Imagine walking into a neighbourhood shop in Stockholm and reaching for a banknote to pay. You may be surprised when the cashier politely tells you that cash is no longer accepted. What still seems unimaginable in Bangladesh has become an everyday reality in many parts of the world. The rapid rise of digital payments is transforming not only how people buy goods and services but also how entire economies function. Countries such as Sweden, Norway, China and South Korea have emerged as global leaders in the transition to cashless societies, where payment cards, mobile wallets and QR code-based platforms dominate everyday transactions. People can go about their daily lives without carrying or using cash.
Wider adoption of cashless transactions benefits both the individuals and the economy. For consumers, digital payments are faster, safer and more convenient than carrying physical cash. It eliminates the hassle of finding small change, dealing with worn-out banknotes or worrying about counterfeit currency and theft. For businesses, digital payments simplify transactions, improve record-keeping and reduce the risks associated with handling large amounts of cash. At the national level, it helps curb tax evasion by making it more difficult to conceal financial activities. Moreover, it reduces the government's cost of cash management, including the printing, distribution, transportation, security and replacement of banknotes.
In Bangladesh, however, cash is still the king, making up 67.2 per cent of total transaction in 2025, according to Bangladesh Bank. Although digital transactions have grown rapidly over the past decade, largely driven by the expansion of mobile financial services (MFS), much of this growth has been came from in cash-out services rather than digital payments. For most users, MFS serves as a convenient channel to send money, which is then withdrawn in cash instead of being used directly to pay for goods and services. As a result, MFS providers have functioned more as facilitators of cash movement than as drivers of a cashless economy. A transaction can be considered digital only as long as the money remains within the digital ecosystem and is used to pay for goods and services without being converted into cash.
The desired growth in cashless transactions has remained elusive for several reasons. Foremost among them is the low acceptance of digital payments by merchants, particularly small and informal retail businesses that continue to rely almost exclusively on cash. At the same time, the fragmented nature of the country's digital payment ecosystem was another bottleneck, where merchants displayed different QR codes issued by different MFS, while customers could make QR payments only at outlets displaying the QR code of their own service provider. For example, a bKash user could pay only at merchants accepting bKash QR codes, while Nagad and users of other MFS platforms faced similar restrictions. This lack of interoperability created unnecessary inconvenience for both merchants and consumers, discouraged wider adoption of digital payments, and ultimately slowed the transition towards a cashless economy.
Against this backdrop, Bangladesh Bank made Bangla QR, an interoperable Quick Response (QR) payment collection system, mandatory for all banks and MFS from June 1. At the same time, all commercial establishments and merchant outlets have been instructed to display and use the Bangla QR code. The central bank has even warned that failure to adopt the national QR code could land businesses in trouble when renewing their trade licenses.
As per the central bank's directive, banks and MFS providers that previously used their own QR codes have now replaced them with Bangla QR. As a result, the country's digital payment ecosystem has been unified under a single interoperable platform. Customers can now make digital payments seamlessly across different platforms using a single QR standard, regardless of whether they use a banking app or an MFS service such as bKash, Nagad or Rocket. This unified platform is expected to encourage wider adoption of digital payments, and accelerate transition towards a cashless economy.
However, just as the mandatory rollout of Bangla QR was poised to boost cashless transactions, the regulator fixed a minimum Merchant Discount Rate (MDR) of 1 per cent for Bangla QR merchant payments. Strangely enough, this 1 per cent MDR is a minimum, not a maximum, which means no banks or payment service providers can offer a lower charge. Before July 1, some banks were reportedly acquiring QR merchants at rates ranging from Tk 7 to Tk 9 per thousand. The new rule has, in effect, banned such price competition.
The 1 per cent fee is deducted directly from the shopkeeper's earnings. For a Tk 1,000 purchase, the customer pays Tk 1,000, but the shopkeeper receives about Tk 990; the remaining Tk 10 is retained by the processing bank or MFS provider as a service fee or merchant discount rate (MDR). This mandatory cost frustrates small traders, many of whom operate on razor-thin profit margins. Consequently, many small traders are refusing to accept QR payments or are passing the additional cost on to consumers.
Fixing the MDR at such a high rate defies logic at a time when the government is aiming to encourage cashless transactions. Bangladesh has one of the lowest rates of cashless transactions, but it has set one of the highest fees for such transaction. In many countries where QR-based transactions have experienced a boom, the MDR is much lower, or the service is even free. Take India's UPI as an example: merchant payments are free, which has accelerated widespread adoption. The result is: more than 731 million QR codes in circulation, which processed over 241 billion UPI transactions in FY2025-26.
Experts therefore argue that the MDR should be reduced to 0.5 per cent or abolished altogether, at least for small-value QR transactions. If the Bangladesh Bank thinks eliminating the MDR would place an undue burden on banks and MFS providers, it could temporarily subsidise them instead. The central bank reportedly spends around Tk 200 billion each year on cash management. So, wider adoption of cashless transactions would significantly reduce this expenditure. So, instead of discouraging digital payments by imposing high charges, policymakers should foster a digital payment ecosystem where transactions are not only free, but also secure and seamless.
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