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Sub-Team Report on
Mobile Financial Services (MFS) in Bangladesh – MNO Perspective
Prepared for:
Mr. Sheikh Morshed Jahan Associate Professor, IBA, University of Dhaka Course instructor: Business Strategy (W 650)
Prepared by:
Abdullah Al Mahmud (ZR 20, MBA 52D) [email protected]; 01912782525
Tapas Debnath (ZR40, MBA 52D)
[email protected]; 01612082727
IBA, University of Dhaka
May 14, 2016
Page | ii
Contents
EXECUTIVE SUMMARY ............................................................................................................................ 2
1 INTRODUCTION .................................................................................................................................... 3
2 OVERALL Mobile Financial Services (MFS) INDUSTRY STRUCTURE (MNO PERSPECTIVE) ................... 4
2.1 Mobile Financial Services (MFS) of Different Mobile Network Operators (MNOs) ...................... 4
2.2 Mobile Banking in Bangladesh ...................................................................................................... 9
2.2.1 Key Players in Mobile Banking ............................................................................................ 9
2.2.2 Mobile Banking Ecosystem ................................................................................................ 10
2.2.3 Critical Components for Successful M-Banking ............................................................... 11
2.2.4 Business Canvas Model ........................................................................................................ 12
2.2.5 Industry growth of mobile banking ...................................................................................... 13
2.2.6 Mobile Money Opportunity in Bangladesh ...................................................................... 16
2.2.7 Industry Life Cycle .............................................................................................................. 18
2.2.8 Industry Value Chain .......................................................................................................... 18
2.2.9 Drivers of change in the industry ..................................................................................... 19
2.3 Pricing Strategy ........................................................................................................................... 19
2.4 Rivalry among major players....................................................................................................... 19
2.5 Marketing Strategies ................................................................................................................... 19
3 REGULATORY FRAMEWORK ............................................................................................................... 20
3.1 Regulatory Guidelines for MFS - 2011 ........................................................................................ 20
3.2 Pre-draft Regulatory Guidelines for MFS - July 2015 .................................................................. 20
3.3 Implication of new pre-draft ....................................................................................................... 20
4 ANALYSES ........................................................................................................................................... 21
4.1 PESTEL ......................................................................................................................................... 21
4.2 Porter’s 5 forces .......................................................................................................................... 21
4.3 SWOT........................................................................................................................................... 21
4.4 Strategic Group Mapping ............................................................................................................ 22
5 CONCLUSION ...................................................................................................................................... 23
5.1 Future Growth Prospect / Investment Attractiveness / Growth Trajectory ............................... 23
5.2 Recommendation ........................................................................................................................ 23
REFERENCES .......................................................................................................................................... 24
APPENDIX .............................................................................................................................................. 25
Page | 2
EXECUTIVE SUMMARY
Mobile Financial Service (MFS) refers to the financial services which can be facilitated by mobile
phone technology. It includes a huge array of services like utility (gas, water, electricity) bill payment,
ticket (train, Cricket match etc.) purchase, insurance premium payment, mobile banking (money
transfer, merchant bill payment, POS transaction, mobile cash remittance, salary payment) etc.
Among mobile based all the financial products, mobile banking could manage a huge traction in last
5 years. In March, 2016, average daily transaction was BDT 608 crore and number of average daily
transaction was more than 40 lakhs. In March alone, the amount of total transaction was 18,241
crore. Actually, this mobile money transfer is so successful in Bangladesh that in terms of the
transaction number and amount, Bangladesh is in 2nd position worldwide, only after Kenya; that too
is expected to be taken in a very near future. In a word, mobile banking is a huge success in
Bangladesh and it has a huge prospects.
Mobile banking in Bangladesh is highly regulated and it’s a bank-led model, unlike the general world
trend where around 70% mobile banking is conducted by the mobile network operators (MNO) and
rest 30% is by the banks. Actually it’s a result of Bangladesh Bank’s 2011 guidelines regarding MFS
activities which barred MNOs from having equity/ownership in a MFS provider. Now MNOs are just
working as network operators in this thriving mobile banking.
But in July 2015, Bangladesh Bank published a pre-draft guidelines, which allowed the MNOs to get
15% stake in MFS operator / provider. This move of Bangladesh Bank can be treated as a massive
policy changing stance and it allowed MNOs the direct access toward MFS operations. But that 2015-
draft is still in the formulation phase and until it is being passed, the circumstances are not certain
from the perspective of the MNOs.
