Woes of millions of poor customers with extremely high MFS charges

More than 32 million people, mostly unbanked and living in rural areas, are making formal transactions through mobile financial services (MFS) or what we call, in general, mobile banking. This has contributed to reducing the level of poverty by more than 15 per cent over the last six years. Even this data -- the 15 per cent -- merits rechecking, considering its importance.
MSF operators in Bangladesh charge 1.85 per cent for each transaction. This amounts to around Tk 20 for every transaction of Tk 1000. Under the current rate, clients are paying a disproportionate amount of money to the service providers. To cite here an example, Fatema Khatun who works in a garment at Gazipur, sends every month her mother an amount of Tk 5,000 through MFS services and pays Tk 92.50 for cash-out purpose. She questions herself why does she pay such a high amount for the money transfer?
Mobile network is the main ingredient of the MFS service through what she transfers money. Then why does a service by the MFS providers that requires maximum Tk 4.0, involving three different steps -- person-to-person, cash-in and cash-out -- using the telecom resources ultimately entails a charge of Tk 92.50 for her?
As a mobile phone user, Fatima may not be aware that an SMS cost her Tk.20 and a USSD session costs, at best, Tk 1.5. This, in total, translates into Tk 1.70. USSD run-structured supplementary serial data is a telecom resource and pretty similar to voice service pricing.
As a consumer of MFS we face a number of challenges, firstly the MFS charging process lacks transparency. We don't know why we are paying such a stounding amount of money as service charge. Are we having transparency in terms of resource use and relevant charging? Transfer of any amount of money whether Tk 100 or Tk 10,000 uses the same resources, at least for telecom. Then why is the service charge applied, based on the value of the transaction in the case of cash-out? It should be a fixed amount consisting of the cost components and margin of the service provider.
Secondly, as consumers we don't know the rationality of the service charge. For instance, when we were earlier used to sending money through courier service, they charged Tk 20 for per Tk 1,000 transfer. That service included the fright charge, human labour involvement etc. The same service has now been replaced by mobile phone-based USSD service. The telecom resource that is being used for this particular MFS service is similar to other telecom utility services and should be clearly communicated to the customers so that they can get a clear picture about the pricing method.
Telecom industry is the most expensive in nature since the relevant companies spend billions of dollars to build the network. If they can provide the service within the range of Tk 1.0 - Tk 2.0 per session, why is then the mobile financial services, meant for the poor segments of the population, so expensive?
Thirdly, if we look at the same kinds of services around some other countries what do we find? In India, Airtel money charges 0.65 per cent for cash-out. In African countries including Kenya, Tanzania and Zimbabwe, the rate is applicable to different slabs-the higher the amount, the lower is the service charge; that is a regressive rate. In both cases, the cash-in is free. Those countries clearly mention the pricing of USSD or telecom resource as well. For example, the Indians pay Tk 0.65 for a session that goes up to a maximum of 90 seconds.
Then why in Bangladesh do we pay around 2.0 per cent as service charge in total? If we take into consideration the variable costs of operation (including USSD price), MFS rates in Bangladesh are not rational. Appropriate tariff modeling is necessary for both the growth of MFS and financial inclusion of the poor segments of the population.
As ordinary citizens of Bangladesh, we seek clear communication from the service providers and regulators on the pricing modality for both MFS and relevant telecom service usage. Bangladesh Telecommunications Regulatory Commission (BTRC) should clearly spell out its position on pricing for each of the telecom sessions. Bangladesh Bank should also clarity or set the pricing of MFS session on a rational ground.
The writer is Secretary General, AMTOB and a technology and
socio-economic analyst. timnkabir@gmail.com