Bkash used the remaining 16 per cent of the revenue

using the network; another 7 per cent of the service revenue was shared with the telco. bKash used the
remaining 16 per cent of the revenue for operational activities such as marketing, technology, and recruiting
agents. Overall, the margins seemed rather small, but volume generated viability (see Exhibit 3).
SCALING THE MODEL: THE CHALLENGE
The reliance on existing distribution channels, also used for such diverse activities as distributing
matchboxes, distributing aid after hurricanes, or selling mobile airtime, had given bKash the ability to reach
even the remotest parts of Bangladesh. However, moving physical cash around the country was becoming
a challenge due to the liquidity imbalance (see Exhibit 4). As people were primarily sending cash from
urban to rural areas, urban agents received cash from customers in the cities and rural agents were paying
out cash to customers in the rural areas. There was a need for agents in the capital to deposit their cash in
banks, and for agents in rural areas to obtain cash.
However, because of existing regulations, depositing cash was only possible through the BRAC Bank,
which had about 100 branches. This was not only inefficient but also posed security risks as agents had to
travel far with cash. The need for extra protection raised costs, defeating the logic of a low-cost service.
Moreover, counting excessive amounts of currency notes became a burden for BRAC Bank branches. The
central bank recognized the challenges and adopted a change in regulation that allowed agents to deposit
funds in any bank, not just a BRAC Bank. The new arrangement increased the protection of customer
deposits, as the customers’ money was now kept in multiple banks, including large state-owned banks,

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instead of the BRAC Bank alone. Moreover, depositing in multiple banks reduced the risks to a customer’s
deposit in case of a liquidity crisis in a single bank.
Then there was the question of technology. While large multinational companies often focused their
research and development expenses on technologies for improving customer convenience in rich countries,
different needs in emerging markets called for different technologies. As bKash grew, it needed a new
platform that could help it run smoothly on a much larger scale and cater to new, innovative products and
services it could offer. Fundamo had, in the meantime, been bought by Visa, which brought a very different
working relationship. Under the new setting, the partner had less incentive to serve customers like bKash.
In developed countries, new platforms had taken many years to mature, but bKash could not wait; it was
time for bKash to find a new technology partner. In 2016, bKash started working with technology giant
Huawei in place of Fundamo.
Separately, bKash thought about gearing up its application (app) development effort since cheap
smartphones were becoming increasingly common. Quadir was looking for a human-centric designing firm
that could help bKash come up with an app design allowing its customers to graduate out of USSD while
receiving alternative channels. In 2016, bKash started working with San Francisco-based IDEO, which
famously designed the first Apple mouse and many other innovative products.