What is Agency Banking?

In recent years, the concept of agency banking has gained popularity as a way of extending financial services to individuals in developing countries.

It has become an increasingly popular financial service that has been extended to a larger portion of the population of unbanked and underbanked individuals in emerging markets.

This innovative banking model involves the use of third-party agents to provide banking services to customers, including deposits, withdrawals, fund transfers, and bill payments.

In this article, we’ll explore the definition of agency banking, its brief history and evolution, and the importance of agency banking in expanding financial participation.

Brief History and Evolution of Agency Banking

The history and evolution of agency banking can be traced back to the early 2000s when banks began experimenting with alternative channels for delivering financial services.

The use of third-party agents to provide banking services was first introduced in Brazil, where Banco do Brasil partnered with retailers to offer banking services to customers through their existing distribution networks.

This innovative approach was soon adopted by other banks, and by 2007, it had spread to Kenya, where Safaricom launched M-PESA, a mobile money platform that allowed users to send and receive money using their mobile phones.

M-PESA was an instant success, and it paved the way for the growth of agency banking in Kenya and other parts of Africa.

Today, agency banking has become a mainstream banking model, particularly in emerging markets where many people lack access to traditional banking services.

It is estimated that there are over 1 million agency banking agents worldwide, serving millions of customers who would otherwise be excluded from the formal financial system.

The importance of agency banking in expanding financial inclusion cannot be overstated. It has played a critical role in bringing banking services closer to customers, particularly in rural areas where traditional bank branches are often scarce.

This has enabled individuals and small businesses to access basic banking services such as savings, loans, and insurance, which are essential for building financial resilience and promoting economic growth.

Moreover, agency banking has proven to be a cost-effective way for banks to expand their reach without incurring the high costs associated with building and maintaining physical branches.

This has enabled them to offer services to low-income customers who would otherwise be unprofitable to serve through traditional banking channels.

How Agency Banking Works

Agency banking agents are individuals or small businesses that are authorized to provide banking services to customers on behalf of the bank.

They act as a point of contact between the bank and the customers, delivering financial services to them in exchange for a commission.

These agents can be located in remote areas, making banking services accessible to people who live far away from bank branches.

Becoming an agency banking agent involves several steps, including applying to the bank, passing a background check, completing training on how to use the banking platform, and getting approved by the bank to start providing banking services.

Agents are required to have a minimum level of education, a clean criminal record, and a suitable business location to be eligible for the program.

Agency banking agents can provide various financial services to customers, such as cash deposits, cash withdrawals, funds transfers, bill payments, and account openings.

These services are typically limited to basic transactions, but they provide an opportunity for people in remote areas to access banking services that they otherwise would not have had.

Agency banking relies heavily on technology to facilitate transactions between agents and customers.

Agents are provided with a mobile device or a Point of Sale (POS) terminal that is connected to the bank’s system, enabling them to perform transactions on behalf of the bank.

The technology used is designed to be user-friendly, ensuring that agents can easily navigate the platform and provide a seamless banking experience to customers.

Advantages of Agency Banking

1. Convenience and Accessibility to Financial Services

One of the primary advantages of agency banking is the convenience and accessibility it provides to customers who may not have easy access to banking services.

Agency banking agents are usually located in remote areas, making it possible for customers who live far from bank branches to access financial services without having to travel long distances.

This convenience makes it easier for people to manage their finances and conduct transactions, thereby promoting financial inclusion.

2. Cost-Effectiveness for Banks

Agency banking provides cost-effective solutions for banks and financial institutions, particularly in areas where the cost of setting up and maintaining a bank branch is high.

By using third-party agents to provide banking services, banks can expand their reach to underserved areas without incurring the high cost of building and operating physical branches. This also helps banks to reduce operational costs and increase profitability.

3. Additional Source of Income for Agents

Becoming an agency banking agent provides individuals and small businesses with an additional source of income. As agents provide banking services to customers, they earn commissions on transactions made.

This additional income can help to improve the financial stability of agents and their families, thereby contributing to economic growth and development.

4. Job Creation and Economic Development

Agency banking also has the potential to create jobs and contribute to economic development, particularly in rural areas.

By providing financial services, agents help to promote economic activity, enabling small businesses to access credit, and facilitating the movement of money, which can help to boost local economies.

Additionally, as more people become financially included, there is a potential for increased economic activity, leading to the creation of more jobs and increased economic growth.

Challenges and Risks of Agency Banking

1. Operational Risks Associated with Agents

One of the main challenges associated with agency banking is the operational risks that come with using third-party agents to provide banking services.

Agents may lack the necessary training and knowledge to handle financial transactions effectively, leading to errors or fraudulent activities. This can result in financial losses for both customers and banks.

To mitigate this risk, it is important for banks to establish robust risk management policies and procedures and provide ongoing training and support to their agents.

2. Security Risks Associated with Technology

The use of technology for agency banking transactions creates a security risk for both banks and customers.

Hackers and cybercriminals may attempt to gain unauthorized access to sensitive customer data or banking systems, which can result in financial losses, reputational damage, and legal liability.

