National Survey of Branchless Banking Agents in India: Towards high quality BC customer service points

Gregory Chen Aimthy Thoumoung June 2012

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CSP Survey: Background

In 2006 India’s central bank (Reserve Bank of India) permitted banks to use Business Correspondents (BCs) to organize networks of customer service points (CSPs) – these CSPs are the equivalent of agents in other countries. CSPs are individuals a bank’s clients can locate to transact with the bank. For the purpose of this survey and in this PowerPoint, CSP refers to individuals managing these service points. (In some cases there is no BC company and banks contract directly with CSPs.)

A national survey of CSPs was undertaken jointly by CGAP and the College of Agricultural Banking (an affiliate of the Reserve Bank of India) from March to May of 2012. MicroSave provided technical input to the survey design and deep case field work to complement this quantitative survey.

This PowerPoint presents the summary headline findings. The survey data will be analyzed in greater depth and the analysis shared through a full report led by the College of Agricultural Banking due for release in August 2012.

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BC * Guidelines

Issued

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

2006 2007 2008 2009 2010 2011 2012

Estimated (all India) Business Correspondent* Customer Service Points

3 year financial inclusion targets

Proposed shift to

electronic G2P

Rural

Urban

adapted

CSPs increasing and becoming a large part of financial infrastructure

But, it’s early

Majority are <24 months in operation

CSP Survey: Background

*Business Correspondent (BC): regulatory category created by Reserve Bank of India which allows organizations to partner with banks to set up one or more customer services points (bank agents)

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Bank  

Client  

CSP  

BC  

CSP Survey: Background

Aggregated supply side figures most commonly analyzed; missing critical feedback on how CSPs and clients

interact

Surveyed 860 on -  service quality -  motivations

CSPs = customer service points, individuals authorized by banks to transact remotely with the bank’s clients

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CSP Survey: Objectives

• National not anecdotal or sub-set

• Focus on CSP quality

• Establish baseline to track improvements over time

Joint effort of College of Agricultural Banking and CGAP Largely corroborated by in-depth field work by MicroSave

1.  This PPT summarizes findings 2.  Subsequent report more in-depth (due August 2012)

Government & Policy

•  Track Financial Inclusion policy outcomes

•  Balance quality alongside quantitative targets

•  Obtain market feedback on suitability of regulations

Providers & Delivery

•  Identify key risks

•  Articulate key service level indicators

•  Cull poor practices and build on positives

CSP Survey: Objectives

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CSP Survey: National Sample

All 5 regions: North, South, East, West & Northeast Prioritized 11 states with higher reported FI* coverage Selected from bank lists of CSPs active as of Dec 2011 ✪

Survey Details 10th March to 11th May, 2012 Business hours, weekdays & weekends Local languages IMRB http://www.imrbint.com/ survey firm

Sample Selection

* Financial Inclusion: villages targeted under national financial inclusion plan

✪  Publicly accessible lists of CSPs and locations are not widely available yet

Tried to contact 1,030 CSPs 170 unable to survey, of these: 79 not reachable: wrong phone #, no response 91 unwilling: stopped CSP work or unhappy

with CSP work

Sample: 860 surveyed

Not Available

Available

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CSP Survey: National Sample

CSP Sample

Sought 1,030 Dec ‘11 bank listed CSPs

Reached & surveyed 860 CSPs that work for: 7 Public Sector Banks 2 Regional Rural Banks 2 Private Banks 10 BC Companies* Note: added 241 customer surveys to double check some CSP responses

214 102

14

2

92

98

78

70

68

76

46

* BC companies are third party firms that manage networks of CSPs. 148 of the CSPs surveyed were individuals contracted directly by banks and not through BC companies.

53%

26% 18% 3% 0

50 100 150 200 250 300 350 400 450 500

POS+Card Personal Computer Mobile Phone None

CSP Technology

CSP Survey: National Snapshot

Typical CSP Profile:

Male 85%

25-35 47%

High School (Class XII) or Graduate 66%

# of

CSPs

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Specialized BC Companies (78%)

Individual BC CSPs (17%)

Large Corporate BC Companies (5%)

CSPs that use mobile phones handsets for transactions is low.

•  Will this later limit self-service by clients over their own handsets? •  How might this affect product use and uptake?

Fixed Point 70%

Moving Point 30%

CSP Survey: National Snapshot

# of

CSPs

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FI Village 69%

Non-FI Village

18%

Urban 13%

Recent fast expansion means many new CSPs. Survey could not estimate CSP churn which requires data from Banks and BC Companies.

