Bangladesh’s goal has been to digitize the country by 2021. In March 2010, Bangladesh Bank approved 20 banks to provide mobile banking service. According to BTRC, total mobile phone subscribers stood at 155.81 million in September 2018. Each mobile phone user owns about 2 sims on average, so the actual number of mobile phone subscribers would have been 77.905 million people.
Also, according to Bangladesh Bank, the number of mobile phone users that were subscribed to mobile payment and financial services, grew from 54.7% in September 2017 to 64.7% in September 2018. Despite the fact that mobile based financial services usage is increasing, the vast majority of mobile phone users have still not been able to take advantage of the services. This is because of barriers such as not being able to afford a smartphone and not knowing how to use the technology. Moreover, many users feel insecure in dealing with money over digital mediums and prefer to do it in cash.
Bangladesh’s leading digital wallet is bKash, which was launched in 2011 as a subsidiary of BRAC Bank. A cashless payment system called iPay came into the Bangladeshi market in late 2018. Bangladesh’s largest consumer bank by ATM-network coverage is Dutch-Bangla Bank and it operates e-wallet services called NexusPay and Rocket.
As of May 2018, 5.98 million transactions took place every day on average as per Bangladesh Bank data. The total amount transacted stood at Bangladeshi Taka 328 billion or US$ 3.8 billion for the month of May 2018. Dutch-Bangla Bank’s Rocket and Brac Bank’s bKash accounted for 99% of market share in the MFS market.
Since bKash was early to market and one of the clear leaders, China’s Alibaba took notice and bought a 20% stake in bKash in April 2018. To generate increased adoption rates in urban centers, bKash is offering lucrative cashback offers as high as 25% at point-of-sale terminals and e-commerce sites.
A new entrant in the MFS market is Nagad, which was launched by the Bangladesh Post Office on 11th November 2018. Nagad’s expansion plan has been to take over the mobile phone top-up business in the country. Since launch, Nagad has seen credit recharges of Bangladeshi Taka 260 billion or US$ 3.08 billion.
Since the launch of Nagad, the Posts and Telecommunications Division has asked all four mobile operators in the country to provide them at least five “master SIM cards” each so that they can run their MFS business through their 32,000 agent points. The master SIM cards enable mobile operators to connect to distributors who provide credit to agents, who in-turn supply the credit to retailers. When asked to comment regarding the request, the mobile operators termed it as a sensitive matter because giving such access to a government entity could be detrimental to their business.
According to mobile operators, they share 3.75% of the recharge amount with the agents as commission and Nagad potentially might be targeting that share. In 2018, the total mobile top-up amount was Bangladeshi Taka 254.4 billion or about US$ 3 billion and, the 3.75% commission of that amount was Bangladeshi Taka 9.5 billion or US$ 112.4 million.
Nagad not only plans to use mobile top-up centers but also the 9,886 post offices, 8,500 e-post centres and 5,235 regional union digital centres to act as agent points.
The top five mobile banking apps in Bangladesh are by City Bank (City Touch), Eastern Bank Limited (EBL Skybanking), Mutual Trust Bank (MTB Smart Banking), Standard Chartered Bank (SC Mobile Banking) and BRAC Bank Mobile. These apps have a myriad of features such as fund transfer, transactional history and even perks such as air ticket purchase to mobile top-up functionality.
The mobile payment transaction value in Bangladesh expected to increase at a CAGR of 24.7% during 2018-2025. Over the forecast period of 2019 to 2025, the market is expected to reach US$ 155,910.1 million by 2025, increasing from US$ 44,726.1 million in 2019.
bKash’s QR code has been adopted in government offices recently to accept payments and some private sector companies are also using it to disburse salaries. Bill payment, merchant payment, salary disbursement and international remittances are some of the popular uses of bKash among others such as retail purchases and user to user fund transfer.
Furthermore, Bangladesh Bank announced in July 2019 that they would raise the limit for e-wallet account from Bangladeshi Taka 50,000 to Taka 100,000 per day, as a means to encourage more cashless transactions. The new maximum balance for e-wallet accounts would be Taka 400,000. These new limits would not be applicable for mobile financial services. E-wallets are essentially accounts linked to a bank, that have no cash-out option like MFS services such as bKash. PayNXT360 expects competition to intensify over the next five years with entry of new start-ups and increased rate of innovation.
To know more about changing mobile payment market dynamics in Bangladesh, click here.