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Is a Transition to Mobile Wallets Underway in Bangladesh?
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Is a Transition to Mobile Wallets Underway in Bangladesh?

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Bangladesh is one of the fastest growing mobile financial service (MFS) markets globally. It added over 10 million new accounts in 2013 and grew transaction volumes to nearly $900 million per month. …

Bangladesh is one of the fastest growing mobile financial service (MFS) markets globally. It added over 10 million new accounts in 2013 and grew transaction volumes to nearly $900 million per month. The market is dominated by a single provider bKash, a subsidiary of BRAC Bank.

The use of MFS remains new. Most users have begun to use MFS only in the prior 12 months. Most use over-the-counter (OTC) transactions to make fund transfers rather than use their own wallets. OTC is valuable, convenient and instant. But client use of their own wallet remains a critical objective since it serves as a store of value, basis for long term relationship, a way to deliver products beyond payments and building a banking track record.

There is a transition of users who shift to wallets, but it is gradual. The pathways to wallet use vary. About half of wallet users began with OTC before shifting. Some wallet users shifted from Post Office or informal Courier fund transfer services. The transitions to wallets are very recent with one half of wallet users having adopted wallets only in the prior 3 months. Even as a transitions is underway, there will be a significant portion of OTC users who may transition to wallets slowly or not transition at all.

There is more providers could do to make wallets more attractive and lower barriers to use. The biggest challenge is the absence of a strong or clear value proposition for wallets. OTC is popular because it is easy, fast and convenient. Many prefer to avoid the hassle of wallet opening and agents are not incentivized to promote wallet use by clients. Providers ought to consider various measures to increase wallet use: better targeting of market influencers as users, changing the incentives for agents, offering more value/services and adjusting pricing.


