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The development comes after the Department of Posts applied to the Bangladesh Bank for an extension to Nagad’s temporary approval, which expired on March 15
Nagad, the digital financial services arm of the Bangladesh Post Office, has gotten three more months to fulfil the conditions of the central bank to become a full-fledged mobile financial services provider.
The development comes after the Department of Posts applied to the Bangladesh Bank for an extension to Nagad’s temporary approval, which expired on March 15, said a top official of the central bank requesting anonymity as he is not authorised to speak with the media.
Subsequently, the payment systems department of the central bank on Monday informed the Department of Posts that the validity of the interim licence for Nagad, a joint venture between the Bangladesh Post Office and Third Wave Technologies, has been extended to June 30.
This is the second extension of the interim licence for Nagad.
The operator applied for a full-fledged licence in April last year after a BB move left it hamstrung.
On March 5 last year, the central bank had asked banks to suspend the trust-cum-settlement accounts of companies that were providing MFS and digital wallet services without its approval.
Nagad was the only MFS provider running without the BB’s approval then.
Several banks froze Nagad’s accounts, making it difficult for the company to run its operations.
This compelled the company, which until then was operating under the Post Office Act 1898 and not as per the central bank’s MFS regulations, to seek out a full-fledged licence from the BB.
The postal act empowers the postal department to independently provide financial services.
As part of the licencing process, the BB first gives a temporary approval for six months.
During the period, the operator has to fulfil the central bank’s laundry list of requirements before it becomes eligible for the full licence.
As part of the interim licencing terms, Nagad had to bring down the additional transaction limit it enjoyed that allowed it to gain a huge customer base soon after rolling out services.
A Nagad user could transact a total of Tk 2.5 lakh per day whereas it was Tk 30,000 for the other MFS providers.
Each transaction, of which 10 were allowed, could be up to Tk 50,000. But for the other MFS providers, the cash-in limit was Tk 15,000 and cash-out Tk 10,000 a day.
The monthly transaction limit for Nagad customers was Tk 5 lakh, whereas for the others operating under the BB’s regulations it ranged from Tk 25,000 to Tk 1 lakh.
The temporary licence granted to Nagad had expired in September and another was given then for another six months.
“Nagad will not be given another extension,” said the BB official, adding that the operator must fulfil all the conditions for the full-fledged licence in that time.
Rahel Ahmed, chief executive officer of Nagad, acknowledged receiving the extension to the temporary approval.
The Department of Posts applied to the central bank for extending the validity of the interim licence as some inter-ministerial work is yet to be done.
“There is a massive integration process and we are very close to completing it,” he told Dhaka Tribune.
The MFS operator will have to file an application with the BB upon fulfilment of the regulatory requirement within the validity of the interim licence.
One of the conditions for getting the final nod from the BB is forming a separate entity clearly outlining the stakes of each party.
“We are working on forming a separate company by ensuring the stake of the Bangladesh Post Office,” Md. Siraz Uddin, director-general of the Directorate of Posts, told Dhaka Tribune.
The company will be formed by May.
“Last week, we appointed our official to Third Wave Technologies to observe the transactions of Nagad. Everything will be solved after the formation of a separate company and then Nagad will get the final approval of the central bank,” he added.
Formally inaugurated on March 26, 2019, in just two years the operator has gone on to become the second-largest player in the market, muscling out Dutch-Bangla Bank’s Rocket.
Nagad has managed to win hearts by offering lower transaction charges and an easy customer onboarding process.
As much as 95 per cent of the accounts opened were by dialling *167# from the mobile phone and setting a personal identification number, according to Nagad.
The MFS provider then pulls the information of the customer from the mobile operators’ database by way of an agreement it had signed.
Since the mobile operators have the information of a national identification (NID) number of a subscriber, whenever a prospective user dials *167# to express his or her interest to open the MFS account, their information is instantly verified against the NID database and the process to open the account is completed.
On March 7, a record 2.87 lakh people opened accounts with Nagad, meaning three people joined its network every second that day, according to a press release from Nagad. On the previous day, about 2.5 lakh came on board.
Nagad’s surge comes at a time when the pace of new account openings on the platform has dropped off since September last year, according to data from the Bangladesh Bank.
Besides, the number of active accounts, which are accounts that had made transactions over the previous 90 days, is on the wane, too.
At the end of January, there were 3.2 crore MFS accounts, down 2.6 per cent year-on-year, making it the third straight month of decline.
However, transactions through the platform stood at Tk 57,253.1 crore, which is the second-highest in its decade-old journey, on the back of higher person-to-person and cash-in transactions.
Nagad’s final approval would take the tally of MFS licences to 16.
(DT)
