Gazi Anowar :
Nagad, a digital financial service of Bangladesh Postal Department, is likely to come under the regulatory supervision of Bangladesh Bank (BB) to avoid complexities and maintain stability of sensitive digital financial services industry.
The Nagad operation has come under the scrutiny as it is modelled like mobile financial service without obtaining license from Bangladesh Bank, the financial regulator of the country and offering higher transaction limit for its customers, which is several times higher than the limit set for 18 other BB licensed operators.
Industry experts see that the higher transaction limits offered by a particular operator is bound to increase risks of Money Laundering and Terrorist Financing destabilize the country’s fastest growing Mobile Financial Services (MFS) industry.
With its multidimensional effect on financial inclusion, MFS has become an effective tool to reduce poverty and push up economic growth. The industry has an exponential 150 percent growth over the years since 2011 thanks to impressive performance of 18 operators offered by commercial banks with more than 50 million customers across the country, mostly poor and low-income people.
The Finance Ministry recently communicated with the Ministry of Post and Telecommunications (MOPT) stating that a complex situation has been created in the financial market by its service Nagadand suggested to bring it under the central bank’s regulatory framework.
The Finance Ministry has also suggested that the MOPT may create a subsidiary company with majority shareholding by Bangladesh Postal Department and bring the financial services offered by Nagad under regulatory oversight of Bangladesh Bank.The Finance Ministry in its letter to the Post and Telecommunication Minister reiterated the role of Bangladesh Bank as the sole regulator for payment services of the country.
In line to the suggested measures defined in the letter from the Ministry of Finance, the Ministry of Post and Telecommunications has recently asked the Postal Department to work on it and find the ways to fulfilling the regulatory requirements in line with the Finance Ministry proposal, a highly placed ministry official said.
After the directive from the ministry, the Postal department has formed a committee to find a good way to place the Nagad under the regulatory framework. The committee will also examine the possibility of forming a subsidiary company in line with the suggestion of Finance Ministry, officials said noting that they will soon submit their recommendations to the ministry.
Nagad is virtually a mobile financial service (MFS) outsourced by Bangladesh Post Office to Third Wave Technologies that had entered the market in September 2018 offering mobile payment services as per the Postal Act. But, Nagad allows its customers across the country to make 10 transactions a day amounting to a total of BDT 250,000in contrast to a limit of BDT 15,000 set for 18 MFS operatorsby Bangladesh Bank. These in effect have seriously disturbed the level playing field in theMFS sector causing concern of the MFS providers and their investors.
Bangladesh Investment Development Authority (BIDA) has also expressed their concern over the discriminatory payment transaction limit offered by identical business model under two different sets of regulations. BIDA speculates that such arrangements may disturb the conducive investment environment currently enjoyed by Bangladesh.
Bangladesh Bank recently requested the Postal department to follow financial regulations in case of its digital financial services through its third party digital platform Nagad in order to keep financial market stable and sound.
“Bangladesh Bank is the regulator of the financial market and we must follow the central bank’s rule to keep the market stable and competitive”, Ashoke Kumar Biswas, Acting Secretary to the Ministry of Post& Telecommunication said when he was asked regarding the concern over Nagad operations.
“We can’t ignore regulations. Nagad financial service is now being operated under the Postal regulations that permits higher transaction limit. We are trying to find the right way to resolve complexities,” he said. “The ministry will take necessary steps based on the recommendations of the Postal Department,” he added.
Bangladesh Financial Intelligence Unit (BFIU) expressed concern in a recent meeting, regarding money laundering opportunities due to high transaction limit of Nagad.”Money flow through any channel should be regulated by a single authority as generally practiced all over the world.Otherwise, it might allow money laundering and create serious catastrophic in financial markets. The recent global financial collapse is the bright example”, said a top central bank official.
“Pricing in payment system especially in mobile banking is very sensitive.We should be mindful,not to allow any distortion ofthe conducive environment created in MFS industry over a period of almost a decade”, he said.
“Alternatively, Bangladesh Bank can set revised transaction limits considering the consistent GDP growth over the last decade, salary increase and inflation to align identical business model for all”, he concluded.
