N50 million and a minimum of 50 sub-agents in its network. The applicant is also required to obtain letter of reference from a financial institution, among other documentary requirements.
The CBN wants to be sure that the applicant has the structure, financial and human capacity to provide super agent banking. Super agents privide agent network management services. This icludes agent recruitment, onboarding, monitoring, training, and ensuring that they deliver the services efficiently.
Sole Agent
To be a sole-agent, all you have to do is apply to any bank of your choice. The bank assesses the applicant in line with the general CBN guidelines.
The Bank then applies to the CBN for approval. The bank will usually submit a list of its proposed agents for consideration and on approval by the CBN, enter into agency agreement with the respective agents.
Thereafter, the bank supplies the agent with the needed equipment for the operation of the agency banking relationship. This will include: POS terminals, relevant software where necessary, other gadgets and other things the agent will need to carry out his duties.
The agent opens a bank account for the purpose of the agency relationship, funds it. And he is in business.
In line with existing regulatory, an applicant must be operating an existing business to qualify to provide agent banking services.
Some of the businesses that are easily suited for this include: super markets, gas/petrol filling stations, business and communication centers, corner shops, boutiques, distributors of FMCG, etc.
NGOs, religious bodies and such other similar organizations are not allowed to offer agency banking services.
All the commercial banks in Nigeria has dedicated agent banking programmes as alternative delivery channels to reach, hitherto underserved customers. For example, First Bank calls its agent banking offering, First Monie; for Access Bank, it’s Closer, ZMoney, and Ecobank, Xpresspoint, etc.
Sub-Agent
These, essentially are the POS Business Owners. Sub-agents are agents that are recruited and managed by the Super-Agent under an agent network management arrangement.
All you need to be a sub-agent is your initial investment for your float, a POS and a mobile phone. You can start this business from the corner of your house, a rented shop, kiosk or any empty space where you can mount an umbrella to provide you a cover from the sun and rain.
However, your location is key. Operators who site their business on busy areas, with limited bank ATMs make more money.
With about #100,000 you can become a sub-agent with any of the licensed super-agents. Review the terms and conditions under which the different super agents operate, decide on any of them, visit their website and complete an application. Their staff will contact you to conclude the onboarding processes. Then you are in business.
The amount you pay will cover cost of POS termibal, the installation of agent banking application on your mobile device and your initial float.
Agent Aggregator
A new kind of business model that has emerged within the agent banking ecosystem, is the Agent Aggregator. The Aggregator is an individual or business engaged in agent network management. Thus, your work as an aggregator is to recruit, train and manage a group of agents on behalf of a bank, mobile money operator or a super-agent.
An aggregator is the bridge between agents and merchants and as result earns a commission on all transaction executed by the agents in his network.
If you hope to be a Super Agent but does not have the financial capacity yet to install the necessary structures, why not consider starting as an agent aggregator first. Gradualy build capacity and thereafter apply to the CBN for licensing as Super-Agent Banking.
Visit the website of the Super Agent, bank, PSB or MMO of your choice to find out their conditions for appointing aggregators. It is often not much in terms of financial commitments. However, you will be required to have a regiatered business, sign an agreement and perhaps have a risk management system in place.
Delivery Channels for Agent Banking In Nigeria
Like in other parts of the world, Agent banking in Nigeria is delivered through the use of POS terminals, card readers, Mobile Phones, and bank linked mobile wallets for real time transaction processing.
Agent Banking Services
Agent banks help to drive the retail services of banks to places where it is not profitable for banks to establish branches. Some of the services they are allowed to provide include:
- Account Opening
- Balance Inquiry
- Deposit and withdrawal of cash
- Issuance of mini-statements
- Funds transfer (Local)
- Bills Payment – Taxes, tenement rates, utilities, subscriptions, etc.
- Payment of salaries
- Collection of bank mails
- Cheque book request and collection
Some agency contract may allow the agent to do more if the principal (Bank) believes the agent has the capacity.
