Bangladesh's Financial Sector's Digitalization Evolution

Over the past 15 years, there has been a significant digitalization of Bangladesh's financial industry, allowing millions of people access to banking services that are even available in rural areas.

Technology adoption in the nation's financial industry has been greatly aided by the advent of Mobile Financial Service (MFS), payment services, and fintech in addition to modernizing the conventional banking system.

Internet Banking

Standard Chartered Bangladesh was the pioneer of internet banking in the nation in the early 2000s, and since then, it has quickly assimilated into the financial sector.

In an attempt to encourage clients to use the digital window, banks started implementing a variety of initiatives in 2010.

People no longer need to visit a real bank office because of the increasing popularity of online banking, which allows users to deposit and transfer money whenever and from anywhere.

According to data from Bangladesh Bank, as of August '23, there were 76.32 lakh customers using Internet banking. In the same month, transactions totaled Tk 52,099.67 crore, a 104 percent year-over-year growth from Tk 25,543 crore.

Agent Banking

In an effort to give the impoverished and underserved population—who typically reside in isolated locations outside of the reach of conventional banking networks—a secure alternative means of receiving banking services, Bangladesh Bank launched agent banking in the nation in 2012 by publishing guidelines.

In January 2014, Bank Asia launched the first agent banking services in the nation. Annually, there has been a rise in the quantity of accounts opened by agents in addition to the substantial surge in transactions. In August 2023, there were 15,671 agents nationwide, compared to 14,509 in the same month the year before. During that time, there were 21,559 agent banking outlets as opposed to 19,981.In August 2023, there were 2.04 crore agent banking accounts overall, which represents an increase of almost 23% from the same month the previous year.

CRM

Bangladeshi banks are constantly implementing new technology to streamline client banking services. One such technology that is revolutionizing the nation's financial sector is cash recycling machines (CRMs). Cash deposits and transfers to other people's accounts are made possible by the new technology. Banks began establishing CRMs in Bangladesh in 2017. According to data from Bangladesh Bank, as of August of this year, there were 3,652 machines, up from 1,930 a year earlier.

e-KYC

Customers have always had to endure the tedious process of opening an account. After the Electronic Know Your Customer (e-KYC) system was implemented in January 2020 by the Bangladesh Financial Intelligence Unit (BFIU), customers can now open bank accounts in five minutes instead of the two to four days it used to take.

Mobile Financial Service (MFS)

In Bangladesh, many people and businesses did not have access to financial services a decade ago, or they were too expensive. With the central bank's approval, 27 banks launched the Mobile Financial Service (MFS) in Bangladesh in 2011. Not every license holder was able to make it. Still, by 2016 19 companies had implemented the service. Of these, thirteen are presently involved in a market that sees daily transactions totaling more than Tk 3,500 crore, and this amount is rising daily. In March 2011, Dutch-Bangla Bank Ltd. launched "DBBL Mobile," which was subsequently rebranded as "Rocket," and became the first MFS provider in the nation. Additionally, three months later, bKash, a BRAC Bank subsidiary, did the same.

Digital Nano Loans

Thanks to the quick and timely disbursement of loans ranging from Tk 500 to Tk 50,000 to individual customers at up to 9 percent interest, the recent move, known as the "digital nano loan," is showing promising prospects. As of right now, lenders have about 1.6 lakh customers, and the default rate is less than 1 percent, according to the banks.

In December 2021, bKash and City Bank jointly introduced the Digital Nano Loan, which was designed for small borrowers such as cottage, micro, small, and medium-sized enterprises (CMSMEs) and individuals for personal use. Since its introduction, comparable products have been offered by at least three other banks, and each of them is upbeat about the prospects for digital lending.
Prime Bank introduced PrimeAgrim, a digital nanoloan product, to the market in October 2022 following a successful pilot program. Bank Asia debuted the digital nanoloan on a trial basis, while Dhaka Bank introduced its e-Rin products.

"Atiur Rahman, a former governor of the central bank, stated that Bangladesh has been witnessing fast financial inclusion in tandem with a swifter uptake of digital technology." "The digitization of the financial sector gained new momentum through the latest move by Bangladesh Bank toward digital banking," he explained.

The banking sector's digitization has completely changed Bangladesh's ability to access financing. Making the economic recovery of the nation desirable and inclusive will depend greatly on this.
However, he noted that extra caution must be exercised to guarantee that internet access and digital infrastructure become sustainable and affordable.

The demand for financial technology products in Bangladesh is high, according to Anis A Khan, the former chairman of the Association of Bankers Bangladesh. The development of the digital platform and customer-friendly sophisticated products for customers has been greatly advanced by the financial institutions, he continued.

He stressed that financial institutions needed to prepare for a revolutionary change in financial technologies due to the advent of artificial intelligence and nanotechnologies.
The Bangladesh Institute of Bank Management (BIBM)'s Prof. Shah Ahsan Habib asserts that the financial sector's digitization journey requires a supportive regulatory environment and applicable policies.

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