A new policy paper of Bangladesh Bank released on Monday recommended that the central bank should actively promote entry of two to four new serious mobile financial service providers.
The paper on Mobile Financial Services in Bangladesh : An Overview of Market Development said that it would be less than ideal for the MFS sector to have 1 to 2 dominant players like BRAC Bank’s bKash and Dutch Bangla Bank.
‘Bangladesh Bank should actively promote entry of 2 to 4 additional serious players,’ said the paper, prepared by some BB officials and two representatives of the global policy research body Consultative Group to Assist the Poor.
There are several tools Bangladesh Bank should use to promote more competition and entry in the MFS or mobile banking sector, it said.
First, BB can pursue a more active intermediation or ‘honest broker’ role so that mobile phone operators and banks bridge their differences and enter into agreements.
Second, BB can also pursue measures that make MFS more attractive by promoting government payments onto electronic channels.
Third, it can encourage donors or venture funds to invest in 3 to 4 fledgling banks which in future can provide real competition to the existing two market leaders.
Fourth, BB can build links for MFS to connect into the national payments system.
The paper also said that it was critical that the BB remained firm and sent a consistent signal that the overall regulatory structure it had chosen in the MFS Guidelines 2011 will remain in place.
‘This certainty will allow partners to negotiate long-term agreements. Uncertainty or mixed signals might delay or confuse negotiations. Incremental refinements and interpretations of the regulatory structure by Bangladesh Bank may be helpful from time to time,’ it said.
The paper also recommended that the central bank should seek market feedback from the full range of players in a systematic manner and establish a quarterly dashboard report detailing the scale and components of MFS development.
‘An MFS can make more points of service available and at lower costs across the banking system. An important benefit is that MFS has the potential to bring many un-banked into the formal financial sector and can also become critical infrastructure that lowers costs and raises productivity across the banking system and wider economy,’ it said.
As per the paper, the central bank has so far issued MFS licence to 10 banks till March.
Of the banks, BRAC’s subsidiary bKash and Dutch Bangla Bank have made significant strides netting more than 4 lakh customers and transacting around Tk 200 crore till March.
The BB guidelines state that only a bank-led model will be permitted to operate MFS. ‘For Bangladesh Bank this means that a customer’s account, termed “Mobile Account”, will rest with the bank and will be accessible through the customer’s mobile device,’ said the policy paper.
A recent observation of the central bank, however, said that the subsidiary of BRAC Bank, bKash, holds the customer’s accounts although the BRAC Bank should have held those accounts.