Having worked in the mobile telecom industry for over a decade and having played an active role in establishing Association of Mobile Operator of Bangladesh (AMTOB), it is important that I throw in my little observation on a recently published article on mobile financial services. In an op-ed in Dhaka Tribune titled “How if not mobile?” on January 8, 2016 -- the author did a great job on behalf of mobile network operators (MNOs), making the case that MNOs should provide mobile financial services (MFS) in Bangladesh. At the moment, MNOs are not allowed by Bangladesh Bank to operate MFS. Only scheduled banks or their subsidiaries are allowed to do so.
First, let me present some realities next to the author’s rhetoric. He is implying that MNOs might be “marginalised” or “killed” if they are deprived of carrying out MFS, a point that could not be farther from the truth. The largest MNO’s profitability is perhaps a hundred times higher than that of the largest MFS. How can MFS, with this level of strength, marginalise or kill MNOs?
Second, the author brings up the fact that MNOs are the largest tax-payers. They are the largest tax-payers because they have the largest businesses. By saying that the largest businesses should be given more business in new industries, the author is basically arguing that big business should get bigger. In fact, the author wants them to go beyond banking and get involved in “health and agriculture,” making them even bigger. If they are allowed to enter banking, it would only be the beginning, by the author’s own account. If big businesses become bigger and economic power is concentrated within a few at the expense of smaller ones, is that good for Bangladesh? Far from so.
Larger businesses can create many problems, including stifling innovations, competition, and losing focus of what customers need. They destroy opportunities for entrepreneurs, and are less accountable. The country is better off with many entrepreneurial ventures than its economy being dominated by a few large corporate bodies.
The author also says that MNOs have paved the way for a truly digital Bangladesh. In reality, digitalisation happens because of the government’s policy, focus, and approach. Others are contributors in building an ecosystem. Nobody is denying that MNOs have done a useful job. This is how and why, as already noted, they have gotten some of the biggest businesses.
That does not, however, mean that they must take over banking, and later into other industries, such as health and agriculture. Other businesses must remain free to pursue their ideas and dreams in respective industries. Furthermore, Bangladesh does not become “less digital” if MFS is carried out by whole new industry as it is being done now. MNOs are not the inventors nor owners of digital technology; such technology is owned and used by many other industries. Bangladesh is better off by allowing many different industries to use digital technology.
The author further says that MNOs are heavily investing in distribution network. In reality, distribution networks have been existing for centuries. Distributors and retailers are independent business houses who have been distributing hundreds of products of different companies. The same distribution and retail businesses sell fast-moving consumer goods, tobacco, medicine, MNO’s products, MFS’ products. All different producers have to invest in the distribution network, nothing unique for the MNO. What’s wrong in distributors and retailers earning from multiple sources?
To advance the cause of inclusivity in MFS, there is absolutely no need to create confusion as to which body should oversee it. It should be the central bank. MFS should not be operated by MNOs that are supervised by the Ministry of Telecom.
In four years, MFS providers have recruited 31 million subscribers, creating one of the most impressive cases of inclusivity worldwide. In contrast, in many countries, such as Pakistan and Philippines, inclusivity is poorer despite a more-or-less free reign by MNOs who do not necessarily advance the cause of inclusivity. What is to prevent MNOs to neglect MFS once they are licensed to operate? After all, MFS would be representing marginal business, economically speaking, for the MNOs.
The author also brings up the issue of over-the-counter (OTC) use of MFS, which means agents sending money to agents, on behalf of customers, rather than individual customers sending money to each other. Let’s look into some facts. Firstly, third-party surveys confirm that OTC numbers are improving, namely, going down. This is a natural trend in new services.
Initially, consumers are afraid of getting into new things; over time, they become more comfortable. Second, Bangladesh is physically a small country, and the success of MFS requires agents being located close to users. Such closeness and MFS largely being used by the poor, who cannot easily read or write, naturally contribute to this challenge that is getting mitigated over time. Third, the reasons presented above (as to why OTCs take place) apply to MNOs as well, and they are likely to encounter the same problems. Fourth, it is said that MNOs might introduce more advanced identification technology, but so can MFS providers. The MFS providers pro-actively are about to validate their KYC data with the Election Commission’s database.
The author writes that MNOs have had to face all sorts of teething problems as telecommunication start-ups. The author implies now that the MNOs have overcome such problems, if they at all have, everything else must now be thrown to them. He goes back to his let-the-big-get-bigger argument. If these giants had their teething problems -- which have gone unnoticed because they did not have other giants breathing down their necks -- we should let the MFS providers overcome their own teething problems in due time.
Today, the MNOs are posturing to get into MFS, ie banking. Someday, they will be asking to get into other industries. Digital technology is unleashing possibilities, and the MNOs happen to be in the advantageous position of catering to them. Unless the government and Bangladesh Bank strictly regulate them, as has been done by Bangladesh Bank so far, they will engulf other industries like, television, health care, agriculture, education.
I would rather say that this constant posturing of giant MNOs trying to get into MFS over the last five years is preventing new capital from flowing into this nascent industry, preventing it from further growth, competition, and innovation. All these good things -- investment, growth, competition, and innovation -- would be promoted if the central bank could maintain a level-playing field by keeping the MNOs out.
MNO entries will make the field extremely uneven. The nation is facing this constant clamouring by MNOs, not because MFS is natural to them, but because they feel they can. The power company provides electricity, but leaves the MNOs to use that electricity; the power companies do not try to run MNOs. The government owns the roads and highways and leaves the bus companies in peace to run their buses. MNOs will be far better off providing connectivity to all those willing to pay for it, and focus on expanding the volume of connectivity business.
It is an ancient piece of truth, championed by the founder of modern economics, Adam Smith, that all parties involved (consumers and businesses) benefit through specialisation. MNOs would benefit by specialising on the provision of connectivity. MFS providers could do a better job by focusing on MFS. By creating clear borders among different lines of business, it will also make fair regulations feasible, promoting accountability.
Then, Bangladesh will be better served.
