bKash, the leading mobile financial service provider of Bangladesh has recently announced its reduction of the cash-out charge. Now bKash customers can cash out up to Tk.25,000 at a 1.45% charge from a “Priyo Agent” number.
However, some keynotes of the offer are:
- A customer will be able to select any agent number to add as a Priyo agent number for cash out in a calendar month
- This 1.49% charge will be applicable till BDT 25,000 in a month. After this BDT 25,000 limit, a 1.85% charge will be applicable.
- One bKash agent number can be added as Priyo agent numbers in a calendar month and A customer can have a maximum of 1 Priyo number at any moment.
- 85% charge will be applicable for Cash Out from any agent except Priyo agent both from App & USSD
- 75% charge of App Cash Out will be discontinued.
The decision to reduce the rate has huge implications as it is the largest revenue source of the company. The decision has also created a positive tone of attitude among the users since this is something that the customers were looking for.
We believe this is a well-made strategic move from bKash as it will be a win-win situation for the customers and the company.
That’s why in this article we have decided to take a deep dive and analyze the impact of the decision made by bKash.
Customers Wanted This and bKash Delivered
The decision came as a good morning blessing for the users of the MFS giant. As we can all say, as customers we always want to have our cost get reduced. Then the question arises if bKash could figure this out, then why they took this long to deliver the good news?
As a matured market leader, bKash is expected to ensure their price revise should benefit the majority of their user base while still maintaining the balance of authority regulation, business sustainability, with the customer benefits so that the market is not disturbed in the name of disruption. So, bKash always had to go through the regulatory outlines to ensure the balance between the industry standard and stakeholder benefits, before every decision that includes the reduction of these cash-out charges. And this time, they hit a jackpot.
Why The Limit?
Many of you might have a question regarding why there is a limit in the offer of up to Tk 25,000 each month. Before getting into this, food for thought-
“When was the last month you cashed out more than Tk 25,000 in a month from bKash except for any sudden emergencies?”
We believe you already have your answer.
In fact, a recent analysis on bKash transactions shows that 95% of customers ‘Cash Out’ within Tk25,000 per month, said a press release. So, the offer covers everyone who actually would get benefited from this reduction of the charge.
And when you think about the limit of One Favorite Agent aka Priyo Agent, think about this- almost everyone we believe has one or two local known preferred agent points. So, one can easily choose one based on their choice. And since one can also change the name after a calendar month, the option of switching is always open. Makes perfect sense altogether.
The Burning Question- Is This a Price War?
The answer is- NO!
We don’t believe that the move made by bKash is due to intense competition. MFS industry in Bangladesh is now more competitive than ever with the emergence of Nagad and Upay. However, bKash continues to grow even after the competition.
Net Revenue continues to grow as the company is showing no sign of slowing down. In H1’21, the Net Revenue of the company increased by 27.4% YoY from Tk 10,702.2 Mn in H1’20 to Tk 13,629.7 Mn in H1’21. Moreover, the company has shown healthy growth in transaction volume by growing above 20% each year from 2018-2020. In the first six months of 2021, the transaction volume of bKash was Tk 2,847 Bn. The company is still the market leader with a 75% market share in terms of transaction volume (Bangladesh Bank data doesn’t include Nagad).
The growth in Net Revenue and Transaction volume clearly indicates that bKash doesn’t need to make any price reduction due to competition. Moreover, the company allowed the reduction for less than Tk 25,000 which was made predominantly by keeping in mind the user base that will be benefitted from cost savings. It is a well-timed strategic move by bKash which is likely to benefit the company in the long term.
Let’s think from a different angle- bKash has discontinued the 1.75% app cash out charge offer with this introduction of the new offer. So, if it was a price war, why would bKash apply to increase the app cash-out charge by Tk 1.00?
A Relief For The Customers
This is an offer for every set of customers of bKash. And this balance is one of the reasons why we have liked the offer.
Till H1’21 (Jan-Jun’21) bKash has about 53.7 Mn customers of which 27.2 Mn are active customers. The company is making strides in-app customer acquisition. In 2020 total number of app users were 7.1 Mn which was 4.0 Mn in 2019. The app-savvy user base is now accustomed to the cashless ecosystem of bKash by enjoying services like bill payment, money transfer, recharge. This user segment is not mainly dependent on the cash-out feature.
However, the majority of bKash customers still rely mainly on the cash-out feature. Hence the “Priyo Agent” feature will help the user group who still owns a non-smartphone and is reliant on USSD based services. The new feature is a game-changer for them. Since, to them every penny matters.
As the recent analysis has already shown that 95% of bKash’s user base including the ones reliant mainly on cash-out service usually receives the service regularly from nearby agents and does not cash out more than Tk 25,000. Hence it is a big win for the customer segment which will be able to save on some costs.
On the bigger scale of things, this revision appears to be crafted for catering to the ones who need it the most and excluding none at the same time.
An Opportunity For The Agents
bKash has about 0.3 Mn agents which is the largest agent network in Bangladesh. The “Priyo Agent” feature will allow agents to have a long-term and meaningful relationship with the customer. The feature guideline states that a customer can cash out from a single agent each month. Hence it will allow agents to create a relationship with the customers.
The move shows the commitment of bKash to the financial wellbeing of agents. Agents and distributors are the main stakeholders which have been instrumental in the exponential growth of the company. The move shows that even after investing in app agents remain the key stakeholder for the long-term future of the company.
Our Verdict- Why It’s a Smart Move from bKash?
There are few reasons why we have really liked this new introduction of bKash. If you go deep, the offer gives you a better understanding of bKash’s overall approach to the business and its commitments as a market leader. Here’s why:
The Balance of The Offer
The new offer caters to all sorts of the user bases of bKash while ensuring the benefits applied to the segment that needs it the most. And since it includes achieving the delight of both Customers & agents, two of the most important stakeholders of bKash, it gives us the idea of the company’s long-term sustainability vision as well. Lastly, ensuring all these with the keeping the regulations intact interprets towards the long-standing value of a market leader.
Listening to the customers but not blindly
The stature of the offer also gives you an idea of bKash’s business intelligence. Many might have a question about why there is a limit on the monthly transactions or why the charge gets a bit higher for app users, simply because they (customers) don’t need it. The data shows almost everyone usually never cashes out more than Tk 25K in a month and the app users are mostly walking towards a cashless economy. So, why would any business let alone bKash do something that’s not needed!
Turning the Agents into A Priceless Asset
It is a great strategic move from bKash as it will allow agents to be more than a cash-out service provider. bKash has now branched into bill payments, merchant payment, and even savings products. A deeper agent-customer relationship can allow bKash to cross-sell these services to the user base. In the long run, the bKash agents can become the distributors of different services within the bKash ecosystem.
The introduction of “Priyo Agent” is a well-made strategical move from bKash which will benefit the customers and agents. The company will get a long-term benefit out of the move by pouncing on the stronger agent-customer relationship with the “Priyo Agent” model. We expect the agent-customer relationship will be stronger than ever through this system and would allow customers to get access to more services of bKash soon with the help of agents. A win-win situation for all.
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