Sunday, November 16, 2014

Bangladesh Pioneering Unique Models & Innovations for Agent Networks

Earlier this year, the Helix Institute of Digital Finance conducted a nationally representative survey of 2,800 mobile money agents in Bangladesh, coupled with qualitative interviews across the country. The 2014 Bangladesh Country Report provides insights into some of the unique models and innovative techniques players in this country have designed to develop an agent network of more than 80,000 agents in under four years.
Unique Leadership in the Market: No Telecoms
The report finds that bKash—a third party provider majority owned by BRAC Bank Ltd, managed by Money in Motion LLC with equity investments from The International Finance Corporation (IFC) and the Gates Foundation—dominates the digital financial services space with 50% of the agents offering their services.  They are followed by the Dutch Bangla Bank Ltd. (DBBL—28%), United Commercial Bank Ltd. (UCash- 14%) and Islami Bank Bangladesh Ltd. (mCash – 6%).  

Beyond the burgeoning competitive landscape in Bangladesh, it is intriguing that none of the above players are telecoms.  Thus far we have seen the majority of the success in the digital finance space lead by telecoms who have large marketing budgets, national networks of retailors already serving them, and usually tens of millions of customers they can entice to register for digital finance.  In Bangladesh the regulation stipulates that telecoms are not allowed to brand their own digital finance services, which has given the opportunity to banks and third party providers like bKash.  This is strong evidence that players other than telecoms can scale agent networks in digital finance.

Distinctive Agency Demographics: Non-dedicated and Male
The different types of institutions leading market growth in Bangladesh are also making distinctive decisions about the demographics of their agent network.   In Bangladesh almost all agents (96%) have pre-existing, parallel businesses in addition to the digital finance service they provide (they are “non- dedicated” to the DFS business). As the below chart shows, this is very different to the leading DFS markets in East Africa, where many more agents are completely dedicated to the DFS business.  Generally, these types of agents can only exist in markets where transactions per day and therefore profits are relatively high, which therefore sustain the entire business.  Hence we might see a move towards more dedicated professional agents, if profits increase in Bangladesh in the future.  Another difference worth highlighting, is that while the majority of agents across East Africa are female, in Bangladesh 100% are male.  More research will have to be done to uncover both the drivers and the implications for customer uptake and usage of this gender difference.

Different Business Model Viability: Low Transactions and Profits
Median monthly profitability ($51) as compared to the leading East African Countries is low, and is a result of low transactions per day for agents.  However, 96% of agents are profitable, driven by very low median operational costs. When asked what the biggest barrier is to conducing more transactions, agents most commonly cited there are too many other agents competing for business, which is often an indication that focus must be shifted towards acquiring more customers, and encouraging them to transact more often.  
Innovation: Liquidity Management
Bangladeshi service providers have created an innovative system to tackle the prevalent issue of liquidity management.  Most agents have their cash and electronic float delivered to them at their outlets, mainly by a ‘runner’ who is an employee of master agent (referred to locally as a distributor or aggregator).  As a result, the frequency of rebalancing (both cash deposits and withdrawals) is higher in Bangladesh than in East Africa. In Kenya, for example, agents do a median of just four cash deposits and three cash withdrawals per month as compared to a median of 12 cash deposits and ten withdrawals in Bangladesh.  As a result, Bangladeshi agents report denying a median of zero transactions daily due to lack of liquidity, in comparison, Tanzanian agents deny a median of five transactions each day, which is equal to 14% of their median daily transactions.

Summary: The Market View
Bangladesh is showing impressive results, and is finding unique ways of achieving them given the different operating environment there compared to those of the pioneers in East Africa.  There are definitely some challenges ahead in terms of increasing transactions and therefore profits at the agent level.  However, it is also important to note that with a liquidity management system that rebalances on demand, and agent demographics where almost everyone has a core business operating in parallel to the digital finance services they are providing, this might be much less important than it is in East Africa.  Further, many transactions in Bangladesh are done over the counter (OTC) and therefore only partially captured by the above statistics.  While this means the transactions and profits might be higher in Bangladesh this OTC system usually does not involve the required KYC verification, is not permitted, and therefore represents much more of a risk to the growth and functionality of the system than profits.  This topic will be discussed in future blogs.

- Maha Khan & Mike McCaffrey

Mike McCaffrey is a Principle Consultant – Strategic Operations for Digital Finance at MicroSave, and Maha Khan is a Senior Research Manager - Digital Financial Insights at MicroSave. Both Maha and Mike’s work at MicroSave is focused around The Helix Institute of Digital Finance. Founded in November 2013 as a partnership between MicroSave, the Bill and Melinda Gates Foundation, the International Finance Corporation (IFC), and the UN Capital Development Fun (UNCDF)The Helix Institute of Digital Finance provides world-class training and cutting-edge  data to digital finance practitioners. For more information visit our website

Read The Helix Institute’s Bangladesh report in full here:' Agent Network Accelerator Survey: Bangladesh Country Report 2014'
Note: The blog was originally posted at Mobile Money Asia has agreed to cross promote the blog at the request of the authors. 

Tuesday, November 4, 2014

The big push to launch G2P e-money payments in Indonesia

This week the Indonesian government launched one of its biggest ever pushes towards financial inclusion and the delivery of government services using e-money. The new government has launched a suite on new cards for poor citizens that will give access to health services, education and cash subsidies.
Of most interest to those seeking greater financial inclusion is an ambitious program to distribute cash subsidies to 1 million poor households via e-money. Over the coming months, 1 million households will receive a new SIM card from one of the three biggest telcos in Indonesia (XL, Indosat and Telkomsel) and a linked electronic money account provided by Bank Mandiri. The SIM card and e-money account will come pre-registered with information provided by TNP2K’s Universal Database (BDT). Recipients can then use their phones to receive a One Time Password redeemable at the Post Office, who will act as an agent for Bank Mandiri's e-cash product. 

While the Post Office has been used for social transfer disbursements in the past, this scheme represents a leap forward for financial inclusion because these e-money accounts (known as LKD, or Digital Financial Services) will also be accessible through mobile handsets, agents and ATMs. The program builds on a pilot of approximately 1800 Conditional Cash transfer recipients who received funds through bank-based e-money in October 2014.