Mobile Banking in Bangladesh: An Incomplete Study


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This is an incomplete study on Mobile Banking in Bangladesh. Feel free to use this for educational purpose. A more detailed version will be available soon.

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Mobile Banking in Bangladesh: An Incomplete Study

  1. 1. Mobile Banking in Bangladesh An Incomplete Study Prepared By: Ahsanul Karim Feedback to:
  2. 2. Mobile Banking in Bangladesh (MFS)1. Banking Infrastructure2. Banking: Technology and Channels3. Mobile Banking: as the largest Channel4. Prospects of MFS Systems5. SWOT: Strengths, Weaknesses, Opportunities & Threats
  3. 3. Banking InfrastructureBangladesh: DemographicsTotal Population 160mPopulation having Bank 14% (22.4Account m)Mobile Phone Users 60% (95.53 m)Banks 47Mobile Operators 06Banks started MFS 05Mobile Operators joined 04MFS
  4. 4. Banking: Technology & Channels4 common alternativebanking channels: 1. ATM 2. Debit Card 3. Credit Card 4. POS60% transactionstake place throughalternative channels. Innovative Technology and Bank Profitability: The Bangladesh Experience (Working Paper Series: WP 0803-Bangladesh Bank)Cost of transaction The huge mobile penetration (58%) inis 10% of manual Bangladesh makes Mobile Banking (MFS)channels. as the Biggest Alternative channel.
  5. 5. MFS: Biggest Channel? (1)Although MFS activities are underdeveloped through agents sofar: Transaction Points Among Scheduled Commercial Banks Branches ATMs Agents 7,961 3,000 9,093Success Story 1:DBBL reports 1,72,020 unbanked customers and around BDT 90crore transaction (as on 18 July, 2012) within 14 months oflaunch.Success Story 2:BRAC Bank/bKash reports 2,37,423 registered clients and aroundBDT 118.51 crore transaction within 12 months of launch
  6. 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) 0Benefits: On an average, the customers pay 1% of the transactionamount as fee. This fee is shared among the parties tentatively asfollows: Agent-50%, MNO-25%, Bank-25%
  7. 7. MFS: Biggest Channel? (3)Mobile Penetration is Bangladesh:11th Position in the world in terms of number of subscribers: (Source: Wikipedia)
  8. 8. Mobile Banking: WhyFeasibility: Cost Minimization: ● Alternative channels alwaysTo bring rural unbanked people minimizes cost than manualinto 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. 9. SWOTStrengths: 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 ProvidersOpportunities: 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. 10. Existing Systems: Infrastructure Trust Bank DBBL bKashCore Banking Y Y NMobile Wallet Y Y NSMS Y Y NGPRS Y Y NUSSD Y Y YIVR N Y YApps N Y NNFC N Y N
  11. 11. Existing Systems: Features (1) Trust DBBL bKash BankPayment Network Y N NMultibank N Y NBalance N Y YStatement N Y NFund Transfer N Y YBill Pay N Y YRemittance N Y NDigital Content Payment N N N
  12. 12. Existing Systems: Features (2) Trust DBBL bKash BankTop-ups N Y YAnti-Money N Y NLaunderingTax Pay N N NSecurity Audit N Y NMicro Payment N Y NMicro Finance N Y NMicro Insurance N N NMicro Savings N N N
  13. 13. Central Bank Regulations 1. Bangladesh Bank Guidelines and Regulations for MFS 2. Compliance
  14. 14. Bangladesh Bank RegulationsMFS Guidelines & Regulations:iSentric Mobile Banking Solutions is compliant with the following guidelinesfrom Bangladesh Bank and also open to provide all solutions for specifiedservices: ● 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. 15. Data Source[1] Bangladesh Bank report on Mobile Financial Services in Bangladesh: AnOverview of Market Development. (July 2012)[2][3][4][5]
  16. 16. Key DefinitionsAgent 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.SCBSB Savings BankPCB Private Commercial BankFCBMFS Mobile Financial Services