Freedom at your fingertips

During his childhood, Md Mujbur Rahman would see his mother waiting for days to receive money sent by his father through the post office from Adamjee Jute Mills, the then biggest operational jute mill in the world.

The wait for the postmaster to inform about the receipt of the money sometimes took up to a month.

Today, 51-year-old Rahman, the only breadwinner of his five-member family, sends money in seconds via mobile banking channels to his spouse living more than 285 km away south of Dhaka.

Over there in Betagi, a remote sub-district in Barguna, his spouse Nipu Begum gets a message of the receipt of the money in her phone. Withdrawal of the money, popularly known as cash-out, is some hundred yards' walking distance for Begum and her children.

Days of wait for receipt of money are now long gone.

"This provides us a lot of convenience. My family gets the money instantly after I send it from an agent's counter. And they can withdraw the money without taking the trouble to visit the bank which is three and a half miles away from our home," he said.

Rahman has been sending money to his family via mobile banking for more than four years.

Millions of others are also doing the same: using Mobile Financial Services (MFS) in their quest for convenience, and ease of withdrawal of the money.

The landscape of financial transactions is changing and MFS have emerged as one of the main drivers of change.

Today, more than 10 crore people out of a population of 16.6 crore plus use mobile banking or have an MFS account. Of them, over three crore MFS account holders are active and they collectively transact Tk 1,786 crore daily.

In March 2012, less than a year after the launch of MFS in Bangladesh, the total number of MFS accounts was 4.42 lakh and total transactions stood at Tk 207 crore, according to a BB policy paper titled "Mobile Financial Services in Bangladesh: An Overview of Market Development" published in July 2012.

Dutch Bangla Bank Ltd was the first to launch MFS in May 2011 followed by BRAC Bank that launched bKash in July 2011, now one of the world's largest MFS providers.

Since then the number of banks providing MFS grew, along with the number of agents and registered clients, buoyed by the expansion spree of major MFS providers, namely bKash.

MFS have become an integral service following the outbreak of the Covid-19 pandemic. After the government declared and enforced general holidays and lockdown since the end of March 2020, MFS emerged to be a big support system, especially for payment of online purchases, transfer of funds from one person to another, payment of utility bills and so on.

Many people, who did not have MFS accounts before the pandemic, opened MFS accounts in order to carry out financial transactions in order to avoid hard cash and engage in contactless transactions to keep the virus at bay.

This is reflected in the figures: the number of MFS account holders increased nearly 10 percent to 9.78 crore in November 2020, up from 8.18 crore in February of the same year, the month before the first coronavirus case was detected in the country, according to data by the BB.

The number of active clients shot up 17 percent to 3.16 crore in November, 2020 from 2.7 crore in February, 2020.

The daily average transactions soared 25 percent to Tk 1,786 crore in November, 2020 from Tk 1,425 crore in February 2020.

From mobile phone recharge, utility bill payments, to payment for purchases from shops including groceries, use of digital money from mobile wallets has increased over the last one year amid worries among many about the risk of infection through cash.

Data by the BB showed that uses of MFS for person-to-person transactions, utility bill payment, payment to merchants against purchases and salary disbursement increased as a percentage of total transactions through MFS.

For instance, the ratio of person-to-person transactions increased to 30 percent of the total transactions of Tk 53,598 crore in November 2020 from 24 percent in January 2020. The ratio of merchant payments and utility bill payments doubled during the period.

"We have seen a spike in interest among people to pay bills through mobile banking channels. And during these pandemic days, when educational institutions are closed, many parents paid tuition fees through MFS," said Fardous Al Banzer Gorkey, an MFS agent at Panchagarh, a bordering district in the northwest.

"People now show an interest to carry out financial transactions through MFS because it is easy and hassle-free," he said.

Kamal Quadir, chief executive of bKash, said the MFS provider bKash had the opportunity to learn from the global Covid experience as it has received Chinese and American investment.

He said declaration of MFS as an essential service by Bangladesh Bank, the central bank, was a huge responsibility and opportunity for the MFS provider to work for the nation.

The opportunity for bKash to deliver the Prime Minister's financial support to the COVID-affected families was extraordinary, which the MFS provider accomplished with accuracy and speed, he said.

"As the pandemic continued, we kept transforming the realities into new experiences," said Quadir adding ensuring safety by maintaining hygiene during the early days of the pandemic was bKash's primary challenge.

"bKash employees worked online day and night wholeheartedly to provide quality service from home," he said.

