NORTH SOUTH UNIVERSITY
ASSIGNMENT ON “ MOBILE MONEY TRANSFER ”
Subject : IP Telephony
ETE - 605
Date: April 15, 2008
MS in Electronics & Telecommunication
Student ID # 061774056
Section # I
Bangladesh is a labor-exporting country with many rural villagers (predominantly men) working in
the Gulf States. When transferring remittances home, many Bangladeshis prefer to avoid formal
banking system channels and use informal means to transfer funds to family members at home.
Remittances from overseas workers have important micro-implications for rural households and
In Bangladesh, large numbers of workers find their employment overseas through unofficial
channels and similarly use unofficial means for transferring remittance payments to family
members. Unofficial remittance transfer methods are used to avoid exchange rate over-evaluation
(which acts as an implicit tax), high bank charges, long delays in cashing cheques in foreign-
currency denominations, and general uncertainty about the integrity of national financial
institutions. Foreign workers will often resort to keeping earnings in foreign bank accounts and
transferring foreign cash to relatives through kinship and friendship networks. Despite the risks
involved in informal cash transfers, the benefits appear to outweigh the risks associated with
official transfers through an inefficient banking system combined with restrictive foreign exchange
practices. Once cash is received in Bangladesh by a family member, it can be saved, exchanged
with local money traders, or used as an alternative local currency for purchases and productive
At the micro level, remittances tend to be used for daily household expenses such as food, clothing
and health care (Puri, S. and Ritzema, T., 1999). Remittances are thus an important factor in
meeting household subsistence needs, and can make up a significant portion of household
income. Remittance funds are also spent on capital items including building or improving housing,
buying cattle or land, and buying consumer goods such as portable tape/CD players and
televisions. Once subsistence needs are met, remittances tend to be used for “productive
investments”, or for savings. Starting a small business or buying land enable families with migrant
laborers to improve their local socio-economic standing in relation to established capital owners in
Transferring cash from a Gulf State to a rural village in Bangladesh is fraught with risks. Cash is
often placed in the hands of other foreign workers who are returning home and, without access to
reliable communication; there is no way for the transferee to notify relatives about the transfer or
the amount of the transfer to expect. Reports of outright theft of cash, deductions from the original
transfer amount, and extreme delays in the receipt of remittances are common.
The poor need a remittance system to send money to their families when they migrate out of their
villages or towns. Situations often arise when migrant workers in a city remit money to their families
in the village or when parents in the village need to remit money to their children in the city. Other
cases of remittance could arise on account of transfer payments by Government or remittances of
miscellaneous nature. As such the service they need should meet the following criteria:
a. Accessible service - The product should be available to them without unnecessary hassle.
Entry barriers such as existing relationship with banks, possession of checkable accounts or
filling up long forms act as deterrents in accessing the services.
b. Timeliness and certainty of delivery - Predictability of delivery at the recipient's place is
important for those who depend on remittances for meeting their basic needs.
c. Cost effectiveness, affordability and value for money services - The remittance needs are
mostly repetitive and small value. The present system of remitting through post offices is costly.
Other sources are risk prone, further adding to the cost of the service.
d. Receipt of delivery status - Timely confirmation of delivery is a requirement for poor people
who have limited access to communication facility.
In the Philippines, BayanTel offers “phone shop” services in over 300 public calling offices
nationwide, including facilities for domestic and international money transfer. BayanTel’s money
transfer services are especially popular with overseas workers and their families. In our country,
has most of the technical, telecommunication, and financial pieces needed to establish similar
electronic money transfer services to the rural area. It is likely only a matter of time before these
Current Modes of Remittance Transfer
Non Banks Transfer Agencies (e.g. MoneyGram)
Courier Services (e.g. S. A. Poribahan)
Hand carry by Friends or Relatives
Proposed Method for Transferring Remittance
To solve that kind of hassle during money transfer either from outside of the country or from one
place to another place inside the country one system could be developed where a single SMS any
one can easily send money from one to their friends, relatives or whom so ever concerned in
Bangladesh. Here I am interested to focus a method for transferring the money inside the
The following is an example of how money can be moved via cell phones:
• The sender gives cash for transfer to a remittance center, plus a fee of approximately 3-5
percent (fees generally depend on the amount transferred, and there are generally limits on
the amount that can be transferred at one time).