Though prospect of MFS in Bangladesh is very much promising, and there’s a lot can be offered and
attained through this sector, MNOs current standing and moves are very much crucial and it will
determine the nature of future affiliation of MNOs with the MFS sector (including mobile banking) in
Bangladesh.
Page | 3
1 INTRODUCTION
1.1 Objectives
The objectives of this research are the following:
Broad Objective
To understand strategy related issues for the industry players and future industry prospect for the
whole sector.
Specifics Objectives
Specific objectives of this report are:
A. To understand overall current environment of MFS sector from the perspective of MNOs
B. To understand it's value chain
C. To understand influencing factors/issues
D. To understand it’s growth trajectory
E. To understand the sector’s affiliation regarding people, planet and profit
F. To understand the obstacles of this sector
G. To understand the regulatory issues of the sector
1.2 Methodology
This research involves exploratory research based upon information from both primary and
secondary information.
Primary Data
To find out the strategic aspects, industry insiders have been interviewed. Informal meet up,
contacting through mobile and e-mail, questionnaire etc. have been used regarding collecting
primary data.
Secondary Data
Different strategy research paper, journals, publications, newspaper article, previously done reports
etc. have been used for collecting secondary data.
Page | 4
2 OVERALL Mobile Financial Services (MFS) INDUSTRY STRUCTURE (MNO PERSPECTIVE)
2.1 Mobile Financial Services (MFS) of Different Mobile Network Operators (MNOs)
[A] Grameenphone MFS
The financial services can be divided in two payments of utility bills and ticketing. There are three
types in ticketing, train ticketing, lottery ticketing and cricket match ticketing.
(1) Utility Bill Pay
It is available to all GP subscribers and non-subscribers. GP subscribers can go for it through their
Mobicash wallet while non-subscribers can avail it by showing the bill to GP retailers as retailers pay
through their Mobicash. Currently focused on utility bill collection in 9 localities of the country via
GP- authorized agents and self- directed mobile wallet transactions executed by customers from
their own handsets.
This service is available for1
Gas (Titas, BGSL, KGDCL) Bill Payment
DESCO / PDB / DPDC / WZPDCL, KWASA Bill Payment
WASA / CWASA Bill Payment
Bangladesh Power Development Board Bill Payment
Currently there are nine utility partners of GP; both GP users and non-users are enabled to pay
through this system.
Partner Convenience
- Instant Information
- Automated bill posting
- Operational Efficiency
- Easy expansion into new territories
Customer Convenience
- Convenient locations, open longer
- Easy to use
- Access to relevant information
- 24/7 dedicated call centers
- Wider coverage (over 5000 GP- authorized agents for cash- in and bill payment)
(2) Purchasing Ticket
Only the GP subscribers can go for BCB Match Ticket and BTRB Ticket. But Ticketing for lottery is
available for non-subscribers.
Lottery Ticket
- Government approved lotteries authorized for fund raising and philanthropic purposes. Any
GP prepaid subscriber can buy a lottery ticket directly from their mobile phone.
BCB Match Ticket
1 http://www.grameenphone.com/personal/digital-services/mobile-financial-services/bill-pay
Page | 5
- GP has exclusive agreement with BCB to sell tickets for all international matches in
Bangladesh.
BTRB Ticket
- Any registered GP subscriber can book and purchase a train ticket directly from their mobile
phone, up to 10 days before travel time. Physical ticket collection against purchased e- ticket
is available at selected GP centers.
(3) Mobicash
Mobicash is a special Service by Grameenphone where subscribers can avail a range of convenient
and innovative services such as:
Mobile Banking services of different partner banks such as
Dutch Bangla Mobile Banking Service
ONE Bank “Ok” Mobile Banking Service
MYCash service of Mercantile Bank Ltd.
mCash service of Islami Bank Bangladesh Ltd.
UCash service of United Commercial Bank
IFIC bank’s Mobile Banking
- Customer registration or partner bank’s mobile banking account opening
- Cash-in (deposit cash into mobile banking account) of any of the above partner bank
- Cash-out (withdraw cash from your mobile banking account) of any of the above
partner bank
- Bill-Pay service for utility bill payment such as Electricity, Gas and WASA (applicable in
approved locations)
- Flexiload
- Nirvoy life insurance registration and payments
(4) Nirvoy Life Insurance by GP
Grameenphone in partnership with MicroEnsure Bangladesh and Pragati Life Insurance has
introduced ‘Nirvoy’ the life insurance product for its valued customers2. Nirvoy was launched in June
2013. The purpose of Nirvoy is to provide GP customers with an opportunity to manage their life risk
by simply committing to a nominal amount of spend on the GP network. Nirvoy is the free life
insurance offer from Grameenphone built on monthly Recharge of a customer.