Tanvir A Mishuk, managing director of Nagad, another MFS provider, said the pandemic has boosted the use of MFS. Use of personal MFS accounts has increased during the pandemic.

People who used to send money through MFS agents are now sending money from their own accounts, he said.

"We have seen a substantial increase in bill payment through MFS during the pandemic. Person-to-person transactions have also increased a lot," said Mishuk adding that Nagad saw its registered clients rise to 3 crore from 1 crore a year ago.

It also saw a jump in transactions.

Government's transfer of money, in the form of school stipends and various allowances under social safety net schemes, also contributed to the increased use of MFS, he said.

Quadir said bKash, the biggest MFS provider, found that people are making more and more merchant payments and other kinds of payment such as mobile recharge through bKash that charge no additional fee.

bKash customers currently make contactless payment at more than 1.6 lakh merchant points across the country, he said.

Abul Kashem Md Shirin, managing director and chief executive of Dutch Bangla Bank Ltd (DBBL), said it has been possible for the formal financial sector to reach out to remote rural areas through MFS. It is not feasible to establish ATM booths in rural areas.

But with MFS, it has been possible to bring the rural population under the formal financial sector, said Shirin of DBBL which runs Rocket, the second biggest MFS provider in the country.

"The financial sector is taking new shape," he said.

Despite the growth of MFS, cash-in and cash-out still mainly dominate the overall transactions of MFS.

High transaction costs (as much as nearly Tk 20 per thousand), preference of a large number of people to send money through MFS agents, allegations of fraud, and risk of money laundering limit the realisation of the potential of MFS.

Shirin said the cost of transaction should be reduced to encourage the wider use of MFS.

It will not help if we reduce the rate alone. Transaction costs should be reduced by all and the central bank should frame a policy in order to bring down the cost, he said.

He said the use of personal MFS accounts to transfer money will not increase unless over-the-counter (OTC) transactions are reduced.

OTC-based transactions should be reduced to plug the scope of fund transfers for illegal purposes, he added.

Challenges also remain in generating savings through MFS accounts. The issue of interoperability among MFS providers is yet to be started.

Besides, payments through MFS to merchants against purchases are yet to become popular among traders outside Dhaka as businesses have to pay a service charge to receive payment through MFS.

In spite of the high cost of transaction and other challenges, Gorkey, who has been an MFS agent since 2012, said money transfer through MFS has become popular.

Traders come to his district to buy agricultural produce. "It appears that cash-carrying has reduced among people because of the scope to cash out even at remote locations and to transfer funds instantly from distant places," he said.

"Many parents use MFS to send money to children living in cities for educational purposes as MFS provide them the scope to send money in phases even in small amounts. This provides a lot of convenience to families."

A decade ago, Gorkey said, banks, private courier and parcel services were popular as these allowed people to transfer money faster than conventional post offices.

However, these courier and parcel services have some limitations.

The branches are located in towns and people had to visit the branches to send or withdraw money. People had to wait in long queues and they could not withdraw money instantly.

"So when they saw the benefits of mobile banking such as the scope to cash-out instantly, people began to show interest in it," he said.

KAS Murshid, director general of Bangladesh Institute of Development Studies (BIDS), said expansion of MFS has broadened and deepened the financial sector.

"Its outreach is vast. It is still in its early stages in our country," he said citing that people in China do most of their transactions on mobile phones and the use of cards  there is quite low.

"The more we go digital, the more mobile-based services will dominate," he said. But, according to him, there remain concerns about digital security and steps should be taken to ensure security.

Murshid said MFS were more popular among people in rural areas before the pandemic and the use of the services dropped initially after the pandemic.

However, the pandemic has given a boost to MFS among the socioeconomic classes that did not use MFS in pre-Covid days, he said citing the use of MFS by the urban middle-class since MFS provide the scope to make contactless payment.

bKash CEO Quadir said the fundamental insight driving the development of bKash was to develop an efficient system so that people who come to urban centres to earn a livelihood and support their families back in villages can use a regulated financial account to send money home in an easy, secure, fast and affordable way.

"It was about extending banking services to the unbanked, bringing them into the mainstream financial system for overall economic development," he said.

Rahman, who works at a private firm in Dhaka, is also aware that money transfer through mobile banking channels is formal and his family receives the money instantly to bear grocery, educational and other expenses without hassle.

"It is safer and money transfer through mobile phones has saved a lot of my time. I still remember those days when I used to wait in long queues to send money. But MFS are much more convenient for people like me."