Cutting cost means empowering society

For the last several months, I have been thinking about reducing the cost of using digital financial service. In my mind, I prepared a register where I wrote the arguments in favour of the idea, particularly cash-out charge levied by mobile financial service on one side and the counter-arguments on the other side so that none has to be told what the outcome of the simple mathematical practice is after the calculation.

As a conclusion of the calculation, Nagad is charging its customers less than 1 per cent for the funds withdrawn. So, Nagad users now pay only Tk 9.99 to cash out Tk 1,000. The new rate came into effect on October 1. Currently, users can enjoy the revised rate while carrying out transactions through the app.

However, customers who do not use the app for cash-out and rather rely on the mobile phone's USSD facility will have to pay Tk 12.99. A 15 percent value-added tax fixed by the government will apply on the app and the USSD facility as well.

The new rate would take a major leap forward in pulling out the customers from the popular scheme of Tk 20 cash-out charge per Tk 1,000 withdrawal – a practice that has been continuing for the last decade.

Like us, for all of those providing MFS service, this is a service as well as a business. The MFS operators would have to earn to survive in the business and introduce new and innovative services. Undoubtedly cash-out charge is the major source of incomes.

So, the higher the cash-out charge, the higher the potential of earnings for the MFS operators. But it should also be discussed how much money an MFS operator would make and how much of the burden would be passed onto the customers in the name of cash-out charges.

There should be a balance. This thought came to me during the coronavirus pandemic.

Since we began the preparation to roll out Nagad, we have seen that the Tk 20 cash-out charge per Tk 1,000 withdrawal is a punishment for customers. So, the task to free the customers from the shackle was high on our agenda and we are working for it and reduced the cost in several segments.

We have introduced a package – Swadhin – for five types of small businesses in the early days of the pandemic to allow them to transact Tk 1,000 for just Tk 6, meaning 0.6 per cent charge only.

Thanks to the Swadhin package, those small businesses were able to conduct much-needed transactions comfortably with nominal cost during the restrictions. The rate was some sort of piloting for us but we have continued the rate.  

Nagad is charging its customers less than 1 percent for the funds withdrawn. Photo: Courtesy.

If I put the burden of Tk 20 cash-out charge per Tk 1,000 on one side of the accounting page and bring down the cash-out rate to half to encourage customers to carry out more and more digital transactions on the other side of it, I think the second option would take us to victory. Reducing the cash-out charge would expand economic activities and help the whole Bangladesh pull off a triumph.

The second question that came to my mind is the number of customers using MFS has gone up to several crores since the service was introduced in the country.

Simultaneously, the number of transactions has also risen, boosting the incomes for the MFS operators. Why would then the cash-out charge remain as it was in the past? The calculations now and a decade ago can't be the same. So, I have had to side with the argument in favour of reducing the cash-out charge.

The third question is: Why will anyone who claims to be the largest operator and the successful stakeholder in the mobile financial service segment impose the highest charge for transactions? Why won't the charge be brought down by using technologies to lessen the burden for the customers? Nagad would free customers from this situation. Reducing the cash-out charge is the only way.  

Everybody knows that one can bring down the cost of doing business by adopting technologies, which is also our first goal. We have used innovative technologies in such a way that we have been able to register clients in the shortest possible time and at the cheapest cost.

In the same way, we have been able to ensure the highest security for transactions. For all these reasons, our cost to provide the service is also the lowest. So, some benefits can be passed on to the customers as well. 

The next issue that can come up for discussion is Bangladesh has to spend Tk 9,000 crore every year just to print and manage currency notes. We can at least save this amount of money by boosting digital transactions, which is another mandate of us.

And if we do not bring down the cash-out charge and other charges users will not be encouraged to use this service. And this Tk 9,000 crore can play an important role in the development of a country like Bangladesh.

So, those who work in rendering digital services have a role to play to this effect and the responsibility is reducing the cost of availing service to a tolerable level. If the cost goes down, transactions will receive a boost, which will ultimately raise the incomes to the previous high levels.

These issues made me think from the very beginning. So, we have made person to person transactions in between Nagad completely free of cost since our inception, whereas other MFS operators are fleecing their customers even when they perform transactions within the same network.

Whereas we are also offering the highest interest at 7.5 per cent rates which also encourage common people to use digital facilities of financial services.

On the charges issues, the government can play a role, as I think. The government usually imposes various restrictions in case of call rates, SMS costs and approval of new packages for mobile phone operators.

The government can do the same in the case of the MFS segment as it is also the same kind of technological service. The government can fix the highest rate for the cash-out charge so that none can levy as much rate as they want. And the government also can bring a regulation so that other players can survive in the market and can compete, which ultimately helps to benefit customers.

The government should beef up its supervision in this segment as MFS operators deal with public money. There should be people to examine whether real digitalisation is taking place or not and how much prices people are paying in their efforts to have digital services. And our plea is to stop the competition of money and muscles to empower society.

As I inserted my arguments and counter-arguments on my fictional register, that was in my mind, I got a very clear picture and that is to reduce the cost and increase the service network which will benefit the users and ultimately help to grow the business.

Anyone can compare that and will find Nagad customers are availing most cost-effective service not only in cashing out their money but also having other services. They yearn to stand by the people during the coronavirus pandemic also helped me make the decision.

As we strongly believe that if people survive, the country will survive, it is very natural that we will necessarily be on their side when they need us the most.

Tanvir A Mishuk is the managing director of the postal department's mobile financial service Nagad