NORA SHAFINAZ BT SAEDUN (P82842), TU6414, AGENT BANKING IN

BRANCHLESS BANKING SOLUTION

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Executive Summary
Branchless banking is defined as delivery channels of financial service outside the banks
branch. It relies on information and communication technologies to transmit transaction
details between customer and the banks. Branchless banking initially was globally introduced
in early 70s with use of Automated Teller Machine (ATM) and ever since the ideas of
branchless banking improved in order to give better financial experience to the customer.
Nowadays the technology blooms in such an innovative approach like Agent Banking. An
agent banking is a concept of granting an agent, access in providing limited financial service
offered by the bank in their premise. As one of the key initiatives under Financial Sector
Blueprint 2011-2020 by Central Bank of Malaysia (BNM), the introduction of agent banking
to the bank in 2012 contributes to the financial inclusion by enhancing accessibility to quality
and affordable financial services to underserved and remote area customer. Bank Simpanan
Nasional (BSN) was a pioneer to introduce new concept of branchless banking solution of
Ejen Bank Berdaftar (EBB) that fall under Central Bank of Malaysia (BNM) regulatory. EBB
innovation demonstrates a comprehensive framework which developed to enable outreach of
financial services at lower costs while expanding the reach of community.
Example of Usage
BSN has been appointed by BNM in pioneering national project of EBB on 2012. Initially
there are 200 agents and now the numbers
keep on expanding to over 5,000 agents in
the country that symbolize acceptance of
technology change in financial industry.
The agent will be giving training and basic
banking device such as biometric Point-OfSale (POS) terminal, to grasp the
implementation of BSN EBB. BSN EBB
requires both customer and agents to have
BSN accounts then the customer can use
their BSN ATM card in order to perform
Figure 1: Process of deposit and withdrawal transaction
through an Agent Bank

any transaction provided.

Service offered by BSN EBB are account

opening, cash deposit, cash withdrawal, SPP
Purchase, Bill Payment for over 30 billers,
cashless transaction - payment on purchase at the
agents premise and telco prepaid top up
purchase. Recently in 2015, BSN EBB upgrades
and adds value to its service with allowing all
transaction can be completed using MyKad as
substitute of BSN ATM card.

Figure 2: BSN EBB

Business Value
Implementation of EBB at BSN benefitting various parties such as the bank, telco companies,
POS vendors and the agents specifically. These also add in revenue to the national economy
growth. Following is the business values created with the aids of this technology:

Real time processing of all

transaction with no additional
charges to the customer.
Generate business opportunity to the
community. As well as expanding the
services and business by the bank
through this channel.
Reach potential customer at different
location and deliver new approach to
underserved account holder. Hassle
free with long operating hours.
Increase banks network and deepen
financial integration.
Figure 1 : Total revenue of BSN EBB implementation in
Low cost on delivering new channels
Q3 2014
to the customers compared to set up a
branch or self-service terminals such as ATM, CDM and VTM.
Promote green technology with formless transaction.
Reengineered financial transaction process, which everything being simplified and
automated.
Cost effective and time saving agents are available in nearest retail store.
Embrace technology wise such as IT and communication network.

Further innovation to enable more banking services in BSN EBB was rapidly developed. By
2015 more banks in Malaysia follow the framework in order to get same advantages at such.

Technology Specification
The EBBs architecture has its own layers of application and security. With handheld POS
terminal that work on GPRS mobile data service in real-time connectivity, a typical
transaction takes only about
45 seconds to complete and
without having to go to a
physical banking branch.

