12:00 AM, April 07, 2017 / LAST MODIFIED: 03:04 PM, April 09, 2017


Like Bangladesh itself, bKash is a success story that few saw coming. Going by its huge growth and scale, it is easy to forget that, in many ways, bKash still works like a startup. It is already serving more than 24 million Bangladeshis, and there are rumblings of a global expansion. But as big as bKash is, it is only a small part of a rising tidal wave of innovation: FinTech, an industry that uses new technology with available resources in order to compete with traditional financial institutions and intermediaries in the delivery of financial services.

The FinTech story is taking place not only in Bangladesh, but in India, China and first world countries like the US, UK and Sweden as well. Although the specifics vary, the core of this story is the same: making the world better through transforming finance.

bKash success story

bKash has grown by leaps and bounds since 2011. Its monthly transaction volume has grown from USD 680 million in 2013 to USD 1.05 billion in 2015.

That alone sounds impressive. bKash's user base, however, has grown at a rate that can only be described as meteoric. The number of business accepting bKash as a payment option has grown by over eight times, from 75 to 700, in this same two-year period. The number of merchants has grown by almost 50 times, from 600 to 30,000.

Why bKash is the tip of the iceberg

However, bKash is only a small piece of a much larger puzzle: FinTech. bKash currently provides only two of four mobile financial service (MFS) offerings: mobile money and mobile savings. Mobile credit, for instance, is a fast-growing segment that is being smartly leveraged by China's largest peer-to-peer (P2P) lender, Lu.com.

Global FinTech revolution

FinTechs leverage technology to improve financial systems. Banking, capital markets, portfolio management, and insurance are among their core areas of interest. Currently there are over a thousand global FinTechs, which are cumulatively valued at USD 867 Billion. Experts at traditional financial businesses estimate that as much as 23 percent of their revenue may be lost to FinTechs by 2020.

The FinTech scene in Asia is already picking up. Buoyed by large tech investors such Alibaba, Tencent and Baidu, China has already moved past the FinTech tipping point. There are over 30 active FinTechs in China.

The race is on between local giants and their western counterparts. Alipay, China's largest third-party payment platform, already operates in over 200 countries, whereas Apple Pay is struggling to find its footing in China.

India is gaining momentum in this arena too. However, 40+ contenders are already trying to get a foothold in market that covers 182 million customers.

How FinTech can transform finance

India's demonetisation last November took almost everyone by surprise. PayTM, however, was quick to capitalise. The e-wallet firm is already recording over 8 million transactions each day. This translates to an annual revenue of USD 10 billion.

Venmo is a popular digital wallet app used by US millennials for paying rent, utilities, and car expenses. It represents a growing movement that is redefining 'unbanked', by focusing on urban populations who are wary of traditional banking options, but open to newer, digital-first options.

This disruption has not gone unnoticed: Paypal acquired Braintree, Venmo's parent company for USD 800 million in 2014.

P2P FinTechs such as Lending Club and Prosper are leading the charge in disrupting consumer banking. These companies offer low-interest loans, funded by people all over the US, without the additional hassle of collaterals. Lending Club, which had its IPO in 2014, has issued over USD 20 billion in loans worldwide and has a valuation of USD 15 billion. Prosper, on the other hand, is trying to bounce back from a USD 53 million loss in the first half of 2016. It is negotiating a USD 5 billion loan deal with a consortium of like-minded stakeholders. They include the likes of Goldman Sachs, Morgan Stanley, and Deutsche Bank AG.

Another FinTech to keep on your radar is Nutmeg. The UK-based robo-advisor provides investment services for businesses. So far, it has raised a total of USD 100 million in funds as of last November.

Learning from bKash’s success

The key reason bKash stood out is its dynamic vision of scale. From a very early stage, it was designed to be a transnational enterprise. Entrepreneurs, private sector organisations and global donors all came together to form the company's unique identity.

The basis of this vision came from US-based Money in Motion LLC, who provided the initial USD 5 million as seed funding. Two of the investors involved, brothers Iqbal and Kamal Qadir, had previous large-scale successes in Bangladesh with GrameenPhone and Cellbazaar. The third, Nick Hughes, founded M-Pesa, the first successful MFS provider, in Kenya. Once the ball got rolling, supporting stakeholders like the Bill and Melinda Gates Foundation, BRAC Bank and IFC started to come onboard.

As bKash's identity continues to evolve, so do its services. While its bread and butter are still payments, the FinTech is looking to expand into other areas such as small loans and insurance.

FinTechs in Bangladesh?

It is unlikely there will be another bKash in Bangladesh, but we can learn from its success to explore other untapped financial segments. The SME market is still underserved by existing banks. A FinTech solution, such as online lending, can be a good business opportunity, especially given the sector's long-term policy support. Over time, a P2P lending platform can also offer high return on investment.

Mobile insurance is another potential goldmine in Bangladesh. Setting up and maintaining insurance claims is tiresome for both the insuree and the insurer. A proper FinTech service in this space, utilising the ease and power of smartphones, can make risk management much easier. Lastly, in a country where credit card penetration is quite low, mobile money has great opportunities of further broadening their network partnering with different businesses.

It is difficult to say how successful FinTechs ultimately will be in Bangladesh because the definition for success, especially when it comes to startups, is constantly evolving. To survive, and ultimately thrive, we also must accept change, and adapt when necessary.


M S Rayed is a business consultant at LightCastle Partners. Shatabdi Biswas is an intern at Institute of Business Administration, University of Dhaka 


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