Valuable Bits

Last week we had the privilege to meet up with Cameron Goldie-Scot from Triple Jump and one interesting thing that he mentioned was about Zap’s business model to attract agents. The agent network is an important part of the mobile banking services that’s provided in Tanzania and elsewhere. These services are rolled out as ‘branchless banking’ which means that local shops and kiosks becomes agents (branches of the banking tree) and offers withdrawals and deposits for a small fee. In order to attract customers to use the m-banking service you must provide them a trustworthy agent not too far where they live or work. Zain have now chosen a totally different model from the one M-Pesa uses and after the first impressions it seems to be a more lucrative deal for the agent.

It looks like Zain has identified the agent network to be the most important part in the mobile money transfer service. The Reserve Bank of India tells us that distance to some sort of a banking branch is by far the largest obstacle for unbanked people to enroll to banking services. Zain are trying to expand the size of the network as fast as possible. To do this they don’t just have to offer the agents a better deal then M-Pesa, they have to convince shop owners that becoming a agent is worth the hustle and can be a profitable part of their business.

Whenever a customer wants to withdraw or deposit cash he or she has to negotiate with the agent over the price. The idea here is that the market will set a price for these fees that are more affordable than their competitors. There are certain recommended fees, but these are only recommendations. The agent gets 100% of the fees for withdrawals and deposits, and gets to keep the whole addon he or she charged, making it very easy to understand the benefits of being an agent in this agent network.

Jacques Voogt from Vodacom is a bit worried of the consequences this agent model will have for costumers. While Zap’s agent model will work fine in 3-4 years it may be too little competition right now to keep agents from charging to high fees. Already studies have shown that M-Pesa in Kenya has strengthened the correlation between prices of goods in rural areas to the salary pay-outs in the city. If this is the case elsewhere then this might be only one of the times where an unknown fese might cause issues. Another issue is the float problems of agents that are located far away from the banking network.

On a side note: When we talked to the agent in the store of the photo he explained that the service wouldn’t be available there for 2 weeks or so. Also, the company hasn’t ordered the Zap SIM cards in English yet, so here’s a chance to practice some Swahili..