India has unusually wide use of CSPs that are roaming or on the move

Most CSPs opened by banks as means of meeting national (FI) financial inclusion targets: villages >2,000 people without bank presence

6%

20%

36% 31%

5% 1% 1% 1% 0

50

100

150

200

250

300

350

<3 4-6 6-12 12-24 24-36 36-48 48-60 >60

Length of time operating as CSPs

Months in operation

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CSP Survey: National Snapshot

18%

33%

4% 4%

5% 3%

Sole Income

Other Income

8% 12%

1% 1% 2%

8%

Agriculture Kirana Shop Salaried Self

Employed Other

Fixed Point

Moving Point

Survey asked individuals about individual CSP income; not household income

0

50

100

150

200

250

300 Transaction Volumes

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CSP Survey: National Snapshot

#    of  

CSPs  

*CGAP research 2010

Low CSP transaction levels in India are a sign that BC/Bank/CSPs arrangements are still under-developed. Offerings need to become more attractive to clients to drive more transactions.

CSP Transactions Per Day National Average

Brazil * 157

Kenya * 87

India 25

CSP Transactions Per Day

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CSP Survey: Outline

Part I Are Customers Receiving Value?

Part II Will CSPs Remain Motivated?

Part III Summary Observations

Part I

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Part I – Are Customers Receiving Value?

Reliability •  Availability •  Ability to

Transact

Convenience •  Fixed point •  Moving point •  Choice of CSP

Efficiency •  Account opening •  Account

activation

Products •  Payments •  Savings •  Insurance •  Credit

Part I

CSP ability to transact

25% unable to transact at moment of survey (215/860)

Technology is the main barrier: • Connectivity • Defective cards or POS

RELIABILITY: significant portions of CSPs are unavailable and face technology failure

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Tried to contact 1,030

170 not possible to survey

860 surveyed

CSP availability

Significant pockets where CSPs are probably not available to clients

45 no transactions yet 99 no cash on hand 95 no income from CSP activities

MicroSave’s work estimates CSP dormancy of 22-43%

CONVENIENCE: differences between fixed and moving point; limited choice for many clients

Part I

Access to CSP 70% fixed point CSPs (602/860) of these: 93% at the correct address (590/602) 69% open 7 days a week (415/602) 86% easy to find (518/602)

30% moving point (258/860) Advantage: can move closer to customers Disadvantage: not always readily available

Choice of CSP 35% of customers tied to one CSP (301/860)

Regulatory change allowing clients to use CSPs of multiple banks approved in March 2012; this change has not affected client choice yet

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EFFICIENCY: CSPs open accounts quickly; account activation time by BC/Banks too slow

Part I

0%

5%

10%

15%

20%

25%

30%

35%

40%

1-5 5-10 10-15 15-20 20-25 25-30 30-60 60-90 >90

Account Opening Time - MINUTES

CSPs' Perception

Customers' Perception

%    Of  

respondents  

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

1 2 4 7 15 30 45 60 >60

Account Activation Time - DAYS

CSPs' Perception Customers' Perception

Activation beyond 7 days indicative of inadequate back-end synchronization between BC Company and Bank

Clients who can transact immediately are more likely to become active users in the future

%    Of  

respondents  

0

50

100

150

200

250

300

350

400

450

500

G2P P2P Savings Insurance Credit

# CSPs Offering

# CSPs Priority

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PRODUCTS: most CSPs offer only single payment product; more cross-sell of other products critical

Payments prioritized. CSPs primarily payment points; more like ATMs, less like branches

No Frills Accounts (NFAs) are basic low balance bank accounts offered by nearly all CSPs. NFAs are not categorized here as a separate product and graph below only includes non-NFA products. NFAs are basic “gateway” transactional accounts enabling use of multiple products.

Part I

Credit is least available and prioritized

#    of  

CSPs  

Product Categories

29% CSPs offer only one product category & risk becoming single-purpose

23% offer 2 products 14% offer 3 products 18% offer 4 or more products

16% offer only NFA

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CSP Survey: Outline

Part I Are Customers Receiving Value?

Part II Will CSPs Remain Motivated?