Nagad, a digital financial service of Bangladesh Postal Department, is likely to come under the regulatory supervision of Bangladesh Bank (BB) to avoid complexities and maintain stability of sensitive digital financial services industry.
The Nagad operation has come under the scrutiny as it is modelled like mobile financial service without obtaining license from Bangladesh Bank, the financial regulator of the country and offering higher transaction limit for its customers, which is several times higher than the limit set for 18 other BB licensed operators.
Industry experts see that the higher transaction limits offered by a particular operator is bound to increase risks of Money Laundering and Terrorist Financing destabilize the country’s fastest growing Mobile Financial Services (MFS) industry.
With its multidimensional effect on financial inclusion, MFS has become an effective tool to reduce poverty and push up economic growth. The industry has an exponential 150 percent growth over the years since 2011 thanks to impressive performance of 18 operators offered by commercial banks with more than 50 million customers across the country, mostly poor and low-income people.
The Finance Ministry recently communicated with the Ministry of Post and Telecommunications (MOPT) stating that a complex situation has been created in the financial market by its service Nagadand suggested to bring it under the central bank’s regulatory framework.
The Finance Ministry has also suggested that the MOPT may create a subsidiary company with majority shareholding by Bangladesh Postal Department and bring the financial services offered by Nagad under regulatory oversight of Bangladesh Bank.The Finance Ministry in its letter to the Post and Telecommunication Minister reiterated the role of Bangladesh Bank as the sole regulator for payment services of the country.
In line to the suggested measures defined in the letter from the Ministry of Finance, the Ministry of Post and Telecommunications has recently asked the Postal Department to work on it and find the ways to fulfilling the regulatory requirements in line with the Finance Ministry proposal, a highly placed ministry official said.
After the directive from the ministry, the Postal department has formed a committee to find a good way to place the Nagad under the regulatory framework. The committee will also examine the possibility of forming a subsidiary company in line with the suggestion of Finance Ministry, officials said noting that they will soon submit their recommendations to the ministry.
Nagad is virtually a mobile financial service (MFS) outsourced by Bangladesh Post Office to Third Wave Technologies that had entered the market in September 2018 offering mobile payment services as per the Postal Act. But, Nagad allows its customers across the country to make 10 transactions a day amounting to a total of BDT 250,000in contrast to a limit of BDT 15,000 set for 18 MFS operatorsby Bangladesh Bank. These in effect have seriously disturbed the level playing field in theMFS sector causing concern of the MFS providers and their investors.
Bangladesh Investment Development Authority (BIDA) has also expressed their concern over the discriminatory payment transaction limit offered by identical business model under two different sets of regulations. BIDA speculates that such arrangements may disturb the conducive investment environment currently enjoyed by Bangladesh.
Bangladesh Bank recently requested the Postal department to follow financial regulations in case of its digital financial services through its third party digital platform Nagad in order to keep financial market stable and sound.
“Bangladesh Bank is the regulator of the financial market and we must follow the central bank’s rule to keep the market stable and competitive”, Ashoke Kumar Biswas, Acting Secretary to the Ministry of Post& Telecommunication said when he was asked regarding the concern over Nagad operations.
“We can’t ignore regulations. Nagad financial service is now being operated under the Postal regulations that permits higher transaction limit. We are trying to find the right way to resolve complexities,” he said. “The ministry will take necessary steps based on the recommendations of the Postal Department,” he added.
Bangladesh Financial Intelligence Unit (BFIU) expressed concern in a recent meeting, regarding money laundering opportunities due to high transaction limit of Nagad.”Money flow through any channel should be regulated by a single authority as generally practiced all over the world.Otherwise, it might allow money laundering and create serious catastrophic in financial markets. The recent global financial collapse is the bright example”, said a top central bank official.
“Pricing in payment system especially in mobile banking is very sensitive.We should be mindful,not to allow any distortion ofthe conducive environment created in MFS industry over a period of almost a decade”, he said.
“Alternatively, Bangladesh Bank can set revised transaction limits considering the consistent GDP growth over the last decade, salary increase and inflation to align identical business model for all”, he concluded.
