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EVALUATION OF MOBILE BANKING OPERATION OF DUTCH BANGLA BANK LIMITED

Prepared By Md. Saydur Rahman Chowdhury ID: 3-09-16-002

Supervised By Prof. Dr. Md. Ataur Rahman

A Project Report Submitted to the Department of Management Studies

In partial fulfillment of the requirements for the award of the degree of MASTER OF BUSINESS ADMINISTRATION

UNIVERSITY OF DHAKA DHAKA 1000 September, 2012

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BONAFIDE CERTIFICATE

This is to certify that this project report titled Evaluation Of Mobile Banking Operation Of Dutch Bangla Bank Limited is the bona fide work of Md. Saydur Rahman Chowdhury who carried out the research under my supervision. It is certified further that to the best of my knowledge the work reported herein does not form part of any other project report or dissertation on the basis of which a degree or award was conferred on an earlier occasion on this or any other candidate.

Dr. Md. Ataur Rahman Professor Department of Management Studies University of Dhaka.

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LETTER OF TRANSMITTAL

Thursday, October 12, 2012 Dr. Md. Ataur Rahman Professor Department of Management Studies University of Dhaka. Subject: Submission of Project Report on Evaluation of Mobile Banking Operation of Dutch Bangla Bank Limited. Dear Sir, I would now like to forward herewith the papers prepared by me on the topic mentioned above. In this regard I am glad to mention here that your cooperation and guideline helped me immensely to solve the problems in preparing the papers. Now I hope you will find it in order.

Thanking you, Sincerely, Md. Saydur Rahman Chowdhury ID: 3-09-16-002

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ABSTRACT

The banking industry of Bangladesh has shown tremendous growth in volume and complexity over the recent years. Despite making significant improvements in all the areas relating to financial viability, profitability, innovation and competitiveness, there are concerns that banks have not been able to include vast segment of the population, especially the underprivileged sections and rural people into the field of basic banking services.

Dutch-Bangla Bank Limited (DBBL), a technology savvy commercial bank in Bangladesh is serving over 2.5 million people in Bangladesh. A couple of years ago, DBBL was facing a challenge, as it was unable to serve people in rural areas. There were 160 million people in Bangladesh at the time, of which, 87% didnt have a bank account and most were living in rural areas. But on the other hand, even the remote areas of Bangladesh are now under the coverage of mobile phone networks. This represented a huge untapped market for DBBL. Using the existing infrastructure of Mobile Network Operators (MNO) DBBL come up with an innovative solution termed as Mobile Banking.

Mobile banking (m-banking) involves the use of a mobile phone or another mobile device to undertake financial transactions linked to a clients account. Mbanking is one of the newest approaches to the provision of financial services, made possible by the widespread adoption of mobile phones even in low income people. With the help of mobile banking, people do not need to go to the banks; rather bank itself can easily reach at the doorsteps of the deprived section of the society efficiently and at affordable cost even at the remote areas.

It is evident that financial inclusion is a necessity that will lead to the development of the rural economy of Bangladesh. Using mobile banking solution, Dutch Bangla Bank Limited took another step forward in promoting financial inclusion in Bangladesh.

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ACKNOWLEDGEMENT

I express my sincere gratitude to my honorable supervisor Dr. Md. Ataur Rahman, Professor, Department of Management Studies, University of Dhaka, without whose untiring, persevering and unflinching help and guidance this project would not have seen the light of day. He extended his helping hand by providing guidance, offering valuable suggestions, encouragement for writing this report. I acknowledge his profound indebtedness and gratitude to him.

I would also like to give special thanks to Mr. Mir Mominul Haque, Head of Mobile Banking Division and Mr. Mohammed Mesbahul Alam, Deputy Head of Mobile Banking Division, Dutch Bangla Bank Limited for their extended cooperation in preparing this report on Dutch Bangla Bank Mobile Banking.

Lastly, I am grateful to Almighty Allah for His blessings throughout the preparation of this report.

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TABLE OF CONTENTS

CHAPTER 1: INTRODUCTION .............................................................................................. 1 1.1 Background Of The Study ........................................................................................................... 1 1.2 Statement Of The Study ............................................................................................................... 2 1.3 Objectives Of The Study............................................................................................................... 3 1.3.1 Broad Objective....................................................................................................................... 3 1.3.2 Specific Objectives ................................................................................................................. 3 CHAPTER 2: METHODOLOGY .............................................................................................. 4 2.1 Methods Of Data Collection And Data Collection Instrument Used ......................... 4 2.1.1 Sources Of Data ....................................................................................................................... 4 2.1.2 Sampling .................................................................................................................................... 4 2.2 Data Processing And Analysis................................................................................................... 5 2.2.1 Data Tabulation And Presentation ................................................................................. 5 2.2.2 Computer Software Used .................................................................................................... 5 CHAPTER 3: MOBILE BANKING OPERATION ................................................................. 6 3.1 Why Mobile Banking ..................................................................................................................... 6 3.2 Ways To Financial Inclusion - Mobile Banking ................................................................. 7 3.3 Benefits Of Mobile Banking........................................................................................................ 8 3.4 Mobile Banking Business Model .............................................................................................. 9 3.5 Mobile Banking Permission From Bangladesh Bank .................................................... 10 3.6 Market Development For Mobile Financial Services (MFS) ...................................... 12 3.7 Market Structure For MFS ........................................................................................................ 14 3.7.1 Market Structure Of MNOs ............................................................................................... 15 3.7.2 Partnership Status Between Banks And MNOs....................................................... 15 3.8 History Of Mobile Banking In Bangladesh......................................................................... 16 3.9 Upcoming Mobile Banking In Bangladesh ......................................................................... 17

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CHAPTER 4: MOBILE BANKING OF DBBL ..................................................................... 18 4.1 Background Of DBBL Mobile Banking................................................................................. 27 4.2 Inauguration Of DBBL Mobile Banking............................................................................... 28 4.3 DBBL Mobile Banking Model................................................................................................... 29 4.4 Present Status Of DBBL Mobile Banking ............................................................................ 31 4.5 Present Products & Services ................................................................................................... 34 4.6 Transaction Limits, Fees & Charges ..................................................................................... 40 4.7 Security Of DBBL Mobile Banking......................................................................................... 41 4.8 Sybase Mbanking 365 Solution Adopted By DBBL .................................................... 43 4.9 Income And Expenditure Of DBBL Mobile Banking ...................................................... 45 4.10 Transaction Report ................................................................................................................... 46 4.11 Growth Analysis ......................................................................................................................... 47 4.11.1 Growth Analysis In Terms Of Customers ................................................................ 47 4.11.2 Growth Analysis In Terms Of Deposit ...................................................................... 48 4.11.3 Growth Analysis In Terms Of Agent .......................................................................... 49 4.12 Customer Feedback .................................................................................................................. 49 CHAPTER 5: STUDY RESULTS AND FINDINGS .............................................................. 57 5.1 Challenges Identified .................................................................................................................. 57 5.2 Prospects.......................................................................................................................................... 58 CHAPTER 6: CONCLUSION AND RECOMMENDATION ................................................ 59 6.1 Recommendation ......................................................................................................................... 59 6.2 Conclusion ....................................................................................................................................... 60

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LIST OF TABLES

Table 3.1 MFS Permissions Granted by BB ................................................................................... 11 Table 3.2: Foreign remittance only permissions ........................................................................ 12 Table 3.3: Full MFS permissions ........................................................................................................ 13 Table 3.4: Market Structure of MNOs .............................................................................................. 15 Table 4.1: Upazilla Coverage ............................................................................................................... 31 Table 4.3: Upazilla Agents .................................................................................................................... 32 Table 4.4: Revenue Share ..................................................................................................................... 33 Table 4.5: Transaction Report ............................................................................................................ 46 Table 4.6: Customer Growth ............................................................................................................... 47 Table 4.7: Deposit Growth.................................................................................................................... 48 Table 4.8: Agent Growth ....................................................................................................................... 49

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LIST OF FIGURES

Figure 3.1: Bank-MNO Partnership .................................................................................................. 16 Figure 4.3: Agents coverage ................................................................................................................ 32 Figure 4.4: Revenue Share.................................................................................................................... 33 Figure 4.5: Customer Growth.............................................................................................................. 48 Figure 4.6: Deposit Growth .................................................................................................................. 48 Figure 4.7: Agent Growth...................................................................................................................... 49

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CHAPTER 1

INTRODUCTION

1.1 BACKGROUND OF THE STUDY Improving access to financial services, such as savings, deposits, insurance and remittances, is vital to reducing poverty. Savings can help poor people to invest in productive assets like livestock, a loan may help to expand business activities, and insurance can provide income for a family if a breadwinner becomes sick.

