In Bangladesh, customers have to pay 7 to 15 times higher service charges for mobile financial services (MFS) compared to commercial banks, according to a study published by Transparency International Bangladesh (TIB) on Tuesday.
The rates are also several times higher than those in neighboring countries. Customers even pay for services that don’t cost anything in other countries, the study also stated.
TIB noted the observations in its research report launched at a press conference titled “Governance Challenges and the Way Forward in the Mobile Financial Services (MFS) Sector.”
In 2024, for cash-out transactions totaling Tk550,000 crore, customers were charged an estimated Tk4,410 crore to Tk10,197 crore, while commercial banks collected only Tk639 crore for similar withdrawals.
Bangladesh also has the highest MFS service charges among neighboring countries.
For instance, withdrawing Tk25,000 via bKash costs Tk372.5 to Tk462.5, compared to Tk355.7 in Pakistan (Easypaisa), Tk231.3 in Myanmar (Wave Pay), and no charge in India (Phone Pay).
A lack of comprehensive legal framework, discriminatory practices, and limited regulatory powers for Bangladesh Bank have enabled a monopolistic market, dominated by bKash (84.4%) and Nagad (30.9%) of personal account holders.
The study finds that the MFS sector lacks long-term planning and is plagued by ad hoc decisions, weak policies, legal gaps, and undue influence from political and vested interest groups.
Alarming misuse of MFS for fraud, bribery, online gambling, and money laundering has also been revealed.
Despite efforts by regulators to block gambling platforms, MFSPs have failed to prevent such transactions.
In 2022 alone, around $7.8 billion (Tk75,000 crore) was laundered through MFS. MFSPs also lack adequate capacity to detect and prevent suspicious and hundi transactions.
The study showed 6.3% of personal, 17% of agent, and 1.6% of merchant MFS users faced fraud, with 3.6%, 8.7%, and 1.4% respectively suffering financial losses ranging from Tk53 to Tk3.76 lakh.
The study also revealed that Nagad’s operating company, Third Wave Technologies Ltd/Nagad Ltd, violated MFS regulations by creating around Tk645 crore in excess e-money beyond trust fund limits, risking customer funds.
It also identifies misuse of influence in distributing government allowances and money laundering through MFSPs.
It stated that through a tripartite collusion among MFSP entrepreneurs, regulatory and supervisory authorities, and politically influential individuals, the sector has been captured by influencing policy-making, manipulating oversight mechanisms, and misusing state institutions.
As a result, MFS has been used for financial exploitation of the public, embezzlement of state funds, bribery, and money laundering. To overcome the prevailing governance challenges in the mobile financial services sector, TIB put forward 13 specific recommendations.
TIB Executive Director Dr. Iftekharuzzaman stated: “To capture the MFS sector, politically influential groups have exploited policy and legal loopholes under their protection and used regulatory bodies to serve their interests. In particular, unethical advantages were extended to Nagad, allowing politically powerful vested groups to benefit, thereby destroying the scope for open competition in this vital sector. Due to weak policy frameworks, we now see a monopoly by one entity in the market.”
“Moreover, although the sector claims to promote inclusion, women and marginalized communities are being excluded from the real benefits. As MFS providers alone determine service charges, customers are forced to pay much higher fees compared to conventional banking services—an extra burden especially for the marginalized, women, and disadvantaged groups. We urge the authorities to investigate this matter and call for a complete reform of the sector through a robust policy and legal framework to ensure the protection of consumers’ rights.”
Highlighting the long-term economic risks posed by the use of MFS for bribes, money laundering, online gambling, and cryptocurrency transactions, the TIB executive director said: “One key reason behind the record surge in foreign remittance in FY25 after the fall of the Awami League regime is the control over illegal hundi transactions conducted through MFS.”
“At the same time, where earlier bribes were exchanged directly, now they are being transacted through MFS. Therefore, the MFS sector must be brought under the tax regime. This will help detect income inconsistent with legal earnings, tax evasion, and bribe transactions.”