Faruk Ahmed :
Despite some setbacks, many people nowadays are using mobile financial service (MFS) payment tools like bKash, Rocket, Nagad to buy food, medicine and other essentials from their homes to avoid virus contamination. The coronavirus has totally upended the supply and demand markets. Safe distancing has become the new norm and work from home has become the default option for many companies and organisations looking to strike a delicate balance between safety and productivity. As a result, it accelerated the adoption of digital payments across many industries.
In Bangladesh, millions of people under lock down find mobile financial service (MFS) as a boon to them as it helps them to pay bills, buy medicines and foods without visiting markets and contacts that are the main reason for virus contamination. With increasing adoption of mobile and digital banking channels since 2011 after the entrance of bkash, Bangladesh has leapfrogged into a mobile innovation power house in order to jump start economic development, by passing traditional banking services. This leads the digital economy drive leading to a rise in cashless transactions. And thus Bangladesh is moving fast towards a less cash society mostly led by mobile financial services (MFS) and digital payment service operators with its dream to become cash less society.
Bangladesh with its robust MFS industry, which experienced an astronomical 120 percent growth a year since its onset, has a bright opportunity to leverage the advantages of cashless society. Introduction of QR code has already added fuel in the process and helping Bangladesh to move faster on the road to a cashless society. As the demand for cards is increasing day by day commercial banks are installing more booths in every corner across the country to attract more digital customers. Meanwhile, smartphone penetration now stands at over 35 per cent in Bangladesh and with 4G networks smartphones users are using MFS services particularly bkash service to make their payments digitally.
The government is encouraging people to adopt digitalization in all operations and promoting fintech firms and technology innovations in its financial landscape that reduces the use of cash. In the pandemic time, the government has disbursed millions of taka as aids and allowances to people across the country through mobile financial service operators. This helps MFS innovations to grow and boost financial inclusion to drive economic growth. With increased access to person-to-person (P2P) payment service, more consumers across the country now prefer to use mobile applications when paying other people as opposed to cash.
MFS operators experienced robust 80.84 per cent growth in government payments thanks to the government’s new policy to reduce direct cash payments that can stimulate coronavirus attack. Now the government has asked all factories to disburse workers’ salaries through MFS to reduce the risks of virus contamination. In social front, the landscape is evolving thanks to availability of ATM booths everywhere and mobile payment acceptance by most shop owners. Millions of young consumers are avoiding cash and using cards to buy foods in restaurants, pubs and shopping malls, which has pushed up digital transactions day by day.
The volume of e-commerce is increasing thanks to world standard payment services offered by MFS operators under a conducive regulatory environment and proactive role the government. In the pandemic, people have learned that mobile payment is easy, secured and convenient service. More than 30 per cent banks have Online Payment Gateway Service for e-commerce payment processing, while more than 928 online shop owners and merchants are selling products using bank’s payment gateways.
Industry experts say Bangladesh has enormous potentiality to turn rural economy into a digital economy as the rural population is ready to learn, with one person receiving benefit soon the rest of the villagers follow and thus literacy rate is increasing. The explosive growth of use of mobile money has had the unintended benefit of increasing public involvement in the formal financial system, including expansion of savings accounts in the regulated financial intermediaries.
One of the major pillars on which this MFS industry is standing on is the simplified KYC introduced by Bangladesh Bank and the BFIU. As per BB guidelines, banks and MFS operators are required to periodically update the KYC records. This is a part of banks due diligence framework. So, the top risk for the Bangladesh government is that transaction through unregulated MFS channel may poses risks of money laundering for financing terrorism, which ultimately will hit economic growth and Digital Bangladesh Vision. To mitigate risks and frauds in mobile banking, strict enforcement of regulation is urgent.
Today, mobile money operators process over a billion dollars a day, representing vital and life-sustaining transactions of over 690 million mobile money accounts. In Bangladesh, MFS has become a game changer in poverty reduction through speeding up financial inclusion. The most the MFS customers are poor and low income citizens who are in front of the Bangladesh journey towards a cashless society. Fraudulent activities may discourage them to stay in the road. Bangladesh Bank should strictly monitor KYC protocol in MFS account to reduce risks of frauds and money laundering.
(Faruk Ahmed is is a senior journalist. Email: [email protected])
