From notes to digital: a five-year summary of Bangladesh's payments transformation

introductory

The payments industry in Bangladesh has undergone a sea change in the last five years. With the proliferation of mobile internet, advances in fintech and government policies, the country is gradually shifting from reliance on cash transactions to a digital payment model. In this paper, we will review the key developments of these five years, analyse the factors influencing the digital transformation and look at future trends.

I. Starting point for payments in Bangladesh: a highly cash-dependent economy

Until 2018, Bangladesh remained a cash-dominated economy. According to the World Bank, more than 901 TP3T of transactions were still done through banknotes at that time. Despite the size of the banking sector, the process of cashlessness was hampered by low financial service coverage in rural areas, a limited number of ATMs and a lack of trust in e-payments among the population.

1. Limitations of traditional banking

• Uneven distribution of outlets
• High ATM cash withdrawal fees
• Cumbersome KYC (Know Your Customer) process

2. The microtransaction dilemma

Due to the lack of convenient digital payment tools, everyday small transactions (e.g. market shopping, transport costs, etc.) rely almost exclusively on cash circulation.

II. Turning point: the dual drive of policy and technology

A range of policies and innovative technologies are beginning to drive change from 2019:

1. Accelerating the implementation of the "Digital Bangladesh" strategy

The government has launched the 'Digital Bangladesh' programme (Vision 2021), which focuses on, among other things:

• MFS licence issuance(Mobile Financial Services): The rise of platforms such as bKash and Nagad.
• NID Binding Enforcement: Require all mobile financial accounts to be linked to a National Identity Card (NID) for increased security.
• Reduced transfer costs: The Central Bank has imposed a cap on interbank transfer fees.

2. The explosive growth of bKash

As a leading local mobile wallet service provider:
Subscriber base grows by 3,00% to top 60 million in 2019-2023.;
Introduced QR code payment technology through a partnership with Alipay;
Supports utility bill payment and payroll functions.

(Comparative table of data)

vintages	Active users (millions)	Average daily turnover (Taka billion)
2018	18	12
2023	62+	45+

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III. Key challenges and responses

Despite the remarkable progress, there are still resistance to transformation.

(a) Frequent cybersecurity problems

For example, in 2022 a third-party app vulnerability led to the theft of more than 2,000 accounts - the regulator subsequently introduced a Biometric Authentication Code to strengthen risk control.

(b) Low acceptance in rural areas

Solutions include.
-Expansion of the agent network to the township level.
-Establishment of a training centre at the Upazila level.

(c) Inefficient cross-border payments

The recent pilot of RippleNet technology is expected to improve the speed of remittance processing.

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IV. Projections of future trends

Based on the current situation, the future is likely to be characterised by the following.

✅ CBDC Pilot Launch

RBI digital currency expected to be tried and tested first in Dhaka ;)

✅ Wave of Super App Integration

The "one-stop platform" similar to WeChat Pay will integrate taxi/takeaway functions.

✅ Biometric penetration

Fingerprint/face authentication instead of traditional passwords.

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# Conclusion

In the past five years, from street vendors refusing to accept electronic payments to food markets full of QR codes - this change is not only a technological upgrade but also a change in mindset. Although it will take some time to achieve a completely cashless society, the path is clear: continuous optimisation of infrastructure and enhancement of digital literacy of the whole population can achieve true financial inclusion.

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V. Diversification of the payment ecosystem: from a single wallet to open banking

With the popularity of mobile payments, the fintech ecosystem in Bangladesh is gradually evolving towards a more open system. Over the past five years, in addition to headline players such as bKash and Nagad, emerging digital banks, API-driven financial services, and cross-border payment solutions have accelerated their presence.

1. The rise of digital banking

After 2020, the Central Bank of Bangladesh started issuing digital banking licences (e.g., "DigiBank BD"), which allow financial institutions operating purely online to provide deposit, lending and wealth management services. The features of these institutions include:

• No physical outlets: Reduce operating costs and improve accessibility;
• AI Risk Control Models: Use big data to analyse users with low credit histories;
• Embedded Finance (EF): Provide instalment services in collaboration with e-commerce platforms.

2. The emerging trend towards open banking

Inspired by India's UPI (Unified Payment Interface), some financial institutions in Bangladesh have started exploring open API architecture:

• Allow third-party developers to access the account system;
• Enabling cross-platform fund transfers;
• For example, aggregator payment gateways such as PayWell already support instant settlement from multiple banks.

(Case comparison)

paradigm	Representative companies	key function
Traditional MFS	bKash	P2P transfers/bill payments
digital banking	DigiBank BD	Savings/Microfinance
open API	PayWell	Cross-agency real-time clearing

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VI. Social impact of financial inclusion

Digitalisation has not only changed the way transactions are conducted, but has also given a deeper boost to economic inclusiveness.

📈 Facilitation of MSME financing

Supply chain finance platforms such as "ShopUp" provide credit facilities to retailers based on transaction flows

👩‍🌾 transparency of farmers' incomes improved

Agricultural subsidies paid directly to e-wallets to reduce intermediation

Increased female economic participation

Women's share of registered mobile wallets reaches 371 TP3T in 2023 (only 191 TP3T in 2018)

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VII. Positioning and challenges in a global perspective

Compared to its neighbours, Bangladesh still has gaps but great potential.

🔍 Benchmarking India (UPI averages 8 billion transactions per month)

→ Need to accelerate the construction of a real-time settlement system at the national level

🔍 Compare Indonesia (Gopay + OVO duopoly)

→ Local market not yet fully integrated

Core shortcomings.
❌ 4G network coverage is only 65%
❌ Cash-dependent inertia is hard to overcome (cash/GDP ratio still over 50%)

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# Future Outlook:Can we become a cashless society by 2030?

If the current rate of growth is maintained, key milestones could include.

✔️2025:MFS penetration rate exceeds 80%
✔️2027:Launch of Central Bank Digital Currency (BDT-CBDC)
✔️2030:Cash transaction share falls below 20%

Achievement of the objective will require.
✅ Ongoing government policy incentives (e.g., tax breaks to encourage merchants to accept electronic payments)
✅ Private sector innovation (biometric/voice payment technology on the ground)
✅ Consumer Habits Development (Youth Financial Education Programme)

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concluding remarks

This transformation is far from over - from QR codes in vegetable markets to cross-border blockchain remittances, every advance is reshaping the financial DNA of this emerging South Asian economy.In the next five years, we may be witnessing a new era of smarter and fairer payments in Bangladesh.

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