Report On: Overview of bKash

Submitted To –

Dr. Jashim Uddin Ahmed

Professor of MBA Program,
School of Business and Economics
North South University
Course: BUS 690 (Strategic Management)
Section: 2

Submitted By –

Name : Kaniz Fatima Nourin Choudhury

ID : 143 0929 060

Date of Submission: December 20, 2016

 Letter of Transmittal

December 20, 2016

Dr. Jashim Uddin Ahmed
Professor of MBA Program,
School of Business and Economics
North South University

Subject: Letter of Transmittal

Dear Sir,

It was a great pleasure for me to prepare the report titled “Overview of bKash” which you
have assigned me for Strategic Management (BUS 690) course.

In writing this report, I have followed the instructions that you have given me in and outside
of the class. The contents provided in this report are all my own, though some information and
references have been taken from primary and secondary sources like newspapers, interviews,
journal articles, internet, and our textbook to facilitate our assignment writing.

I would like to thank you for your sincere guidance and constant support that I have
received during the course of writing this report. It would not be possible for me to complete the
report without your kind help. I would be glad to provide any clarification and modification if and
when required.

Yours Sincerely,

Kaniz Fatima Nourin Choudhury

ID: 143 0929 060

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Acknowledgement

I would first like to thank Almighty Allah for giving me this opportunity to work and complete
this report since preparing this report has been a great challenge for me. I am very grateful to my
honorable faculty Dr. Jashim Uddin Ahmed, Professor of MBA Program, for his generous
cooperation and constant guidance that made me really confident about the desired outcome of my
report on ‘Overview of bKash’. It was a very interesting experience for me and I tried my best to
cover all the necessary parts of the report assigned.

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Executive Summary

Due to the rapid penetration of Mobile phone users, Mobile banking (MB) or Mobile
Financial Service (MFS) has been very successful within a short span of time for facilitating easy
money transfer service across the country. Through MFS, unbanked communities are able to avail
financial services that are provided efficiently at an affordable cost.

Bangladesh has seen one of the world’s fastest growing mobile money ecosystems develop
in the past two years. This growth has propelled bKash to become the second largest mobile money
provider in the world, only behind Kenya’s mPesa. bKash Limited is a joint venture between
BRAC BANK Limited, Bangladesh, and Money in Motion LLC, USA with objective to ensure
access to a broader range of financial services for the people of Bangladesh. It has a special focus
to serve the low income masses of the country to achieve broader financial inclusion by providing
services that are convenient, affordable and reliable (bKash, 2013). This report mainly focuses on
the mobile financing industry as a whole and competitive position of bKash in the arena.

The report also portrays the industry through Porters’ Five forces model. The state of the
industry is best portrayed through the model. The threat of new entrants is moderate due to the
shortage in spectrum and bargaining power of suppliers is also moderate.
[

Finally, the report has identified the setbacks and challenges for bKash and way forward
opportunities to lead MFS industry.

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Table of Content

Acknowledgement ....................................................................................................................... 2

Executive Summary .................................................................................................................... 3

Table of Content .......................................................................................................................... 4

Introduction ................................................................................................................................. 5

Background ................................................................................................................................. 6

An Overview of the MFS in Bangladesh .................................................................................... 7

Company Background ................................................................................................................. 9

Offered Services ........................................................................................................................ 10

Factors behind the rapid growth of bKash ................................................................................ 11

bKash Business Model .............................................................................................................. 12

Revenue Model ......................................................................................................................... 13

bKash in light of Porter's Five Forces Model............................................................................ 14

Threat of Intense Segment Rivalry ............................................................................................ 14

Threat of New Entrants ............................................................................................................. 15

Threat of Substitute Products .................................................................................................... 16

Threat of Buyers’ Growing Bargaining Power ......................................................................... 16

Bargaining Power of Suppliers ................................................................................................. 16

Competitive Advantage ............................................................................................................. 17

Setback and challenges.............................................................................................................. 18

Conclusion................................................................................................................................. 21

References ................................................................................................................................. 22

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Introduction

‘Manik Mia supplies fish to Dhaka from Trishal, Mymensingh. Due to delays and other
challenges in traditional methods of transactions, he would often not be able to make payments in
time to get fresh supplies of fish. The fish would begin to spoil, and he would have to incur losses.
Now Manik uses bKash to make payments to his suppliers instantly. This has enabled him to
significantly reduce wastage and loss in his business.’ This is one of the stories on how a mobile
financial service company like bKash is improving ordinary people’s lives in Bangladesh. Amidst
several setbacks and challenges, bKash is striving to ensure access to a broader range of financial
services for the people of Bangladesh. Its main focus is to serve the low income masses of the
country to achieve broader financial inclusion by providing services that are convenient, affordable
and reliable (bKash, 2016).

