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Dhaka Tribune

The path to financial inclusion

Embracing the dawn of a cashless era can pave the way for a brighter, more prosperous Bangladesh

Update : 28 Apr 2024, 09:08 AM

In today's rapidly evolving digital landscape, the concept of a cashless society is no longer a distant vision but a tangible reality. Bangladesh, much like the rest of the world, is witnessing a seismic shift towards digital financial transactions, spurred on by the global pandemic and accelerated by technological advancements. As we navigate this transformative journey, it's imperative to explore both the promises and the challenges that accompany the transition to a cashless economy.

At its core, a cashless society denotes a mode of conducting financial transactions without the physical exchange of currency notes or coins. This concept isn't novel. But with the proliferation of digital technologies, the cashless revolution has reached unprecedented heights, offering a plethora of payment options ranging from mobile banking to QR code-based transactions.

Spread of payment services

Bangladesh aims for 75% of retail transactions to be settled digitally by 2027, driving its ambition to become a digital powerhouse. The Bangladesh Bank, in collaboration with the Information and Communication Technology Department, has spearheaded initiatives to foster a cashless ecosystem. One such groundbreaking attempt is the introduction of “Bangla QR” -- a universal payment system designed to streamline transactions across banks and mobile financial services (MFS) platforms. This innovative approach ensures that every citizen, regardless of their banking affiliation, can seamlessly participate in the digital economy.

The proliferation of MFS providers like Bkash, Nagad, Rocket, Upay, and others has democratized financial access, empowering millions of Bangladeshis to engage in cashless transactions with unprecedented ease. These services offer a myriad of benefits, from hassle-free bill payments to instant fund transfers, all accessible through the convenience of a mobile device. As evidenced by the exponential growth in mobile banking agents and active users, Bangladeshis are embracing digital finance as a cornerstone of their daily lives.

Growth in numbers

According to data from the Bangladesh Bank, the number of mobile banking agents surged from 971,620 in December 2019 to 1,739,321 by January 2024, representing a remarkable increase of approximately 1.5 times. Similarly, the count of active users of mobile banking accounts witnessed a substantial rise from 346.46 lakh in December 2019 to 837.1 lakh by January 2024, marking a significant surge of about 2.5 times compared to the previous rate.

Moreover, amidst the challenges posed by the Covid-19 pandemic, mobile banking emerged as the primary mode of financial transactions for people across Bangladesh. During the lockdown periods, the reliance on mobile banking soared as individuals sought convenient and safe ways to conduct their financial affairs. Even in the post-Covid-19 era, the trend continues, with daily average transactions witnessing a steady increase year by year.

It's imperative for users, especially those from low-income backgrounds, to be equipped with the knowledge and tools to safeguard their digital assets

Security and awareness

The advantages of a cashless system extends far beyond mere convenience. By eliminating the need for physical currency, transactions become faster, more secure, and environmentally sustainable. The reduced reliance on cash minimizes the cost of currency production and circulation, while also curbing the risk of theft and counterfeiting. Moreover, the digital trail left by each transaction facilitates transparent record-keeping, mitigating the possibility of tax evasion and financial crimes.

However, amid the promises of a cashless future, concerns linger regarding security and accessibility. Instances of digital theft and account hacking underscore the importance of robust cybersecurity measures and user education. While law enforcement agencies strive to combat cybercrime, it's imperative for users, especially those from low-income backgrounds, to be equipped with the knowledge and tools to safeguard their digital assets. Furthermore, ensuring equitable access to cashless services and minimizing service charges are essential steps towards fostering inclusivity in the digital economy.

As Bangladesh marches towards a cashless future, it must navigate these challenges with prudence and foresight. Embracing technological innovations while safeguarding user privacy and financial security should be paramount. Regulatory bodies must collaborate with financial institutions and technology providers to enact policies that promote transparency, accountability, and consumer protection in the digital sphere.

The transition to a cashless society represents a paradigm shift with far-reaching implications for Bangladesh's economic landscape. By harnessing the power of digital finance, we can unlock new opportunities for financial inclusion, innovation, and sustainable growth. However, realizing this vision requires a concerted effort from all stakeholders, including government agencies, financial institutions, technology providers, and, most importantly, the citizens themselves.

ASM Rafad Asgar is a Research Associate, Bangladesh Institute of Governance and Management.

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