The case tells the compelling growth story of bKash Limited. Used by 22% adults of Bangladesh, a lower middle-income country with 170 million people, bKash services account for roughly 4.5 million transactions per day. Anatomy of bKash’s success reveals three broad factors:
Targeting: On-point with the Pain Point
Specialized Business Model
The following discussion analyzes these three factors first, then moves forward with the present challenge the company is facing, and finally, analyzes on the discussion questions.
Targeting: On-point with the Pain Point
More than 70% of Bangladeshi population was living in rural areas in 2011, the year of bKash’s inception, as reported by World Bank. The increasing urban migration rate has risen even more rapidly from sixty-seven (67) persons to ninety (90) persons per thousand during 2011–2015—according to Bangladesh Bureau of Statistics. This migrant population includes the working poor with strong ties with their families who are living in the village and depending on the migrant member’s income. So, transferring money is a necessity to this low-income population.
Lack of financial literacy, fear toward formalized banking system, unavailability of nearby branches, and the complication of banking impose a barrier to this less educated working poor, who are unaccustomed to and uncomfortable with banking practice—and thus, often unbanked. They used to resort to the traditional alternatives, including courier services, personal contacts, post office, transport services, middlemen, etc. Security and trust issues from mishap of middleman or contacts, high costs of courier and postal services, and irregular and lengthy delivery period have prevailed in these alternatives—leaving this segment susceptible to fraud, inconvenience, lack of security, lack of financial stability, less control with their finances, and added transfer costs from third parties. This is the pain point bKash has catered to.
Specialized Business Model
bKash has developed a specialized business model in which the financial institutions provide the service, and take the compliance responsibility; MNO provide connectivity, while customers and agents use their own handsets. Ubiquitous mobile phones and favorable regulatory guidelines have been catalysts to this specialized model.
Ubiquitous Mobile Phone
Mobile phones are ubiquitous in Bangladesh. In March 2011, months before bKash’s launching, the number of subscribers was almost 73 million which has doubled to 143 million in November 2017, as per Bangladesh Telecommunication Regulatory Commission data. The telecom operators had already established a nation-wide distribution channel of agents in almost every remote corner of the country—enabling the subscribers to recharge airtime at a walking distance. bKash capitalized on the already existing strong network of mobile-phone users and the agents.
Favorable Regulatory Guidelines
Government and regulatory support can be crucial factors in the highly regulated financial institution industry of a developing country where trust, security, and awareness issues are prevalent. The government’s “Digital Bangladesh Vision” has aimed at the overall improvement of the daily lifestyle of general people through maximum use of technology, while “financial inclusion” initiatives target at expanding banking services to the population who are left out of formal banking and deprived of their financial services. The concept of mobile financial services industry seemed to dovetail with both the goals—paving the way for bKash and other early stage MFS companies.
Apposite Marketing Mix
bKash’s marketing mix, comprised of the product, pricing, promotions, and placements, has been proven to be apposite for its targeted group.
Product: bKash’s smart sequencing strategy initially focused on the simple and most needed services, like money transfer and gradually included more complex services to its offering. Well-targeted to it’s less educated, tech-averse, and low-income customer, these services are affordable—with free account opening and deposit, compatible with any economic handset with USSD, and easily usable allowing the user to transact only by typing numbers rather than typing anything in English. More importantly, it has developed trust through secure transaction, customer care, and helping agents.
Price: Free accounts with very low cost, that clearly outweighs the costs and hassle of alternative means, helped the bKash services’ adoption and frequent usage.
Place: bKash utilized the already existing network of airtime recharge agents who are usually the small grocery store owners, thus, familiar faces to the community. Using this, existing network has helped bKash to be available in walking distances from almost every remote place of the country. In addition to commission from bKash transactions, these agents usually enjoy additional inflow of customers in their shop for these transactions.
Promotion : Attracting the less educated and low-income people who have skepticism and lack of confidence in technology—particularly with their finances—can be a daunting task in an environment where stories of fraudulent activities were abundant. This segment had the fear of losing money due to mistakes in transactions as well. bKash educated the customer through large scale awareness campaign plan which included mass advertising, street plays, short documentaries, and interactive games. The in-person usage guidance by the network of more than 120 thousand agents has further supplemented this effort.
bKash presently enjoys a dominant 75% market share. The brand name has become a generic name to Bangladeshi households who use “bKash” synonymously with mobile financial services. However, as bKash’s targeted market approaches toward the urban households with middle to upper income level, amidst the rise of other MSF brands like Rocket, mCash, Ucash, etc., there is a new set of challenges for the MFS giant. Regulatory issues also make the game difficult. bKash needs to answer the following questions now:
How will bKash attract the urban middle-to-high income population? What can be the adoption and usage factors for this newly targeted group?
How can bKash better manage the fraudulent activities by scammers?
Can Rocket and the other competitors be a threat to bKash, especially with the competitive costs?
Government regulations have limited both the number and amount of transactions. How can bKash manage its impact?
Teaching Purpose and Objectives
The case provides the following lessons and insights.
An in-depth analysis of the targeted group’s pain-point can yield compelling business solutions to revolutionize their lifestyle.
A customized and specialized business model can be innovated to serve the unique problem of the targeted group.
It is possible for a heavily technological and complicated business process to thrive in a segment of less educated, tech-averse, unbanked population.
Educating the customer, a seemingly costly and demanding task, can reap its benefits. Mass level campaigns with relatable stories and hand-holding were the ways in this case.
Partnering with already existing entities, MNOs and agents in this case, can help to reach the targeted customer easily and closely through low-cost delivery channels.
