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Growth of digital payment in 'New Normal'

Amitabh Guha Roy and Hanan Fariyel Osman | December 07, 2020 00:00:00

Surviving eight months into this pandemic, where COVID-19 took about 6 thousand lives and infected more than 400 thousand people, we are getting accustomed to the 'New Normal'. As wearing masks, using sanitizers, and intense cleaning routine have become part of our daily lives, such hygiene concerns and social distancing have also made us more aware to adopt digital payments, shifting our preference from cash based transactions. From receiving monthly salary to sending money to any part of the country, we have advanced and fast-tracked many steps forward towards our dream of becoming a cashless society through financial inclusion.

From the beginning of the year until August 2020, ATM transactions and POS transactions experienced negative growth as movements were restricted. In contrast, CRM (Cash Recycler Machine) transactions have grown by 1.5 times, and e-commerce transactions through card experienced 35% growth from January 2020. The MFS industry conducts 10 million transactions in a day, which has increased by 1.4 times from July last year.

The pandemic has been a game-changer for e-commerce and fintech, both appearing as the saviours with shining armors during this period. People, irrespective of their income level, opted for mobile financial services to pay for everyday needs more than ever during this pandemic. MFS industry onboarded 11 million new beneficiaries since the epidemic started. Other than traditional financial transactions such as cash in, cash out, and send money, transactions like mobile recharge, utility bill payment gained momentum and grew exponentially. Around 8.0 million utility bills were paid through MFS in August 2020, growing by 1.4 times since January 2020. Electricity bills through digital payment platforms reached to 60%, which was only 5.0% before. Country's leading mobile service operator Grameenphone collects more than 20% through bKash, which was less than 15% in 2019. Other than payments, customers are also adopting digital channels to bring money to their mobile wallets. With the increase in internet banking transactions, the MFS market leader, bKash experienced four-folds growth in fund inflow from banks since January 2020. Bangladesh's banked population has also accessed MFS, which has enabled people with ease of payment and freedom of movement.

Merchant payment volume through MFS has doubled in September 2020 compared to January 2020. bKash's online payment transaction volume has grownby 144% in October compared to what it was in the beginning of the year. Furthermore, the international ride-sharing giant Uber's integration with bKash, for contactless payment, has escalated the opportunity of becoming cashless through digital transactions. This partnership is one of a kind for Uber Bangladesh to increase riders' mobility with enhanced convenience.

About 63% of the MFS wallets opened since March 2020, are from rural areas, indicating that 7.0 million people have been brought under financial inclusion during this pandemic. The government of Bangladesh declared financial assistance for the marginal population of the country. MFS has been chosen to disburse this crisis fund as it ensures transparency where customers can be reached in the shortest possible time due to the widespread agent network. bKash alone disbursed government funds to more than 900 thousand people contributing around Taka 30 million cash out fee contribution. When salary disbursement for readymade garments sector was made mandatory to be disbursed through MFS to avail government declared stimulus package, bKash contributed around Tk 500 million as cash-out fee. The workers have also found benefits of taking salaries in their mobile wallets like sending money to the families, mobile recharge from their wallets, as well as paying bills, instead of being dependent on nearby agent points for cash out only.

BRAC, the largest NGO in the world, has scaled up its collection through bKash. In September 2020, transactions increased 5.5 times compared to January 2020, where BRAC Microfinance beneficiaries are making recurring instalment payments through bKash. 8.0% of BRAC Microfinance's instalment collection is now done through bKash payments. And according to BRAC, 85% of the customers who have opted for digital payment are willing to continue digital payment in the future. Pandemic has fast-forwarded regular instalment collection of NGOs through bKash while ensuring interconnection with the institution and communication and awareness for transaction notification along with wallet security.

Other than NGOs, banks and financial institutions have considered MFS industry to tap on to both banked and unbanked population of the country. IPDC Finance Ltd. has come forward to collect loan and DPS instalments through bKash. Along with financial institutions, insurance companies are also shifting their focus to adopting digital payment to accelerate collection and improve customer payment journey. Another remarkable innovation in the financial sector also came through in this Covid-19 struck-year. The City Bank Ltd. launched collateral-free, instant, digital loan with bKash. In this pilot phase, up to BDT 10,000 loan can be requested through bKash app. The digital loan would revolutionise the financial sector by enabling both banked and unbanked population to avail instant loans, converting informal loans and driving financial inclusion of Bangladesh.

The journey of digital payments has gone into overdrive, and the future of digital payment is going to be a wild ride ahead. South Asian mobile payment industry is expected to grow at a CAGR of 28.2%, reaching the projected transaction volume of USD 54bn by 2024. In 2020, where a customer spends USD 91.5 through mobile payment, is expected to spend USD 225.8 after next four years. Keeping pace with the regional outlook, according to Statista, Bangladesh mobile payment industry is expected to grow at a four years CARG of 39.4%. Recent momentum in digital payments and promising Bangladesh outlook has also drawn the attention of the global leader in payment technology, Visa, who has opened an office in Bangladesh to tap the growing opportunity.

Today, the financial inclusion journey of MFS is not only limited to reaching every corner of Bangladesh but also to cater to every personal financial need. Digital payments have now become our day to day companion, enabling us with contactless financial transactions. Today thousands of people are getting their salaries in mobile wallets. Digital payment through bKash for application, admission, and tuition fees to educational institutes has increased by 1.5 times compared to last year. One needs to study hard, play hard and be smart, and the gamers today also got cover through digital payments. PUBG lovers can easily buy mobile UC through bKash. MFS today allows us to send money not only to our dearest ones but also for the payment of our daily needs, be it at the nearest laundry or the closest grocery shop. And all these are just a few taps away.


The authors are currently working at bKash. They can be reached at [email protected] and [email protected]

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