"ABSTRACTMobile banking is a newly added service in the banking sector that facilitates banking viamobile devices. With the tremendous growth in mobile phone usage, banks in the developedworld have moved to utilize mobile banking, which makes banking easier, faster, and verycost-effective. Mobile phones have quickly emerged as a successful and popular means ofcommunication in recent years and the researchers believe that growth of mobile banking inBangladesh is inevitable, especially when banks do not have sufficient number of branches inthe rural areas of Bangladesh. The purpose of this project work is to assess the Opportunitiesand Challenges of mobile banking in this country. To accomplish this empirical study,multiple banks have been surveyed which either currently have an operational mobilebanking in place or planning to introduce one in the near future. The project showstremendous potential for mobile banking in Bangladesh and reveals some of the key barriersof progress as well.Introduction:There are around 151.82 million people in Bangladesh according to (adb.org/bangladesh),2012 of which only 13 percent have bank accounts whereas more than 95 percent are mobilephone users. Banks can now offer the banking services to both the rural community and thepopulation (without banking transaction) through mobile phones. Mobile banking refers to asystem that enables bank customers to access accounts and general information on bankproducts and services through Mobile devices.Mobile banking is a system that allows customers of a financial institution to conduct anumber of financial transactions through a mobile device such as a mobile phone or personaldigital assistant.Mobile banking differs from mobile payments, which involve the use of a mobile device topay for goods or services either at the point of sale or remotely.The earliest mobile banking services were offered over SMS, a service known as SMSbanking. With the introduction ofsmart phones with WAP support enabling the use ofthe mobile web in 1999, the first European banks started to offer mobile banking on thisplatform to their customers.1 | P a g e Structure of the financial system in Bangladesh The financial system of Bangladesh is comprised of three broad fragmented sectors:1. Formal Sector,2. Semi-Formal Sector,3. Informal Sector.The sectors have been categorized in accordance with their degree of regulation.The formal sector includes all regulated institutions like Banks, Non-Bank FinancialInstitutions (FIs),Insurance Companies, Capital Market Intermediaries like BrokerageHouses, Merchant Banks etc.; Micro Finance Institutions (MFIs). The semi-formal sector includes those institutions which are regulated otherwise but do notfall under the jurisdiction of Central Bank, Insurance Authority, Securities and ExchangeCommission or any other enacted financial regulator. This sector is mainly representedby Specialized Financial Institutions like House Building Finance Corporation (HBFC), PalliKarma Sahayak Foundation (PKSF), Samabay Bank, Grameen Bank etc.,Non-GovernmentalOrganizations1 The informal sector includes private intermediaries which are completely unregulated.[1]Regulation of Mobile Financial ServicesThe rapid growth of mobile phone users and countrywide coverage of mobile operator'snetwork has made their delivery channel an important tool-of-the-trade for extending bankingservices to the unbanked/banked population, especially to expedite faster delivery ofremittances across the country. From legal and regulatory perspective, only the bank-ledmodel is allowed to operate in Bangladesh.Approved Mobile Financial Services (in broad categories) are listed below –1. Disbursement of inward foreign remittances.1 2 | P a g e 2. Cash in /out using mobile account through agents/Bank branches/ ATMs/MobileOperator's outlets.3. Person to Business Payments - e.g. a. utility bill payments, b. merchant payments.4. Business to Person Payments e.g. salary disbursement, dividend and refund warrantpayments, vendor payments, etc.5. Government to Person Payments e.g. elderly allowances. Freedom -fighter allowances,subsidies, etc.6. Person to Government Payments e.g. tax, levy payments.7. Person to Person Payments (One registered mobile Account to another registeredmobile account).8. Other payments like microfinance, overdrawn facility, insurance premium, DPS, etc.Bangladesh Bank