How to Make Money in Agent Banking
The following are the revenue streams for bank agents in Nigeria:
Commission
The banks pay their agents commission on the volume of transactions carried out on their behalf. This commission is stated in the agency agreement and will normally vary from bank to bank.
Transactions are usually settled on a monthly basis and commissions credited to agents account after due deduction of charges.
A recent study shows that an agent who drives volume can earn as high as N200,000 every month on commissions net of charges.
However, some agents to bank led arrangement have complained that their banks slam them with so much charges that their commissions are eroded.
Service Charges
Depending on the terms of the agency agreement with the Bank, agents also collect service charges from the customer for some services rendered. This particularly applies to bills payment, taxes and subscriptions.
Float
Smart agent can deploy sound cash management strategy for the benefit of their primary business.
For instance, a supermarket operator who doubles as a bank agent can apply excess cash to replenish his stocks. Doing this rightly is a win-win to both the agent and the bank.
This is what one bank agent has to say:
“People here are doing it like daily contribution. They compel themselves to put in something into their account everyday, no matter how small. Instead of patronizing the Esusu people, they come here to make deposit. Sometimes, I use their money for my other business and ask the bank to debit my account in order to credit their account“.
For sub-agents in the network of a super-agent, commission is based on sharing formular in line with CBN guidelines. Most super agents allows their sub-agents keep NGN60 out of every N100 transaction charge. In all the cases, to make money, the agent must drive volume.
How Much Do You Need To Invest?
To be a Super-Agent, you need a minimum investment of NGN50 million under the prevailing regulatory framework. You must also meet prescribed anti-money laundering and compliance requirement. The documentation processes is also rigorous and may require that you engage a consultant to guide you.
To operate as sole agent and/or sub-agent may not require much investment. If you have an existing business such as a super market, gas station, business center, etc; you can add to your revenue stream by becoming an agent to your bank.
However, you are required to deposit some money with the Bank to cover your float and this will vary from bank to bank. The bank will assess your business cash flow to determine your float.
To be a sub-agent, all you need do is to approach a super agent of your choice and follow through the process. The super agent will brand your kiosk or shop, give you a POS and link you into its agency network. And you are in business.
Super agents will usually require a deposit of between #50,000 to #100,000 from applicants for enlistment into their agency banking network.
Agent aggregators will need to invest up to NGN3 million to effectively carry out the business of agent network management.
Final Words
Agent banking in Nigeria presents a lot of benefits to the economy, the banks, operators and bank customers. It enhances financial inclusion by helping to take banking services to places where bank branches are not present.
To succeed in the business of agent banking, site your business in places where there are limited or no bank branches or busy environment. Put in place adequate risk management strategies. And ensure you have honest staff to prevent fraud.
You must also enhance your cash management skills, raise reasonable working capital so as to have a higher float and ensure you adhere to the rules.
As with any other business opportunity we share here, do your research properly and if possible seek a professional opinion before embarking on agent banking business.
If you want to operate in the Super Agent Banking space, you’ll have to raise the needed capital, go through the rigorous process of licensing and implement relevant structures.
Having a consultant to provide necessary guidance will help greatly. I and my team have worked on a couple projects in this regard and are available to work with you. Feel free to contact us.
Buchi creates content and leads the Team at Kobotalk Management Services; a business development and investment consultancy firm. He provides strategic advisory to help SME's, small business owners and HNI's grow profitable business and make informed investing decisions.
Thanks for the info sir
good morning sir, there is an article i am writing on. I would like to cite your article but would need your full name please. bisah66@gmail.com thanks in advance.
Buchi Ejiogu is my full name, and thanks for the thoughts
Please which bank is the best to join for someone that want to be an agent. Is there any bank that is better for agent banking?
Please how can I start the agent banking I really need to start it very urgent.
Isaac, as highlighted in the article, you must have been doing business for sometime, any business.
Then approach your bank for Agent Banking relationship. Your bank will guide you through the process.
All they will do us create an account for you, install the relevant software/application and configure a POS.
You fund your account and you are in business.
So first step, visit your bank or a super agent, then take it from there.