Utilising Agents to distribute low cost Banking

One of the biggest challenges of bringing low cost banking to rural areas are the cost of distributing banking products. It takes a lot of time and effort to get someone to open a bank account - especially given the stringent regulatory requirements. I have seen some instances where banks have a requirement to have a photo-copy of this and that, as well as firm identification, in addition to a form that must be filled in and signed - quite a cumbersome and difficult process.

So some companies have started deploying a mechanism where agents are utilised to distribute these bank accounts. This means that some-one works on a commission basis to get people to open bank accounts. These agents do not earn a fixed salary, but rather get paid for each account that is opened by them. Great idea! Often this is also a mechanism to create work for people that do not have work. I have always been intrigued by this approach. I do subscribe to creating work and getting the community involved with banking themselves, but I am not sure if the economies work. How many accounts do an agent have to open to be able to earn a living wage? This is especially difficult if the commission must be earned on a low cost bank account. All of the sums that I do make this approach a marginal employment for the agents and I am not sure if it will work.

Low cost banks have two remedies:

a. Enable an agent to open bank accounts, but also sell more lucrative products (that have better margins) - preferably products that require a bank account (like insurance, loan products etc.). or

b. Enable customers to open a bank account themselves (even on their phone) with no assistance and no photo-copies. This is possible, and have been implemented by Fundamo.