Building Payment Ecosystem for Digital Bangladesh | The Daily Star
12:00 AM, August 19, 2018 / LAST MODIFIED: 01:03 AM, August 19, 2018

Building Payment Ecosystem for Digital Bangladesh

Banks request Bangladesh Bank to promote an open, interoperable and inclusive payment ecosystem in the country

The Daily Star and Association of Bankers, Bangladesh (ABB) organised a roundtable titled “Building payment ecosystem for digital Bangladesh: Challenges and opportunities” on July 30, 2018. Here we publish a summary of the discussion.

Pial Islam, Managing Partner, pi Strategy Consulting & Moderator of the session

A 2016 report showed that about $30 billion was transacted on a monthly basis, among which only about 12% went through digital means, the remaining 88% went through as cash. These statistics indicate an amazing opportunity for digitisation of payment system in Bangladesh.

The percentage of digital money has gone up by 50% (now standing at 18%). Two key drivers propelled this number: (1) Mobile Money (Number of users, transaction volumes) (2) Initiatives from the Government (P2G, E-Governance, G2P, E-Government Payments). The country is on the right track, according to these statistics, in moving towards 'Digital Bangladesh.'

Mahfuz Anam, Editor & Publisher, The Daily Star

The whole payment ecosystem consists of two 'C's: convenience and confidence. People opt for digital payment system because it is convenient. People resist going for this payment system because they lack the confidence in it. People will slowly lean towards it because of the convenience factor. We must provide a condition in which people will feel much more confident. 

95% of the e-commerce is cash-based. Being a reasonably educated man, I myself do not use the digital payment system. The closest I come to it is when I use my credit card. It took several hundred years for societies to go from barter to money. A whole psychological transformation had to take place for people to be okay with giving up the concept of barter. It took time for people to trust money itself. Now, people are being asked to forget money and put that belief into a mechanised system. 

It must be established that we cannot take as much time in making this process more acceptable to people as was the case with money in the first place. The world is moving at a rapid speed and Bangladesh must be in line with that. To make the e-commerce process convenient, we need a modern and effective regulatory system. A proper legal framework for this to operate is a number one priority. Bangladesh Bank, and all concerned financial institutes, are working towards this. A secured technological platform is needed as well. Incidents of the past, in relation to Bangladesh Bank (BB), do make the public lose some confidence in the system. These factors need improving and can be enhanced in order to provide a level playing field in creating a competitive environment between service providers.

As a representative of a newspaper, I can say that we can be of great help in being a partner of these initiatives. Media can be much more straightforward than bankers or financial institutions. Please help us learn the basics so we can reflect on the appropriate regulatory system and legal framework needed. It would assist Bangladeshi policymakers in familiarising themselves with the total procedure. Also, building public confidence is crucial and The Daily Star can play a pivotal role in that, as it has done with other initiatives in the past.

Syed Mahbubur Rahman, Chairman, ABB & Managing Director, Dhaka Bank Limited

Only about 12 million people use debit cards in the country, and approximately 1 million use credit cards. This dependency on cash will undoubtedly change as the economy matures with time. The e-commerce market, currently valued at Tk. 400 crore per year, is also on the rise and is expected to grow with time. Almost 90 % of all e-commerce transactions are 'cash on delivery'. This can be a huge opportunity for the growth of digital payment methods.

In terms of opportunities where digital payment ecosystems can significantly contribute to government payments, remittance and e-commerce are key areas. In the garments sector, crores of taka are being handled in cash, which is very risky. Such transactions must also be brought under the digital payment system.

We must appreciate the role of Bangladesh Bank in driving the growth of a digital payment ecosystem by establishing a forward-looking regulatory mechanism.

Early days of the digital payment ecosystem were helped by card-based payment mechanisms. Now, Mobile Financial Services (MFS), digital wallets and app-based payment mechanisms are flourishing day by day. Banks are also launching digital payments. With the rise of many avenues of digital electronics payments, it is also important to make them more sustainable and trustworthy.

We face numerous challenges as well such as infrastructure development, adaption, security, time and cost. Digital payment systems require long-term investments. It becomes difficult to get our board of directors on board in such long-terms plans, as they usually look for immediate recovery of their investment. 

