Mobile Financial Services: Opportunities & Challenges in Bangladesh

1. Mobile Financial Services: Opportunities & Challenges in Bangladesh Bangladesh Bank Sunday, January 5, 2020

2. Scenario 01 In Bangladesh, Banking is traditionally branch-based concentrated mainly in the urban areas There are 8200 Bank Branches of 47 Banks for 152 million people Customers need to come to bank-branches ATM booths cannot not be installed in the remote and rural area of the country Setup of branches is not profitable in the rural areas Dasgupta Asim Kumar, Executive Director, Bangladesh Bank

3. Scenario 02 In Bangladesh financial inclusion rate is 55 %, 45 %of adults have no access to formal financial services Among the financially included population 31% are fully banked 39% are under-banked, with only basic access, such as a savings account. Dasgupta Asim Kumar, Executive Director, Bangladesh Bank

4. Use of mobile phone has become an indispensable part of Bangladesh's everyday-life. Dasgupta Asim Kumar, Executive Director, Bangladesh Bank

5. Active subscribers has reached 90 million at the end of September 2012 with an increasing trend. (Source: Bangladesh Telecom Regulatory Commission Web: http://www.btrc.gov.bd) Dasgupta Asim Kumar, Executive Director, Bangladesh Bank

6. More than half of the country's population [90 million out of 152 million] as Active subscribers created an unprecedented opportunity to deliver basic formal financial services using the mobile phones to the financially excluded population Dasgupta Asim Kumar, Executive Director, Bangladesh Bank

7. Other Externalities in Favor . . . • Supporting Governments vision - ‘Digital Bangladesh: 2021’ • Low transaction costs of Mobile Financial Services than formal financial services. • Availability of Cell phone and SIM cards at affordable low cost. • Minimum subscription for opening bank account is 10 Taka for the farmers in the rural areas. • Newly established IT-enabled Union Information and Services Centres (UISC) operating at all 4,501 Union Parishads (UP, lowest tier of local government) of the country. • Ease of selection of partners/agents due to large distribution network of MNOs/NGOs/BPOs. Dasgupta Asim Kumar, Executive Director, Bangladesh Bank

8. Bankers’ gain from MFS • Increased number of customers which ensures - • New source of deposit • New source of income • Countrywide coverage at a minimum operating cost. Dasgupta Asim Kumar, Executive Director, Bangladesh Bank

9. Customers’ piece (peace) of the pie !!! • For the Customers, the Mobile Financial Services has the following benefits: • Safe deposit of their money and earning interest on it. • Daily transactions in the account on 24 X 7 basis. • Sending and receiving local remittance instantly. • Receiving inward foreign remittance from a walking distance hassle-free. Dasgupta Asim Kumar, Executive Director, Bangladesh Bank

10. Regulatory Framework • Regulations – A “Guidelines on Mobile Financial Services for the Banks” have been issued in September 2011. • Business model– Bangladesh will follow Bank-led model. • Distribution networks – Banks to appoint credible agents/partners for delivering MFS to the unbanked population cost-effectively utilizing MNO’s countrywide coverage. Dasgupta Asim Kumar, Executive Director, Bangladesh Bank

11. Services permitted • Disbursement of inward foreign remittances, • Cash in/out using mobile account through agents/Bank branches/ ATMs/Mobile Operator’s outlets. • P2B Payments e.g. a. utility bill payments, b. merchant payments • B2P Payments e.g. salary disbursement, dividend and refund warrant payments, vendor payments, etc. • G2P Payments e.g. elderly allowances. Freedom-fighter allowances, subsidies, etc. • P2G Payments e.g. tax, levy payments. • P2P Payments. • Other payments like microfinance, overdrawn facility, insurance premium, DPS, etc. Dasgupta Asim Kumar, Executive Director, Bangladesh Bank

12. Actors in the Field . . . • 23 out of 47 Commercial banks have obtained license from Central Bank for MFS. • 14 banks have already started offering MFS to their customers. • bKash, a BRAC Bank subsidiary and Dutch-Bangla Bank Ltd. are the pioneers in this field. • Beside the banks, Bangladesh Post Office (BPO) introduced the service - 'post e-pay', in September 5, 2011 with 57 branches which will gradually be launched in all the 9,886 branches of the post office in phases with the help of the mobile operators' countrywide network. Clients have to register themselves with the post office to get the service. Dasgupta Asim Kumar, Executive Director, Bangladesh Bank

13. Dutch-Bangla Bank Ltd. - MFS • Pioneer in Mobile Financial Services in Bangladesh. • Provide service through own branch/agents/UISCs. • Services • Cash-in (cash deposit) • Cash-out (cash withdrawal) • Merchant Payment • Utility Payment • Salary Disbursement • Foreign Remittance • Air-time Top-up • Fund Transfer Dasgupta Asim Kumar, Executive Director, Bangladesh Bank

14. DBBL MFS @ Telco Agents Banglalink Agent Citycell Agent

15. DBBL MFS @ Branch & UICS DBBL MB Upazila Office Union Information & Service Centre

16. Dutch-Bangla Bank Ltd. • No of customers: • Registerd: 810527 • Active: 635295 • Deposit Amount: BDT 422 million • Cash in: • Number of transactions: 1,749,629 • Amount: 5.01 billion • Cash out: • Number of transactions: 884,935 • Amount: 4.17 billion Dasgupta Asim Kumar, Executive Director, Bangladesh Bank

17. Dutch-Bangla Bank Ltd. • P2P: • Number of transactions: 643,943 • Amount: 829 million • Top-Up: • Number of transactions: 2,685,121 • Amount: 64 million Dasgupta Asim Kumar, Executive Director, Bangladesh Bank