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  • 1. Consumer insights from Bangladesh Is a Transition to Mobile Wallets Underway? Greg Chen & Pial Islam March 2014
  • 2. Summary: the Bangladesh market in transition 2 Bangladesh is one of the fastest growing mobile financial service (MFS) markets globally. It added over 10 million new accounts in 2013 and grew transaction volumes to nearly $900 million per month. The market is dominated by a single provider bKash, a subsidiary of BRAC Bank. There are patterns among early MFS adopters. There are a wide range of early adopters but there is a tendency to be young, a student, proficient in English, and better educated. Only a small portion of MFS users were already users of conventional banking services. The early adopters use MFS predominantly to send or receive money within their families and most transactions are small at about $US40. The use of MFS remains new. Most users have begun to use MFS only in the prior 12 months. Most use over-the- counter (OTC) transactions to make fund transfers rather than use their own wallets. OTC is valuable, convenient and instant. But client use of their own wallet remains a critical objective since it serves as a store of value, basis for long term relationship, a way to deliver products beyond payments and building a banking track record. There is a transition of users who shift to wallets, but it is gradual. The pathways to wallet use vary. About half of wallet users began with OTC before shifting. Some wallet users shifted from Post Office or informal Courier fund transfer services. The transitions to wallets are very recent with one half of wallet users having adopted wallets only in the prior 3 months. Even as a transitions is underway, there will be a significant portion of OTC users who may transition to wallets slowly or not transition at all. There is more providers could do to make wallets more attractive and lower barriers to use. The biggest challenge is the absence of a strong or clear value proposition for wallets. OTC is popular because it is easy, fast and convenient. Many prefer to avoid the hassle of wallet opening and agents are not incentivized to promote wallet use by clients. Providers ought to consider various measures to increase wallet use: better targeting of market influencers as users, changing the incentives for agents, offering more value/services and adjusting pricing.
  • 3. Contents I. Mobile Financial Services (MFS) in Bangladesh II. Research Methodology III. MFS Users and Use Patterns IV. Is There a Transition to Wallets Underway? V. Pathways to Greater Value and Use of Wallets 3
  • 4. Part I: MFS in Bangladesh 4Mohammad Moniruzzaman, 2009 CGAP Photo Contest
  • 5. Extraordinary growth in Bangladesh cash-in (42%) + cash-out (40%) + wallet-to-wallet (17%) + other (1%) 5 0 100 200 300 400 500 600 700 800 900 Jan Feb Mar Apr Sept Oct Nov Dec 2013 Transaction Volume ($US Millions) Source: Bangladesh Bank Payments Department
  • 6. Primary market players 28 Banks Licensed Only 3 with noticeable market presence - bKash (subsidiary of BRAC Bank) - Dutch Bangla Bank - Islami Bank 6 bKash dominates generating large majority of business volume, clients, and agents
  • 7. Bangladesh – emerging global leader but lagging wallet usage 7 Source: InterMedia Financial Inclusion Insights Program, Bangladesh Survey Fall 2013 Pakistan 2013 7% Mobile Money Users 0.4% Registered Users Bangladesh 2013 22% Mobile Money Users 3% Registered Users Uganda 2013 43% Mobile Money Users 29% Registered Users Kenya 2013 76% Mobile Money Users 68% Registered Users
  • 8. Bangladesh - early high use of unregistered OTC 8 Registered 15% Unregistered 85% Percentage of mobile money users with registered accounts Base n=1,267 MM users Source: InterMedia Financial Inclusion Insights Program, Bangladesh Survey Fall 2013
  • 9. Why we care about OTC and wallet use Over-the-counter (OTC) …….are transactions that happen where clients do not use their own registered accounts but rely on the agent to make a funds transfer. OTC is fast, reliable, and there are many agents to choose from. However, OTC is a one-time transaction and no wider relationship is built between provider and client. The value for clients and providers is thereby limited. Wallet use over time is critical….. • Establishing deeper relationship with clients • Generating float • Providing a means for providers to retain customers • Serving as a gateway for savings, credit, insurance • Building transactional records to predict needs & manage risk 9
  • 10. Part II: Research Methodology 10Md Farhad Rahman, 2013 CGAP Photo Contest
  • 11. Un-banked payments behavior driven by choices available ATMs • 5,248 Informal Courier Services • 6,000 Outlets (Estimated) Bank Branches • 8,427 Outlets Post Office • 10,000 Outlets Mobile financial service agents • 188,000 (but a lot of double counting) (Source: Bangladesh Bank) 11 Options for the un-banked
  • 12. This research set out to answer three questions 1. Who is using MFS? 2. What do they use it for? 3. How can providers build a better pathway to greater wallet use? 12
  • 13. Definitions OTC Neither sender nor receiver uses their own wallet during the transaction Partial OTC Either sender or receiver uses their own wallet during the transaction Wallet Both sender and receiver use their own wallet during the transaction 13 SENDER Account RECEIVER Account AccountAccount
  • 14. Research methodology August 2013 to January 2014 14 Interview guide of 60 close-ended questions with interviews lasting 30 minutes. Cue Cards used to test numeracy and English proficiency.
  • 15. Research sample: MFS users 440 = 361+79 (plus 20 from Courier and 20 from Post) 15 361 Purposive (random) Sampling Targeted Sampling 79 bKash & Dutch Bangla Bank provided sample + Snowballing OTC Partial OTC Wallet Post Courier Wallet 40
  • 16. 16GMB Akash, 2011 CGAP Photo Contest Part III: MFS Users and Use Patterns
  • 17. MFS users: younger, male dominated, both urban and rural 17 4% 9% 12% 20% 29% 4% 15% 7% Education 52% 35% 13% 15 to 25 26 to 35 Above 35 Age Senders Receivers Male 40% 40% Female 6% 13% Senders Receivers Urban 22% 23% Semi-Urban 11% 9% Rural 14% 21%
  • 18. MFS users: multiple occupations and a range of income levels 18 32% 27% 11% 9% 6% 5% 3% 3% 2% 1% 1% Student Service holder Small trader Housewife Shopkeepers Petty trader Laborer Driver/CNG Driver Unemployed Self-employed Farmer Occupation 0% 5% 10% 15% 20% 25% 30% 35% 0 1 to 37 37+ to 75 75+ to 112 112+ to 150 > 150 Monthly Income ($US)
  • 19. MFS users: heavily under-banked and excluded 19 8% 92% Outstanding Loan 33% 67% Bank account None Yes
  • 20. MFS users: predominantly basic handset 20 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Total Sample (n=440) Feature Phone with color display Feature Phone with Monochrome Display Smart Phone ≈ $US 50