has fixed the transaction limit for the account holders of mobile financialservices at maximum Tk. 10,000 daily and a total of Tk. 25,000 on monthly basis videDCMPS Circular No. - 10/2011 December 14, 2011. A holistic view of the MFS status as ofApril, 2015 are given in the table belowNo. of Banks permitted : 28Started MFS operation : 20Registered customers : 29.21 millionAgents : 542,400 3 | P a g e The figure below shows the trends of transaction amount through mobile financial services in2014:2 [2]History of mobile banking The central bank issued guidelines on ?Mobile Financial Services for Banks? in September2011 clearly stating a choice to make the market bank-led. However, the central bank hasadvocated for mobile operators and microfinance organizations to be active partners. It hasprovided 10 licenses to banks to offer the full range of mobile financial services.This regulatory certainty has allowed the market to move and by late 2011 and into 2012 twoearly leaders have emerged with the largest customer bases and agent networks.ThebKash service is provided by BRAC Bank in cooperation with its subsidiary bKash.AndDutch Bangla Mobile is a new service from Dutch Bangla Bank. Combined these twoproviders made the largest contribution to the nearly 500,000 new mobile accounts and morethan 9,000 new agents. 2 4 | P a g e The mobile financial services market is at an early stage of development as providers areworking to stabilize their technology, build agent networks and acquire new customers. Thisinvolves finding and training agents, marketing, helping customers transact and acquiringcustomers by using know -your -customer (KYC) and account opening processes. A surveyconducted by Bangladesh’s central bank found that the new services are reaching multipleparts of Bangladesh and that most clients and agents express cautious optimism about mobilefinancial services being valuable to them.Three quarters of clients said their main reason touse this service is to send or receive payments, while the remaining one -quarter highlightedsafekeeping as the main reason. Rural users specifically mentioned the benefits of receivingpayments. Initial hopes for international remittances to drive the mobile financial services have notmaterialized. Similarly, earlier efforts to allow cash-out via mobile phones has not generatedmuch volumes. It seems that Bangladesh is like many other markets whereinternationalremittances are more likely to follow rather than lead.These developments offer promising signs that mobile financial services could develop intime. However, big questions remain to be answered. There is a significant upfrontinvestment required to build momentum and none of the providers are yet covering theirrunning costs. The rapid uptake by customers still needs to be proved. Bangladesh has a large5 | P a g e population in a small geography. It is also home to one of the most deeply penetratedmicrofinance markets. Indeed, Bangladesh’s overall access to accounts for adults of nearly40% is higher than South Asia’s average of 33% and the global low -income country averageof 27% (source).Nevertheless, most banks, mobile operators and microfinance institutionsagree that mobile financial services are likely to focus initially on domestic person-to-persontransfers that are very scarce among formal providers. Bangladesh Bank’s aim is to ensure that the market develops with several providers, anddiverse technologies are tested and used, different kinds of agent networks deployed, and arange of products available so that the consumer is empowered with a full range of choices.It is an exciting time in Bangladesh for mobile financial services and much will be learned in3 the coming months. [3]Objective of Mobile Banking:Around 87% of the total population of Bangladesh is un-banked. To bring such a hugepopulation into the banking channel, DBBL is implementing a system to launch mobilebanking soon. The project is in its final stage now. With this facility any person having amobile number will be able to use his number as a bank account. In this mobile account theywill be able to do the following:? Cash deposit to any Agent of DBBL? Cash withdrawal from any Agent of DBBL? Cash withdrawal from DBBL ATMs? Funds transfer to another mobile account? Utility bill payment, Tuition fee payment, Air time top-up.? Receive remittance from home and