The Bangladesh Bank plans to promote digital banking to encourage the broad adoption of financial products and services as it looks to accelerate financial inclusion, thus moving the country towards a cashless society.
The central bank has made a significant effort to develop a modern digital payment system over the last decade.
The digitalisation of the banking sector, the popularisation of mobile financial services (MFS) and agent banking, the rise of online-based banking services, the introduction of payment systems operators (PSOs) and payment service providers (PSPs), and the full interoperability of the financial sector, specifically the introduction of interoperable digital transaction platform “Binimoy” are some of the critical initiatives to impact the onboarding and transaction behaviour of end-users.
“However, as expected by the central bank, these accounts are yet to spark the broad adoption of the whole spectrum of financial products and services,” said the BB in its monetary policy statement yesterday.
“Against the backdrop, the banking sector is considering a new wave of technological innovation, digital banking, in ways that could lead to a deeper level of financial inclusion, moving towards a cashless society and thereby economic activities would be augmented.”
It said that country-wide spread mobile networks, availability of electricity, new financial technologies, transformative business models, and the government’s eagerness to digitalise government-to-person (G2P) payments act as the catalyst to enable better access to financial services. The same infrastructure has encouraged the BB to introduce end-to-end electronic processing of banking activities or transactions, known as “digital banking.”
It will accommodate different segments of the population so that the unbanked become banked and get faster access to finances at a lower cost.
The BB said the low-income segment and many short-term borrowers are still dependent on the informal sector.
“Institutionalising these services through digital banks, effective regulations, and a resilient and robust technological background will help stabilise the financial sector, bringing people’s trust to the formal banking sector.”
An easily accessible, low-cost real-time digital banking system will also help create an environment conducive to financial inclusion, said the central bank.
The central bank’s comments point to its keenness about allowing digital banking, said a number of bankers yesterday.
“In fact, we are all moving in the direction of digital banking because digitalisation is the future,” said Syed Mahbubur Rahman, managing director of Mutual Trust Bank Limited.
He said digitalisation would make the financial sector cashless, increase transparency, eliminate customers’ necessity to visit branches, deepen inclusion, and cut theft.
Generation Z – those born roughly between 1997 and 2012 – is the future of banking and products and services have to be aligned as per their requirements, according to Rahman.
Naser Ezaz Bijoy, chief executive officer at Standard Chartered Bangladesh, said: “This is clearly a positive development and step in the right direction.”
The benefit of reduced cash transactions and digitalisation of payment systems are immense and can address the fundamental challenges against transparency, inclusion, improvement of revenue collections and simplifications once implemented in a meaningful and sustainable manner with appropriate safeguards against cyber-securities and data privacy/protections, he said.
In order to realise the real potential value of digital banking and payment systems, the banking ecosystem and national identification, the Credit Information Bureau, and the customs and tax systems need to be integrated, according to Naser.
“Clearly, it is a journey that needs to be implemented carefully and at the right synchronisation. We are delighted to see a progressive approach and clear statement of intent from the central bank. Now all stakeholders need to collectively move towards execution.”