[B] Banglalink MFS
(1) Train ticket
Banglalink has launched mobile train ticket service in joint collaboration with CNS limited and
Bangladesh railway. Through this service, railway passengers are able to purchase their train ticket
from their own Banglalink mobile phone as well as from approximately 15003 “Banglalink mobile
cash points” located at Dhaka, Chittagong, Rajshahi and Sylhet. Once the ticket is purchased either
from own mobile or through the Banglalink mobile cash points, passengers will receive an e-ticket
with e-ticket number in their mobile phone as reply sms. Passengers can go to source/starting
2 http://www.grameenphone.com/personal/offers/nirvoy-free-life-insurance 3 http://www.banglalink.com.bd/en/services/mobile-financial-services/mobile-cash-ticketing/mobile-cash-train-ticket/
Page | 6
station just an hour before the journey time and take printed ticket by mentioning the e-ticket
number and his/her mobile number (which was used for mobile ticketing).
Service Details: Using Banglalink mobile ticketing service, Bangladesh rail passengers can buy
railway ticket in following ways:
Mobile ticketing from subscribers’ own mobile
- Individual Banglalink subscriber will be able to purchase railway ticket form their own
handset using the money wallet balance.
Mobile ticketing at the Banglalink mobile cash point
- Railway passengers will be able to purchase railway ticket form Banglalink mobile cash point
marked outlets and receive money receipt with unique transaction ID
Number of Mobile Cash Points:
Banglalink has approx 1500 mobile cash points rolled out in Dhaka, Chittagong, Sylhet, Rajshahi and
Khulna and Banglalink is working to increase the number of points gradually.
Payment Service:
Banglalink customers can pay following bills through their mobile financial service.
Qubee Bill Payment
DESCO Bill Payment
WASA Bill Payment
Bangladesh Power Development Board Bill Payment
Jibon Bima Corporation payment
(2) Mobile banking
Banglalink provides network to the following service providers to facilitate mobile banking:
DBBL mobile banking
bKash
UCash
IBBL (mCash)
IFIC mobile banking
MBL (MyCash)
(3) Mobile cash remittance
Available mobile financial remittance services for Banglalink subscribers are:
Mobile cash remittance with western union
Mobile cash remittance service
(4) Mobile cash electronic money order with BPO
Electronic money order with Bangladesh Post Office: Banglalink partners with the Bangladesh post
office (BPO) has launched the first ever electronic money order (EMO) service through the post
office branches all across the country.
Page | 7
This service enables to send money all across the country almost instantly which used to require 7 to
10 days. So far approx. 1,200 post offices brought under the service and more post offices are in the
process of integration
[C] Robi MFS
(1) Utility Bill Pay
Robi customers can pay following bills through their mobile financial service.
DESCO Bill Payment
CWASA Bill Payment
DWASA Bill Payment
Bangladesh Power Development Board Bill Payment
(2) Ticket Purchasing
Robi customers can buy following tickets through their mobile financial service
Bus tickets
Movie ticket of BLOCKBUSTER CINEMAS
Movie tickets of STAR Cineplex
(3) Mobile Remittance
Bangladeshi mobile operator Robi Axiata and Jamuna Bank have signed an agreement on
remittances via mobile services. Selected Robi retailers act as cash out points (accredited by the
partner banks) from where the beneficiaries can withdraw their remittance in cash. Customers of
any mobile operator can use the remittance service and remittance recipients get the service free of
cost.
(4) Mobile banking
Robi provides network to the following service providers to facilitate mobile banking:
DBBL mobile banking
bKash
UCash
IBBL (mCash)
[D] Airtel MFS
(1) Mobile banking
Airtel provides network to the following service providers to facilitate mobile banking:
DBBL mobile banking
bKash
UCash
IBBL (mCash)
SureCash
Page | 8
IFIC Mobile Banking
MyCash
Bank Asia
(2) Foreign Remittance
Airtel customers can receive foreign remittance at their mobile banking account without any hassle.
Sender chooses mobile banking account while sending inward foreign remittance through his
exchange house. Receiver will get a notification SMS that X amount of money has been sent to
his/her mobile wallet.
