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4 March, 2019 00:00 00 AM

Bangladesh moving towards a ‘less cash’ society

Regulators should go hand in hand and ensure a level playing field for all innovations in digital payment market. Supporting innovation can also help regulators meet their objectives
Faruk Ahmed
Bangladesh moving towards a 
‘less cash’ society

Bangladesh is moving fast towards a cashless regime with its robust Mobile Financial Service (MFS), a unique payment innovation that helps China a less cash nation within a few years and made Sweden a fully cashless society. Bangladesh Bank data that shows that the average daily transactions through mobile financial services (MFS) has jumped to Tk 1005.51 crore in September last, which is five times higher than the amount recorded in the same month in 2014.  And the move has gained momentum in recent time thanks to rapid growth of smart phone users and fastest growing MFS industry led by bKash, the largest player in Bangladesh with more than 32 million subscribers mostly who were unbanked poor.

Industry experts say, Bangladesh can leverage the advantages of a cashless society with MFS innovation like China where without mobile phone nobody thinks to buy anything from any market, shopping malls or store.  A total of 18 commercial banks are involved in MFS service in Bangladesh where bKash is playing revolutionary role in this landscape thanks to its service innovations that meet customers’ expectations. More banks are now adopting this innovation to survive in the highly competitive environment while some of them are making collaboration with bKash and other operators to avoid high investment. This has already stimulated the inflow of remittance as Bangladeshi workers living abroad are sending their hard-earned remittance to their relatives through bKash via Western unions. More service innovative providers like Pathao and sellers of goods and services are using bKash payment.

Besides, mobile wallets, plastic cards offered by banks are also accelerating the Bangladesh’s journey towards a cashless society. Millions of young consumers are now using cards to buy food in restaurants, grocery and clothing items in shopping malls, which has pushed up credit card transactions to Tk. 1007.1 crore as on September’18, according to Bangladesh Bank. As the demand for cards is increasing day by day commercial banks are installing more booths in every corner across the country to attract more digital customers. E-commerce business is also growing rapidly in Bangladesh as more than 30 per cent banks have ‘Online Payment Gateway Service’ for e-commerce payment processing, while more than 928 online shop owners and merchants are selling products using bank's payment gateways. The volume of e-commerce has exceeded Tk 3000 crore in 2018 thanks to the ‘state of the art’ payment services offered by MFS operators like bKash, Rocket, U-Pay, i-Pay under a conducive yet stringent regulatory environment. Nearly 80 per cent of online users use the Internet for online purchase and 50 per cent of them go online to purchase products more than once, which pushed up fund transfer through internet by 30.84 per cent in September 2018 from the previous month.

With the growing number of payment innovations, more people in Bangladesh are becoming digital consumers who are using mobile payment as way of life and more and more as common practice. The government is facilitating conducive environment to promote innovations in payments while the regulator is providing appropriate regulations and strict supervision. At present, a great percentage of the government-to-business payments have been shifted to the digital channels, while more than 50 million people are using MFS innovation in their daily transactions across the country under a secure and business-friendly financial environment. With the day by day increase of smartphone penetration along with 4G networks and deployment of QR technology, the use of mobile wallet has turned more convenient.

But the story is not ended here. The fastest growing payment industry is now becoming a battle field as different players from different regulators are coming with new innovations and creating an un-level field which is distorting regulatory environment and kill innovations. For example, Nagad, a digital financial service operated by Bangladesh Post Office, has stood out with different approach outside the central bank’s regulations for other innovations. According to reports published in leading dailies, this new player allows its customers higher amount of money- nine times greater than the existing MFS operators set by the financial regulator-Bangladesh Bank. This has created anarchy among both market players and millions of customers who are using mobile financial services to meet their daily needs.

Not only risk of money laundering, MFS operators have expressed their concern that sudden entrance of Nagad from a different business environment to the highly regulated financial industry will to hit the balanced growth of market players, destabilise conducive environment of financial services by breaking the level playing field. So, the question has been raised about the role of innovation and responsibility of regulators to create a less cash society to drive growth. Industry experts say Nagad should be regulated by the central bank. And all innovations should adhere to the rules of Bangladesh Financial Intelligence (BFIU) authority to reduce risks of money laundering.

For countries that have huge population in rural areas, like Bangladesh, China and Indonesia, the most effective innovation in payment is mobile financial service (MFS), which has seamlessly penetrated into every person's daily activities in those countries and has had a profound effect on poor lives. But an un-level playing field in the era of globalisation can create innovation winners or losers. The new book Innovation and Growth: Chasing a Moving Frontier, published jointly by the Organisation for Economic Cooperation and Development (OECD) and the World Bank, describes how innovation puts developing countries on an un-level playing field compared to developed countries. In the book, experts show how the more open and global nature of innovation makes innovation policies more difficult to design, implement and monitor at the national scale alone.

To ensure due roles of MFS innovations, the central bank has formulated a prudential guideline for all banks and non-bank players of digital payment field to protect consumer rights and stop money laundering. So, regulations should be same for all players of similar business and regulators must ensure a level playing field for all innovations in digital payment market regulated by Bangladesh Bank. Otherwise, unwanted situation may arise to kill innovations and consumers will lose confidence. At the same time, innovation operators must maintain transparency and balance product development with stability and ensure consumer rights protection and more investments in consumer literacy and security of services. Bangladesh Bank and the Bangladesh Post Office should ensure a balanced growth in digital payment landscape creating a level playing field for all market players to sustain industry growth momentum and push forward the journey towards a less cash society.

To realise the promise of greater economic growth, incumbent businesses, challengers and the policymakers who regulate them need to find a balance that encourages fairness without either stifling entrepreneurialism or compromising the public interest. Finding this balance has proven difficult for businesses and industry regulators alike. An enabling environment and strict adherence of policy by innovation players are urgent to realise the promise of greater economic growth. Supporting innovation can also help regulators meet their objectives such as promoting competition and making markets work well for consumers.

Regulation should be risk-based and technologically neutral—i.e., ‘same risk – same regulation’—for everybody. The same regulatory conditions and supervision should apply to all actors who seek to innovate and compete in the digital financial system. And all innovations require the most robust security and compliance capabilities to meet regulatory obligation, protect themselves from threat actors and instill confidence in their stakeholders. Regulators themselves require secure, agile, and performance technology to support their own oversight activities and continue to ensure the stability of the financial system. Regulators should not only be responsive but also proactive so that the players can balance new product development with stability and consumer protection.

Disruptive innovators have entered the market to provide products and services which not only increase consumer welfare, and drive financial inclusion, but also force their competition to up their game. Regulators have to provide a level playing field for all participants (banks and non-banks alike), while at the same time fostering an innovative, secure and competitive financial market.

Time is now to create a level playing field for all innovations in digital payment market to promote competition and make markets work well for consumers.

The writer is a senior financial journalist and Chairman of BJFCI. He can be reached at,



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Editor : M. Shamsur Rahman
Published by the Editor on behalf of Independent Publications Limited at Media Printers, 446/H, Tejgaon I/A, Dhaka-1215.
Editorial, News & Commercial Offices : Beximco Media Complex, 149-150 Tejgaon I/A, Dhaka-1208, Bangladesh. GPO Box No. 934, Dhaka-1000.

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