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Mobile Financial Services: Overview,

Policy and Current Scenario

K.M.Abdul Wadood General Manager

Payment System Department

Bangladesh Bank

(Central Bank of Bangladesh)

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Banking Industry in Bangladesh

In Bangladesh,

Banking is traditionally branch-based concentrated mainly in the urban areas

There are about 8800 Bank Branches of 56 Banks

for 160 million people

Customers need to come to bank-branches

ATM booths can not be installed in the remote and rural area of the country

Setup of branches is not profitable in the rural areas

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Bangladesh Bank Choose MFS as a tool of

Financial Inclusion

Vast majority of our population live in the rural area and outside the coverage of traditional banking services.

For the banks it is very much costly to establish bank branches in the rural areas.

Mobile phones an act as an easy, safe and widely available access channel to banking services.

Rapid growth and wider coverage of mobile network operator’s (MNOs)

MFS Account

The mobile wallet/MFS account is a

technology that allows users to transfer

money or pay for goods by simply providing

instruction by his mobile phone or swiping or

tapping their mobile phones against a special

reader machine.

But both parties payer and payee have to have

‘Wallet’/MFS account first at a bank branch

or at their agent outlet.

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MFS Account (contd.)

Any kind of bill could also be paid through

the MFS service. The government could pay

salaries to its employees cell-phone account.

“Clients can get the service without going to a

bank branch or agent point in exchange of

some charge for the transaction .

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Legal Authority

Article 7A(e) of Bangladesh Bank Order, 1972, one of the functions of Bangladesh Bank is

"to promote, regulate and ensure a secure and efficient payment system, including the issue of bank notes."

According to Section 4 of Bangladesh Payment and Settlement Systems Regulations, 2009 Bangladesh Bank have jurisdiction for licensing, authorizing and designating payment systems.

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Regulation on MFS

• In 2011, Bangladesh Bank issue regulation

that mobile financial services will be bank led.

• Within the Bangladesh Bank regulations,

banks are allows to use mobile financial

services for:

• payments in / out

• transferring inward remittances

Regulation on MFS (contd.)

• person to person payments (P2P)

• person to business payments (P2B)

• business to person payments (B2P)

• person to government payments (P2G)

• government to person payments (G2P)

• other payments

(microfinance, insurance premiums, etc)

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Mobile Account

Under the Guidelines customer account, termed "Mobile Account" will rest with the bank and will be accessible through customers’ mobile device.

This Account will be a non-chequing limited purpose account.

Banks must ensure that a 'Mobile Account' has been opened for each customer seeking to avail Mobile Financial Services with all the required documents.

No MFS facility is permissible without having mobile a/c.

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Documents Required by the Banks to have

NOC for MFS

Application

MoU with the MNO and Vendor company

- Roles and responsibilities of both parties

- Business model

Process flow

Board Approval

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Anti Money Laundering Issues

Banks will have to comply with the prevailing AML/CFT related laws, regulations and guidelines issued by Bangladesh Bank from time to time.

Banks shall have

to use a short 'Know Your Customer (KYC)' format given in the Guidelines for customers.

to follow full KYC format for the cash points/agents.

to develop an IT based automated system to identify suspicious activity/transaction report (STR/SAR) .

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Security Issues

Banks shall have to strictly comply with the following issues:

Confidentiality

Integrity

Authorization

All the transactions must be authenticated by the account holders using their respective Personal Identification Number (PIN) or similar other secured mechanism.

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Limits

P2P transaction- Tk. 10,000/day,

25,000/month.

Cash in- 5 times/day, 20 times/month

Tk25,000/day, Tk1,50,000/month

Cash Out- 3 times/day,10 times/month

Tk25,000/day, Tk1,50,000/month

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Inter-operability

Banks may link their mobile financial services

with those of other banks.

Mobile account may be linked with

customer's bank account (if any).

BB is introducing NPSB, through which MFS

account will be interpretational among banks.

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Current status of MFS in Bangladesh

Up to August’2014

No. of Banks got NOC-28

No. of Banks Launched MFS -19

No. of agents-4,95,338

No of registered customers- 191.91 lac

Average no. of transactions/ day-15 lac

Average volume of Transaction/ day-247.82 Crore

Risk & responsibility

Banks shall be responsible for mitigation of

all kind of risks such as

Liquidity Risk

Operational Risk

Fraud Risk

Technical Risk

Bank will bear all the liabilities on behalf of

their subsidiaries/agents/cash points/partners

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Risk & responsibility (contd.)

Banks shall be held responsible to protect customer

rights and dispute resolution.

Banks shall have to disclose risks, responsibilities

and liabilities to the customers through

website/newspaper /printed materials.

Whenever any customer is dissatisfied by the action

of bank, customer can register complaint with

Bangladesh Bank to mediate the dispute. In that case

decision from Bangladesh Bank will be final.

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Is MFS cost effective ?

MFS clients used to pay for cash-in & cash-

out as follows:

BRAC/bkash : BDT (9+9)= BDT18/thousand

DBBL : BDT (10+10)= BDT 20/ thousand

IBBL : BDT (0+15)= BDT 15/thousand

Four Parties share the revenue i.e Agent,

Distributor, MNO & Bank

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Is MFS cost effective ?

Bangladesh Govt. is observing market economy.

MNO needs to be well regulated and rational.

Session based or revenue sharing based

What would be the cost of maintaining MFS

account, for fund transfer and for balance statement

that depends on competition among the market

players.

On the other hand how much profit or interest will

be given on the balance of a wallet account that

depends on market competition.

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Financial Services at the Post Office

Using the postal network to deliver financial services is not a new idea.

The first postal account was opened in 1861 when in the post of the United Kingdom established a postal savings bank to encourage poor people to save.

Since then, many posts have followed suit in offering savings accounts and basic remittance services.

For over a century, the business model of the postal savings bank remained essentially unchanged.

Financial Services at the Post Office (contd.)

With over a billion people using the postal

sector for savings and deposit accounts and a

widespread presence in rural and poor areas,

post offices (or “posts”) can play a leading

role in advancing financial inclusion

Universal Postal Union (UPU) hosting the

Global Forum on Financial Inclusion for

Development is very much encouraging and

highly appreciable.

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Thank You