(3) Bill Payment
Currently Airtel only provides its customers to pay WASA bills through their mobile financial service
(4) Payment for Traffic Case
Airtel mobile banking user can make the payment of any traffic case of Dhaka Metropolitan Police
through UCash mobile banking service without any hassle.
(5) m-Donation
Now Airtel mobile banking user can use DBBL mobile bank account to donate to the great cause of
Jaago foundation.
(6) m-Salary
Now any corporate house or small and medium enterprise can disburse their employee salary
through mobile banking account. This solution is cost effective, saves time, money and production
hour.
[E] Teletalk MFS
In February, 2016 bKash signed a network sharing agreement with Teletalk. It gave Teletalk’s
customers the access to bKash mobile financial services. Actually this move can be treated as
practically first significant move regarding MFS related activities. Apart from this, Teletalk has
affiliation with Trust Bank Mobile Money.
[F] Citycell MFS
Citycell has a very much limited affiliation with MFS activities, which can be treated as virtually non-
existent.
Comparison of mobile financial services provided by the mobile operators of Bangladeh
From the comparison among the operators regarding various MFS, it’s evident that, Grameenphone
is the most active one. Immediate next operators are Banglalink and Robi, they are very close in
terms of range of proving services. All these three operators have comparative large number of MFS
products in their portfolios. Airtel comes next and most inactive two operators are Teletalk and
citycell. As a matter of fact, Teletalk just very recently became affiliated with bKash (in April, 2016)
Page | 9
and has a MFS concern with Trust Bank. On the other hand, Citycell’s MFS involvement is also
insignificant.
Exhibit: A comparison of mobile financial services provided by the mobile operators of Bangladeh
Grameenphone Banglalink Robi Airtel Teletalk Citycell
Mobile M-commerce √ (Mobicash) X X √ X X
Ticket - Cricket Match √ X X X X X
Ticket - Bus X X √ X X X
Ticket - Train √ √ X X X X
Ticket - Movie X X √ X X X
GAS Bill Payment √ X X X X X
DESCO Bill Payment √ √ √ X X X
WASA Bill Payment √ √ √ √ X X
BPDB Bill Payment √ √ √ X X X
Insurance Payment √ (Own Insurance Service) √ X X X X
Provide USSD Gateway For MFS √ √ √ √ √ √
Mobile Money Order X √ X X X X
Payment for Traffic Case X X X √ X X
2.2 Mobile Banking in Bangladesh
Mobile banking (m-banking) involves the use of a mobile phone or another mobile device to
undertake financial transactions linked to a client’s account. M-banking is one of the newest
approaches to the provision of financial services, made possible by the widespread adoption of
mobile phones even in low income people. The roll out of mobile telephony has been rapid,
and has extended access well beyond already connected customers in rural area.
2.2.1 Key Players in Mobile Banking
Banks, MNOs, agents, payment service providers and regulators play its own part to make the system works. Here all the above 5 participant’s participation revolves around the prime element – customer.
Figure: Key players in mobile banking
Page | 10
(A) Banks
Offer banking services
Hold float or accounts in customers’ names
Ensure compliance with financial sector regulation
Promote use of new banking channels with new clients (SME, corporate clients)
Bring customers into full banking relationships
(B) MNOs
Provide infrastructure and communications services
Acquire clients / can be super agents
Co-marketing and branding with banks
(C) Agents/Retail Networks
Perform cash-in /out functions
Can open accounts
Support marketing/sales
Customer service
(D) Payments Service Providers (PSPs)
Provide payments infrastructure
Provide IT platforms
(E) Regulators
Provide enabling environment
Protect stability of financial system
Encourage and protect behavior change
Mobile banking Ecosystem
2.2.2 Mobile Banking Ecosystem
In the whole ecosystem various parties including individuals or households, business enterprises, financial institutions (banks & other FIs), regulators (Bangladesh Bank as the central bank, BTRC), agents & distributors, merchant outlets became involved and make the money transfer and payment systems active and accessible.
Page | 11
Exhibit: mobile Banking Eco-system
2.2.3 Critical Components for Successful M-Banking
Numerous parties are involved / engaged in the whole process of mobile banking. Proper combination for the optimum outcome and for making the whole process successful is very much important.
Exhibit: Critical components for the success of M-banking
Actually, the exact mix of these components and their relative importance is a function of the strategy adopted.