Technology needs to be adapted and usage process needs to be simplified—suiting to the customers.
Sequencing and pricing strategy can play an important role in introducing a new concept.
The marketing mix may need to be adjusted, even remodeled, when the company is expanding to a new market segment.
Additional Reading Suggested
The following materials are expected to help the reader better understand this case:
“Built for Change: Inclusive Business Solutions for the Base of the Pyramid” by International Finance Corporation, published in September 2016.
“Adopting mobile money: Lessons learned” by BRAC.
“Business Model of bKash”—a presentation by Mohammad Azmal Huda, Chief Technology Officer, bKash Limited.
“bKash Bangladesh: A Fast Start for Mobile Financial Services” by Gregory Chen and Stephen Rasmussen, CGAP, 2014.
Discussion Question and Analysis
Question 1: How will bKash attract the urban middle-to-high income population? What can be the adoption and usage factors for this newly targeted group?
Analysis: In the rural areas, the usage of bKash has been need-based. In the absence of access to finance, the working poor needed the services offered by bKash. Contrarily, with access to finance through many alternatives, the urban population is not in dire need of adopting bKash services. This banked population has a wide array of banking services, including credit and debit cards, internet banking facilities, ATMs, etc. Appealing to this urban segment to adopt behavior-based or lifestyle usage is the challenge.
A vital pain-point of this urban segment is the terrible traffic congestion. World Bank Analysis suggests that traffic jam in Dhaka eats up 3.2 million working hours per day. Moreover, they also need to stand in long inefficient queues for payments, deposits, and withdrawals for a variety of transactions in the densely populated Dhaka City. One area of bKash’s proposition can be addressing these issues.
Probable bKash services relating the urban lifestyles
Education: Payment of tuition and other fees, admission test fees, semester fees, stipends, scholarships, etc. involving millions of students studying in thousands of urban educational institutions;
Health and fitness: Payment of fees for health services, including, doctor’s appointment, medical check-ups, diagnosis, health insurance, clinic charges, hospital fees, fitness center charges, park membership fees, etc.;
Utilities and other bills: Payment of monthly bills on electricity, gas, water, internet, cable television, newspaper, etc.;
Shopping and Restaurant: Transaction with retail stores, supermarkets, shopping malls, clothing stores, groceries, stationery shops, restaurants, etc.;
Entertainment: Payment for tickets in movies, sports matches, music, dance, concerts, festivals, etc.;
Transport: Payment for tickets in bus, train, airplanes, taxi-cab services, ride-sharing services, on-demand vehicle services, etc.,
Business: Disbursement of salaries, collection of receivables, collection of revenue for small start-ups depending on distant deliveries of products and services, etc.; and
Others: Payments for citizen services like passport, trade-license, tax return, etc., remittance and cross-border transactions, etc.
Probable promotional activities to attract customers
Cash-back offers in transactions through bKash (occasion-based and promotional).
Discount from selected outlets, e.g., shopping mall, retail chain, restaurant, clothing stores, etc. when transacted through bKash (through partnership with them).
Free or very low-cost installation of bKash transaction and payroll systems in educational institutes, banks, businesses, hospitals, etc.
Partnerships with events, festivals, contests, etc. to manage their transactions through bKash
The case solution is encouraged to include any other activities, innovations, and campaign plans to attract and retain the urban segment. Perception barriers of urban segments using MasterCard, Visa, or other prestigious payment platform to adopt a homegrown solution known for lower-income group can be one of the challenges bKash needs to deal with. Whether bKash can utilize the high smartphone penetration of this urban segment, without hampering the simplicity, security, and feasibility issues of this transaction process, can be another issue to work on. Appealing to the urban segments without losing the already existing rural client base needs to be strategic.
Question 2: How can bKash better manage the fraudulent activities by scammers?
Analysis: Since lack of financial and technological literacy exists in this growing stage industry, educating the people on these issues can reduce the fraudulent activities. Partnering with the regulators and other MFS providers to run awareness campaigns for the greater good of the MFS industry, collaborating with the law enforcement agencies with the detection and enforcement of the crimes, training sessions with the agents to better help the clients can be feasible ways.
bKash can also examine whether there is scope for improvement on its internal technology, monitoring layers, interface, and process to reduce the fraudulent activities—without causing much barrier or complication for the end-users.
Additional Questions and analysis:
Question 3: Can Rocket and the other competitors be a threat to bKash, specifically with the competitive costs?
Implications: The competition can indeed get tougher in the coming days. Some of the advantages bKash holds include—an already existing huge user-base, widespread network of agents, strong brand image, global recognition and reputation, strong visual presence through its banners and advertisements in every remote area of the country, etc. However, since there is no switching cost and almost uniform services with slightly lower costs seem to be rising, bKash needs to be watchful on its competitors’ move. In the long run, if increased bargaining power of the end-users become inevitable, then, bKash may need to focus on the quality, costs, and differentiation points to retain its leadership.
Question 4: Government regulations have limited both the number and amount of transactions. How can bKash manage its impact?
Implications: The regulations, intended to curtail illegal activities, can affect bKash negatively. A by-product of these restrictions is likely to be the increase of its competitors’ user base since the users requiring transacting higher amount than the permitted limit may resort to multiple MFS accounts. bKash can strategize to ensure that it becomes the first preference account of the MFS users. Provided bKash’s dominant market position, impact, and relationship with government regulatory bodies, it can try to convince the government to further extend the limit to facilitate trade and commerce. Whether stringent monitoring measures can be effective in reducing illegal activities can be an important question to ask in this regard.