Digital financial services can transform Bangladesh

Digital Bangladesh is arguably the most talked about term in recent times whenever there is any discussion on development. And the idea of Digital Bangladesh is not limited to simply digitising certain citizen services.

The emergence of technology aided us in overcoming many barriers to development in a densely populated developing country where massive investment in infrastructure is not always a feasible choice. Bringing the entire population together on the development highway can dramatically change the pace of development by dissolving the digital divide in an acutely capitalist socio-economic setting such as the one in Bangladesh. Inclusion is a key imperative.

Since the beginning of the Digital Bangladesh journey, we have achieved many milestones in areas of citizen services. The underlying enabler in making that work was the foundation of mobile financial services (MFS) that has been made available to the public.

Among many components of the digital financial services (DFS) platform, we have made comparatively significant progress only in the areas of MFS in past few years. But the MFS is still at its infancy in terms of product composition.

As of November 2015, some 96 per cent of transactions involved money transfers, of which 79 per cent was cash in/cash out type transactions and 17 per cent was people-to-people (P2P) transactions.

Other products include private salary payments (0.9 per cent); utility payments (0.7 per cent); and others (2.4 per cent). A tiny volume (0.03 per cent) also represented inward remittance.

Though it is important for MFS to thrive in order to expand our digital inclusion net to involve more and more people with financial inclusion programmes, we must also ensure that the right guards, processes and policies are in place to mitigate risks.

We still are going through the learning curve in getting MFS right. The exposure of MFS towards criminal abuse is a major roadblock to its expansion. A comprehensive platform for all digital financial services is just missing.

None of the commercially available services is comprehensive like Google Pay. With Google Pay, users can both withdraw and deposit money in an ATM. Boarding passes and event tickets can be stored in Google Pay. Google is also planning to add QR codes to initiate a peer-to-peer payment. Users can use their PayPal to pay on Google Pay.

This means a user’s PayPal account will automatically become enabled on Gmail, the Google Play Store, YouTube, or anywhere that Google offers a payment service, without the need to log in again.

Google Pay could also be used in e-commerce sites, hotels, ride apps like Lyft, etc. Users can use Google Pay on smartwatches. Google Pay works with TrasnferWise and it allows users to hold and manage money in 27 different currencies. WorldRemit, an international transfer service works with Google Pay and it allows users to transfer funds around the world for a small foreign exchange rate markup and processing fee.
Bangladesh does not have this service as yet.

Kenya has been one of the greatest success stories in implementing MFS quite effectively. Kenya achieved 89 per cent score for financial inclusion. Access to any form of formal financial service has dramatically increased there from about 27 per cent to over 75 per cent. The number of Kenyans not using any form of financial service declined from 25.1 per cent in 2013 to only 17.4 per cent in 2016.

According to the World Bank, access to finance is critical for lifting people out of poverty. Having bank accounts and being able to save and get credit helps people and firms make plans, consume, and invest for longer term, and manage unforeseen short-term shocks.

Despite mobile money being available in 93 countries today, and success stories like that of Kenya, Bangladesh scores only 67 per cent in financial inclusion. We have our own set of challenges still to overcome. Interoperability is a major challenge in MFS as one operator’s wallet holder cannot send money to another operator’s wallet. For example bKash wallet holder cannot send money to Rocket account holder.
Despite these facts, Bangladesh is one of the fastest-growing mobile money markets in the world when measured by the total number of accounts in part due to the prevalence of mobile phones (as of March 2016, there were about 131 million mobile phones subscribers out of a total population of about 160 million) and fairly strong 3G/4G network coverage levels.

Bangladesh also needs to embrace the fact that access to financial transaction platform today is more of a right than privilege. To achieve the ambitious short, medium and long-term development growth we must be able to get around or remove the barriers to the path towards financial inclusion at the earliest. We must decisively graduate towards a full spectrum of digital financial services going beyond MFS while MFS can remain the key platform.

It is important that there is a public-private initiative in ensuring the rapid and effective expansion of DFS and MFS platform across the country reaching out to every citizen. The government of Bangladesh is doing exactly that by partnering with the private sector regarding digitalising the banking services of Bangladesh Post Office coining the service “NAGAD”. Our financial inclusion score of 67 per cent indicates that we have a long way to go and the market is underutilised. We MUST ensure that this is addressed at the earliest to ensure every citizen, every firm, every factory, every economic activity is included in our development highway to contribute to the overall development journey of Bangladesh towards prosperity.

* The author is the convener at BASIS IT Service Forum