Ensure compliance, not compromise in the MFS industry

At a roundtable in the city recently, there was a roaring consensus on the necessity of ensuring compliance by the mobile financial service (MFS) providers.  

Pertinently, the demand has its merit in the backdrop of a robust vertical growth in the country's mobile financial services sector over the last decade, its projected peripheral development in the years to come and of course, the confusions in the emergence and conduct of certain providers.

It is a visible truth that the introduction of mobile financial services has enabled a vast segment of unbanked people, mostly in rural and remote regions, to gain access to financial transactions. 

Illustration: TBS

The system or service has been easy, comforting and user-friendly even for those having no formal and even non-formal education. 

The sporadic availability of cheaper mobile phone devices, undoubtedly, played a significant role in the fast-track expansion of MFS. 

Today, there are about 5 crore MFS subscribers, rolling a daily transaction of about Tk2,000 crore. The central bank informed that Bangladesh ranks fifth in the world when it comes to the use of mobile phone financial services.

The question of compliance in the sector has been surfacing for quite some time, particularly in recent years following the detection of a few fraudulent transactions using MFS platforms. 

The urge for a check got renewed interest following the scams and fallouts in the e-commerce sector despite experiencing a dramatic growth during the Covid-19 pandemic.

Generally, compliance has a legal perspective. It is all about conformity to various lawful obligations that range from ethical to moral to social and to even environmental standards and technical specifications. While ethics spearhead the aspects of compliance, strict governance plays the domineering role.  

Again, it is a prerequisite for any industry to operate in compliance with a set of legal, financial, social, technical and environmental standards which, of course, vary from sector to sector. 

The set of rules and measures are set to keep the industries or any business in line to avoid any technical or financial or administrative abnormality, breach of social harmony, deception of the consumers and adverse effect on the natural environment.

In fact, in the developed world, compliance has always been the inherent propeller for any business function and lifestyle.  

The compliance necessities have been rigorously and religiously followed so that business operations, or productions, or even general lifestyles are not affected or impacted. 

When driving, one follows the road signage; when flying passengers fasten seat belts and follow other instructions complying with rules of safety; while visiting a park visitors do not pluck flowers to respect the set rules; while operating doctors and nurses wear masks and gloves; in manufacturing industries, all activities are conducted as per a pre-set and agreed operative standard to ensure the safety of workers, product quality, no damage to environment etc. 

So, compliance is nothing but conformity to all rules, policies, regulations that are ethically, legally, technically and administratively standardised to keep us away from different challenges and risks.     

The debate starts when compliance is compromised. 

In our country, we became familiar with the word 'compliance' following some fatal incidents in the readymade garment sector. Western buyers and consumers were so aghast with the safety and working conditions in the factories that strict compliance issues became preconditions. 

As RMG has been the backbone for our economy, things had to be adjusted leaving no room for non-compliant factories to stay in business.

In recent months, the discourse on compliance has again surfaced and this time it is focused on the MFS sector as well as the booming e-commerce arena. 

Non-compliant practices by some e-commerce platforms like Evaly, Alesha, e-orange and an unclear operation by an MFS provider sparked worries among the consumers, especially given the silence of the regulatory authorities. 

Though they are of different streams, public gossip and worries emerged because of their intentions, formative structure, modus operandi etc. 

It is crystal clear that some e-commerce platforms were formed without any financial strength of their own and intended solely on grappling public money through deception. Actions were taken only after outrage in the media, particularly social media. But the sufferers are yet to get the return on their investments.

In the MFS sector as well, winds of discomfort have been blowing. The long outstanding licence issue for Nagad remains on a hanging rope. 

Operating in full gear, Nagad has been working through a mere periodic No Objection Certificate which itself got renewed several times. 

For strict compliance, any MFS provider has to have a full licence. Though it says that the Bangladesh Post Office has 51% stakes in it, they (Post Office) failed to showcase their engagement so far.

It would have been a wonderful idea to use the historically important Post Office platform for widespread financial inclusion. 

With the advent of technology and the internet and mobile phone, in particular, the importance of postal service has worn out from everywhere. 

There have been attempts in many countries like Korea, India, Germany, the UK etc. to keep their postal departments alive through ancillary communication and banking services. However, nowhere does it meet with noteworthy success to be noted.

The arrival of Nagad as an MFS provider was indeed welcome news as it would have added to the huge task of financial inclusion of all in the country. 

Also, it would bring vigour to the MFS concept and practice in the country. However, all such moves needed clarity, transparency and above all, full compliance with the existing rules and regulations. 

Sadly the haze around Nagad still exists as the issues regarding its licensing, ownership structure etc. is yet to be settled. 

Within a short time following its launching, Nagad bagged quite a significant number of customers. But the company still walks on thin ice and if this goes on, they may begin to lose the confidence of the consumers. 

Consumers have always been on the losing side. They often fall for tempting promotions of deceptive enterprises and suffer when these companies fail to deliver. The code of ethical advertisement implies that the purpose of such content is to inform the consumers, not to exploit them through deception. 

The story of digital commerce and transactions in Bangladesh has become exemplary around the world as it has helped in massive financial inclusion and contributed to creating financial services equality. 

This shining mark of excellence in our digital journey cannot be put to any litmus test for the wildcat unethical business operations of a few. 

The central bank and the concerned authorities have to fasten their belts to oversee and ensure that the digitalisation of the society is accomplished in compliance with all aspects of established regulations. 

Compromising these principles would not only hurt the consumers but also the digitalisation efforts would face serious hiccups and the country's image would be shattered again like after the RMG accidents. So, let there be a holistic approach to ensure full compliance and shut all windows for compromise with it.

Mohiuddin Babar is the CEO at Bizcare.

Disclaimer: The views and opinions expressed in this article are those of the authors and do not necessarily reflect the opinions and views of The Business Standard.