Many customers still do not feel comfortable in using digital payment methods. That's why we need to invest more in creating awareness among general public about the benefits of digital payment system. It is a convenient system for both customers and governments to receive funds in a quicker manner. In addition, it is something which creates the velocity of money.

We need to embrace global practices along with the local payment system. Any kind of restrictive measures will discourage innovation and competitiveness in the payment industry. Moreover, the community will not evolve in this sector if we do not adapt to the new methods which are available to us. I would like to request Bangladesh Bank to relax its mandatory policy of routing all card transactions through the National Payment Switch Bangladesh (NPSB). If the NPSB collapses for any reason, the entire banking transaction system will be disrupted. Single point of failure is always risky. I request Bangladesh Bank to give the option to the banks to choose the routing route for all domestic card transaction through NPSB or international schemes.

If 117 million people in the country are using mobile phones and 65 million people are using the internet, then it is high time that that we make the leap towards digital payment system.

Tom Crawford, Public Policy Advisor, FTI Consulting

The proliferation of mobile technology is essential. Smart phones are game changers from the standpoint of being able to deploy digital payment systems at scale. They help these systems to work proficiently and educate citizens digitally. Smart phones have created a bridge between the people and digital payments, thus saving Bangladesh from having to build an infrastructure.

The world is now able to communicate through the digital world. Alibaba and Amazon are platforms which provide products and services worldwide via digital payment. Today, globalisation means that everyone in the world participates and takes part in economic or political considerations. It isn't just financial inclusion but an idea of all societies being linked into one powerful infrastructure: The Big Digital Economy.

The next observation I can make is security threats. One of the biggest mistakes I see around the world is a nationalistic trend where governments want to take sole responsibility for security. The nature of these threats is global. We need a global approach to security which is collaborative. The private sector, government, NGOs and multi-lateral organisations all need to work together to find common approaches to solving security threats. The worst breaches we see are in systems which are built in isolation and are non-compliant, thus becoming sitting ducks prone to hacking.

This is an unprecedented opportunity for Bangladesh to build something better than what the developed world has. The US and Western Europe have legacy systems against which they had to integrate electronic systems. Bangladesh has the opportunity to start from scratch and optimise a system which has not been in place even in developed countries. That is a motivating factor for the emerging world: to invent something new in order to lift the entire society using the tools of electronic payment system.

Open access is needed instead of a closed system when it comes to electronic payments. Government favoring few players in a market is a detriment to choice and competition. Security should underpin every decision in the payment system. This idea of confidence is the most important thing. The one issue that unifies all consumers in the world is security. It needs to be solved in order to optimise into a global digital payment system. When a major issue comes up, it is much more productive to work as a group.

Interoperability is another factor which should be considered. It means security, confidence, reliability and setting a standard in relation to the electronic payment system. One should think about all the stakeholders, constituencies and factors for financial inclusion when taking interoperability into account.

The government and the private sector must be partners. India, for example, has drifted towards the government competing with the private sector. When people talk to me about domestic schemes, there is a feeling that citizens of a particular country think that they know what is best for their homeland. But the scope of the challenge is such that these expectations cannot always be realistic. One of the most historic and sweeping pronouncements has been the demonetisation process in India. In two years since this massive step, India now has 5% more digital adoption than before. But they still run mostly on cash (over 90 percent). They are not on the wrong track, but it is proof that it cannot be done alone. Real presence, on a global scale, in digital adoption cannot be brought about without a proper collaboration between the government and the private sector.

Merchant value is something which I think is not talked about enough. In every instance that we have been able to study, merchants get at least two times more sales where they take debit and three times more when they accept credit cards. There is no place in the world where a merchant makes less sales by taking electronic payments.

Open is the new normal in financial services. Transparency, inclusivity, availability of services and convenience can only be ensured by open systems. Foreign direct investments go to places where it is easy to do business. Governments also need to play their part to provide the openness needed to work efficiently. The better way to deal with security threats is to have a regulatory framework which looks at everything that is going on and allows people to participate, share and grow in that very system. This would pave the way for an ecosystem which could identify the issues and deal with them.

What is lacking in Bangladesh and other countries as well is a global advisory council. It would allow all players to discuss the dealings in a much more collaborative manner. Networks, banks and governments need to come together to work in this regard. It would help the government regulate what people want and set the priorities straight.