In many developing countries, however, 9 out of 10 people do not have a bank account or access to basic financial services. Poor people are often not considered viable customers by the formal financial sector as their transaction sizes are small, and many live in remote areas beyond the reach of banks branch networks. Informal banking services such as microfinance and village savings and loan associations remain limited in their reach.

Internet Banking helped give the customer's anytime access to their banks. Customer's could check out their account details, get their bank statements, perform transactions like transferring money to other accounts and pay their bills sitting in the comfort of their homes and offices. However the biggest limitation of Internet banking is the requirement of a PC with an Internet connection, not a big obstacle if we look at the US and the European countries, but definitely a big barrier if we consider our country.

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The banking industry of Bangladesh has shown tremendous growth in volume and complexity over the recent years. Despite making significant improvements in all the areas relating to financial viability, profitability, innovation and competitiveness, there are concerns that banks have not been able to include vast segment of the population, especially the underprivileged sections and rural people into the field of basic banking services.

1.2 STATEMENT OF THE STUDY A very few number of people in Bangladesh, i.e, only 30% of total population have bank accounts while the largest segment are deprived from the banking facility as most of the banks in our country are likely to focus on urban population and they have not yet been able to setup their branches in rural areas.

Though due to the Financial Inclusion encouraged by Bangladesh Bank, the number of account holders has increased to 30%, but in reality the number of financial transactions is not increased that much. After Bangladesh Bank created the opportunity to open bank accounts with 10 Taka, many people from remote areas opened accounts in the banks at urban/semi-urban areas, but later on they are actually not doing any transaction with the banks only because the banks are not located at their vicinity.

But on the other hand, even the remote areas of Bangladesh are now under the coverage of mobile phone networks. So, with the help of mobile banking, people do not need to go to the banks, rather bank itself can easily reach at the doorsteps of the deprived section of the society efficiently and at affordable cost even at the remote areas. With this goal in mind, Dutch Bangla Bank has started the Mobile Banking Banking for the Unbanked.

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1.3 OBJECTIVES OF THE STUDY

1.3.1 Broad Objective

The main objective of the study is to evaluate the Mobile Banking operation of Dutch Bangla Bank Limited in Bangladesh.

1.3.2 Specific Objectives

To assess the income and expenditure of Mobile Banking Operation of Dutch Bangla Bank Limited. To explore the reactions of customers. To identify the problems and challenges of mobile banking of DBBL. To identify the future prospects of mobile banking in Bangladesh. To provide suggestions for improving the mobile banking operation of DBBL.

1.4 LIMITATIONS OF THE STUDY The major limitations of the study are: Sufficient records, publications were not readily available. Lack of organized and up to date data was experienced. Banks keep some information restricted; this confidentiality of information was another barrier that hindered the study. Customer feedback survey was conducted in limited areas; it was not possible to cover the whole country under the survey. Customers are not free to interview long time.

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CHAPTER 2

METHODOLOGY

2.1 METHODS OF DATA COLLECTION AND DATA COLLECTION INSTRUMENT USED For the purpose of data collection two methods will be followed one is expert interview and the other is survey. To gather data from banks side, Mobile banking experts from Dutch Bangla Bank will be interviewed. On the other hand, a survey will be conducted to collect customer feedback at a rural location outside of Dhaka City. As a data collection instrument, questionnaire will be used for collecting customer feedback.

2.1.1 Sources of Data

Data will be collected from both primary and secondary sources. The primary data collection will be performed from two parties from the bank and from the customers. The concerned bank managers and executives will be consulted informally for collecting primary data. A set of questionnaire will be constructed for the customers to know their feedback about the performance of DBBL mobile banking operation as well as problem and future prospects of the same. Secondary data will be collected from publications by relevant authorities like DBBL, BTRC, BBS, Bangladesh Bank, etc. and also from internet.

2.1.2 Sampling

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For the purpose of expert interview, purposive sampling will be used, which is a non-probability sampling. Head of DBBL Mobile Banking division will be interviewed for collecting data as this will ensure the authenticity and credibility of the data collected. Also the Deputy Head of DBBL Mobile Banking division will be interviewed for this purpose. Head and Deputy Head of mobile banking division of DBBL will be considered for interview to collect information from the bank as they are the most resourceful, authentic and authoritative persons in this regard.

We will adopt another non-probability sampling, i.e. convenience sampling for the collection of customer feedback through survey questionnaire. The survey will be conducted both inside and outside of Dhaka City. Due to convenience, Manikdi area near Dhaka Cantonment and Patuakhali from outside of Dhaka will be selected. Customer will be interviewed randomly at DBBL agent points. A sample size of thirty will be used for this survey.

2.2 DATA PROCESSING AND ANALYSIS

2.2.1 Data Tabulation and Presentation

After collecting the data from Dutch Bangla Bank Limited, tables will be generated using those data. Based on those tables, trend analysis will be performed and data will be presented using graphs and charts as well.

2.2.2 Computer Software Used

Microsoft Word and Microsoft Excel will be used for the preparation of the report and Microsoft power point will be used for preparing the presentation.

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Internet browsing software like Mozilla Firefox will be used for surfing and collecting secondary data from internet.

CHAPTER 3

MOBILE BANKING OPERATION: A THEORITICAL ANALYSIS

Mobile banking (m-banking) involves the use of a mobile phone or another mobile device to undertake financial transactions linked to a clients account. Mbanking is one of the newest approaches to the provision of financial services, made possible by the widespread adoption of mobile phones even in low income people.

3.1 WHY MOBILE BANKING In Bangladesh, banking was traditionally branch-based. Customers needed to come to bank branches for banking transactions, specially for payments or withdrawals. Mass-scale deployment of ATMs by different banks facilitated banking services for customers by making them available at their nearby locations. However, due to special requirements such as regular cash feeding from a nearby branch the ATM booths could not be installed in the remote and rural areas of Bangladesh (as there are no bank branches in these areas. The setup of branches is not feasible in the rural areas of Bangladesh as the amount of deposits and loans & advances in the rural areas do not earn sufficient revenue for the branch to become feasible.

Moreover, establishing bank branches across rural Bangladesh was not always an option because of the costs and of regulatory constraints as the Central

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Bank only grants new branch opening licenses for a maximum of 15 branches in a year.

In addition, traditional banking is very costly for rural customers customers need to pay numerous charges in traditional banking such as half-yearly service charge, annual card charge, government charges and online charge (outstation transaction charge). Customers also need to maintain a minimum balance in their accounts which tends to be difficult for rural customers. Moreover, most of the rural people are not educated and thus cannot write cheques or sign them.

Due to the absence of the appropriate system to address all the above issues, the rural, underprivileged people of Bangladesh remained isolated from banking facilities and services.

This barrier for the un-banked has been bypassed by Mobile Banking solution through which the customer can use their mobile phone to authenticate a transaction by typing their secret PIN instead of having to write a cheque and signing it; if the combination of the PIN and the customers mobile phone number is correct, the transaction is passed. Mobile banking is not simply another delivery channel but represents a fundamental shift in the paradigm of consumer banking.

3.2 WAYS TO FINANCIAL INCLUSION - MOBILE BANKING It is evident that financial inclusion is a necessity that will lead to the development of the rural economy of Bangladesh. But how to bring rural marginal savers under the umbrella of the formal banking system remains a challenge. Efforts have been made by NGOs using microfinance as a tool of financial inclusion to meet the credit requirement of the people. But sufficient emphasis has not been given to

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bring the marginal savers under the purview of the formal banking system. Despite a large number of bank branches and microfinance institutions in our country a large segment of our population particularly rural, destitute people have scant access to banking services. High transaction costs significantly inhibit the commercial banks from the expansion of financial services to the poor especially those residing in rural and sparsely populated areas.

Recent advances in technology such as mobile telephones, point-of-sale devices, and low-cost automated teller machines (ATMs) offer great potential for overcoming this barrier to the provision of financial services to the poor.

When mobile banking technology is appropriately used, financial institutions no longer have to open numerous brick-and-mortar branches to provide and expand services. Moreover, mobile banking models can significantly reduce client and provider transaction costs compared to conventional banking models.

3.3 BENEFITS OF MOBILE BANKING The biggest advantage of mobile banking in a developing country like Bangladesh is that it brings a vast segment of un-banked and low income population under the umbrella of the formal banking system. 1. Real time on-line banking 2. Available anytime, anywhere throughout the country 3. It is convenient, affordable and secure 4. It is much more effective in developing savings habits 5. It will make access to banking and advanced payment transactions at affordable cost 6. It is much safer, speedy and safeguard against fraudulent transactions

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3.4 MOBILE BANKING BUSINESS MODEL Depending on the operation, responsibility and relationship with the customer, mainly two types of mobile financial services are followed worldwide: Bank-led model and Non-Bank-led model.

