‘Agent bankers’ make transactions easier, but thieves want a cut
Kunle worked as a manager at a marketing company in Lagos, but had responsibilities far outweighing his monthly salary of N30,000. When the urge to become more struck, he knew it was time for a change – not the type offered by the current government in 2015, and he would later quit the job in 2019.
What followed was a life of difficulty in catering for his family, and so, he began a search for an alternative source of income and after a while, in a conversation with a friend, something came up.
“Agent banking,” he said. A friend had mentioned it to him while brainstorming on what he could quickly do. With that, he went into agent baking precisely in July 2020.
He started with a capital of N200,000 which he raised through help from friends and family. His shop is located within a network of streets in one of Ikorodu’s popular estates.
Agent banking enables licensed financial institutions to provide financial services through the use of agents popularly called PoS agents, like Kunle. These agents help customers with withdrawals, deposits, cash transfers, cable TV subscriptions, and other financial services.
Agents confirmed to BusinessDay that the business is easy to start and lucrative. Sometimes, Kunle makes N6,000 at the end of each business day after subtracting all the charges.
“When the market is okay, we have about N10,000 a day,” he adds, indicating he is able to make between N180,000 to N300,000 monthly.
In agent banking, profitability is dependent on the volume of patronage, which is also dependent on location as confirmed by multiple agents who spoke to BusinessDay.
Kunle has spent a little over a year in the business and has grown to be very famous in his location. Despite starting during the peak of coronavirus, his customer base increased from an initial 40 customers to 90 customers per day. According to him, the business always thrives in busy areas. This is especially so in places with high economic activities like markets, which have become a preference for other like Ahmed Bello (a pseudonym), another agent.
“It’s profitable if where you site your business is populated,” Bello agrees, noting he started the business to majorly foot bills at home.
Bello ventured into it with an initial capital of N50,000 and runs the business at home. He later topped his capital with an additional sum of N70,000 taking it up to N120,000, after observing that it is easier and more profitable to start with bigger capital.
He explained that with enough capital, an agent will be able to attend to customers when they come for cash transfers, cash withdrawals, and other transactions and get profit. But with limited cash or insufficient capital, they go elsewhere.
Increased patronage was another reason Bello sought more funding for the business. Despite not owning a shop or operating at an open place, he makes about N20,000 to N30,000 monthly.
Bello said he maintained a profit of N30,000 consistently during the coronavirus lockdown as banks were closed, and he is currently looking for a shop.
Growth of agent banking/PoS agents
The success of agency banking in other countries like Colombia, Brazil, Peru, India and Kenya as shown in a study by Enhancing Financial Innovation & Access (EFInA) inspired Nigeria to develop its agent banking network.
The Central Bank of Nigeria (CBN) introduced the PoS system and agent banking in 2013 to achieve financial inclusion and develop a cashless economy. The system has since recorded some impressive growth in recent times.
The number of agents across the country has grown consistently since 2017 according to the National Financial Inclusion Strategy (NFIS) 2019 report.
The increase in the value of point-of-sale (PoS) transactions in Nigeria shows the spending patterns of Nigerians and payment preferences as compared to cash payments
The value of PoS transactions made in Nigeria hit a record-high of N3 trillion in the first half of 2021, according to a recent report released by the Nigeria Inter-Bank Settlement System (NIBSS). This represents a 393 percent increase compared to 2017 when the value stood at N610.1 billion. This is also a 48 percent increase compared to N2 trillion recorded in the corresponding period of 2020.
The increase in the value of point-of-sale (PoS) transactions in Nigeria shows the spending patterns of Nigerians and payment preferences as compared to cash payments.
The number of PoS connectivity and usage has also been increasing according to NFIS’s report. Recent data by NIBSS also shows that there has been more increase in PoS usage.
According to NIBSS, the number of registered PoS terminals in the country rose to 976,898 in June 2021, just a little under 1 million, compared to 523,488 registered as of the same period in 2020. Meanwhile, deployed PoS machines as of June 2021, stood at 638,983.
This growth in the number of PoS businesses in the country has also formed a major source of employment for Nigerians, including John Adeniyi, a graduate of Banking and Finance.
Adeniyi resigned three years ago to begin his PoS business after failed attempts at getting promotion in his 15-years work with a commercial bank.
He said his PoS business has grown tremendously, as he rakes in half a million naira in profit and employs 13 people he pays between N35, 000-40,000 monthly.
“I am better off now than when I was working at the bank,” Adeniyi said.