When regulators compete without a sufficient understanding of consequences and impacts, it creates problems. Under the guise of national aspirations, it is easy to say that 'we will just build walls around us,' but the truth of the matter is that the best markets are the ones who are working with regulatory environments which are consistent. Bangladesh should aspire to increasingly integrate standards like the 'EMVCo.' It is important for Bangladesh to look to enter such systems instead of trying to create a separate one altogether.

People want their cards and payments to be functional and safe. We often get caught up talking about different systems and interoperability in a way that does not relate to people's everyday lives. Selling payment systems around the world come down to 'what is the wallet issue for people?' We've got to be able to clearly state values, reasons and why people will be better off with electronic payments.

The most cash-less countries are competitive, open and have pro-regulatory environment systems. No countries with nationalistic schemes or competitive regulations are successful in making world-class electronic payment systems. Sweden is the most cash-less country in the world (80%). There is an opportunity for all which is seemingly endless.

Dianne Rajaratnam, Asia Pacific Lead, Better Than Cash Alliance

Bangladesh government became a member of the Better Than Cash Alliance in March 2015, and we worked closely across various entities to help them transition from cash to digital payments. The Alliance is a global partnership of governments, companies and international organisations that accelerates the transition from cash to digital payments.

We mainly do three things. First, we advocate for the transition of cash to digital payments in a way that advances financial inclusion and promotes responsible digital finance. We also conduct lots of research and share experiences from our members to inform strategies for making the transitions. Lastly, we work closely with our members to capitalise the development for inclusive digital payments ecosystems to reduce costs, increase transparency, advance financial inclusion and promote inclusive growth.

In November 2016, a digital payments diagnostic was launched in Bangladesh. The diagnostic report showed that Bangladesh is making great strides towards digital economy and it also outlined specific policy measures. Led by initiatives from the Bangladesh Government, the country has seen progress and growth in mobile financial services. However, there is still a majority of transactions in Bangladesh being made in cash.

Current data indicates that government entities, businesses and individuals pay 46% of payments by volume and 12% of payments by value digitally. The major shift for digital payments from governments and businesses to individuals has been happening, and there is increase in Mobile Financial Services (MFS) available. Out of the report, we have got three specific actions that both the government and the private sector should take into consideration in order to capitalise on the shift. First: implementation of the national identification system and integration of it with key services. Second: improve the regulatory environment to achieve more competition within the market. This would allow suspended risk to be managed. It would also promote competitive pricing. It is also very important to continue the pace in developing in areas which support other digital and non-digital channels as well as infrastructure. The final recommendation was to improve interoperability to create a flow of money across user accounts from different institutions, service providers and multiple channels. Agent interoperability, in Bangladesh, allows a single agent to act for more than one service provider. In turn, this allows customers to access multiple accounts using one SIM card.

Over the past decade, Peru (one of the members of the Better Than Cash Alliance) has become one of the region's fastest growing economies. But the pace of financial inclusion has not grown along with the economy itself. Of the 30 million Peruvians, only 30% had saving accounts with financial institutions (2014). The use of mobile phones has skyrocketed in Peru, and the cost of using financial services also went up. Instead of competing, the entities in Peru saw the value of cooperating. They formed deep partnerships through the Peruvian Bankers Association and instead of using resources to build their own systems, they jointly invested and built a single platform. Instead of fighting for customer ownership, they shared access to agents, branches and ATMs. They worked together under a new brand to bring customers under one common payment product. They realised that competing with non-financial institutions would be challenging on an individual basis.

Tanzania, one of the first countries to launch mobile money back in 2008, has evolved into a mature and competitive market with four mobile money providers. It is a significant contributor to the growth in the region. In 2015, almost a third of the active mobile accounts in East Africa came from Tanzania. Through meetings, debates and consensus, Tanzania was able to put together a set of standards which dealt with how person-to-person (P2P) payments would be handled across the network. Tanzania defined a set of common business standards.

Uruguay's financial inclusion law in 2014 had a number of provisions on digital payments. Among others, it mandated interoperability of financial and payment infrastructures. They combined it also with incentives for users and providers in order to drive the volume of transactions.

