There are not many companies like bKash in Bangladesh. The fin-tech leader is a master of execution. It has effectively scaled a product in a sector which is highly sensitive and strictly regulated and that too ahead of any of the incumbents of the sector.
In the process, it has effectively commoditized the idea of trust in banking products and made it easier for other fin-tech products to access market.
bKash has done a tremendous job, no doubt about it. But to me, the most important contribution of bKash is not the technology or the scale it has achieved today but the trust it has been able to create among people in technology.
At an individual level, people have not interacted with technology in a way that required financial trust. bKash for the first time as a technology wanted ‘trust’ from its users and in most cases, people responded positively. It has created the basic infrastructure for FinTech and that is ‘trust’. That is why I do not see bKash as a delivery channel rather it is something more. It has in a way changed the trust infrastructure of financial services and paved the path for fin-tech products.
bKash is the leader in MFS market in Bangladesh with about 75% market share, according to last year data from Bangladesh Bank. It is most popular financial service in the country having users in all strata of the population. Some 22% of Bangladeshis now use bKash. More than 4.5 million transactions pass through the system every day. It is the second largest mobile money service in the world.
Launched in 2011, as a joint venture between BRAC Bank Limited, Bangladesh and Money in Motion LLC, USA, the company raised investments from International Finance Corporation (IFC) in 2013, a member of the World Bank Group and Bill & Melinda Gates Foundation in 2014. It's now reportedly in talks with Alibaba for a potential investment.
It is impossible to overstate the importance of digital payments for bKash. In fact, its long-term success depends on its success in the digital payments space.
bKash has experienced a tremendous growth over the past few years and has become synonymous with P2P money transfer in the country. As I mentioned earlier, some 22% Bangladeshis use the service and 4.5 million transactions happen per day.
After its success in the P2P money transfer space, the company is now eyeing digital payments for further growth. Digital payment is a huge market, way bigger than P2P money transfer market.
Since it already dominates P2P space, which means a large number of users already have bKash balance in their phone and they can effectively use that balance for all other purposes starting from grocery shopping to hotel booking to book purchasing to ticket purchasing.
This is what bKash has exactly been doing. Over the past few months, it has been aggressively pushing into payment area with all kind of offers and collaborations. It is offering cashback in areas like online shopping, hotel booking, and other areas.
The company says it now has partnerships with over 47,000 outlets nationwide where you can transact through bKash. The company is trying heavily to get into travel. See an example below:
bKash your Payment and get up to 60% exclusive discount at 21 hotels, resorts, and 2 online travel agencies. The campaign is valid until December 31, 2017. Following hotels, resorts and travel agencies are participating in this campaign.
bKash started this push way earlier than many of us think. It promoted payment through bKash during 2015 Ekushey Book Fair. From a Dhaka Tribune report:
bKash, the leading mobile financial service provider in the country, has signed agreements with more than 120 publishers to accept payments through bKash by the customers.
The service provider also offers 10% cash back if the wallet users make the purchase through bKash.
The offer got started on February 7 and has been able to generate positive response from the book lovers.
Payment is important for more than one reason. As I said, it is a long-term sustainability issue for the company. For bKash, apart from being a big opportunity, it is critical to secure a position in the digital payments space for its long-term competitive advantage.
Payment is a big market and there will be more serious players in this space in the coming days.
We are already seeing an early sign of that. Take iPay, SureCash and a few other players who are trying to break into the market.
There is already a rumor in the market that India’s Paytm takes interest in Bangladesh market.
Payments and P2P money transfer are intimately connected. Adaptation of one service influences the adaptation of another.
More importantly, since payment is a more frequent need for most people and since smartphone has already become ubiquitous in Bangladesh, the chances are people will not be using different apps for different purposes which means bKash’s long-term success also depends on its ability to secure a strong position in the payment space.
I suspect bKash will soon launch more convenient payment option to take its effort in the space further: an app and QR Code-based system will be way more user-friendly. It is a wonder why bKash has not done it yet.
Simply, the existing payment mechanism that bKash offers is inconvenient. More so for people who it is now targeting for travel and shopping payments.
Another challenge that bKash faces is its positioning as a banking service for the unbanked population which is, in fact, the biggest contributor to it today’s success. The company now has to find a solution to turn it into a service for everyone. Particularly, urban population that it is now targeting for payment.
The apparent opportunity, however, for bKash lies in its roots. If it can enable small vendors to receive payment through bKash in different parts of the country where it has a deeper penetration and higher usage rate, it would be easier for it to make an inroad in that market and then slowly move upward. It can borrow a playbook from recently launched Singapore-based Grab Pay for this.
Competition is slowly growing in Dhaka’s payment space. There are some 17 providers of mobile financial services (MFS) in Bangladesh. However, the two largest, bKash and Rocket, have a combined market share of over 90%.
There are new players entering the market as well. Among them, iPay, co-founded by Zakaria Swapan of Priyo.com is the most prominent one. The startup which is now beta testing its service seems to have developed a superior technology and a long-term ambition. India’s Paytm also takes interest in Bangladesh market.
Although Dhaka’s digital ecosystem is still at its early stage, it is growing fast. It is a big market. Mobile phone penetration has gone through the roof over the past few years. Given the reality, digital payment has immense potential in the coming years.
Going full throttle in the payments and improving its product and image for the payments market is the right strategy for bKash for its long-term growth and it is apparent from its move that the company is very much aware of this reality.
Cover photo: This video