Mobile financial services and beyond

bdnews24 desk
Published : 14 Feb 2016, 11:39 AM
Updated : 14 Feb 2016, 11:39 AM

Featured image:

© Asaduzzaman Pramanik

Every country has a few competitive advantages and Bangladesh has its fair share. It has fertile flat land that gets lots of sunlight and water, which allows it to grow four crops a year and keeps people engaged in productive activities round the year. The country is home to160 million people inhabiting an area of slightly over 55,000 square miles.

Capitalising on three of the factors noted above—flat land, small size and a large population with a certain level of affordability—mobile technology has blossomed in Bangladesh since its entry into the market in the late 1990s. In the early days, a favorable government policy also contributed to the development and spectrum came free of charge. Along with these factors, mobile technology dug its roots deeper across Bangladesh, the goal clearly being a tackling of the socio-economic challenges faced by the country. And this was done through a unique combination of motivational entrepreneurship with a global network, local institutions and world-class mobile network operators. By 2014, over 67 million people were privy to connectivity links to the tune of more than 100 million, with 99% area covered. The country could rely on a dependable digital infrastructure.

The mobile handset has been one of the most democratising tools in human history. It provides a universal scope for access that results in higher communication and more efficient utilisation of resources, saving time and money. That leads to advancement in all directions and empowers people, particularly average people who earlier had no such tools of communication. When such progress is multiplied by hundreds of millions, because millions of people are communicating through the mobile network every day, the impact is truly enormous. Again, the impact goes beyond communication. Fundamentally, those phones are powerful digital machines or computers; each has a screen, a keyboard, a battery, and operates by wireless. A poor person with a phone, then, can communicate just as well as a relatively wealthy person can with a computer. That surely opens up many new possibilities.

"The poor, long used to keeping their money under mattresses at home, now have a collective mattress where they can safely keep it."

Applications that go beyond providing voice connectivity – services that support other human needs around market information, finance, health care, education – are opening up new opportunities. For instance, in the absence of conventional banking facilities, a mobile based financial service can connect a user-owned handset to the server of the financial service provider. Another way of seeing this would be to compare it with an ATM service, where the user accesses her/his bank's server with an ATM and sends a withdrawal or deposit request in managing cash. A nationwide distribution of ATMs is difficult in Bangladesh, but retail agents armed with mobile phones in the form of human ATMs are readily available and eager to offer services at low cost. In effect, a mobile phone becomes a mobile wallet that provides easy ways of making payments and transferring money. This kind of service has dramatically expanded access to formal financial services for Bangladesh's people. According to Bangladesh Bank, the country's central bank, more than 32 million mobile wallets were registered by 2015.

While the most common use of mobile financial services has been sending money home, on the part of migrant workers, the value proposition goes far beyond. It can be used more and more as a payment medium; small traders will transfer mobile money among each other, thereby paying for goods and services. Instead of traveling long distances to pay suppliers, traders will pay efficiently by mobile transfers of money, parents will pay school fees, fishermen will supply their goods to customers. The poor, long used to keeping their money under mattresses at home, now have a collective mattress where they can safely keep it. In addition, every use of mobile money generates a multiplier effect of the value. The physical value of the money, preserved in a bank, is utilised as a capital resource for other purposes. There is nothing new in small individuals contributing to large pools of resources, but what is new here is that digital technology is making it possible for common people with a $15 handset to take part in the nation-building process.

As mobile technology unleashes new possibilities, regulatory bodies find that they have an important role to play here. The mobile network provider mainly provides universal access; beyond that the result depends on other stakeholders. They might be service providers over whom the network providers, by virtue of providing a necessary technology infrastructure, have an advantage. For example, in the case of financial services,what if Bangladesh had an engaged central bank that ensured that financial services were effectively under its surveillance? The Central Bank develops effective guidelines defining different stakeholders and their roles; users use their own handsets, mobile network operators provide connectivity for fees, and financial institutions provide compliant services. Such active engagement would ensure order and discipline in order for mobile payment initiatives to grow and flourish. Other mobile endeavors – be they in the regions of agriculture, heath care, or education– will of course have their complexities. However, once all the dots are put together, mobile technology can result in immense benefits for Bangladesh.

Kamal Quadir is CEO of bKash, one of the leading mobile financial services in the world. He had founded CellBazaar, a pioneering mobile based marketplace.
Toufique Imrose Khalidi
Editor-in-Chief and Publisher