THE LAST MILE MOBILE MONEY AGENTS

Mobile money agents, frequently described as the “bridges” to financial inclusion constitute the last-mile distribution network of digital money services. These fleets of financial mediators are rapidly growing in size and complexity, and the successful integration of new technologies and best practices in managing them will only increase in importance as the universalizing effects of interoperability collide with the competitiveness advantages of culturalization.

With only a year and a half to go until the universal financial inclusion goal of 2020, what opportunities are there for mobile money providers – through strategic investments in agent networks to conquer the last frontiers beyond mobile money’s reach?

Mobile money continues to grow at breakneck speed in emerging markets, creating a patchwork of corridors connecting the rural to the urban and the Global South to the North.

Formal account ownership of a mobile money account has been responsible for a sizable chunk of the inroads made into the World Bank’s goal of 100 percent financial inclusion by 2020, particularly in Africa where mobile money growth has accounted for nearly all of the growth in formal account ownership in recent years.

In setting their sights on an additional 1.7 billion globally (the number of adults worldwide without a formal account of some kind), mobile money operators rely on a complex and fast growing network of agents who are in many cases the forces driving account registrations as well as ensuring the smooth execution of transactions.

‘Fast-growing’ is no exaggeration: the number of mobile money agents grew more than 10x in less than a decade, topping five million in 2017.

At the crux of sustainably scaling such a formidable collection of networks is, first and foremost, the profitability calculus for agents, as well as the streamlined delivery of support and responsiveness needed for agents to perform their critical functions at the last-mile of the digital money pipeline.

Nurturing an effective agent network is no mean feat for mobile money operators who face a number of challenges, from regulatory hurdles to building and retaining consumer trust, in staying afloat

Keeping agents happy is no easy task either, in Zimbabwe, where one might assume mobile money’s particular ubiquity would signal a happy mobile money ecosystem, agents face serious challenges in managing reserves of hard cash, and are often forced to establish multiple tiered pricing and black market markups to deliver the critical cash-in / cash-out functions (CICO) that make up the bread and butter of their mobile money toil.

For the mobile money operators that do intend on surviving, different strategies have emerged. In Senegal, where traditional telcos were slow to the starting gates in deploying mobile money networks, dedicated mobile money operators like Wari and Joni Joni have leapt to dominance. Here, most agents are not bound by exclusivity agreements in offering mobile money services to their clients as in bank or MNO-dominated mobile money landscapes like Kenya, India and Indonesia.

Variation in the preponderance of exclusivity across countries is quite high – sometimes determined by regulation, as in Senegal – and has been associated with up to 40 percent higher revenues for agents in countries like Senegal, Kenya and Bangladesh.

Aside from this exclusivity, a mobile money network may be composed of dedicated agents whose digital finance services constitute their full-time occupation, non-dedicated agents who are typically retail merchants of all stripes, from kiosk sellers to gas station attendants, or a combination of both. While the up-front cost of recruiting and continually training dedicated agents is often higher than opting for the more franchise-leaning model of non-dedicated agents, getting the incentive structure right across the diversity of the latter is a tricky proposition, particularly in an industry where agent remuneration from CICO accounts for more than half of total provider revenues.

This has put pressure on providers to distinguish themselves from one another through branding differentiation and innovation. Witness Wari’s aggressive and innovative expansion plans: after being burned by a retracted offer to be bought by Tigo, a competitor and local division of Swiss telecom behemoth Millicom, Wari joined forces with a French billionaire-led consortium and has recently announced partnerships to integrate its digital wallet services into both Whatsapp and Mara Phones (French), a ‘made-in-Africa’ handset manufacturer based in Rwanda.

Indian payment providers, for their part, are getting the governmental green light to push the reach of their agent networks further into the remote markets that remain uncharted territories for digital money’s reach: the Reserve Bank of India (RBI) recently published a comprehensive payments vision document and drafted rules for a regulatory sandbox that fintech companies can use in targeting the Tier 2 and Tier 3 markets from which “a healthy share” of the next phase of growth for the Indian digital payments ecosystem will come.