Nagad, a mobile financial service (MFS) platform of Bangladesh Post Office, has set Tk9.99 in service charge for the cash-out of every Tk1,000, the cheapest withdrawal rate.
Nagad has also decided that it will be formed as a separate subsidiary of the postal department as part of the process ingetting a licence from the central bank for MFS operation. It is now running under a partnership agreement with the government.
Both the announcements came at an event at the InterContinental hotel in the city on Thursday.
Currently, other MFS providers charge Tk18.50 for every cash-out worth Tk1,000.
For Nagad customers who use the mobile app, the total cash-out charge per Tk1,000, including 15% VAT (Value Added Tax), will be Tk11.49 and the charge will be Tk12.99 for making transaction through mobile phone's USSD facility.
People have long been demanding a reduction in the cash-out charge of MFS providers and Nagad had been trying to bring it down to an affordable level since its inception last year, said Tanvir Ahmed Mishuk, managing director of Nagad.
On 1 October this year, Nagad set the lowest service charge on a pilot basis for the cash-out of up to Tk2,100. Now, it has lifted that bar, he said.
He said with the reduction of the cash-out charge, Nagad experienced more than 60% growth in mobile account opening in the last one month.
Nagad has 2.19 crore users as of June and its daily transaction value is around Tk300 crore, according to the company.
Nagad is the fastest growing MFS in the country as the newcomer secured the second position in the market within seven months since it started operation, overtaking Dutch-Bangla Bank Rocket, the first MFS provider in the country.
Although the MFS started in the country 10 years ago, the cash-out charge remained unchanged at Tk18.50 per cash-out worth Tk1,000 since the beginning.
The state-backed Nagad is the first MFS that reduced the service charge.
Nagad will have a profit margin despite cutting the service charge, said Mishuk.
He said Nagad disbursed around Tk3 crore in profit to its partner postal department which holds a 51% stake of the MFS platform.
There is more scope for reducing the service charge but a regulatory intervention is required in this regard, as some MFS providers are against it, he added.
Nagad is a joint venture between the Bangladesh Post Office and Third Wave Technologies. Although the postal department holds 51% stake, Third Wave Technologies fully invested in this project with its 49% stake.
Now, Nagad will be formed a separate subsidiary of the postal department as part of the process of getting licence from the Bangladesh Bank for operating MFS service.
Joining the event through online, Mustafa Jabbar, minister of post and telecommunication, said the postal department has the authority to run financial service. But as the Bangladesh Bank monitors the MFS activities, Nagad will take a licence from the central bank complying with all requirements.
As part of the process of obtaining a licence, Nagad will be formed as a separate subsidiary but it will be a postal department-led model when other operators follow the bank-led model.
Even though Nagad started operation in March last year as a subsidiary of the Bangladesh Post Office, it is yet to complete the licencing process with the Bangladesh Bank.
After more than one year of operation, the service platform applied for a licence to the Bangladesh Bank in March this year, following the Bangladesh Bank's instruction to banks to stop providing salaries of garment workers under the government stimulus package to MFS accounts which are not under its surveillance.
That regulatory instruction forced Nagad to become legitimate by obtaining a licence from the Bangladesh Bank.
Later, the central bank gave Nagad an interim licence for six months and the time was extended more six months as they could not comply with the licensing requirements within the stipulated period.
Until March this year, Nagad had enjoyed disproportionately higher transaction limits and could take lower transaction charges as it was out of the purview of the central bank, thanks to the Postal Act – a privilege that allowed it to eat away a chunk of other MFS operators' subscribers.
Before coming under the central bank rule, a user of Nagad could transact up to Tk2.5 lakh per day under the Postal Act, whereas the maximum daily individual transaction limit is only Tk30,000 for the other MFS providers.
Nagad has been enjoying the same transaction ceiling since it has taken Bangladesh Bank's interim licence.