Estonia, a non-member of the Alliance, is leading the way globally on creating inclusive digital ecosystems. Estonia defines interoperability, as different organisations and information systems are being able to communicate with each other. They have paved the way for public and private sectors to link up and function in harmony. The measures they have taken when it comes to facilitate electronic payments saves them 800 hours of working time every year.

There is no one way to do this. Every country has adopted its individual approach to achieve similar results. A lot depends on the ecosystem dynamics: infrastructure, payment system, services, market structure, stakeholders, regulation, etc. To develop a truly digital ecosystem for payments, stakeholders need to have a clear understanding on the specifics in order to take the rights actions. For Bangladesh, these kinds of measures would help in building a digital ecosystem suitable to thrive on a global scale.

Muhammad Ali, Deputy Managing Director, Pubali Bank Limited

To ensure convenience and confidence of customers, we must improve our digital payment system. For example, the scope of the National Payment Switch Bangladesh (NPSB) needs to be expanded. Customers want 24/7 fund transfer services. To do that, we need to connect mobile apps, internet banking and mobile payment services as well as utility providers to NPSB.

Anis A. Khan, Group Managing Director & CEO, Mutual Trust Bank Limited

Financial inclusion in Bangladesh is on the rise, as evident by agent banking. We take cash biometrically. Because it is expensive to set up full branches in rural areas, we have opened small agent banking branches in rural areas. Our agent banking entity has made profits and this can be embraced on a large scale.

Lila Rashid, General Manager, Payment Systems Department, Bangladesh Bank

We are talking about retail payment today which falls under one of our systems in Bangladesh Bank. The Bangladesh Automated Clearing House was launched in 2010. Through this, we ensured smooth movement of funds in Bangladesh. The Bangladesh Automated Cheque Processing System digitalised our previously established manual clearing house. We also introduced the Bangladesh Electronic Fund Transfer Network. In addition, we also established a national payment switch back in 2011. It has options for ATM interoperability, cost interoperability, internet banking interoperability, mobile financial service interoperability and other functions as well.

We also have a system called the Bangladesh Real Time Gross Settlement (BD-RTGS) System. If we compare our systems, in terms of transactions, Mobile Financial Services comprises 94% of the total amount. But in terms of value, MFS comprises only 6% of the total amount. RTGS comprises over 50% of the total market value. If we look at the retail market (check clearing, mobile banking, card payment, EFT), check clearing takes up 78% of the total payment system. Card system only operates in 5% of the market. Divided further, 89% of the card payments are done by the ATMs, mainly for cash withdrawal. Internet banking still captures a very insignificant part of Bangladeshi markets.

The future of Bangladesh's payment system is based on internet banking. Bangladesh Bank is constantly trying to push banks to take the internet banking approach, but only about 13 banks currently are connected to internet banking, while only 5 or 6 of those have actually implemented proper, functional internet banking services.

We have given licenses to some private organisations outside the banking system to operate e-wallet, even though it is not that popular as of yet in Bangladesh. It has a chance of being picked up by a large number of customers, particularly young customers. It is common for people not to be familiar when a new system is introduced, and that is the case with Bangladesh. We expect the banking sector to come forward with more ideas and push us to accommodate new technology. We have already requested ABB to take over National Payment Switch. We want private sector to come up with more processing capacity. There is only one such payment processor in Bangladesh. More should invest and establish such processing capability.

As a government organisation, we always prioritise public interest. Sometimes, the government has to intervene when the market is not that mature. When the private sector does not play its part, the government has to work in its own way to implement certain standards. We have already formed a committee to plan how to hand over such facilities to the private sector. We have 87 million bank (deposit) accounts, but in the market, we only have 12.5 million debit cards and roughly 1 million credit cards. The private sector should issue one debit card to every account.

Khurshed Alam, EVP & Head of Retail Finance, LankaBangla Finance Limited

Currently, for example, one can send money only from bKash to bKash, not from bKash to Rocket. It is time to create an integrated platform where all the MFSs will provide interoperability.

There is still little presence of debit/credit cards in the divisional and district towns. Therefore, we have a huge opportunity to expand our card payment system in those areas.

We need to reduce the transaction cost of digital payment methods to make it more popular to the general public.

Md. Tohurul Hasan, Programme Manager, Digital Financial Service, Access to Information (a2i) Programme

The government is now capable of making every kind of payment electronically. We are disbursing stipends and social safety net funds through the digital payment system.