Page | 12
2.2.4 Business Canvas Model
Key Partners Key Activities Value Proposition Customer
Relationship Customer Segments
- Mobile Network operators
- Banks - Distributors - Agents
Providing USSD gateway for the MFSs Partnering with Banks
- Bill Payments - Ticket Purchase
(train/bus/movie/ cricket match)
- Mobile top-up - Balance
transfer - Cash-in - Cash-out - Remittance - Insurance
payments - Traffic case
payments - Mobile banking - Merchant
payments - SMS Banking
- Customer Care Center
- Agents
- Mobile phone
users - Households - Merchant - Small
enterprises - Retail sectors Key Resources Channel
- Technological setup
- Subscribers - Agents - Distributors
- Mobile phone - Agents - ATMs - Banks
Cost Structure Revenue Streams
- People recruitment - Training - Marketing - Product design & Network built-out - Technology solution purchase or in-house
development - Maintenance fees - Transmission cost
- USSD gateway charge - SMS charge - charge on per transaction - accounts opening charge - Charge on buying tickets - Utility bills pay charge - Revenue share from MFS providers / Banks
Page | 13
2.2.5 Industry growth of mobile banking
Mobile banking in Bangladesh is increasing in a steady rate over the last few years. In March, 2016,
average daily transaction through mobile banking was BDT 608 crore and number of average daily
transaction was more than 40 lakhs. In March alone, the amount of total transaction was 18241
crore.
Figure: Total Value of Transactions (BDT, in Crore)
The client base is increasing in a steady rate and in March, 2016 number of registered clients was
34.88 million. Just from 5 million in Jan, 2013 this kind of increase is really a strong growth.
Figure: Number of Total Registered Clients (in million)
2415
4714
69368323.8
11136.3
12969.51 15928.43
18241.51
0
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From the segment wise differentiation we get that mostly cash-in, cash-out was most significant part
of mobile banking. Besides those, P2P transactions were worth mentionable.
Number of total agents also increased in a steady rate and now the number is 0.585 million.
Figure: Number of Total Agents (in million)
7,733.29
7,050.78
2,812.88
157.35 182.7 299.74
0.00
1,000.00
2,000.00
3,000.00
4,000.00
5,000.00
6,000.00
7,000.00
8,000.00
9,000.00
Figure: Transactions as of March 2016 (in crore, BDT)
Cash-in Cash-out P2P B2P Utility (P2B) Others
0.06
0.121
0.19
0.414
0.540.567
0.573
0.585
0
0.1
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Page | 15
In the same time number of total transaction has been increased in a steady pattern.
Figure: Number of Total Transactions (in million)
If we go through the MFS operator market position, we can find the sole market dominance of bKash
in that market, followed by DBBL mobile banking.
1020.4
32
44.01
75
96.15 115
121.33
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bKash58%
DBBL Mobile Banking19%
Ucash8%
Others12%
MyCash3%
MARKET SHARE BY SUBSCRIBERS
bKash
DBBL Mobile Banking
Ucash
Others
MyCash
Page | 16
2.2.6 Mobile Money Opportunity in Bangladesh
The massive improvement of technologies around the world brings an opportunity to improve the
technological platform of banking sector. The goal of the extending service of banks with improve
technology is to satisfy the desire of customers. One of the extending services with modern
technological advancement is Mobile Banking. In this process of banking customer are allowed to
access into the banking system in anytime from anywhere.
The requirements for this process are to have a mobile device and mobile network connection. The
core benefit of this mobile banking is to reach to the people who do not have the access in internet
banking or in normal banking procedure. It is mostly helpful for the people of remote areas. Millions
of people across the developing nations are relying on informal economic activities for their living
and most of these people are from the bottom stage of the pyramid. These mass populations do not
have the access into the basic financial services or the regular banking system. This mobile banking
brings the opportunity for these people to get the banking facility. Now the reason why “mobile
banking” is getting greater emphasize because more there are than 4 billion mobile subscribers who
represent 61% population of world. So it is the best way to reach among the biggest portion of world
population. Also, mobile banking needs less processing than general banking process. It helps the
banks to reduce cost, requires less storage facility. Mobile Banking is also better process among all
the other e-banking process. In internet banking there has the higher risk then mobile banking due
to hacking system. Also to use internet banking people needs extra skills to use computer. On the
other hand, to use Mobile Bank, customers’ needs to have the basic idea about how to operate
mobile in daily life. So to use this mobile banking a great level of awareness is not needed to create.
It is said that mobile banking is one of the best thing ever happened in the personal finance
management. Through this process customers will keep them attached with the banking system all
the time. This mobile banking is still in growing business. In some countries mobile banking is
become very much popular while in some countries it is just in the beginning stage. Though it is in an
emerging stage but already mobile banking has created a good level of impact in world economy.