In a bank-led model each bank is responsible for its customers, known as KYC (Know Your Customer), and the bank is the custodian of each customers money and customer information. This model is the predominant and preferred model worldwide. In a non-bank-led model the KYC responsibility, the customers money and information lies with an organization that is not a commercial bank and as such, is not under the authority of a regulator (Central Bank). This model is used by some African countries.

3.4.1 Permissible Business Model in Bangladesh There was some debate in Bangladesh regarding the model which should be followed for mobile banking: bank-led or non-bank-led? Bangladesh Bank has concluded this debate for mobile banking in Bangladesh. Bangladesh Bank clearly states in its Guidelines on Mobile Financial Services (MFS) for the Banks that from legal and regulatory perspective, only the bank-led model will be allowed to operate.

Banks are experienced in ensuring proper KYC of the customer. Internal auditors and auditors from the central bank periodically check the compliance of KYC requirement. For hundreds of years, banks have been trusted as custodians of deposits. The central bank/regulator has many mechanisms and regulations to ensure that a

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bank will be able to pay a customers money back upon the customers request. Such mechanisms include maintaining proper liquidity, CAR (Capital Adequacy Ratio), CRR (Cash Reserve Requirements) and SLR (Statutory Liquidity Ratio) by the respective banks. These requirements of the central bank help to keep the health of a bank in good condition and protect the depositors interest. Maintaining secrecy of the customers information, nature of transactions and balance in the account, is a mandatory requirement of a bank. This is why no bank can afford to keep its customer database in shared software or a software system installed and maintained by a third party. For all these reasons, bank-led model is the permissible model for mobile banking operation in Bangladesh as well as in many other countries in the world. In mobile banking operation, Customer account which is termed as "Mobile Account" will rest with the bank and will be accessible through customers mobile device. Mobile Account will be a non-chequing limited purpose account.

3.5 MOBILE BANKING PERMISSION FROM BANGLADESH BANK In order to ensure the access of un-banked people by taking advantage of countrywide mobile network coverage, Bangladesh Bank has brought out operating guidelines on Mobile Financial Services (MFS) for adoption by the commercial banks of Bangladesh.

3.5.1 MFS Permissions Granted by BB In the year of 2010, Bangladesh Bank issued licenses to 14 commercial banks including Dutch-Bangla Bank to perform mobile banking activities in Bangladesh.

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Table 3.1 MFS Permissions Granted by BB Sl 1 2 3 4 5 6 7 8 9 10 11 12 13 14 International Remittance Only Eastern Bank Dhaka Bank AB Bank Southeast Bank Premier Bank NCCBL Standard Bank Citi N.A Jamuna Bank Full MFS Permission Trust Bank Dutch Bangla Bank BRAC Bank/bKash Mercantile Bank Bank Asia First Security Islami Bank Janata Bank Sonali Bank Prime Bank Bangladesh Commerce Bank UCBL One Bank Islami Bank IFIC Bank

3.5.2 Mobile Financial Services

Bangladesh Bank allows the following Mobile Financial Services (in broad categories) I. II. III. IV. Disbursement of inward foreign remittances, Cash in /out using mobile account through agents/Bank branches/ ATMs/Mobile Operators outlets. Person to Business Payments - e.g. a. utility bill payments, b. merchant payments Business to Person Payments e.g. salary disbursement, dividend and refund warrant payments, vendor payments, etc.

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V. VI. VII. VIII.

Government to Person Payments e.g. elderly allowances. Freedom-fighter allowances, subsidies, etc. Person to Government Payments e.g. tax, levy payments. Person to Person Payments (One registered mobile Account to another registered mobile account). Other payments like microfinance, overdrawn facility, insurance premium, DPS, etc.

3.6 MARKET DEVELOPMENT FOR MOBILE FINANCIAL SERVICES (MFS)

3.6.1 Market Development for Foreign remittance only permissions

As per the approval from Bangladesh Bank, eight (8) commercial banks are permitted to perform only foreign remittance operation under mobile banking. They establish partnership with different MNOs and use the existing infrastructure of MNOs to conduct this operation. Most of the banks have already launched their operation. Only NCCBL and Jamuna Bank have not yet started their operation. Table 3.2: Foreign remittance only permissions Bank Technology MNO Platform Partnership Eastern Bank Dhaka Bank AB Bank Southeas t Bank Premier Citycell Grameen Phone Grameen 11-Sep 182 0.01 10-Sep 11-Jun 116 200 0.04 Joint with Banglalink Robi Banglalink 10-Apr 594 1,786 11.47 10-Apr 293 1,386 Launch Date Registered Customers Agent Transacti ons (Crore Taka) 35.96 Banglalink Comviva

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Bank NCCBL Standard Bank Jamuna Bank TOTAL

Phone Grameen Phone Grameen Phone 12-Jan

887

3,670

47.48

As per the approval from Bangladesh Bank, 14 commercial banks are given permission to perform complete mobile banking operation. Out of them, 8 banks have already launched their operation. However, only two banks are performing mobile banking operation.

Table 3.3: Full MFS permissions Technolog y Platform Genweb2 Sybase 365 MNO Partnerships Teletalk Airtel Banglalin k Citycell Grameen Phone BRAC Bank/bKas h Fundamo (Visa) Banglalin k Robi Grameen Phone Mercantile SMG Grameen 12-Feb 1392 170 0 Jul-l1 778000 15,00 0 2488.55 Registere Launc h Date d Customer s 10-Aug 1104 11May 534570 329 Agent Transaction s (Crore Taka) 0

Bank

Trust Bank Dutch Bangla Bank

14774 776.03

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Bank Bank Asia First Security Islami Bank Sonali Bank Prime Bank Bangladesh iPay Commerce Bank Janata Bank UCBL One Bank Islami Bank IFIC Bank Transaction Solution Semicon (Pvt) Ltd Digital Technologie s SMG iPay Progoti Systems

Phone Not required 12Mar 12Mar 112 80 0.06

12Mar 12Mar

30,02 TOTAL 13,14,074 4 3,264.64

3.7 MARKET STRUCTURE FOR MFS The table given below shows the market structure of MNOs currently operating in Bangladesh:

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3.7.1 Market Structure of MNOs Table 3.4: Market Structure of MNOs MNO GrameenPhone Banglalink Robi Airtel Citycell Teletalk TOTAL Year Service Acquired Connections or Launched 1997 2004 1997 2011 1991 2005 (millions) 37.6 24.7 17.7 6.4 1.8 1.3 89.5 Average Revenue Per User (US$ per month) 2.61 1.86 2.28 N/A N/A N/A 2.3

3.7.2 Partnership status between Banks and MNOs Only DBBL and Brac Bank/bKash are performing mobile banking operation in Bangladesh. Each of them maintains partnership with different MNOs to increase the service coverage.

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Figure 3.1: Bank-MNO Partnership

3.8 HISTORY OF MOBILE BANKING IN BANGLADESH

Bangladesh is a country of 160 million people, only 14% of which are banked. Mobile penetration stands at 55% while mobile coverage is at 90% of the population, sowing the seeds for great potential.

Dutch-Bangla Bank Limited (DBBL) has for the first time introduced its mobile banking service on March 31, 2011 expanding the banking service from cities to remote areas. Bangladesh Bank Governor Dr. Atiur Rahman inaugurated the service by depositing Tk 2,000 and withdrawing Tk 1,500 through Banglalink and Citycell mobile networks in Motijheel area. Bangladesh Bank has already allowed 10 banks to initiate mobile banking. Of them DBBL kicked off first." Mobile banking is an alternative to the traditional banking through which banking service can be reached at the doorsteps of the deprived section of the society, the central bank governor said at an inaugural press briefing at Hotel Purbani. through mobile banking various banking services including depositing and withdrawing money, payment of utility bills and reaching remittance to the

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recipient would be possible.

Bangladesh's another mobile financial service provider, bKash Limited, a BRAC Bank subsidiary, launched its operation today, July 21, 2011. Bangladesh Bank Governor Dr. Atiur Rahman inaugurated the service in Dhaka. The Governor marked the occasion as a milestone event not only for the advancement of Bangladesh but also to celebrate a true partnership between banking and telecom industries. bKash is designed to provide financial services via mobile phones to both the un-banked and the banked people of Bangladesh. The overall bKash value proposition is simple: a safe, convenient place to store money; a safe, easy way to make payments and money transfers. The bKash mobile wallet, a VISA technology platform which is fully encrypted to ensure most secure transactions, will be the customer account into which money can be deposited and out of which money can be withdrawn or used for various services. Customers will be able to receive electronic money into their bKash accounts through salary, loan, domestic remittance, and other disbursements and eventually will cash out the electronic money at any of the hundreds of cash out agents which bKash assigns.

