"In the bustling streets of Bangladesh, where cash once reigned supreme, a financial revolution is quietly unfolding. As fintech gains ground, the traditional cash-centric landscape is giving way to a more connected and cashless future, transforming the nation's financial fabric."
In 2023, the central bank of Bangladesh, Bangladesh Bank, formally introduced the National Quick Response (QR) Code Standard with the goal of streamlining fintech digital payments across platforms and fostering a more efficient and interoperable cashless economy. The standard would remove misunderstanding and increase customer convenience by enabling seamless QR code payments across various retailers and banking apps. An individual may transact up to Tk. 20,000 per day for static Bangla QR-based fintech transactions, according to the requirements for "Bangla QR Code Based Payments."
This is anticipated to hasten Bangladesh's transition to fintech digital payments—a nation where cash transactions still predominate despite a fast rising mobile phone penetration rate. It is anticipated that the fintech project will promote economic growth, transaction transparency, and financial inclusion.
In 2010, the National Payment Switch Bangladesh (NPSB) was founded by the government with the goal of creating a cashless and paperless society. Millions of people's lives have been impacted by the significant fintech change in the nation's economic environment in recent years. Let's examine the contributions made by each major figure in this fintech revolution as well as the historical context of its evolution.
2001: bKash Takes the Stage—A Fintech Game-Changer: The Mobile Financial Services (MFS) era was heralded by a small green emblem. Transmitting money between villages no longer required a treacherous walk but rather a fast tap on a phone. Women who were frequently shut out of formal banking were able to achieve financial independence by securely sending and receiving remittances. Instant access to microloans allowed microentrepreneurs to flourish, and rural households were able to get critical help without having to carry cash. The success of bKash opened doors for other fintech MFS providers in Bangladesh, such as Nagad and Rocket. The Daily Star reports that MFS accounts in Bangladesh now reach 22 crore, as reported by BB, surpassing the country's total population. In 2023, the average daily cash transaction will be BDT 1028 Crore.
2010s: Digital Payments Join the Party Shifting the fintech landscape: As digital payments like bKash, Nagad, and Mastercard Easypaisa gained popularity, cash registers began to sing a different tune. Online shopping, bill paying, and cashless store transactions have all become commonplace. As cash gave way to fintech digital trails and convenience became the deciding factor, security concerns disappeared. Compared to cash, it offers speed and security while lowering the possibility of fraud and theft. The expansion of e-commerce in Bangladesh has been spurred by the rise of fintech digital payments, which has increased economic activity and created new job opportunities. Utility payments and merchant payments combined totaled BDT90 crore and BDT 162 crore per day in 2023.
Taking Banking Online: Access to financial services has increased thanks to internet banking, especially for people living in distant locations without physical banks. People now have 24/7 access to financial services because to internet banking. With just one click, residents in remote areas may access accounts, send money, and pay bills, improving their financial literacy and awareness. Bank operating costs are decreased via online banking, which could result in cheaper fees and more reasonably priced financial services. Internet banking transactions in Bangladesh rose to Tk2,19,960 crore in the first eight months of FY23 from Tk1,34,425 crore in the same period the previous fiscal year, a 63.63% rise, according to a Dhaka Tribune report. In just two years, transactions increased by 247%, from Tk8,477.3 crore in February 2021 to Tk29,385.9 crore in February 2023.The transaction amount peaked in January 2023 at Tk33,925.6 crore. The number of online banking users climbed to 6.57 million in February 2023 from 4.7 million in February 2022 and 3.4 million in February 2021. Internet banking has rapidly expanded in Bangladesh since Standard Chartered introduced it twenty years ago, offering fintech services such as deposits, transfers, and bill payments.
The Dawn of Digital Banks: A New Era of Financial Innovation: Bangladesh recently witnessed the launch of its first fintech digital bank, DBBL Pure. These banks operate solely online, offering innovative products and services tailored to the digital generation. Digital banks cater to the needs of a tech-savvy generation, offering mobile-first experiences and personalized financial solutions. Digital banks introduce healthy competition to the traditional banking sector, potentially leading to improved services and lower fees for customers. Kori and Nagad have also recently gotten the nod from Bangladesh Bank to launch full-fledged fintech digital banks.
