The street scene of honking cycle rickshaws, jaywalking pedestrians and precariously tilting buses in crowded Dhaka was an easy distraction. It was December 2017 when Matteo Chiampo, an advisor to the Consultative Group to Assist the Poor (CGAP), was writing an advisory report on the future growth strategy for SureCash, a mobile financial services (MFS) company in Bangladesh.
Brainstorming for questions, and not answers, was something he had not tried before. Nevertheless, Chiampo tried to focus on the questions he had on his mind—questions that he believed would give novel and transformative insights on the way forward.
SureCash was founded in 2014 with the objective of providing a range of mobile financial products to the unbanked population in Bangladesh, and a long-term vision to become the premier ‘digital financial services’ provider in the country. The company tied up with local retail convenience or ‘mudi dokan’ stores and mobile phone shops to deliver financial services to its customers. The initial approach, focused more on mobile services, was based on an agent banking structure. This meant providing limited scale banking and financial services through engaged agents under an agency agreement, rather than a teller/cashier system. SureCash was thus the owner of an outlet which conducted banking transactions on behalf of a bank, and to this end, it had co-branded with five banks, along with establishing collaboration agreements with mobile network operators and other partners.
In early 2017, SureCash created history by transporting the nation’s Primary Education Stipend Project (PESP) onto its digital platform. In the process, it successfully opened accounts for 10 million women in Bangladesh, and transferred the stipend funds to their accounts. However, despite this large deal, CEO Shahadat Khan was on the lookout for new growth opportunities that could be created for his relatively small company.
The MFS sector in Bangladesh was essentially an oligopoly dominated by two large players: bKash, which held more than half of the market share, followed by the Dutch Bangla Bank Limited (DBBL), which owned about one-sixth of the subscribers’ market share, at a distant second. With advice from CGAP, Khan was considering the kind of growth strategy a player like SureCash could implement in such a market.
Homegrown technology
The SureCash software platform had been developed internally, leveraging web-based technologies. As the backend platform was built and controlled by the company, customised development and modification took less time as compared to commercial platforms. The full software development lifecycle, including testing and production maintenance of service solutions, were all done in-house. Being able to control its entire technology stack was a definite advantage for SureCash. Other MFS providers in the country had typically acquired platforms built by third-party foreign companies, who were unlikely to understand the unique needs of the local customer. The SureCash platform was designed to be fast, real-time and reliable, and used the mobile phone as the primary transaction interface.
Opening an account
Opening a SureCash account through one of its partners was a simple process offered free to the customer. Customers could go to any agent outlet in the country with their mobile phone (the mobile operator needed to be a partner of the company), proof of identity, and a photograph, and complete a form. Once the forms were completed and verified, the customer would receive a confirmation SMS that the account had been opened. Thereafter, they could avail of a range of services including cash-in, cash-out, cash transfers between individuals (P2P), cash transfers from business/organisations to individuals (B2P), bill payments, merchant payments, mobile top-ups, and collections.
MFS transaction
A typical MFS transaction request from a SureCash customer is placed over Unstructured Supplementary Service Data (USSD) through a menu-driven user interface on the customer’s mobile phone.
Over-the-counter transaction
For over-the-counter (OTC) wallet-to-wallet remittance, customers had to visit an agent outlet to execute the transaction. They handed over the amount to transfer in cash to the agent, and indicated the recipient’s account number. The agent then performed the transaction on his/her mobile or electronic device.
The MFS market in Bangladesh
MFS in Bangladesh had been established as part of the government’s regulatory reforms, which allowed financial service providers to operate in the country in partnership with a locally-registered bank. These reforms were introduced in early 2011, following which DBBL and bKash entered the market almost immediately.
Having one or two large dominant players in the market had several drawbacks for smaller MFS players, including bleaker possibilities for building large agent networks, less control on transaction fees, and a challenge for brand management. This was in addition to the risks faced by all MFS operators, which included local agents allowing registration of fake accounts without ensuring proper verification, or then daily operational challenges related to interoperability, where interoperability is defined as ‘the possibility to transfer money between customer accounts at different mobile money schemes, and between accounts at mobile money schemes and accounts at banks’.
Tackling an oligopolistic market
Rather than competing directly with its competitors, SureCash had chosen to adopt the path of differentiation to make its mark on Bangladesh’s MFS market. In 2014, the company had started working with educational institutions to facilitate the collection of tuition fees, and decided to pursue this path. Most educational institutions in the country were at the time still maintaining piles of physical ledger books to keep track of student fees and payments—which was proving to be increasingly inconvenient. By 2016, more than 200 educational institutions collected semester and monthly tuition fees using the SureCash educational fee collection platform.
At the same time, SureCash also began promoting its platform to organisations for salary disbursements. Organisations like Grameen Bank (a microfinance organisation and community development bank founded in Bangladesh), Grameen Trust, Integrated Development Foundation, and FoodPanda started disbursing salaries, transport allowances and vendor payments using SureCash’s platform. Some rural banks also began venturing into disbursing loans and collecting payments using SureCash. In 2016, Grameen Bank signed a memorandum of understanding to use the company’s mobile payment platform for its operations. Later that year, some other government agencies, such as the Water Supply and Sewage Authorities and Bangladesh West Zone Power Distribution Boards, began partnering with SureCash to collect utility bill payments from their consumers.
In 2017, the company collaborated with Rupali Bank to take over the massive task of digitisation of the government-led PESP. SureCash took on the responsibility of disbursing education stipends to mothers of 13 million students, and opened one mobile banking account for each mother so that they could receive the stipends directly into their accounts/mobile wallets. Additionally, SureCash collaborated with Teletalk, whereby the state-owned telecom provider distributed a free SIM card to the stipend recipients.
Niche market strategy
SureCash was thus able to leverage a niche market strategy to its business advantage. A successful niche market strategy should ideally encompass all three of the following factors: the existence of sufficient market demand in the niche today, a low degree of competition in the niche, and a high income potential in the niche.
In Bangladesh, women had far less access to financial services as compared to men. In 2017, 36 percent of women and 65 percent of men had mobile financial accounts, and mobile phone penetration was 47 percent for women compared to 76 percent for men. Hence, there was substantial market potential for innovative services for this niche segment. Second, as both bKash and DBBL were largely focused on P2P transfers, provision of other mobile financial services for disadvantaged women constituted a niche market with a low degree of competition. Third, given the population density of Bangladesh (among the highest in the world), there was a huge pent-up demand that SureCash was able tap into.
The road ahead
SureCash was able to target women and effectively implement a strategy to operate in an oligopolistic market, and its launch of the Rupali Bank SureCash PESP disbursement service has helped it find a niche in a large market. But digital disruption has begun to change the scope of markets across geographies. When the rural population of Bangladesh begins to adopt the smartphone, could the company tap this opportunity to establish itself as the front-runner of emerging technology solutions in the MFS market?
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Originally published by SMU Asian Management Insights, 22 May 2019 by Aurobindo Ghosh and Lipika Bhattacharya. Access the case in full here.