3.9 UPCOMING MOBILE BANKING IN BANGLADESH Mercantile Bank Limited by next six months will introduce branchless mobile banking in 50 Union Information Service centres as pilot programme to provide banking facilities to the grassroots level in the country. The remaining UISCs will be brought under the programme under phases. All banking facilities including opening of bank account, cash withdrawal and depositing of money and receiving remittances wil be available through mobile banking.

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CHAPTER 4

PROFILE OF DBBL

4.1 HISTORY OF DBBL Dutch-Bangla Bank Limited is a scheduled commercial bank. The Bank was established under the Bank Companies Act 1991 and incorporated as a public limited company under the Companies Act 1994 in Bangladesh with the primary objective to carry on all kinds of banking business in Bangladesh. The Bank is listed with Dhaka Stock Exchange Limited and Chittagong Stock Exchange Limited. DBBLa Bangladesh European private joint venture scheduled commercial bank commenced formal operation from June 3, 1996. The head office of the Bank is located at Senakalyan Bhaban (4th floor), 195, Motijheel C/A, Dhaka, Bangladesh. The Bank commenced its banking business with one branch on 4 July 1996. Dutch Bangla Bank Limited (DBBL) a public company limited by shares, incorporated in Bangladesh in the year 1995 under companies Act 1994. With 30% equity holding, the Netherlands Development Finance company (FMO) of the Netherlands is the international cosponsor of the Bank. Out of the rest 70%, 60% equity has been provided by prominent local entrepreneurs and industrialists & the rest 10% shares is the public issue. During the initial operating year (1996-1997) the bank received skill augmentation technical assistance from ABN Amro Bank of the Netherlands. DBBLs focus is to provide one counter service to clients covering: Commercial Banking (Deposit Accounts), Consumer Banking (Retail Baking) Traveler Cheques- Foreign & Inland Remittances, Financial Services, Corporate Banking, Asset & liability management, Liquidity & capital Resources Management,

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Information technology, Human Resources. DBBL Internet banking enables customer to access his/her personal or business accounts anytime anywhere from home, office or when traveling. Internet Banking gives customer the freedom to choose his/her own banking hours. It can save time, money and effort. It's fast, easy, secure and best of all. DBBL, since its inception was active in various social activities, which increased manifold over the period of time and its growth. It is one of the fast growing leading online banks in private sector. The emergence of Dutch-Bangla Bank Ltd. in the private sector is an important event in the banking area of Bangladesh. The Netherlands Development Finance Company (FMO) of the Netherlands is the international sponsor of the Bank. The FMO is the Dutch development bank of the Netherlands specialized in the financing of private enterprises in Asia, Africa, Latin America and Eastern Europe. Dutch-Bangla Bank Ltd. came into existence with joint venture as a public limited company incorporated in Bangladesh on June 26, 1995 with the primary objectives to carry on all kinds of banking business in and outside of Bangladesh. DBBL has started its business with foreign bank. DBBL commenced its business as scheduled bank with effect from July 04, 1995 with one branch-Motijheel Branch, Dhaka, with a motto to grow as a leader in the banking arena of Bangladesh through better counselling and effect service to clients and thus to revitalize the economy of the country. All the branches are currently providing truly On-Line banking facility. DBBL resumed its operational activities initially with an authorized capital of Tk.400 million and paid up capital of Tk.202.14 million.

4.2 OBJECTIVE OF DBBL Dutch-Bangla Bank engineers enterprise and creativity in business and industry with a commitment to social responsibility. "Profits alone" do not hold a central focus in the Bank's operation; because "man does not live by bread and butter alone". Dutch-Bangla Bank dreams of better Bangladesh, where arts and letters,

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sports and athletics, music and entertainment, science and education, health and hygiene, clean and pollution free environment and above all a society based on morality and ethics make all our lives worth living. DBBL's essence and ethos rest on a cosmos of creativity and the marvel-magic of a charmed life that abounds with spirit of life and adventures that contributes towards human development. Dutch-Bangla Bank believes in its uncompromising commitment to fulfill its customer needs and satisfaction and to become their first choice in banking. Taking cue from its pool esteemed clientele, Dutch-Bangla Bank intends to pave the way for a new era in banking that upholds and epitomizes its vaunted marquees "Your Trusted Partner".

4.3 FUCTIONS OF DBBL Functions of DBBL fall under following categories: Retail Banking Remittance and collection Import and export handling and financing Corporate Banking Project Finance Investment Banking Consumer credit Agriculture Loan Real time any branch banking 24 Hours Banking through ATM o DBBL-NEXUS ATM & Debit card o DBBL-Maestro/Cirrus ATM & Debit card o DBBL Credit card Internet Banking SMS Banking On line Banking through all Branches

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4.4 ORGANOGRAM OF DBBL

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4.5 MANPOWER OF DBBL

A couple of years ago, DBBL was facing a challenge, as it was unable to serve people

4.6 PRESENT ACTIVITIES OF DBBL At present DBBL offers various products and services:

4.6.1 Deposits

Savings Deposit Account Current Deposit Account Short Term Deposit Account Resident Foreign Currency Deposit Foreign Currency Deposit Convertible Taka Account Non-Convertible Taka Account Exporter's FC Deposit(FBPAR) Current Deposit Account-Bank Short Term Deposit Account-Bank

4.6.2 Loan & Advances

Loan against Trust Receipt Transport Loan Consumer Credit Scheme Real Estate Loan (Res. & Comm.) Loan Against Accepted Bill

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Industrial Term Loan Agricultural Term Loan Lease Finance Other Term Loan FMO Local currency Loan for SME FMO Foreign currency Loan Cash Credit (Hypothecation) Small Shop Financing Scheme

4.6.3 ATM Services

We can find DBBL ATMs beside our home, in our office premise, nearby market, university, college & school premises, Airport, Railway stations etc., throughout the country. Using any of the DBBL ATM pools anywhere in the country, you can perform the following: Account balance enquiry Cash withdrawal 24 hours a day, 7 days a week, 365 days a year Cash deposit to a certain number of ATMs any time Mini statement printing PIN (Personal Identification Number) change

4.6.4 Treasury

DBBL is well equipped for treasury operation through subscribing Reuters's terminal and operating in SWIFT network. It is also well equipped with competent human resources for efficient dealing. DBBLs treasury quotes competitive exchange rate for major currencies: Spot Sale/Purchase Forward Sale/Purchase Money market Inter bank & Corporate

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SWAPS

4.6.5 Account Service DBBL provides all the accounts services as prescribed by the guidelines of Central Bank (Bangladesh Bank). DBBL offers competitive interest rate and provides premium quality services for the accounts. Account services are: Foreign Currency Account Non-Resident Foreign Currency Deposit Account (NFCD) Resident Foreign Currency Deposit Account (RFCD) Convertible and Non-Convertible Taka Account

4.6.6 Foreign Trade DBBL extends finance to the importers in the form of: Opening of L/C (Foreign/Local) Credit against Trust Receipt for retirement of import bills. Short term & medium term loans for installation of imported Import Finance Export Finance

4.6.7 Foreign Remittance DBBL provides premium quality service for repatriation and collection of remittance with the help of its first class correspondents and trained personnel. By introducing on-line banking service and becoming a SWIFT Alliance Access Member, which enable its branches to send and receive payment instruction directly, which helps provide premium services. Remittance services provided by DBBL are: Inward Remittance: Draft, TT Outward Remittance: FDD, TT, TC and Cash (FC)

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4.6.8 DBBL Internet Banking DBBL Internet banking enables customer to access his/her personal or business accounts anytime anywhere from home, office or when traveling. Internet Banking gives customer the freedom to choose his/her own banking hours. It can save time, money and effort. It's fast, easy, secure and best of all.

4.6.9 DBBL Mobile Banking DBBL launched its mobile money service on 31 May 2011 in partnership with Citycell and Banglalink, the number 4 and number 2 MNOs in the country, respectively. The service which is powered by Sybase 365, a division of SAP, has 520,369 un-banked active customers (as on 30 September, 2012).

4.8 SWOT ANALYSIS a) Strength Largest banking service provider in the commercial bank and operate near about 1000 corporate client. Qualified, hard working & dedicated human resources Gets advantage for ATM card Strong ATM network as well as concentrate on social contribution Well developed and implemented CSR b) Weaknesses

Low deposit rate and minimum balances are too high. Non functioning ATM machines, delay for providing cards. Poor coordination & communication between Head offices and branches Idle money problem with competitor. Establishing strong social network. Escalating debt. c) Opportunities

If reducing its current fees & charges and positioning attractively, so DBBL can attract more corporate client

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By offering more attractive interest rates, and lowering the minimum balances eligible for interest, the bank can attract a lot of the old customers concentrate more social sectors. Have a strong backbone. d) Threats Bangladesh Bank obligation. Strong competition with other companies.