Scope
Use of mobile money for transactions and services in a developing country like Bangladesh includes -
Domestic and international remittances
Bill payment
Payroll deposit
Loan receipt and repayment
Purchases of goods and services ranging from prepaid airtime to groceries to bus ticket to
micro- insurance
Motivation for the poor people
Financial services can help poor people who are the majority in Bangladesh forge their own paths
out of poverty in 2 ways –
Page | 17
They enable one to obtain through savings or credit sums of money large enough to invest in
income generation and asset creation (through enterprise, housing, education or training which
involves ones job market prospects).
They help reduce vulnerability to unexpected events such as accident, illness, thefts, or
droughts. In addition in many countries, poor people are forced to rely on informal financial
services, which may be unsafe or fringe formal financial products which may be expensive as
well as unsafe.
Financial inclusion bolsters both the access to resources and he ability to transform resources into
opportunities. Thus inclusion in financial sector is a critical prerequisite for effective market
participation in its broadest sense – from being able to integrate send a utility bill payment by
mobile phone instead of losing half days work in the line of the bank, to being able to integrate one’s
small business into the value chains of the larger market players.
Socio economic Agents
Population 164.4 mn (UN estimated)
Population living below $ 2 per day 82.8%
Urban population 27%
Per capita Income $ 580 (nominal)
Annual GDP growth At least 5- 6% since 1996
Labor Force 75 mn
Communication & Connectivity
Mobile Phone Penetration 44%
Mobile Phone Subscribers 76.43 mn
Mobile Network Coverage 99+%
PSTN Subscribers 1 mn
No of mobile networks 6
Internet Users <1%
Inward Foreign Remittance
Number of Workers abroad 6- 7 mn
Remittances >$10 bn (9- 13% of GDP)
Page | 18
2.2.7 Industry Life Cycle
The inception of mobile banking in Bangladesh is around 5 years back and in this time period it could
attain massive growth rate, both in terms of number of transaction and the amount of money being
transacted. Still there is a huge segment of the market is untapped and still large portion of the
population of Bangladesh is out of the monetary inclusion. So, mobile banking of Bangladesh is in
the early growth stage of the overall industry life cycle.
Figure: Position of Mobile banking in Industry Life Cycle in Bangladesh
2.2.8 Industry Value Chain
In the value chain of mobile banking, banks, mobile network operators (MNOs) and independent
MNO agents are involved. Different portion of the process is being conducted by different entity.
Exhibit: Mobile Banking Value Chain of Bangladesh
Bank Mobile Network Operator (MNO) Independent MNO Agents
Page | 19
2.2.9 Drivers of change in the industry
Most important drivers keep very much important role in determining the future growth trajectory
as well as the current standing of the industry.
Figure: Drivers of changes in the industry
2.3 Pricing Strategy
Pricing is very much competitive here and hardly there’s scope for attaining unconventional profit
without a real breakthrough move; that too for very much limited time.
2.4 Rivalry among major players
The competition is intense among the engaged companies of the telecom sector of Bangladesh. This
trend is almost same in this MFS operations too. Grameenphone, Banglalink, Robi and Airtel are the
major players of this sector and everyone is working overnight to get an edge over it’s competitors
all the time.
2.5 Marketing Strategies
MNOs offer various promotional offers and thereby promote their MFS operations. Offering bonus
for recharging (mobile top-up), offering discounts and / or cash back for using their mobile financial
services is a common practice in this sector.
Page | 20
3 REGULATORY FRAMEWORK
3.1 Regulatory Guidelines for MFS - 2011
The prime features of this guideline are:
1. MFS sector will be bank led, access of MNO as equity holder has been barred
2. MNO will remain as network operators only.
3. Banks can exercise both the subsidiary-based model as well as different business wing-type
pattern.
3.2 Pre-draft Regulatory Guidelines for MFS - July 2015
Prime features of this proposed guideline are:
1. At least 51% ownership of MFS operators will remain in the hand of banking entity.
2. Any single entity won’t be able to hold more than 15% equity in any MFS operator
ownership.
3. The guidelines were against any kind of monopoly in the market.
4. Ownership of any MFS operator has to be segregated among at least 7 different entities.
5. It instructed for subsidiary based model instead of operating MFS activities as bank’s
different wing.
3.3 Implication of new pre-draft
Proposed in July 2015, the pre-draft has been criticized from different parties, from different angle.
