bKash had a tough choice – to take home huge profits now but risk the future or invest in future to tide over competitors and reap low profits for now.
It obviously chose the latter.
The largest mobile financial service provider launched in 2011, bKash, thought it should have a much improved mobile application to make the transactions smooth and better customer satisfaction.
It thought it has to have a better network to pipe in remittance so that its App becomes popular among the Bangladeshi expatriates.
And it thought it should bolster its communication and so invest in marketing.
After all, Rocket, the first mobile financial service launched by Dutch-Bangla Bank, and Nagad, owned by Bangladesh Postal Service Department, were moving aggressively. And bKash, a subsidiary of BRAC Bank and a market leader with over 3 crore people using it, was definitely feeling the heat.
So with such spending decisions, bKash that first clocked profits in 2014 found itself with the lowest profit in the last five years in 2018 when its year-on-year net earning tanked 62 percent to Tk 18.48 crore.
However, its customers and transactions continued to increase substantially making bKash enable to retain its market share of about 50 percent in 2018.
“bKash went for massive investment in technologies to improve its service in view of new competitors entering the market,” said Shamsuddin Haider Dalim, head of corporate communications and public relations at bKash.
Nagad, the government-owned service launched last year, has gained quick popularity because people can transfer more money through it. When other services offer a highest of Tk 1.25 lakh transaction a day, Nagad users can transact up to Tk 2.50 lakh.
And Rocket, the first service, sailed on the reputation of Dutch-Bangla Bank. Its transaction value grew by over 97 percent in the last year when its close competitor bKash saw 23 percent growth during the same period.
So bKash felt it needed more muscles to sprint faster and hence, the investment decisions and needed an improved App. The App was an immediate success with more than 9.6 crore transactions made it last year.
It added additional features like payment of utility bills to its service that together added in Tk 372 crore new transactions.
Another important factor was the acquisition of 20 percent stakes in bKash by Alipay, a Chinese e-commerce giant, last year.
“Alipay advised bKash to deepen investment in digital capabilites for better future performance,” said Dalim.
Such strategic decisions and market positioning led to the declining profit last year for a better future, he explained.
bKash will see strong profit in the coming years as customers are increasing, he hoped.
It has forged partnership with the leading digital money transfer company, WorldRemit, enabling customers to receive money directly to BRAC Bank and bKash accounts.
It has also joined hands with MasterCard and Western Union to channel remittance.
The total registered clients under MFS platform was 6.70 crore as of December last year.