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.