Financial inclusion has an important role in reducing poverty and achieving inclusive
growth (World Bank, 2014; and Curl, Ehrbeck and Hole, 2014). When people participate in the
financial system, they are better able to start and expand businesses, invest in education, manage
risks and absorb shocks. Access to bank accounts, savings and payment mechanisms increases
savings, creates jobs, empowers women and boosts investment and consumption. Greater access
to financial services for firms and individuals may help accelerate growth and reduce income
inequality (Demurgic-Kunt and Levine, 2009). In recent years, more than 50 countries have set
ambitious goals and targets for financial inclusion (World Bank, 2014).

Thus, Mobile banking (MB) or Mobile Financial Service (MFS), a new technology in
Bangladesh starting from March 31, 2011, became popular in Bangladesh within a short span of
time for facilitating easy money transfer service. MFS involves processing of banking services
without necessarily having any formal branch of a bank. Through MFS, unbanked communities
are able to avail financial services provided efficiently at an affordable cost. In July 2016, there
were 36.58 million mobile accounts which is 28.37 per cent of mobile phone subscribers (mobile
phone subscribers was 128.94 million) as per Bangladesh Bank and BTRC (Jubaer, 2016).

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Background

Despite inflation of 6.2 per cent in 2015, Bangladesh has maintained an impressive growth
and development. In the past decade, the economy has grown at nearly 6 percent per year, and
standard of living improved. Poverty decreased by nearly a third, along with increased life
expectancy, literacy, and per capita food intake. Despite the strong track record, around 47 million
people are still below the poverty line, and improving access to quality services for this vulnerable
group is a priority. There are also many people who could fall back into poverty if they lose their
jobs or are affected by natural disasters (World Bank, 2016).

Bangladesh is one of the most densely populated countries in the world. Sustained growth
in recent years has generated higher demand for electricity, transport, and telecommunication
services, and contributed to widening infrastructure deficits. While the population growth rate has
declined, the labor force is growing rapidly. This can be turned into a significant demographic
dividend in the coming years, if more and better jobs can be created for the growing number of
job-seekers. Moreover, improving labor force participation and productivity will help to release
the potential of the economy. Both public and private investment will need to increase as well.
Growth will also need to be more inclusive through creation of productive employment
opportunities in the domestic economy (World Bank, 2016).

According to Bill Gates in a recent Bloomberg interview, banking is more fundamental

than it is realized. There have been attempts (at banking for the poor) by microfinance groups,
cooperatives, but the transaction fees were always too high. Until those services are made available
with very low fees and in digital mode, banking will only be for those who are better off. In
Bangladesh, where 95 per cent of the population have access to mobile phones but only 20 per
cent have a formal bank account, the significance of such an opportunity for a banking revolution
is even more signified. Indeed, since 2011, the Bill and Melinda Gates Foundation has made over
USD 21 million in grants and equity investments in bKash. Bangladesh has seen one of the world’s
fastest growing mobile money ecosystems develop in the past two years. This growth has propelled
bKash to become the second largest mobile money provider in the world, only behind Kenya’s
mPesa (Chakma and May, 2016).

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An Overview of the MFS in Bangladesh

Mobile Banking is one of the very latest services of banking business. This system has
brought some important changes in the socio-economic life of the people. Within a very
few seconds, by using their smart phones, people are now able to know their account balance,
transaction history, products of the bank, and facilitate fund transfer at anytime from anywhere.
Thus mobile banking becomes a part of new banking dimension utilizing infrastructure of Mobile
Network Operators (MNO). For example, the idea of branchless banking emerged. This
branchless banking has great potential to extend the distribution of financial services to poor
people who are not entertained by the traditional banking network. This also provides lower
cost of delivery, including cost to both the banks for building and maintaining a delivery
channel and to customers for accessing services (Ivatuary and Mas, 2008).

