Last year, I urgently needed to send BDT 20,000 to one of my relatives for meeting her immediate needs. Remitting from Canada would have taken at least seven days, so I requested a friend of mine in Dhaka to send that amount of money as fast as possible. On my request, he assured me of doing so within a couple of hours using bKash but I was wondering, how could he send this big amount of money using non-banking channel as I had the impression that only small amounts, most likely below BDT 5,000, can be transferred through non-banking channel which is the usual practice in the technologically advanced developed world. Within a few hours on the same day, my relative confirmed that she had received the money. However, as a professional banker I realised that although the system is good but sometimes too good is not good at all.
MOBILE BANKING & bKash ARE VERY POPULAR: In our country, bKash and mobile banking are very popular means of carrying financial transactions, particularly in transferring money, paying bills and others payments. Mass people have been enthusiastically using this method of financial transaction across the country. Probably there is no other financial service in our country as popular as bKash. This service is easily acceptable to all segments of the society-- being a fast and compliance free means of financial transaction. Only one mobile phone number and pin number are good enough for the people to instantly move money from place to place and from person to person.
LESS REGULATION MEANS MORE POPULARITY: Although bKash and mobile baking undertake financial transactions, they are under less regulation and oversight compared to banks. Customers have to follow some strict measures in maintaining clientele relationship with bank as series of documents, proof of identification, compliance requirement like KYC (Know Your Customer) form are required to be produced by the customer to open an account with bank, which is the prerequisite for carrying out any transaction through bank. So, for sending any amount of money, both sender and receiver must have established account with banks after satisfying strict compliance requirement that comes not only from the bank itself but also from the regulators. Whereas, this type compliance requirement is not necessary at all for establishing bKash account as cell phone number and national ID are the only requirements. Obviously, the service which is under less regulation must be more popular than highly regulated ones. Any service requiring less regulation, control and oversight get quick popularity among the people. As for example social media is more popular than mainstream media as the former has no regulation or control while the latter has strict editorial control. So, it is natural that bKash and mobile banking will be more popular than banks.
MOBILE BANKING AND ONLINE BANKING: There is a kind of misconception about mobile banking and online banking and many people find it synonymous although there is a clear distinction between these two services. Online banking is internet-based banking platform from where virtual banking can be carried out. Under online banking, the customer is not required to physically appear at the bank premises to conduct financial transaction, instead they can log on their account using bank's online portal from distant places using computer, smartphone or other electronic device and thus can conduct necessary transaction. Mobile phone used as a device to access the bank's online service and perform transaction from his / her account should be termed as online banking, not mobile banking. Mobile banking is a separate application that the banks offer to their customers for performing some services. The customer is required to download that application in their mobile phone and then can use it to perform some specific transactions like cheque deposit. Since this service is offered by the banks to their accountholders, it falls under the purview of bank's usual product and as such goes through standard compliance requirement and supervisory oversight. For this type of service, bank assumes the risk and responsibility, so customer's risk is well mitigated. Mobile phone if used for any other monetary transaction other than the service offered by the bank is a risky means of transaction, so people should be aware of its consequences.
EQUAL CONTROL AND OVERSIGHT FOR ALL FINANCING ENTITY: In our country, the central bank (Bangladesh Bank) is the only regulatory body which oversees and supervises banks and non-bank financial institutions. Although bKash operates under licence issued by Bangladesh Bank, yet it is not clear to what extent BB oversees their operation. From oversight perspective, Bangladesh Bank follows different standards as their oversight measures are very strict for banks while comparatively less for non-bank financial institution and very nominal for other financial entities like bKash. The reason behind such differential oversight is that BB focuses importance on protecting depositors' interest and since bank is the deposit taking institutions, they are put under strict oversight measures while others do not directly take deposit form the people, so they are placed under less oversight measures. In the modern monetary system, all financial institutions, irrespective of their status as banks or non-bank, are considered to play equal role in the monetary system. Even, the concept of indirect deposit usually mobilised by non-bank institutions is drawing more focus during low or negative interest rate era. Moreover, from regulatory perspective, non-bank and other financial entities should be placed under stricter oversight than bank as the latter itself performs some self-regulatory roles by complying with many national and international rules and regulations.
FRAUD GUARANTEE AND INSURANCE: Easy and quick service providing companies are always exposed under fraud risk. Therefore, fraud guarantee is one of the primary conditions for allowing fast pacing service involving monetary transaction. So, people's interest must be protected first. Under fraud guarantee, the affected party soon after occurring fraud will be reimbursed / compensated immediately pending fraud investigation. Whenever fraud is detected, the company will reimburse or compensate the affected customer and will separately conduct investigation for their own purpose. This fraud protection measures not only safeguard customers' interest but also uphold the confidence of the service. In the developed world, credit card is the most common method of payment which people indiscriminately use in carrying out any type of transaction. In order to popularise this ever fastest payment method, the credit card issuing company always provides fraud protection, so people do not hesitate to charge credit card in any place fully knowing that any fraud or unauthorised payment will be reimbursed without asking any question. I myself also became the victim of credit card fraud as $3,500 was fraudulently charged from my credit card which I got reimbursed soon after reporting. They did not keep me waiting till fraud investigation was completed. This is the standard practice which is followed not only for credit card but also for any means of quick and easy financial service. However, fraud protection requires involvement of substantial fund which the service providing company may not afford. Therefore, the company purchases insurance of fraud protection to shift the fraud risk to the third-party insurance company. Any fraud soon after detection is reported to the insurance company who pays to the affected customer. If this insurance product is not available in our country, insurance companies may consider this product as very prospective.
The popularity of bKash and mobile banking needs to be under stricter oversight not only for protecting the interest of common people but also for ensuring sustainable business of service providing companies. Already, fraudulent activity is taking place in bKash transactions, which bKash itself has admitted by putting extensive media advertisement against fraudulent activity. It is true that the easiest and quickest means of service cannot be made foolproof against fraud but its eventual impact and public repercussion can be minimised by introducing fraud guarantee. Bangladesh Bank and other concerned authorities should take appropriate steps in this regard.
Nironjan Roy is a banker based in Toronto, Canada.
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