MFS Interoperability Explained
1/ MFS interoperability is here. Interoperability means as a user you can switch between service providers. If you have an account in one MFS provider, you can switch to another MFS service provider without essentially creating a new account with that new service provider. We have interoperability in mobile operators as well where mobile users can switch operators following some rules.
2/ With the new MFS interoperability, Bangladesh Bank has announced that users can transfer money/account balance between bKash, Nagad, Rocket, and other MFS services once the interoperable service is launched on Tuesday, Oct 27th, 2020. The banks and companies that have finished testing the services will begin allowing transactions on October 27. Others must start providing the services within March 31 next year. From a policy perspective, this is an excellent move that will improve competitiveness and encourage innovation in the space.
3/ New interoperability will also allow customers to make transactions between banks and the MFS service providers and vice versa through the National Payment Switch.
4/ An MFS firm will have to pay 0.8 percent of the money received from another provider. The company from which the customer sends the amount will get the fees. The fees will be 0.45 percent for transactions between banks and MFS companies. These new fees will be borne by companies and banks instead of customers. The fees to withdraw money remain the same for customers.
6/ BRAC Bank’s bKash, Islami Bank’s MCash, United Commercial Bank’s UCash, Al-Arafah Islami Bank’s Islamic Wallet, and Pubali Bank are joining the services for now.
Reading between the line
1/ It appears that the current interoperability is not direct interoperability where customers can choose and switch between services while using the service or making a payment or sending money. To use a different MFS service, a user first has to transfer from one MFS service to another and then only can use that service. While this and the fees involved make sense from a competitive perspective, it also allows the incumbent to retain some power in the transaction.
2/ Regardless, this move will improve competitiveness in the market. Players with better pricing and customer service will be able to compete more effectively. Customer acquisition is going to take a different turn as well.
4/ If the regulatory framework allows, this move is going to make pricing more competitive. However, since switching will require some efforts, it means customers are likely to stick with the service providing the best customer service and experience. Players like bKash will get added benefit since they have built a product that offers a large range of services and is no more limited to mere MFS services. Overall, interoperability means greater competition, which means customers enjoy better benefits and innovation will accelerate.