Nazmul Karim Chowdhury, Senior Vice President and Head of Brand at City Bank, Bangladesh, describes how cautious optimism toward mobile financial services is slowly permeating Bangladesh society, from institutions to rural areas.
April 19, 2016 | Nazmul Karim Chowdhury
The wide use of mobile phones, even among the world’s most financially disadvantaged, makes mobile money a viable alternative to physical currency. In Bangladesh, the mobile financial services market is at an early stage of development as providers work to stabilise their technology, build agent networks, and acquire new customers. However, mobile money is already becoming a part of everyday life.
The Bangladesh Bank, the regulator, aims to ensure that the market develops with several providers. Diverse technologies are being tested and used, different kinds of agent networks deployed, and a range of products extended to the consumer.
Accessibility and security
For many in Bangladesh, delivering money to loved ones is an absolute necessity, and one that was risky in the past. Launched in 2011, bKash (one of the largest mobile financial service platforms) has become a lifeline for millions of its daily users in Bangladesh. It allows users to utilise their mobile phones to deposit, withdraw, and transfer money. Users can also pay utility bills and purchase goods, though on a limited scale. The company reports processing more than 70 million transactions per day.
Before platforms like bKash, people had little choice but to send money to relatives through substandard or completely unofficial means. The lack of accessible financial services in Bangladesh allowed mobile payment platforms to fulfil a critical need, leading to great success for innovative financial technology companies and even greater financial freedom for their users.
Carrying large volumes of cash across long distances can make staff members or other payees vulnerable to theft or other safety concerns. Mobile money directly addressed this issue by reducing the need for individuals to handle or transport cash. In low-income areas, the use of mobile money reduced the risk of mugging because the presence of cash was less obvious.
Savings and efficiency
While cash itself is free, the associated transportation costs and staff time required to disburse cash payments can be very costly for organisations and businesses operating in emerging markets. Though there are some costs associated with the use of mobile payments, shifting to mobile can bring dramatic cost savings.
A cost analysis of cash versus mobile money by WorldFish, an international non-profit sustainable fisheries research organisation operating in Bangladesh showed that shifting to mobile payments brought the organisation nearly $20,000 in annual cost savings. Mobile dramatically reduced the staff time required to disburse money to farmers participating in its programs, while eliminating the transaction and transportation costs that had previously been involved in the process.
For English in Action (EIA), an educational nongovernment organisation in Bangladesh that began disbursing bulk payments through mobile money in 2013, disbursing bulk payments via mobile reduced wait times for field staff and enabled beneficiaries to quickly receive money. By paying educational officers and teachers with bKash mobile money, EIA was able to increase the number of training sessions it conducted from 10 to 30 within the same period and with the same staff, boosting staff efficiency and enabling the program to be scaled up.
A desire for transparency drives many organisations and businesses to shift to digital payments. With mobile money, financial flows can be more accurately monitored via an open and transparent digital platform. Cash payments are highly vulnerable to misuse and corruption, as they tend to pass through many hands and lack a transparent tracking process. Mobile money provides safer and speedier transactions and reduced opportunities for corruption and threat.
While it is often not the primary motivation, the long-term goal of enhancing financial inclusion does in fact encourage many organisations and businesses to shift to mobile money. Paying (often unbanked) beneficiaries and staff members using mobile money has the potential to connect poor individuals to the formal financial sector, fostering local economic growth and employment.
In some cases, organisations or businesses require payment recipients to create a mobile money account in order to receive salaries or bonuses. Armed with this account, they can then access an increasing array of other financial services, from mobile-based savings to insurance products. Mobile money usage data can also create a financial track record, unlocking access to previously inaccessible credit. Bulk payments via mobile money thus serve as a stepping stone toward broader financial inclusion.
Going forward, one of the central criticisms about mobile money that still needs to be addressed is its poor adoption among women. Women do not identify themselves as users of mobile money, which is perceived as the domain of businessman. Many women lack confidence in their ability to use the service, preferring to use cash instead. While an information gap or limited literacy contribute to this problem, the barriers to adoption go much deeper. Human-centred design techniques are important for the growth of the platform. This requires more creativity from mobile money providers on how they design their services.
, Retail Banking
, Technology & Operations
Keywords: Mobile Money
, Financial Inclusion
, Mobile Phone