Mobile Banking – an affordable technology for digital banking

Mobile Banking – an affordable technology for digital banking

Written by

Abul Kashem Md Shirin

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In Bangladesh, banking was traditionally branch-based. Customers need to come to a bank-branch for banking especially for deposit and withdrawal of cash. Deployment of mass-scaled ATM by Dutch-Bangla Bank Limited (DBBL) since 2004 facilitates the customers to withdraw cash from outside a bank-branch. However both bank-branch and ATM booths are mainly urban based, and as such the rural people remains out of banking services.

On the other hand, the traditional banking is costly for the customer. The customers need to pay enormous bank charges. The customers also need to maintain a handsome amount of minimum balance in his bank account. Moreover, most of the rural peoples are not educated and thus can’t write check and sign on it.

It was therefore a requirement that there is a banking system where the customers can transact from their home in the rural area, pay less charges for banking, and can use their mobile phone to pass the transaction typing a secret PIN (instead of signing on a check). More than 100 million people out of a total of nearly 160 million people of the country use mobile phone.

In absence of an appropriate system to address all the above issues, the rural people were always remained outside the banking facility. Until 31 May, 2011, there were no means and ways to deliver banking services to the rural poor people of the country.

A Mobile Banking Agent Point

 On 31 May 2011, the first Mobile Banking system was deployed by DBBL to boost a Digital Banking System in Bangladesh. Later on, another 19 banks launched Mobile Banking in last 3 years.

The Mobile Banking is a revolution in Bangladesh. Now the number of people who knows the words “Mobile Banking” is more than the number of the peoples who knows the words “Savings Account”. Within next 2-3 years, there will be more Mobile Banking accounts in Bangladesh than the traditional bank accounts.

As per the Central Bank of Bangladesh, till March, 2014, the number of the registered mobile banking customers is 15.0 million and the number of Agents offering mobile banking services on behalf of Banks from their own shops in the rural area is 293,000, which is more than the outlets of the existing traditional banking system in Bangladesh.  The value of mobile banking transactions stood at Taka 79.00 billion (approx. USD 1.0 billion) in March, 2014 which constitutes:

a)      Cash-in (cash deposit)

b)      Cash-out (cash withdrawal)

c)      Cardless ATM withdrawal

d)      Disbursement of foreign remittance/salary

e)      Air-time top-up (mobile recharge)

f)       Person-to-Person (P2P) fund transfer

g)      Merchant Payment (payment after buying goods from a shop)

h)      Utility bills payment (such as tuition fee, insurance premium, electricity/gas/water bill)

i)        Collection (collection of distributor’s payment by a principal company before delivery of goods to its distributors).

Disbursing government salary through Mobile Banking Union Parishad (UP) is a local government body located in the rural area and constituted by a few villages. There are elected Chairman and Members and appointed secretary, Chowkidars and Dofadhars in each of the UP. The respective district offices are responsible for disbursing their salary on bi-monthly basis. On the date of salary the UP staffs need to spend one or two working days travelling up to 100 km to collect their salary. A large part of their salary was spent in travelling, accommodation and food during collection of their salary from the district head quarter. There was involvement of risk also while they were travelling with cash. The process makes the UP staffs to spend their office time and hard-earned money, and also invites risks of loss of their money. DBBL’s Mobile Banking has removed all these barriers for the UP staffs in Sylhet, Sunamgonj and Jamalpur districts. The district authorities disburse the UP staff salary through DBBL mobile banking every month and the UP staffs withdraw their money from their nearest DBBL mobile banking agents. DBBL has more than 80,000 agents all over the country. The UP staffs now get monthly salary instead of bi-monthly, they don’t need to travel up to 100 Km, and spend lot of time and money. They can now utilize more time in their office.

Nearly 80% of the people of the country are beyond traditional banking services. Many of them receive local and foreign remittance by unknown channels. Their savings remains out of banking channel.

There are millions of shops in the rural area, sale proceeds of which are kept at shop or home. Thus a huge amount of money remains ideal. Money at home or shop is not secured.

If all these people and their money can be brought into mobile banking channel, there will be a huge revolution in terms of financial inclusion and economic activity.

Mobile Banking in Bangladesh is an affordable technology to achieve this goal. Any low cost basic mobile phone can be used to access mobile banking system of a bank using USSD (Unstructured Supplementary Service Data) connectivity of their respective mobile operators.

In Bangladesh, only Bank-led model of mobile banking is allowed. Bank-led models allow a prudent, regulated and mature approach to banking. While Bank-led models are winning overwhelmingly in almost all countries, the non-bank led model exists in few undeveloped countries.

Peoples of Bangladesh, although less literate, are accepting the technology enormously. Government of Bangladesh including the Central Bank and BTRC (Bangladesh Telecom Regulatory Commission) is unanimously supporting the technology by formulating various policies & regulations and promoting by arranging seminars, symposium and talk shows on the subject matter.

(The writer is a Deputy Managing Director of Dutch-Bangla Bank and can be reached at akmshirin@dbbl.com.bd)