MFS Reaches Turning Point: BREAK THE BOUNDARY

FARUK AHMED

?Mobile payment is not a charity, but a necessity in everyday life. Need makes the frog jump. So, payment through mobile phone is jumping day by day.

?A new global market study says the global mobile banking industry is expected to reach $1,824.7 million by 2026, while digital payment volumes are set to increase by more than 80% from 2020 to 2025, from about one trillion transactions to almost 1.9 trillion, and to almost triple by 2030.

?Digital remittances are expected to jump 45% between 2021 and 2025, to $428 billion, according to a report from Juniper Research. After dipping in 2020, US B2B payments are set for a second consecutive year of growth in 2022, with volume forecast to reach $28.611 trillion.

?By 2025, another study says over 7 in 10 smartphone owners will be mobile P2P payment users, with the potential to onboard two untapped audiences: Gen Zers gaining spending power and security-minded consumers who have avoided digital payments due to safety concerns.

?One of the main reasons behind the escalating growth of mobile payment growth is that the Coronavirus outbreak is prompting second thoughts about reaching for cash. As consumers turn to contactless payment methods, retailers are aligning their hybrid shopping experiences and point-of-sale technology to match.

?Mobile commerce recorded the most significant retail sales growth (12.2%) in 2021, beating traditional e-commerce and in-store shopping. Driving this trend is the estimated 292 million people expected to have their own mobile devices by 2024.

?Retail mobile commerce sales hit $359.32 billion in 2021, an increase of 15.2% over 2020. By 2025, retail mobile commerce sales should double to $728.28 billion. Insider Intelligence predicts this volume to hit $620.97 billion, or 42.9% of e-commerce, in 2024.

?The events of the past 18 months have pushed consumers to quickly incorporate new payment technologies into their daily lives. Pandemic-related health concerns and public safety initiatives have led to a greater demand for touchless payment options and services, with one study showing that 35% of consumers are more likely to use contactless payments for in-store purchases now than they were before the pandemic.

And this is changing the purchasing patterns with the increasing adoption of mobile wallets. Both retailers and consumers continue to adapt and adjust. From offering services to migrant workers desperate to send wages home, to giving retailers new ways to provide instalment financing, to arming businesses with new cyber security tools, industry experts say mobile payments will keep growing in 2022.

In Bangladesh, mobile payment is leaning towards mobile-first channels thanks to the impressive performance of 15 mobile financial services (MFS) operators offered by banks. Bangladesh Bank data shows that MFS transactions increased to around Taka 5.35 trillion during the last 11 months ending January 2021, from Taka 4.10 trillion during the same period of the previous 11 months.?

?Bangladesh has over 170 million cell phone subscribers and over 112 million internet subscribers, and MFS has been the go-to solution in digital bill payments, online tax returns, academic institution registration, digital health services, and online banking systems. Government bills and payments through MFS rose by a staggering 132 per cent in October 2021 compared to September earlier the same year.

?Fueled by the pandemic, the MFS is growing day by day with its multidimensional impacts on rural people’s lives since 2011. More than 1o million people are now using mobile payment services across the country who transacts over Taka 10 billion a day mostly through bKash, the leading MFS operator in Bangladesh and the largest player across the globe.

?The unbanked population, comprising 85% of adults of Bangladesh, have embraced MFS as a unique platform for easy and quick payment methods. When the Coronavirus hit the countrymen in 2020, Bangladesh Bank declared MFS as an emergency service to help people meet their urgent needs safely. MFS providers also helped people in those bad days with their services at very nominal charges.

?Paying for goods and services has never been more convenient than using a mobile payment system. This has created a new group of customers who are not unbanked but feel comfortable shopping with mobile payment. Younger generations, especially, are more inclined to reach for a smartphone rather than a wallet when it comes to making payments.

?Not only millennium consumers, 80 per cent of the consumers who are older than 66 years and above also will increasingly adopt digital payment channels in the near time, according to a study by Capgemini Research Institute conducted on a large number of consumers. As a result, merchant payments through MFS, which include payments to retail shops and e-commerce by customers, surged by a massive 230 per cent during the period.?

Even though cash and credit cards are still widely used by many consumers, MFS tools such as bKash, Nagad or Rocket promise to replace current payment methods in the long run. Payments are growing faster than the global average and are allowing millions of unbanked people to gain access to goods and services without cash.

?bkash, the leading MFS player is leading the curve with a global standard app and seamless service, which enables customers to make payments faster and be able to pay in more places.

?Now more people are using the bKash app to meet their daily needs - buying essentials from roadside markets, branded goods from shopping malls or online, goods from big merchandisers living far away, paying utility bills and school fees and using in coffee shops, crowded kitchen markets and even sending gifts to their relatives through third-party service providers.

?What essentially started as an initiative to include the unbanked and under-banked rural population in the formal economy, MFS has now become an essential part of the lives of all strata of citizens of Bangladesh. The shift driven by necessity is consistent with the changing shopping culture of the people of Bangladesh, who are graduating to the citizens of a developing economy with higher per capita income.

?But the role of MFS is still limited within a boundary designed to promote financial inclusion only. So, the country’s MFS industry is now a turning point. The question is: Should we break the boundary???

The Turning Point

?MFS has now reached a turning point as millions of health-conscious city dwellers and merchandisers; shoppers and retailers; and also remittance senders and receivers, both in urban and rural areas are feeling comfortable with mobile payment.

