Bangladesh’s banks must adopt new tools to serve the digital-first generation
Bangladesh's retail banking sector is at a critical juncture. For years, one-size-fits-all offerings have dominated the landscape. The sector has seen decades of growth through conventional methods such as branch expansion, the rise of mobile financial services, and agent-led networks. Now, the country faces a new imperative: reimagining how financial services are delivered to a digital-first population. In this context, embedded finance and banking-as-a-service (BaaS) offer a transformational shift. These models depart sharply from legacy banking and present a compelling opportunity to make finance invisible, intuitive, and inclusive.
Embedded finance refers to the complete integration of banking services, such as payments, lending, insurance, and savings, into non-financial digital platforms. Instead of requiring customers to visit a bank or even open a banking app, these services are delivered seamlessly within the flow of everyday digital activities—whether on an e-commerce site, a ride-sharing or food delivery app, or a gig work platform.
For all latest news, follow The Daily Star's Google News channel. Just imagine a small shopkeeper in Dhaka being offered a microloan through their digital point-of-sale system based on real-time sales data; a regular user of an e-commerce site being offered instant credit based on their background data; a farmer using an agri app receiving instant credit tailored to their crop cycle; or an RMG worker accessing earned wages early via their employer's HR platform. These are no longer theoretical ideas; the digital rails already exist through over 90 million active mobile financial services (MFS) users across the country and growing gig economy platforms.
While embedded finance is what users experience, BaaS is the behind-the-scenes infrastructure that enables it. Through BaaS, licensed banks expose many of their services, such as e-know your customer (eKYC), account creation, payments, and lending, via Application Programming Interfaces (API) to third parties, enabling relevant fintech startups and even large enterprises to plug into the bank's regulated framework and offer tailored financial products within their customer ecosystems. Large conglomerates in Bangladesh, with direct penetration into the retail customer base, can leverage their ecosystems and create a win-win for all parties.
In Bangladesh, with a youthful, tech-savvy population and high penetration of mobile devices and digital wallets, we are uniquely positioned to leapfrog legacy banking models and unlock credit access for micro, small and medium enterprises (MSME), which often lack collateral and formal credit histories. By leveraging sales or supply chain data through platforms like ShopUp or digital wholesalers, embedded lending can enable instant microcredit for many.
Banks could also offer financial products for gig workers: platforms like Pathao or Foodpanda could integrate real-time payments, insurance, or micro-savings options directly within their apps for drivers and delivery agents. A similar system has already been implemented successfully in Southeast Asian markets. Micro-insurance products—such as travel insurance while booking a bus ticket, crop insurance through agri-tech apps, or health coverage via mobile health platforms—could deepen insurance penetration, which has remained below one percent for decades.
To advance the much-coveted financial inclusion agenda, various fintech and payroll platforms could embed automated micro-savings during salary disbursement or festival bonuses, subtly cultivating financial discipline and awareness among bottom-of-the-pyramid populations. Banks could also tap into the young demographic by linking with educational or lifestyle apps offering tuition-linked microloans or savings features for users navigating university costs.
Despite its vast promise, embedded finance in Bangladesh is still in its infancy. This is primarily due to the traditional banking mindset, the biggest barrier of all. Most banks in the country, if not all, operate within a product-centric model. Services are rigid, non-modular, and not API-ready. They continue to focus on pulling customers into their channels rather than stepping outside the box and integrating into third-party ecosystems. This again stems from a persistent trust deficit between banks and tech platforms. Few strategic partnerships exist, and banks rarely see themselves as infrastructure providers to third parties.
The central bank, too, must play an enabling role. While Bangladesh Bank (BB) has taken steps towards digital banking, including clear frameworks for API banking, digital KYC, and data privacy to a certain extent, the fintech-bank collaboration remains underdeveloped. Moreover, legacy banking systems often lack the agility to provide real-time APIs or process embedded transactions efficiently—a challenge that calls for investment in cloud-native, API-first infrastructure. Lastly, although consumers may trust an e-commerce platform for shopping, trusting it with lending or insurance requires new levels of transparency and collaboration with banks, and this could be a win-win for all.
Grab and Gojek in Southeast Asia began as ride-sharing apps, and now offer embedded payments, micro-loans, and insurance—all delivered contextually, helping millions in Indonesia and Vietnam to access credit and protection. In China, super apps like WeChat and Alipay allow users to manage their entire financial lives—from payments to investments—without ever leaving the platform. These sorts of deep integration and personalisation illustrate what's possible with strong data ecosystems and trust. The success of UPI and Razorpay demonstrates how APIs and open banking standards can democratise financial services.
To make this work in Bangladesh, BB should create sandbox environments for testing embedded finance models, clarifying data sharing, risk allocation, digital identity, and consent architecture. In parallel, banks must modernise core systems to be API-ready and cloud-compliant, allowing real-time integration with third-party apps. Shared digital infrastructure—through credit scoring APIs, eKYC utilities, and consent management systems—will enable more players to participate securely. Banks should set up dedicated embedded finance teams, tasked with co-creating solutions alongside respective platform partners. Finally, a user-centric approach that builds trust, ensures data privacy, and delivers clear benefits will accelerate the required adoption. To do that, continuous customer education is absolutely critical to avoid any unforeseen issues.
Embedded finance and BaaS are not merely new product offerings; they represent a paradigm shift in the philosophy of banking. Instead of being a destination, banking becomes an experience, woven into the everyday lives of people and businesses. For Bangladesh, this invisible revolution offers a path to greater financial inclusion, innovation, and competitiveness. The question is no longer if Bangladesh will embrace embedded finance; it is when, and how boldly.
Rahel Ahmed is a banking sector analyst.
Views expressed in this article are the author's own.
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