‘Interoperability needed to break monopoly of MFS market’

The Mobile Financial Services (MFS) industry has been in the country for 12 years, but the market is still monopolistic due to its high commission structure.

Also, the time has come for a market correction by restructuring the pricing and allowing interoperability to break the monopoly.

These observations came from Tanvir Ahmed Mishuk who leads Nagad–one of the fastest growing MFS providers–as its managing director.

In an interview with The Business Standard, 38-year-old Mishuk, the youngest top executive of the MFS market, said commission charges have been high since the inception of the industry in 2011.

MFS operators charge customers 1.85 percent for cash-out mobile transactions; which is the highest in the world.

"The transaction charge can be brought down to half of the current rate," said Mishuk, a passionate business magnate, sprightly investor and philanthropist.

A combined effort is needed for a price correction because one operator alone cannot reduce the charge, he said.

Most MFS providers are dependent on agents. If one operator reduces a commission charge for agents, they will not sell the product of that operator.

All the operators agreed to restructure the pricing, except for one significant market player, Mishuk, who successfully managed numerous business ventures in more than 17 countries, he claimed.

So, the Bangladesh Bank should intervene to set the price, he said.

Mishuk–who is renowned both nationally and internationally for his admiration of a change management journey for his companies, and adaptation of culture for data-driven decision-making–said 30 banks got licences to operate MFS at the beginning of the industry but only 15 of those banks are now in operation.

"At the beginning, one operator held 95 percent of market share. Still, the market is monopolistic as one company is holding more than 49 percent share due to price structure," he said.

Agents are given higher commissions which are charged from customers. So, if the pricing structure is revised, it will benefit customers, he added.

Before restructuring price structures, interoperability is needed, said the Nagad managing director, who is now successfully leading diversified companies in different industries such as: telecommunications, ICT, ready-made garments, fintech, human capital, food and beverage, etc.

"Interoperability among MFS providers will give customers freedom to switch operators like mobile operators. Banks allowed interoperation in ATM transactions; which increased convenience for customers," he said.

Nagad, a joint venture of the Bangladesh Post Office and Third Wave Technologies, entered the market and gained customers at a faster pace; grabbing second place within seven months of its inception.

The company went into operation in March last year and overtook Rocket, an 11-year-old MFS of Dutch-Bangla Bank, within seven months in terms of number of customers. The total number of active users of Nagad currently stands at around two crore.

The postal department owns a 51 percent stake in the company and the rest is owned by Third Wave Technologies, a private entity.

Currently, bKash is the largest MFS provider in the country, with 4.5 crore registered clients as of June this year. It holds 48 percent of market share while Nagad has around 30 percent, Rocket around 20 percent, and others hold the rest. 

Explaining the reasons behind the faster growth in the number of customers, Mishuk said, "We gained 30 percent of market share within a year and a half of launching as we brought products after assessing market demand."

He said when Nagad started its journey, 66 percent of people were excluded from financial inclusion. Despite having a huge market, banks could not do business due to traditional products; like only having the option to send money. Banks were following the banking model which was not very viable for the business.

However, Nagad, from day one, started a combined business model with bank and mobile operators which helped it gain second place in the MFS market within this short period.

Product diversification and simplifying transaction processes helped Nagad grab second position when 30 banks failed to penetrate the market due to traditional products and services.

"Previously, opening MFS accounts would require filling out a two-page form, as well as providing a national identity card photocopy and a photo which cost customers Tk100-150. Moreover, filling out the form was not so easy for users who lived in remote areas of the country. It used to take 10 days to complete the process of opening an account," Mishuk said.

Nagad looks to turn into a digital bank

From the very beginning, Nagad introduced a digital know your customer (KYC) and customers could open accounts within a minute by taking a photo of their national identity card and a selfie. Customer information is verified through the Election Commission.

When Nagad introduced a digital KYC, it was criticised on the market for not having a digital KYC policy. But, within the next six months, all operators started to follow Nagad by introducing a digital KYC, Mishuk, who is also the chairman of Sigma Telecom, explained.

The simplification of account opening was the main contributor to the rapid growth of numbers of Nagad users, he reflected.

MFS operators have saving products which are just for showing off because four percent interest is given on a deposit and of that, 1.8 percent is deducted as a cash-out charge. So, ultimately interest stands at less than two percent.

However, Nagad started to offer a net 7.5 percent interest on deposits and refunds for cash-out charges. So, customers are getting the real interest rate.

This is how Nagad identified the real needs of customers and designed products accordingly.

The latest addition of Nagad is a biometric account in collaboration with mobile operators. Every mobile operator has a biometric national identity against mobile SIM cards which can give MFS operators access to information about the customer.

So, Nagad used the information of telecom operators to open MFS accounts. In this case, Nagad is allowing customers to open accounts through their mobile number and other information is collected from the telecom operators.

This process aims to reduce hassles for customers and enable them to open accounts within a second; which is Nagad's prime objective.

The company started this biometric account opening process through Teletalk. Then it joined hands with Robi and Grameenphone. Now, Nagad is negotiating with Banglalink in this regard.

Nagad is the first in the world to have started the model of opening accounts via telecom operators. It set its foot in a mature market. So, it had to go through in-depth analysis about security loopholes of existing operators, customer needs and diversification of products before entering the market.

It came up with secured products so, less than one percent of complaints the operator receives are about account forgery by users.

Tanvir Ahmed Mishuk, managing director of Nagad. Photo: Courtesy

Mishuk, who has been leading the state-run MFS since the beginning of its journey, completed his education at North South University. Before joining Nagad, he was in a leading position at Sigma Group, a multidisciplinary industrial and business house in Bangladesh.

Sharing his vision, Mishuk said he wants to make Nagad the national wallet within the next year.

"People do not need to carry a national identity card if they have a Nagad account. People will be able to avail all kinds of government services through Nagad," he said.

Currently, 33 percent of people are being served by banks and MFS. Nagad is aiming to bring 70 percent of unbanked people under financial inclusion within the next two years, Mishuk added.

The total number of registered clients under MFS stood at 8.87 crore in June. Of them, 3.85 crore were active account users.

The average daily transactions in June were around Tk1,500 crore, according to the Bangladesh Bank's data.