> Posted by Kathleen Yaworsky, Lead Specialist, Channels & Technology, Accion, and Alexandra Rizzi, Deputy Director, the Smart Campaign

Hi, I’d like to send money to my mother in Bihar. Can you help me?

Sure, I’ll help you do that here. Here’s what you’ll need…

A similar scene unfolded across 80 small merchant agent locations (business correspondents or customer service points, as they’re called in India) as the Smart Campaign conducted mystery shopping research to uncover and understand the client protection risks in the provision of financial services at agent network outlets.

Agent networks play a critical role in increasing financial access by helping financial service providers broaden their reach beyond branches, but in order for an agent network to succeed, the client must trust the agent and be able to perform transactions with confidence. The current rapid growth in agent networks is driven by a push to build out the infrastructure and increase access points. Future growth will require quality from the services delivered through that infrastructure. That’s why it is critical to identify and address potential risks early on.

Complicating the identification and mitigation of client protection risks are several common characteristics of agent banking, including limited agent control over product design and pricing, and the part-time nature and lack of employee status of agents.

So, what does responsible agent management look like in practice? To begin to answer this, the Smart Campaign and Accion’s Channels and Technology Team went to India to map the Client Protection Principles and standards against agent models and develop a deeper understanding of the client protection risks and potential mitigating steps for agent managers. Two agent networks volunteered to be part of this exercise. This research marks a critical first step in engaging agent network managers to share practices and contribute to shaping industry guidelines.

We examined each institution’s policies, procedures, and manuals, interviewed management and conducted field visits. The two networks differed in the strength and clarity of client protection policies and procedures. Perhaps more important, even where policies and procedures were clear, they were often inconsistently applied across the whole agent network. This is hardly surprising. In India, agent network managers aiming for national coverage must evolve a uniform level of service delivery despite a multitude of jurisdictions, cultures, and languages.

Transparency, in particular, could be significantly improved by providing more training to, creating incentives for, and monitoring service quality of agents. Without transparent practices from agents, clients cannot make informed decisions, which is essential for their financial well-being and faith in the financial institution. Inadequate disclosure translates to surprise fees and prices and that leads to disillusion.

Another area for improvement is the implementation of a mechanism for complaints resolution that is well understood and recognized by everyone in the network – customers, agents, and agent network manager staff. Poor customer recourse can exacerbate practices that are damaging to both clients and providers; recourse mechanisms help ensure that clients are treated respectfully and are satisfied, and they offer a crucial loop for feedback on banking practices.

With our findings in hand, we convened over 20 key stakeholders in Mumbai, including representation from major agent network managers, banks, and industry bodies, to discuss these results and chart a path that could ultimately lead to widely accepted standards. We observed that agent network managers largely view the agents as the end point of their responsibilities. They are, after all, managing agents on behalf of financial institutions. However, we find that the discourse needs to shift so that agent network managers recognize that ultimately the end-customer who uses the agent’s services is also their client. At the workshop there was also consensus among participants that bank managers view agent banking as a requirement imposed by political directive, rather than a profitable part of their core business. In building the overall business case for agent banking, we would contend that investing in client protection management systems can help strengthen the underlying business model.

The Smart Campaign intends to conduct similar investigations in Africa and elsewhere with the aim of developing globally relevant standards over time. With knowledge from additional mappings and industry consultations, the Campaign plans to move gradually toward more concrete recommendations, standards, and potentially even a Client Protection Certification module for agent networks. This progression from risks and early recommendations to standards and benchmarks will take time. It is a consensus building process and must be adequately grounded in experience. Developing guidelines and standards with field observation and repeated industry feedback is how the Campaign developed its first standards on client protection in microfinance. Thus, the analysis, results, and recommendations presented in this report should be taken in the spirit of mutual discovery and learning. We welcome your comments!

For more, including details on the early recommendations, read the report.

Have you read?

eCPPs: How a Principles Approach to Client Protection Is Built for the Digital Age

Indian Microfinance Gets Serious about Grievance Redressal

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