The concept of banking dates back many centuries. A bank is a system that deposits, borrows, and gives its users loans. It bridges those who have extra money to save and those who need money.
There are many types of banking available now. Branch Banking and Agent Banking are two types of Banking systems available amongst many other banking systems.
Key Takeaways
- Branch banking involves a physical branch location where customers can access various banking services. In contrast, agent banking involves non-bank retail locations where customers can perform basic banking transactions.
- Branch banking requires a significant investment in infrastructure and human resources, while agent banking involves lower capital requirements and a more flexible business model.
- Branch banking suits customers with more complex banking needs, while agent banking is more suitable for customers in remote or underserved areas with limited access to traditional banking services.
Branch Banking vs Agent Banking
Branch banking is a traditional banking model where financial institutions establish physical branches in various locations to provide customer banking services. Agent banking is a banking model where financial institutions use intermediaries or agents to offer banking services to customers.
Branch Banking is an extended service of the main office of a bank. It provides all services like a bank’s main office, but it is extended to serve customers at their location.
It is convenient for people to use the branches of the bank.
Agent Banking is a banking system that connects rural people, small businesses, and users to a bank for all the main bank’s services.
An agent can do functions like sending or receiving money, depositing money or giving small loans on behalf of a bank.
Comparison Table
| Parameters of Comparison | Branch Banking | Agent banking |
|---|---|---|
| Purpose | It is a banking centre that provides face-to-face or automated bank service to the customer. | It is an outlet that conducts banking services to unserved or underserved people on behalf of banks. |
| Function | It performs all the same functions that its head office performs. | It offers some limited but important basic functions of a bank. |
| Operation Cost | It requires more operational costs. | It requires less operational cost. |
| Resources | It has more resources. | It has fewer resources. |
| Area Covered | It can not reach more remote places. | It is especially for remote areas and small businesses. |
What is Branch Banking?
Branch Banking is a financial institution system that is extended to provide service to its customers.
As everyone can not reach the bank’s head office when needed, branch banking is a good option to use bank service conveniently. It provides all facilities that one needs from a bank.
It has advanced its functions in these years. It provides banking services and can sell insurance and investment products. Based on its functions and services, it is divided into different types.
These include Instore Branch Banking and foreign Bank branch.
Instore Branch Banking can be found in retail, such as a shopping mall or a metro station. If in need, it can provide some basic services in no time.
It can be a bank providing full service or limited service. It has limited staff and uses other methods like ATMs or other technology to provide Services.
Foreign Bank Branch is Branch Banking, which has to follow all the regulations made by its home office and the country in which it operates.
There are many other types of Branch Banking, but the basic function of all the banks is the same.
What is Agent Banking?
Agent Banking is a Banking system that mainly connects unserved or underserved rural people, small businesses, etc. Agents provide banking services on behalf of a bank to the customers.
A user can deposit, withdraw, send money or apply for a loan with the help of these agents.
Anyone can be an agent, like a mobile network operator, a pharmacy, a post office, or any other shop. It lets them connect any bank from any part of the world to any isolated location.
It has to perform the task under the guidance of the main bank.
Agent Banking has many agents equipped with any machine like a POS, card reader, bar code scanner, mobile phone, or personal computer to perform the task on behalf of the bank.
These devices help them to connect with bank servers. The agent can verify the customer by requesting a PIN or a biometric.
Many financial institutions use agents to divert the crowd from their branch to an agent, and sometimes, they use an agent to reach remote places. Banking agents are essential to mobile banking as they perform many tasks using mobile-only.
Main Differences Between Branch Banking and Agent Banking
- Branch Banking is a formal body of the main bank. Conversely, Agent Banking is an informal body of the banking system.
- Branch Banking requires more resources and operating costs to perform the function, whereas anyone can do agent Banking as it requires very little capital.
- Branch Banking can not reach the more remote location due to negative operating costs at these places, but anyone can do agent Banking and hence has more reach.
- Branch Banking is an extended part of a parent bank. On the other hand, Agent Banking is a financial institution doing all the bank functions on its behalf.
- In Branch Banking, it has the authority to decide by discussing it with higher bodies, while in Agent Banking, it only has to perform pre-assigned duties of the bank.
- https://link.springer.com/chapter/10.1007/978-3-319-43434-6_31
- https://pdfs.semanticscholar.org/d5fe/bba91cbaf64760a8ab02504fddaaae51e1e5.pdf
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Chara Yadav holds MBA in Finance. Her goal is to simplify finance-related topics. She has worked in finance for about 25 years. She has held multiple finance and banking classes for business schools and communities. Read more at her bio page.
