MFS merchant payment booms in 5 years

Merchant payment has a major role in creating a cashless society. The more digital transactions are used in shopping, the faster Bangladesh will move towards a cashless society. Neighbouring India has progressed a lot in this regard, but Bangladesh is lagging behind.

However, there is hope as the amount of merchant payments through mobile financial services (MFS) is increasing. In the last five years, such payments rose 7.43 times.

According to the Bangladesh Bank, merchant payments through MFS amounted to Tk 486 crore in December 2018 alone, which jumped to Tk 3,614 crore in the same month last year.

Industry insiders say the scopes for mobile wallet usage are increasing due to the growth of the digital financial ecosystem. As a result, merchant payments are increasing. In addition, MFS operators are regularly introducing new services, which is increasing customers’ trust and comfort.

Rezaul Hossain, market transformation specialist and former managing director of upay, told The Business Post merchant payments are rising as the number of smartphone users has increased and QR code facilities have been introduced in urban areas.

“But since cash-in amounts are not much higher than cash-out, this market will take more time to grow,” he added.

UCB Fintech Company, a subsidiary of United Commercial Bank, offers MFS under the upay brand.

Shamsuddin Haider Dalim, head of corporate communications at bKash, said MFS operators are launching new services.

“Also, in cases where the transition from manual to digital payment is lengthy, bKash handles those by collaborating with others. As a result, merchant payments are increasing day by day.”

Although the merchant payment volume has increased, its share in the total MFS transactions is very low. MFS transactions were Tk 1,00,593 crore in January this year. Of this, merchant payments accounted for only 3.75 per cent or Tk 3,773 crore.

In this regard, Rezaul said whether the merchant payment share will increase depends on the use of smartphones and internet in Bangladesh while digital literacy is also required. “Without these, it is not possible to have the expected growth.”

Transactions increase during festivals

Mobile banking transactions increase significantly during festivals, including the two Eids and Ramadan, Pahela Baishakh, New Year, and year end.

Last year, the month of fasting and Eid-ul-Fitr were in April and May. In April, mobile banking transactions reached an all-time high of Tk 1,07,460 crore. Similarly, merchant payments also increased.

Regarding the increase in transactions during festivals, former chairman of the National Board of Revenue Muhammad Abdul Mazid said people give Zakat and Fitra through mobile banking during Eid-ul-Fitar due to the introduction of digital transactions.

“On the other hand, digital payments are also made while buying and selling sacrificial animals during Eid-ul-Azha. In addition, household spending increases during festivals, resulting in higher transaction volumes compared to other times,” he added.

Apart from this, due to the discounts offered by various operators during festivals, merchant payments increase at that time, said industry people.

In this context, Dalim said many customers wait for those discounts and that is why transactions go up during festivals.

Micro merchant facility

At present, people can pay for goods through MFS or card in shopping malls, super shops, and outlets of various brands in cities.

This facility is not available while buying from micro and small traders, such as local groceries, drugstores, kitchen markets, street vendors, and hawkers. However, in November 2020, the central bank introduced the opportunity to make digital payments while purchasing from these traders.

The central bank allowed small traders to open a micro merchant account without a trade licence only with a national identity card and a certificate of occupation from the local public representative or a professional association.

However, even though more than two years have passed, paying such traders through MFS or card has not yet gained momentum.

Muhammad Zahidul Islam, head of public communication at Nagad, said, “We have already piloted transactions through micro merchant accounts and got a good response.

“We are now waiting for regulatory permission and will soon launch micro merchant transaction services. We can reach our goal of becoming a cashless society by providing micro merchants with an easy and simple payment option.”

Dalim said micro merchants associated with f-commerce are taking this advantage now.

“But lack of digital literacy among kitchen market traders and their reluctance to do digital transactions are the key reasons why this section of businessmen is not taking an interest in adopting digital merchant payment.”