The document analyzes the state of mobile banking (MFS) in Bangladesh. It finds that MFS has grown rapidly, with over 4 million accounts opened, driven by the large unbanked population and widespread mobile phone access. Several banks have launched successful MFS programs. However, MFS is still in early stages, with opportunities to expand agent networks and offerings. Regulations by Bangladesh Bank support further growth and integration of MFS with other financial services. Security, integration challenges, and agent management remain as issues to address for MFS to become a primary banking channel in Bangladesh.

1. Mobile Banking in
Bangladesh
An Incomplete Study
Prepared By: Ahsanul Karim
Feedback to: ahsanul.karim@sentinelbd.com

2. Mobile Banking in
Bangladesh (MFS)
1. Banking Infrastructure
2. Banking: Technology and Channels
3. Mobile Banking: as the largest Channel
4. Prospects of MFS Systems
5. SWOT: Strengths, Weaknesses,
Opportunities & Threats

3. Banking Infrastructure
Bangladesh: Demographics
Total Population 160m
Population having Bank 14% (22.4
Account m)
Mobile Phone Users 60% (95.53
m)
Banks 47
Mobile Operators 06
Banks started MFS 05
Mobile Operators joined 04
MFS

4. Banking: Technology & Channels
4 common alternative
banking channels:
1. ATM
2. Debit Card
3. Credit Card
4. POS
60% transactions
take place through
alternative channels. Innovative Technology and Bank Profitability: The Bangladesh
Experience (Working Paper Series: WP 0803-Bangladesh Bank)
Cost of transaction The huge mobile penetration (58%) in
is 10% of manual Bangladesh makes Mobile Banking (MFS)
channels. as the Biggest Alternative channel.

5. MFS: Biggest Channel? (1)
Although MFS activities are underdeveloped through agents so
far:
Transaction Points Among Scheduled Commercial Banks
Branches ATMs Agents
7,961 3,000 9,093
Success Story 1:
DBBL reports 1,72,020 unbanked customers and around BDT 90
crore transaction (as on 18 July, 2012) within 14 months of
launch.
Success Story 2:
BRAC Bank/bKash reports 2,37,423 registered clients and around
BDT 118.51 crore transaction within 12 months of launch

6. MFS: Biggest Channel? (2)
Mobile Banking: Current Status Cost Study of DBBL:
upto March 2012 (excluding Estimating:
remittance-only deployments) interest spread of 5%,
Banks with MFS 10
deposit of 5 billion taka (USD
License 62.5 million) would create an
annual income of 250 million
Live MFS deployments 5 taka (USD 3.125 million),
equivalent to the maximum
annual expense of the project.
Accounts Opened 4,42,269
DBBL expects to achieve the
Appointed Agents 9,093 above targeted deposit and
income by the end of 2013.
Total Value of 207,00,00 Breakeven: 30 months
Transactions (BDT) 0
Benefits: On an average, the customers pay 1% of the transaction
amount as fee. This fee is shared among the parties tentatively as
follows: Agent-50%, MNO-25%, Bank-25%

7. MFS: Biggest Channel? (3)
Mobile Penetration is Bangladesh:
11th Position in the world in terms of number of subscribers: (Source: Wikipedia)

8. Mobile Banking: Why
Feasibility: Cost Minimization:
● Alternative channels always
To bring rural unbanked people
minimizes cost than manual
into banking channel banking (even sometimes 90%)
● Setup of bank branches: not ● Apart from cost minimization
profitable mobile banking can generate
○ Amount of deposits and loans revenue
in the rural areas do not always ● Can create new marketing
generate enough revenue to channel for new products and
meet expenses services
● Setup of ATM in rural areas: not
always feasible Infrastructure:
○ ATMs need regular cash feed ● Ability to use existing MNO
from bank branches networks and infrastructure
● Ability to create agent
○ ATM needs data network
networks using mobile airtime
coverage and security resellers, small shops, and
convenience stores

9. SWOT
Strengths: Weaknesses:
● Number of unbanked people ● Security issues
with mobile access causing a ● Defensive culture in some of the
huge demand banks
● Awareness already established ● 3 way integration: Banks, Telcos
● Lower cost for agent network and Technology Providers
Opportunities: Threats:
● Reduce cost of banking ● Fraud Management
● Platform for new services like ● Load Balancing
digital content buy/sell etc ● Money Laundering
● Offering value added services

10. Existing Systems: Infrastructure
Trust Bank DBBL bKash
Core Banking Y Y N
Mobile Wallet
Y Y N
SMS Y Y N
GPRS Y Y N
USSD Y Y Y
IVR N Y Y
Apps N Y N
NFC N Y N

11. Existing Systems: Features (1)
Trust DBBL bKash
Bank
Payment Network Y N N
Multibank N Y N
Balance N Y Y
Statement N Y N
Fund Transfer N Y Y
Bill Pay N Y Y
Remittance N Y N
Digital Content Payment N N N

12. Existing Systems: Features (2)
Trust DBBL bKash
Bank
Top-ups N Y Y
Anti-Money
N Y N
Laundering
Tax Pay N N N
Security Audit N Y N
Micro Payment N Y N
Micro Finance N Y N
Micro Insurance N N N
Micro Savings N N N

13. Central Bank Regulations
1. Bangladesh Bank Guidelines
and Regulations for MFS
2. Compliance

14. Bangladesh Bank Regulations
MFS Guidelines & Regulations:
iSentric Mobile Banking Solutions is compliant with the following guidelines
from Bangladesh Bank and also open to provide all solutions for specified
services:
● Disbursement of inward foreign remittances
● Cash in/out using mobile account through agents/Bank
branches/ATMs/MNO’s outlets
● Person to Business Payments (utility bill payments or merchant payments)
● Business to Person Payments (salary disbursement, dividend and refund
warrant payments, vendor payments)
● Government to Person Payments (elderly allowances, freedom-fighter
allowances, subsidies)
● Person to Government Payments (taxes, levy payments)
● Person to Person Payments P2P (One registered mobile account to another
registered mobile account)
● Other Payments (microfinance, overdraft facility, insurance premiums,
deposit pension scheme deposits)

15. Data Source
[1] Bangladesh Bank report on Mobile Financial Services in Bangladesh: An
Overview of Market Development. (July 2012)
[2]http://www.thedailystar.net/newDesign/news-details.php?nid=104699
[3]http://www.smbworldasia.com/en/content/dutch-bangla-bank-pioneers-
mobile-banking-banglades
[4]http://en.wikipedia.
org/wiki/List_of_countries_by_number_of_mobile_phones_in_use
[5]http://www.isentric.com/index.php?rt=page/content&page=solution-
banking&m=solution

16. Key Definitions
Agent A person or organization authorized by a bank to carry out financial
transactions on behalf of the bank. Often these are small shops whose
proprietor can provide cash-in and cash-out services to a bank’s clients.
IVR Interactive Voice Response – refers to different ways users can use a
voice prompted menu driven service over the phone.
MNO Mobile Network Operator – Airtel, Banglalink, Citicell, GrameenPhone,
Robi, Teletalk.
SMS Short Message Service – text messaging over mobile phones.
USSD Unstructured Supplementary Service Data – a real time communication
channel between a mobile handset and the servers of a mobile network
operator. MFS providers typically require a commercial agreement with a
mobile network operator to gain access to USSD, but this has the
advantage of being accessible over any handset.
SCB
SB Savings Bank
PCB Private Commercial Bank
FCB
MFS Mobile Financial Services