In the dynamic realm of entrepreneurship, a select few visionary individuals embark on journeys that not only redefine entire industries but also profoundly impact the lives of millions. Tanvir A. Mishuk, the visionary Founder and Managing Director of Nagad, exemplifies this extraordinary breed of changemakers. His idiosyncratic mission was to revolutionize financial inclusion in Bangladesh while concurrently crafting a billion-dollar empire. In this exclusive conversation, we explore the inception of Nagad, the pivotal role of innovation, and the myriad challenges and remarkable triumphs, all while envisioning the future landscape of digital banking in Bangladesh. With over 8 crore people benefiting from Nagad’s transformative initiatives in just over four years, this narrative is nothing short of a modern-day financial odyssey.

Nagad’s Quest for Innovation & Inclusion 

“When I reflect on the moment Nagad entered the financial landscape of Bangladesh on that fateful day, March 26, 2019, it feels like we were stepping into uncharted territory. The financial arena had long been dominated by traditional banks, and mobile financial services (MFS) were primarily seen as tools for money transfers. The process of opening an MFS account was cumbersome, involving extensive paperwork. Imagine having to fill out a 10-page form just to get started. It was evident that the existing banking system had its flaws, and a solution was long overdue,” the founder of Nagad began.

That’s when Tanvir decided to embark on this transformative journey with Nagad. He recognized that change was needed, and it had to start with simplifying the process. “We introduced Electronic Know Your Customer (e-KYC), allowing customers to onboard with nothing more than their smartphones. A simple photo of their National ID (NID) card and a selfie were all it took to activate an account and initiate transactions,” he reveals.

Before Nagad’s arrival, only 33% of the population participated in financial inclusion, accounting for both bank and MFS account holders. However, Tanvir mentions that this figure had its irregularities, with some individuals owning multiple bank accounts, inflating the statistics. Alongside Tanvir, Nagad set out to redefine financial inclusion by offering user-friendly facilities accessible through smartphones. It was a game-changer!

“As I look back, I am proud to say that Nagad’s innovative approach contributed to reaching over 8 crore people in just over four years. Our journey was nothing short of miraculous, breathing new life into the realm of financial inclusion,” the MD of Nagad believes.

Transforming the Financial Landscape: Nagad’s Triumph Over Doubts

Nagad’s journey faced criticism and even mockery at the inception of digital banking in Bangladesh. Many disregarded his efforts with disbelief and remained skeptical about his path. 

Reminiscing about his earlier efforts, the founder of Nagad says, “When we introduced the idea of Nagad to the market, the central bank hadn’t established any policies for electronic KYC. Naturally, this innovation raised eyebrows in both the media and the financial industry. Many were skeptical, fearing potential irregularities, money laundering, and disruptions in secure communication between Mobile Financial Services (MFS) operators and account holders. However, within a mere 6 to 7 months, a remarkable shift occurred. People began to recognize the enhanced reliability of our electronic KYC compared to the cumbersome manual form-filling process, and they enthusiastically embraced digital financial transactions.”

Nagad’s transformation was indeed profound. In the past, individuals could easily forge documents, National ID cards (NIDs), and photographs on paper forms. However, Nagad’s digitized process incorporated internal facial verification and automatic NID validation from the Election Commission. This ensured greater transparency, and simplified the entire procedure, making it far more user-friendly. They were determined to initiate policy changes that would improve people’s lives, and fortunately, their efforts garnered recognition from the government, propelling them further toward their goal of financial inclusivity.

Redefining Digital Banking: The Nagad Experience 

Nagad’s incessant commitment to innovation has been the cornerstone of its remarkable success and rapid expansion. Their unique selling proposition (USP) lies in their innovative approach to solving challenges. 

Tanvir A. Mishuk, the visionary behind Nagad, explains, “We consistently sought innovative solutions for our operations. For instance, when we realized that only 30% of our population had smartphones, we faced the challenge of ensuring the success of our e-KYC process. Within a year, we forged partnerships with all major telecom companies, securing access to their biometric data. This enabled users with basic bar phones to dial a designated number, facilitating data sharing with our platform. Subsequently, this data was meticulously authenticated with the Election Commission, enabling us to open secure accounts for these users.”

