MFS Interoperability: EVERYTHING YOU NEED TO KNOW

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It is set to bring about a revolution in the country’s financial landscape

 

 

Mobile Financial Services (MFS) is one of the easiest ways to transfer money and the newest, albeit decade-old portal to widen the cashless transaction market. As the concept of cashless transactions gains traction, more and more service providers enter the sector to offer their services. Although bKash still dominates the market, other players not limited to Rocket and Nagad are not too far behind either. According to Bangladesh Bank, some 10.27 crore people hold MFS accounts as of March 2021, with around 11 lacs acting as agents. Transactions close to Tk60,000 crore took place on MFS platforms last year, and more than double that amount enters the country through these platforms as foreign remittance. These large numbers, especially during the pandemic, are a testimony to the success the MFS industry enjoys, and that too in just about ten years since introduction. Now, with interoperability coming to MFS, more success seems to be on the cards for this already booming sector.

 

MFS interoperability means that customers can now switch between service providers without essentially having to create a new account with the new service provider. It is similar to what we do with mobile phone services – we can change our service providers without having to buy a new sim or change our existing contact details.

 

The MFS interoperability plan was rolled out in 2011 and was announced by the Bangladesh Bank to be carried out in full swing in 2020, but it was halted days before it was set to launch, citing technical difficulties. However, after a limbo of more than a year, and with the Central Bank having removed all possible kinks in the process, MFS interoperability is again looking like a genuine possibility for early next year. MFS interoperability means that customers can now switch between service providers without essentially having to create a new account with the new service provider. It is similar to what we do with mobile phone services – we can change our service providers without having to buy a new sim or change our existing contact details. In addition, once the interoperability is launched, users will be able to transfer money between service providers and banks seamlessly, which is not entirely possible right now.

 

 

 

The move is a strategic one that will translate into healthy competition and novelty in the market.
Interoperability will be operated and ensured by the Central Bank through the Interoperable Digital Transaction Platform (IDTP) and is being encouraged to reduce cash transactions under National Payment Switch Bangladesh (NPSB). The NSPB is another electronic platform that allows smooth transactions between banks and MFS providers. The NPSB was created in 2012 and helps banks interoperate on card-based and online transactions and helps process transactions made on inter-bank ATMs, POS, and internet banking. The IDTP, a substantial 56-crore government initiative, is the one that makes all the accounts of banks and MFS organisations interoperable and will be run directly by the Central Bank. An app has already been developed by the IDTP to allow customers to register through the mobile banking apps of their banks or existing MFS providers. One account needs to be created, and all other financial institutions will tie it to other accounts simply by NID verification. Multiple client accounts will be represented by one alias, discounting the need to disclose any account number. Clients can purchase products or services from their desired shops by scanning QR codes. Top-notch security is to be maintained through a two-factor authentication for every purchase. As the test phase comes to a close, the process looks easy, accessible and very safe.
Once the launch is complete, MFS organisations will have to pay a certain fee fixed by the Bangladesh Bank, 0.8% to be exact for transactions within MFS organisations, and 0.45% between banks and MFS organisations. Still, the costs will not trickle down to the ordinary customer. It means that customers will not have to pay any additional charges for the new services, thereby gleaning optimum benefits from the service. Moreover, money withdrawal fees are also to remain the same for customers. Of course, the interoperability that is being expected is not the one where customers can directly switch and use different payment methods. They will have to make the formal switch between various organisations for service transferability. However, the customers’ fee structure or lack thereof allows them to retain control and power. The fee structure between banks and organisations is meant to create healthy competition in the market. In all, likeliness will also affect the individual price lists of each organisation as each party looks to maximise their customer base. It is especially true as service inertia will, in all probability, keep people from switching between different MFS organisations unless the base service or customer service is substandard.
Many experts from finance and other sectors have welcomed the change. From the viewpoint of finance, the benefits are manyfold. One, MFS will help analysts understand the true nature of clients as there will be more datat o analyse. It will help roll out new and customised loan schemes for banks and other financial institutions, keeping in mind the social strata of people. Two, MFS interoperability will be more convenient for users in terms of reach. For instance, users with a certain MFS account may be unable to send money to a remote place in the country because their service has no agents there. With interoperability in place, this will be a problem no more. It will also be a sigh of relief for stores currently losing potential sales as customers don’t have the same MFS provider as they do and vice versa. Three, it would push the people towards a more cashless society and boost digital transactions, which will be safer and just overall, more convenient for everybody.

 

With interoperability in place, that will be a problem no more. It will also be a sigh of relief for stores currently losing potential sales as customers don’t have the same MFS provider as they do and vice versa.

 

 

As we set foot into the new year and hope for interoperability to come and make it financially fruitful, here are a few things we wish it brings with it – healthy competition, user-friendliness, a good buffet of innovative products and services and diligent alertness of the regulatory bodies. As customers attain higher switching power without any additional cost, the MFS providers have no choice but to boost innovation into their offerings to attract new customers and retain existing ones. Additionally, it is expected that the kinks in the system have been worked out through thorough research and trials before launch. The regulatory bodies would still be vigilant during the pilot phase of the service (and later) to push up customer confidence and security. At the core of it all is the promise that customer interests will be given the highest of priorities. Therefore, the service must be kept user-friendly and inclusive.

 

Suppose MFS interoperability is all that it promises to be. In that case, it is set to bring about a revolution in the country’s financial landscape, only this time, the services furthering the causes of the lower rung of the pyramid. In the epoch of the world’s ever-fluid and dynamic financial ecology, MFS could be the boon that sets Bangladesh apart in the globe.

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