We are now focusing on developing digital payment systems for P2G payment. But there are some challenges in collecting funds from citizens electronically. The major problem is that digital payment is costlier than physical payment because one has to pay extra charge for digital transactions. We need to resolve this issue with the help of all the stakeholders of our digital payment ecosystem.

In most cases, there is an exclusive partnership between one bank and one utility provider. From a2i, we are trying to establish a single platform where 16 utility providers and 8 education boards will be connected with all the existing financial service providers. Through this platform, people will be able to make payments from anywhere through any payment system.

Md. Ariful Islam Chowdhury, SEVP, Head of Retail Business, Bank Asia Limited

Agent banking has proved to be an effective tool to reach banking services to rural people. The challenge we are facing in operating agent banking is a complicated KYC system. It needs to be short and simplified. For that, we can set a per day or per month threshold limit.

QR code solutions have already been launched in Bangladesh. We need to set up a common platform for QR code solutions, like BharatQR, which will be interoperable with all banks and MFSs.

Abul Kashem Md. Shirin, Managing Director, Dutch-Bangla Bank Limited

In the MFS, there are only two active operators: bKash and Rocket. Among these two operators, one has monopoly in the market. The Central Bank should think about how to make MFS popular to other banks and create a healthy competition.

Our banks will face a major challenge from non-bank payment systems like Paytm, Ali pay, Paypal, bKash, Rocket and also crypto currency. Banks should take adequate preparation to face and combat these challenges.

We request Bangladesh Bank to establish an interoperable and inclusive payment ecosystem in Bangladesh.

Rasel Hasan, Head of Cards & Digital Banking, Eastern Bank Limited (EBL)

Currently, only telcos have access to the national NID database. Banks should be given access to the database, which will enable them to carry out biometric verification and thus the KYC process will be simplified.

Banks are only allowed to issue credit cards to Tax Identification Number (TIN) holders. If this requirement can be relaxed by policymakers, it may allow the number of credit card holders to increase drastically. 

Apurva Jain, Head of Transaction Banking, Standard Chartered Bank (SCB)

I am really glad that Bangladesh Bank has launched Electronic Funds Transfer (EFT), Real-time Gross Settlement (RTGS) and now Monetary Policy Statements (MPS). It will be really helpful if the transaction threshold and number of transaction restrictions, currently implemented on MPS, can be removed so that people can transact higher values as well as carry out more transactions.

MPS is operating in only one direction at this moment. But if real-time pull can happen, it will really help a lot of corporate clients to attract real-time money from account holders.

RTGS was working really well, but for the past 6-8 months there has been a certain instability in RTGS.  If that can be quickly addressed, it will provide much more confidence in the industry.

Shyamol B. Das, Head of Technology, BRAC Bank Limited

It is not only about the technology factor but about people, processes and the bodies working together, among other things, to create a digital payment ecosystem. One of the biggest challenges we have faced when designing a digital platform is interoperability. Finding a compliant partner is a big challenge. The whole payment ecosystem should be open, where instead of depending on a single authority, different entities will take different initiatives to effect change.

Abedur Rahman Sikder, SEVP & CRBO, Dutch Bangla Bank Limited (DBBL)

We have a reasonable number of channels in terms of offering payment systems and services. But, awareness is absent here. The channels and technological platforms that we have established in the market are not used at their optimum level yet. When it comes to building a cashless society, I would request the Central Bank and government agencies to take initiatives in order to encourage people to use these channels which are already established in the market.

Md. Nurul Islam, President, American Chamber of Commerce in Bangladesh

It has been encouraging to witness that both the government and the private sector are focusing a lot on developing the payment ecosystem. Even though most transactions taking place in Bangladesh are still based on cash, non-cash transactions like the MFS have been growing quite quickly. There is a huge opportunity for further growth, not only because of the large population, which is still not being served, but also because of the flexibility, transparency and the speed with which the consumers experience the digital banking system.

