Bangladesh Bank (BB) Governor Abdur Rashid Talukder said has that various measures will be taken gradually as Bangladesh plans to go cashless for 75% of its overall transactions by the year 2027. The government thinks that cashless transaction is a key development tool that would contribute in a huge manner to the activities that foster economic growth in the near future, as Bangladesh is gradually entering an era of a highly digitalised world.
The remarks have been attributed from a Memorandum of Understanding (MoU) signing function with the Bangladesh Investment Development Authority (BIDA) at the BB headquarters.
The BB governor said, “Steps are being taken by us in order to promote transactions without cash here. We will make enhanced efforts in near future as we are desperate to reaching to our targets of transforming overall 75% of the transaction to cashless from the cash one and it is our hope to do it by 2027.”
Rise of mobile banking: A step towards cashless society?
Over the last decade, Bangladesh’s transactional activities have been experiencing massive transformation due to the advancement of mobile financial services. The way people send money to their villages or to a distant place from their address have seen a significant change as mobile banking has brought the distance so close to them that, in only 5 minutes, they can send money to any place they want – thanks to the evolution of the digital payment system.
All of these factors have contributed to the country’s recent increase in online banking or digital payment usage. Online deposit, online DPS, and credit service with the help of mobile financial services (MFS) are some of the key factors to serve the fast growing consumers of digital transactions. Bkash, Nagad, Rocket, etc. are now so common that people use these methods frequently to transfer their money from one place to another.
But there is no reason to think that these transformations in people’s transaction methods in Bangladesh are a “surprise.” Though the market for Bangladesh’s digital financial landscape is still in its infancy, as the market is expanding in a massive manner, policymakers can easily hope for changing the whole of the transformation system into a digital one.
Some statistics about mobile banking systems
According to BB, there was a 154% increase in year-on-year statistics for internet banking in December 2021, whereas in the case of mobile banking, the transaction rate rose about 28% from January, 2021 to January, 2022. Beside person-to-person transactions, MFS is being used for several tasks, like wage or salary payment, bonus share, government grants, social security allowances, etc.
As digital financing is a common scenario in neighbouring countries like India, China, Vietnam, and Indonesia, Bangladesh is advancing to join the list in the upcoming years, as it is already seeing the benefits of using these.
Paytm, a unicorn, valued above one billion dollars, took only five years to reach that level. But due to the massive demands for digital financing in this country, several other names in this sector are gradually emerging, like Navi, Lendingkart, Groww, Phonepe, Cred, Khatabook, etc., which are sharing the market with Paytm to throw it the challenge of grabbing the market.
Vietnam, a well-known country for its advancement in technologies, is also becoming well known for its rapid growth in fintech unicorns. The familiar names of servers in this sector in Vietnam are VNPay, PayPal, MoMo, etc. MoMo is currently the largest e-wallet company in Vietnam, holding more than $2 billion. The company itself is claiming to have about 60% of the total share of Vietnam’s mobile banking market in its pocket.
But in the case of Bangladesh, the only player who earned the benchmark of “unicorn” is Bkash, which is valued at over $1 billion and has become the largest MFS Company in Bangladesh.
If compared with the markets of Vietnam, India, and China, Bangladesh’s market is still at an infant level, but the rise of Nagad, Upay, Rocket, and several other serious players in the field is making the industry boom day by day.
Any untapped markets here?
A Bangladesh Telecommunication Regulatory Commission (BRTC) report said there are now a total of 126 million internet subscriptions in Bangladesh, 92% of which are mobile phone users. From these 92% internet users, approximately 60% adult people use MFS accounts actively, which is enabling to have more than 1.1 million agents, allowing penetration of an extensive country-wide agent network here.
But the use of MFS is limited in certain ways. People are mostly using these services for cash-in, cash-out, sending money, or recharging their phone, which is about 95% to be added here. The remaining 5%, which includes salary payments, utility bills, government disbursements, and merchant payments, has yet to be fully utilised.
What BB thinks about the rise of MFS?
BB has long promoted digital banking to encourage broad adoption of financial products and services and to keep the pace of economic growth in line with structural development. The popularity that MFS has, the rise of online banking, the introduction of payment service providers (PSPs), payment systems operators (PSOs), and the incorporation of “Binomoy,” an interoperable digital transaction platform, are some of the massive initiatives in tapping the cashless market.
BB said, “As we are considering a new wave of digital banking and technological innovation in transaction, in the future, a deeper level of financial inclusion to move forward to a “cashless society” can be attributed, following the augmentation of economic activities.”
Several banking experts also shared their thoughts on the idea of cashless society, claiming that MFS capitalisation would make the financial sector cashless – allowing the country to increase transparency, eliminate customer visits to branches, and save time – thereby deepening inclusion and reducing theft.