Another step forward to cashless society

With a goal of providing greater financial inclusion and cashless transactions, the government is going to develop a digital payment ecosystem involving three modes – bank and agent banking, mobile financial services (MFS), and payment service providers.   

The Bangladesh Bank on Monday issued a circular in this regard explaining how the system would work.

It said the system would be efficient and cost-effective and would offer financial inclusion to a large number of people. 

Cash is mostly used for daily transactions, such as buying products in the kitchen market or paying for street foods. Even though people use debit or credit cards, the share of electronic payments in retail transactions is very small.

Besides, most of the transactions in big businesses or supply chains are also done by cash.   

The Bangladesh Bank believes a favourable situation exists in the country to build such a system due to the increase in the number of mobile app-based transactions, the expansion of mobile phone and Internet services, technological advancement in the banking sector, and the introduction of universal QR and e-KYC.

In the digital ecosystem, labour-dependent small and micro traders, as well as marginal goods sellers and service providers, will be able to easily open bank or mobile accounts.

Experts laud the system

Economists, bankers, businessmen and others have welcomed the initiative, saying it will play a key role in establishing a cashless society.

Research Director at the Centre for Policy Dialogue Dr Khondaker Golam Moazzem told The Business Standard retail transactions and informal sector accounting would be integrated into the mainstream economy as a result of the initiative.

Besides, the government will also have a database of small and micro traders, he said.  

"Small or micro traders are unable to save money as they make cash transactions. Now that they will have the opportunity to open accounts, a portion of the balance will be saved. This will enable them to invest more and borrow from banks," explained the economist.   

Managing Director of Mutual Trust Bank Syed Mahbubur Rahman, also the former president of the Association of Bankers, Bangladesh, termed it a very good initiative.

"But the revenue board has to consider exempting these account holders from paying the excise duty imposed on general bank accounts. This consideration is needed to popularise a cashless society," he said.

Industry players think MFS will account for most of the transactions in the new system. 

Tanvir A Mishuk, managing director of Nagad, told The Business Standard, "We are welcoming this move of the central bank and I am quite sure that this decision will accelerate financial inclusion and boost financial industry's digitalisation in the country."

"Recently, Nagad adopted the tagline 'everything will be done by Nagad' and I am quite sure that the banking regulator's right move will also help us a lot to include every entity in our platform," he added. 

Shamsuddin Haider Dalim, head of public relations at bKash, described the new system as a revolutionary initiative and said MFS companies had long been demanding this service.  

He said various government allowances, including wages of readymade garment workers, are paid via mobile banking but the money is cashed out again for shopping.

"If bKash accounts can be opened for small and micro traders to make business transactions, a client will be able to transact using the money in the account. He will not have to cash out," Dalim added.

Shams Mahmud, president of Dhaka Chamber of Commerce and Industry (DCCI), lauded the central bank's initiative.

He said DCCI would take all the necessary initiatives so that small traders would be interested in opening such accounts and making transactions.  

"As a result of this initiative, the activities of small traders will be included in the mainstream economy and banks will have a list of them. They can also take loans to expand their business. This will create opportunities for small business owners to become big entrepreneurs."

The circular issued by the Payment Systems Department of the Bangladesh Bank said KYC and e-KYC policies should be followed to open personal current accounts through banks and agent banking.

No transaction limit will apply to such accounts. But in case of opening an account with e-KYC, the monthly transaction and one-time maximum balance cannot be more than Tk10 lakh.

Mahbubur of Mutual Trust Bank thinks there should be a transaction limit for accounts opened without e-KYC.  

He said there is a limit for all kinds of accounts as per the law. 

Such accounts will have to be opened under direct supervision of bank and agent banking officials or their appointed representatives. These cannot be opened through an agent.

Daily, monthly transaction limits specified

The MFS account opening guidelines say accounts can be opened with the national identity card (NID). If someone has a normal MFS account, a new account can be opened with the same NID.

Daily and monthly limits have been set for six types of transactions in mobile banking. The daily minimum and maximum limits are Tk10,000 and Tk50,000 respectively. On the other hand, the monthly minimum and maximum limits are Tk1 lakh and Tk10 lakh respectively.

For these accounts, the one-time maximum balance will be Tk5 lakh.

The KYC or e-KYC policy has to be followed as well when opening an account (e-wallet) via a payment service provider (PSP). Occupation of the person who will open the account, his eligibility to open the account and his registered mobile number have to be confirmed by service providers' own officials or representatives.

In a PSP account, the monthly transaction shall not exceed Tk10 lakh and the one-time maximum balance shall not be more than Tk5 lakh.