Futureproofing – has been the preoccupation of bKash, the company that revolutionised the mobile financial service in Bangladesh, in recent years.
Which is why, the company is fine with forfeiting profits in the short-term if it means its future dominance is assured.
Over the past two years, the company has invested more than Tk400 crore for product development and marketing activities, according to the annual statement of BRAC Bank, the parent company of bKash.
And in that time, its net profit slid from Tk18.5 crore to Tk62.5 crore in the negative – in what is a steep comedown from its dizzy heights in the preceding years.
In 2019, its total revenue grew 10.9 percent year-on-year to Tk2,416 crore.
"We will continue this investment in 2020 and the company will have to make a loss this year also," Kamal Quadir, chief executive officer of bKash, told The Business Standard recently.
The company, which is 20 percent owned by Chinese payment giant Alipay, has the capital to absorb the losses.
"The loss is the part of our planned investment," Quadir added.
But bKash's move to go for wholesale technology upgrade could not be more serendipitous. The global coronavirus pandemic's turbocharging of digitalisation means the company is in good stead to make the most of the situation.
Since the onset of the pandemic in March, bKash made loss Tk21 crore in charges from sending money and withdrawals and Tk27.50 crore from disbursing salaries of garment workers from the government's Tk5,000 crore stimulus package, according to Shamsuddin Haider Dalim, head of corporate communications and public relations at bKash.
It also gained about 70 lakh new customers to take the tally to 4.50 crore in June, according to bKash.
To put things into perspective, Rocket, one of bKash's main rivals, gained 18 lakh fresh customers during the period.
And the reason for the gulf in new customer onboarding could very well be the well-oiled mobile app that bKash had rolled out in 2018 for both the iOS and Android operating systems, to which it has been incrementally adding on functionalities.
"2019 was a critical period in terms of the business achieving a technological breakthrough and sustained growth across key numerical metrics," the company said in the annual report, while stressing customer and agent apps.
Today, that app has made the process of new customer onboarding as fuss-free as possible and paying for mobile recharge, shopping, utility bills, internet charges, education fees, tickets and credit card bills as seamless a process as possible.
It allows transfer to and from bank accounts and topping up balance with bank cards.
In short, the app has enough functionalities and interconnectedness to make it an appealing platform for both urban and rural populations alike, and is most likely to stand tall to the emerging threat of upstart Nagad, the mobile financial service arm of Bangladesh Post Office.
Nagad though was ahead of bKash in gaining customers during the pandemic: it saw fresh account opening of 1.26 crore since March to take the tally to 3.5 crore.
Until March, Nagad, which was rolled out in October 2018, had enjoyed disproportionately higher transaction limits and offered lower transaction charges due to being out of the purview of the central bank thanks to the postal act – a privilege that allowed it cannibalise a chunk of other MFS operators' subscribers.
This could perhaps explain the slump in bKash's market share to 50 percent at the end of 2018 from 67 percent in the previous year, according to data from the Bangladesh Bank.
Today, Nagad, which has received an interim licence from the BB to operate as an MFS as opposed to its previous form of being a digital financial service provider, is the number 2 player in the market, overtaking Rocket.
And Rocket, the MFS arm of Dutch-Bangla Bank, was coasting on the reputation of its parent. Last year, its transaction value declined 9.54 percent, when bKash saw a 15.7 percent rise. Rocket saw a 10 percent growth in customer base last year, while bKash saw a 23 percent growth.
"Our main target is to bring good experience to customers, ensuring top compliance practice and investment in technology. We are focusing on these three areas," Quadir said.
He said it is expensive to make sure all compliances in line with requirements of the Bangladesh Bank and the BFIU (Bangladesh Financial Intelligence Unit) and investment in technology.
bKash started its journey in July 2011 as a joint venture between BRAC Bank and American Money in Motion.
Later on, the International Finance Corporation (IFC) of the World Bank Group and Bill & Melinda Gates Foundation joined the mission through equity partnership in April 2013 and April 2014 respectively.
In April 2018, bKash also onboarded Ant Financial Services Group as a strategic partner. The partnership involves Ant Financials investing in bKash and increasing its technological capabilities, allowing it to provide greater convenience and security in mobile financial services.
The company created direct employment opportunity for more than 1,400, and its 226 active distribution houses, 230,000 agents and numerous agencies spread throughout the country indirectly provide livelihoods to thousands more.