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CHAPTER 5

MOBILE BANKING OF DBBL

4.1 BACKGROUND OF DBBL MOBILE BANKING A couple of years ago, DBBL was facing a challenge, as it was unable to serve people in rural areas. There were 160 million people in Bangladesh at that time, of which, 87% didnt have a bank account and most were living in rural areas. This represented a huge untapped market for DBBL. However, establishing bank branches across rural Bangladesh was not an option because of the costs and of regulatory constraints as the Central Bank only grants new branch opening licenses for a maximum of 15 branches in a year. DBBL had to come up with an innovative solution.

Its in Kenya that Mr. Sayem Ahmed, Chairman of the Executive Committee of the Board of DBBL, and Mr. Abul Kashem Md. Shirin found the solution. Twenty months ago, they embarked on a trip to East Africa to learn from the worlds most famous mobile money service, M-PESA. When they came back to Bangladesh, Mr. Shirin presented the idea of a mobile money service for the unbanked to the board along with a compelling business case.

Following the Central Banks Guidelines on Mobile Financial Services (MFS) for the Banks (of 22 September 2011, as amended on 20 December 2011), it was clear to both Bangladeshi banks and MNOs that mobile money would only be through partnership models led by banks. DBBL launched its mobile money service on 31 May 2011 in partnership with Citycell and Banglalink, the number 4 and number 2 MNOs in the country, respectively. The service which is powered by

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Sybase 365, a division of SAP, has 520,369 un-banked active customers (as on 30 September, 2012).

4.2 INAUGURATION OF DBBL MOBILE BANKING March 31, 2011 was a historic day for the banking sector of Bangladesh as DBBL inaugurated Bangladeshs first mobile banking. The inauguration was done at the retail locations of Banglalink and Citycell. Present at the inauguration were the Honorable Governor of Bangladesh Bank and chief guest Dr. Atiur Rahman, Chairman of the Executive Committee of the Board of Directors of DBBL Mr. Sayem Ahmed, CEO of Banglalink Mr. Ahmed Abu Doma, COO of Citycell Mr. David Lee, Managing Director of DBBL Mr. K.S. Tabrez, Deputy Managing Director of DBBL Mr. Abul Kashem Md. Shirin and other high Officials from both the organizations. After receiving approval from Bangladesh Bank, Dutch-Bangla Bank managed to launch mobile banking in a very short time span and became the foremost mobile banking service provider in Bangladesh. Commercial Launching DBBL Mobile Banking began commercial operation on May 15, 2011. The pilot project made mobile banking available in 34 upazillas of 6 Districts and in Dhaka City. From May 15, 2011 customers were able to open Mobile Accounts and carry out transactions such as Cash-in (deposit) and cash-out (withdraw) at all the designated agent points of DBBL and at DBBL branches. Initially the mobile banking operation was delivered using the

communication and agent network of Citycell and Banglalink. The service was later extended through the use of the communication and agent network of airtel. The UISCs (Union Information and Service Centers) were also included as DBBL agents to deliver mobile banking services to the un-banked. Dutch Bangla Bank Mobile Banking is Bangladeshs first initiative to support financial inclusion.

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Until the launch of DBBLs Mobile Banking system on May 31, 2011, there were no means through which to deliver banking services to the rural, destitute, unbanked people of Bangladesh. Initially a total of 450 new employees joined the Mobile Banking Division of DBBL and were posted in different parts of Bangladesh. 151 small offices in the rural areas of Bangladesh were leased and employees were posted in these offices. In each of these offices, a large number of mobile banking agents were nominated who, on behalf of DBBL, pay cash to the customers and receive deposits from them. These agents are normally small business owners (e.g. small shop owners or retailers).

4.3 DBBL MOBILE BANKING MODEL Dutch-Bangla Bank Limited (DBBL), a technology savvy commercial bank in Bangladesh, started Mobile Banking on 31 March, 2011. DBBL has followed a unique model for deployment of the Mobile Banking in Bangladesh. DBBL model has the following characteristics: Bank-led model DBBL Mobile Banking is a Bank-led model to fulfill the basic banking needs utilizing mobile phones in Bangladesh where only 24% of the adult population has bank accounts, but 60% are using mobile phones. This is contrary to the Mobile Banking in developed countries where almost 100% of the adult people have bank account, and as such there is no need for discharging basic banking activities using mobile phones, rather there is a requirement for the banks to discharge conventional banking services over the existing bank accounts more conveniently using mobile phones. Vision The vision of the DBBL Mobile Banking is to promote Banking to the unbanked (unlike other models in developing countries which promote P2P or Send Money), and to develop savings habit among the un-banked. Accordingly DBBL Mobile Banking started with and providing highest importance to the registration with proper KYC, Cash-in and Cash-out activities. Other activities like P2P,

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disbursement of foreign remittance, salary/wages, governments/other allowances, air-time top-up, buying goods and services etc are considered as the by-product of the basic banking services. An account, not a wallet DBBL Mobile Banking considers the deposit of the customer as balance in his mobile account like balance in the savings or current accounts, not as electronic money or wallet. Four Parties involved DBBL Mobile Banking has involved four parties Bank, Mobile Network Operators (MNO), Agents and Customers with a commission model to suit each of the parties. The commission charged to the customers is acceptable to them (customers), and at the same time it is motivational for the Bank, MNO and agents to run their respective business. Highest priority is given to the benefits of customers and agents. Four Cash movement tiers Customers can cash-in/cash-out at agents, agents at super agents and the super agents at bank branches. Thus all the cash is ultimately deposited at a bank branch. To make the transactions convenient, provision has been kept for the customers and agents to perform the transaction directly at bank branches/ATMs. Four Geographical tiers To have better and close supervision on the customers, agents and super agents, develop the mobile banking market, quick and localized data entry during customer registration, and the dispute management, the country has been divided into four tiers territory, upozila, district and division. Meantime small offices have been setup in the two middle tiers and at least 3 officers have been recruited for each of the offices from the respective localities.

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4.4 PRESENT STATUS OF DBBL MOBILE BANKING

4.4.1 Coverage

While mobile banking activities will be carried out by the agents, the presence of DBBL offices and officers at Upazilla level will give more confidence to the customer. As the bank is solely responsible for verification of KYC (Know Your Customer) for its customer, the officials are required at Upazila level to verify the KYC of the customers. The officers are also required to supervise the agents for dispute management, market development and customers data entry. In 2011, DBBL established 151 offices in different upazillas of 24 districts. These offices are fully equipped with computers, scanners, printers and other IT equipment. As on September 2012, DBBL has opened Mobile Banking Offices in 368 Upazillas out of 486 Upazillas of Bangladesh. The setup of DBBL Mobile Banking Offices in Upazila level creates jobs for the local people and opportunities for landlords to build and rent their buildings to the banks. Table 4.1: Upazilla Coverage Upazilla Coverage Covered Uncovered Total 368 118 486

Figure 4.1: Upazilla outage

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4.4.2 Agents After the launch of its mobile money service last year, a total of 15,029 agents have been appointed as of September 2012 to perform cash-ins and cash-outs for customers. These agents are normally small shop owners or retailers of various MNOs, third party agents of DBBL, agents in Union Information Service Center (UISC) or some Courier Services. Table 4.3: Upazilla Agents Division Dhaka Cittagong Sylhel Barishal Rangpur Khulna Rahshahi Total Agents 5856 2566 901 900 1671 1479 1656 15029

Figure 4.3: Agents coverage

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4.4.3 MNO Partners DBBL has now partnerships with Citycell, Banglalink, GrameenPhone and Airtel. As per the partnership agreement, MNOs provide USSD connectivity between the DBBL server system and agents/customers who are using their mobile phones. They also engage their retailers to work as DBBL agent points.

4.4.4 Revenue Sharing The revenue earned from the transaction fees paid by customers, is shared among three parties, the agent, the MNO and the Bank. Table 4.4: Revenue Share Party Agent MNO Bank Revenue Share (%) 50 25 25

Figure 4.4: Revenue Share

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4.5 PRESENT PRODUCTS & SERVICES

DBBL Mobile Banking has launched the following Product & Services for its customers during the year 2011: 1. Customer registration Customers can open a DBBL Mobile Account with an initial deposit of Taka 100/- One Hundred) only from any agent point of DBBL. Registration Process Customer can register at any authorized agent point of DBBL who can display 'DBBL Agent Certificate' and 'DBBL Mobile Banking Banner'.

