Analysis of the Current Situation and Regulatory Policies of the Payment Industry in Bangladesh

The payments industry in Bangladesh has grown rapidly in recent years, but still faces challenges such as inadequate infrastructure and a pending regulatory framework. The following is an analysis of the industry's current development and regulatory policies:

I. Status of the payments industry

1. Market size and growth

   • E-payment transaction volume grows 351 TP3T YoY in 2023, mobile wallet users cross 40 million (RBI data)
   • Digital payment penetration still under 20%, cash transactions account for over 75%
   • bKash (Ant Group's stake) holds a 65% share of the mobile payments market, followed by Nagad (state-owned) and Rocket

2. Key participants

   • Bank-led: More than 30 commercial banks offer internet banking services
   • non-banking organisation:: 15 licensed PSPs (Payment Service Provider)
   • international player: Alipay and WeChat Pay have access to some cross-border scenarios

3. Innovative directions

   • Agent Banking model (Agent Banking) covering rural areas
   • Dhaka Pay", an NFC-based transport card, is being piloted.
   • Central bank digital currency research enters second phase

II. Regulatory policy framework

1. Core legislation

   • Payment Systems Bill 2021: establishing absolute regulatory powers of the Central Bank
     • Minimum registered capital of PSP Tk 5 crore (about US$ 4.5 million)
     • Foreign shareholding cap of 60% (subject to case-by-case approval)

2. Recent Important New Policies(2023-24)
   ① KYC Enhancement: Biometric Verification Made Mandatory
   ② rate control: P2P transfer fees shall not exceed 0.5%
   ③ QR standard harmonisation: implementation of the NPQR national standard code

3. Cross-border payment management
   under strict exchange controls:
   Exporters can retain 50% foreign exchange earnings
   Annual digital services purchase limit of $500 for individuals

4. Sandbox mechanism
Innovations in testing:
Blockchain-based letter of credit system
Optimisation of cross-border remittance channels for migrant workers

III. Challenges and opportunities Challenges and opportunities
|areas|main challenges|potential opportunities
|—|—|—|
Technology Infrastructure |4G Coverage Only 45% |USSD Channels Sinking Markets |
Compliance Costs |High AML Audit Frequency |RegTech Solutions |
Market Competition |State-run platform price war |Segmented scenarios deep ploughing (e.g. education payment) |

Suggested directions to follow:

• B2B Supply Chain Finance Tool Development
• DFA (Digital Farmer's Account) ecological construction
• GP/Apple Pay Localisation Alternatives

Note: Latest developments indicate that the RBI is proposing to launch an open API framework in 2024Q4, which could reshape the industry landscape. Foreign investors need to pay special attention to the new requirements for data localisation in the draft Digital Economy Bill.

IV. In-depth analysis of payment industry segments

1. Mobile Wallet Market Landscape and Competitive Landscape

The mobile wallet market in Bangladesh is controlled by three dominant players:

• bKash (market share 65%): Strategic investment by Ant Group, covering over 250,000 agent locations, focusing on P2P transfers and microfinance.
• Nagad (market share 22%): State-owned background, expanding rapidly with a low fee policy and surpassing 20 million users by 2023.
• Rocket (part of Dutch-Bangla Bank): Focus on corporate payments and payroll operations.

🔹 emerging challenger::

• Upay (launched in conjunction with Telecom) - focuses on cross-border remittance scenarios
• Tap & Pay (Visa's partnership programme) - promoting NFC near field payments

2. Upgrade of the interbank clearing system

The Central Bank-led Real Time Gross Settlement System RTGS has realised the following improvements:
✅ Transaction processing time reduced to less than 10 seconds
✅ Support API direct connection to enterprise ERP system
⚠️ Existing problems: Excessive access costs for small and medium-sized banks, leading to uneven utilisation

3. B2B payment innovation cases

• Chaldal (fresh produce e-commerce): development of a supply chain "pay-as-you-go" credit payment tool
• Pathao (logistics platform): instant settlement system for drivers' fuel costs

V. Regulatory trends (2024-2025)

💡 Noteworthy legislative processes::

1. Amendments to the Digital Security Act - biometric logs may be required to be retained for electronic transactions
2. CBDC Roadmap - Wholesale Digital Currency Priority Pilot

VI. Suggestions for Foreign Investment Entry Strategies

For international payment organisations wishing to enter the Bangladeshi market:
1️⃣ The joint venture model is superior to wholly owned : Seek local bank/telecom operator partnerships to reduce compliance risk
2️⃣ strategy of encircling the city from the countryside : Penetration outside Tier 2 cities through correspondent banking network
3️⃣ Examples of differentiated positioning ::

• Amazon Pay could target cross-border e-commerce settlement pain points
• SaaS embedded acquiring solutions available for Stripe-type businesses

🚨 red line warning :: Avoid scenarios involving sensitive financial flows such as religious donations (Zakat)

For more detailed analyses in a specific area (e.g., details of cross-border remittance regulation), please let me know how I can proceed.