Main issues of criticism are:
1. Already many banks have invested money and effort in their MFS operations. Now why
should they divest specially after taking so many hassles for these years?
2. MNOs are allowed only 15% access in a MFS operation. It’s been treated as too small.
3. It may initiate conflict of interest
4. It will segregate the ownership among at least 7 different parties. So who will take the lead
and for why he will be interested to take the lead?
5. It will initiate anomaly in financial sector.
6. BB has proposed business model instead of policy guideline.
Page | 21
4 ANALYSES
4.1 PESTEL
Political factors: Political factors are not that much significant regarding this sector.
Economic factors: Stable and thriving economy will obviously increase the economic
activities and thereby an important factor for this sector.
Social factors: Not that significant.
Technological factors: It’s hugely important factor and it can even change the total trajectory
(positively or negatively) of the whole sector.
Environmental factors: Not that significant.
Legal factors: It is the single most important factor for the involvement of MNOs in MFS in
more active pattern.
4.2 Porter’s 5 forces
Bargaining power of customers: Very high.
Bargaining power of suppliers: Not that significant.
Threat of substitutes: Very high
Threat of new entrants: Very Low
Intra-industry rivalry: High
4.3 SWOT
Strength:
Expert human resources
Reach of distribution channel is in every point of the country
Weakness:
Depended on cooperation of banks
Low access upon identification process (including NID)
Opportunity:
Change in the standing of central bank (regarding allowing MNO’s equity involvement in
MFS operator)
Availability of the mobile technology even in rural areas makes a bigger market available for
mobile banking to expand.
Acceptance of new technology by the user
Threat:
Revenue stream mainly comes from money transfer
Who is withdrawing money it can’t be traced
Page | 22
Traditional baking risk like, credit risk, market risk and liquidity risk are also present in e-
banking sector
4.4 Strategic Group Mapping
This strategic group mapping is based on MF services provided by mobile network operators in
Bangladesh vs number of subscriber they have. Y-axis shows MF services and X-axis shows number
of subscribers. Currently in Bangladesh there are almost 13 types of mobile financial services that
are provided by mobile network operators under m-commerce term. Here GP has the highest
number of subscribers and also providing maximum number of mobile financial services.
GP
Banglalink
Robi
Airtel
C.Cell T.Talk
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
80.00%
0 10 20 30 40 50 60
Mo
bile
Fin
anci
al S
erv
ice
Number of Subscriber in million
Strategic Group Mapping
Page | 23
5 CONCLUSION
5.1 Future Growth Prospect / Investment Attractiveness / Growth Trajectory Future prospect of MFS (including mobile banking) in Bangladesh is pretty bright. Because of M-
banking’s great success, it’s very much crucial in the context of MFS of Bangladesh. Due to the
volatile, indecisive, incomplete and un-conclusive stance from the regulatory authorities, MNOs’
straight & closer involvement in MFS operations is somewhat bleak, for now. If regulators of this
sector allow the access of MNOs in the equity / ownership of the MFS operators, it would be an
exclusively positive move from MNOs’ perspective. Otherwise, in terms of innovation and new
product development, MFS still has good prospect for the MNOs of Bangladesh.
5.2 Recommendation After going through the whole industry related aspects, we are proposing the following
recommendation:
1. Balanced policy formulation by Bangladesh Bank: Preparing a well formulated policy
regarding MFS, which will create no anomaly and conflict of interest among the involved
entities.
2. Taking the issue of great distribution channel of MNOs in to consideration in a more active
manner for achieving financial inclusion in a greater scale.
3. Greater, more active and more innovative role of MNOs in accessing more beneficial impacts
of MFS beyond just money-transfer.
