Page 212 - ITU-T Focus Group Digital Financial Services – Technology, innovation and competition

ITU-T Focus Group Digital Financial Services
Technology, Innovation and Competition

G AGENTS

12 Agents in DFS

12.1 Overview

One of the transformational components of the DFS ecosystem has been the emergence of agents as the
frontline retail providers of service to customers. Agents, however, require training, marketing materials,
liquidity management and replenishing, physical platforms for their locations, and incentives to signup up
customers and do CICO transactions. Further, they often need to be notified to or approved by the relevant
financial regulator. In all, these components require major investments to set up and manage effectively.

Those ‘first to market’ are usually the ones who have invested this time and money, and consequently wish
to protect their investments. This need may however be counterbalanced by market forces, for example
subsequent entrants who want to use these same agents to sell their DFS products. This commercial need is
often hindered by so-called agent exclusivity arrangements that prevent an agent contracted to one DFS SP
from doing the same DFS business with another DFS PSP.
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From a competition authority’s or regulator’s perspective, exclusivity arrangements in the DFS ecosystem may
be seen as anti-competitive and hindering financial inclusion by decreasing the ability of customers to access
multiple providers (and thus services) from an agent serving their location.

12.2 Competition aspects

In some instances, bans on agent exclusivity are motivated by competition concerns. In other respects, for
example in India, the regulator has mandated exclusivity based on consumer protection concerns. From a
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DFS PSP’s perspective, however, a ban on agent exclusivity could depress its incentive to roll out comprehensive
agent networks. Even where there are bans on exclusivity, there are reports of exclusivity prohibitions being
flouted.
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There are also instances where there is an agent regulation for banks and another regulation for non-banks,
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which may result in different approval conditions or criteria being imposed on agents offering identical types of
services. This unequal treatment of bank versus non-bank agents could be motivated by issues of proportionality
in risk mitigation rather than a competition issue per se, since banking agents may have a higher risk profile
because of the activities they carry out and as such may warrant more stringent regulations.

12.3 Country examples

Bangladesh

Bangladesh has an agent regulation for banks - Guidelines on Agent Banking for the Banks 2013 – as well as
slightly different rules for MFS agents in their MFS Guidelines. Although many of the provisions are similar
between the two regulations, there is a restrained requirement for country wide networks for MFS agents,

207 This sharing of agents is not interoperability as it has sometimes been described, as there is no interconnection between the
e-money accounts of the agent. The agent will hold two separate e-money accounts from two or more DFS SPs. Exclusivity could
manifest not only as a provider not allowing its agent to serve other service providers but could include only allowing one com-
pany or person to serve a particular location.
208 The recently issued operating guidelines on payments banks allow interoperability of banking correspondents (agents), except for
customer acquisition. RBI (2016) Operating Guidelines for Payments Banks, available at https:// goo. gl/ lByJQp
209 Mazer et al (2016) ibid
210 See Section 7.3 below on Bangladesh and Kenya.

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