MFS and Hundi
Fintech financial systems such as Bkash have left their mark on other countries. By giving them a practical and easily accessible fintech financial tool for sending and receiving money, this greatly eliminates Hundi, the informal and frequently illegal method of cross-border money transfer. It also does away with the need for Hundi agents and their constrained reach. When it comes to transfer fees, bKash usually provides a better deal than Hundi, which frequently has hidden fees and poor exchange rates. The cost benefit encourages consumers to switch to the official fintech MFS channel.
Effect on NPL
Lenders can more precisely evaluate borrowers' creditworthiness by examining their spending patterns, income patterns, and repayment histories thanks to the data trail left by fintech digital transactions. By using a data-driven strategy, it is possible to detect high-risk borrowers and stop NPLs before they happen. Digital platforms have the ability to automate debt collection procedures, allowing for more effective reminders and pursuit of past-due payments. This can reduce losses for lenders and speed up NPL recovery.
Despite Bangladesh's impressive fintech digital progress, vulnerabilities remain. The 2016 "Bangla QR" cyber-attack and recent ATM/MFS muggings highlight ongoing security concerns. Criminals adapt, demanding proactive measures in both physical and digital realms to secure Bangladesh's cashless fintech future. A few of such challenges are discussed below briefly.
Digital Divide: Rural areas face hindered fintech digital financial service utilization due to unreliable internet access. On the other hand, older generations and rural residents lack skills for online banking, crucial for full adoption. The government estimates 50-60 million villagers lack bank accounts, exacerbating economic inequality.
Infrastructure Gaps: Varying access to ATMs, POS terminals, and mobile coverage between urban and rural areas limits cashless transactions while frequent disruptions in some regions deter reliance on cashless methods.
Informal Economy: Integrating cash-reliant informal businesses into the fintech digital financial system is challenging.
Resistance to Change: Businesses and individuals accustomed to cash transactions may hesitate due to perceived complexity or lack of trust.
Financial Inclusion Issues: Rural areas lack smartphone ownership, essential for mobile banking and fintech MFS services. Transaction fees and mobile data costs discourage reliance on cashless methods.
Cybersecurity Concerns: Limited digital literacy leads to apprehensions about cybercrime and financial scams. Ensuring the safety of personal data in fintech digital financial systems is crucial for trust and wider adoption.
Money Laundering: Legitimate businesses used for money laundering via under/over-invoicing. Companies resisting fintech digital payments may raise suspicion.
Pain of Paying: In a cashless society, physical money exchange is absent, reducing negative emotions during payments. This may lead to overspending and increased dependence on credit.
Transaction Standstill: Server issues, glitches, or insufficient electronic funds result in transaction halts, lacking alternate payment options.
Addressing these challenges:
Expanding internet access and fintech digital literacy programs: Increasing internet infrastructure, particularly in rural areas, and providing digital literacy training can bridge the digital divide.
Investing in digital infrastructure: Expanding the network of ATMs, POS terminals, and mobile network coverage is crucial for wider participation in the cashless fintech ecosystem.
Formalizing the informal sector: Encouraging informal businesses and workers to register and adopt fintech digital payment methods can bring them into the formal economy and facilitate cashless transactions.
Making fintech digital transactions affordable: Reducing transaction fees, offering free data plans for essential financial services, and providing subsidized devices can make cashless methods more accessible.
Promoting cybersecurity awareness: Educating the public about online security practices and implementing robust data protection measures can build trust and mitigate concerns about cyber threats.
Society should prioritize moral education for fintech computer programmers. While there's a push for more programmers, the moral integrity of these professionals is crucial to prevent the emergence of bad actors.
Sweden allows retailers to refuse physical currency. This serves as an example, highlighting the need for fintech financial institutions and executives to be highly tech-savvy, implementing continuous monitoring of transaction activities for enhanced security.
Integration between Financial platforms
Integration between Financial platforms Until not long ago, it was only possible to transfer funds between one bank to another. After the introduction of mobile financial services, banks and these fintech platforms integrated themselves so that funds could be exchanged seamlessly between them. But now, these competing fintech financial platforms are integrating among themselves by introducing services like BkashBinimoy so that fund transfer is ever easier and no inconvenience of an “empty balance” account remains.
Bangladesh's journey from a cash-dependent nation to a fintech digital frontier is a remarkable story of innovation, inclusion, and economic progress and as Bangladesh continues to embrace fintech digital technologies, its future holds immense promise for a more inclusive, efficient, and prosperous nation.
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