The role of rural agent networks in the smartphone world

In the last edition of the Handelot Times, we reported on how smartphone manufacturers are looking to sub-Saharan Africa to find brand new customer bases, equipping devices with need-specific features. What we didn’t discuss so much, is how those phones get to end users. As one might expect, regular distribution networks like mobile money agents, while doing a good job in urban areas, often falter in rural ones. This is an opportunity for all sorts of e-commerce firms to establish a network of rural agents to penetrate deeper into markets in Africa, East Asia, and Latin America. And initial results seem very promising.

Why don’t mobile money agents make more effort in rural areas? According to CGAP, agents reach fewer clients from whom to generate transaction fees because of the low population densities in rural areas. This makes it difficult to break even, let alone make a profit. They also bring the hardship partly on themselves. In an attempt to build a competitive advantage, mobile money providers and regulators sometimes compound this challenge by requiring their agents to be exclusive (or only represent one mobile money provider) or dedicated (or only operate in the mobile money business).

On the flipside, e-commerce companies providing

DFS have reached scale in urban areas.

It’s little wonder, then, they have set their sights on expanding to rural ones, where cash still dominates transactions. Some of these companies are already showing impressive gains in rural outreach. Perhaps the most mature example is Alibaba’s Rural Taobao program. Launched in 2014, Taobao has already established a rural agent network that serves 30,000 rural villages where customers can pay cash for goods and services they bought via the Taobao network. Similar approaches aiming to have rural coverage are being developed by providers like StoreKing and Paytm Mall in India, Go-Jek and Grab in Indonesia, Jumia Pay across Africa, Oxxo in Mexico and Mercado Pago across Latin America. These new providers have stronger incentives to service rural clients given the vast product mix they can monetize, and they are mobilizing large investments to develop such agent networks as part of their broader strategies.