Customer fills up the KYC Form and submit to agent along with his/her photograph & National ID (NID) Agent goes to Customer Registration Menu from his/her mobile and insert customer's mobile number Customer receives an IVR call or USSD Flash menu and in reply, s/he gives a 4-digit PIN number at his/her choice A Mobile Account is created in DBBL system which is his/her mobile number + one check digit Customer receives a confirmation SMS which contains his/her Mobile Account Number

2. Cash-in (Cash Deposit) Customers can Cash-in (deposit money) at any authorized agent of DBBL or any DBBL Branch. Cash-in process Customer hands over cash to the Agent

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Agent initiates the transaction from his/her mobile Agent issues a receipt to the customer System sends an SMS to the customer's mobile For security reason, customer needs to check the sending number of SMS and the amount. SMS will be sent from 16216 or 01190016216. If the amount of money is not correct or the sms send from different number, then it wouldn't be considered as correct

3. Cash-Out (Cash withdrawal) Customers can Cash-out (withdraw money) from any authorized agent point of DBBL or DBBL Branch. Cash-out from Agent Point Customer asks the Agent for withdrawal of an amount from his/her Mobile Account Agent initiates the transaction from his/her mobile DBBL system sends USSD Flash menu to the customer's mobile (or IVR Call): "Welcome to Dutch Bangla Bank. You are going to withdraw Tk.XXX from your account. If you want to continue enter your 4 digit pin or if not cancel the call. Customer enters his/her PIN System sends an SMS to the customer's mobile Agent hands over money to the customer

Cash-out from ATM Customer press the Mobile Banking button at ATM Customer enters his/her 12 digit account number at ATM Customer enters his/her PIN number & amount at ATM. Customer receive a USSD (For Robi and Airtel number) Flash message or IVR (For Banglalink, GP, Citycell, Teletalk) call in his/her mobile from DBBL system where customer will be requested to enter his/her PIN number.

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Customer enters his/her PIN number through his/her mobile ATM will dispense the money to the customer

4. Foreign Remittance Expatriate Bangladeshis can send foreign remittance from any nominated Exchange House of Dutch-Bangla Bank and other Bangladeshi banks located all over the world. The remitted money will be transferred to the beneficiarys Mobile account within 24-72 hours (24 hours in the case of DBBL Exchange House). The account number in this case is the mobile number + check digit. Sending foreign remittance Remitter can send remittance from any nominated Exchange Houses of Dutch-Bangla Bank and other Bangladeshi Banks located all over the world. The remitted money will be transferred to the beneficiary's Mobile Account within 24-72 hours (in case of DBBL Exchange House - 24 hours) and the beneficiary will immediately receive an SMS about the deposit. To avail this service, just provide the following information at the exchange houses: Amount Beneficiary's Name, Bank Name (Dutch-Bangla Bank ) and Mobile Account number

5. Salary/Allowance Disbursement It is the process by which Corporate Office can disburse the salary of their employees and Government can disburse different allowances like elderly allowance, freedom fighter allowance etc. to the people within a few moment in a hassle free way. Salary/Allowance Disbursement Process

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Corporate Office/Government will send the list of mobile account numbers (including check digit) and monthly salary/allowance to DBBL DBBL will credit all the individual accounts by debiting corporate account centrally by a batch process system The employee/beneficiary wil get an SMS regarding the transaction The employee/beneficiary can go to any agent or DBBL ATM or DBBL Branch to withdraw money The employee/beneficiary will receive an sms confirmation

6. Balance Inquiry Customers can check their mobile account balance using the Balance Inquiry option of DBBLs mobile banking system. Balance Inquiry Process Citycell customer will send an SMS to 16216 by writing M or Blank SMS, Banglalink customer will dial *322# and Airtel customer will dial *322# or *400#. Customer will get a USSD Flash Menu on his/her mobile Customer will press "Reply" button and insert the corresponding serial number of "Balance" as mentioned in the Menu. Then s/he will press "Send" button Customer will get a call from the system and he will type the PIN number according to instruction DBBL System sends balance amount to the customer's mobile. The customer of other mobile operators can know their "Balance" by dialing 16216 from their mobile. 7. Statement Inquiry Statement inquiries can be made using the Statement Inquiry option of DBBLs mobile banking system.

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8. Air-time Top-up The mobile account holder will be able to recharge/top-up their own or other mobile phone balance using their own mobile account. This will help the customer to get their mobile balance in a hassle free way on a 24/7 basis. Mobile Top-up Process Customer initiates Mobile Top-up from his/her mobile Customer will select "Self" or "Other" sub-Menu from "Top-up" Menu Customer will provide amount and PIN in case of "Self" Top-up; OR mobile number, amount and PIN in case of "Other" Top-up Mobile balance will be Top-up and customer will receive a confirmation SMS 9. P2P Fund transfer The money transfer from one registered mobile account to another registered mobile account is called P2P transfer. This is a very useful feature of the mobile banking through which customers will be able to remit their funds to another registered account holder. As per the Bangladesh Bank guidelines a mobile account holder will be able to transfer a maximum of Tk.10,000/- per day and a maximum of Tk.25,000/- per month. Sending money to another Mobile Account Customer initiates the transaction from his mobile. Customer select the send money option from the main menu and insert the receivers Mobile account number and amount. Customer enters his/her PIN Money will be transferred and both sender & receiver will get SMS notification.

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10. Withdrawal from ATM Dutch-Bangla Bank has 1,940 ATMs all over Bangladesh. These ATMs provide 24-hour banking services to DBBL customers. In the year 2012 DBBL will open the ATMs to mobile accounts so that mobile account holders will be able to withdraw money from their mobile account without using a card. Withdrawal of remitted money from the Mobile Account Now a day, a beneficiary of remote area has to come to the district town to withdraw money from Banks where cost and money involvement is high. To avoid this difficulty, a beneficiary can easily withdraw money from the nearest DBBL agent points. DBBL has enormous agent points all over the country like: Retailer of Citycell, Banglalink and Airtel Own agent of DBBL (3rd Party Agent) Union Information Service centre (UISC) located at each of the Unions of Bangladesh. One can now withdraw remitted money from any of these agent points. Apart from above, one can withdraw remitted money from any branch of DBBL or ATM. 11. Merchant Payment A mobile account holder will be able to make payments to a merchant (registered) from their mobile account for the purchase of any goods or services. 12. Utility Payment The DBBL Mobile Account holder will be able to pay utility bills from their own mobiles for services of Utility services providers who have payment arrangements with DBBL.

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4.6 TRANSACTION LIMITS, FEES & CHARGES

4.6.1 Transaction limit (At Agent Point)

Current limit for the customers are as under: Cash-in frequency per day = 5 times Cash-out frequency per day = 5 times Per transaction limit (Cash-in /cash-out) =Tk. 20,000/Daily transaction limit (Cash-in /cash-out) =Tk. 50,000/Cash-in frequency per month = 20 times Cash-out frequency per month = 20 times P2P transfer per day = Tk. 10,000/P2P transfer per month = Tk. 25,000/-

4.6.2 Fees & Service Charges Registration Fee : Free Cash-in at DBBL Branch : Free Cash-out at DBBL Branch : Free Remittance Disbursement (To mobile account) : Free Salary Disbursement : Free P2P Fund Transfer : Free Mobile Top-up : Free Cash-in Charges : 1% of the transaction amount or Tk. 5/-, whichever is higher Cash-out Charges : 2% of the transaction amount or Tk. 10/-, whichever is higher

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4.7 SECURITY OF DBBL MOBILE BANKING

4.7.1 Check Digit as a security tool

Mobile number is public and known to many people. In order to eliminate error as well as to enhance security and safety of the transaction, one extra digit is used along with the mobile number to generate the account number for the customer. This digit is known as check digit. This digit is generated based on the mobile number using mod calculation method and it can be 0-9. DBBL mobile account = 01234567891 Plus (Check Digit) Without knowing the check digit, no one will be able to deposit money at his account, thus it helps to keep the mobile account confidential. On the other hand, a check digit eliminates typing error, thus protects sending or depositing money to a wrong account.

4.7.2 Requirement of PIN

PIN is required to be inputted during cash withdrawal from an Agent Point of DBBL or DBBL Branch or DBBL ATM. PIN ensures the security of money and protect fraudulent transactions.

PIN is the key for transaction of Mobile Banking. Only correct match of PIN & Mobile Number can access the Mobile Account. PIN is needed to verify the A/C owner by the system. If a PIN is disclosed, respective account is at risk, therefore, PIN should be handled very carefully.

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PIN can be changed using the following procedures: Citycell customer will send an SMS to 16216 by writing M or Blank SMS, Banglalink customer will dial *322# and Airtel customer will dial *322# or *400#. Customer will get a USSD Flash Menu on his/her mobile Customer will press "Reply" button and insert the corresponding serial number of "Change PIN" as mentioned in the Menu. Then s/he will press "Send" button Customer will get a call from the system and according to instruction, at first s/he will type the existing PIN, then new PIN The PIN will be changed The customer of other mobile operators can change their PIN by dialing 16216

4.7.3 Security issue of DBBL mobile banking

Security is the main issue on the part of the customer for making banking transactions with a commercial bank. DBBL Mobile Banking is highly secured as it uses either USSD or SMS+IVR as its communication channel. In case of USSD, both the instructions and PIN are communicated using USSD while in case of SMS+IVR, instructions are sent via SMS and PIN via IVR (voice channel), both the USSD and IVR are secured for transmission of PIN. Customer's money is safe as none can withdraw his/her money without taking possession of Mobile set, PIN and Check digit together. None will be able to deposit unwanted money into a Mobile Account without knowing the check digit (although the mobile number is publicly known).

