Tuesday, 30 May, 2023

Scitech research

Mobile banking to strengthen digital economy

Bangladesh is missing the opportunity to strengthen its digital economy through its mobile financial service (MFS) providers due to inadequate services, narrow transactions limits and focus to limited segments of customers.

People prefer contact-less mobile payment tools replacing ATM cards to avoid virus contamination. The volume of MFS transaction was Tk 679.66 billion in November 2021 - much higher than credit card transactions of Tk. 20.92 billion, according to Bangladesh Bank.

During Jul'21-Nov'21, MFS transactions recorded 26.47 percent growth when the growth in credit card transaction was 32.42 percent, said a news release.

“MFS reduces costs and risks of handling cash, increase ease of conducting online transactions, and increase transparency among monetary transactions among people,’ said a banker.

But a large number of multi-classes people are yet to use MFS due to limited services offered by the providers and existing transactions limit set by the regulator.

“Limits are too small for many affluent consumers, businesses and micro merchants to meet needs. The limit is lower comparing to cap set by other central banks,” said an official.

In 2020, when the coronavirus hit the entire world population and economy, BB raised the monthly transaction limit to Tk 200 thousand from Tk 75 thousand and set the highest limit for each transaction at Tk 10 thousand.

The Central Bank of Kenya, in the same time of pandemic increased the transaction limit to Kenyan shilling 150 thousand in order to reduce the use of cash in the economy facilitating increased use of mobile money transactions instead of cash.

As the demand is growing, industry experts say BB should break the existing limit to enable millions of shoppers and merchants use digital money in their purchases, which will strengthen our digital economy bringing more economic actors under digital payment networks.

MFS has now become an essential part of the lives of all strata of citizens of Bangladesh. Even though cash and credit cards are still widely used by many of the consumers, MFS such as bKash, Nagad or Rocket promises to replace current payment methods in the long run.

bkash is leading the curve with a global standard app and seamless service, which enables customers to make payments faster and to pay in more places. With bKash app, now more people are buying essentials, branded goods, goods, pay utility bills and school fees and use in coffee shops, crowded kitchen markets and send gifts to their relatives.

A new study says the global mobile banking industry is expected to reach 1824.7 million US dollar by 2026, while digital remittances will jump 45 percent between 2021 and 2025, to 428 billion US dollar.