According to Bangladesh Bank (2012), Mobile Financial Services (MFS) is a way of

offering financial services that combines banking with mobile wireless networks enabling users to
execute banking transactions. This means the ability to make deposits, withdraw, and to send or
receive funds from a mobile account. Often these services are enabled by the use of bank agents
that allow mobile account holders to transact at independent agent locations outside of bank
branches. Bangladesh Bank allows various types of Mobile Financial Services like a.
Disbursement of inward foreign remittances; b. Cash in /out using mobile account through
agents/Bank branches/ ATMs/Mobile Operator’s outlets (P2P); c. Person to Business Payments
(P2B) - e.g. utility bill payments, merchant payments; d. Business to Person Payments (B2P) e.g.
salary disbursement, dividend and refund warrant payments, vendor payments, etc. Government
to Person (G2P) Payments e.g. elderly allowances. Freedom-fighter allowances, subsidies, etc. f.
Person to Government Payments (P2G) e.g. tax, levy payments; g. Person to Person Payments -
One registered mobile Account to another registered mobile account; h. Other payments like
microfinance, overdrawn facility, insurance premium, DPS, etc.

Banking business is very sensitive as it deals with money and service. There is a strong
bondage between the banks and its customers. Banks are using mobile banking services to provide
better customer satisfaction. Over the years, mobile banking is providing unparalleled services
to some of the disadvantaged groups of the society. People can use banking activities at any

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time with their mobile phones and this has made mobile banking a blessing both for the banks
and for the customers. Since its launch in 2011, mobile banking has been experiencing exponential
growth. Bangladesh is among the biggest mobile banking market in the world and accounted
for almost 8 per cent of total registered global mobile banking users (Mahbub, 2015). Since
a large number of population do not have access to conventional banking, mobile banking has
become an instant strike in the country. The industry has seen its biggest growth between January
2013 and February 2015. During this period the number of registered clients increased more than
fivefold from 5 million to over 25 million (Mahbub, 2015). The number of transactions has also
grown significantly during this period, from 10 million in January 2013 to just under 77 million
in February 2015, making the daily transaction amount via mobile staggering USD 47.44
million on an average (Mahbub, 2015). These figures indicated that mobile banking service
has got huge popularity within a very short period of time and thus influences the social and
economic life of the people of Bangladesh (Kamal and Mondal, 2016).

The introduction of mobile banking services has improved the development of banking
channel by adding more values to the bank customers. With this new service, customers are
allowed to perform several transactions via their mobile phone, such as checking account
balance, interest rates and the latest transactions of their accounts, to transfer funds between
accounts, and to make payments to registered accounts. The emerging of this new banking service
has increased the attention mainly from innovative researchers. Following the technological
development, mobile phones are permeating almost every aspect of life (Laukkanen, 2007).

The rapid proliferation of mobile phones and other electronic gadgets have not only
changed the way people live, but also created a new channel for service delivery,
consumption and marketing. The high penetration rate of mobile phones has resulted in the
increasing use of handheld devices for marketing purpose. Some sectors even expect that the
mobile phones would be the ultimate medium for one to one marketing. Particularly, the
banking sector is regarded as one of the leading industries in employing mobile technology
as means to deliver customer service and value (Laukkanen, 2007).

The Bangladesh Bank provided a supportive regulatory environment for MFS through the
MFS Regulations of 2011. It developed simple and easy to implement guidelines to balance
prudential requirements with ease of mobile money account operations. But it also imposed an

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important regulatory constraint: only banks are allowed to provide MFS. However, they are
allowed to have minority non-bank, non-MNO shareholders. To ensure low-cost transactions it
used its moral persuasion authority to facilitate the pricing of the mobile phone facility use
Unstructured Supplementary Service Data (USSD) as a certain small percentage of MFS revenues
from actual transactions. By preventing Mobile Network Operators to enter the MFS market it also
de-facto encouraged unrestricted access to USSD (PRI, 2016).

Presently MFS service provision is dominated mostly by two suppliers. First, bKash is the
overwhelmingly large provider accounting for some 81.4 per cent of the total transactions. The
second important player is the Dutch Bangla Bank, accounting for 16.8 per cent of the market
share. The market dominance by bKash partly reflects the dynamism shown by bKash who runs
the MFS as a BRAC subsidiary. But it also reflects the underlying market structure for MFS and
the regulatory environment guiding MFS (PRI, 2016).