4.7.4 Risk Mitigation Banks shall be responsible for mitigation of all kinds of risks such as liquidity risk, operational risks, fraud risks including money laundering and terrorist financing risks. Technical risks should be covered by the solution provider.

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4.8 Sybase mBanking 365 SOLUTION ADOPTED BY DBBL With the help of Sybase mBanking 365 mobile-platform technologies, DutchBangla Bank has opened a large and previously-untapped consumer market segment in Bangladesh to which the bank can now provide banking services via mobile phones.

4.8.1 Key Features

Enables consumers to conduct banking transactions securely via mobile devices Provides easy, user-friendly environment that accelerates technology adoption rates Offers a mobile-banking platform easy to customize for specific bank requirements Integrates efficiently with third party partner systems

4.8.2 Sybase Mobile Technology Offers Superior Banking Capabilities

In searching for a mobile device platform on which to build its banking applications, DBBL considered solutions from different developers but found that Sybase mBanking 365 met the requirements most cost-effectively. Sybase has vast experience in mobile technology and has proven itself by delivering reliable solutions on-time along with expert support, Mr. Shirin says. We also found that Sybase mBanking 365 best met our technical requirements with enough flexibility to allow us to customize the platform according to the needs of our frontend application. Sybase mBanking 365 enables financial institutions to introduce mobile banking services that allow customers to have the flexibility and convenience of managing finances over their mobile phones. Customers can make micropayments, check account balances, transfer money, pay bills and execute other financial transactions. Financial institutions can easily integrate the mBanking

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platform with existing banking platforms and their core banking systems so that they can offer innovative mobile commerce services.

4.8.3 Banking Services Now Available For the First Time for Many Consumers

With the Sybase mBanking 365 platform, DBBL can easily register selected banking agents that are authorized to work with customers. The platform also makes it easy for customers to open accounts at agent points and check account balances. Customers can then make deposits and withdrawals at any agent point with their mobile phone serving as the device to authorize the transactions. Although customers are not aware that the Sybase mBanking 365 platform powers the DBBL mobile application, the technology enables them to conduct many banking transactions. For example, customers can arrange to have employers or the Bangladesh government automatically deposit payments to their mobile wallets, and they can transfer money to another customers mobile wallet. Customers can also make merchant payments and pay utility bills. The account remains secure by requiring PIN access, and the PIN can be changed right from the mobile phone. The Sybase mBanking 365 customization has allowed DBBL to create a mobile banking solution that meets the needs of Bangladeshi consumers that do not live near bank locations. By designing and deploying the solution quickly, Sybase also enabled DBBL to become the first bank in Bangladesh to offer a mobile banking solution.

Existing and new customers have adopted the new technology quickly, and the agent network DBBL partners with is enthusiastically marketing the service in their respective localities. A large segment of people that lived too far away from banks to open accounts can now conduct all types of banking transactions, Mr. Shirin says. Previously, we could not reach this untapped market, but Sybase made it possible by creating an environment that lets us connect to anyone with a mobile phone. The new mobile banking solution has also prompted the need for DBBL to recruit a large number of new employees to provide services for the expanded customer base, which is growing rapidly. In addition, the solution is a new source of revenue for the mobile-phone network operators and banking agents that DBBL

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partners with. With consumers linking to DBBL for banking services via their mobile operator, they are less likely to switch to another operator.

4.9 INCOME AND EXPENDITURE OF DBBL MOBILE BANKING

DBBL mobile banking involves high initial investment. Although they are using the existing infrastructure of Mobile Network Operator (MNO), they have to maintain offices throughout the country to monitor the operation of the agents and thereby protecting the interest of the customers. Currently, DBBL is operating their offices in 368 upazillas in Bangladesh. In each office, three officials are recruited and they follow up the activities of the agents in the respective upazilla. Customers are requested to meet them if they face any problem with the agents in transacting money. Moreover, DBBL also maintains office in every district of the country to monitor and control the operation of the upazilla offices. This incurs huge operating cost each month.

According to DBBL mobile banking Head Mir Mominul Haque, mobile banking unit incurs monthly expense of around 2.5 crore BDT. On the other hand, till now profit seems very low. Monthly revenue is only 40 Lacs. It will take long time to reach the breakeven.

As per the information collected from DBBL mobile banking head, DBBL mobile banking will cross breakeven and earn profit at the end of 2013. The calculation is as follows: Total Deposit as on September2012 = 34, 28, 08, 000 BDT No. of active Customers as on September2012 = 5, 20,369 Deposit per customer = 658 BDT No. of active Customers as on June 2012 = 2, 88, 571

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Growth rate (per quarter) = (5, 20, 369 - 288,571)/ 288,571 * 100 = 80.4 % At this growth rate, number of active customer will be 54, 62, 625 at the end of September 2013 and total Deposit will be 3,59,44,09,224 BDT.

Considering yearly 12% interest spread on this amount, the revenue will be 43, 13, 29, 106 BDT, i.e. monthly 3, 69, 44, 092 BDT.

According to DBBL mobile banking Head Mir Mominul Haque, DBBL will be able to setup offices in rest of the upazillas within September, 2013. At that time, monthly operating expenditure will increase to some extent. Monthly Operating expense of each upazilla office at present = 2, 50, 00,000/368 = 67, 935 BDT Monthly Operating Expense (September2013) = 67, 935 x 486 = 3, 30, 16, 410 BDT Hence, Monthly profit will be = (3, 69, 44, 092 - 3, 30, 16, 410) BDT = 39, 27, 682 BDT Therefore, at the end of September 2013 DBBL mobile banking will cross breakeven and start earning profit.

4.10 TRANSACTION REPORT

Transaction report of DBBL Mobile Banking service as on June 2012 is provided below: Table 4.5: Transaction Report
Amount in

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Thousand Tk. No of A/C Regis tered Acti ve Dep osit Amo unt Cash-in No. Amo unt Cash-out No. Amo unt Remittan ce Am No. oun t P2P No. Amo unt TOP-UP No. Am oun t Ag ent

393,3 06

288, 571

209, 891

623, 610

1,502 ,459

326, 139

1,357 ,610

1,0 78

21,6 87

80, 130

104, 539

141, 228

3,22 3

9,5 07

4.11 GROWTH ANALYSIS

DBBL mobile banking experiences significant growth in this quarter compared to previous quarter. It shows increasing trend in terms of number of customer account, amount of deposit, agent etc. Currently, customer and deposit is growing rapidly. Moreover, agent point is also increased to a significant amount to serve new and potential customers.

4.11.1 Growth Analysis in terms of customers

Table 4.6: Customer Growth As on Jun'12 Sep'12 No. of Registered A/C 393306 656276 No. of Active A/C 288571 520369 Growth Rate 80.40%

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Figure 4.5: Customer Growth

Growth Rate = 80.4% 4.11.2 Growth Analysis in terms of Deposit Table 4.7: Deposit Growth As on Jun'12 Sep'12 Deposit Amount (In Taka) 209,891,000 342,808,000 Growth Rate 63.3%

Figure 4.6: Deposit Growth

Growth Rate = 63.3%

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4.11.3 Growth Analysis in terms of Agent Table 4.8: Agent Growth As on Jun'12 Sep'12 Number of Agents 9507 15029 Growth Rate 58%

Figure 4.7: Agent Growth Growth Rate = 58%

4.12 CUSTOMER FEEDBACK

A survey was conducted both inside and outside of Dhaka City to collect feedback from customers. Due to convenience, Manikdi area near Dhaka Cantonment and Patuakhali from outside of Dhaka were selected. A survey questionnaire was used as data collection tool which is attached here in Annex-1. Responses from the customers are as follows: 1. Select your age group Age 20-30 31-40 41-50 Above 50 Number of Respondents 11 9 7 3 Percentage 37 30 23 10

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2. Select your Education level Education level No formal education SSC HSC Graduation Post Graduation Number of Respondents 7 11 6 4 2 Percentage 23 37 20 14 6

3. What is your profession? Profession Student Service holder Small business Housewife Others Number of Respondents 9 8 4 2 7 Percentage 30 27 13 7 23

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4. For which service you use DBBL Mobile banking most? service Cash-in Cash-out Fund transfer Remittance Air-time Top-up Number of Respondents 1 2 16 5 6 Percentage 3 7 54 16 20

