{"id":15453,"date":"2016-11-17T01:12:50","date_gmt":"2016-11-17T06:12:50","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/bkash-bracs-venture-into-mobile-banking\/"},"modified":"2016-11-17T01:14:17","modified_gmt":"2016-11-17T06:14:17","slug":"bkash-bracs-venture-into-mobile-banking","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/bkash-bracs-venture-into-mobile-banking\/","title":{"rendered":"bKash, BRAC\u2019s venture into mobile banking"},"content":{"rendered":"

\"aaeaaqaaaaaaaaloaaaajduxytgxmduwltmwmzatngjlyy04otm3ltc5mgqwymq4m2i3oa\"<\/a>In 2011, changes in government regulations allowed BRAC Bank, one of the leading private banks in Bangladesh, to launch the country\u2019s first mobile money service, bKash. Mobile money is an electronic wallet service that allows users to store, send and receive money using their mobile phones. Bangladesh possessed key characteristics for mobile money\u2019s successful adoption: universal wireless network coverage, widespread ownership of mobile phones, and a cash economy. Less than 15% of Bangladesh\u2019s 160+ million inhabitants have accounts at formal financial institutions whereas over 68% have mobile phones[1]<\/a>. The launch of bKash allowed the country\u2019s unbanked to obtain access to a safe and convenient method of sending money via basic handsets. As of 2015, bKash was the second largest mobile money company in the world \u2013 its services were used by over 17 million Bangladeshis and it handled more than 70 million transactions a day[2]<\/a>.<\/p>\n

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What explains bKash\u2019s fast growth? <\/strong><\/p>\n

To set up bKash, BRAC Bank had to establish a unique business and operational model which was fundamentally different from commercial bank structures. The success of mobile money is dependent on rapid adoption by customers as well as the establishment of a wide agent network which allows customers easy access. BRAC Bank tapped its base of small and medium enterprise borrowers (e.g. grocery store proprietors) to initially establish bKash\u2019s agent network. The agent network grew from 500 in 2011 to over 135,000 by 2015[3]<\/a>,[4]<\/a><\/sup>. With the Central Bank\u2019s support, bKash entered revenue-sharing agreements to access the USSD gateway with all four big mobile network operators, providing access to over 98% of mobile phone subscribers[5]<\/a>. Partnerships with international investors such as the Gates Foundation allowed the founders to access international experts on agent network management and ensured that the company could make the necessary technology investments to ensure superior service[6]<\/a>.<\/p>\n

bKash\u2019s value proposition was particularly strong for the urban migrant population. Prior to the introduction of bKash, migrant workers sent cash monthly to their families in rural areas via acquaintances or courier companies. Cash got lost or arrived late, which led to significant hardships for rural families with no other sources of income. bKash\u2019s broad distribution network and prolific advertising campaign thus led to rapid adoption rates.<\/p>\n

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How does bKash work? <\/strong><\/p>\n

\"untitled2\"<\/a>bKash isn\u2019t just for money transfers, it\u2019s a payroll system, a mobile wallet and a savings account \u2013 it\u2019s digital, affordable and regulated by the Central Bank[7]<\/a>. Customers can open bKash accounts, which run on a fully encrypted VISA technology platform, for free. Its simple interface can be accessed by the cheapest (i.e. $15) handsets. Unlike a commercial bank, there are no minimum balance requirements and customers need minimal documents to open accounts \u2013 a photo and\u00a0national ID\u00a0are sufficient[8]<\/a>. bKash earns revenues from service charges (1.3% – 1.8% for purchases (charged to merchants), 2% for cash-outs and Tk.5 ($0.06) for person-to-person transactions).<\/p>\n

\"untitled\"<\/a>Although bKash provides multiple services, customers are less likely to use a registered account and typically make transactions over-the-counter (OTC)[9]<\/a>. In an OTC transaction, both parties rely on agents for funds transfer. Many bKash users are unfamiliar with technology and consider it to be risky to use their own mobile wallets given the potential for human error. bKash\u2019s additional services are thus underutilized, limiting revenue potential for the company.<\/p>\n

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How can bKash expand its footprint? <\/strong><\/p>\n

Mobile money is considered to be the \u201cperfect platform for Bangladesh to take financial services to the country\u2019s largely unbanked population\u201d[10]<\/a>. How can bKash continue to use digital technology to transform the lives of the country\u2019s unbanked?<\/p>\n