Mobile Banking in BangladeshAn Incomplete Study
Prepared By: Ahsanul KarimFeedback to: [email protected]
Mobile Banking in Bangladesh (MFS)
1. Banking Infrastructure2. Banking: Technology and Channels3. Mobile Banking: as the largest Channel4. Prospects of MFS Systems5. SWOT: Strengths, Weaknesses,
Opportunities & Threats
Banking InfrastructureBangladesh: Demographics
Total Population 160m
Population having Bank Account
14% (22.4m)
Mobile Phone Users 60% (95.53m)
Banks 47
Mobile Operators 06
Banks started MFS 05
Mobile Operators joined MFS
04
Banking: Technology & Channels4 common alternative banking channels:
1. ATM2. Debit Card3. Credit Card4. POS
Innovative Technology and Bank Profitability: The Bangladesh Experience (Working Paper Series: WP 0803-Bangladesh Bank)
60% transactions take place through alternative channels.
Cost of transaction is 10% of manual channels.
The huge mobile penetration (58%) in Bangladesh makes Mobile Banking (MFS) as the Biggest Alternative channel.
MFS: Biggest Channel? (1) Although MFS activities are underdeveloped through agents so far:
Branches ATMs Agents
7,961 3,000 9,093
Transaction Points Among Scheduled Commercial Banks
Success Story 1: DBBL reports 1,72,020 unbanked customers and around BDT 90 crore transaction (as on 18 July, 2012) within 14 months of launch.
Success Story 2: BRAC Bank/bKash reports 2,37,423 registered clients and around BDT 118.51 crore transaction within 12 months of launch
MFS: Biggest Channel? (2) Mobile Banking: Current Statusupto March 2012 (excluding remittance-only deployments)
Banks with MFS License
10
Live MFS deployments 5
Accounts Opened 4,42,269
Appointed Agents 9,093
Total Value of Transactions (BDT)
207,00,000
Cost Study of DBBL:Estimating: interest spread of 5%, deposit of 5 billion taka (USD 62.5 million) would create an annual income of 250 million taka (USD 3.125 million), equivalent to the maximum annual expense of the project. DBBL expects to achieve the above targeted deposit and income by the end of 2013.Breakeven: 30 months
Benefits: On an average, the customers pay 1% of the transaction amount as fee. This fee is shared among the parties tentatively as follows: Agent-50%, MNO-25%, Bank-25%
MFS: Biggest Channel? (3) Mobile Penetration is Bangladesh: 11th Position in the world in terms of number of subscribers: (Source: Wikipedia)
Mobile Banking: WhyFeasibility:To bring rural unbanked people into banking channel● Setup of bank branches: not
profitable○ Amount of deposits and loans
in the rural areas do not always generate enough revenue to meet expenses
● Setup of ATM in rural areas: not always feasible○ ATMs need regular cash feed
from bank branches○ ATM needs data network
coverage and security
Cost Minimization:● Alternative channels always
minimizes cost than manual banking (even sometimes 90%)
● Apart from cost minimization mobile banking can generate revenue
● Can create new marketing channel for new products and services
Infrastructure:● Ability to use existing MNO
networks and infrastructure● Ability to create agent
networks using mobile airtime resellers, small shops, and convenience stores
SWOTStrengths:● Number of unbanked people
with mobile access causing a huge demand
● Awareness already established● Lower cost for agent network
Weaknesses:● Security issues● Defensive culture in some of the
banks● 3 way integration: Banks, Telcos
and Technology Providers
Opportunities:● Reduce cost of banking ● Platform for new services like
digital content buy/sell etc● Offering value added services
Threats:● Fraud Management● Load Balancing● Money Laundering
Existing Systems: InfrastructureTrust Bank DBBL bKash
Core Banking Y Y N
Mobile WalletY Y N
SMS Y Y N
GPRS Y Y N
USSD Y Y Y
IVR N Y Y
Apps N Y N
NFC N Y N
Existing Systems: Features (1)Trust Bank
DBBL bKash
Payment Network Y N N
Multibank N Y N
Balance N Y Y
Statement N Y N
Fund Transfer N Y Y
Bill Pay N Y Y
Remittance N Y N
Digital Content Payment N N N
Existing Systems: Features (2)Trust Bank
DBBL bKash
Top-ups N Y Y
Anti-Money Laundering N Y N
Tax Pay N N N
Security Audit N Y N
Micro Payment N Y N
Micro Finance N Y N
Micro Insurance N N N
Micro Savings N N N
Central Bank Regulations1. Bangladesh Bank Guidelines
and Regulations for MFS2. Compliance
MFS Guidelines & Regulations:iSentric Mobile Banking Solutions is compliant with the following guidelines from Bangladesh Bank and also open to provide all solutions for specified services:● Disbursement of inward foreign remittances ● Cash in/out using mobile account through agents/Bank
branches/ATMs/MNO’s outlets● Person to Business Payments (utility bill payments or merchant payments)● Business to Person Payments (salary disbursement, dividend and refund
warrant payments, vendor payments)● Government to Person Payments (elderly allowances, freedom-fighter
allowances, subsidies)● Person to Government Payments (taxes, levy payments)● Person to Person Payments P2P (One registered mobile account to another
registered mobile account)● Other Payments (microfinance, overdraft facility, insurance premiums,
deposit pension scheme deposits)
Bangladesh Bank Regulations
Data Source[1] Bangladesh Bank report on Mobile Financial Services in Bangladesh: An Overview of Market Development. (July 2012)[2]http://www.thedailystar.net/newDesign/news-details.php?nid=104699[3]http://www.smbworldasia.com/en/content/dutch-bangla-bank-pioneers-mobile-banking-banglades[4]http://en.wikipedia.org/wiki/List_of_countries_by_number_of_mobile_phones_in_use[5]http://www.isentric.com/index.php?rt=page/content&page=solution-banking&m=solution
Key DefinitionsAgent A person or organization authorized by a bank to carry out financial
transactions on behalf of the bank. Often these are small shops whose proprietor can provide cash-in and cash-out services to a bank’s clients.
IVR Interactive Voice Response – refers to different ways users can use a voice prompted menu driven service over the phone.
MNO Mobile Network Operator – Airtel, Banglalink, Citicell, GrameenPhone, Robi, Teletalk.
SMS Short Message Service – text messaging over mobile phones.
USSD Unstructured Supplementary Service Data – a real time communication channel between a mobile handset and the servers of a mobile network operator. MFS providers typically require a commercial agreement with a mobile network operator to gain access to USSD, but this has the advantage of being accessible over any handset.
SCB
SB Savings Bank
PCB Private Commercial Bank
FCB
MFS Mobile Financial Services