The mobile money wonder
Illustration: TBS
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Illustration: TBS
Today’s kids may not think how cumbersome it was even a decade ago to send money to anyone, or receive it when it was sent by others.
Going to a post office for a money order, or traveling to the local commercial hub 20-30 kilometers away for a courier service branch like SA Paribahan, were the options available to send or receive money across the country for the mass people, a smaller portion of whom used banking services.
The amount of effort and cost of going to bank branches was even greater in the 2000s due to urban concentration. Transaction size, frequency and user profile are used to determine whether a person will go to a bank or not.
At least half a day used to be spent on a transaction if one had to travel to the service points, while people in the area had to spend at least one or two hours.
In the early 2010s, when the banking industry and regulators were busy discussing ways to financial inclusion, an innovative, disruptive industry – mobile financial services (MFS) – quietly revolutionized it.
After a decade, it now only takes a minute to press the mobile phone button or smartphone screen to send and receive money through MFS. And the money kept in the digital wallet can be withdrawn at any of the nearly 15 lakh agent points across the country, most likely one at your nearest stores.
Like cash-out, cash-in from the agent points is also a matter of a minute.
Even people in remote villages barely need half an hour to walk to an agent point.
Meanwhile, agent banking, ATMs and online banking have emerged to make financial transactions faster and more convenient. But none of those helped banks reach as many people across the country as their MFS wings did.
A fast growing large market
BKash, the mobile money pioneer, started operations in 2011 and reached the milestone of 20 lakh users in 2012 and one crore in 2013.
Now the MFS market leader alone has 6.5 crore unique users, while its one dozen competitors have taken the number of total MFS accounts to over 18 crore, of which 6.71 crore are active in transactions.
According to the Bangladesh Bank, the number of registered mobile money accounts has soared to 910 per 1,000 adult population in 2021, up from 10 nine years ago.
The rapid rise has been made possible by mobile phone penetration as almost everyone in families who deal with money uses a phone.
Bangladesh with its large population has emerged as the fastest growing major MFS market and BKash – a Brac Bank joint venture with US firm Money in Motion LLC is gradually on-boarding the world’s most reputed partners like the International Finance Corporation of the World Bank Group, Bill and Melinda Gates Foundation, Alibaba wing Ant Financial Group and SoftBank’s Vision Fund – became the country’s first unicorn.
Startup companies with a billion dollar value are called unicorns and Bkash’s value rose to around $2 billion in November last year.
The firm has received much local and global recognition for the changes it has made, while its competitors only add the power of mobile money.
The popularity
The MFS industry which started as a solution to the unbanked people’s problems of sending and receiving money and filling the gaps, in line with the Digital Bangladesh Mission of the government, has made its way big.
In August this year, an average of 1.32 crore MFS transactions were done daily for a total turnover of Tk2,821 crore.
Not the entire amount paid for sending or receiving money, instead the MFS industry has emerged as a great relief to the people in terms of payment solutions.
Paying utility bills, school fees and even traffic fines at a bearable transaction cost that doesn’t exceed the transport cost of reaching a bank branch has made daily life so easy.
Paying bills for a minute by tapping mobile phones has helped busy people forget their memories of the hassle of hours-long queues in front of booths that they had to go through before.
ATM cards helped urban people to forget cash carriers and mobile wallets democratized it by offering cashless life across the country.
Running out of money on the road is no longer a problem, as a phone call to a well-liked person to send money to an MFS account is enough to have cash within minutes, regardless of whether you are in rural areas or in the cities.
With almost every adult as a user, MFS has become a good friend of retailers, no matter if they sell online or offline.
Bkash alone has three lakh merchants on board who find it profitable to get the prices of their products or services paid with mobile money which they can later pay out at an affordable cost, no more than they have to pay for debit processing -credit card transactions.
Getting more and more merchants on board and arranging profitable deals – discounts, refunds – for using mobile money in shopping continues to drive the growth of MFS in shopping.
Along with the big stores accepting bills in mobile money, the emerging e-commerce sector is significantly reciprocating the growth with the MFS by supporting each other.
No online retailer in the country denies being paid online by its preferred MFS partners as debit or credit card users are very less compared to mobile money.
Especially the small and medium online retailers, mostly on Facebook, have embraced MFS because of their smaller ticket size and a wide yet-to-be-banked customer base.
A rural housewife orders her portable online, pays with mobile money and receives the package further, which would have been impossible without MFS.
More than 55% of MFS users are rural people and nearly 42% are women, according to Bangladesh Bank’s September data.
MFS, which has a digital database of every single customer and transaction, is transparent enough to regulators and the government, and with the mass penetration, they have already proven themselves as an effective tool for disbursing salaries and government welfare benefits to the poor without banks. .
MFS players work with lenders and insurers for transaction facilitation along with their own efforts to encourage people to save money in mobile wallets.
Nagad, another major MFS firm, pays interest to its users on mobile wallet balances.
The SME sector, and local trade and commerce have a significant part of their payments through MFS every day.
Many, especially those in wholesale businesses, have multiple MFS accounts to ensure that the daily transaction limits imposed by regulators do not impede their immediate cash inflows or outflows.
Using bank accounts for a few lakh taka in daily transactions will help them save some in transaction costs, but they hardly bother as long as their sales continue and the peer puts on mobile money.
Transfer from abroad is another important area facilitated by MFS.
Rural people do not need to go to villages to withdraw remittances sent by their loved ones and relatives from abroad, nor need to seek help from others who travel to the villages regularly, as mobile remittances have made their lives easy has.
However, high transaction costs compared to the peer markets are still a problem, while MFS companies hardly enjoy it, as they spend most of the fees to feed their value chain partners, to finance the campaigns for market growth.
Mobile money has directly created nearly 15 lakh jobs in the form of MFS agents, with at least one-third of them fully active in the business of supporting account holders’ cash-in, cash-out and other activities.
BKash alone has three lakh agents across Bangladesh and they earn decent money for a living every day.
The next leg of the mobile financial services revolution could be payment solutions for micro-merchants, as in the peer-to-peer economies, as the regulators push for further progress in digitizing the economy.
A lack of interoperability, transactions between the MFS platforms has long been a felt problem and the government’s recent initiative Binimoy shows a way out of this problem for the next leg of MFS growth story in Bangladesh.
