MFS changing transaction trends in competitive market
Mobile Financial Services (MFS) creates a new dimension in transaction trends in the country over the year especially, during pandemic period. MFS network across the country by using strong information and communication technology network backbone which are helping a lot in developing economy. A good numbers of service providers are in the market of which 2 to 3 companies are grabbing the major per cent of market share.
Among the operating companies Bkash and Nagad are the key market players whereas there are other 13 companies which are also playing a small role in the market. According to Bangladesh Bank (BB) latest data apart from Nagad and Bkash the third growing company is Rocket and few others are also gradually trying to enhance their shares with competition.
Currently including a two new MFS a total 15 MFS are being operated but a particular company was doing monopoly with high service charge that is one has to pay Tk 20 as service charge against cash out of per one thousand taka. In this back drop of high charge a new MFS provider 'Nagad' entered into the market with offering low transaction costs.
The new company 'Nagad' hit the market with its fast market penetration that within a short span of time, it has 40 million customer and providing the easiest way of opening accounts, transferring money, cash out and other services.
'Nagad' is in operations as a service provider of Bangladesh Post Office based on a joint venture with Third Wave Technologies Limited under the Post Office (Amendment) Act 2010.
It has broken the market monopoly in regards cash out costs that it is offering Tk 9.9 only against per Tk1000 cash out whereas other service providers are still charging Tk20 against cash out of Tk1000.
This low transaction charges are attracting customers and the provider is expanding its market share faster than other MFSs.
In the prolonged COVID pandemic, MFS witnessed a tremendous surge in the number of customers as it added around 20 million in 11 months from March 2020 to January 2021, taking the number of registered clients to 110 million.
The central bank data shows that the transaction through mobile phone was Taka 5353 billion during the 11 months from March 2020 to January 2021 which was Taka 4103 billion during the previous 11 months from March 2019 to January 2020.
Offering continuous innovation and technological integration to the table, the country's MFS operators are now providing different services, including sending money, cash-in, cash-out, salary disbursement, donation for the poor, stipend disbursement, remittance, payments for different government services, toll payment, credit card bill payment and insurance premiums.
According to the above market statistics peoples' tendency towards paperless banking, simplification of transaction procedures by MFS, up-gradation of digital infrastructure of commercial banks and allowing utility service payments are the main factors for the growth of the MFS in Bangladesh.
During the countrywide lockdown people has insisted to use digital banking as they are familiar with the online and mobile service payment systems, resulting in the huge growth.
In this growing trend it is a matter of lowering down costs in mobile financial services that more people will be benefited in MFS with low costs. To bring present manual transaction services into digital services people may seek lower costs and to minimize costs it is inevitable to lower costs.
Currently, as one service provider Nagad is offering low costs, inevitable the others should follow it and a uniform market policy is needed for everyone. Once every MFS providers come to a single platform the ultimate winners are the clients and it is encouraging for bringing more people into mobile money transaction network.
For an example in the lockdown period people are using Nagad due to its cheaper costs and it is becoming the first choice for their transaction and it is ultimately increasing transaction volume that this operator reached to its Tk 4 billion transaction in a day.
In this tough time the MFS should offer easy system so that people can be connected and can easily pay their bills. In a wide payment network and partnership with almost all the chain retailers so people are ordering for their daily commodities sitting at home and easily paying bills using different services and once a particular service provider offers charge-free bill payments facilities and other services including digital payments for Covid-19 test fees it will be more beneficial for them.
The government is providing various supports under it's stimulus packages, stipends, social allowance, Eid gifts for people who are hard hit due to covid19 in the villages and other poverty hit areas, students, parents and old age senior citizens. There is a question of transparency and accountability in disbursing such money. But MFS are making it easier. As per the government decision MFS are sending money to every individual's mobile account and it has become hassle free.
In the current market it is also a matter of government's expenditures in paying the MFS for their service charges and dramatically the service providing costs have come down to almost 50 per cent as Nagad is offering services at lower prices.
All MFS must be equipped with state of the art technology that can ensure right time transactions and people can maintain safety of their PIN and passwords. Amid the new challenges brought on by Covid-19 people are now increasingly depending on digital solutions to adapt to the new normal, looking for simple-to-use services at one place to meet essential needs ensuring personal safety.
During the pandemic low cost cash out and other uninterrupted services including mobile recharge, send money, add money from banks, cash-in, cash-out, salary disbursement, offline or online merchant payment, donation for the poor, stipend disbursement, remittance and payments in different government services are being provided with the MFSs.
Customers are availing mobile recharge service for all mobile operators of the country through Nagad and bkash, 24/7 from anywhere. Especially during the pandemic millions of customers regularly recharge their mobile phones as they have the facility to buy different packages from any place at any time depending on their preferences.
With the stipends, distributed through a mobile app, Prime Minister's IT advisor Sajib Wazed Joy brought millions of families into MFS. Nagad has already delivered the government's stipends for primary and mass education transparently to the mobile wallets of ten million students' mothers. The beneficiaries can easily cash-out the sum from the nearby shops of Nagad entrepreneurs. In the latest phase, Nagad has already distributed the stipends for the April-June quarter of 2021.
Along with Nagad which covers around 45 per cent of the 3.6 million families, the other service providers (bkash 30 per cent and Rocket 20 per cent) are also facilitating the government's effort to distribute financial aids- as gift from the Prime Minister on the occasion of the upcoming Eid-ul-Fitr to the targeted people of Tk 2500 for every individual family. MFS are the way that helped these hassle free and secured transactions of providing different government financial assistance to poverty hit people.
The writer is Senior Vice President, SBAC Bank Ltd