abroad? Salary disbursement? Disbursement of Govt. allowances? Merchant Payment? Balance Inquiry3 6 | P a g e Some other purpose of Mobile Banking:While poor people have little money, they are active managers of what they have. Holdingcash comes at high price to poor people because of the risk of crime in many poor People, butthey often have few alternatives to cash based services.In particular, appropriate financial services help poor people to access usefully large lumpsums of money, which may either enable a pathway out of poverty through investment inincome generating activities (such as micro enterprises) or asset creation (such as housing);or may reduce vulnerability to sudden shocks to cash flow, as a result for example of illnessor climate conditions.In our country, poor people are forced to rely on informal financial services, which may beunsafe, or fringe formal financial products which may be expensive as well as unsafe. Inother words, their exclusion from formal financial services has economic and social impactswhich may exacerbate their poverty.The cost efficient provision of formal financial services (payments/ remittances, savings,credit or insurance) is predicated on customers having access at least to a basic transactionalaccount, from which electronic transfers can be made as like purchase product and pay oneanother by M-banking and cash withdrawn as necessary.M-banking holds the prospect of offering a low cost, accessible transaction banking platformfor currently unbaked and poorer customers. In addition, as mobile networks expand theircoverage, they offer the opportunity of bringing payment and remittance services into thatareas where banking services is unable able.However, not all m-banking products will be transformational in the sense of broadeningaccess to financial services substantially at first or even at all. However, it is likely that evenm-banking services which start targeted at existing banked customers may over time extendto un-banked groups.7 | P a g e SWOT analysis of mobile banking To find out the viability of a particular product we may perform a SWOC Analysis of theproduct. This will analyze the Strengths, Weaknesses, Opportunities and Threats of theparticular product. For analyzing the performance of Mobile Banking in Bangladesh theSWOC Analysis is considered. Strengths: Mobile Banking is new in our economy. Only a few banks are now offering this service.Through Internet Banking Most of the banks are offering only balance information. Actualfund transfer and fund disbursement is not possible in all the banks that are offering internetbanking services. So this product will enjoy the benefit of a first mover. It is cheap both forthe banks and the customers. The bank will be able to lower down the overhead costs andmake more profit out of it. The customers will be able to save time as well as money for theirtransaction needs. Many poor people already have access to mobile phones. A positive aspectof mobile phones is that mobile networks can reach remote areas at low cost. The poor oftenhave greater familiarity and trust with mobile phone companies.WeaknessesThe system will have a problem with the identification of the individual who is initiating thetransaction. In Bangladesh, the identification of an individual is not yet supported digitally.So there may be a problem in moving toward mobile banking era. Opportunities Non-branch banking is becoming popular in our country. Many banks are now offering nobranch banking facilities. A person can withdraw or deposit money in any branch of the bankhe has account with. So moving to mobile banking will allow the banks to offer non-branchbanking facilities. Mobile device is becoming very common to us. So a service offeredthrough the mobile phone will be widely accepted in the near future. 