Is a Transition to Mobile Wallets Underway in Bangladesh?
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Transcript of Is a Transition to Mobile Wallets Underway in Bangladesh?
Consumer insights from Bangladesh Is a Transition to Mobile Wallets Underway?
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Greg Chen & Pial IslamMarch 2014
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Summary: the Bangladesh market in transition
Bangladesh is one of the fastest growing mobile financial service (MFS) markets globally . It added over 10 million new accounts in 2013 and grew transaction volumes to nearly $900 million per month. The market is dominated by a single provider bKash, a subsidiary of BRAC Bank.
There are patterns among early MFS adopters. There are a wide range of early adopters but there is a tendency to be young, a student, proficient in English, and better educated. Only a small portion of MFS users were already users of conventional banking services. The early adopters use MFS predominantly to send or receive money within their families and most transactions are small at about $US40.
The use of MFS remains new. Most users have begun to use MFS only in the prior 12 months. Most use over-the-counter (OTC) transactions to make fund transfers rather than use their own wallets. OTC is valuable, convenient and instant. But client use of their own wallet remains a critical objective since it serves as a store of value, basis for long term relationship, a way to deliver products beyond payments and building a banking track record.
There is a transition of users who shift to wallets, but it is gradual. The pathways to wallet use vary. About half of wallet users began with OTC before shifting. Some wallet users shifted from Post Office or informal Courier fund transfer services. The transitions to wallets are very recent with one half of wallet users having adopted wallets only in the prior 3 months. Even as a transitions is underway, there will be a significant portion of OTC users who may transition to wallets slowly or not transition at all.
There is more providers could do to make wallets more attractive and lower barriers to use . The biggest challenge is the absence of a strong or clear value proposition for wallets. OTC is popular because it is easy, fast and convenient. Many prefer to avoid the hassle of wallet opening and agents are not incentivized to promote wallet use by clients. Providers ought to consider various measures to increase wallet use: better targeting of market influencers as users, changing the incentives for agents, offering more value/services and adjusting pricing.
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Contents
I. Mobile Financial Services (MFS) in Bangladesh
II. Research Methodology
III. MFS Users and Use Patterns
IV. Is There a Transition to Wallets Underway?
V. Pathways to Greater Value and Use of Wallets
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Part I: MFS in Bangladesh
Mohammad Moniruzzaman, 2009 CGAP Photo Contest
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Extraordinary growth in Bangladesh
cash-in (42%)
+
cash-out (40%)
+
wallet-to-wallet (17%)
+
other (1%)
Jan Feb Mar Apr Sept Oct Nov Dec0
100
200
300
400
500
600
700
800
900
2013 Transaction Volume ($US Millions)
Source: Bangladesh Bank Payments Department
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Primary market players
28 Banks Licensed
Only 3 with noticeable market presence- bKash (subsidiary of BRAC Bank)- Dutch Bangla Bank- Islami Bank
bKash dominates generating large majority of business volume, clients, and agents
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Bangladesh – emerging global leader but lagging wallet usage
Source: InterMedia Financial Inclusion Insights Program, Bangladesh Survey Fall 2013
Pakistan 2013
7% Mobile Money Users
0.4% Registered Users
Bangladesh 2013
22% Mobile Money Users
3% Registered Users
Uganda 2013
43% Mobile Money Users
29% Registered Users
Kenya 2013
76% Mobile Money Users
68% Registered Users
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Bangladesh - early high use of unregistered OTC
Registered15%
Unregistered85%
Percentage of mobile money users with regis-tered accounts
Base n=1,267 MM users
Source: InterMedia Financial Inclusion Insights Program, Bangladesh Survey Fall 2013
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Why we care about OTC and wallet use
Over-the-counter (OTC) …….are transactions that happen where clients do not use their own registered accounts but rely on the agent to make a funds transfer. OTC is fast, reliable, and there are many agents to choose from. However, OTC is a one-time transaction and no wider relationship is built between provider and client. The value for clients and providers is thereby limited.
Wallet use over time is critical…..
