Nagad, the world’s fastest-growing MFS
It took only about two years to translate an idea into a business and make Nagad the fastest-growing mobile financial service in the world, thanks to the adoption of state-of-the-art technologies and a disruptive approach, which also sped up the overall financial inclusion in Bangladesh.
Nagad, the Mobile Financial Service (MFS) arm of the Bangladesh Post Office, was inaugurated by Prime Minister Sheikh Hasina on March 26, 2019. From the very beginning, it kept cost efficacy in mind and for that, they opted for the best technology available, which gave them a very positive result. Nagad has introduced a number of innovations that gave it a solid boost in customer acquisition and transaction volume.
The carrier has acquired 3.75 crore accounts; and, on average, BDT 400 crore is transacted through the platform every day. Evidently, the service brought more people into financial service.
"Our initial target was to upgrade citizens' life by digitalising the payment system. I think we have done quite well in this segment in the last two years," said Tanvir A Mishuk, co-founder and managing director of the carrier.
Financial inclusion through formal banking channel in Bangladesh stands at about 20 percent, whereas the MFS industry has pushed it towards 50 percent. Nagad plays a significant role in this effect.
The country is now very close to bringing the entire population into the financial system, which is also a major pillar of the Sustainable Development Goals (SDGs).
Nagad made it easier for the people to keep money transactions and payment for purchases up and running in the early days of the Covid-19 pandemic in Bangladesh. Through Nagad, people can transfer money electronically, make payments and pay tuition fees and bills free of cost. It is contributing to the attainment of socio-economic development in the country. Some philanthropic organisations also use this platform to collect donations in order to run their operations.
"I think it's a massive shift in the payment transaction behavior in Bangladesh, where people were used to avoiding formal financial channels," said Mishuk. Transactions through Nagad have been growing every month.
The state-owned carrier sorted out the government's safety net disbursement challenges, and the ultimate result is it has ensured transparency, improved efficacy, and saved time.
Nagad has disbursed some of the financial assistance of the government. Thanks to the transparency ensured by the technology and the success rate, the government has awarded work orders to Nagad to disburse several thousand crores of taka worth of safety net allowances to the hard-to-reach people.
"Nagad has received tremendous success because of technology adoption. Without state-of-the-art technologies, no one can guarantee a safe and secure transaction with foolproof data security. Technology helps us to ease our account opening process. Nagad's cost of doing business has been cut drastically because of that. So, we can offer the service at the cheapest charge," Mishuk said.
Nagad is contributing to poverty alleviation and thus making the economy stronger. The financial services provided through mobile phone networks are helping people a lot in the prolonged pandemic.
The company helps people avoid long queues at banks and have lessened the need to carry cash and reduced the risks of theft.
To ensure seamless services, Nagad appointed 240,000 agents, partnered with more than 12,000 merchants, including chain shops, and teamed up with about 500 e-commerce ventures and delivery companies.
Nagad has been the only digital payment platform that ensured cashless payment options for Covid-19 tests.
"In order to promote digital business, we are giving huge cash-back offers and other attractive facilities to both buyers and sellers. To encourage digital purchase and nurture an overall digital culture, Nagad has recently adopted a tag line- "Everything is possible with Nagad."
All of these have been possible because of the simple digitalised account opening process. All users of Nagad are authentically verified with a valid database.
Nagad introduced the electronic-Know Your Customer (e-KYC) process, the first of its kind in Bangladesh. When Mishuk's team developed the process, he had faced massive criticism from the existing players. But within a few months, the process got popularity and the players who had earlier criticised the process, embraced it. A majority of banks are now using the process to open accounts, a task that earlier took about a week and involved a process of filling up a form running several pages.
As most of the users do not have a smartphone and cannot access the e-KYC facilities, Nagad's team developed a new facility in partnership with mobile phone carriers so that a basic phone user can also avail the same facilities to open an account.
Under this innovation, any Bangladeshi with a mobile phone can open a Nagad account in just a few seconds by dialling *167# from their mobile phones and set up a personal identification number called digital KYC.
The innovation came to the notice of various international bodies, which have recognised this as a state-of-the-art innovation and honoured Nagad. In November 2020, Nagad won the World Information Technology and Services Alliance (WITSA) Global ICT Excellence Award 2020 as the first Bangladeshi MFS for its role in promoting financial inclusion. In October, Inclusive Fintech 50, a group of global organisations, selected Nagad as the best fintech startup for 2020, a rare recognition for any South Asian company.
The "Send Money" service of Nagad is also applicable for users who do not have an existing Nagad account. This innovation of Nagad has been well recognized by both local and international agencies and has been copied by other players in the market as well.
It had a ripple effect in the market as the feature was quickly adopted by others following Nagad's introduction of it.
"All through this innovation, we have already occupied one-third of the market share. Our target is to acquire 50 percent of the market share by this year," Mishuk added.
The postal department runs 16 services, including Nagad. But it has never received any net income from any of its services except Nagad.
The Asia Pacific Postal Union (APPU) has seen the dilapidated situation of postal services in many countries because of digitalisation. They were surprised to learn about the partnership between the Bangladesh Post office and Nagad.
In the latest development, nine member countries of the APPU showed interests to replicate the business model of Nagad to revive their dying post offices.