Nagad’s introduction of e-KYC initially brought 1.5 crore people on board. However, their strategic collaboration with telecom companies dramatically expanded their reach to approximately 8 crore individuals within four years. This initiative democratized access to e-KYC, making its benefits available to everyone, regardless of smartphone ownership.

From Underdog to Market Leader

Indeed, Nagad’s ascent to the top of Bangladesh’s mobile financial services (MFS) industry was nothing short of remarkable. After initially holding the 28th position among 29 licensed MFS providers, Nagad swiftly claimed the number one spot. According to Tanvir, while there may be 29 MFS service providers in Bangladesh on paper, only two truly dominate the market.  

The factors that contributed to Nagad’s success are innovations in e-KYC and customer acquisition by dialing *167#, and the company almost halved the cash-out charge, which was BDT 20 per BDT 1,000 for the past 12 years. These changes that Nagad brought to free people from cumbersome processes and extra charges helped it achieve success within two and a half years of its inception.

Tanvir firmly believes in Bangladesh’s potential to foster unicorn startups, thanks to the robust infrastructure provided by the country’s leadership, including the honorable Prime Minister, Sheikh Hasina. He states, “I believe whatever resources or facilities the startup environments in the USA, Australia, and Singapore have are all available here in Bangladesh for companies to emerge and grow exponentially.” 

Tanvir explains that Bangladesh faces no connectivity or network issues and possesses the necessary technology and resources. With the right focus on products aligned with market needs, companies can achieve unicorn status in a fraction of the time it took Nagad, which was four years. He elucidates, “I think it can be done faster if we focus on the right product that the market and people need.”

Customer-Centric Innovation 

Tanvir credits Nagad’s success to its customer-centric approach. The inventive minds behind Nagad design products with a lesser focus on meeting people’s needs and delivering tangible benefits to them. They needed to consider their users’ financial capabilities to offer products that truly resonated with the market. Their customer-centricity has catapulted them to become the fastest-growing unicorn startup in Bangladesh and has also set us apart in the broader Asian business landscape.

“Reflecting on our business philosophy, I must emphasize that different MFS service providers often operate with distinct principles and models based on their respective areas of focus. For Nagad, our mission is clear: we aim to foster financial inclusion and extend our reach to the rural corners of Bangladesh, where digitization has yet to make its mark. A quick glance at our transaction records reveals that the majority of our transactions occur throughout Bangladesh, transcending the confines of major cities like Dhaka or Chottogram,” Tanvir denotes passionately.

The famous entrepreneur then shares, “In the past year alone, Nagad has enabled its users to save over BDT 35,000 crore by facilitating money transfers and harnessing the capabilities of other MFS service operators.”

Building Revenue-Focused Ventures

The entrepreneur shares his insightful perspective on the dynamics of startup investments, drawing from both global and domestic examples. He emphasized that in many countries, including India, startups tend to seek investments primarily from foreign investors rather than relying on local banks or organizations. 

Highlighting the Indian startup ecosystem, he points out that over 95% of investments in successful Indian startups have come from global investors like Facebook, Warren Buffet, and SoftBank, rather than domestic sources.

Offering valuable advice to aspiring entrepreneurs, Tanvir stresses the importance of building a business with tangible revenue streams. He says, “While in the past, startups could attract seed funds or capital from foreign investors based on customer numbers and transaction counts, the landscape has evolved. Today’s investors are more focused on seeing substantial financial results generated by the venture.”

When advising emerging entrepreneurs, Tanvir was clear: prioritize designing a business model that generates revenue rather than burning through capital or resources. This pragmatic approach, he believes, is key to attracting the interest and support of investors in the current entrepreneurial landscape.

