“There should be at least five more MFS competitors”

Tanvir A Mishuk, Co-founder & Managing Director, Nagad

What was the situation of the Mobile Financial Services (MFS) industry before Nagad came onto the scene?

Nagad's journey began on March 26, 2019. Until then, opening an MFS account was possible only using the traditional method of filling out a two-page form that funnelled through customer service and then arrived at the office via a courier service. It took seven to ten days to open a new account, which was highly inconvenient for users. Consequently, only 33 percent of the population was under financial inclusion, including banks and all MFS, and within that, only 25 percent were active users. Another issue was that people began opening multiple accounts using one NID. People without much education were also unable to fill out such long forms accurately, so the customer service officers would accept forms containing wrong information just to get a commission.

What innovations did Nagad bring to the MFS industry?

We were the first to introduce Electronic Know-Your-Customer (e-KYC) in Bangladesh. Through this, people can take a picture of their NID, and our Bangla optical character reader (OCR) can extract all the information from the NID using Artificial Intelligence. The information is then sent to the Election Commission database to be cross-checked and the account is activated. This entire process only takes one minute. Within six months of being launched, the e-KYC technology began being used by all banks and MFS providers.

We then realised how, apart from people living in the metropolitan cities, nobody in Bangladesh owned smartphones. 70 percent of the population still use bar phones. These users are left out of the process since they are unable to take photos using their phones. Only telecom operators in Bangladesh have biometric KYC. So, we partnered with some of the most prominent telecom operators to make the process accessible to those with bar phones. Now, people can dial *167# on their phone and their operator will know that they wish to open a Nagad account. The operator will then send a confirmation message, and upon user agreement, their identification data is sent to Nagad, and the account is opened. The process is now so user-friendly that, every day, 2.5 to 3 lakh people are opening Nagad accounts.

2.5 to 3 lakh new users per day is an impressive feat. What is the reason behind Nagad's success?

People were already making transactions through merchants, so having their own accounts, that too by just dialling a code on their phone, have been much more convenient for users. They also no longer need to pay 20 taka per 1,000 taka transaction since our charge is only 10 taka—half the market rate. Our "Send Money," "Bill Pay," and "Merchant Payment" options are also free of charge. The ease that this service brings to people's lives has attracted many users.

Do you find the MFS industry to be sufficiently competitive?

Even though people were dissatisfied with all the hidden charges they had to pay using MFS back in the day, they had no alternatives. So there was no competition until Nagad came into the market. I believe there should be at least five more real MFS competitors. Regulators need to control the competition so that one or two players don't have the entire market share. It is a massive risk for the government if regulators do not take immediate action on this. The Bangladesh Competition Commission could take charge here and provide recommendations to Bangladesh Bank on how best to tackle this issue.

Do you recommend any policy revisions to make the market more competitive?

We have already enhanced competition by offering lower cost and using state of the art technologies. However, the banking regulator can play a role here to improve the situation from the competition point of view.

The Honourable Prime Minister issued a directive to all government agencies to use Nagad for Social Safety Net (SSN) allowance disbursement. Why is Nagad the right choice for this?

Nagad is being used to disburse 100 percent of the primary education stipend, 75 percent of the social welfare allowance, and a handsome amount for the fisheries and livestock sector. Nagad is a great choice here because of our low rates and efficient services. These allowances are meant to help people. But, if there are high charges when sending the money and also when withdrawing the cash, the government's purpose is no longer served. Since Nagad offers these transaction options for free, all of the money can go towards supporting the people who need it the most.

On the other hand, when the government has tried to arrange cashless payment for COVID-19 testing none but Nagad came forward to support the government initiative considering stand beside the people.

What are Nagad's plans for the future?

The MFS guidelines were launched a decade ago in the country. During the ongoing fourth industrial revolution, I'd say that MFS has become dated. The world has moved to digital banks, so Bangladesh should follow suit. Digital banks will allow for the 360-degree financial needs of users to be fulfilled. We are working with our platform, our technology, and our regulators to turn digital banks into a reality in the country by this year.