Evaly episode: When central bank rises to protect us

E-commerce is the future, but not the kind that Evaly and others started in Bangladesh. What they did is something akin to a scam.

And thanks to the Bangladesh Bank for its tedious job of investigating the scam (as far as they could as they were not allowed full access to the accounts of Evaly) and showing how this one company's working was putting the whole financial system at risk of chaos.

While these e-commerce companies tweaked with customers' money by offering impossibly alluring offers, there appeared to be no guardian to protect the unsuspecting customers. The commerce ministry inexplicably just sat idle for a year on preparing a guideline to regulate e-commerce activities.

However, the authorities have finally woken up from the slumber and taken measures aimed at controlling the payment system. Consumers' money will now face less risk as payments will be made only after the delivery of products to customers in the changed situation.

This mechanism, if enforced efficiently, may appear as a game changer, contributing to streamlining the e-commerce companies and minimising incidents of fraudulent practices.

So, this is a breakthrough. And for this the Bangladesh Bank deserves kudos for its role that yielded the development at a time when numerous customers are being allured by some e-commerce sites with their reckless discount offers, triggering risk in the financial sector.

The Bangladesh Bank report hits the nail on the head by focusing on the large gap between asset and liabilities of the company. Meaning, Evaly is not capable of paying back its customers who have paid for products but have not received the deliveries even after a long wait.

The disclosure of the central bank's investigation in a report – titled "Evaly...reckless or clever?" published in The Business Standard on 22 June 2021 – sent a chilling effect through the banking sector.

A number of banks have suspended use of their cards in making advance payments for Evaly and nine other e-commerce companies. A few other banks have warned their clients against using cards for online transactions, cautioning them against possible fraud.

All this led the commerce ministry to hold an urgent meeting last Thursday with representatives of the central bank, other ministries and the e-commerce association. That produced the good result: no payment to e-commerce merchants before delivery of products. A third party company, which will work as a payment gateway, will hold the money until a product reaches the customer's hand.

But customers will have to wait some more days to get the benefit of the new system to be enforced. An effective execution of the system will decide its fate.

Take note that many good initiatives in the past fizzled out only because of a lack of proper execution.

There are more than three dozen laws that deal with protection of consumers. The laws include the Bangladesh Standards Testing Institute (BSTI) Ordinance, 1985, the Special Powers Act, 1974 and the Pure Foods Ordinance, 1959. Yet, the absence of a new law has been felt and a unified law – the Consumer Rights Protection Act – was made in 2009 to strengthen the legal mechanism to protect consumers.

But, incidents of fraudulent practices by some businesses are abundant. Some e-commerce companies with their reckless discount offers increased further the risk for consumers. Against the backdrop, the role the Bangladesh Bank played is immensely important. Its role is to get the ball rolling for good. Now an efficient execution of the decision made by the commerce ministry may contribute to a healthy growth of e-commerce.