Part III Summary Observations

Part II

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Part II – CSP Motivations

Income •  Earnings from

CSP work

Liquidity Costs •  Liquidity held by

CSPs

Balance with Other Work •  Sole Income •  Partial Income &

Other Activities

BC/Bank Support •  Training •  Visits from BC/

Bank •  Timelines of pay

Part II

0

10

20

30

40

50

60

70

80

90

100

Monthly CSP Revenue from CSP Work

21

INCOME: CSP earnings from CSP work are dangerously low

CSP Expectations (median)

Part II

# of

CSPs

Primarily fixed point CSPs at urban locations

Revenue (INR 000s)

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LIQUIDITY COSTS: required amount of CSP liquidity not a major cost yet

Part II

# of

CSPs

0

50

100

150

200

250 CSP Liquidity

CSP's Cash

CSP's Settlement Account *

Most CSPs keep small amounts of liquidity and have limited ability to respond quickly to immediate client needs. Low liquidity limits CSP costs but may inhibit client uptake of more products.

* electronic float account some CSPs keep to transact with clients

Balances (INR 000s)

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BALANCE: less than half of CSPs earn income elsewhere; raises regulatory and labor union questions

Part II

Little other work

CSP work as sole income source raises questions:

•  Bank unions may question CSP employment status

•  Business Correspondent design was to leverage existing organizations

•  Only 5% of CSPs are sourced by large corporates such as fast-moving-consumer goods (FMCG) companies or mobile operators

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SUPPORT: training and visits from BC/Banks inadequate in too many cases

Part II

CSPs unable to distinguish BC staff from Bank staff. Survey therefore combined BC and Bank staff into single category.

Training 10% never received training (89/860)

Visits from BC/Bank 18% no visit in > 1 month (158/860) 40% no visit in > 1 week (350/860)

Timeliness of Payment 50% are paid slowly (428/860) 9% pay has not arrived (77/860)

Opinions on Support 36% say its “not adequate” (313/860)

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CSP Survey: Outline

Part I Are Customers Receiving Value?

Part II Will CSPs Remain Motivated?

Part III Summary Observations

Part III

Value to Customers

•  Reliability: significant portions of CSPs unavailable and face technology failure

•  Convenience: differences between fixed and moving point; limited choice for many clients

•  Efficiency: CSPs open accounts quickly; account activation time by BC/Banks too slow

•  Products most CSPs offer only single payment product; more cross-sell of other products critical

CSP Motivations

•  Income: CSP earnings from CSP work are dangerously low

•  Liquidity costs: required amount of CSP liquidity not a major cost yet

•  Balance: less than half of CSPs earn income elsewhere; raises regulatory and labor union questions

•  Support: training and visits from BC/Banks inadequate in too many cases

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Summary Observations Part III

In the next stage, improving the quality of CSPs will be more important than growth. Quality will determine whether clients benefit, whether costs can be covered and whether confidence can be built. Higher quality CSP networks should provide a more solid foundation for Banks, BC companies and customers to build on.

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Initial Recommendations

Government Providers (Banks, BCs)

•  Set smart and meaningful service quality minimums in financial inclusion targets.

•  Ensure public sector banks include precise quality criteria in tendering & contracts.

•  Monitor closely client uptake as a lead indicator.

•  Ensure well crafted SLAs in commercial agreements.

•  Incentivize service quality, cross sell and transactions.

•  Invest to synchronize products, technology and service quality across Banks, BCs & CSPs.

Part III

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Initial Recommendations Part III

CSP Transactions Per Day

%    of  

CSPs  

Focus on increasing client demand driven use of CSPs tracked by transaction volumes. One leading Indicator to track is # transactions per CSP.

Other Big Picture Questions

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Bank partnerships with large co–equal FMCG or mobile operators?

So far…

5% CSPs from specialized large corporates

Scaled mobile phone deployments?

Multiple products available through CSPs and incentives to cross-sell?

More testing of …

Part III

18% of CSPs use mobile phone as transaction device

Mostly a single payments product

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•  CGAP, “Building Viable Agent Networks in India”, 2010 ▫  http://www.cgap.org/gm/document-1.9.49702/Building_viable_agent_networks_in_India.pdf

•  CGAP, “Agent Network Management Toolkit”, 2011 ▫  http://www.cgap.org/gm/document-1.9.49831/AgentManagement_TG.pdf

•  MicroSave, “The State of Business Correspondence: Agent Networks in India” 2012 http://www.microsave.net/sites/files/technicalBriefs/policybrief/PB_2_The_State_of_Business_Correspondence_Agent_Networks_in_India.pdf

•  MicroSave, “State of BCNM Industry in India-The Supply Side Story” 2012 ▫  http://www.microsave.org/sites/default/files/research_papers/State_of_BCNM_Industry_in_India-The_Supply_Side_Story.pdf

Other Resources

Advancing financial access for the world’s poor www.cgap.org

www.microfinancegateway.org