Bangladesh: Payment Systems Development

A broad social consensus for inclusivity and social justice in socioeconomic development was at the core of Bangladesh’s spirit liberation war, which anchored the government’s development strategies and policies. The Bangladesh government has developed policy, strategy, and action in accordance with the country’s progress in sustainable development, with special thrusts on massive digitalisation to support financial inclusion and inclusive growth, alongside a mitigation and adaptation response to climate change threats. “Digital Bangladesh” and “No One Left Behind” have been the driving forces behind its policy formulation over the last decade.

The financial landscape of Bangladesh has been rapidly transforming, driven by deeper forces: i) the adoption of financial technology led by the omnipresence of the internet and availability of power; ii) opportunities created by the demographic dividend of the country; iii) a young populace driving innovation, with widespread access and usage of technology; iv) rapid industrialisation; v) rapid urbanisation and; vi) as a result of the first five forces, the desired level of economic independence for all are difficult to achieve, though the country has achieved reasonable success in decreasing the poverty level.

To keep the momentum, Bangladesh has built up a payment ecosystem that is capable of supporting a stable 6 percent, plus equitable and environmentally sustainable economic growth. Both financial regulation and policies, therefore, need to better anticipate, leverage and, where needed, shape these forces to improve both the breadth and quality of financial inclusion. The payment system in Bangladesh is also devised accordingly to meet the practical needs of the economy, facilitate the market to solve various day-to-day problems, and ensure accessible, affordable, and secure systems to end-users.

At the national level, these deeper forces are nurtured by better coordination and communication among intermediaries, regulatory agencies, agents, and customers to prevent tunnel vision. Regulations have been designed to strike a delicate balance between innovation and risk management. For instance, digital finance was seen to be pushing the frontiers of both innovation and risk. A market-oriented approach was adopted to design a dynamic, inclusive, and resilient system for digital financial services (DFS). In Bangladesh, mobile financial services (MFS), the largest in the world, could ...

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