POSTBANK
DRIVERS OF AGENT ACTIVITY:
REACTIVATING AGENTS IN
RURAL KENYA
Case Study: KPOSB’S Journey to Agent Reactivation
April 2016
RETAIL
REGIONAL
RESPONSIBLE
Learning Paper
II
DRIVERS OF AGENT ACTIVITY: REACTIVATING AGENTS IN RURAL KENYA
CASE STUDY: KPOSB’S JOURNEY TO
AGENT REACTIVATION6
The Kenya Post Office Savings Bank (KPOSB)
participated in the World Savings and Retail Banking
Institute (WSBI) Programme, ‘working with savings
banks to double the number of savings accounts in
the hands of the poor.’ In 2009, KPOSB was the only
bank already set up to conduct agency business in
Kenya, and therefore had an early market entrant
advantage. The bank chose agency banking as the
most viable channel for deepening financial access as
it was already providing agency banking services
working with the Kenya Power and Lighting
Company, providing bill-payment touch points using
the over 200 postal services outlets office locations
in the region, and had a sizable customer base in
rural areas.
While this strategy provided the bank with the
opportunity to exert control over the quality of agents
and customer experience, it also meant that the
speed to market was low, and market reach medium
to low.
Commission Structure
The bank currently offers a flat commission on all
transactions, while majority of the other banks and
MNOs offer tiered commissions to protect high value
transactions and still make sense for low value
transactions.
Incentives
■
The bank expected to set up 1,000 agents in the
programme period to serve the envisioned 2.4 million
customers it would have by then.
■
■
■
In 2010, the Central Bank of Kenya (CBK) developed
guidelines for agency banking for all banks, opening
up the space for all players, and effectively skewing
KPOSBs lead in the market. With the quick entrance
of Equity bank, KCBank, and the Co-operative banks
into the market, the landscape changed and it
became apparent that the KPOSB had to review and
adjust its agent strategy.
Deployment Strategy
KPOSB adopted a purely bank-led agent recruitment
strategy, building its own agent network from scratch
as opposed to using an existing retail structure.
The bank also used and continues to use its own staff
based in the regions to identify, select, train and
onboard agents, while other banks and Mobile
Network Operators (MNOs) use a mix of bank led and
agent network manager models.
The Agents recruited then were dedicated to PostBank
business only, excluding other banks and MNOs.
This scenario was to change later when the CBK
allowed non-dedication of agents, allowing agents to
operate up to five different banks or MNOs outlets in
one space. The bank also chose a staggered
expansion strategy. All agents offer uniform services
at a single stop, including account opening and
Cash In / Cash Out (CICO) ensuring a standardized
experience.
■
Outlet branding and signage
Regular training especially for Tellers
Annual conventions for Agent Owners to discuss
the business with Bank
Support logistics for repair and maintenance of
business tools
Negotiated agency license fees with the government
Agent Dormancy
As at March 2015, KPOSB had established 992 agents,
of which 519 were active, 371 were classified as
dormant and inactive, and a further 102 had been
terminated for breach of contract. This position was
further compounded by the requirement to upgrade
point-of-sale (POS) terminals and automated teller
machine (ATM) cards to the Europay, MasterCard and
Visa (EMV) chip which provided additional client
protection. The bank’s Point of Sale (POS) terminals
were outdated and could not accept the EMV upgrade,
consequently crashing and rendering the agency
business inoperable, effectively reducing the number
of active agents to 217 by December 2015, majority
of whom are operating on the phone. Considering
the high investment cost in business tools, a clear
and flexible long-term acquisition and amortization
strategy should be articulated, bearing in mind
changes in the operating environment.
6 See the accompanying WSBI Learning Paper on Drivers of Agent Activity and the Reactivation of Agents in rural Kenya.
LEARNING PAPER
Considering the heavy investment into agency
banking, WSBI and KPOSB thought it prudent to map
KPOSB agents and bank branch locations in order
to study the relational effects of location and
performance, and to conduct a survey into the causes
of agent dormancy, with a view to informing the
agent deployment model, reactivating dormant agents,
and arresting further dormancy.
Using geospatial information systems (GIS) data, we
mapped KPOSB branch locations against agent
locations to understand how much populations
cluster together in the sort of numbers that might
make an agent outlet sustainable, and whether
proximity of the agent to a bank branch has any
bearing on remaining active or becoming dormant.
The data indicated that agent dormancy is not wholly
proximity related. Case in point was the presence of
an operating agent in Lamu, which is 100 kilometers
from the nearest bank branch in Malindi and the
dormancy of three others in the same location. The
active agent in Lamu reported sufficient business
volumes to make the cost of rebalancing at an MNO
viable, while the dormant agents ceased business due
to inadequate support from the Bank and inadequate
traffic. In Kilifi, 50% of the agents were dormant
despite the proximity to a bank branch in the vicinity.