Realising this potential will require a robust payment ecosystem and building a digital payment ecosystem will require continued governmental regulatory support. Regulatory support should come through the formulation of appropriate policies and regulatory frameworks. Too many regulations can hinder the development of any ecosystem and appropriate regulations can bring in large benefits to the economy and customers. Regulators should continuously provide incentives to the industry participants for greater digitisation and inclusion. Regulations should also facilitate creation of new markets and inspire innovation towards the inclusion of the 'under-banked' people.

We want to see a payment ecosystem, where all relevant stakeholders are having level playing field and bringing innovation.

Shehzad Munim, President, FICCI

At FICCI, we are looking toward a solution to implement a “less cash” but not “cashless” approach in retail and distributor transactions. We have been working with bKash and Rocket in this regard.

While you are providing solutions for consumers in regards to consumer payments, we are looking at the retail to distributor payment system. The margins are very thin. We need a completely different solution where we can charge by transaction and not on the gross amount. On an average day, for example, we have turnovers worth about Tk. 65 to 70 crores. I can't pay 0.25 or 0.5 percent interest on that amount. That is impossible. So, there has to be a different route but the opportunities are definitely expanding. In the Fast Moving Consumer Goods (FMCGs) category, the massive growth is coming from the rural side of Bangladesh and not from the urban sector, which is already saturated. The incredible growth in the rural sector is a great step forward, but we need to implement credit facilitation in those areas. The reality is that because of the growth in turnover, an average outlet in rural Bangladesh is forced to cut down on their strength and focus on products with faster turnaround. The rural market's needs are growing, for which they are looking for more products to utilise. We need to ensure that these credit facilities reach those areas.

SM Mainuddin Chowdhury, Additional Managing Director, Southeast Bank Limited

The government is providing QR transaction licenses to many organisations. We already have DBBL QR code, iPay QR code and Ucash QR codes. We must have global standards for QR code solutions which all the actors will follow.

We must have e-KYC. We should also have a system through which we can obtain valid information about individuals. For example, sometimes we assume that our credit card system is not that great. Why is that so? Because assessing a person is very difficult. To assess a person, we must have information about that individual and the correct procedure needs to take place in order for that to happen.

Lila Rashid

According to the law of the country, the responsibility of the payment system lies with Bangladesh Bank (Bangladesh Bank Order, Clause 78). We should not confuse it with a2i; a2i is actually facilitating us. So, the core responsibility lies with Bangladesh Bank.

KYC issues actually lie with Bangladesh Financial Intelligence Unit (BFIU). We have already started talking to them. We mentioned to them that they can relax some clauses. For example, trade license comes to mind. Many do not have trade licenses and we have made provisions where a spouse's trade license may be considered. Also, ride sharing apps like Pathao and Uber have requested us to consider driver's licenses instead of trade licenses. Also we will look into the issue for having a mandatory TIN certificate for getting a Credit Card.

Banks can charge for RTGS (Tk. 100 per transaction) but not for BFTA. This leads to banks not using the BFTA system, as there is no earning for them even if they do use it. We are providing MPSB for free but banks can charge the customers for it.

MFS charging a lot of money has been an issue. We have now started working on MFS prices. The government is involved in the MFS section. Telecommunication charges, which are connected to MFS charges, is one of the biggest chunk in the pricing system. Recently, we sat together with policymakers to discuss the appropriate charges which should be properly applied in relation to MFS. After getting the circular, we will be sitting with the MFS providers and we will decide if we can reduce charges. bKash and Rocket have introduced apps, the usage of which leads to fewer charges. We have revised our previous MFS guidelines and very soon modified MFS regulations will be released, which will be put in place to tackle some of the issues at hand. 

Vikas Varma, Senior Vice President, Account Management, South Asia, MasterCard

Given my multiple visits here, I would like to point to two factors which are needed to make a vibrant e-payment system in Bangladesh.

One is about choice, not only in terms of brand and effort, but in terms of form factor. We have seen MFS grow and become much larger in terms of wallets. All of us have to ditch owning and being close to a particular form factor. We, as a company, have done that a while ago; we have started to reinvent ourselves. We no longer look at ourselves as solely a card company. Anybody who wants to be in the payment space (merchants, governments and businesses) may register with us. We are embracing wallets, payment factors within phones, virtual cards and even account-based payments.