Company Background

bKash Limited, a subsidiary of BRAC Bank, started as a joint venture between BRAC
Bank Limited, Bangladesh and Money in Motion LLC, USA. In April 2013, International Finance
Corporation (IFC), a member of the World Bank Group, became an equity partner and in April
2014, Bill & Melinda Gates Foundation became the investor of the company. The ultimate
objective of bKash is ensuring access to a broader range of financial services for the people of
Bangladesh. It focuses to serve the low income masses of the country to achieve broader financial
inclusion by providing services that are convenient, affordable and reliable (bKash, 2016).

More than 70 per cent of the population of Bangladesh lives in rural areas where access to
formal financial services is difficult. Yet these are the people who are in most need of such
services, either for receiving funds from loved ones in distant locations, or to access financial tools
to improve their economic condition. Less than 15 per cent of Bangladeshis are connected to the
formal banking system whereas over 68 per cent have mobile phones. These phones are not merely
devices for talking, but can be used for more useful and sophisticated processing tasks. bKash was
conceived primarily to utilize these mobile devices and the omnipresent telecom networks to

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extend financial services in a secure manner to the under-served remote population of Bangladesh
(bKash, 2016).

By providing financial services that are convenient, affordable and reliable, bKash aims to
widen the net of financial inclusion. bKash wants to provide a solution for Mobile Financial
Services, built on a highly scalable Mobile Money platform, allowing the people of Bangladesh to
safely send and receive money via mobile devices. At present, its CEO is Mr. Kamal Quadir, and
Board of Directors include Mr. Shameran Abed, also the Chairman, Ryan Gilbert, Andi Dervishi,
Mr. Nicholas Hughes, Mr. ArunGore, Mr. Iqbal Quadir, Nihad Kabir, Mr. Kazi Mahmood Sattar,
and Mr. Selim R. F. Hussain (bKash, 2016).

Offered Services

The products and services of bKash include Cash In, Cash Out, Send Money, Payment,
Buy Airtime, Remittance, and Interest on Savings. Cash In is used to deposit money into a bKash
account. And with Cash Out, if a bKash account holder has sufficient balance in his/her bKash
Account he/she can withdraw cash anytime from any bKash Agent or from any bKash enabled
BRAC Bank ATM. Send Money allows a bKash account holder to transfer money from his/her
bKash Account to another bKash Account. One can also make payments from his/her bKash
Account to any Merchant who accepts bKash Payment. Buy Airtime allows a bKash account
holder to recharge Mobile Airtime from his/her bKash Account. Buy airtime can be done for own
mobile phone or for someone else's mobile. Currently, this service is available for any bKash
Account holder to Buy Airtime for all Grameenphone, Banglalink, Robi, Teletalk and Airtel
numbers (bKash, 2016).

Remittance can also be received in bKash account through Western Union and International
Remittance. Western Union, MasterCard and bKash have come together to launch a ground
breaking service for Bangladeshis to receive remittance in the most convenient way possible and
people can receive money sent from more than 200 countries using Western Union directly into
their bKash account at the comfort of their home people. The money is transferred through
MasterCard’s secured network, hence the efficacy of this new service is highly ensured. And using
International Remittance, bKash account holders can receive remittance sent by Bangladeshis

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living abroad in the easiest and most convenient way through enlisted Bank and Exchange Houses
in UAE, Oman, UK, Malaysia, USA, South Africa and Saudi Arabia. No charge is applicable to
receive remittance on bKash Account. One has to pay bKash standard Cash Out charge only when
withdrawing money from bKash Agent or BRAC Bank ATM. A bKash Customer can keep a
maximum amount of BDT 150,000 in his/her bKash Account at any moment. Along with keeping
money safe, one can also enjoy up to 4 per cent Interest (per annum) on Savings on your bKash
Account (bKash, 2016).

Factors behind the rapid growth of bKash

Strategic partnership of bKash with BRAC Group and Bank is a key factor. bKash was
established as a subsidiary of BRAC bank that has a strong rural presence including involvement
in MFI. bKash is also a dedicated Bangladesh Bank licensed MFS entity and not a side business
of a traditional commercial bank. It mobilized a large number of internationally reputed equity
holders under the management of an innovative and dynamic team with good understanding of
both the market and the technology. bKash offers a simple easy to use technology that can work
with all mobile carriers. The service fee charged is attractive for customers. bKash has built up a
well-trained network of distributors and easy access retail outlets. Extensive distribution network
with more than 100,000 Agents covering each district and Thana along with around 300 BRAC
Bank ATMs provides nationwide reach and capacity that enables people to avail bKash services
at a close proximity. bKash uses an aggressive marketing strategy that has drawn the attention of
rural customers. The enabling environment established by Bangladesh Bank was especially
conducive to the growth of non-MNO led service providers through low-cost and easy access to
USSD (PRI, 2016).