8 | P a g e Threats Decries of visa & master card charge, availability of visa, maser card acceptance and alsoonline payment system is increase day by day. This is a threats for mobile banking.Peoplehave concern about security and privacy. They like to feel their money with their hand. Theyactually don’t believe in virtual money transfer. Furthermore a mobile handset may not easilybe operated to handle banking transactions as most of our people do not have soundtechnological knowledge. In the field of IT new technology is coming every day. One whichis very popular today might get obsolete tomorrow. So, to have a competitive edge over thecompetitors the banks must always update their services. But the challenge is to createawareness and make it believable to potential clients.Interest in Mobile BankingMobile banking is a new technology in Bangladesh, started from 31st March 2011. DutchBangla Bank Limited pioneered in mobile banking services in Bangladesh. Most peopleinformed about it but 52% of them are not eager to use it as they are happy in usingtraditional e-banking system.Opinion about time savingMobile banking, a real time on-line banking service is available anytime, anywherethroughout the country. So it can save one’s time. People have not to wait by standing in along line so it takes less time than traditional banking. But some people think it higher timeconsuming and some people think it takes same time as traditional banking.CostMobile banking is allowed to access banking facilities at affordable cost. A positive aspect ofmobile phones is that mobile networks can reach remote areas at lowest cost. Around 26%respondents say its cost is higher, 20% say same and 54% say it is more affordable thantraditional banking. 9 | P a g e Trust worthy One can trust mobile banking as traditional banking system. It has secured PIN (PersonalIdentification Number) code which is known by the user, and also has a check digit. But inBangladesh traditional branch based banking remains the most widely adopted method ofconducting banking transaction. The poor often have greater familiarity and trust with mobilephone companies than formal banking institutions. Furthermore a mobile handset can easily4 be adapted to handle banking transactions. But it is not commonly known by all.[4]Market and Future GrowthList of Banks providing Mobile/SMS Banking Services inBangladesh (2015)1. Duch-Bangla Mobile-Banking http://www.dutchbanglabank.com/mobile- Bank Limited banking/home.html 2. BRAC Bank bKashhttp://www.bkash.com/Limited. SMS Banking http://www.bracbank.com/SMS-Banking.phpMobile Top-Up http://www.bracbank.com/mobile_top_up.php3. Prime Bank Phone Banking https://www.primebank.com.bd/index.php/home/phone_ Limited. banking SMS https://www.primebank.com.bd/index.php/home/sms_b anking4. Islami Bank mCash(mobile)sm http://mcash.islamibankbd.com/http://www.islamibankb Bangladesh s d.com/advservices/advSerSMS.phpLimited. 5. Trust Bank Mobile Moneyhttp://www.trustbank.com.bd/MobileMoney6. National SureCashhttps://www.nccbank.com.bd/index.php/nccbsms_bank Credit and ingCommerce 4 10 | P a g e Bank Limited7. Bank Asia Mobile Bankinghttp://www.bankasia-bd.com/home/mobile_bankingLimited. 8. Dhaka Bank SMS Bankinghttps://ibank.dhakabank.com.bd/window.asp?Page=S MSBanking.asp9. Mercantile MYcash http://www.mycashmbl.com/Bank SMS Banking http://www.mblbd.com/home/sms_banking10. AB Bank SMS Bankinghttp://www.abbl.com/sms-banking.html11. South East SMS Bankinghttp://www.southeastbank.com.bd/sms.phpBank 12. First SureCashSMS https://fsibl.surecashbd.com/http://www.fsiblbd.com/?pa Security Banking ge_id=2243Islami BankMobile Banking http://www.fsiblbd.com/?cat=3113. Bangladesh S-Cash http://www.bcblbd.com/home/detailpages/36Commerce Bank14. United SMS Bankinghttp://www.ucb.com.bd/index.php?page=personal- Commerce banking/services/sms-bankingBank 15 EBL SMS Banking http://www.ebl.com.bd/home/sms16 IFIC Bank Mobile Banking http://www.ificbank.com.bd/mbanking/17 Midland Alert http://www.midlandbankbd.net/sms_bankingBank Banking(SMS) 18 NCC Bank SMS Banking https://www.nccbank.com.bd/index.php/nccbsms_banki ng19 ONE Bank OK http://okbanking.com.bd/Banking(Mobile) SMS Banking http://www.onebank.com.bd/home/sms.php20 Farmers Mobile http://www.farmersbankbd.com/mobile_banking.phpBank BankingSMShttp://www.farmersbankbd.com/SMS_banking.php11 | P a g e Banking21 Premier Mobile Banking http://www.premierbankltd.com/pbl/product%20n%20se Bank (upcoming) rvices/upcomming.php22 Exim Bank SMS Bankinghttp://www.eximbankbd.com/services/SMS_Banking23ShahjalalIsla SMS Bankinghttp://www.shahjalalbank.com.bd/Services.phpmi Bank 5 [5]Details of some mobile banking in Bangladesh:Dutch-Bangla Bank Limited:Dutch Bangla Bank pioneered Mobile Banking in Bangladesh. It was the first bank to offerbanking facilities through a wide range of mobile phones. Mobile Banking is a Bankingprocess without bank branch which provides financial