Page | 24
REFERENCES
1. http://www.thedailystar.net/round-tables/regulatory-guidelines-mobile-financial-services-
mfs-bangladesh-133390
2. http://www.thedailystar.net/business/banglalink-keen-expand-mobile-financial-service-
784465
3. http://www.dhakatribune.com/business/2015/oct/04/bringing-mfs-providers-under-
platform-remains-challenge
4. http://www.thedailystar.net/business/mobile-cash-transfer-hits-14b-month-101008
5. https://www.bb.org.bd/fnansys/paymentsys/mfsdata.php
6. http://www.cashlearning.org/downloads/mfsinbangladeshapril2015.pdf
7. https://www.bb.org.bd/fnansys/paymentsys/mobilefin.php
8. http://futurestartup.com/2016/04/18/inside-bkashs-big-remittance-move/
9. http://futurestartup.com/2015/06/24/mobile-banking-bkash-and-future-of-mobile-financial-
services/
10. http://www.grameenphone.com/personal/digital-services/mobile-financial-services
11. http://www.banglalink.com.bd/en/services/mobile-financial-services/
12. http://www.bd.airtel.com/personal/products-services/mcommerce
13. http://www.robi.com.bd/bill-pay-service-from-robicash-point?lang=eng
14. http://www.robi.com.bd/digital-service/?lang=eng
15. http://www.citycell.com/index.php/services/mobile_banking
16. http://www.teletalk.com.bd/dynamicLayout.jsp?page=40003&menuItem=44004
Page | 25
APPENDIX
QUESTIONNAIRE
Research topic: "MFS in Bangladesh - MNO perspective"
Q1 : Around what percent of revenue of Banglalink comes from the operations of MFS? [We
don’t need any exact revenue figure, just a rough estimation of range like – around 2% to 7%
will suffice]
A: We cannot make a comment on it, but we can say that a small portion of revenue is being
earned from MFS Operators since it is mostly based on revenue sharing arrangement where
the maximum portion goes to the Distribution Channel while the rest is being split between
the MNOs and MFS Operators.
Q2 : How many Banglalink sim is registered for mobile banking (with DBBL mobile banking,
bKash, UCash, mCash, IFIC mobile banking, MyCash)? [If bank-wise specific number is not
possible then just a rough estimation of range about the total like – around 2 to 4 million will
suffice]
A: Confidential Data, for better understanding you can visit the following website
https://www.bb.org.bd/fnansys/paymentsys/mfsdata.php and get the proportion according
to the subscriber data available in BTRC website.
Q3 : What is the mechanism of Banglalink’s mobile banking partnership with bKash, UCash,
mCash etc? How it works? What’s the cost structure? What’s the fee structure for providing
service as MNO? [A rough sketch or framework would do]
A: It is a revenue sharing model. MFS operators usually take service charge from customers on
specific transactions. As defined earlier that a maximum portion of ranging 80% to 90% goes
to the distribution channel and the rest is being split between MNOs, MFS Operator and
Technical Platform providers (where applicable). The cost components for MNOs would be
the network utilization cost, distribution channel cost (as applicable) and overhead cost.
Q4 : So far mobile banking in Bangladesh is a pure bank-led model. It actually is a result of
Bangladesh Bank’s regulatory guidelines for Mobile Financial Services (MFS) in 2011. BB’s
this stance is going to be shifted and now a new draft is going to be formulated, where
MNOs might get access in the equity (around 15%). What’s your observation regarding these
policy related issues?
A: It is a good sign that now the Central Bank has provided some focus to the MNOs to become
stakeholder and we are happy with it, but the 15% stake does not bring a justified business
case for anyone since as per the draft any stakeholder can have maximum 15% equity share.
We believe that it should be bank-led, but for maximizing the benefit of the ecosystem the
sharing of stake should have been 51% (banks) and 49% (MNOs or any other entity).
Q5: How you see Banglalink’s MFS operations in upcoming 5 to 10 years? How you want to
spread?
Page | 26
A : From our Management perspective, MFS has a huge focus and for the betterment of the
society we want to be a part of the financial inclusion, while ensuring business. We are yet to
receive the finalized new MFS guideline which may guide us to new course of action down
the time.
Q6 : How you see the prospect of overall MFS sector of Bangladesh in upcoming days?
A : Very promising, since maximum population is not entitled to banking and financial inclusion
through MFS is a bright idea towards digitization of the economy.
Q7 : Do you think more involvement of MNOs will be a positive move for the well-being of MFS
sector and financial inclusion?
A : Yes, since prior to the launch of mobile banking or MFS guideline MNOs has been providing
MFS in form of bill payments, railway ticketing and as an industry we have made a stand that
certain things can be done correctly and conveniently by the MNOs.
Q8 : What kind of problems you are facing (if any) for more involvement in MFS?
A : Since MNOs are regulated by BTRC and MFS Operators are regulated by Central Bank, but in
the total value chain the chemistry of banks and MNOs to work together is a must for a
successful MFS and these two regulators need to align them first for the growth of the
industry.
Q9: Is there any recommendation regarding MFS sector?
A : Till date we see MFS as a mode of sending and receiving money. There are huge avenues of
payments, collections, credits which are absent in this industry and a hybrid model between
Banks and MNOs can always work for developing the untapped service portfolios.
* The collection of information is for academic research purpose only.