Figure 2 : EBB - How It Works

Customers are required to

confirm their Personal
Identification Number (PIN)
of BSN ATM Card and
biometric verification (that
match with MyKad) before
initiating their transaction.
The encrypted data will
transmitted via GPRS or
landline network which is
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connected to the POS Terminals. Then the data transfer to the banks server for decryption
and validation. After validation of the data is success, the data will be transmitting back to the
POS terminal and a receipt will be generated upon each successful transaction. All operation
of transaction must follow BNM regulations even though it was formless.
Competitive Environment
With the numbers of revenue captured by the bank, there are always many to follow either to
innovate or to recreate new opportunities based on the idea of agent banking. Therefore, there
are huge competitions in order to greater
the business. Competitive environment
may lead to shortfall to the bank but then
everyone should agree that it can develop
more innovation to value add current
technology.
Initially public acceptance on the
technology offered is the major
challenges to the bank while this channel
was developed to service them. To
overcome the issue, marketing and
advertisement extra the effort to educate
Figure 3 : New innovation of payment using mPOS
the public and make the system reliable
to the unbanked and underserved
customer while banking at their favourable retail premise. Close monitoring operation by the
bank to the agent also was an issue in order to maintain brands credibility to the customer.
The bank also needs a ground support hand-holding by internal resources to ensure the
national aspiration is well carried by the numbers of total revenue captured. In remote area
which communications become a barrier, the bank have to ensure communication service
provided by telecommunication company has been carried out. Recently Maybank one of the
players in Malaysia banking industry introduced advanced technologies that collaborate with
Maxis known as mPOS. Eventhough mPOS is not EBB but the service of cashless payment
offered might attract user and the bank should ponder something to ensure EBB is still
relevant to the customer. The R&D of this service should be life-long journey to the banks.
Analysis
There is growing interest in many parts of the developing world in delivering financial
services through agent banking, including at post offices, airtime resellers, and local shops.
Being able to transact at local retail, agents has many potential advantages to the customers.
For providers of banking services, it allows the rollout of a much more granular distribution
network without incurring the large fixed setup and operational costs of branch and ATM
networks. Agents banking are very cheap to set up and are typically remunerated on a pertransaction basis, so their cost to the provider is largely variable. Financial service providers
can use agents banking to decongest branches, expand coverage to areas where they do not
have branches, or develop lower-cost services for lower-value customer segments. For the
customer, agent banking services will further reduce the cost of accessing financial services
by cutting down on travel time and waiting time at banking outlets. Modern agent networks
rely on technology to eliminate credit risk and ensure the finality of transactions at the point
of transaction between customer and agent. The schemes of use POS devices at the store in
combination with customers bank cards and MyKad prove to the customer that this national
aspiration is secured and somehow was carried out and govern seriously by the policy. The
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technology platform is used to ensure that the bank or account issuer is able to authorize and
execute transactions in real time, this create great confident level of the customer while the
banks maintains its credibility to their customers and new potential customer. Branchless
banking which referred to technology-enabled for agent banking; enables clients to store,
send, and receive electronic money through local agents, rather than traveling to the nearest
bank branch. It is hoped that by moving financial services beyond banks traditional bricksand-mortar infrastructure and shifting them to a more scalable, variable-cost channel,
financial services can be provided profitably and sustainably to segments of the population
that are poorer or more remote, and that are currently neglected by regulated financial
institutions. This is not the mere adoption of new channels and technologies by existing
players, but this is more to expand profitably into previously underserved customer markets
and to ensure every citizen is well financial served by the key player. The possibility arises of
creating very different value chain structures through a process of specialization and scale
also can be develop towards this new branchless banking solution.

Reference
Laporan Tahunan BSN 2012; BSN; 2012
Improving Access to Finance for SMEs Banking Beyond Branches ; BNM AFI Capacity Building
Programme; 14 October 2014; n.d
myBSN : BSNs Ejen Bank Berdaftar (EBB);
http://www.mybsn.com.my/content.xhtml?contentId=150

Financial
Sector
Blueprint
2011-2020;
Bank
Negara
Malaysia;
n.d;
(http://www.bnm.gov.my/index.php?ch=en_publication_catalogue&pg=en_publication_blu
eprint&ac=7&lang=en)
Asian Link Financial Inclusion; Asian Institute Of Finance; 12,2013 ;
(http://www.aif.org.my/clients/aif_d01/assets/multimediaMS/publication/Asianlink-12.pdf)
Maybank mPOS ; n.d
http://www.maybank2u.com.my/mbb_info/m2u/public/promoDetail.do?channelId=PROPromotions&cntTypeId=1&cntKey=PRO03.55&programId=PRO03Cards:Maybankard&chCatId=/mbb/Personal/PRO-Promotions
Ringgit Rakan Kewangan Anda; Bank Negara Malaysia; July 2015;
http://www.bnm.gov.my/index.php?ch=109&pg=824&ac=83&bb=file
First ATM opens for business; History.com Staff; 2009 ; http://www.history.com/this-day-inhistory/first-atm-opens-for-business
http://www.slideshare.net/wearesocialsg/digital-social-mobile-in-2015
Digital, Social & Mobile in 2015; Simon Kemp in News;21 January 2015 ;
http://wearesocial.sg/blog/2015/01/digital-social-mobile-2015/