services to unbanked communitiesefficiently and at affordable cost. To provide banking and financial services, such as cash-in,cash out, merchant payment, utility payment, salary disbursement, foreign remittance,government allowance disbursement, ATM money withdrawal through mobile technologydevices, i.e. Mobile Phone, is called Mobile Banking.Their Services:1. Customer service flow5 12 | P a g e 2. Customer Registration 3. Cash-in (cash deposit)4. Cash-out (cash withdrawal)5. ATM Withdrawal6. Mobile top-up7. Person to Person Transfer (P2P)8. Bank A/C – Mobile A/C Transfer9. Foreign Remittance10. Salary Disbursement11. Balance Enquiry12. Bill Payment13.Merchant Payment14. Transaction limit6 15.Fees & Service Charges[6]bKash:bKash Limited, a subsidiary of BRAC Bank, started as a joint venture between BRAC BankLimited, Bangladesh and Money in Motion LLC, USA. In April 2013, International FinanceCorporation (IFC), a member of the World Bank Group, became an equity partner and inApril 2014, Bill & Melinda Gates Foundation became the investor of the company. Theultimate objective of bKash is to ensure access to a broader range of financial services for thepeople of Bangladesh. It has a special focus to serve the low income masses of the country toachieve broader financial inclusion by providing services that are convenient, affordable andreliable.More than 70% of the population of Bangladesh lives in rural areas where access to formalfinancial services is difficult. Yet these are the people who are in most need of such services,either for receiving funds from loved ones in distant locations, or to access financial tools toimprove their economic condition. Less than 15% of Bangladeshis are connected to theformal banking system whereas over 68% have mobile phones. These phones are not merelydevices for talking, but can be used for more useful and sophisticated processing tasks. bKashwas conceived primarily to utilize these mobile devices and the omnipresent telecom6 13 | P a g e networks to extend financial services in a secure manner to the under-served remotepopulation of Bangladesh.By providing financial services that are convenient, affordable and reliable, bKash aims towiden the net of financial inclusion. bKash wants to provide a solution for Mobile FinancialServices, built on a highly scalable Mobile Money platform, allowing the people ofBangladesh to safely send and receive money via mobile devices.Their Services:1. Cash In2. Cash Out3. Send Money4. Payment5. Buy Airtime6. Int'l Remittance7 7. Interest on Savings[7] 7 14 | P a g e EasyCash:Prime Bank’s mobile banking banned,on 7 august, 2014Easy Cash is the first to face Bangladesh Bank’s restriction on continuing with the fastgrowing businessBangladesh Bank (BB) has banned the mobile financial service of Prime Bank withimmediate effect as it found gross irregularities into the service.?The bank will no more be able to continue its mobile financial service as the central bankhas canceled license after digging out its fraudulence in the name of the service,? a seniorexecutive of Bangladesh Bank said yesterday.The central bank earlier issued a show-cause notice to the managing director of Prime Bankafter detecting huge anomalies in recruiting manpower for the service – Easy Cash. ?But the bank failed to give satisfactory answer, prompting BB to cancel the license of itsmobile financial service,? said another executive. The BB has also asked stopping mobile financial service-related advertisement ?Mobicash?of Grameenphone (GP), as the mobile operator was giving the service violating the agentbanking guideline. Five banks, including Islami Bank Bangladesh and Dutch-Bangla Bank, have agreement withGP for Mobicash service.This is for the first time the central bank has canceled license for mobile phone banking of aprivate commercial bank and an advertisement after introducing mobile banking in thecountry. According to the BB inspection report, SMG Infocom as appointed by the Prime Bank tooperate its mobile banking Easy Cash received Tk25 core as undertaking money from 2,500jobseekers using the Prime Bank’s logo.SMG Infocom had shut down its operation immediately after the recruitment, but it had notrefunded the undertaking money to the appointed ones as the solution provider had assuredthe jobseekers they would refund the undertaking money after recruitment.15 | P a g e "