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bKash Business Model

bKash provides instantaneous and secured Mobile Financial Services nationwide allowing
customers to send, receive and pay money with minimal effort and cost using an advanced
technology available on own mobile anytime, anywhere. The medium of transaction cycle is very
simple:

Distribution House Agents Customer

From the Distribution Houses in every Thana or Upazilla, the cash and virtual money is
distributed to the authorized agents. The Customers deal with the agents for their Cash In, Cash
Out or Payment purposes. Later, the transactions are taken care of by the executives of distribution
house at the end of each day (Huda, 2013).

The bKash interface uses a very easy and simple instruction based USSD channel *247#
accessible both from customer and agent end. The services taken by the USSD are named as cash
in and out, send money, buy airtime, payment, remittance and cash out from ATM. In short, Cash
In allows to deposit money into bKash Account, Send Money allows to transfer to other bKash
account, Buy Airtime allows to recharge Mobile Airtime, Payment allows payment to any
Merchant who accepts bKash Payment, Cash Out from Agent allows to withdraw cash anytime
from agents if sufficient balance is available and Cash Out from ATM allows withdraw money
from any Brac Bank ATM Booths in the major cities. People can send money from more than 200
countries to the ones living in Bangladesh with the service Remittance which allows to receive
International Remittance through enlisted Bank and exchange houses, and using Western Union
directly through MasterCard’s secured network. bKash offers a range of products and services,
including cash transfers between individuals (P2P) and between businesses/organizations and
individuals (B2P). Corporate account users can send money transfers in bulk by sending a list of
the individual accounts plus the amounts to be transferred to bKash via email, although they are
working on developing an automated system for these purposes. Once the payments have been
made, bKash sends a notification with a report of transactions, including any that failed to go
through, to the organization (Huda, 2013).

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 The entire transactions are done by transferring virtual money to destined account by the
simple USSD channel. While executing Cash In, an agent transfers the desired virtual amount from
his bKash account to the customer’s mentioned valid bKash Number and gets the cash money.
Whereas while executing Cash Out, an agent receives virtual amount to his bKash account from
another and provides customers with the cash money. At the end of each day, the amounts of E-
Money and cash money are to be balanced by the executives from distribution house (Huda, 2013).

A photocopy of National ID Card/ Driving License/ Passport, two Passport size recent
Photograph, customer form that to be filled up with valid information is mandatory for a person to
avail bKash account. For being an authorized bKash Agent, it is mandatory to have a physical or
fixed shop in a specific place within the area covered by the Distribution House (DH) along with
valid trade license, a photocopy of National ID Card/ Driving License/ Passport, two Passport size
recent Photograph, agent form that to be filled up with valid information. The DH either provides
a new SIM card to the agent or turns his the existing number into a bKash Number depending on
the demand of the agent. The amount of the virtual money E-Money also varies from agent to
agent depending on the amount provided to the distribution house. Each distribution house
contains a master number from which all the transaction, distribution and collection are taken care
of (bKash, 2016).

Revenue Model

The business model of bKash is fundamentally different from conventional banking.

Instead of focusing on credit or savings and building a balance sheet, bKash drives transactions
and earns revenue through fees (USAID, 2014).

The financial revenues earned by bKash are through the charges automatically deducted
from cash out both from agents and ATMs, from per transfer of money and on interest on float
account. For each cash out done by customers from agents, the charge deducted is 1.85 per cent of
the amount. For each cash out done by customers from Brac Bank ATM booth, the charge deducted
is 2 per cent of the amount. For per transfer of money from one account to another via Send Money,
charge is BDT 5 (USAID, 2014).

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In Corporate Accounts, price is charged in Collection, Cash Out from ATM and Money Transfer.
Collection is priced at 1.50 per cent of Corporate Collection Settlement Charge. In Cash out from
ATM 2 per cent charge is automatically deducted from bKash Account. In Money Transfer,
Corporate Disbursement Charge is 0.50 per cent and Corporate Disbursement Charge is negotiable
in nature depending on business volume, nature, etc. (USAID, 2014).

