The mobile money wonder

Illustration: TBS

Today's children might not imagine how cumbersome it was even a decade ago to send some money to anyone, or receive it when sent by others. 

Going to a post office for a money order, or traveling to the regional commercial hub 20-30 kilometers away for a courier service branch like SA Paribahan, were the available options for sending or receiving money across the country for the mass people, a smaller portion of whom were availing banking services. 

The amount of hassle and costs of going to bank branches were even bigger in the 2000s because of urban concentration. Transaction size, frequency, and user profile used to determine if one would 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 nearby had to spend at least one or two hours.

In the early 2010s, when the banking industry and regulators were busy discussing ways for financial inclusion, an innovative, disruptive industry – mobile financial services (MFS) – silently revolutionised it.

After a decade, now it takes only a minute to press the cellphone button or smartphone screen to send and receive money through MFS. And the money safe kept in the digital wallet can be withdrawn from any of the nearly 15 lakh agent points across the country, most likely one at your nearest shops. 

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 – all have emerged to make financial transactions faster and more convenient. But none of those helped banks reach so many people across the country that their MFS wings did.

A fast-growing vast market

BKash, the mobile money pioneer, started operations in 2011 and reached the 20 lakh users milestone in 2012 and one crore in 2013.

Now the MFS market leader alone has 6.5 crore unique users, while its one dozen contenders took the number of total MFS accounts to over 18 crore, 6.71 crore of which are active in transactions.  

According to the Financial Access Survey-2022 of IMF, in 2021 the number of registered mobile money accounts skyrocketed to 910 per 1,000 adult population, from 10 nine years ago.

The fast rise was enabled by cell phone penetration as almost everyone in families dealing with money uses a phone.

Bangladesh with its huge population has emerged as the fastest growing big MFS market and BKash – a Brac Bank joint venture with US firm Money in Motion LLC gradually onboarding world's most reputed partners such as the International Finance Corporation of the World Bank Group, Bill and Melinda Gates Foundation, Alibaba wing Ant Financial Group, and SoftBank's Vision Fund – has become the country's first unicorn.

Startup companies having a billion-dollar value are called unicorns and Bkash's value soared to around $2 billion in November last year.

The firm received many local and global recognitions for the changes it made, while its competitors are only adding to the power of mobile money.

The popularity

The MFS industry which started as a solution to the unbanked people's problems in sending and receiving money and filling the gaps, in line with the Digital Bangladesh mission of the government, has made its big way.

In August this year, on an average 1.32 crore MFS transactions were made daily for a total turnover of Tk2,821 crore.

Not the entire amount transacted for sending or receiving money, instead the MFS industry has emerged as a big relief for the people in terms of payment solutions.

Paying utility bills, school fees, and even traffic fines at a bearable transaction cost not surpassing the conveyance for reaching a bank branch made daily life so easy.

Paying bills through tapping phones for a minute helped busy people forget their memories of the hassles of hour-long queuing in front of booths that they had to go through previously.

ATM cards helped urban people forget cash-carrying and mobile wallets democratised it by offering cashless life across the country.

Running out of money on the go is not a problem anymore as a phone call to a well-wisher to send money to an MFS account is enough to have cash in minutes regardless of whether one is in rural areas or in the cities.

Having almost every adult as a user, MFS has become a good friend of retailers no matter whether they are selling online or offline.

Bkash alone has three lakh merchants onboard who find it profitable to get paid the prices of their products or services with mobile money that they can cash out later at a bearable cost, not more than what they have to pay for processing debit-credit card transactions.

Onboarding more and more merchants and arranging lucrative deals – discounts, cashbacks – for using mobile money in shopping keeps adding to the growth of MFS in shopping.

Alongside the big shops receiving bills in mobile money, the burgeoning e-commerce sector significantly reciprocates the growth with the MFS by supporting each other.

No online retailer in the country denies being paid online through its preferred MFS partners as debit or credit card users are much fewer in number compared to mobile money.

Especially, the small and medium online retailers, mostly Facebook-based, embraced MFS due to their smaller ticket size and a wide customer base yet to be banked.

A rural housewife is ordering her wearable online, paying with mobile money, and receiving the parcel onwards which would have been impossible without MFS.

More than 55% of the MFS users are rural people and nearly 42% are women, according to the Bangladesh Bank's September data.  

MFS, having a digital database of every single customer and transaction, is transparent enough to regulators and the government, and with the mass penetration, they already proved themselves as an effective tool for the disbursement of salaries, and state welfare benefits to the unbanked poor.  

MFS players are partnering with lenders and insurers for transaction facilitation alongside their own efforts to encourage people to save money in mobile wallets.

Nagad, another large MFS firm, pays interest to its users on mobile wallet balances.  

The SME sector, and local trade and commerce are having a significant portion of their payments every day through MFS.

Many, especially those who are in wholesale businesses, have multiple MFS accounts to ensure that the daily transaction limits imposed by regulators do not hinder their instant cash inflow or outflow.

Using bank accounts for the several lakh taka in daily transactions would help them save some in transaction costs, but they barely bother as long as their sales go on and the counterpart is sitting on mobile money.

Remittance from abroad is another significant area facilitated by MFS.

Rural people neither need to go to towns to withdraw remittances sent from abroad by their dear and near ones nor need to ask for help from others who frequently travel to the towns as mobile remittance has made their lives easy.

However, high transaction cost compared to the peer markets is still a problem, while MFS companies are barely enjoying it as they spend most of the fees to feed their value chain partners, to finance the campaigns for market growth.

Mobile money directly created nearly 15 lakh employment in the form of MFS agents, having 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 every day for a living.

The next leg of the mobile financial services revolution might be payment solutions for micro merchants like in the peer economies as the regulators are pushing for further progress in digitalisation of the economy.

A lack of interoperability, transactions among the MFS platforms have long been a problem being felt and the government's recent initiative Binimoy is showing a way out to this problem for the next leg of MFS growth story in Bangladesh.