A good beginning makes a good ending. Start on a good note to reap the benefits at the end. So, I am very optimistic that Bangladesh is going to be a smart Bangladesh within a decade thanks to its economic growth momentum and its good strategy promoting digital banking to speed up the cashless journey and turn the country into a Smart Bangladesh.

To fulfil the dream of Smart Bangladesh, the nation must be cashless as people of smart societies around the world are dumping cash with mobile phones or credit cards and walking on the road to a cashless society. So, Bangladesh Bank has unveiled a campaign titled "Cashless Bangladesh, Smart Bangladesh" to bring small merchants under a low-cost payment system. The campaign is part of the idea to popularize an interoperable Bangla QR Code across the capital that will help clients pay their bills for goods and services through mobile banking applications, mobile financial services (MFS), and payment service providers (PSP). Initially, 10 banks joined the campaign to strengthen the country’s journey towards a cashless society.

Earlier on Sunday, November 13, 2022, Bangladesh stepped into a new era of digital Bangladesh with the launch of BINIMOY, an Interoperable Digital Transaction Platform (IDTP). Fund transfers across mobile financial services (MFSs) and banks, and payment service providers (PSPs) are now more comfortable than ever.  'Binimoy' is a breakthrough platform for establishing digital financial transactions. It’s a web-based platform that will be integrated as a service into the apps of banks, mobile financial services and payment system providers under a collaborative initiative supervised by Bangladesh Bank. The government aims to build a cashless society within the next three or four years as part of its target to bring cent per cent of people under bank account service”, Prime Minister's ICT Affairs Adviser Sajeeb Wazed Joy said after launching Binimoy at a city hotel. "Our next target is to build a cashless society", he said.

No doubt, BINIMOY is a milestone in the country’s journey towards a cashless society which seriously started in 2011 after the entrance of bKash, the leading mobile financial service (MFS) operator in Bangladesh. Bangladesh bank’s "Cashless Bangladesh, Smart Bangladesh" campaign no doubt is a big boost to this journey. The electronic payment mode has an important role to play in making the economy vibrant as it encourages people to engage in economic activities. Our people are very much enthusiastic to use digital services. This is high time to accelerate the QR-based transaction at the grassroots level. Industry experts say Bangladesh has a bright opportunity to leverage the advantages of a cashless society regime with MFS industry which is growing day by day and experienced an astronomical 120 per cent growth a year since 2011.

Despite all the benefits, however, the reality of a completely cashless society is still more of a pipe dream. A lot of issues are pending as barriers in the way of the road, which have generated serious concern among industry experts regarding a cashless society. Many fear that the dream of a Smart Bangladesh through building a cashless society might fade as the central bank is not a fully independent body and the regulatory bar on MFS transactions and the absence of a level playing field for all players remain the big barrier on the road.

Despite the enormous opportunity, Bangladesh is yet to explore more potential from its mobile financial services (MFS) innovations as its users are limited to a few services. Most MFS users are frustrated for not being able to borrow money from all banks and repay loans. All banks and non-bank financial institutions should offer more services through mobile banking processes to their customers. As investment in setting up a mobile financial service 9MFS) is too high for an individual bank, they can use the existing MFS providers to act as their agents as enumerated in Bangladesh MFS Regulation 2018.

The government’s Digital Bangladesh Vision is a big impetus for the use of digital innovations and the government is implementing some mega projects which will push up economic activities in the days ahead and help build a Smart Bangladesh. The government can accelerate the cashless journey and boost the growth momentum using MFS providers to disburse salaries, social welfare allowances and other funds.  The governments of many developing countries are using this digital payment tool to cut the cost of operations and encourage this innovation. For example, Afghanistan pays police officers through mobile-enabled accounts. Pakistan uses it to send salaries and pensions to soldiers. In Malawi, more than 80 % of payments from donor groups such as nonprofit organizations to private citizens are now made digitally. The Mexican government digitized its payments, saving $1.2 billion a year.

