Financial Service Providers (FSPs) are deploying various alternative delivery channels (ADCs) to serve their clients outside of branches, often enabled by technology and digitization of the service. FSPs are developing metrics and dashboards to monitor the development of these new channels and to track them against operational and strategic goals. However, FSPs still need visibility onto the rest of the market.
Understanding this need, MIX embarked on research to design ADC performance metrics and benchmarks to enable FSPs to assess their performance against other market actors. With support from The MasterCard Foundation, IFC and UNCDF, MIX was able to interview, visit and collect data from partner FSPs in sub-Saharan Africa. This research builds on the extensive work on ADC metrics conducted by Bankable Frontier Associates in collaboration with The MasterCard Foundation.
In the absence of standard definitions, collecting data across a sample of various institutions types represented a significant challenge and an equally significant achievement. The analysis of this data serves the dual purpose of testing the relevance and usefulness of ADC performance indicators and encouraging market players to adopt ADC reporting standards.
A sample of the key findings:
- A significant share of transactions is performed at ADCs. This supports the hypothesis that ADCs contribute to improved client convenience. ADCs accounted for anywhere between 10 and 70 percent of an institution’s transactions.
- Transactions at ADCs are performed by clients who are more active than average. The question remains whether channels foster increased usage, whether channels only attract transactions formerly performed at branches, or whether ADC users were already more active users at branches.
- Clients carry out much smaller transactions at ADCs. It is likely that the lower opportunity cost of using ADCs makes it worthwhile for clients to perform smaller transactions, enabling new behaviors through improved client convenience.
- Outside of agents, clients enrolled in ADCs rarely exceed 20 percent. That number drops when considering whether the client is active or inactive. Roving staff register less than half of enrolled clients as active, surprising for a doorstep service. For ATMs and mobile, active enrolled clients falls below 10 percent.
- Assessing deposit mobilization is made difficult by the multiplicity of channels. Account balances are the net result of a client’s behavior across all channels, making it difficult to assess whether an increase in cash deposits at agents or roving staff, for example, results in a consistent, stable increase.
- Transactions that remain at branches have specificities of their own that should be considered in an FSP’s service point mix. The value of transactions per service point per month is 30 to 60 times greater at branches. Displacing client transactions at branches, then, implies significant assumptions on client behavior, such as a willingness to perform large transactions outside of branches.
The findings from this research highlight the demand for standard metrics to guide decision making on ADCs in a changing environment. The research also indicates that FSPs must begin by updating their reporting systems and dashboards to track these metrics. Doing so will allow them to analyze ADC performance within their institutions and also to contribute their data to create visibility onto the overall market.
Originally published by MIX >>>