Overview
Should agent exclusivity be permitted?
Agent exclusivity focuses on the ability of a customer of one provider to use the agent of another provider for cash-in and cash-out services related to that customer’s account. In several countries, e-money providers with significant market power initially established and enforced exclusivity agreements with agents. These agreements made it difficult for later entrants to compete on a level playing field.
ARGUMENTS
Arguments for Permitting Agent Exclusivity
Exclusivity may encourage investment
First-movers spend significant resources identifying, training, and monitoring agents. To incentivize agent network development, they should be permitted to recoup these expenses without allowing competitors to free-ride on their investment in agent identification and training.
Exclusivity may not impact competition
Exclusive agents may not the only potential agents, so effective competition often is still possible.
Arguments for Prohibiting Agent Exclusivity
Exclusivity may favor first-movers
In countries where first-movers have significant market power, exclusivity agreements may make it difficult for later entrants to compete on a level playing field.
Exclusivity may be particularly harmful in rural areas
In some areas (particularly rural areas), there may be few entities that are able to meet the requirements to serve effectively as an agent.
CONSIDERATIONS
- As market structures and incentives vary, the merits and risks of agent exclusivity policies will need to be evaluated in the particular country context.
- While every country is different and should be evaluated independently, in most cases the risk to effective competition from permitting agent exclusivity is likely to outweigh the risk that prohibiting agent exclusivity would discourage investment in agent infrastructure.
- In countries where agent exclusivity is prohibited, regulators may need to monitor the market for signs of possible agent coercion, such as high rates of “voluntary” agent exclusivity, particularly with respect to agents of a market leader or other large EMI.
Country Examples
Country Examples
Zimbabwe the competition problem of exclusivity arrangements, but has not ruled them out entirely and requires justification for them. For instance, in 2014 the Reserve Bank of Zimbabwe (RBZ) issued a National Payment Systems Directive that provides: “Where a payment system provider requires entering into exclusive arrangements with an agent, the payment system provider shall apply to the Reserve Bank justifying why such an agreement is necessary.” Justifications could include, for example, where the mobile money provider owns the agent shop.
In 2014, the Competition Authority of Kenya (CAK) rather than the Central Bank addressed the issue of agent exclusivity. The CAK became involved when Airtel made a complaint about Safaricom and their M-Pesa agent network. This was followed up with evidence from individual agents regarding exclusivity clauses in their contracts.
Safaricom argued that it had invested in building an agent network and should not be required to share agents with competitors and lose the return on investment. CAK awarded the case to Airtel in July 2014.
After the CAK’s ruling on agent exclusivity in July 2014, the number of agents in Kenya serving only one provider dropped from 96% in 2013 to 87% at the end of 2014.
In 2013, Bank of Uganda (BoU) issued its Mobile Money Guidelines prohibiting agent exclusivity requirements.
In practice, it took several months for agents to offer services for alternate providers.
In 2015, the Commercial Court also declared that agent exclusivity agreements violated the Communications Act and were null and void
In Uganda, agent exclusivity dropped from 84% to 36% by the end of 2015 in response to BoU's Guidelines and the Commercial Court ruling.
More recently, Uganda has issued National Payment Systems (Agents) Regulations in 2021 reiterating prohibition of exclusivity arrangements.