If a small snapshot of bKash is taken from December 2013, there were 5,001 staffs and
80,000 agents. Monthly average Cash In was done around 13 million, monthly average Cash Out
was done around 12 million, monthly average transfer was done around 5 million and other
transactions sized around 0.3 million. The monthly transaction was found around USD 680 million
dollars whereas, average transaction size was found USD 27 (Huda, 2013).

The primary costs done from the revenue collected are for distributor and retailer
commissions, fee to mobile operators for USSD access, staff and administration. Of the total
revenue, 80 per cent is estimated for all distributors and retailer commissions and 7 per cent is
estimated for all mobile operators. The rest 13 per cent of the entire revenue amount is estimated
for bKash (Huda, 2013).

bKash in light of Porter's Five Forces Model

From last year, the competitive environment in the mobile financing industry has become
intensely competitive, with not only constant special offers and new value added services, but also
with new and bigger entrants. The following sections describe the competitive environment in the
industry using Michael Porter’s five forces model.

Threat of Intense Segment Rivalry

This mobile financing industry is growing very fast. Till now, bKash and Dutch Bangla
Mobile Banking dominates the market. These two are covering the market very fast. Beside this,
they are try to incise their market share with more competition. Dutch Bangla Mobile Banking has
become aggressive and rebranded itself into Rocket to remove the image of serving low income

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people only. Recently Islamic Bank Bangladesh has also introduced M Cash. It could be one of
main competitor for those two companies (PRI, 2016).

However, the monopoly soon came to an end in this industry. In mobile financing industry,
there are some banks who are offering mobile banking. They are mainly Prime Bank, Bank Asia,
Trust Bank, Dhaka Bank, Mercantile Bank, Premier Bank, Jamuna Bank, and some new banks are
also entering. Thus there are also many potential competitors in this industry. All of them are
establishing themselves strongly to run mobile banking. But they are not concentrating in MFS, so
it is easy for bKash and Dutch Bangla Bank for capturing the market (PRI, 2016).

Since BRAC Bank introduced bKash in this industry, they have been doing aggressive
marketing. Now they are covering 81.4 per cent of market share with huge number of agents. (PRI,
2016). They aggressively use television and radio commercial, billboard, newspaper and social
media like Facebook to promote their services. Beside this DBBL is also doing this kind of
branding to promote their mobile banking services. Now in this mobile banking industry bKash is
the market leader (PRI, 2016), but growth rate is very high in this industry. However, any one can
come to this industry and that will be a threat for bKash. bKash is very much aware about this and
so they are capturing the market rapidly. Beside this they are introducing their services in every
new possible scopes they have (PRI, 2016).

After coming in to the industry Islami Bank’s M cash is also doing well. They are giving a
hard competition to other companies. M cash is doing aggressive marketing in terms of other
companies. The visibility of the companies are quite good. So, the rivalry among existing
competitors is high (PRI, 2016).

Threat of New Entrants

Bangladesh Bank introduced a new rule that every Bank should have mobile banking
service. So it is not that much hard to enter the industry. But beside this Bangladesh Bank also has
some regulations for new entrants. Existing companies have created brand positioning and
economies of scale in coverage that also act as entry barrier. In addition, there is price battle
between the competitors regarding service charge. So potential direct entry to the industry is
relatively restricted at the moment, due to control over licenses. However, companies are finding

15
other ways to enter the industry, i.e. through merging with existing operators’ mobile financing
industry. So the threat of new entrants is moderate (Mahbub, 2015).

Threat of Substitute Products

Mobile banking is a high-tech industry and the substitutes that would replace the services
of today are strongly related to the factor of innovation. In case of Bangladesh mobile banking
industry, substitutes exist in the form of government post office and some private courier service
providers. However, there is no strong competitive substitute for mobile banking industry as the
existing alternatives are either nearly obsolete or in embryonic stage and thus posing very little
threat to the industry. bKash is the only company in the country who provides services through
huge number of agents and ATM booths. However, the substitute services are not much strong so
the companies are not giving much attention to substitutes. Also, agent banking has emerged, and
can be a threat since they are offering services from bank like outlets at affordable price. To
counter these, bKash can come with more aggressive strategy and people-centric facilities. So, the
threat from substitutes is moderate in Bangladesh.

