Digital payment: a catalyst for cashless economy

With the proliferation of smartphones, mobile apps, and online platforms, peoples have countless options at their fingertips for conducting payments, transfers, and purchases. This transformation in the payment landscape has not only modernised transaction processes but also impacted consumer behaviours, preferences and lives worldwide. Digital revolution enhances the convenience and quality of life for all individuals, irrespective of their educational background or financial status. Accordingly its presence ensures effortless accessibility leading to cost reduction from both the service providers’ and receivers’ end. Moreover, digital payment system is being developed to reshape financial dealings day by day to deal with the behaviour about how consumers interact with money. It encompasses with various methods like contactless payment system, mobile wallets, online payment platforms, mobile cash, QR code etc. These methods have completely transformed the way transactions are conducted, replacing traditional cash-based transactions with more convenient, efficient, and secure alternatives.

On the other side, digital payments have emerged as a transformative force to interconnect the different countries bridging the financial divide and fostering economic empowerment. From bustling urban centres to remote villages, the shifting of payment mechanism is not merely a technological advancement but one of the substances for inclusive growth. This transition is particularly evident in Bangladesh, where digital financial services are reshaping the economic landscape and offering new opportunities for the underserved.

The Symbiotic relationship between digital payments and financial inclusion is multifaceted incorporating the outcomes such as-
• Account Ownership: According to the World Bank, between 2014 and 2021 the share of adults in emerging markets and developing economies using digital payments rose from 35 to 57 per cent, underscoring the rapid adoption of digital financial services worldwide through account ownership.
• Access to Credit: Digital payment histories can serve as credit records, enabling previously unbanked individuals to access loans and other financial products.
• Economic Participation: By facilitating secure and convenient transactions, digital payments empower individuals to participate more fully in the economy, from saving and investing to entrepreneurship.
• Gender Inclusion: Digital financial services have the potential to narrow the gender gap in financial inclusion by providing women with greater access to financial tools and resources. Mostly the initiatives have been grabbed by the Mobile Financial Service (MFS) providers operated in Bangladesh like bKash, Nagad, Upay, Rocket etc.
• Broadening the scope of Domestic Trade: Digital payments not only expand the area as mentioned above, but also enlarge the area of domestic trade as most of the cottage entrepreneurs can explore business opportunity through social websites, the payment mechanism requires the presence of MFS to conduct business from home. It enlarges the scope of business opportunities in large-scale.

GLOBAL LANDSCAPE: DIGITAL PAYMENTS DRIVING INCLUSION: Globally, digital payments are recognised as a catalyst for financial inclusion. According to the World Bank, digital financial inclusion involves deploying cost-effective digital means to reach financially excluded and underserved populations with a range of formal financial services suited to their needs. These services delivered responsibly and affordably, can empower individuals and businesses fostering economic resilience and growth. One of the effective ways of ensuring digital inclusion is digital payments that have become increasingly predominant worldwide. In the United States, 92 per cent of consumers reported using some form of digital payment in 2024, with in-app and in-store digital wallet usage on the rise. In Europe, similar trends are observed, with consumers embracing digital payment methods for convenience and efficiency. Real-time payment systems have further accelerated this trend. A study by ACI Worldwide projects revealed that by 2028 real-time payments could contribute an additional $285.8 billion to global GDP and bring over 167 million new individuals into the formal financial system. The McKinsey Global Institute estimates that digital finance could integrate 1.6 billion unbanked individuals into the formal economy, potentially increasing the GDP of developing countries by $3.7 trillion by 2025. China alone accounts for a large share of global digital payment transactions, driven by platforms like Alipay and WeChat Pay, which processed USD 35.5 trillion in 2022. Asia is also home to a diverse set of economies where digital payments are not only a convenience but a tool for enhancing financial inclusion. India’s Unified Payments Interface (UPI) has seen a surge in usage, with more than 8 billion transactions processed monthly in 2023.The digital shift has been set as a new dimension for continuation of human lifelines since COVID-19 pandemic. This surge not only increased the adoption of digital payments but also narrowed the gender gap in account ownership, providing women with greater access to financial services. Therefore, the rise of digital wallets, contactless payment system, mobile wallets, online payment platforms, and mobile cash, Buy Now Pay Later (BNPL) services, account-to-account (A2A) transfers, and crypto currencies are diversifying payment options, catering to varied customer needs and promoting financial inclusion.

DIGITAL PAYMENTREVOLUTION – BANGLADESH CHAPTER: Bangladesh has witnessed a substantial increase in digital payments. According to Visa’s Network analysis, in 2024 Bangladeshi card users increased their spending by 14 per cent, with the number of transactions rising by 17 per cent compared to 2023. Tap-to-pay transactions more than doubled, accounting for 13 per cent of all Visa-facilitated payments in 2024. Domestic contactless payments alone tripled, indicating a strong shift toward digital transactions. In recent years, Bangladesh has witnessed a notable surge in the use of both credit and debit cards, with digital and online transactions emerging as the primary growth engine. While in-store card usage has seen a steady increase, it is the rapid expansion of e-commerce that has truly accelerated card-based spending across the country. As urban consumers become more digitally savvy, they are using their cards not only for large-ticket items but also for routine purchases such as groceries, food delivery, and digital subscriptions. Moreover, the integration of digital payments into microfinance has enhanced transparency and efficiency. By reducing reliance on cash, microfinance institutions are facilitating better track transactions, minimise risks, and offer more personalized services to clients.

In Bangladesh, the digital financial landscape has undergone a significant transformation. Mobile Financial Services (MFS) have been at the forefront of this change, with platforms like bKash, Nagad, Upayand Rocket etc. bKash as a leading MFS, has become an integral part of daily life for millions since 2011, offering services ranging from money transfers and bill payments to savings schemes and digital loans. According to Bangladesh Bank, the number of MFS accounts in Bangladesh were 2,404.66 lac (customer plus merchant), with the average daily transaction in BDT5,883.08 crore and total number of transactions per day 6,713.41 lac approximately at the end of February 2025. These platforms have been instrumental in bridging the financial inclusion gap, especially in rural and underserved areas. The government of Bangladesh has been proactive in promoting digital payments. The National Digital Payments Roadmap outlines strategies to digitise government-to-person (G2P) and person-to-government (P2G) transactions, aiming to ensure financial services are accessible and affordable for all citizens.

Despite these progress, some challenges also persist in the economy of Bangladesh on the following issues.

• Digital literacy and access to finance: A significant portion of the population, particularly women, faces barriers due to limited digital literacy and access to affordable internet services.
• Security concerns: Enhancing data security and building trust in digital platforms are critical for sustained adoption.
• Infrastructure development: Strengthening digital infrastructure is essential to support the expanding digital payment ecosystem.

In conclusion, digital payments are pivotal in advancing financial inclusion, offering scalable solutions to bridge economic disparities. Bangladesh’s proactive approach serves as a model for integrating digital financial services to empower underserved communities. Continued investment in infrastructure, education, and security will be vital to harness the full potential of digital payments in fostering inclusive economic growth.

Aminul Haque Russel is a PhD fellow, Jagannath University and Assistant Professor, Daffodil Institute of IT (DIIT). Sanjoy Pal is a banker and certified Financial Modeling & Valuation Analyst (FMVA®). pal.sanjoy25@gmail.com