BKash started as a financial inclusion service-provider and is now growing very quickly. Do you think of bKash as being, still just a financial inclusion service-provider or an economy-wide mobile payments platform?
First, let’s look at how bKash came about. The forces behind bKash – Brac Bank and Money in Motion – have the history of working with the idea of inclusivity. Brac needs no introduction, and the people behind Money in Motion also have also been working in the “inclusion space” for the last 20 years. Financial inclusion will always remain in the DNA of bKash, and we have no desire to move away from that agenda.
However, we live in an economy where the customer for inclusivity and the “included customer” are intertwined. For example, if my wife goes shopping and the shopkeeper wants to be paid through bKash, she needs to have a bKash account. She is entitled to that service, and we should allow her to have a bKash account. But that does not mean we, as a company, are graduating out of that inclusive agenda.
Do you think bKash has a perception problem? That it is just for low-income individuals or households?
I would prefer to use the term “common people” when referring to our most likely customer base. If we change our communication strategy for the sake of including higher income groups – for whom bKash may be an added layer of convenience on top of the many (debit) cards they already use – then the common people who wholeheartedly recognise bKash as their financial tool might get a different signal. We may end up isolating the vast majority of common people whose needs we fulfill most effectively.
We have no plans to change our communication strategy. We also think it is critical for other user groups to know that they can participate. However, their exposure or access to information about bKash is high, so they will be able to figure out that they can also participate in bKash transactions.
It is a well-crafted perception, not an accidental one.
Do you worry that having such an image will hamper innovation and new product development within the company, especially to serve small businesses and provide better customer service?
Well, as Andrew Grove (former Intel CEO and management guru) once said, only the paranoid survive. We are paranoid about everything, we are always asking ourselves if we are doing things right. So of course, the fear that we may be locking ourselves into a box is there.
That said, we are serving a large number of customers, and whenever you have to provide customised services, a comprehensive review is required to assess how a change would affect the ecosystem. To put it simply, digital money in the hands of common people is a new service, and we are learning every day how we can reach and serve the customer better.
On the subject of customer service, there are a few important elements; protection of customer’s fund, assuring service satisfaction and coming up with new services in meeting the customer’s evolving needs.
Customer funds are 100% protected. People give us cash and we give a different version of that money back to them in the form of electronic funds. The physical cash we get is kept in a bank under the surveillance of the central bank. All bKash accounts are entirely pre-funded.
Secondly, we have very secure systems to ensure data protection and security. Our platform is acquired from Visa that maintains the highest global standard for security, which among other reasons attracted us to use them. Moreover, the Global System for Mobile (GSM) also has additional levels of encryption, and there are firewalls built in as well.
We are continuing our work on improving customer satisfaction. At the same time, indices for monitoring customer satisfaction in the “financial inclusion space” is in itself something new that we are trying to learn about. For example, when we were setting up our customer service team, a lot of people advised us to outsource this function. But which element of the customer service function should we have outsourced? We needed to understand that first, so we did not outsource.
There are many “first-of-its-kind” issues that we, as practitioners, are recognising and often share with the regulator. One positive aspect is that we have an engaged central bank that is providing adequate policy support for the mobile financial services industry. Their active engagement has created a stable environment for mobile payment initiatives. Such engagement needs to continue, especially in assessing future challenges, so that practitioners can serve their customers while remaining within the rules and regulations of the country’s financial system.
Where do you see bKash in the next three to five years?
BKash is a tool to undertake small financial transactions efficiently. The common people who have access to ubiquitous mobile infrastructure can now access this state-of-the-art technology to undertake financial activities more efficiently.
Our growth will depend on how effectively and creatively we can engage people to use the services on offer. It will depend on how businesses use this payment tool to make their businesses more efficient.
For example, somebody can setup a “solar electricity” business whereby the solar panel provider supplies electricity to a remote village and asks customers to pay through bKash. This way, the expensive and time consuming task of physically travelling miles to pay or collect bills is avoided. Eliminating this significant cost factor will improve operational efficiency and make the business case for solar electricity more viable. So growth will depend on how bKash or similar services are used. I believe necessity will drive innovation.
What does that mean in terms of numbers? You have 16 million users now, how many million are you targeting in the next three to five years? And does bKash have plans to develop a fully integrated e-commerce payments product, such as API for mobile in-app purchases?