Leading Bangladesh’s Digital Banking Consortium

Tanvir unveils a fascinating trend in the world of banking: a growing swarm of banks eager to join forces in creating a digital banking consortium. He shares, “I’ve learned from media reports that a staggering 52 banks have applied to be part of the consortium. Considering that one bank cannot hold more than a 10% share, it implies that 520 entities have expressed their interest. This is quite intriguing, especially in a country like Bangladesh, where just one or two digital banks could effectively serve 170 million people, amidst a landscape already crowded with 61 traditional banks.”

Expressing his perspective, Tanvir proposed, “In my opinion, Bangladesh Bank should limit the initial number of digital banks to 2 or 3. These banks should be allowed to establish a solid foundation for the digital economy before expanding further.” 

He continues, “This approach would not only benefit these pioneering institutions but also ensure the broader populace reaps the rewards. Allowing an excessive number of approvals would likely result in only a fraction of these banks being profitable, leaving others struggling. I would respectfully urge the central bank to exercise prudence by permitting a select few, perhaps 3 to 5, digital banks in the initial phase.” 

Tanvir recounted the journey of advocating for digital banking, noting that back in 2020, many assumed that the concept of their e-KYC was unrealistic. He elaborates, “Until 2022, I engaged in continuous discussions with the Central Bank, endeavoring to convince them of the imperative need for digital banking. It’s heartening to witness policymakers acknowledging their earlier reservations and now wholeheartedly supporting Nagad’s forthcoming initiatives. It’s gratifying to know that our efforts are being recognized, as the successful execution of this transformation will ultimately benefit the people of our nation.”

Recognizing the critical juncture Bangladesh had reached in terms of digital infrastructure needs, Tanvir embraced the opportunity to share the fruits of his labor and contribute to the nation’s digital banking evolution.

Blueprint for a Digital Financial Revolution in Bangladesh 

As he discussed a critical aspect of Bangladesh’s financial landscape, he highlighted the fact that a substantial 52% of the nation’s financial transactions occur outside formal channels. He feels that this segment comprises individuals often excluded from the formal economy due to a lack of education and financial literacy. 

“Farmers, vendors, rickshaw pullers, and many more find the prospect of engaging with traditional banks daunting and uncomfortable,” he says. Tanvir explained the limitations of mobile financial services (MFS) operators, stating that they do not fully cater to the diverse financial needs of this population. As a result, these individuals often resort to borrowing money from traditional lenders, who charge exorbitant interest rates. 

He then shares that there are women in Bangladesh who want to have different services regarding savings that the MFS providers fail to offer, and banks are not eager to entertain small amounts like BDT 500 or BDT 1000 as their processing fee is around BDT 131 for each transaction (including CapEx, OpEx, employee costs, and building costs). Through digital banking services, people will be able to save as much as they want on a safe and reliable platform, and the government will be able to rope informal transactions into its system.

Tanvir highlights the potential impact of including these underserved individuals in the digital banking ecosystem. “Through digital banking, they could access a wide range of services with just a click, free from the burden of collateral. Furthermore, formalizing these transactions could bring them under the government’s purview, enhancing transparency and accountability,” the visionary expresses.

Sharing his vision for Nagad, he wishes to streamline foreign study payments, provide efficient smart payment services, and assist students pursuing higher education abroad. Additionally, he acknowledged the unmet financial needs of women in Bangladesh, particularly regarding savings, and plans to cater to them in the coming years. 

“Existing MFS operators often fall short in delivering these services, while traditional banks are reluctant to entertain small transactions due to high processing fees,” he says. Tanvir envisions digital banking as a solution, offering a secure and reliable platform for people to save according to their preferences while facilitating the integration of informal transactions into the government’s financial ecosystem. 

Digital literacy emerged as a paramount concern for Tanvir. He acknowledges the progress made toward transforming Bangladesh into a digitally capable nation. Furthermore, he stresses that a portion of the population still lacks digital literacy, which could potentially hinder their adaptation to digital platforms. Recognizing the government’s role in promoting digital literacy, Tanvir hopes that continued efforts will lead to mass awareness and basic digital literacy within the next 2 to 3 years.