• The remittance center transfers the amount electronically through the phone company to
the receiver’s cell phone account.
• The recipient receives a text message with notice of the transfer of credit to his or her
“electronic wallet.” The recipient will go to a licensed Outlet or at any prepaid distribution
point of their mobile service provider or an ATM Booth to pick up the cash. For
example, Mr. Reza works in Dhaka - will soon be able to transfer money to his wife. All he
would need is to go to a remittance transfer center and he will give the cash plus a fee to
the center – and a SMS will be sent from the authorized center to a specific number that is
fixed by the mobile operator with indicating his wife’s number. She, in turn, would receive a
number i.e. PIN (Personal Identification Number) and be able to redeem this for cash at any
prepaid distribution point of her mobile service provider. The entire transaction takes just a
Objectives of the Mobile Money Transfer Initiative
• Enable millions of typically 'un-banked' poorer migrant workers access to very affordable
remittances through the ubiquity, ease of use and scale of the GSM ecosystem.
• Position the Mobile Network Operator community as leading the way in helping these
poorer migrant workers, and in so doing secure public and governmental recognition.
• Secure appropriate role in remittance value chain for Mobile Network Operators.
• Explore opportunities for commercialisation and a global rollout by GSMA members.
• Catalyze the growth of broader m-banking, m-payments and m-commerce.
Principles of the Mobile Money Transfer Initiative
• Expand the accessibility of remittances and dramatically lower fees especially for low
denomination amounts while enhancing value to Mobile Network Operators through share
of fees, SMS traffic and customer loyalty.
• Address interoperability issues, messaging and financial transfers at an international
multilateral 'hub' level, not at a local level.
• Partner with global financial players who can facilitate the hub with minimal regulatory or
other related concerns.
• National distribution and regulatory issues will be handled by operators (and their banking
partners), GSMA will provide assistance/guidance as appropriate.
• Use of pilot programmes by operators to speed understanding and support mobile
operators who are uniquely positioned to meet the needs of this latent market, with both
developed and developing economies offering a potential total direct market revenue
opportunity of more than US$100 billion by end 2010, coupled with a significant opportunity
for Mobile Network Operators to reduce churn.
Why Thinking of This Method
The attributes of the Rural Area of any Developing Country are:
• Huge Proportion un-banked.
• Poor Infrastructure.
• Limited Education.
• Low Funds.
• Deep Sense of Culture and Community.
• High Expectations.
On the Other hand, the Services in the Rural areas in any Underdeveloped Country are as follows:
Services Low High
Mobile Phones √
Mobile Phone Subscribers in Bangladesh
The total number of Mobile Phone Subscribers has reached 32.5 million at the end of July 2007.
The Mobile Phone tele-density has increased 23.23%. The Mobile Phone subscribers base of
operators is given at Annexure-I.
Operators May 2007 June 2007 July 2007
(1) (2) (3) (4)
Grameen Phone Ltd. (GP) 13.24 13.97 15.73
TMIB (Aktel) 5.55 5.05 6.67
Sheba Telecom Ltd. (Banglalink) 5.53 6.04 6.61
PBTL (Citycell) 1.27 1.30 1.31
Teletalk Bangladesh Ltd. (Teletalk) 0.87 0.89 0.91
Warid Telecom Int. (Warid) 0.20 0.47 1.14
Total 26.66 27.72 32.37
(Subscribers in Millions)
Understanding the requirements
The four major requirements to participate in MMT are described below.
Distribution Point / Financial Institution
Regulation Remittance Transfer
Distribution Point / ATM Booth
The Distribution Point / ATM Booth will provide the money to the receiver regarding their PIN No.