First of all, it’s important to understand what that 16 million figure means. 16 million individual SIM cards have been registered, it does not mean all 16 million individuals use bKash regularly.
We use a very stringent definition for determining active customers. An active customer is someone who has undertaken at least one financial transaction in the past 30 days. Based on that definition, only 30% of our registered users are active users. This is a common phenomenon. We hear for M-Pesa in Kenya – the largest mobile payments platform in the world which has been in operation since 2007 – that around 50% of their customers are active.
Our main goal is to continue empowering customers with digital financial services. If we have a large customer base, they benefit from having a large network of users to transact with and the ecosystem becomes more robust. In that sense, it is very important for us to grow the network. Alternatively, if others grow, we can aim for interoperability with them and we are very open to that.
Lastly, we are trying to give our clients fully integrated services, depending on the clients’ needs and our priorities. For example, you can now top-up your mobile airtime for the four major operators through bKash. We will continue to ensure inter-operability of our services among mobile operators in Bangladesh.
Increasingly, we are looking for ways to provide access and extend the value of bKash products and services to other banks. Bangladesh Krishi Bank, South East Bank and Standard Chartered Bank are already working with us.
A 2013 survey by Pi Strategy Consulting reported that approximately 22% of the population use bKash, but only 3% are registered wallet users. Why do people use bKash agents more actively?
First of all, the 3% figure for wallet users is not all that low when compared to a few other countries. For example, in Pakistan where mobile money started four years earlier, 0.4% of the population are wallet-users compared to 7% who use mobile money (based on the same survey data).
Furthermore, 3% of our population using wallets means 5 million people using wallets. Often one member of a family opens an account, so if 5 million people use mobile wallets that represents around 5 million households. Considering each household has around 5 members, 25 million people are impacted by mobile money. So, 3% wallet adoption indeed impacts a large population.
Now, in some cases the reality is that when a rickshaw-puller sends money to his wife in Gaibandha, he goes over to a community-based shopkeeper who he may know well and trust and asks that bKash agent to be an intermediary in that transaction. So the job is getting done.
If you and I expect, for the sake of financial inclusion, that the common people will learn computing skills and gain literacy to push a few mobile buttons to send money across, we need to give them some time. When we look at the adoption trend, we see a gradual change in behaviour with more and more people using their own accounts. That’s encouraging.
BKash now has a savings product and a remittance product. It is obvious that wallet use is important for people to be able to use those services. Are you actively working with the Bangladesh government to promote financial literacy to develop capacity to use wallets?
The three ads that we are running heavily focus on promoting the use of bKash wallets. We are telling people that they should actively use their own accounts. We are also seeking support from the regulator in helping us implement the right practices.
Opening an account involves going to an agent, having your national ID, and completing a form with 21 questions. Some people might find it a hassle, if you are a rickshaw-puller it is definitely a challenge. Unless you have a need for storing money or making an airtime purchase in the middle of the night or sending money to your mother at any time you want, people will not adopt those services just because we are telling them to.
At the same time, efficient ways of undertaking financial transactions boosts productivity for small businesses. These businesses with digital money practices not only accept payments efficiently, they also pay efficiently; this improvement in efficiency will contribute to growing their businesses. The ability to make small digital payments will give birth to new business ideas; the common people will have the opportunity to participate in local and global value chains. Once the value of adopting wallets is internalised, the adoption rate will increase.
Moving on to regulations, how is bKash regulated?
We operate under the jurisdiction of the Bangladesh Bank (BB). BB instructs us on what needs to be done, but in terms of bKash’s license, Brac Bank and bKash are jointly responsible for ensuring that bKash’s activities are compliant with BB regulations. Notwithstanding the complexity, the message from the central bank, I feel, is that if bKash fails in mitigating certain risks, BB will hold Brac Bank responsible.
How does Brac Bank supervise the operational risk associated with bKash’s activities?
First of all, Brac Bank maintains 51% controlling stake in bKash. But more importantly, Brac Bank audits bKash to ensure compliance and to manage risk exposures.
Let me end with the following question. Is bKash profitable?
No, not yet. It will be soon, it’s going in that direction. Looking at the projections, the shareholders seem happy; our shareholders, Brac Bank, Money in Motion, IFC and Gates Foundation, may have a social agenda in mind, but they have invested equity and they will be expecting a return.
The author is an economist.
