Branch Banking Vs. Agent Banking: The Differences

The concept of banking can be traced back to several centuries. In simple terms, a bank is a system that deposits, borrows, and provides loans to its users. 

In that context, there are many types of banking available today. Among the various types of banking systems available are Branch Banking and Agent Banking.

Branch Banking vs Agent Banking

Branch banking is a banking system in which a bank has spread its services by setting up branches in every possible location to serve its needs. 

Agent Banking, in contrast, can be compared to a virtual bank in which anyone or anything can act as a system of the bank. This system provides its services on behalf of the bank.

Branch Banking is an extension of the main office of a bank. Unlike the main office of a bank, it provides all the services customers would receive at their location. This makes it convenient for people to use the branches of a bank.

With Agent Banking, rural people, small businesses, and users are able to connect with a bank for all the services a main bank provides. Depending on the function, an agent may be able to handle functions such as sending or receiving money, depositing money, or issuing small loans on behalf of a bank.

What Exactly Is Branch Banking?

Branch banking refers to the services that a financial institution extends to its customers. The bank’s head office is not readily accessible to everyone, which makes branch banking a convenient way to use bank services. These services include everything one would expect from a bank.

A variety of features have been added to branch banking since its inception. Aside from providing banking services, it can also offer insurance and investment products. 

Branch banking includes in-store branches and foreign bank branches. Instore Branch Banking is available in a retail location, such as a mall or metro station. Where applicable, it can provide basic services within minutes. It can be a full-service or limited-service bank. In addition to its limited staff, other methods of providing services are used, such as ATMs or other technologies.

What Exactly Is Agent Banking?

Essentially, Agent Banking connects rural people, small businesses, among others, with unserved or underserved banks. On behalf of banks, agents offer customers banking services. These agents help users deposit money, withdraw, send money, and apply for loans.

Moreover, any retailer, mobile network operator, pharmacy, post office, or other shop can be an agent. It enables them to connect any bank, anywhere in the world, with any isolated location. 

Several agents are equipped with a variety of machines to complete tasks on behalf of the bank, including POS machines, card readers, barcode scanners, mobile phones, and personal computers. Through these devices, they are connected to the bank’s servers. An agent can verify the customer’s identity using a PIN or even a biometric.

Many financial institutions use agents as a means to divert customers from their branch to the agent, and they occasionally use an agent to reach remote areas. As mobile banking agents, they handle many tasks exclusively through mobile devices.

Main Differences Between Branch Banking and Agent Banking

• Branch banking is the formal branch of the main bank. In contrast, Agent Banking is an informal institution of the banking system.

• Branch banking requires more resources and operating costs, while agent banking is more accessible since it requires minimal capital.

• In more remote areas, branch banking is not possible because of negative operating costs, but anyone can conduct agent banking, so it is more accessible.

• Branch Banking is an extended part of a parent bank. Meanwhile, Agent Banking refers to a financial institution performing all the functions of a bank on its behalf.

• Branches have the authority to make decisions by discussing them with higher bodies, while agents can only perform pre-assigned duties.

To Conclude

Agent Banking is aimed to support agent and microfinance banking services for unbanked and underserved communities, by offering financial services to this customer segment through a mobile application. Moreover, the solution comes with a centralized administration portal that allows to configure the agent banking mobile application and manage agents and customers.