Bangladesh a country with lots of business potential where 168.367 million people have access to mobile phone and about 101.905 million, are using mobile internet. Market data shows that about 45% people own a smartphone which is around 76.5 million Bangladesh people having at least one smartphone in their pocket. And due to recent COVID situation entire dynamic of the payment industry as well as economic situation of the country changes dramatically which never experienced before.
By now, those of us in the payments industry are well aware of the growth digital payments have endured and continue to experience during the Covid-19 pandemic. A recent study from Research and Markets found that almost 50% of consumers worldwide are using digital payments more now than they did before the pandemic, and the majority of those consumers said they plan to continue using digital payments after the virus is contained. This shifting demographic will surely be responsible for bringing lots of behavioral changes in the market overall.
Unbanked People ratio, emergence of Generation- Z, Mobile penetration, smart handset adaptation and behavioral shift and favorable regulatory support will be the key influential of digital payment industry of Bangladesh in coming days.
Current Market Players
At present, 15 banks in the country are providing MFS with over 1.03 million agents countrywide. Apart from the banks, Nagad is a venture by the Bangladesh Post Office that facilitates the day-to-day financial transaction needs of the people. In Oct, 2020 the total amount of transaction was 290 mn with volume of BDT 53258.84 crore ( $ 6265.74 mn).
On Nov 2019, the board of directors of United Commercial Bank (UCB) has decided to form a subsidiary company, aiming to provide mobile financial services (MFS). According to the disclosure, UCB will hold at least 51 per cent shares of the subsidiary company and rest 49 per cent shares may be offered to national/international reputed MFS/DFS providers as per MFS guidelines of Bangladesh Bank.
The mobile financial service market is set to heat up with the entry of a new player, Trust Axiata Pay (TAP), a venture of Trust Bank and Malaysian telecommunications conglomerate Axiata Group. Trust Bank holds 51 per cent stake in TAP and Axiata the remaining 49 per cent. TAP, whose focus will be wallet-based services, got the no-objection certificated from the Bangladesh Bank last year and on 30th Dec, 2020 they launched the service with brand name of TAP.
More than 90% market share captured by , bKash, Rocket and Nagad in the industry. To facilitate the digital payment in the industry there are 4 PSO (payment system operator) and 3 PSP (payment service provider) licensees in the market.
Industry Analysis of Pre and During Coving Scenario:
From the data of Bangladesh bank payment report approximate 100 mn (964.16 mn based on Oct published data ) registered MFS wallet is in the industry with average monthly active base of 39%. The trend shows gradual increased after lockdown in both new wallet registration and active base and this will continue to grow as per moving average trend and other factors by the providers towards wallet usages.
With a deep drive a bit with the parameters of Bangladesh Bank following indications observed before and during COVID situation.
Those facts & figures clearly indicate the acceptance and good potential of digital payments in different sectors of payment ecosystem of Bangladesh.
Price war between several players already begun in the Industry whereas the referral, cash back discount % and freebies is the main medium used by the players; bKash- Rocket- Nagad promoting wallet payment no service charge / Cash back offer. All company promoting referring new wallet user with incentive stating for BDT 25 to BDT 100.
One of the major striking initiatives taken by Nagad by slicing the Cash-Out fee [ BDT 9.99% for BDT 1,000 ] to almost 50%. Previously there was a practice of 2% (actually 1.8% to 1.85% based on provider) cash out fee for a ticket size of any BDT 1,000. Now with this strategic moves Nagad gain a good amount of market share in retail OTC segment. If we observe and study the market closely it’s clear that company with good base like; bKash and Rocket are pulling customer towards app/wallet with different offers. On the other hand Nagad’s primary focus is on OTC lowest Cash out fee and different govt incentive to pull customer towards Nagad’s OTC channel.
In App space bKash is dominating the industry with best UI/UX, innovative features, offers, promotion and different new service integration. Nagad is also focusing on the new service / partner onboarding and different types of disbursements at the time of pandemic.
During the time of COVID several guidelines on digital payment to wallets, different Government allowance, package disbursement initiated by government to support the mass people of the country. And it helps to adapt the practice, first hand know experience of the customers and which is reflected by Bangladesh bank published data too. Now with the entry of new players in the market it’s time to see what innovative customer centric strategy they follow to attract the customers and build a critical loyal base considering the fierce competition by existing players.
Product and Service Level Impact Assessement:
Various payment method used and responded diversely and distictly during COVID pandamic. The following table represents views about impact of COVID has had on various modes of payment;
Factors that will drive the payment Industry in Coming Days:
Factors that will accelerate the adoption of more active wallet and development of digital ecosystem of the country are;
1. Implementation of wallet Interoperability is highly required for this industry now. Just imagine ~ 96 mn registered customer can transfer money between them and this move will improve competitiveness in the market and customer will be benefited more along with the retailers. This will uplift another level of customer experience with more active base. Introduce QR based interoperable payment in the industry is a global phenomenon. QR has already been very successful and easy scalability and cost effectiveness model example of PayTM is in front of us. Around 76.5 mn peple have smart phone in our country with know how to use it. The basic building block is already there now it’s time to make it reality.
2. Emergence of TechFin Startups in the industry; farms / startups delivering the technology solutions, launch a new way to delivery financial services. Which already been started example of ShopUp and Sheba XYZ . ShopUp a software solutions for e-retailers to sell products online. Its features include order & inventory management, logistics & supply chain management, marketing tools, PIM, CRM, and others offer working capital support to SMEs already raised $22.5 mn. And SManager solution by Sheba is also offer working capital financing support merchants in the market.
3. Micro-Merchant for last mile digitization & Cashless economy. According to UNCDF micro-merchant survey, there are approximately 1.4 mn micro merchant in our country with 45% having bank a/c & 98% with mobile connection. Those merchant are the last mile touch points of customer and they work as an agent to serve customer for different organization such as, FMCG, MFS, Telco and so on. By digitizing this segment with the help of existing mobile device there can be a leapfrog development in the payment industry. Some examples are safety net disbursements, money transfer, and collection, mini banking facilities can easy linked to this channel.
4. Embedded Financing facility to different f-commerce, SME, e-Commer groups. During COVID situation there is a rise in online business, pages and ecommerce segments where wallet and payment gateway act as main catalyst for payment which linked and support courier / delivery business. The e-commerce market in Bangladesh has exceeded one and a half billion US dollars, according to the German-based research institute Statista, expected to reach at two billion dollars this year and three billion dollars by 2023. LOCAL shoppers in the COVID-19 are now online. As a result, e-commerce is booming around the globe. Shopping online is on the rise. Transactions are also increasing significantly. Now people habituated to place order via app, page, and site, make payment and receive home delivery for the desire products. This trend is increasing day by day. It is known that online sales have increased by 70 to 80 percent compared to the regular time. With the help of embedded financing facilities to f-commerce, eCommerce and SMEs this sector can develop more in digital space with more money flow in the ecosystem.
5. Build service offering around customer pain points; it’s already been proven that if a company rightly identify the customer pain points and design solution are highly accepted among customers. Instead of bringing only flashy featured, service try to focus on the actual pain points of customer they experienced during this COVID like; one app that ease you all payment need with 24 x 7 support.
6. Regulatory support to welcome different innovative solution from cross industry players. To drive the agenda of Digital Bangladesh. Launching of Regulatory Sandbox with different industry player to support and nature the ideas for the betterment of country as a whole.