Globe recently announced that the Bangko Sentral ng Pilipinas (BSP) has approved their request to use Globe Telecom Sub Distributors as GCASH outlets. Building on Globe’s announcement to launch BanKO in late 2009, this announcement marks the start to what will be a busy 2010 for the team at G-Xchange.

The move to leverage Globe sub-distributors makes sense. For years, GCASH have used pawnshops, rural banks, and Globe Business Centres as cash in/out agents, but haven’t made an aggressive push to use any tier of their airtime distribution network. Globe has pursued this path until now for many reasons, but let’s explore three.

First, the financial and operational business case for pawnshops made so much sense, that these types of stores seemed a logical starting point. Pawnshops are cash rich and looking for ways to cover their high fixed costs. Thus, introducing a service like GCASH made sense, as it delivered incremental revenue for minimal effort.

Second, until recently, the BSP has required each mobile money agent to participate in a one day AML/CFT training seminar hosted by the regulator, at a central location. This rule made it difficult for Globe to target smaller or less sophisticated agents, particularly those in the airtime distribution channel. Many small businesses, including airtime agents, balked at the idea of leaving their store for a day and missing out on income.

Third, the commissions paid by Globe (and equally SMART) are so high that, by comparison, some argue that the business case for mobile money looks unappealing. Thus, some made the argument that businesses like pawnshops made more sense to target than airtime agents, who may be more discerning in their evaluation of mobile money (i.e. “I make 12% from airtime and it’s a huge business for me… why are you only offering me 3% for this new service?”). Whether agents truly make a comparison between the two, or simply look at mobile money as a new service they can offer is hotly debated (and we won’t solve that debate today).

So for these reasons (and probably others), airtime agents have played a minimal role in Globe’s agent network – until now. People often write about how important airtime agents are to mobile money, but why has Globe specifically targeted their airtime sub-distributors? After all, this is one very specific tier of several in a massive distribution channel. So what makes sub-distributors such compelling targets?

First, let’s clarify what a sub-distributor does. Quite simply, their role is to sell airtime (or, more accurately, ‘load’ as it’s referred to in the Philippines) to the massive tier of airtime agents below them. Globe has close to one million airtime retailers in total the Philippines, and it’s this tier of sub-distributors that helps make sure they are stocked with product. By virtue of this cycle, sub-distributors are the tier in Globe’s airtime distribution network highly likely to be cash rich – critical for liquidity. On top of this, sub-distributors are registered businesses – Globe can be sure of that because they’ve checked, and kept the necessary documentation as part of their vetting process. Because this step was completed when Globe accredited sub-distributors for the airtime business, there’s less administrative work that needs to be done to accredit them as GCASH agents. Hence, the path to scale is much faster.

But processing documents isn’t the only step to accrediting a GCASH agent. They also need to be trained. To this end, the BSP has taken the equally important approach of being open to to a new model of training. Under the old set of rules, Globe would have needed to persuade each sub-distributor to attend a central training session, and in some cases close their businesses temporarily (for the day of travel and training). With the new model, Globe will bring the training to the agent, by way of a mobile training team that will administer AML/KYC and commercial training at the agent’s site.

This is an exciting time for Globe, and it will be interesting to see how this move drives their next stage of growth. What I’ll be keeping an eye on is their approach to scaling up the agent network in parallel with the number of active users to ensure that each agent is still provided with a strong value proposition. That is, ensuring that agents are provided with enough transactions per day to ensure their interest in GCASH is sustained after this initial push to capture it.