bKash - a disruptive idea and hope

The recent deal between Alipay, a subsidiary of China's e-commerce giant Alibaba Group, and bKash is a fresh breath of news the country needed. Alas that in midst of ongoing political tantrum and banking sector upheaval the bKash-Alipay news did not get the attention it deserves. Nonetheless the sage stakeholders, policy experts, domestic and foreign investors not only took notice but possibly are rethinking their strategy about Bangladesh. Ant Financial, the operator of Alipay, agreed to buy 10 per cent stake on bKash this year and another 10 per cent in 2019. Industry experts have estimated bKash's current valuation to be around US$640 million and with Alipay's insight and collaboration bKash could become the first US$1.0 billion mobile financial service company in Bangladesh by 2020.

The growth of bKash and this eventuality is not bKash's and its parent BRAC's sole credit; rather the systemic challenges and weaknesses of Bangladesh acted as positive catalysts as well. BRAC, bKash's pedigree, had shown significant success in micro-finance, rural-education and women empowerment. However, expecting same result from a combination of financial service and technology in Bangladesh's context was challenging. Last few years bKash faced criticism from government that the service allegedly is being used for money-laundering and illegal remittance. Bangladeshi workers abroad will continue to use whatever means available to ensure that they get the best value for their hard-work when sending money to their family. Blaming innovative solution like bKash for government's own inefficiency will not bring any fruitful result, government must make remittance services simpler and cost effective.

Each innovation and idea, especially a disruptive one, has its share of criticism and challenges. The true entrepreneurs, sage investors and policy experts recognise these challenges as learning opportunities and in some cases more avenues for growth. Recently it was reported by the World Bank (WB) that 50 per cent of the adult population of Bangladesh are not integrated into the regular banking system. The primary reason is lack of fund at individual level; hence there is no incentive for bank services. On the other hand, the World Bank reported that number of people with mobile money account has increased seven times in last four years. We need to recognise the dynamics of technology and to design policies and services that take advantage of the financial-monetary transaction of mass population of Bangladesh. 

The private sector banks (PSBs) have been operating in this country for almost 25 years and most of them have truly failed to design any customer-centric solution that is catered for Bangladesh's demography. BRAC and BRAC bank did not invent the idea of mobile-money or mobile transaction system. The idea has been in practice for a while in Kenya and Tanzania - it's called M-Pesa. M-Pesa became popular in Afghanistan, South Africa, India, Romania and Albania. The brilliance of bKash is that as a joint venture by BRAC and a few foreign investors with technological expertise they designed it to cater Bangladesh's mass people's need.

We have to understand what bKash at its core means to its clientele -- the economic entities of this country - the people. bKash fills the void, the unmet need that has gone unanswered for decades, which is a simple, quick, secure payment system to serve day-to-day small transactional needs of the people. Money transfer within country was riddled with bureaucratic issues, red tape and, most of all, principal-agent problem. The principal-agent problem arises when a principal holds undue advantages over an agent either through official power and information asymmetry. This problem is one of the most fundamental challenges that hampers Bangladesh's progress and rather than decreasing, the problem has increased due to digital governance designed with systemic loopholes to propagate the unfair advantage to the principal. The secret to bKash's success is that by design it circumvented this problem and ensured a service that is transparent at end user level.

Similarly, we have to design our banking services based on our people's need. The internet and cell phone penetration in Bangladesh provides a great opportunity for government and private sector to collaborate and design mobile-banking solution for the masses. The ongoing banking sector crisis shows a lack of proper regulatory environment for progressive reform; rather the steps taken are surely going backwards. We have seen government supporting solutions that serves people's need based on technology. Uber, the tech-based taxi service, has met the need of a commuting service for the middle and upper-class city dwellers of Dhaka. Whereas, Pathao the locally designed ride-share service based on bikes, serves the commuting need of the general city dwellers. These tech-based transportation services address the systemic gaps in the transportation sector. The Government has recognised this development and has provided a cordial regulatory environment for the tech-based transport and ride-share sub-sector. Pathao has been valued close to US$100 million recently during a pre-series B financing rounds.

Financial service sector, bank owners and government should think outside the box, they should embrace the fact that in order to become a truly profitable banking venture they need to identify customers' need and adopt technology to meet those needs. Then they could become a sustainable and profitable operation; otherwise, in the long-run, they will truly become obsolete.   

bKash has done the impossible feat of challenging the English grammar. In Bangladesh's overall lexicon it has become a verb just like Google, Xerox and Mobile. People use bKash as term for money transfer and rarely even bother with the fact that it is the name of the company that provides the service. Just as when we need to search for something on the internet we say, "Google it", or when we need to change our car's engine oil we say "change mobil"; similarly now to send money within country we say "bKash koren" (use bKash).

bKash as a company has joined that exclusive club where it forces the English grammar to adapt its rule for modern usages. Disruptive ideas like cryptocurrency, mobile-technology, mobile-money threaten the traditional institutions that forgot to answer the need of their true clients -- the people. Hopefully, our new generation will promote and adopt more disruptive ideas because that is the way forward.

Safwan Rob is Archer Fellow, Lee Kuan Yew Scholar.

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