  • 21. MFS users: few wallet users found at agents 21 361 random clients found at agents, of these 3% came to transact with their own wallets Use Wallets (n=10) Have Wallets (n=96) Total Random Sample (n=361)
  • 22. MFS transactions: smaller transaction size 22 210 63 42 Courier Service Post Office Mobile Financial Service Average Transaction Size ($US)
  • 23. MFS transactions: between family members 23 100% 75% 86% 81% 90% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Courier PO OTC Partial OTC Pure Wallet Transaction Within the Same Household
  • 24. Part IV: Is There a Transition to Wallets Underway? 24Bir Azam, 2013 CGAP Photo Contest
  • 25. Case study: initial transitions to MFS Using MFS for first time; transition accelerating over the past 6 months 25 100% 70% 25% 0% 30% 75% Before 1 year 6 month- 1 year Last 6 month Funds transfer choices (# of transactions) Hand to hand Pure OTC Lipi Garments Worker Monthly Income: $62 Education: Class 5 Perceived Value of MFS: Instant transfer
  • 26. Case study: more advanced MFS user Uses wide variety of payments; with recent shift towards partial OTC and wallet use 26 Sajjad Entrepreneur Monthly Income: $250 Education: Class 8 Perceived Value of MFS: Safe keeping of funds, flexibility 70% 60% 50% 30% 20% 20% 0% 20% 15% 0% 0% 10% 0% 0% 5% Before 1 year 6 month to 1 year Last 6 month Funds Transfer Choices (# of transactions) By hand Courier Pure OTC Partial OTC Pure Wallet
  • 27. Pathways to wallet use 41 new wallet users September to November arrived through variety of pathways 27 More than 3 months (Pre Sep) Prior 3 Months (Sep to Nov) At time of survey (December) Pure OTC Partial OTC Pure Wallet Courier PO 41* 12 4 14 3 8 8 4 7 2 2 5 3 2 3 22Hand-to-hand 7 8 7 1 1
  • 28. Pathways to wallet use 41 new wallet users September to November arrived through variety of pathways 28 Mobile financial services are very new to most users: before September 2013 more than half relied on hand-to-hand cash transfers, and about one-third either Post Office or Courier services. OTC is a close substitute to fund transfer systems many already know. The OTC agent and fund transfer mimics what clients know about Post Office and Courier services. MFS are initially seen as a replica of these existing services. The role of wallets is not initially well understood. The transition to wallets takes multiple pathways. About one half use OTC before shifting to wallets. The other half came directly from either Post Office or Courier services. No one came directly from hand-to-hand transfer to wallet use directly.
  • 29. Early adopters of wallets: earn more, younger, educated, English 29 121 106 89 105 133 Courier PO OTC Partial OTC Pure Wallet $US Average Monthly Income 0% 20% 40% 60% 80% 100% Courier PO OTC Partial OTC Pure Wallet Age 15-25 0% 20% 40% 60% 80% 100% Courier PO OTC Partial OTC Pure Wallet More than Grade-10 0% 20% 40% 60% 80% 100% Courier PO OTC Partial OTC Pure Wallet Read English
  • 30. Barriers to wallets: value proposition and account opening 30 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% I don't require it It seems complex to me Does not know how to open an account Its time consuming Question to non-wallet users “Why haven’t you considered a Mobile Banking Wallet?” Note: beyond the 4 primary responses to the open-ended question the balance of responses included more than 20 wide ranging reasons associated with new services. These included rationales such as: not enough knowledge, no ID, and concerns with security.
  • 31. Barriers to wallets: trust is not a barrier 31 Courier 3% PO 6% OTC 26% Partial OTC 10% Wallet 55% Which money transfer mode do you trust most? (n=480)
  • 32. Barriers to wallets: agent charges are not a barrier to wallet use 32 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% OTC Partial OTC Pure Wallet “I am not happy with what agent charges”
  • 33. Barriers to wallets: agents over-charging not a barrier 33 16% (n=440) paid extra charges OTC Partial OTC Pure Wallet 0% 20% 40% 60% 80% 100% Other Reported Problems: • Lost Funds for Technical Errors (0.4% reported) • Lost Funds to Fraud or Misappropriation (0.4% reported) • Had Money Sent, but Not Delivered (1.7% reported)52 out of 208 12 out of 143 6 out of 89 Unauthorized fees charged by agents
  • 34. Barriers to wallets: agents promote wallet opening but not use 34 Agents are incentivized to open wallets by earning fees. But there does not appear to be a strong incentive for agents to promote wallet use. 50% 34% 16% Agent encouraged me to USE a Wallet Disagree Neutral Agree 17% 29%54% Agent encouraged me to OPEN a Wallet Disagree Neutral Agree
  • 35. Barriers to wallets: OTC seen as easier, less-costly and instant 35 Instant Trustworthy Cost Effective Easy to Use Reasons they prefer OTC or Wallet (%) OTC (n=208) Wallet (n=89)
  • 36. Part V: Pathways to Greater Value and Use of Wallets 36Sumon Yusuf, 2013 CGAP Photo Contest
  • 37. • Women or men? • Senders or receivers? • Poor or less poor? • Courier or Post users? • Less well educated? Can promotional campaigns be more efficient and effective? Industry responses: identify early adopters or influencers? 37 Mohammad Moniruzzaman, 2009 CGAP Photo Contest Which early adopters might also influence others to use wallets?
  • 38. • Build easier to use interface? • Position “coaches” to help new wallet users? • Find use cases beyond intra-family transfers: merchant payments, salary, G2P, microfinance? • New products: savings, credit, clean water, solar power? Industry responses: strengthen the value proposition of wallets? 38 Forhad Kamaly, 2013 CGAP Photo Contest Wallets need to offer a more compelling case. Is this about savings, more frequent transactions, easier customer interface, Bengali language, easing daily life, and/or lowering cost?
  • 39. Aligning incentives: - Share float revenue? - Deferred fees linked to clients wallet use? - Change in pricing on cash-in and out? Industry responses: better align agent incentives? 39 KM Asad, 2013 CGAP Photo Contest OTC is good business and wallet use could undermine the agents’ ability to earn fees.
  • 40. One possible combination to test? 1. Allow OTC but make more expensive than wallet use 2. Require clients phone to be physically present for cash-in (monitored with mystery shopping and recording phone number in register) 3. Reduce fees on cash-out and shift fees to P2P transactions Industry responses: pricing and rules changes? 40 Arifur Fahman, 2012 CGAP Photo Contest The fees paid (formal and informal) between wallet and OTC are similar – most fees are on cash out. Little price advantage to wallet use.
  • 41. CONFIDENTIAL Only for DBBL Management Advancing financial access for the world’s poor www.cgap.org 41