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The government has been encouraging people to conduct financial transactions digitally using debit and credit cards, mobile financial service(MFS), mobile wallet, etc., and thus fast move towards a cashless economy. Still, the use of cash is showing no sign of declining in Bangladesh. At a discussion event titled 'Cashless Summit 2025', Debapriya Bhattacharya of the local think tank, Centre for Policy Dialogue (CPD), in a keynote highlighted the advantages of a cashless economy. The advantages include, for instance, increase in efficiency, bringing informal economic activities into the formal sector (recognition and regulation of those by the government), making financial services accessible to more people and businesses, reducing cost of transactions and improving connectivity with the global economy.
In fact, digital financial transaction was introduced though Mobile Financial Service (MFS) in the country first in 2011. The Bangladesh Bank (BB), provided the framework under which banks and non-bank financial institutions began to offer these services. Notably, the Dutch-Bangla Bank's 'Rocket' was the first MFS platform, followed by bKash. Others like Nagad also entered the MFS market. But how far have such digital systems of fund transfer could reduce the use of physical currencies like bank notes? The BB Governor, Ahsan H Mansur, who spoke at the discussion informed that even with the increase in digital transactions, the use of cash has been increasing. The digital platforms are used simply as a vehicle to transfer cash. But this goes very much against the spirit of a digital economy, which envisages a falling rate of transactions by cash. Had the people used the digital platforms also to make payments for buying goods and services, paying bills and so on, the use of cash money could be gradually reduced. But reports have it that only 4.5 per cent of such transactions are being done for merchant payments. In 2024, the total number of MFS transactions, according to the presentation made at that discussion event, reached 17.37 trillion, which is about 50 per cent of the country's GDP and, overall, 84 per cent of the banking done digitally (56 per cent of those done online, while 28 per cent through MFS) and 47.8 per cent of the population used MFS wallets. Internet banking usage stood at 44 per cent and card usage at 30 per cent.
Through certain government initiatives such as using MFS to distribute social security net allowances and scholarships, enabling taxpayers to pay their taxes and the citizens their utility bills digitally, leakages could be reduced and efficiency of such transactions improved significantly. Even so, overall, Bangladesh's digital adoption remains partial and uneven and is marked by overreliance on a handful of platforms like bKash and Nagad and underuse of interoperability systems. Interoperability of digital platforms is about the ability of different systems and applications to send and receive data securely and automatically, share and understand the information being exchanged. In this connection, the BB has meanwhile announced that interoperable fund transfer among banks, MFS and payment service providers (PSPs) would officially start from the next month (on November 1). Obviously, this is a move to reduce dependence on cash and develop a seamless digital payment ecosystem. Users will thus be able to transfer money across digital platforms like bKash, Nagad, Rocket and also between MFS wallets and traditional bank accounts. Notably, all such transactions will be routed through the National Payment Switch Bangladesh (NPSB), which is a centralised electronic platform launched by the BB enabling real time interoperability among the country's banks. Hopefully, this move by the central bank would, to some extent, overcome a critical barrier to a cashless economy. However, alongside this move to establish interoperability among various digital platforms including banks, the government should also take steps to increase digital literacy among the country's workforce, 84.9 per cent of whom are engaged in the informal sector of the economy. Their accessibility to the banking system is also low, which needs to be improved. But all the promises made by the government that it would build a cashless economy will ring hollow so long as the internet service is poor and the power infrastructure remains outdated.
Against such a backdrop, it is not surprising that users still overwhelmingly depend on MFS like bKash and Nagad to transfer only cash, while the banks spend Tk2.6 billion annually for handling cash.
To meet customers' demand, the central bank, on its part, is being compelled to print money. As the demand for cash is growing at least by around 10 per cent annually, the central bank has to spend to the tune of Tk 200 billion to print the cash every year. The economy could be spared this humongous extra cost, if the volume of cashless transactions could be increased.
However, these are but the expectations of those who, including the government, want a faster transition to a cash-free society. But to reach that end the challenges have to be understood and overcome. The perception that the people who have low level of digital literacy are the main barrier to rapid transition to cashless economy is wrong. In Bangladesh where black money, rampant corruption and the culture of tax evasion are prevalent among the rich and the educated, one cannot expect that they will ever allow their ill-gotten wealth to become visible. That is because, digital mode of transferring and storing money would make wealth visible to the government, a prospect they would avoid at all costs. According to an IMF report of 2015, the size of Bangladesh's shadow economy was equivalent to Tk4,532.71 billion. Undoubtedly, that is a colossal amount compared to the size of the entire economy a decade back. With the increase of the size of the visible economy increasing, the invisible part, too, has increased manifolds during the past 10 years. Without concrete steps from the successive governments to address the issue, the wealth of the rich remains mostly beyond the reach of digital modes of transaction. As a result, the government will continue to print more cash money to meet the demand of both the black and mainstream market. But there is also the need to increase the common people's trust in the digital platforms at present conducting their business. To this end, the MFS need to reduce their service charges, which, according to a study by the Transparency International, Bangladesh (TIB), is 7.0 to 15 times higher than that of the commercial banks. There are also reports of money laundering, transaction of bribe, online gambling and cryptocurrency transactions using MFS. These digital platforms need also to come clean on such allegations to win public trust so their business could further be expanded.
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