How Do Innovative Banking Channels Reduce Costs in Downscaling?

This paper analyzes and quantifies cost structures of agent-assisted banking beyond branches channels (ABCs) and compares them to the costs of branch channels. The qualitative review finds that ABCs maximize the proportion of variable costs that depend on realized transactions, which match revenue flows. ABCs reduce investment and operating costs, since existing agent business infrastructure is enhanced and shared. In the context of downscaling, ABCs bridge the major barrier for commercial banks: the expensive last mile to the customer. The quantitative review finds that POS / PC terminal-based ABCs reduce transactional costs to 58 percent of branch channel costs and mobile-based ABCs to 15 percent. Apart from analysis and quantification of cost structures, this paper develops a comprehensive definition of ABCs. Likewise, downscaling is defined; the two research fields are linked and investigated from a commercial banking perspective.