• Establishing deeper relationship with clients• Generating float• Providing a means for providers to retain customers• Serving as a gateway for savings, credit, insurance• Building transactional records to predict needs & manage risk
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Part II: Research MethodologyMd Farhad Rahman, 2013 CGAP Photo Contest
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Un-banked payments behavior driven by choices available
ATMs• 5,248
Informal Courier Services• 6,000 Outlets (Estimated)
Bank Branches• 8,427 Outlets
Post Office• 10,000 Outlets
Mobile financial service agents• 188,000 (but a lot of double counting)
(Source: Bangladesh Bank)
Options for the un-banked
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This research set out to answer three questions
1. Who is using MFS?
2. What do they use it for?
3. How can providers build a better pathway to greater wallet use?
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Definitions
OTC
Neither sender nor receiver uses their own wallet during the transaction
Partial OTC
Either sender or receiver uses their own wallet during the transaction
Wallet
Both sender and receiver use their own wallet during the transaction
SENDER
Account
RECEIVER
Account
AccountAccount
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Research methodology August 2013 to January 2014
Interview guide of 60 close-ended questions with interviews lasting 30 minutes. Cue Cards used to
test numeracy and English proficiency.
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Research sample: MFS users 440 = 361+79(plus 20 from Courier and 20 from Post)
361Purposive (random)
SamplingTargeted Sampling
79
bKash & Dutch Bangla Bank provided sample + Snowballing
OTCPartial OTC
WalletPost
Courier Wallet
40
16GMB Akash, 2011 CGAP Photo Contest
Part III: MFS Users and Use Patterns
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MFS users: younger, male dominated, both urban and rural
Illite
rate
Class
5
Class
8
Secondar
y
High s
chool
Diplo
ma
Bachel
ors
Mas
ters
4%
9%12%
20%
29%
4%
15%
7%
Education
15 to 25 26 to 35 Above 35
52%
35%
13%
Age
Senders Receivers
Male 40% 40%
Female 6% 13%
Senders Receivers
Urban 22% 23%
Semi-Urban 11% 9%
Rural 14% 21%
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MFS users: multiple occupations and a range of income levels
Stude
nt
Servic
e ho
lder
Smal
l trad
er
House
wife
Shopk
eepe
rs
Petty
trade
r
Labo
rer
Driver
/CNG D
river
Unem
ploy
ed
Self-e
mpl
oyed
Farm
er
32%27%
11%9%
6% 5% 3% 3% 2% 1% 1%
Occupation
0
1 to 37
37+ to 75
75+ to 112
112+ to 150
> 150
0% 5% 10% 15% 20% 25% 30% 35%
Monthly Income ($US)
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MFS users: heavily under-banked and excluded
8%
92%
Outstanding Loan
33%
67%
Bank account
None Yes
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MFS users: predominantly basic handset
Total Sample (n=440)0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Smart Phone
Feature Phone with Monochrome Display
Feature Phone with color display
≈ $US 50
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MFS users: few wallet users found at agents
361 random clients found at agents, of these 3% came to transact with their
own walletsUse
Wallets (n=10)
Have Wallets (n=96)
Total Random Sample (n=361)
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MFS transactions: smaller transaction size
Courier Service Post Office Mobile Financial Service
210
6342
Average Transaction Size ($US)
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MFS transactions: between family members
Courier PO OTC Partial OTC Pure Wallet0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%100%
75%
86%81%
90%
Transaction Within the Same Household
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Part IV: Is There a Transition to Wallets Underway?
Bir Azam, 2013 CGAP Photo Contest
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Case study: initial transitions to MFSUsing MFS for first time; transition accelerating over the past 6 months
Before 1 year 6 month- 1 year Last 6 month
100%
70%
25%
0%
30%
75%
Funds transfer choices(# of transactions)
Hand to hand Pure OTC
LipiGarments Worker
Monthly Income: $62
Education: Class 5
Perceived Value of MFS:Instant transfer
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Case study: more advanced MFS userUses wide variety of payments; with recent shift towards partial OTC and wallet use
SajjadEntrepreneur
Monthly Income: $250
Education: Class 8
Perceived Value of MFS:Safe keeping of funds,
flexibility
Before 1 year 6 month to 1 year Last 6 month
70%
60%
50%
30%
20% 20%
0%
20%
15%
0% 0%
10%
0% 0%
5%
Funds Transfer Choices(# of transactions)
By hand Courier Pure OTC Partial OTC Pure Wallet
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Pathways to wallet use41 new wallet users September to November arrived through variety of pathways
More than 3 months(Pre Sep)
Prior 3 Months(Sep to Nov)
At time of survey(December)
Pure OTC
Partial OTC
Pure Wallet
Courier
PO
41*
12
4 14
3 8
8
4 7
2 2
53
2
3
22Hand-to-hand 7
8 7
1
1
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Pathways to wallet use41 new wallet users September to November arrived through variety of pathways
Mobile financial services are very new to most users: before September 2013 more than half relied on hand-to-hand cash transfers, and about one-third either Post Office or Courier services.