Threat of Buyers’ Growing Bargaining Power

There are mainly 3 mobile banking operators in Bangladesh and they offer almost
homogenous services which have low switching costs between operators. So the bargaining power
of end-buyers in this industry is moderate with the exception of remote-area customers who have
no alternative service available in their vicinity. Merchants such Aarong, Bata, etc. using mobile
banking to facilitate customers’ payments and Corporate Account holders using mobile banking
to disburse salary, make business to business money transfers, etc. are the business buyers of
mobile banking. Since they are very important clients for ensuring profitability of this industry,
MFS companies compete with one another to attract new clients and retain the existing ones. Thus,
these business buyers have moderate to high bargaining power.

Bargaining Power of Suppliers

The bargaining power of suppliers in the mobile banking industry varies depending on the
brand name and strategic importance of the suppliers’ network as well as the size of the company.
Suppliers such as Grameenphone, Banglalink, Robi, Citycell, and Teletalk in the
telecommunication industry have strong bargaining power in the industry since MFS depends on

16
these suppliers’ telecommunication network. Agents are another important suppliers in
distributing core services such as deposit and withdrawal of cash. Since the number of existing
and potential agents is huge, their bargaining power is moderate.

Competitive Advantage

With nearly 156.19 million population growing at 1.05% (July 2016 est.) and a total area
of 148,460 square kilometers (CIA Facts Book, 2016), Bangladesh is one of the most densely
populated countries in the world. In Bangladesh, less than 15 per cent of Bangladeshis are
connected to the formal banking system whereas over 68 per cent have mobile phones. These
phones are not merely devices for talking, but can be used for more useful and sophisticated
processing tasks. bKash was conceived primarily to utilize these mobile devices and the
omnipresent telecom networks to extend financial services to the under-served remote population
of Bangladesh in a secure manner (bKash, 2016).

The use of mobile devices for conducting banking transactions and accessing other
financial information is an emerging service that has yet to be widely adopted by mobile users.
Over the years a number of mobile banking services emerged, however bKash had the first mover’s
advantage. They captured a high market share due to the brand image that Brac holds in the minds
of the consumers. Brac, one of the biggest NGO’s of the world, identified this niche. People needed
a safe, convenient and affordable means of transferring money to and from the cities to the villages.
So they came up with the idea of mobile banking (PRI, 2016).

The ultimate objective of bKash is to ensure access to a broader range of financial services
to the people of Bangladesh. bKash is the perfect platform for Bangladesh to take financial services
to the country's largely unbanked population in an efficient and low-cost manner (bKash, 2016).

bKash provides Mobile Financial Services allowing customers to send, receive, and pay
money from their mobile phones. People can send and receive money, or make payments instantly
using an advanced technology available on users’ mobile phone. The recipient will receive money
instantly, no matter where he/she is. Payments through bKash also make users’ life easier as they

17
do not have to go back home or anywhere else to get money to buy something when they run out
of cash. They do not have to carry huge amounts of cash. Even if a person does not have the
required amount in his/her bKash Account, someone else can easily send him/her the amount in
times of need (bKash, 2016).

bKash is a secure way to transfer money. Money in a bKash Account will not be lost even
if its user’s mobile phone gets lost. People can notify the authority and block the account
temporarily. Every transaction is protected by a secret PIN number and state-of-the-art technology
provided by VISA ensures that customers’ money is always safe and secure in its system. bKash
offers free registration and also free balance check, account statement collection and PIN change.
It has more than 100,000 agents all over the country. Besides the authorized agents, its service is
also available in all Robi Walk in Centers, BRAC channels and Continental Courier channels.
bKash’s mobile network partners are Robi, Grameenphone, Banglalink and Airtel; it is the only
mobile financial service provider which has one service menu for all the operators (bKash, 2016).
As current market environment is going to be more competitive, to stay and run a business
in this competitive market, marketers have to take more strategies for attracting customers to their
business by providing better facilities and attractive services. Till now, bKash is the most visible
mobile bank in Bangladesh. It has been using heavy advertising from the beginning. It utilizes TV
advertisement, radio advertisement, billboard, poster, festoon, leaflet, shop pointer, social media,
etc. effectively. If they continue to maintain their services as effectively as they are doing so, and
if there isn’t a new strong entrant into the industry, bKash might be able to sustain its competitive
advantage for a long time. Through comparative analysis of the market, it can be seen that bKash
has already built strong brand image among its customers’ minds. Its strengths include skilled and
dedicated workforce, strong financial position, range of product and product innovation skills,
brand image and reputation in the industry, strong company culture, and customer care. It has
shown uniqueness, emotional connections and consistency in their branding.