Digital transformation is now a public sector imperative. To build a public sector that is fit for the future, the government must reinvent itself. To create this digitally enabled public sector of the future, governments have five critical areas to consider. The ultimate goal should be to improve service quality, promote transparent and efficient interaction, enhance the level of public trust in government, drive better citizen outcomes and push up economic growth.

Micro Merchants: Right on Target

Bangladesh Bank has rightly targeted the micro merchants– the small shop owners, street food vendors, vehicle drivers and many others like them under its ongoing campaign Cashless Bangladesh, Smart Bangladesh" campaign to build a Smart Bangladesh as dreamt by Prime Minister Sheikh Hasina. Because, these micro-merchants - support the backbone of Bangladesh’s economy, many of them are often excluded from financial services. Most of the micro merchants are using MFS payment tools to make and receive payments for their personal and family needs. More than 1.31 million micro-merchants all over Bangladesh are transacting more than 18.42 billion US dollars annually. The estimated number of women involved in micro-merchant businesses is 94,800, according to United Nations Capital Development Fund (UNCDF). 

The UNCDF experts say micro-merchants in the retail sector have the potential to become key players in the next growth area in Bangladesh. The Ministry of Local Government, Ministry of Finance and Bangladesh Bank should sit together to simplify TL acquisition through a digital platform (e-TL) and encourage micro-merchants to do business within the legal framework and remain compliant as far as tax payment whatever low it is. Digital TL is the ultimate solution where the process should be simple and the tax collection should be easy to allow the payments by numerous micro merchants bolstering the national exchequer.

Need More Supervision 

But the path towards growth with digital finance is not full of roses. As the economy digitises, so do criminals. One cause is the Internet of things (IoT). More IoT-enabled customer touchpoints for banks mean more possible entry points for cybercriminals to steal financial data. Other digital innovations, such as BaaS and mobile wallets, introduce similar challenges.

In the digital payment landscape, Bangladesh made remarkable progress under the Bangladesh Bank regulation with MFS payment innovation. But the industry is now at a crossroads as the latest MFS entity- Nagad launched by the Bangladesh Post Office being operated by a private fintech company is transacting money without the central bank’s valid licence. This will distort the conducive business environment created by Bangladesh Bank generating uneven competition in the MFS market which may malign the nation’s journey towards a cashless society. Reports published in leading dailies said the Nagad payment service has a risk of money laundering as it is operated without the valid licence of Bangladesh Bank. This has seriously distorted the level playing field of the innovative payment landscape with possible detriment to economic growth.

Bangladesh’s MFS industry has done pretty well over the years, but a lot certainly still needs to be done and success in this area will be determined by how MFS operators decide to innovate and how the policymakers decide to regulate. They should be a common framework that guarantees that all MFS operators will play in a conducive environment while offering financial services to customers and other businesses. As transactions through digital platforms are conducted electronically, more transparency must be embedded into the system, allowing authorities to better monitor sensitive operations. Since digital transformation has gone mobile, customers are in expectation of what would continuously guarantee them ease and convenience in their business dealings. More attention to mobile financial services is urgent to keep economic growth pace and regular supervision is necessary to avoid distortions. Ensuring fair competition and managing the risks ought to comprise that activity involving the same risks should receive the same regulatory treatment.

Last but not least. To build Bangladesh a smart nation, a sustainable digital economy is imperative. A growing digital economy, like Bangladesh, can only be sustained if innovation and regulations work in tandem. Regulation should foster innovation removing unnecessary barriers to fair competition and increasing supervisory oversights to ensure the due roles of digital finance in the economy. The government should ensure a level playing field for all MFS market players and entertain similar innovations on an equal footing.  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.

(The writer is the Editor of THE BANGLADESH EXPRESS and the Chairman of the Bangladesh journalists’ Foundation For Consumers & Investors (BJFCI). He can be reached at dhakamoney@yahoo.com).