OTC is a close substitute to fund transfer systems many already know. The OTC agent and fund transfer mimics what clients know about Post Office and Courier services. MFS are initially seen as a replica of these existing services. The role of wallets is not initially well understood.
The transition to wallets takes multiple pathways. About one half use OTC before shifting to wallets. The other half came directly from either Post Office or Courier services. No one came directly from hand-to-hand transfer to wallet use directly.
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Early adopters of wallets: earn more, younger, educated, English
Courier PO OTC Partial OTC
Pure Wallet
121 106
89 105
133 Average Monthly Income
$U
S
Courier PO OTC Partial OTC
Pure Wallet
0%
20%
40%
60%
80%
100%
Age 15-25
Courier PO OTC Partial OTC
Pure Wallet
0%
20%
40%
60%
80%
100%
More than Grade-10
Courier PO OTC Partial OTC
Pure Wallet
0%
20%
40%
60%
80%
100%
Read English
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Barriers to wallets: value proposition and account opening
I don't require it It seems complex to me
Does not know how to open an account
Its time consuming0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
Question to non-wallet users“Why haven’t you considered a Mobile
Banking Wallet?”
Note: beyond the 4 primary responses to the open-ended question the balance of responses included more than 20 wide ranging reasons associated with new services. These included rationales such as: not enough knowledge, no ID, and concerns with security.
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Barriers to wallets: trust is not a barrier
Courier 3% PO 6%
OTC 26%
Partial OTC 10%
Wallet 55%
Which money transfer mode do you trust most? (n=480)
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Barriers to wallets: agent charges are not a barrier to wallet use
OTC Partial OTC Pure Wallet0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
“I am not happy with what agent charges”
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Barriers to wallets: agents over-charging not a barrier
16% (n=440) paid extra charges
OTC
Partial OTC
Pure Wallet
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Other Reported Problems:
• Lost Funds for Technical Errors (0.4% reported)
• Lost Funds to Fraud or Misappropriation (0.4% reported)
• Had Money Sent, but Not Delivered (1.7% reported)52 out of 208
12 out of 143
6 out of 89
Unauthorized fees charged by agents
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Barriers to wallets: agents promote wallet opening but not use
Agents are incentivized to open wallets by earning fees.
But there does not appear to be a strong incentive for agents to promote wallet use.
49%
34%
16%
Agent encouraged me to USE a Wallet
Disagree Neutral Agree
17%
29%54%
Agent encouraged me to OPEN a Wallet
Disagree Neutral Agree
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Barriers to wallets: OTC seen as easier, less-costly and instant
Instant
Trustworthy
Cost Effective
Easy to Use
Reasons they prefer OTC or Wallet (%)
OTC (n=208) Wallet (n=89)
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Part V: Pathways to Greater Value and Use of Wallets
Sumon Yusuf, 2013 CGAP Photo Contest
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• Women or men?• Senders or receivers?• Poor or less poor?• Courier or Post
users?• Less well educated?
Can promotional campaigns be more efficient and effective?
Industry responses: identify early adopters or influencers?
Mohammad Moniruzzaman, 2009 CGAP Photo Contest
Which early adopters might also influence others to use wallets?
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• Build easier to use interface?
• Position “coaches” to help new wallet users?
• Find use cases beyond intra-family transfers: merchant payments, salary, G2P, microfinance?
• New products: savings, credit, clean water, solar power?
Industry responses: strengthen the value proposition of wallets?
Forhad Kamaly, 2013 CGAP Photo Contest
Wallets need to offer a more compelling case. Is this about savings, more frequent transactions, easier customer interface, Bengali language, easing daily life, and/or lowering cost?
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Aligning incentives:
- Share float revenue?- Deferred fees linked
to clients wallet use?- Change in pricing on
cash-in and out?
Industry responses: better align agent incentives?
KM Asad, 2013 CGAP Photo Contest
OTC is good business and wallet use could undermine the agents’ ability to earn fees.
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One possible combination to test?
1. Allow OTC but make more expensive than wallet use
2. Require clients phone to be physically present for cash-in (monitored with mystery shopping and recording phone number in register)
3. Reduce fees on cash-out and shift fees to P2P transactions
Industry responses: pricing and rules changes?
Arifur Fahman, 2012 CGAP Photo Contest
The fees paid (formal and informal) between wallet and OTC are similar – most fees are on cash out. Little price advantage to wallet use.
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CONFIDENTIALOnly for DBBL Management
Advancing financial access for the world’s poor
www.cgap.org