Setback and challenges

bKash’s initial growth to large scale has been among the fastest globally. At the same time,
it is still in early stage of development. The bKash board and management are the first to say that
there is a long way to go and much still to do to build the business. It needs to stabilize its

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technology platform to support a much higher volume of transactions. For reducing fraudulent
activities, it should encourage customers to shift from doing their transactions over the counter via
agents to using their own accounts. bKash should come up with more new financial services such
as mobile insurance to get the benefits of first mover.

One of the core challenges stems from the perception of low income users regarding
technology. For example, many users mistakenly think that they require advanced skill to use the
technology. A similar issue which arises is that users often think that advanced English is required
to use bKash.

People may make mistake to send their money by using their mobile phone, but there is no
recovery system to recover money from wrong number in bKash limited. bKash limited is a mobile
based banking system and if a customer inputs wrong amount of money or account number while
sending money to another account, there is no option to recover the money lost.

The service charge of bKash limited is higher than normal banking system. Sender has to
pay a charge for sending money as well as receiver has to pay some charges for collecting money
from bKash. After adding all charges, the service charge gets higher. This problem may discourage
customers from using bKash service.

There are so many mobile recharging shops in different locations in Bangladesh. But not
all of them are agents of bKash limited. So, the number of agents of bKash limited is relatively
few in the rural areas of different districts in Bangladesh. Also, some agents do not want to take
the risk of money from customers. If the agent mistakenly does Cash Out to wrong customer
number, he has to repay the money to the client from his own pocket because of limited recovery
systems in bKash. On the other hand, customers also sometimes end up not getting the money
back.
The external security of bKash limited is very lower than normal banking. In a normal
bank, customer makes their transactions after entering an ATM booth or into the bank office. So,
bKash service is more risky than other normal banking service.

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 Customer service centers or touch points are not found everywhere. Hot line service
process is lengthy and costly. Buy Airtime service through which mobiles are recharged is
sometimes unavailable due to random network and connection problems with telecommunication
operators. If technological up-gradation program is implemented fast, it would benefit both bKash
and telecommunication operators as it would enable them to meet the committed services more
efficiently.

bKash service is provided through agents; they may not have available fund all the time.
As per regulatory requirement, bKash has also limits regarding the maximum amount of money
that can be kept in any account, the number of transactions per day and the amount of withdrawals.

Most of the agents’ shops are located in open places where people gather every day. Some
of them are situated in marketplaces where monetary transactions are risky. Robbers may attack
customers while withdrawing money from such risky places.

Another most important challenge is the handling of fraudulent activities and money
laundering that occur through MFS. Customers of the country’s largest mobile financial services
provider like bKash are often becoming victims of fraud and harassment and are losing money to
scammers, who are sending masked SMSs (Short Message Service). bKash Limited, a joint-
venture between Bangladesh’s BRAC Bank Limited, and US-based Money in Motion LLC, having
58 per cent market share of the country’s mobile financial services, attributed the problem to tech-
savvy criminals who are cheating clients. The law enforcement agencies confirmed that this kind
of fraud has been going on through using bKash short code, but the mobile financial service
provider blamed it on masked SMSs. Another common financial fraud being committed through
using bKash is the lottery (Moretaza, 2015).

bKash and other MFS should come up with more preventive measures to check fraudulent
activities, and through handling of fraud should try to recover and return victim’s money and also
take strict measures against fraudsters. This is a difficult task for the company alone to tackle;
proactive and reactive measures are needed from law enforcing agency, Bangladesh Bank, and
most importantly from the general public.

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Conclusion

Mobile Banking in developing countries in South Asia is becoming very popular. People
are becoming very interested to this hustle free banking system that lets them transfer money from
one place to another. In a country like Bangladesh, where hijacking money is a regular crime, safe
transfer of money does really matter. The mobile financing industry in Bangladesh is growing at
an excellent pace. While it took only two years for bKash to reach 3 million customers, DBBL has
got 1 million customers within two years. Beside this, all the other companies have huge potential
to increase their market share, because the industry is in very early stage. There is an opportunity
for the new entrants in the industry.

To wrap up, it can be said that bKash limited is still working hard to grab the entire market
although they are the market leader. But the competition in this industry is increasing rapidly.
Though bKash is in a comfortable place in this industry, to retain the market leadership position,
bKash needs to introduce new services. If they can continue to cater to the needs of their customers
like they are doing now, they have a bright future ahead of them.

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