MFS losing steam

Mobile financial service, the great hope for financial inclusion, appears to be faltering.

Last year, about 3 crore users transacted Tk 434,489.92 crore through the platform by, up 14.68 per cent year-on-year, according to data from the Bangladesh Bank.

It is decent growth but, it pales in comparison to those experienced in previous years.

The growth rate seems to be good in general but in a country like Bangladesh, which is moving towards digitalisation, the transaction volume should be far greater, said industry insiders.

A lack of confidence and proper knowledge on online payment platforms is a major challenge faced by the market, said Md Mahbubur Rahman Alam, an associate professor of the Bangladesh Institute of Bank Management (BIBM).

At the end of last year, the total number of MFS accounts stood at 7.96 crore. But just 3.48 were active, in a testament of the cooling interest on MFS.

Another reason behind the dip in usage is that in recent times other digital payment channels have come up, while regular banks have also come up with convenient application-based platforms in a bid to make online transactions more appealing.

“That is why MFS users have migrated away,” Alam added.

But, bKash, the market leader for online payment systems, maintains that their growth rate is steady.

The transaction volume has increased manifold thanks to customers signing up in droves and roll out of various MFS products, said Sheikh Md Monirul Islam, chief external and corporate affairs officer of bKash.

The market is still widely dominated by vanilla transactions like deposits and withdrawals, which accounts for about 72.60 per cent of the total MFS transaction volume.

For bKash, innovation seems to be the key to its survival.

bKash account holders can now pay utility bills, make payments at registered bKash merchant outlets as well as top up their mobile phone numbers seamlessly.

Having micro merchants on board will help bKash reach its target to have customers make payments for their daily needs on the platform, Islam said, adding that the 2 per cent cash incentive against remittance has also boosted its transaction volume.

MFS needs to improve their services and collaborate with other online service providers, said Alam of BIBM, while citing the option of salary disbursement through the platform as a case in point.

Only a few hundred companies are utilising the platform to pay their workers’ salaries. Only Tk 10,188.83 crore has been disbursed as salaries, which is just 2 per cent of MFS’s total transaction value.

“This is not at all satisfactory,” he added.

Currently, about 3.61 lakh garment workers are paid through bKash. In 2018, only 1.60 lakh workers were paid through the platform, while the number of merchant points, which is now 1.19 lakh, was only 73,599, according to bKash.

Payments for educational institutions and utility bills can also be done through the MFS. However, the net worth of transactions is just Tk 5,023.45 crore, industry insiders said.

Merchant payments could be a major sector for MFS transactions as that value was only Tk 5,465.27 crore last year.

People do not trust most of the e-commerce platforms, which is why they hold off from making payments for the products before getting the products in their hands.

“This is why the number of payments made through MFS are not increasing at a satisfactory rate,” Alam said.

Last year, the government launched a new platform called ‘Nagad’ under the postal act. The platform is run by a separate organisation and holds a significant share of the market.

After launching the service on March 26 last year, transactions worth a few hundred crore taka were completed. Currently, they have a transaction value of about Tk 100 crore a day.

Since Nagad is being run under the postal act, the central bank does not have any control on the transaction system, which is enjoying a far greater transaction volume than the other traditional MFS operators.

A Nagad user can make transactions worth up to Tk 2.5 lakh on any given day but the monthly limit is set at Tk 5 lakh. Other MFS operators can transact only Tk 30,000 a day while their monthly limit is Tk 2 lakh.

However, according to the market insiders, MFS users are still unable to make payments across platforms, which is a major challenge faced when making online payments.

In a recent meeting with the e-Commerce Association of Bangladesh’s (e-CAB), the state minister for ICT Zunaid Ahmed Palak said that they are working on including this benefit by the end of this year.