In line with automation of the banking service, domestic payment system automation has been introduced with Bangladesh Automated Clearing House (BACH), which includes Bangladesh Automated Cheque Processing System (BACPS) and Bangladesh Electronic Funds Transfer Network (BEFTN).
The landmark mobile financial services (MFS) offered by the commercial banks in collaboration with telcos and other partners/agents and Bangladesh Post Office.
The M-commerce is also offering railway ticket sales and sales of cricket match tickets etc.
The world is moving very fast with IT technology.
The IT exporters and the wage earners are looking for quick and secured service for inward payments.
Such a service gateway is a single access point and acts as a proxy for multiple services.
A service gateway enables transformations, routing, and common processing across all the services.
A service gateway module is a single mediation that handles the requests for multiple service consumers and providers.
E-commerce is also picking up with the online payments from home and abroad for online shopping using cards to merchants who maintain a digital shop/web store to sell the products and services through a secure web interface and online utility bill payment to the service providers by their clients.
The national payment switch of Bangladesh (NPSB) facilitates electronic payments originating from different local delivery channels e.g. ATM, POS, internet, mobile phones, etc to ensure interoperability.
They are facilitating the expansion of the card-based payment networks substantially and promote e-commerce/m-commerce/e-payment gateway throughout the country.
Bangladesh Bank support
Earlier, the Bangladesh Bank also took a similar decision to support online IT service providers and bring their payment through services provided by the online payment gateway service providers (OPGSPs).
It was decided earlier to allow authorized dealers (ADs) to offer the facility of repatriation of remittances against small value service exports in non-physical form such as data entry/data process, off-shore IT service, business process outsourcing etc.
Under this initiative, the exporters of the above services will be able to receive their overseas payments through the OPGSPs such as Paypal, MoneyBookers, Best Payment Gateway and Virtual Pay online platforms.
The central bank's FE circular No 44, dated December 28, 2017 and its subsequent circulars in terms of which ADs are allowed to repatriate remittances through OPGSPs against small value service exports for which ADs can enter into standing arrangements with internationally recognized OPGSPs.
Cross-border transactions
A payment gateway is an online platform, which facilitates acceptance of payments electronically through various available options like credit card, debit card, bank transfer and real-time bank transfer based on online banking.
The role of payment gateway in facilitation of payment acceptance online makes them an essential element of the e-commerce industry.
For facilitating cross border transactions, OPGSP has emerged as a successful service model for not only facilitating conclusion of the transaction, but it also allows exporters to retain the export proceeds abroad without resulting in violation of the foreign exchange law of the respective country.
Even the payment against invoice amount of exported goods can be received through OPGSPs and BB may allow such transactions.
Bangladesh Bank (BB) recently allowed MFS providers to bring wage earners' remittances to Bangladesh as per the circular no 34 dated November 29, 2022 under caption of “Inward wage remittances by Mobile Financial Service Providers (MFSPs)”.
Inward wage remittance through mobile financial services gets more freedom and becomes easier under certain conditions that require no permission from Bangladesh Bank.
The circular issued in reference to the FE Circular No. 20 of August 10, 2022 in terms of which ADs are allowed to make drawing arrangements with exchange houses abroad without prior permission from Bangladesh Bank.
ADs are also allowed to go for drawing arrangements without letters of references/certificates from the Bangladesh Embassy/High Commission of the respective country.
“To bring wider flexibility, licensed MFSPs will be allowed to repatriate wage earners' remittance in association with internationally recognized OPGSPs or banks or digital wallets or card schemes and/or aggregators abroad (hereinafter referred to as approved or licensed foreign payment service providers, foreign PSPs),” said a BB circular issued.
In this context, the BB said, MFSPs shall have standing arrangements with foreign PSPs to receive foreign currency in their account and equivalent taka value will be credited to the wage earners' MFS accounts.
Subsequently, foreign PSPs shall provide credit to the designated AD's Nostro account.
After receiving the amount in taka, wage earners' can use the MFS account from abroad to do all transactions in Taka.
Wage earners can open an MFS account in Taka through proper e-KYC along with validated proof of departure from Bangladesh (arrival or departure date stamped page of the passport).
The MFS boom
Bangladesh rolled out MFS in 2011.
Since then, the service has exploded in the country.
At present, 13 MFS operators are providing services to more than 180 million account holders who are transferring nearly Tk3,000 crore daily.
MFS may play a remarkable role for remittance from other countries both for export and repatriation from expatriates.
The outsourcing online service providers have targeted the export of service worth 1 billion and 51% i. e. about $25billion of earnings of the expatriates are brought in by Hundi.
Both the IT service providers and the wage earners need quick and secured payment service by MFS with the active support of other online service providers such as Paypal, Moneybookers, Best Payment Gateway and Virtual Pay online platforms.
For facilitating cross border transactions, OPGSP has emerged as a successful service model for not only facilitating conclusion of the transaction, but it also allows exporters to retain the export proceeds abroad without resulting in violation of the foreign exchange law of the respective country.
The wide use of MFS for remittance may revalorize the foreign exchange market enhancing inward remittance in the critical situation of shortage of foreign exchanges.
The service exporter and online ICT service providers were demanding for facilitating the remittance of export proceeds and service charges.
Although late, the initiative will facilitate the service export.
The service of online gateways has some challenges.
Bangladesh is yet to pass a draft Payment System Act.
Due to lack of an appropriate law, the central bank may lack proper oversight and governance.
The dispute resolution is another challenge due to absence of a comprehensive law.
The regulator and bankers also lack knowledge and experience.
The author is a legal economist and also non-government adviser at the Bangladesh Competition Commission. He can be reached at mssiddiqui2035@gmail.com