The next factor is value. For Bangladesh, there are three areas where more work is needed. The first is infrastructure development, because that is where convenience comes from. Why do you think that about 40 million wallet holders find it okay to transact on a 2 percent economic model in an MFS ecosystem but find that same value difficult to digest when they start to do a card or account-based transaction? It is because you have created convenience around access points. Why are there 150 thousand cash-in and cash-out points for the MFS ecosystem but only around 15 thousand merchants who are electronically empowered from a card acceptance standpoint? There is work to be done either by increasing points of interaction for merchants or by enabling points of capability. Another criterion is digitally empowering all consumers. Over 100 million adults are bankable, but there are probably 25-30 million unique bank accounts; around 10 million cards are probably unique. There is a lot of headroom we can potentially grow. That is the convenience creation through infrastructure development.

The second area I would like to talk about, which most of us don't focus much on, is consumer and merchant education. When we want to drive a behavioural change, we expect to put some technology out in the market and have it absorbed by the public. Very little is spent on creating either a deposit education fund or a merchant acceptance development fund to drive the benefits of merchant acceptance or for consumers to be able to use it.

The third area is about fostering of innovation. Bangladesh's revolution from the payment standpoint is very different from its neighbours or from any other markets we have seen. MFS has grown along with other capabilities, giving Bangladesh's market its own uniqueness. Growth is coming from the rural areas, and so you don't need to have a very expensive infrastructure out there. For example, in India, 65 percent of e-commerce volumes come from tier 3 and tier 4 pin codes, which I can't even recognise on the map. Because economic prosperity has reached those places, people want to buy brands and have the best of things, even though they have no stores even a few hundred kilometres away from their neighbourhoods. Still, they use the postal network and websites like Amazon to be able to get the products they want. We have to find ways in which we can compete as banks with the MFS system as choices vary.

Governments can themselves begin by opening their own capabilities, whether in railways, petroleum, electricity or utilities. Start becoming  merchants and welcome electronic payments as opposed to creating barriers through a convenience model.

Pial Islam

From what we have discussed here, I can confidently say that despite the challenges, there has been a lot of progress. The government and Central Bank have stepped in as strong contributors to the rapid development of digital payment ecosystem in Bangladesh. Moreover, the leap we have witnessed in the telecom sector has been reciprocated in the financial sector as well.

We all expect to see an open, inclusive and interoperable payment ecosystem for Digital Bangladesh.

RECOMMENDATIONS

♦ Transparency, inclusivity, availability of services and convenience can only be ensured by an open financial system. 

♦ While trying to ensure security, regulatory frameworks should not become a roadblock in the process of digitisation.

♦ Interoperability and open loop infrastructure should be in place to create flexibility and vibrancy in the digital payment ecosystem. 

♦ Global practices, such as EMVCo, need to be incorporated with the local payment system to foster innovation and competitiveness. A collaborative global approach to security should be adopted. 

♦ A Global Advisory Council for digital payment ecosystem needs to be established. Strengthened public private partnership can give voice to both large and small players and drive further adoption of digital payments.

♦ Universal access, technology neutrality, competition drive payment system growth, innovation and interoperability. 

♦ A single point of failure in the payment ecosystem should be avoided to eliminate any systemic risk.



♦ A level playing field needs to be created. Inclusion of global networks will bring in much needed innovation and incentive for consumers which will eventually drive acceptance and usage and create a behavioural shift away from cash. 

♦ Banks should be empowered to work directly with other payment schemes to route domestic transactions on a competitive and commercial basis. Sole reliance on NPSB creates a systemic risk of a single point of compromise.

♦ National Schemes are effective ways to deploy infrastructure and ensure alignment with domestic priorities in an evolving digital ecosystem. 

♦ Competition in the local market will drive innovation in digital payment technologies, including contactless and mobile based payment capabilities, which will lead to interoperability and greater choice for the consumers. In order to achieve the Government's vision of Digital Bangladesh and Financial Inclusion, more investments are needed in technology, mobile networks and consumer education.

♦ The KYC process for card issuance should be simplified. TIN should not be made mandatory for credit card eligibility.  

♦ A common platform for QR code solutions needs to be established which will be interoperable with all banks and MFSs.

♦ Media can play a significant role in building public confidence and raising awareness about digital payments.

♦ The Government and private sector should collaborate and invest more in consumer education to drive behavioural change among customers and merchants in favour of digital payment methods.  

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