Other factors contributing to the dormancy findings
from the mapping include the mismatch in the service
suite where the customers mainly hold mobile based
accounts while the agent can only make transactions
using the POS terminal. The mismatch was caused
largely by the logistical challenges the KPOSB faces in
delivering ATM cards and security codes to customers
in far-flung areas due to the security risk posed by
staff handling both at the same time, and reaching
the account holders at the various locations7.
We also conducted a qualitative survey on a cross
section of dormant / inactive and active agents using
Participatory Rapid appraisal techniques, specifically
product attribute ranking, and use of focus group
discussions. One of the challenges faced in getting a
representative sample was the fact that many of the
dormant agents did not see the value of further
collaboration with the bank. The agents were primarily
drawn from within 50 kilometers of the nearest bank
branch for ease of reach.
Distance from Branch
The study sought to establish the location of the
agents from bank branches, and established that
majority of the participants at 84% were located
within 15 kilometers from a branch
.
Chart 2: Distance of agent locations to Branch
■ 15-20 km
9%
■ Over 20 km
16%
■ 8-15 km
13%
■ 1-8 km
62%
While the agents located further than 15 kilometers
from a branch were more likely to reach the rural
poor, they also faced challenges in accessing support
from the branch and incurred high costs in time and
money when rebalancing at the branch, as they not
only had to close the agency, but also procure transport
that in some instances used up all the profit for a
day’s or more transactions. From the proximity study8,
it is clear that the 30% of the Kenyan population live
an obviously urban life in fewer than 100 cities, towns
and trading centers. Another 25% are at declining
densities of non-urban but still clustered living in trading
centers, distinct villages and indistinct but high density
rural areas. The population density within 2 kilometers
of a bank agent therefore declines at an increasing
rate the further you move away from an urban center.
Thirty-two per cent of the participants stated that
they could not continue in business because they did
not receive adequate traffic to their outlets with some
reporting as few as 20 transactions in a month due
to the low number of customers who patronize bank
services.
7 KPOSB policy requires two staff members to issue the ATM card and security pin separately, and the Agents are prohibited from handling them at all
8 WSBI Working Paper: Mapping proximity - Bringing products and services close enough to the poor to be meaningfully usable and still keep them
sustainable for WSBI partner banks, May 2013
III
IV
DRIVERS OF AGENT ACTIVITY: REACTIVATING AGENTS IN RURAL KENYA
Unmet Expectations
Business Expansion
Agents cited having various expectations for entering
into the agency business. Key among these were to
gain an income, improve primary business as the agency
would drive more traffic to their shops, and providing
a service to the people. When asked if their expectations
had been met, 31% answered “No” to a paltry 15%
who answered “Yes”.
Chart 4: Agent desire for expanding business
OPEN ANOTHER OUTLET
■ No response
17%
■ Yes
28%
Chart 3: Assesment of agent satisfaction
HAVE YOUR EXPECTATIONS BEEN MET
■ No response
15%
■ Yes
31%
■ No
55%
■ Partly
21%
■ No
33%
When asked if they would expand their business by
opening an extra outlet only 28% of the active
agents intend to expand their business while 55% do
not intend to.
This indicates a potential for high turnover and a
constant state of flux, and supports the findings of
the MicroSave 2014 ANA Report.
Of concern is the 54% agents who felt that their
expectations had been met partially or not at all.
The main pain points cited were;
■
■
■
■
■
■
Inadequate traffic resulting in low commission,
compounded by the fact that of the total dormant
agents interviewed, 42% were dedicated to
Postbank agency business only. The rest reported
dissatisfaction with the low traffic, not as the main
reason for dormancy
Mismatch in service suite where the agent transacts
on the POS and the customers have mobile based
accounts
Time taken at the bank to rebalance float
Expensive to rebalance float in terms of time and
money
High downtime due to poor connectivity
Inadequate support from the bank in addressing
operational issues
As the bank sets up more agencies, more of the existing
ones stagnate or become dormant.
This information indicated a crucial stage in the
agency banking model. The KPOSB needed to
urgently rethink its agent banking strategy and focus
more on agent quality activity and sustainability
approaches than establishment of new agents.
This information was especially important in strategizing
on how best to review and revitalize the agency model.
9 www.helix-institute.com/sites/default/files/Publications/Agent%20Network%20Accelerator_Kenya%20Country%20Report_2013.pdf
LEARNING PAPER
Attribute Ranking
We asked the agents to rank their most important pain points in running an agent business. Contrary to
common thinking, the commission on transactions was not the only important barrier to staying in business,
and the need for credit was the least important.
Table 1: Barriers to business (* #1 being most important and #4 least important attributes)
ATTRIBUTES RANKED BY IMPORTANCE TO THE AGENT
1
Commission
Internal Operations / Support
Customer Service
2
Marketing
Network
Channels (POS / Phone)
3
Account Opening
Training
4
Loans
Float management / rebalancing
Measures taken by the KPOSB
This case study focuses on the operational constraints that the KPOSB could address immediately ensuring quick
gains in revitalizing the agent network. The comprehensive strategy adopted includes short, mid- term and long
terms activities that address all the grievances raised by the Agents.