The Distribution Point includes functionality such as:
• Distribute the money to the receiver.
• They will check the PIN No that was automatically sent to the receiver’s mobile No with their
transaction ID of distribution Point.
Financial Service Provider
In the majority of mobile money transfer models, partnership with a bank is a key relationship
in the delivery of financial services to the consumer through mobile by:
• Complying to each markets specific regulation in financial services
• Leveraging the connection to the global payments network
• Creating trust with the consumer that their money is within a bank
• Leveraging the core systems, resources and processes already in place at a bank
• Enabling a faster path to product delivery
The MMT initiative is a product of convergence of Mobile Network Operators and Financial
Institutions offerings. As such the Financial Institutions regulatory environment is often
unfamiliar to Mobile Network Operators. MNOs offering mobile financial services are likely to
be required to comply with some with Financial Institution regulation. The regulatory section
outlines the key challenges and steps to understand and address the regulatory environment.
Remittance Service Provider
The global remittance market has four processing environments that the Mobile Network
Operator can choose to use:
• Global Processing
• Wholesale Remittance Providers
• Global Bank
The GSMA as part of the MMT initiative has worked to secure relationships and frameworks
with a global processing provider as well as a wholesale remittance provider. As part of the
MMT initiative the GSMA will continue to look to partner with other remittance service
The Money Transmission Service
Sending Money Transferring Receiving
Location X System Location Y
Remittance Center Amount of
Mtr Receiver’s Mobile No
Send to 4488
After sending this message to the Message Center No (4488), the server will generate an
Authentication No (PIN No) and it will be sent to the receivers mobile no along with amount of
money (like you have received Tk.10,000 and your Authentication Code is M327584). This
Authentication Code will also be saved into the database of Distributor Point or ATM Point. When
receiver will go for cash the PIN No and amount of money will be inserted into the Distribution
Point or ATM Booth’s software. If it is matched then it will appear a successful message. Then the
person of distribution point will pay the money to the receiver.
Barriers of Mobile Money Transfer System
• Access to the facilities to receive money is often limited
• Transfer fee could be high
• Problem for approval of Bangladesh Bank to Mobile Operators.
• Banking regulation.
• Have to identify the original recipient.
• Find a secure location to money out.
In conclusion, I can say that this proposed system could be effective in rural areas. This technology
enables the transferee to provide timely and accurate information on the amount of the transfer,
details on the person acting as courier, and the expected arrival date of the cash. Here there are
some examples where Mobile Money Transfer is practicing.
Globe Telecom, a mobile service provider in Philippines provides an e-wallet facility to its
customers. The product turns cell phone into an e-wallet, and the customers can use their phones
to transact business. Non subscribers can send money electronically to Globe mobile
Experiences from India
In India, mobile services are presently used for conveying information regarding banking
transactions. The potential exists to expand the services for enabling remittance facilities through
mobile phones. Already no frills accounts and Government payments are being routed through
mobile network and telephone on a pilot basis at Warangal, Pithoragarh and Aizwal.
The e-kiosks in villages could be yet another source of operating a remittance system that is
accessible to the poor.
Thus, while the financial inclusion through opening of no frills accounts with banks would improve
the remittance facility for the poor, a conscious effort at devising a product within the existing
payment and settlement system would enable the poor to benefit from the improvements in
From the above it is quite clear that when it comes to transferring money from one village to
another, the poor in Bangladesh are substantially challenged. Both the originator and the
beneficiary have to sometimes travel quite a lot of distance to be in a position to send/ receive
money. Also, the base fees for enabling a transfer work adversely against small ticket remittances.
For small transfers, the fee itself would constitute more than 25% of the remittance. The remittance
needs of the poor may have to be met by a multi-pronged strategy which uses the existing
infrastructure optimally and in addition, new products should be introduced which leverage on
http://www.grameen.org or http://www.grameen.com