How wise is it to go entirely digital?

The call for making financial transactions of the country fully digital has of late reached its crescendo. Experts at an event titled, "Cashless Bangladesh Summit 2025",  organised last week, acclaimed an economy without physical money and made a strong case for Bangladesh going  cashless. To that end, they advised necessary policy support, improvement of infrastructure and undertaking wider adoption strategy and thereby reduce over-dependence on physical currencies.  Notably, the Bangladesh Bank (BB), has charted out a slew of ambitious plans since the previous government to carry out 75 per cent of all financial transactions digitally by 2027. But so far, except for the phenomenal rise in the transactions conducted through Mobile Financial Service (MFS), which according to an estimate amounted to Tk17.37 trillion in 2024, bank customers remained basically loyal  to cash. They use the digital mode simply as a way of transferring cash from their bank accounts to the points where they want to withdraw it through the Automatic Teller Machine (ATM) terminal. But that is nowhere near going cashless. Small wonder that the BB's  efforts at launching online payment systems like Binimoy, TakaPay, Bangla QR code in line with India's Unified Payments Interface (UPI) or China's Alipay or Wichat Pay, did not take off.  Binomy's objective was to create an interoperable digital platform so that seamless and cost-effective fund transfers between banks, Mobile Financial Service (MFS) and Payment Service PS) providers could be made. As expected, the idea was to reduce the financial system's reliance on cash. But thanks to general customers' lack of awareness and the non-cooperation from banks to integrate with the system, the project  ultimately fell through. Similarly, the TakaPay, which  like the international  payment networks, Visa  and Mastercard, was a domestic debit card and a secure payment method operating through the National Payment Switch Bangladesh (NPSB), the BB's digital  payment platform. Financial transactions  through TakaPay could be done through ATMs and Point of  Sales (POS) terminals and other online platforms. Once popularised, it could promote local currency use and replace Visa or Mastercard in payments within the country. That would help save a lot of foreign currency. But for reasons similar to those faced by Binimoy,  it failed to catch the customers' fancy. Similarly, the BB-launched Bangla QR (Quick Response) code, a two dimensional machine readable bar code option that can store more data than the traditional one-dimensional option could also be used as a standardised mode of transactions across  all digital payment platforms and banks. 

But it, like other online payment systems, also failed to gain traction. However, political change and other uncertainties in the economy might have led to these potential digital payment scheme's failure. In fact, the required digital infrastructure was lacking at the banks to make use of the apps to facilitate such transactions. But are we sure, if these digital payment systems could be popularised, our financial system would be foolproof? No doubt, there are many positive aspects of a financial system based completely on digital form of money which does not require a physical space to store, or transports to transfer from one place to another and the central bank doesn't have to print paper currency or mint coins. Obviously, a government could be saved from incurring the costs of producing and handling physical money. Also, the transactions would be faster, more transparent, could be easily traced, monitored and, of course, surveilled. As the transactions are transparent, it would theoretically be harder for corruption to take hold. It is said that in the absence of physical money, there would be fewer instances of  crimes like robbery, burglary, etc.

Well, people who have little access to the banking system, could well be brought under the digital financial network. These are all very good and widely circulated merits of a possible cashless economy.  In fact, advances like biometrics, which measure and analyse an individual's   physical and behavioural characteristics, make copying or other forms of fraudulence real hard. Also, consider the embedded microchips, near field communication (NFC) technology, address verification service (AVS), geolocation, digital wallet and AI-based payment systems. These definitely strengthen security of digital transactions and act as milestones in the march towards a cashless society. 

However, the bitter experience of 2016, when hackers broke into Bangladesh Bank's security architecture and then sent fake fund transfer requests through the SWIFT network  (a secure international messaging service connecting thousands of financial institutions worldwide) to the Federal Reserve Bank of New York.  They were actually able to transfer US$101 million to accounts in Sri Lanka and the Philippines and the money was later laundered through the Philippine's casinos. It exposed the weakness of digital security of the global digital payment network SWIFT  as well as the vulnerability of digital transactions in our financial service itself  when faced with cybercrime. So, as claimed by the advocates of a digital-only, cashless economy, the argument is not really watertight.

 The Covid pandemic (which starting from the third week of December 2019 raged through the world till mid-March 2022)  was instrumental in popularising online financial transactions as it helped avoid physical contact. But that does not mean that people's love for centuries-old paper currency (first used in seventh Century China and introduced in Europe in mid-17th Century) or for the millennia-old the metallic coin (introduced in ancient Lydia of modern-day Turkey in 7th Century BC) would vanish in a jiffy. According to a report published in Britain before the pandemic, up to one in five British citizens could be left behind if a digital-only transaction was established.  If that is the case with a technologically advanced society like Britain, then there is a need for real statistics to gauge how the older educated generation, let alone the little or unlettered masses in the countryside, would fare under a fully digitised financial system. So, the paper currency and metallic coin may not entirely fall into disuse in the near future.

However, such arguments against cashless economy are not meant to infer that the efforts towards digitizing the country's financial transactions, especially payment protocols, are a futile exercise. It must go with the stream of financial technology and adapt to its latest advancements. But at same time, it would be thoughtless to erase the time-tested modes of transactions evolved  over the millennia at one go.

Imagine a powerful solar magnetic storm impacting the Earth's atmosphere or a nuclear war, disrupting or erasing all the world's electronic communications and information storage systems. The indelible metal and paper-based money as well as records and storage systems would then come to our rescue.

God forbid, the world may not have to see such a day!

sfalim.ds@gmail.com