There may be nonetheless a lot to be executed to attain a totally digitized monetary service system in Bangladesh
Most readers will need to have already acquired a brief message or SMS from their banks, asking them to not come to their branches amidst the coronavirus risk, and to make use of extra of their on-line, digital, or alternate banking providers. As we put together ourselves to face interim or lengthy robust occasions, now we have to take shelter beneath different banking or financing providers slightly than bodily going to financial institution branches.
Digital banking and monetary providers in Bangladesh began with on-line banking providers. On-line banking is commonplace now. Based on Bangladesh Financial institution information, 87% of financial institution branches in Bangladesh are on-line and eight% are partially on-line, that means 95% of financial institution branches in Bangladesh can do on-line banking. Whereas 95% on-line protection for financial institution branches is a powerful quantity, statistics are meaningless with out correct context.
So, once we know that in accordance with monetary inclusion insights, solely 35.3% of the Bangladeshi inhabitants has entry to banks, then the 95% availability of on-line banking is actually not sufficient protection for digital monetary providers and monetary inclusion. Whereas cell monetary providers (MFS) performed an ideal position in boosting monetary inclusion in Bangladesh in a reasonably quick interval, for a number of causes, we can’t say it’s performing as much as its potential.
On this rising financial system of 166 million folks, now we have already achieved 94% cell web penetration and cell monetary providers accounts for almost all of digital funds (PwC, 2019). Nonetheless, a big a part of the digitization continues to be restricted to peer-to-peer (P2P) fund switch, and that too is especially by over-the-counter (OTC) customers, not by registered customers.
Based on 2018 information, 44.4% of the Bangladeshi inhabitants has entry to cell cash, however solely 16.9% has a registered account. And 64% of cell cash customers are over-the-counter customers who don’t have registered accounts (Monetary Inclusion Insights, 2018). This signifies that there’s a clear lack of sufficient adoption of MFS.
Then comes the difficulty of service portfolio. Whereas MFS operators like bKash, Rocket, Nagad, and so forth. present a variety of providers, most customers (OTC customers) nonetheless use MFS for P2P fund switch providers solely. Furthermore, fund switch expenses are additionally excessive on the client finish.
For these causes, the adoption of MFS is at a really primary stage by way of service portfolio as properly. For additional monetary inclusion, agent banking providers have been initiated and nearly 20 banks now have agent banking operations. Whereas it has coated loads of the unbanked inhabitants and eased the banking course of with a biometric system, present agent banking actions are primarily restricted to deposit and switch, and mortgage providers are not often obtainable to the agricultural agent banking customers.
Therefore, the present scenario denotes that our model of cell digital monetary providers presents solely deposit accounts, cash switch, and fee options. And typically, it has not been capable of embody essential providers like credit score and insurance coverage for rural and unbanked customers.
For present digital banking, now we have cell apps and playing cards, however in accordance with Bangladesh Financial institution, 87% of our card transactions are ATM transactions, that means the first utilization of playing cards is withdrawing cash and it has not been broadly accepted as an alternative choice to money.
To determine a correct digital monetary system, loads of challenges must be taken care of. Aside from the dearth of adoption, one main subject is the dearth of interoperability. Whereas every system is considerably digital, they aren’t fluid. For that cause, one person should depend on a number of providers of a number of operators to avail all monetary providers. From the service suppliers’ finish, the dearth of partnerships can also be accountable for this. This lack of interoperability can also be a giant impediment in the best way of attaining a cashless financial system.
One other subject is the excessive expenses for these providers. Prospects in Bangladesh, Nepal, and Sri Lanka pay 1-4% expenses on the transaction quantity to avail financial institution/cell cash pockets fee providers (PwC, 2019). For instance, to avail a primary service like cash switch, a bKash person in Bangladesh pays 2% and even the agent banking person pays round 0.25% of the transferred quantity. These expenses, on prime of the dearth of interoperability, make digital finance much less enticing for purchasers.
A very digitized monetary system requires a secured, contactless, and converged monetary platform. This platform needs to be versatile sufficient to incorporate new applied sciences like blockchain and synthetic intelligence-based buyer intelligence. For the customers, it means ease of utilization, fluid switch of funds, and larger flexibility in fee strategies. And for the service suppliers and retailers, it means much less redundancy, larger safety, and harnessing strategic partnerships for higher buyer providers.
The journey in the direction of a totally digitized monetary service system must be supported by an acceptable digitization roadmap from regulatory authorities. This roadmap ought to deal with points like infrastructure enchancment, incentivizing digital fee for the correct viewers, and partnering with key gamers in digital finance house.
Mamun Rashid is a associate at PwC.