> Posted by Antoine Navarro, Blaine Stephens and Nikhil Gehani, MIX
Enabled by technology and fueled by the desire to improve business outcomes, over 60 percent of financial service providers (FSPs) are serving clients through ATMs, mobile money, agent networks, and other channels outside of branches, according to a recent global survey by MIX. While FSPs continue to deploy these alternative delivery channels (ADCs), assessing their performance presents a challenge. Even though many FSPs are developing internal metrics to track performance, basic information like number of transaction failures is largely unavailable outside the institution. And even when such information is available to external parties, comparisons against the market are hampered by a lack of standard metrics in the industry.
With the right reporting systems and processes in place, FSPs can compare internal channel performance to optimize their channel mix. FSPs have told us they need visibility onto the rest of the market to benchmark their performance against peers, inform managerial decisions and improve actual results. MIX’s recently published report, “Measuring the Performance of Alternative Delivery Channels” aims to do just that. Through research supported by The MasterCard Foundation, IFC’s Partnership for Financial Inclusion and UNCDF’s MicroLead program, we were able to engage with a number of FSPs in sub-Saharan Africa to develop and refine a set of standard metrics. We also created initial benchmarks based on the data collected from these institutions, which are published in the report. It is our hope that FSPs around the world will begin collecting and reporting on these metrics so market actors will have a common reference point for ADC performance measurement and comparison.
What was found? You’ll have to read the report to get the full scope, but here are a few high-level takeaways.
According to our research, ADCs account for anywhere between 10 and 70 percent of an institution’s transactions, supporting the hypothesis that ADCs contribute to improved client convenience. Additionally – and perhaps because the barriers to using these channels are lower – clients carry out much smaller transactions at ADCs than at branches. Our research also found that transactions at ADCs are carried out by clients who are more active than average, though the question remains whether these channels foster increased usage or whether ADC users are more active in general. Either way, it is clear that, taken as a whole, ADCs offer more options for clients and contribute to desired outcomes for FSPs.
While it is convenient to bucket ADCs into a single group, significant variations in performance exist between channels. As FSPs look to invest, develop, and expand their use of ADCs, it is important to understand how each performs and how it can contribute to achieving business objectives.
For example, of all channels, agents tend to create the most new touchpoints: clients are using agents more than any other ADC. The physical presence of the channel type contributes to the dominance of agents, as they’re able to perform several transaction activities. FSPs seem to deploy ATMs and roving staff as extensions of branches, in closer proximity to physical bank branches. This limits the impact of the latter channels on closing geographic or convenience gaps for new clients. (Agents are individuals or businesses entitled to act on behalf of an FSP, and they may or may not have a direct contractual relationship with the FSP; roving staff on the other hand are bank staff that serve customers outside the branch in the customer’s home or place of business.)
Outside of agents, clients enrolled in ADCs rarely exceed 20 percent. This number drops when considering whether a client is active or inactive. Roving staff, surprisingly, register less than half of enrolled clients as active even though they are a doorstop banking service visiting clients as often as daily. For ATMs and mobile, the number of active enrolled clients falls below 10 percent.
Finally, transactions that remain at branches have characteristics of their own that should be considered in an FSP’s channel mix. The value of monthly transactions per service point is 30 to 60 times greater at branches. Displacing client transactions at branches, therefore, implies significant assumptions about client behavior, such as a willingness to perform large transactions outside of branches.
To learn more, please register for our April 27 webinar: Measuring the Performance of Alternative Delivery Channels.
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