5. Approximate amount of your each transaction Amount 0 to 1000 1001 to 5000 5001 to 10000 10001 to 20000 Number of Respondents 15 9 2 4 Percentage 50 30 7 13

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6. What do you think about the cost of mobile banking as compared to traditional banking? Cost Higher Lower Same Number of Respondents 5 21 4 Percentage 17 70 13

7. How much time mobile banking takes as compared to traditional banking? Time taken Higher Lower Same Number of Respondents 3 23 4 Percentage 10 77 13

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8. How often do you use this facility? Frequency once a week More than once a week once a month Infrequently Number of Respondents 11 0 12 7 Percentage 37 0 40 23

9. Do you feel safe in your transaction through mobile? Safe Yes No Number of Respondents 27 3 Percentage 90 10

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10. Are Call centre services always available when you require? Available Yes No No Comment Number of Respondents 20 8 2 Percentage 66 27 7

11. Do you feel that agent and branch for m-banking are available? Available Yes No No Comment Number of Respondents 19 11 0 Percentage 63 37 0

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12. Did you face any problem in using mobile banking? Faced Problem Yes No Number of Respondents 5 25 Percentage 17 83

13. How did you come to know about DBBL mobile banking?
Source Number of Respondents Percentage 14 47 9 30 5 17 2 6

Advertisement Relatives Agent Others

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14. Would you like to use mobile banking services again? Will you use again Yes No No Comment Number of Respondents 24 4 2 Percentage 80 13 7

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CHAPTER 5

STUDY RESULTS AND FINDINGS

5.1 CHALLENGES IDENTIFIED

Although banking sector is an aged sector in Bangladesh, but it is still city centric. People of rural areas are still out of the banking service. In Bangladesh, illiteracy and infrastructure are the major problems. That's why banks cannot take their services to remote areas even if they want. It is the mobile technology that is reaching out to the rural population.

Major challenges for Mobile Banking are: It requires heavy initial investment. Initial investment includes setup of sites for mobile banking offices in all the upazillas throughout the country, hiring a huge number of officers, obtaining appropriate software etc. Mobile banking will take long time to reach breakeven. Launching the service proved more difficult than expected. In particular, the main challenge faced by DBBL was customer education. Literacy level of majority of the m-banking customers is very poor, as a result they cannot understand the offered service properly and it takes long to make them comfortable with m-banking. MNOs are not that much interested in partnership for mobile banking. Because the brand of the bank is prominent in marketing, MNO is not getting any branding facility out of this partnership. Determining Cap for transactions is another challenge. Setting up a transaction limit is required but determining the appropriate cap is difficult. The current transaction limit is very low for many customers which discourage them to continue with mobile banking.

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Bank is facing challenges in managing cash at agents point. Bank has to ensure availability of cash at agent point and securing excess cash.

As this is a very new concept in Bangladesh, motivating customers to register for mobile banking is still a big challenge.

5.2 PROSPECTS

Financial inclusion is a necessity in a developing country like Bangladesh that will lead to the development of the rural economy. Many initiatives have been taken toward Financial Inclusion but DBBL has recognized that mobile banking is the best way for the developing countries like Bangladesh. In Bangladesh more than 60% people own mobile phones, more than 90% population is under mobile network coverage but only 24% people have a bank account. So DBBL Mobile Banking can bridge the gap of unbanked people through mobile banking.

Mobile banking is a cost effective solution for providing banking service to the destitute unbanked population. Though it requires high initial investment and is not profitable in short-term view; actually it is less costly than branch banking and will be eventually profitable in the long run.

From growth analysis of mobile banking it is observed that the growth rate is huge; both the customer base and the amount of deposits are increasing rapidly. It indicates that mobile banking is getting its popularity day by day in Bangladesh.

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CHAPTER 6

CONCLUSION AND RECOMMENDATION

6.1 RECOMMENDATION

Since mobile banking is a new concept for Bangladesh, is a key to success of the journey on this unpaved road.

Focus should be given on improving Bank-MNO partnerships. It would it be better to leave branding to bank-MNO negotiation, so that both the brands will be promoted in market.

Need to promote more business by shifting government payments to MFS, increasing transaction limits and lowering restrictions on transfers

Banks should manage expectations: should not be afraid to put a lot of money on the table, mobile money requires heavy initial investments; but will be profitable in the long-term, do not adopt a short-term view.

Government has to take initiative even in the root level to increase literacy.

Mobile banking sector depends on telecommunication services. So, government, banks and mobile operators should work jointly to improve telecommunication network throughout the country.

Bank has to maintain KYC (Know Your Customer) properly for ensuring effective fraud management.

Facilitating 2-4 serious players beyond BRAC Bank/bKash and DBBL will promote competition in market and thus will help to increase the level of service for customers.

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6.2 CONCLUSION

Mobile banking offers the surest way towards financial inclusion in a developing country like Bangladesh. Countries like Bangladesh where mobile penetration is nearing saturation, mobile banking is helping banks to increase revenue as well as contribute more in enhancing our rural economy. It is the best way to reach the doorstep of the underprivileged population. People do not need to go to banks for enjoying banking services; rather bank will go to them for delivering banking service through mobile banking channels. Moreover, it will develop the tendency of saving among the low income population.

But to capture this significant opportunity, banks and telecommunications companies will have to build partnerships with one another and, possibly, with merchants and retail chains as well. Dutch-Bangla Bank Limited is considered as the pioneer for introducing mobile banking in Bangladesh and it has a lot of opportunities to deliver services in the hand of customers. It has initiated m-banking to bring rural marginal savers under the umbrella of the formal banking system. Due to infrastructural limitation, banks are not in a position to open more branches to cover the vast segment of un-banked population, but it can use mobile banking as an alternative tool for financial inclusion.

Though DBBL is not getting any profit from Mobile banking at this moment, they are continuing this as a part of their CSR (Corporate Social Responsibility). But within couple of years it will turn into a profitable business.

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REFERENCES 1. Dutch Bangla Bank Limited (2011), Annual Report of 2011, http://www.dutchbanglabank.com/investor_relations/financial_statements_201 1.html 2. Dutch Bangla Bank Limited, http://www.dutchbanglabank.com/electronic_banking/mobile_banking.html 3. Bangladesh Bank (2011), Mobile Financial Services for the Banks, Retrieved 30 August 2012, http://www.bangladesh-bank.org/aboutus/regulationguideline/guidelist.php 4. The Daily Star (May 15,2012), More financial inclusion is needed, http://www.thedailystar.net/newDesign/news-details.php?nid=234153 5. Security Asia (June 17, 2012), Dutch-Bangla Bank touts secure mobile banking, http://security.networksasia.net/content/dutch-bangla-bank-touts-securemobile-banking 6. GSMA (August 20, 2012), Mobile Money for the Unbanked, http://www.gsma.com/mobilefordevelopment/what-is-the-business-case-forbanks-to-get-into-mobile-money-the-example-of-dbbl-in-bangladesh/ 7. http://www.sybase.fr/detail?id=1094460 8. http://www.sybase.com/detail?id=1098658 9. http://www.globalstrategyexchange.com/?show=speaker&alias=11

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ANNEX -1

CUSTOMER FEEDBACK SURVEY QUESTIONNAIRE Its really appreciable if you take just a few minutes to respond to the questions mentioned below. The purpose of this survey is to find out how you rate the service as a valuable customer of DBBL Mobile Banking. Please read the questions carefully and select the answer that you feel appropriate.

1. Select your age group a) 20-30 years d) above 50 years 2. Select your Education level a) No formal education d) Graduation 3. What is your profession? a) Student d) Housewife b) Service holder e) Others c) Businessman b) SSC e) Post Graduation c) HSC b) 31-40 years c) 41-50 years

4. For which service you use DBBL Mobile banking most? a) Cash-in d) Remittance b) Cash-out e) Air-time Top-up c) Fund transfer

5. Approximate amount of your each transaction a) 0 to 1000 d) 10001 to 20000 b) 1001 to 5000 c) 5001 to 10000

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6. What do you think about the cost of mobile banking as compared to traditional banking? a) Higher b) Lower c) Same

7. How much time mobile banking takes as compared to traditional banking? a) Higher b) Lower c) Same

8. How often do you use this facility? a) once a week d) infrequently 9. Do you feel safe in your transaction through mobile? a) Yes b) No b) More than once a week c) once a month

10. Are Call centre services always available when you require? a) Yes b) No c) No comment

11. Do you feel that agent and branch for m-banking are available? a) Yes b) No c) No comment

12. Did you face any problem in using mobile banking? a) Yes b) No c) No comment

13. How did you come to know about DBBL mobile banking? a) Advertisement d) Others 14. Would you like to use mobile banking services again? a) Yes b) No c) No comment b) Relatives c) Agent