A Study on the Macro Economic Antecedents and Trends of Mobile Banking Services in Bangladesh

Abstract

Safe and reliable money transaction through regular banking system is not available for most people of Bangladesh as only 13 % of the 160 million people have banks accounts. People with no bank account used to send money through the slow and unreliable postal money transfer systems and by middlemen. One dramatic change in the life style of Bangladeshi people in recent time is the use of mobile phone. With the availability of cheap mobile phone sets manufactured locally and low call rates offered by the mobile operators, about 70 % people of the country use mobile phones. With this backdrop the mobile banking started in 2012 by Dutch Bangla Bank, but the full fledge operation took another couple of years. Currently about 18 mobile banks are providing mobile banking services to the people who are mostly out of the traditional banking service. The role of banking service on the economy is well researched. Past research shows that services provided by banks trough mobilizing savings, providing capital for business, and facilitating transactions are essential for economic development of a country. Though past studies shows that the traditional banking has a positive impact on economies apart from few notable exceptions there, is dearth of studies on the effect of mobile banking on the economy of a country. Especially in Bangladesh which started its full fledge mobile banking in 2014, there is few notable study that investigated the effect of mobile banking on economy of the country. Using twenty five months data, from January 2014 to January 2016 this paper investigates the macro-economic antecedents and trends in mobile banking services in Bangladesh. This study finds that the number of clients, number mobile banking agents and amount of transactions are increasing gradually. The result of the study shows that mobile banking cash-in and cash-out transactions are highly cointegrated which indicates a long run equilibrium relationship between cash-in and cash-out transactions in Bangladesh. One of the important finding of the study is that though most mobile banking service is improving gradually, inward foreign remittance are not increasing during the study period and is volatile compared to other mobile banking services. Two factors were identified in the study as the antecedents of the mobile banking service i.e. growing economic need with the growth of the economy of the country and availability of mobile banking facility for mobile banking service. The contribution of the paper lies in the fact most people in Bangladesh is outside the traditional banking service and these people are now using banking service through mobile banking; however this area of research untapped yet. This expected that the finding of the study will bridge the gap in mobile banking literature and will help policy makers in formulating policy related to mobile banking.