?Rupali, a mother of two minor sons residing in the city’s Mohammadpur area is one of them. She has been using the bKash app to buy foods, goods and medicines to avoid virus contamination since Covid-19 hit Bangladesh in 2020.

“Buying goods through bkash app is easy, fast and secured as most shops and even street vendors and sellers in kitchen markets accept payments through bKash”, she said with a smile.

?Rupali was familiar with bKash payment in 2012 when she lived in her village under Matlab South Upazila home when the operator made ignited a revolution across the country by bringing millions of poor and low-income unbanked people into the mainstream banking channel in line with the government’s strategy to boost financial inclusion and spur economic growth.

?“ When I was in my village home, I used bkash to receive money sent by my brother-in-law from Saudi Arabia without visiting a bank branch far away from my home”, she said.?

?Rupali shifted her family along with her bkash experiences to Dhaka city in 2019, to educate her children in a better school. Her better experience with bKash shows that digital payments, once born out of convenience, have become a necessity for most people.

?bkash offers a number of lucrative packages that encourage people to use the bKash app to buy goods from shops, pay utility bills and remit money from abroad. The main reason for bkash’s success is that it is providing its customers one-stop solution for all kinds of fund transfer and payment services.

?As people of all classes are adopting the bkash app, retail shops in the city’s streets to decorated shopping malls have deployed QR codes to accept the bKash app. Even in kitchen markets, fish sellers and street vendors are accepting bKash payments.

?“Customers avoided fish market and handling cash. At one point, I started to deliver fish to the doors of my regular customers and receive payment through the bKash app. It magically rebounded my business within a short time”, Nahid, a fish seller at Khilgaon fish market said.

?Paying for a cup of coffee with a smartphone instead of a credit card is gaining prominence among consumers -- and is disrupting their spending patterns and consumption habits, according to new research co-written by a University of Illinois expert who studies operations management.?

In Bangladesh, the global wave has hit young consumers. A lot of decorated tiny coffee shops, decorated food restaurants and one-stop shopping centres have been set up over the years in city and rural town areas across the country. Youngsters are the main customers of such shops who are now preferring more to pay with mobile phones or credit cards.

?Barber Taposh Biswas of Gentle Hair Cut in the Taltola area of Khilgaon realized these changing trends. So, he didn’t take the risk of losing customers and deployed a QR code in his shop to accept bkash payment.

?“ Some customers often want to pay through the bKash app and sometimes, our busy customers enter my shop leaving their wallets at home. Since accepting bKash payment, my sale volume has been growing remarkably”, Taposh said.

?And this growth in mobile payment adoption is happening not only in rural remote areas or slumps but also in skyscrapers to high streets as most people can’t live without a mobile phone, and most of them have found mobile payment an impeachable part of their lives.

?In the ongoing Ekushey Book Fair, most stalls have deployed QR codes to accept bkash payments. A good number of booksellers said more people are paying their money through the bKash app. Even salesmen of ten top branded book stalls said more than 30% of payments against sales are being conducted through the bKash app.??

?Industry experts see the growing adoption of mobile payment by a large segment of customers who are not unbanked as a great revolution in the country’s growing economy which is built on?a successful MFS revolution started in 2011 to bring millions of unbanked into the formal economic activities.

?Time to Break Boundary

?Despite the growing adoption amid higher demand from different multi-class consumers, the country’s MFS players are unable to satisfy mass people due to some boundaries imposed by regulations. So, a lot of possibilities to spur economic growth remain unexplored in Bangladesh.

?Industry experts say this is the time to view MFS more as a platform for all segments of the pyramid instead of only the bottom segment. The natural adoption of the MFS that took place due to compelling circumstances of the pandemic should now be capitalized by the regulator.

?The first impediment to the growth of the MFS industry is the limit of transactions, particularly cash-out amounts. As per central bank guidelines, daily transactions up to Tk 20,000 can be made through Bangla QR. The existing limit discourages merchants, SME entrepreneurs and also shop owners to enjoy the full benefits of mobile payments.

?The 'Cash Out' limit has correlations with digital payroll solutions and inward foreign remittances. A higher limit would encourage the recipients of both. Considering the detailed KYC of the bank account and verified account of MFS, bank/card-to-MFS fund loading should be enhanced from the current limit as a risk reduction is ensured at both ends.

?Customers willing to avail of higher transaction limits than usual should be able to do so by submitting additional identity details to the MFS provider. Such customers can be listed as a separate group and their transactions can be monitored separately.

?In view of the experience during the pandemic, the need for MFS account for children in the age group of 14 to 18 has been felt all across. MFS account for the mentioned age group should be approved with reasonable lower transaction limits.

?The Bottom Lines

?Mobile payment is not a charity, but a necessity in everyday life. It is supporting the development of digital economies and is driving innovation—all while functioning as a stable backbone for our economies. 2021 was the year for the growth of MFS. In 2022, all efforts must be made both by the regulator and the providers to ensure increased digital transactions by all strata of society.

So, the time has come to break the boundary.

The article was published in DIGITAL FINANCE, a monthly special of THE BANGLADESH EXPRESS on March 2022. For more visit: https://www.thebangladeshexpress.com/?page=monthly-publications&pub_month=2022/02