Once hailed as the solution to getting financial services closer to the people, agency banking is proving to be more of a challenge to the agents than a much sought after business model.

According to a survey by research firm Helix Institute of Digital Finance, the huge number of mobile banking agents in urban areas is now an impediment to the expansion of the commission agent business.

Agents are opting for more than one financial provider or diversifying into other services in the face of minimal revenue growth despite the increasing volumes of transactions handled by them.

In Kenya, annual average revenues fell six per cent from $117 million in 2013 to $110 million in 2014 , according to the survey.

The revenues can take up to a month to be realised, forcing many agents into running their businesses on credit, eroding their margins further.

“Unless there is a defined model for agency banking, banks and MNOs will continue utilising any available opening to push agency banking forward. The go-between agencies are taking advantage including  reselling old agent businesses,” said Thomas Makau, an ICT and telecoms analyst.

There is also a constant need to balance the float between e-money and cash in anticipation of regular patterns of demand for each. Furthermore, agents become visible “carriers of cash” and the target of robberies, and of fraud, according to the new report.

“Given the difficult strategic operations and expenses associated with managing an agent network, areas like liquidity management, agent training and monitoring might be good places to extend partnerships between banks and mobile network operators offering mass market finance in Kenya,” says the report.

A similar survey across Kenya, Uganda and Tanzania in 2013 found that agents had difficulties in managing floats, largely because of inability to predict demand.  Other significant impediments were a lack of resources, and the connected issues of having to shut their store and the length of time it takes to rebalance.

Safaricom, East Africa’s leading company in agency banking, has been seeking to entice pre-existing businesses to diversify into M-Pesa as banks slowly eat into its pie.

“We actively seek to empower agents who already own small businesses, so that their mobile money agency becomes a new opportunity to generate additional earnings,” said Stephen Chege, Safaricom director of corporate affairs.

Safaricom has 85,000 agents across the country.  The firm has dropped its lead to 79 per cent of the agency banking market in 2014 from 90 per cent in 2013, the Helix Institute survey shows.

In February 2014, Safaricom announced it had removed all exclusivity provisions in its M-Pesa agent contracts. Safaricom is now targeting existing businesses for a wider presence.

Competitors in the banking sector have gained with Equity leading at 8 per cent of the market in 2014 from 1.3 per cent in 2013.  Airtel, Co-operative Bank and KCB Group follow at 5 per cent, 4 per cent and 3 per cent respectively.

New partnerships between mobile companies and banks are giving mobile operators an upper hand due to their wider presence. KCB Group, Co-operative and Equity Banks have for instance partnered with Safaricom, allowing bank transactions through M-Pesa accounts.

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Helix notes that in Tanzania, some master agents are now doing float delivery. This could be particularly important for non-dedicated agents, who may be used to their suppliers delivering to them, instead of having to go to the wholesalers. In addition, these complaints point towards a significant demand for lines of credit for agents from service providers.