Reaching the ‘unbanked’ through technological innovation Amjad H. Khan CEO, Bangla Phone Limited

What limits financial inclusion in developing countries?  Large rural population  High illiteracy  Low income  Remote areas  Lack of focus by banks/financial institutions  Poor coverage by banks/branches  Unprofitable for providing traditional banking services

Who are the unbanked? Underprivileged people in rural and urban areas People involved in the informal sector Agricultural and Industrial workers Unemployed Women & old people Physically challenged people

Technology solutions used by banks  A number of technological solutions have been deployed over the years to provide any branch or branchless banking services, including: 1. ATM 2. Debit Card 3. Credit Card 4. Online/Internet banking  However, all of these solutions/services are exclusively targeted towards the existing bank customers, enhancing their choices/convenience

Technology solutions & innovation to reach unbanked  The unbanked can only be reached through transformational branchless banking by tapping into infrastructure that already reaches the rural/remote areas.  Such branchless banking may include a combination of technology solutions and an innovative approach: 1.Technology-based—mobile phones, prepaid/debit cards, POS devices, biometrics, Internet 2. POS in remote areas 3. Engaging Nonbank Agents (use of third parties) to expand reach

New ways of offering banking services  The Mobile Phone is by far the most widely adopted technology platform in developing countries  The mobile phone network is the most readily available infrastructure to deliver branchless/affordable banking services to the unbanked  Illiteracy is not an issue (they can already operate a mobile phone)  Basic services can even be delivered through low-end handsets (SMS/IVR)

Bangladesh: A case study Demographics Population: 150 m Below poverty line: 31.5% Urban population: 27% Population under age 25: nearly 60% Banking Infrastructure Bank Branches: 7,961 Population having bank accounts: 22 million(14%) Mobile subscriptions: 99 million (68% penetration)

Mobile Financial Services  After several years of deliberations, Bangladesh Bank issued the “Guidelines on Mobile Financial Services (MFS) for the Banks” in September 2011 (subsequently amended in December 2011).  The central bank believes that fully developed MFS operations can reduce barriers to access and cost and over time enable a much higher proportion of the population to use basic banking services  Entry to the formal financial sector can lead to greater financial intermediation and contribute to growth.

Mobile Financial Services Mobile Financial Services up to June 2012 (excluding remittance ‐ only deployments): Banks licensed by Bangladesh Bank: 23 Live MFS deployments: 14 Mobile Accounts Opened: 779,532 Appointed Agents: 18,581 Transaction (billion Taka): 10.08

Mobile Banking Solution Highly-secure mobile banking access both on regular low-end mobile handset and also online through the Internet. The Commlink Mobile Banking platform is secured through strong encryption techniques and access authentication. Easy-to-use customer interface has been designed to ensure maximum satisfaction. It is modular and flexible, supports various channels. Supports SMS, USSD, IVR, GPRS/EDGE/WAP, Web Client and any other potential delivery channel. Bangla Phone along with its sister-concern Commlink Info Tech Limited has developed a complete Mobile Banking solution Easy to Interface with any system that supports web services. Session based authentication system. Can be integrated with any retail outlets like chain grocery stores and other merchant outlets Interface with Remittance Agents, Cash-in partners, etc. Agent Management module is also included

Service Features Account Opening/registration by alternative methods Cash in/Withdrawal Send/Receive money Mobile top-up Account statement/Balance enquiry Utility bill payment Foreign remittance Merchant payment Salary disbursement Tax Payment Government allowance disbursement Insurance payment collection Payment History Management Dispute Resolution Advanced Reporting Advanced Site Management Automatic Notification Generation Other customized features can be added

Security Features (1) The Commlink Mobile Banking solution has adopted a robust security model to protect the users which is device independent. It has enterprise-level security encryption capabilities and even temporary data stored in the device are encrypted. The platform requires the use of ‘activation number’ for the authentication of the software and a PIN code to authenticate the user. Our system is completely web based. Security measures have been considered using typical website vulnerability: Remote code execution SQL injection Format string vulnerabilities Cross Site Scripting (XSS) Username enumeration Secured User/Agent management Total hierarchical management control of every transaction at any given time.

Security Features (2) Confidential pages are secured through PKI (Public Key Infrastructure) using HTTP over TLS. Combination of User Name, Password & PIN for authentication. All the transactions in our Internet Banking Solution are highly secured through the use of https (http over SSL/TLS). This ensures the use of public key infrastructure (PKI) Our system supports two factor authentications as we introduced and incorporated SafeNet Ikey (USB Token) into our system. Role based system management for Access Control List (ACL) facilities for bank users In addition, for the first time in Bangladesh, biometric identification is also being deployed to confirm the user. The above tablet with finger print scanner is custom-made and can also be used to scan finger prints before selling a SIM card for later identification, when needed

Mobile Banking Solution Bangla Phone Limited along with its sister-concern Commlink Info Tech, are jointly offering to set up a complete end-to-end mobile banking solution on a turn-key basis. The Commlink Mobile Banking platform is compatible and easy to integrate with the existing banking IT systems. It would include the mobile banking platform, related products, system integration and other professional services. The mobile banking platform can be further customized to meet any particular requirements of banks or financial institutions.

Mobile Banking Solution  The Bangla Phone-Commlink consortium is presently implementing a mobile money and e-commerce solutions called Post e- Pay and Post e-Shop on a turn-key basis for the Bangladesh Post Office  It will play a key role on reviving the fortunes of the postal office.  It will be introduced through all the 10,000 post office branches around the country. In addition, over 100,000 agents will also be appointed.  The touch-points will be equipped either with a lap-top (post offices) or a handheld tablet (agents) and will have wireless online connectivity.

Network Architecture 16 BPO VPN BPO Head Office LAN Internet Internet Users BPO Employees Local Post Office Sylhet Local Post Office Chittagong 3 rd Party e-Commerce Using e-Pay API

Bangladesh Post Office Head Quarter ePost Pay Application Server ePost Pay Application Server System Diagram 17 eShop Application Server eShop Application Server Data Center Mobile App. Server ePay API 3 rd Party e-Commerce ePay API ePay Web e-Pay User Local Post Office Employee eShop Web e-Shop User User Socket Rich Client Application SMS Alert

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