Innovation in Branchless Banking at the Bangladesh Post Office

On a recent visit to Bangladesh Sarah Rotman and I met with Post Office Director General, Mobasherur Rahman, at his office in the middle of busy downtown Dhaka to hear about his foray into the world of branchless banking.

Rahman escorts us through winding corridors, deep into the heart of the Bangladesh Post Office headquarters, to a room unlike any other in the enormous building. Outside an innocuous looking door are about twenty pairs of shoes watched over by a small security camera. We were politely asked to remove our shoes and were shown into the room.

The Post Office now offers two branchless banking services. The longest established service, which was launched in March 2010, is the Electronic Money Transfer Service (EMTS) which allows customers to instantly send money from one branch to a friend or relative who can pick up the funds at 2,000 of the 10,000 post office branches. EMTS, it is envisaged, will soon replace the traditional money order. Post office staff use either a web interface, for those with internet connectivity, or a menu on a specially equipped mobile phone to key in information about the sender and receiver. There is also an option for a free text to be sent to the recipient notifying them of the transfer.

As we enter we are greeted by a blast of icy air from a room where the environment is carefully controlled – other post office staff have to brave the Dhaka heat and humidity with only the aid of a fan. In front of us is a small call center where half a dozen people are answering questions from post office staff and customers about the service. The other half of the room is taken up with huge server racks and we watch as transactions are processed, flashing up on the screen for a few seconds before the next transaction takes its place. Over two million transfers have now been carried out and the system now processes 14,000 transactions per day. As if to answer our questions about what happens in the event of a power cut, the lights momentarily dim and we hear a generator automatically start up in the background. The servers keep humming throughout and there is no let-up in the transactions popping up on the screen.

The other service that has been launched more recently is a Post Office Cash Card. The card looks like a bank ATM card and comes in a smart plastic wallet to protect it from the elements. The next day we visit one of the post offices in Dhaka to sign up for an account. The card does not bear the name of the holder, so you can sign up and walk out of the branch in the same day with your account active. It costs Tk45 (US $0.60) to open the account, or you can get a card with your name and picture for Tk110 (US $1.50) if you are willing to wait a few days for the card. The card allows you to safely store money and it is free to make deposits. Customers are charged 1% for withdrawals. The Post Office will be rolling out more POS devices to an increasing number of branches over the coming months.

Leaving the post office with our new cards in our wallets, we reflect on the reasons for the success of the services. One reason may have to do with incentives. In Bangladesh the Post Master in each branch is paid a commission for each transaction that is processed. Commissions are higher if the Post Master is required to use his or her own funds if the branch runs out of cash (they are paid back the following day from a regional office). This is in stark contrast to an initiative launched by the Pakistan Post Office in partnership with Mobile Network Operator Mobilink. In Pakistan no incentives were provided to staff who therefore had no motivation to learn a seemingly complex system and the service languished at small scale having processed less than 100 transactions when we last met with them.

Another reason for the success is almost certainly the personal commitment, vision and drive of Mobasherur Rahman. You can read more about his efforts to digitize the Bangladesh Post Office in Universal Postal Union magazine.

- Chris Bold