As observed by these reporters, many agents go into the business as a ‘side hustle’—a term used by Nigerians to mean an alternative source of income. So, it is common to see a person selling foodstuff with a PoS device, executing transactions.
Insufficient ATMs and bank branches to meet the banking needs of customers in Nigeria; convenience for customers; the ease of starting the business; and the potential to make profits are some factors driving growth in the sector and pulling more Nigerians in.
In addition, Fintechs like OPay have invested significantly in POS and agent banking infrastructure, which has made agent banking attractive and made it a source of self-employment in Nigeria due to the lack of job opportunities. But this growth has exposed agents to copious sad tales.
Insecurity rains on the parade
PoS agents are often soft targets for armed robbers and guttersnipes. In one instance, an agent said he was a victim of fraudsters who deposited fake naira notes into his account through another PoS agent. Though he has been released, he was arrested after investigations identified him as the recipient of the transfer.
Besides that, he had also been attacked twice in Ikorodu. Another agent working at Allison Market in Ikorodu, also said some of his colleagues have been robbed, stating that he had also escaped a robbery attempt once.
Kunle (mentioned earlier) told BusinessDay he lost N50,000 to fake alerts, noting that the common scams PoS agents are prone to are fake naira notes and fake alerts.
Agents understand these risks and most importantly, they know they are on their own. So, they resume work late in the morning and close very early. From observation and conversations with them, from 5:30 pm they begin to round off with activities.
A certain agent, described as the biggest agent in Arena market in Oshodi, stops transactions as early as 4pm—the same time banks close—in order to be safe from attacks. Many of them are careful with accepting transfers through codes.
Competition gets stiffer
Apart from these security issues affecting growth in the sector, profit is also affected as competition has grown too. Owolabi told BusinessDay that he was the only one in the street he operates in when he started. But more agents started opening kiosks, and soon, his profit plummeted. “My customers reduced,” he said.
To beat competition, he notes, it is important to make a difference and be innovative. For him, he improved on his customer relationship, by making jokes and appreciating customers after transactions, and asking them to come back again.
He also introduced new products to customers like GoTV subscription. In addition, he refrained from collecting the usual service fee of N100 for electricity transactions. While this means that Owolabi forgoes a monthly profit of N30,000, on electricity transactions to retain customers, it changed things for him.
“I realised that the number of customers increased again,” he said. “That is what has been keeping me.”
Some agents cut their cost of operation, which they say, also affects their commission. In addition to these, insufficient power supply is also a challenge that many agents tackle with the use of multiple PoS devices.
Bad network causes losses for agents too. An agent in Surulere called Amaka, said there were times she had helped customers with withdrawals, but the transactions got reversed due to a bad network.
She described the experience as painful because it becomes impossible to trace the customers who will have been long gone by the time the reversal takes place. She added that it makes it sometimes difficult to do the business as she bears the loss.
“Other times, I come out and the network is bad all day so even though there are customers, there is poor network,” she said.
Addressing network and security issues
Olusola Owoyemi, CEO of Infibranches, told BusinessDay that agents can improve their security by always setting up in locations with heavy foot traffic, building trust with people around them so they can come to their aid in times of danger.
He also suggested that agents can include a burglary proof in their set-up, have a safe box to keep cash, noting that POS terminals should be given to merchants for retail operations and not just cash dispensaries.
According to him, agents should also consider the possibility of having a small security camera or taking pictures of customers before transactions are completed.
Owoyemi believes that with these in place, every transaction can be traced to a verified individual within the financial ecosystem.
Recognising that network inconsistencies cannot be completely eradicated due to the existence of many touch points before a transaction can be processed successfully, Infibranches is helping agents to do double validation for every transaction and only give value for successful transactions.
The company is doing this through Omnibranches, a platform that mirrors all of the transactions in real-time with the actual status. On their part, agents also need to put proper processes in place by checking the status of all transactions properly before giving out value. They also need to keep a copy of the transaction receipts over a period of time to avoid losses due to transactions that are reversed.
“Service providers need to also develop processes that will help make reconciliation and dispute resolution seamless,” he said.
Iniabasi Akpan, Opay’s country manager, said there is a need for increased collaboration between the banks, fintechs, regulators, and law enforcement agencies to report cases of fraud since no one is isolated and it impacts the entire ecosystem.
Akpan added that all stakeholders in the ecosystem must be resolute to cooperate, report, share information, investigate and make examples of fraudsters to deter other potential fraudsters.
For Owolabi, it has been over a year since Owolabi delved into agent banking. Despite the challenges, he confirmed to the publication that his business has really grown, and he is now thinking of expanding and getting more outlets.