To address this risk, banks must invest in robust security measures and continuously update and improve their systems to stay ahead of emerging threats.

3. Regulatory Challenges

Regulatory challenges are another significant risk associated with agency banking. Banks and agents must comply with a range of regulations, including Know Your Customer (KYC) and Anti-Money Laundering (AML) requirements.

Failure to comply with these regulations can result in fines, legal action, and reputational damage.

Banks must ensure that their agents are trained on regulatory compliance and that they have appropriate oversight and monitoring mechanisms in place.

4. Reputation Risks for Banks

Any fraudulent or unethical behavior on the part of agency banking agents can negatively impact the reputation of the banks they work with.

Customers may lose trust in the bank, resulting in a loss of business and damage to the bank’s reputation.

Banks must conduct regular audits and assessments of their agents to ensure they are following ethical and professional standards.

Examples of Successful Agency Banking Models

In recent years, several countries have successfully implemented agency banking models, which have greatly improved financial participation and provided access to banking services for people who were previously unbanked or underbanked. Here are some examples of successful agency banking models:

1. Nigeria’s Access Closa

Access Closa, a subsidiary of Access Bank in Nigeria, has revolutionized banking in Nigeria by bringing banking services right to people’s doorsteps.

With Access Closa, customers can access a wide range of financial services without having to visit a bank branch or ATM.

One of the major benefits of Access Closa is that there are no queues involved in carrying out transactions.

Customers can access banking services anytime, including after banking hours, on weekends, and on public holidays. Transactions are PIN-protected, ensuring maximum security for customers.

Access Closa also offers its services to both Access Bank and non-Access Bank customers, making it a very inclusive financial service provider. Customers can access their funds anytime, anywhere, and save the cost of going to a bank branch or ATM.

One unique feature of Access Closa is the opportunity for individuals to become agents and earn extra income.

Becoming an Access Closa agent requires a minimum working capital of ₦50,000 and a visible business location that is easily accessible.

Valid identification such as a Voter’s card, Driver’s License, International Passport, National ID card, utility bill, and business registration documents for corporate bodies are also required.

Access Bank has a strong presence across Nigeria with over 100,000 agents offering Access Closa services in all 36 states and the Federal Capital Territory (FCT). By partnering with Access Closa, agents can provide essential banking services to their customers while earning an income.

As one of the leading banks in Nigeria, Access Bank has established itself as a trusted and reliable partner for agency banking. There are several reasons why Access Bank is the most preferred option for agency banking:

  1. Wide coverage: Access Bank has one of the largest networks of agents across Nigeria, making it easy for customers to access banking services no matter where they are located.
  2. Innovative technology: Access Bank leverages innovative technology to deliver seamless and secure banking services through its agency banking model. This ensures that customers can carry out their transactions with ease and confidence.
  3. Competitive commissions: Access Bank offers competitive commissions to its agents, making it an attractive option for individuals and businesses looking to generate additional income.
  4. Strong regulatory compliance: Access Bank is committed to upholding the highest standards of regulatory compliance, ensuring that its agency banking operations are fully compliant with all relevant laws and regulations.
  5. Excellent customer support: Access Bank provides excellent customer support to its agents and customers, ensuring that any issues or concerns are promptly addressed.

Access Bank’s commitment to innovation, compliance, and customer satisfaction makes it the most preferred option for agency banking in Nigeria.

2. Kenya’s M-PESA

M-PESA, launched in 2007 by Safaricom, is one of the most successful agency banking models in the world. It enables customers to transfer money, pay bills, and purchase goods and services using their mobile phones.

M-PESA agents are located throughout Kenya, including in remote and rural areas, making financial services accessible to many people who were previously excluded from the formal banking system.

3. India’s BC Model

India’s Business Correspondent (BC) model is a government-led initiative aimed at providing banking services to remote and rural areas.

Under the BC model, banks partner with local entities, such as post offices and village councils, to provide banking services through a network of agents.

These agents are authorized to carry out basic banking transactions, such as cash deposits and withdrawals, account opening, and loan disbursals.

The BC model has been successful in bringing banking services to India’s vast rural population and has contributed significantly to the country’s financial inclusion efforts.


Agency banking has proven to be a powerful tool in expanding financial involvement and providing access to financial services to underserved and unbanked communities.

The use of agents as a distribution channel for banking services has several benefits, including convenience, cost-effectiveness, job creation, and economic development.

To successfully operate an agency banking model, agents must adhere to the minimum requirements and comply with the regulatory guidelines to mitigate operational and security risks. It is also crucial for banks to maintain their reputation and ensure their agents deliver quality services.

As we look toward the future of agency banking, there is no doubt that it will continue to play a vital role in promoting financial inclusion and economic development. Therefore, it is necessary for stakeholders to promote and support agency banking initiatives in their respective communities.

If you are in Nigeria and in need of an excellent agency banking service, we encourage you to visit any of Access Bank’s Closa agents to experience the convenience and accessibility of our banking services right at your doorstep.

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