When probed about upcoming innovations, he reveals, “Nagad’s unwavering commitment to pushing the boundaries of service excellence in the next 4 to 5 years. These innovations would be driven by cutting-edge technologies, but no matter how sophisticated the backend systems might be, Nagad’s priority is to ensure a front-end user experience that is exceptionally user-friendly, catering to the masses of Bangladesh.”

Marketing Strategy to Attract Global Investors

The entrepreneur feels that global investors are attracted by the marketing strategies highlighting the products and services. Tanvir says, “If you want to be recognized by a global investor, you have to convince them that your business is genuine, the organization is maintaining proper compliance, and your business model allows you to grow and generate revenue. If you can properly pitch this to foreign investors, they are ready to invest in businesses that would allow them to earn more profit over 6–7% of the interests offered in banks.”

Tanvir states that unfortunately, they are startups that promised results but couldn’t deliver them, which created a bad impression on Bangladeshi startups. Proper branding of our country will also help us showcase successes over failures and gain more trust from foreign investors around the globe. “Only the government alone can build this reputation; the entrepreneurs will also have to provide returns to the investors based on the commitments that we have made. With that, personal branding and being affiliated with forums can also help entrepreneurs gain foreign recognition,” adds Tanvir.

Upper hand in Policies for Startups

Tanvir expresses that the startups in our economy do not have separate policies or forums to go to. They are treated like any other commercial business and enrolled as any other financial organization with a trade license. “In terms of policies, startups are not recognized any differently than regular organizations. However, for technological advancements, the ICT Ministry has allowed tax waivers until 2024, with some added benefits in VAT. But even in countries like India and Singapore, there are no separate policies catered to them,” he mentions.

Tanvir explains that the pandemic boosted the number of startups in the past couple of years around the world, and many organizations received investors with the help of numbers on charts and figures; however, entrepreneurs in post-pandemic times will have to show more than just data to gather investments. The entrepreneurs will have to do real business and drive results to gain credibility in the market.

“My advice to young entrepreneurs is to focus on a business model that drives results and generates steady revenue. Many entrepreneurs spend the funding on luxury rather than establishing a sustainable business first. Entrepreneurs should focus on business and not indulge in spending on personal expenditures to become successful unicorn startups one day,” he states.

The Secret to Nagad’s Success: Proper Utilization of Data

One challenge he recognizes is the limited availability of formal education in data science in Bangladesh. While individuals with backgrounds in finance and technology are stepping up to bridge this gap, Tanvir believes that a comprehensive education system in data science is essential to address future needs.

Lack of studies in data science in Bangladesh is one of the barriers to getting resources on data analysis. Those studying finance and technology are trying to provide support; however, I feel there should be proper education introduced on data science or else we might face a problem regarding this in the future,” he further mentions.

In his 16-year entrepreneurial journey, Tanvir has experienced that some resources and professionals are extremely skilled but lack educational degrees. Initially, he had hired many professionals on a part-time basis but couldn’t get them on board due to a lack of educational certificates. He noticed that these employees were demotivated to work. Hence, he fought with the board of directors to allow these people to become full-time employees and reap the benefits of that.

Tanvir reflects on this experience, saying, “People initially reacted the same way they did when we introduced ‘Nagad.’ However, welcoming these skilled individuals into our team, irrespective of their educational qualifications, has enriched us with a pool of brilliant resources that were already available in the market.”

The Essence of Innovation with Tanvir A. Mishuk

As our conversation with the visionary entrepreneur drew to a close, Tanvir shared that innovation isn’t merely about inventing something entirely new but rather about recognizing the challenges that surround us and devising practical solutions to overcome them.

“In my view, innovation doesn’t require a fancy laboratory or foreign scientists. Instead, it hinges on identifying the right solutions to the problems you encounter,” he emphasizes. 

“Normally, entrepreneurs see innovation as inventing something new; rather, an entrepreneur should recognize the problems around them and rethink how to resolve them easily. If you can find the solution, in my opinion, that is innovation,” he redefines innovation. 

With these words, our enlightening conversation with the transformative force behind Nagad concluded, leaving us with a profound perspective on entrepreneurship and innovation.