Banking agent

A banking agent is a retail or postal outlet contracted by a financial institution or a mobile network operator to process clients’ transactions.

Rather than a branch teller, it is the owner or an employee of the retail outlet who conducts the transaction and lets clients deposit, withdraw, transfer funds, pay their bills, inquire about an account balance, or receive government benefits or a direct deposit from their employer.

Banking agents can be pharmacies, supermarkets, convenience stores, lottery outlets, post offices, and more.

Globally, these retailers and post offices are increasingly utilized as important distribution channels for financial institutions.

Regulators generally determine what kind of, if any, financial institutions are permitted to contract banking agents, what products can be offered at the retail outlets, how financial institutions have to handle cash transport, know your customer requirements, consumer protection, and other operational areas.

Banking agents help financial institutions to divert existing customers from crowded branches providing a “complementary”, often more convenient channel.

Other financial institutions, especially in developing markets, use agents to reach an “additional” client segment or geography.

Reaching poor clients in rural areas is often prohibitively expensive for financial institutions since transaction numbers and volumes do not cover the cost of a branch.

In such environments banking agents that piggy back on existing retail infrastructure – and lower set up and running cost - can play a vital role in offering many low-income people their first-time access to a range of financial services.

Also, low-income clients often feel more comfortable banking at their local store than walking into a marble branch.

If transaction volumes justify it, a banking agent may set up a stand within a store with dedicated staff.

A banking agent may set up a dedicated store which is similar to a mini-branch, i.e., a small shop with around 1-3 tellers, but transactions are processed by non-bank staff.

Brazil is probably the most developed market where banking agents have significantly increased financial system infrastructure.

Financial institutions in other Latin-American markets such as Peru, Colombia, and Mexico have started to learn from the Brazilian experience, adjusted their regulation, and established their own banking agent networks.