18. Current MFS Status . . . Provides financial services through an extensive network of community-based agents and existing technology, including mobile phones. Company Name : bKash Ltd. Ownership : Subsidiary of Brac Bank Ltd. Service Launch date : 21st July, 2011 Service Model : Bank-led PSO Technology Partner : VISA (Fundamo platform) Distribution Partners : BRAC, MNO MNO Partner : Robi (since launching), Grameenphone (from 18th Jan, 2012) www.bkash.com Dasgupta Asim Kumar, Executive Director, Bangladesh Bank

19. Current MFS Status . . . • Transactional Services • bKash account creation • Cash-in • Cash-out • Person-to-Person Transfer (P2P) • Person-to-Business Transfer (P2B) • Business-to-Person Transfer (B2P) • Service Charge • Registration = Free • Cash In = Free • Cash Out = 1.3% on average • Money Transfer= 1 taka (flat rate) Number of Agents: 3750 active agents Number of Divisions covered: All (7) Number of districts covered: All (64) Number of registered customers: 80,102 Number of new registration per day (current): Around 1300 Dasgupta Asim Kumar, Executive Director, Bangladesh Bank

20. Current MFS Status . . . Status as of October 31, 2012: Cash-in : BDT 15.56 billion P2P transfer: BDT 2.90 billion Cash-out: BDT 14.64 billion www.bkash.com Dasgupta Asim Kumar, Executive Director, Bangladesh Bank

21. Electronic Money Transfer Service (EMTS) • EMTS was launched on March 26,2010 • Traditional money order transformed into electronic system. • To send Money in a moment by cell phone or computer. • For domestic and international remittance. • To be extended to all Post Offices (9886) to make it largest financial network In Bangladesh. • Coverage: 2750 Locations including Remote & Hilly Places Bangladesh Post Office (BPO) Dasgupta Asim Kumar, Executive Director, Bangladesh Bank

22. EMTS Services • Domestic remittance. • EMTS • PCC • Traditional Money Order. • International Remittance. • Western Union • International Money Order with 17 Countries. • Savings Bank Bangladesh Post Office (BPO) Dasgupta Asim Kumar, Executive Director, Bangladesh Bank

23. EMTS Monthly Progress Table Dasgupta Asim Kumar, Executive Director, Bangladesh Bank

24. MFS, an effective tool for IFR disbursement • Although commercial banks are gradually approaching to offer more innovative mobile financial services, inward foreign remittances disbursement has been the main focus till date. • MFS is an effective tool for IFR disbursement as • most of the IFR recipients lives in the rural areas. • they don’t have bank access • have to rely on informal transfers of remittances which are insecure Dasgupta Asim Kumar, Executive Director, Bangladesh Bank

25. Complementary Advancements • Bangladesh Bank has also permitted M-Commerce in Bangladesh. • Mobile network operators have been given permission to sell railway tickets and tickets of cricket matches organized by the Bangladesh Cricket Board (BCB) using mobile technology. • Approximately 4,25,000 utility (water, gas and electricity) bill payments are transacted using the m-commerce. • Additionally, Approximately 12000 train tickets are sold and 15000 match tickets are sold via m-commerce. • Recently internet connection subscribers of different Internet Service Providers (ISPs) are paying their subscription fees via MNOs outlets. Dasgupta Asim Kumar, Executive Director, Bangladesh Bank

26. Barriers to overcome • From the target group perspective • Changing the mindset from conventional physical methods of transactions to a virtual payment service is the main obstacle. • The concept of executing financial transactions from a mobile device is a very new and often confusing for people who are not tech-savvy. • The target group in the rural areas are mostly illiterate making it hard for them to read and operate a cell phone to be used for MFS. • Lack of financial literacy among the rural people. • People in the rural areas are not aware of the benefits of MFS but awareness building of the same is crucial for MFS to be successful. Dasgupta Asim Kumar, Executive Director, Bangladesh Bank

27. Barriers to overcome . . . • From the financial perspective of the agents/outlets • liquidity of the cash-in/cash-out outlets • From the supervisors perspective • supervisory control should be very cumbersome in remote rural areas • Industry alliance of Banks and MNOs is a major factor • Bridging telecommunications and appropriate financial services is needed • Capacity building and knowledge sharing among the stakeholders is crucial Dasgupta Asim Kumar, Executive Director, Bangladesh Bank

28. Possibilities & beyond • MFS is now starting with basic financial services • savings • credit • Already the market is moving for • Inward foreign remittance disbursements • Local remittances • micro-finance • micro-insurance programs • micro health insurance and • crop-failure insurance, etc. Dasgupta Asim Kumar, Executive Director, Bangladesh Bank

29. MFS, new magic wand IFR disbursement Dasgupta Asim Kumar, Executive Director, Bangladesh Bank

30. MFS, an new magic wand IFR disbursement • MFS emerged as an effective tool for IFR disbursement • most of the IFR recipients lives in the rural areas. • they don’t have bank access • have to rely on informal transfers of remittances which are insecure Dasgupta Asim Kumar, Executive Director, Bangladesh Bank

31. New frontiers . . . • Being the prime FX earning sector Garment Manufacturing Industry has employed millions, specially innumerable uneducated women of the country. • It is making significant contribution in the field of our export income. MFS ushered a new gateway to disburse salary of millions of workers in the Garments Manufacturing Industry Dasgupta Asim Kumar, Executive Director, Bangladesh Bank

32. Bangladesh, thus, has the huge potential for Mobile Financial Services, with a large population in need of secure, convenient, and affordable banking services to become a revolutionary example in the world. THANK YOU! Dasgupta Asim Kumar, Executive Director, Bangladesh Bank