Innovation leads to success: The Nagad way

Highlights:

• Fastest-growing MFS company within three-and-half years
• Financial inclusion of more than 6.5 crore people
• Daily average transaction Tk750 crore
• 35% market share
• A top VAT-payer for FY22
• Offers 7.5% interest on deposits
• Forerunner in cutting cash-out charge, offering charge-free utility bill payments

Veni, vidi, vici [I came, I saw, I conquered] – it is not as easy as it sounds when you have a dominant player to confront with. But for Nagad, a mobile financial service arm of Bangladesh Postal Department, it was an opportune time to foray into the market, put up tough competition and eventually grab a big slice of the pie. 

But the question is – how Nagad made a difference and gained a strong footing at the fastest pace when the competition was totally missing from other MFS market players having a very little share of the industry.

When Nagad embarked on its journey on March 2019, it found 66% of the country's people were still out of financial inclusion. The mobile money service provider first identified issues that got in the way and thought up a plan to financially connect the unbanked on how to ease the account opening process.

Nagad grabbed the second position as it could gain customers at a faster pace, thanks to its ease of account opening process, product diversification, cost efficiency and simplification of transaction processes.

In only three years of its journey, Nagad has got into the National Board of Revenue's list as a top VAT-paying company for FY22.

From the very beginning, the digital financial service provider introduced a digital know your customer (KYC) process, bringing an end to cumbersome paperwork. Customers can open accounts within a minute by taking a photo of their national identity card and a selfie. As a result, they do not need to find an agent to open an account, thus saving a lot of time and money. Following this innovation of Nagad, other MFS providers and banks started to adopt the e-KYC, also reduced their cost of doing business.

Even then, a large number of rural people still remained unbaked as most of them were feature phone users. To bring them under financial inclusion, Nagad made agreements with Bangladesh Telecommunication Regulatory Commission (BTRC) and telecom operators to add all mobile subscribers to its platform. Anyone could open a Nagad account by simply dialing 167# from their feature phones without using mobile application. In this way, a large portion of rural people got access to mobile financial services offered by Nagad.

Because of such people-friendly services and innovations, Nagad has become the fastest-growing company within three years and a half with the financial inclusion of more than 6.5 crore people. And, the daily average transaction now stands at Tk750 crore.

Tanvir A Mishuk, founder and managing director of Nagad, said, "We started off with a combined business model with banks and mobile operators, and we soon gained the second position in the MFS market."

Nagad has gained 35% of the market share within three years as it has introduced products after the proper assessment of market demand, he noted.

The state-owned MFS company gained the second position in the MFS market owing to product diversification and simplifying account opening and transaction processes, while banks failed to penetrate the market with traditional products and services.

When Nagad began its journey, 66% of people in the country remained out of financial inclusion, the Nagad managing director also said, adding that Nagad has brought the number of unbanked people down to 55% with its customer-friendly products and services.

Nagad is now working on establishing a digital bank, which will help to bring those unbanked under financial inclusion, he pointed out.

All financial services will be available on mobile phones over the next decade and Nagad wants to lead the market with its innovative and people-oriented services, including a good number of micro products, Tanvir A Mishuk added.

How Nagad broke market monopoly

In the beginning, the MFS market ran into a monopolistic situation as one operator held 95% market share, and competition at that time was seriously missing in the market. The operator charges customers 1.85% Tk1,000 for cash-out transactions.

Nagad entered the market and one of its goals was to break this monopoly. The MFS provider has been successful in doing so because of its proper market research and customer-oriented innovations. Since its entry into the market, the company came up with a competitive cash-out charge. Nagad charges Tk11.49, including VAT, for cashing out Tk1,000 each.

Nagad also introduced charge-free bill payments, leading to customers choosing MFS to pay all utility bills. Before the state-owned mobile money service provider entered the market, all MFS operators used to charge Tk30-Tk50 for each bill payment. Following in Nagad's approach, all later stopped charging fees. 

Focus more on app-based services

From the beginning of its journey, Nagad has been giving more importance to its app-based services albeit all of its services are available through the USSD dial. Customers prefer its app for easy transactions by scanning the QR code.

Services that Nagad now offers are cash-in, cash-out, mobile recharge, send Money, EMI payments, merchant pay, bill pay, Shariah MFS, and interest on savings. People are now mainly using mobile phones to send money to family members, pay utility bills or recharge their mobile phones. The government is also disbursing safety net allowances and education stipends to several crores families using Nagad wallets.  Users can even pay income tax directly from a Nagad account.

Besides, Nagad offers a net 7.5% interest on deposits. The mobile money service provider has identified the real needs of customers and designed products accordingly.

Other MFS providers are also following in Nagad footsteps and are beginning to focus more on app-based services.

A couple of months ago, Nagad got the go-ahead from the Bangladesh Bank to bring inward remittances. The MFS company has already started the process to introduce remittance service for its customers.

Nagad continues to work on new innovations for introducing new products for its customers so that it can bring more people under financial inclusion in keeping with the government's Digital Bangladesh Vision.

New products will help the government bring more funds into formal channel and create scopes for disbursing more loans to entrepreneurs.