Table 2: WSBI-KPOSB activity mapping to address identified shortfalls
1
ATTRIBUTE
ISSUES
ACTION TAKEN
Commission
• Low, flat commission rate for all
transactions makes places sever
downward pressure on Return on
Investment
• No commission provided for opening
virtual and mobile accounts
• Proposal to tier commissions to
transaction value, but maintain low
fees for low cash- cash out
• New system will enable tracking of
virtual and mobile account allowing
payment
Internal
operations
• Inadequate agent monitoring
• Agents unable to reconcile accounts as
they do not all have access to internet
banking
• Auto reconcile accounts after network
issues not wait for agent to call
and complain
• Statements are not provided and have
codes not narrations
• Allow auto reversal of erroneous payments
• Ensure work 24/7
• When an agent has more than one
outlet, allocate linked account numbers
and allow for cash movement between
the accounts
• Revision of the agent banking human
resources to segregate roles more
effectively
• All agents to be registered for
Internet banking
• Upgrade to a new core banking
system capable of auto reconciliation
• Provide daily / weekly / monthly
statement with narrations
• Proposal made to configure system
on to make auto reversals upon
prompting by authorized officer
• Accounts have been linked to ease
auto balancing
Customer
Service
• Costly to communicate with bank as
Agent bears the cost
• Inadequate communication on policy
changes & products
• Lack of feedback on issues
• Issues not resolved in time or at all
• Proposal to provide toll-free line
• Establish a call center and help desk
for logging complaints and
monitoring resolution
V
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DRIVERS OF AGENT ACTIVITY: REACTIVATING AGENTS IN RURAL KENYA
2
3
4
ATTRIBUTE
ISSUES
ACTION TAKEN
Float
management
• Costly to rebalance at branch or MNO
• Enable Agents to access float balance on
POS on demand
• POSB to provide a message when float
account is credited / debited
• Introduce agent managers to provide
rebalancing services
• Provide overdrafts to enhance float,
especially during peak payment periods
• Implementation of new internet
banking systems allows auto
rebalancing and reconciliation
• Auto alert configured
• Proposal to introduce aggregators
who will provide overdrafts
Marketing
• Inadequate ATL marketing
• Poor / Inadequate branding
• Lack of pricing instructions
• Agent Manager to be tasked with
quality assurance in branding
• Conduct more Below the Line
marketing before
• Increase targeted Above the Line
marketing
• Provide and openly display tariff
structures
Network
• Poor network causing high downtime
• Use of signal boosters
• Use of phones
Channels
• Phones do not provide receipts
• POS terminals outdated
• Proposal to purchase thermal printers
and card readers
• Procurement of new EMV chip
enabled POS
Account
opening
• Process cannot be completed at agent site
• Bank takes too long to deliver ATM cards
• Allow agents to register accounts
and provide numbers on the spot,
allow deposits but not withdrawals
• Provide ATM cards at agent site with
auto generated Personal Identification
Number (PIN) capacity
Training
• High teller turnover results in untrained
staff, high errors and failed transactions
• Provide training manuals to agent
owners to enable seamless training
of tellers and offer refresher courses
Loans
• Bank does not provide credit to agents
• Proposal to recruit agent Network
Managers who will also provide credit
Armed with the survey findings, the Bank is well placed to reactivate dormant agents, and between June and
December 2015 reactivated 210 agents.
LEARNING PAPER
Key strategies in the agent reactivation
STRATEGY
ACTIVITY
• Design agent reactivation profile
• Segment dormant, inactive, poorly performing
agents by time in dormancy, transaction volumes
at the time of dormancy / inactivity, reasons
for dormancy
• Establish which dormant / inactive agents would be
willing to resume business, collect, profile, address
their business issues, onboard and restate operating
requirements
• Conduct a call survey to gather information
• Review and communicate compensation structure
including loyalty programmes for reactivated agents
• Ensure a tariff that that works for the poor to bring
in more low value transactions, expand the retail
banking suite offered at the agent outlet to broaden
the income base, tier pricing to protect income form
high value transactions
• Redesign deployment model
• Partner with supermarkets / hospitals / churches /
colleges / large office buildings / VSLAs and
co-operative societies to scale faster and ease
rebalancing
• Enhance agent support structures
• Redefine agent support structure and core duties
complete with performance targets with emphasis
on account, agent activity, and retention rather than
registration, and provide refresher training
• Redefine dormant policy to make it more vibrant to
arrest agent inactivity
• Design agent culling framework: watch list,
retraining, probation, termination as well as
associated activities and effective communication
channels
• Design and align financial incentive for ASO /
AROs10 and agent managers for reactivating
dormant agents
• Improve procedures, develop process maps,
streamline workflows, customer interface,
and identify and mitigate inherent risks in all
10 Agent Support Officers / Agent Recruitment Officer
VII
WSBI
Rue Marie-Thérèse, 11 ■ B-1000 Brussels ■ Tel: +32 2 211 11 11 ■ Fax: +32 2 211 11 99
[email protected] ■ www.wsbi-esbg.org
Published by WSBI. © April 2016