Why BB introduces interoperable payment without market leaders bKash, Nagad
bKash says their system not secured yet, Nagad excluded by BB
Highlights:
- Bangladesh Bank launched interoperable payment system on 1 November
- bKash and Nagad, largest MFS operators, not yet included
- Only three MFS providers and six banks joined initially
- bKash cited security concerns, requested integration delay until January
- Nagad excluded for lacking licence, raising regulatory fairness questions
- Interoperable transaction fee set at Tk8.50, affecting MFS profits
The Bangladesh Bank introduced the long-awaited interoperable payment system on 1 November without two market-leading MFS (Mobile Financial Service) operators, bKash and Nagad.
The interoperable system allows instant transfers from mobile wallets, bank accounts, non-bank accounts, or institutional accounts directly to any other account.
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bKash, the largest MFS provider, requested time until 31 January to integrate with the payment system, claiming they are not yet ready on security grounds.
Besides, Nagad, the second-largest MFS operator, was excluded from the interoperability system by Bangladesh Bank.
Nagad, which has been operating under Bangladesh Bank's administration since August last year after the regime change, was excluded on the grounds of not holding a licence.
This has also raised questions about how, then, the central bank is operating Nagad, which does not have a licence.
Bangladesh Bank went live with interoperability at 12am on 1 November, with only three of 13 MFS providers joining the payment system: Islami Bank mCash, Rocket (operated by Dutch-Bangla Bank), and Islamic Wallet (operated by Al-Arafah Islami Bank), according to Bangladesh Bank.
Among banks, only six joined the system, including Islami Bank, BRAC, Eastern, Pubali, MTBL, and Al-Arafah Islami Bank. Other banks will join gradually after completing testing, a senior executive of Bangladesh Bank said.
Arif Hossain Khan, executive director of Bangladesh Bank, said they introduced interoperability "theoretically" because market leaders bKash and Nagad did not join the system.
He said banks are already interoperable, and MFS operators will connect with NPSB (National Payment Switch Bangladesh), operated by Bangladesh Bank, to fully integrate with the interoperability system.
"We are calling the newly introduced interoperability theoretical as the largest operators are not included yet," he said.
He added that bKash sent a letter on Thursday, stating that they could not ensure full security for integration. In this situation, they are unwilling to connect with NPSB and requested time until 31 January.
The Bangladesh Bank is now in an embarrassing situation over bKash's last-minute notice because they are the market leader, he said.
Expressing dissatisfaction, he questioned how the largest MFS provider is not ready to join interoperability when smaller operators are participating.
When asked if there were other issues, he said, "We are not sure if they are really unready or if they want to dictate the price as a market leader."
According to central bank insiders, bKash proposed Tk9.50 per interoperable transaction, the highest among operators, while Nagad proposed Tk7.50, and some others offered less than Tk5.
However, Bangladesh Bank set the interoperable price at Tk8.50, higher than most operators' proposed rates but slightly lower than bKash's.
Moreover, if interoperability proceeds, bKash could lose cash-out business, as it charges Tk18.50 per Tk1,000, Tk6 higher than Nagad.
Shamsuddin Haider Dalim, head of corporate communications at bKash, said: "bKash has already taken the necessary steps to integrate into the system. The functionality also depends on other stakeholders. At this point, we are emphasising strong authentication and layered security features to ensure seamless transactions and handle disputes, if any. Having taken all essential measures, we hope customers will be able to use the services fully soon."
Why Nagad was excluded
Despite being prepared for interoperability under Bangladesh Bank's administration, Nagad's exclusion has raised questions over fair treatment.
Explaining this, Arif Hossain Khan said Nagad was excluded for not holding a licence.
When asked how they could operate MFS under Bangladesh Bank's administration without a licence, Khan said a decision would be made after consulting the governor on Sunday.
Muhammad Zahidul Islam, head of media and communication at Nagad, said: "To enhance customer service, Nagad applied to the regulatory authority for approval to launch interoperability facilities months ago. However, no response has been received.
"As a result, despite being prepared, Nagad has not been able to launch the service. Once regular approval is granted, Nagad will launch interoperability immediately, which will enhance cashless transactions in the country."
A senior Nagad executive expressed dissatisfaction, saying, "We were excluded even after attending all meetings regarding interoperability, including pricing proposals."
"If the licence is the issue, why is the central bank not suspending Nagad's entire operation?" he questioned.
Soon after the regime change on 5 August 2024, Bangladesh Bank appointed an administrator to Nagad on the grounds of not having a licence.
However, Nagad has continued operating under a temporary licence issued by the central bank and has maintained operations even after the administrator was appointed.
Since 2019, Nagad has been operating under a revenue-sharing agreement with the postal department, taking a temporary licence from Bangladesh Bank.
