Agent Network

An agent network is the group of independent outlets, such as small shops, pharmacies, fuel stations, post offices and kiosks, that carry out financial transactions on behalf of a licensed provider. Customers visit an agent to pay cash into an account, withdraw it, send or collect a remittance, pay a bill or open an account. The provider may be a bank, a mobile money operator, an electronic money issuer or a money transfer company.

Agent networks exist because branches and cash machines are expensive to run and are scarce outside city centres. By using shops that already serve the neighbourhood, a provider can reach customers at far lower cost, an approach often called branchless banking. The network is the point at which digital money and physical cash meet, and its quality largely decides whether a wallet or remittance service is usable in practice.

The core services are cash-in, where a customer hands over banknotes and receives the same value in an account or wallet, and cash-out, the reverse. Each transaction is authorized on the provider's system in real time, usually confirmed by a text message to both parties. Agents also register new customers, collecting identity documents for know your customer checks, and many sell airtime, accept bill payments and pay out government benefits.

In money transfer, agents at the sending end take cash and customer details, and agents at the receiving end hand over the funds, a service known as cash pickup. A money transfer operator may run hundreds of thousands of such locations worldwide without owning any of them.

Most networks have layers. The provider contracts with master agents or super-agents, which recruit, train and supervise the retail outlets beneath them and help them manage liquidity. A mobile money agent at the bottom of the chain deals with customers directly. Some providers manage outlets themselves, and others rely on specialist network managers or aggregators that serve several providers at once.

Agents may be exclusive to one provider or shared. Regulators in several countries have banned exclusivity so that one shop can serve customers of competing wallets and banks, which spreads the cost of the outlet over more transactions.

An agent works with two stocks of value: cash in the till and electronic balance, called float, held in the agent's own account with the provider. A cash-in reduces the agent's float and increases its cash; a cash-out does the opposite. If either runs out, the agent has to turn customers away. Moving value between the two, known as rebalancing, means a trip to a bank branch or a super-agent, and it is the main running cost and the main source of failed transactions. In areas that mostly receive money, such as villages collecting remittances from cities, agents run short of cash; in areas that mostly send, they run short of float.

Agents earn commission per transaction, generally on a sliding scale by amount, paid by the provider and shared with the master agent. Commission on account opening encourages agents to sign up customers. Because the income from any one provider is small, many shops treat agency as a way of bringing in footfall for their main trade, and the level of commission strongly influences how much float they are willing to hold.

The licensed provider remains legally responsible for what its agents do. Rules typically require a written agency agreement, due diligence on each outlet, training, displayed tariffs, and notification or registration of agents with the regulator. In the United States, the agents of a licensed money transmitter are known as authorized delegates and are reported to state regulators. In the European Union, payment and electronic money institutions must register their agents with the home supervisor.

The main risks are fraud by or against agents, overcharging, the splitting of transactions to earn extra commission, poor record keeping, and weak identity checks that let criminals use the network to move money. Providers respond with transaction monitoring, mystery shopping, limits by wallet KYC level and the suspension of outlets that break the rules.

Agent networks are widely credited with extending basic financial services to people who were previously unbanked. The spread of M-Pesa in Kenya from 2007 rested on a dense network of airtime sellers turned cash agents, and the model was later repeated across Africa and South Asia. India uses bank agents called business correspondents, and Brazil built a large network of banking correspondents in shops and lottery outlets. Studies of financial inclusion commonly track the number of active agents per head of population alongside the number of accounts.