‘Digital Economy’ is the worldwide network of economic activities, commercial transactions and professional interactions that are enabled by Information and Communications Technologies (ICT), which was first coined by Don Tapscott in his 1995 best-selling book “The Digital Economy: Promise and Peril in the Age of Networked Intelligence”.It can be concisely summed up as the economy based on digital technologies.This article revolves around the present scenario and facts of Digital Economy in Bangladesh, which I am putting together out of my own observation, that I have gathered during my long time engagement with the ICT sector, working seamlessly for the country’s ITES, FinTech, Digital Payment and e-Commerce industry.
In last couple of years Bangladesh has seen a rapid growth in internet connectivity and mobile phone penetration, as well as a rapidly maturing support system for digital entrepreneurs and a young population with an open mindset towards technology.Digital Commerce has gone into a wider level with people’s growing desire to purchase online instead of physically visiting to places. Educated people having smart devices are becoming accustomed to use digital payment instruments, such as debit & credit cards, internet banking, mobile financial services and e-wallets. The convenience of hassle-free cashless payment from anywhere, anytime has caught people’s attention and they are embracing the digital economy day byday. However, there are several challenges to overcome.
In order to digitalization of economy, at first we need to ensure access to finance for all.I am not only talking about the rich individuals and large businesses,but also about the SMEsas well as the startups. Technology-based startups are one of the significant groups in the digital commerce ecosystem. The rising of technology-based startups in our country is showing light to embrace e-Commerce. However, access to finance has always been a big issue to the SMEs and startups. Banks have imposed different regulations for the corporate accounts, which are hard to follow by the startups. Our banks also follow a stringent KYC process for online and offline merchant acquisition. In this process, the documentation requirements for the SMEs are the same as large corporates. The process requires submission of certain documents, which are not always possible for the interested SMEs to produce at once. For ensuring access to finance for all, the existing KYC process and relevant policies of the banks need to be upgraded.I would like to propose a Mini KYC process by the banks for the small merchants or startups, in which the proprietor’s NID Card and verified mobile number will be used as the two main documentary requirements. The same easy and short KYC process should be implemented for the customers that would like to avail Prepaid Cards. We can use this method since all their personal information are available in the NID database and banks can use this as validation process.If we can ease and update the existing KYC processes and backdated policies, both customers and merchants will be encouraged to use the digital payment instruments, which is a primary requirement to build a digital economy.
Besides, in order to create a digital economy and encourage digital payments, we need to acquire more physical merchants and ensure the availability of multiple payment instruments, as the market cannot be served by depending on one or two payment options. Consequently, launching of prepaid cards can be a feasible option, which is very much effective for use in the assisted e-Commerce transactions.
If we look around the world, still there is a huge demand of cards including Prepaid and Virtual Cards. People in many developed countries are accustomed to use cards to make both online and offline transactions. In Bangladesh, we already have some policies regarding Prepaid/Virtual Cards, however these policies need to be refurbished considering present day’s demand. We have a good opportunity for countrywide Prepaid Card rollout. e-Commerce Association of Bangladesh (e-CAB) is coming out with its proposal of starting a pilot project of Prepaid Cards roll-outin association with Access to information in Bangladesh (a2i). Under the project, Prepaid Cards will be available in countrywide Union Digital Centers (UDC). There may be 3 types of Cards, such as Pre-Loaded, Rechargeable and Virtual Cards, where there will be slab-based regulations and payment formats.If this project comes out to be successful, our rural people will be able to buy these cards from the UDCs and make online purchases from their homes. This will ease their lives and make them more interested to use digital payment instruments.Since internet is available countrywide, if we can promote and educate people about using Prepaid Cards, a huge transaction in e-Commerce is expected nationwide.
Now let’s put light to another aspect, which is foreign currency remittance. Foreign transactions are occurring more frequently now-a-days. The small entrepreneurs, who cannot afford to develop own e-Commerce websites and are doing Social Media based businesses, often need to remit money to Facebook, YouTube and so on. The e-Commerce merchants also have to remit money in foreign currency, which is necessary for the activities like Domain Registration &Hosting, purchase of information, Cyber Security & other Software tools, Digital Marketing campaigns through social medias, subscription of various services and purchase of marketing and research reports etc. However, merchants and entrepreneurs are facing challenges to remit these payments as there is no formal guideline for completing such foreign transactions.Although large businesses and MNCs are able to manage it legally by making mutual agreements and collecting central bank’s clearance, small entrepreneurs are struggling to do so because of their lack of documentation and support. They also don’t know the procedures properly and moreover their payment amounts are so small that following all the regulations and procedures would not be feasible to them. As a result, they are compelled to make use of indirect and unauthorized channels to remit money. Consequently, ‘Hundi’ is increasing and the Government is losing a huge revenue. This is also hampering the objective of economic solvency for all.In this regard, I would please to mention that presently Bangladesh Association of Software and Information Services (BASIS) members are enjoying an approval from Bangladesh Bank’s Foreign Currency Department, under which they can remit up to US$20,000 through specific banks. I think, if the similar authorization is given to the e-CAB members, this will increase legal foreign remittances as well as boost Cross-Border e-Commerce.
Another barrier to develop digital economy and foreign transaction is being our traditional ‘Travel Quota’. Under the Foreign Exchange Regulations for Individuals, a Bangladeshi national is allowed to carry up to US$12,000 or other equivalent currency in cash or credit for all their travels abroad in a year. For each travel, up to US$5,000 or equivalent can be taken to SAARC member countries and Myanmar. For the other countries it is up to US$7,000. However, these amounts are often not sufficient enough to carry on all the required expenses. Following our country’s socio-economic improvement, many Bangladeshi nationals have financial capacity to travel abroad for specific reasons, such as treatment and hospitalization, shopping etc. as well as business and personal tours. At times it is necessary to stay abroad for 15 days or more. Because of the recent changes in economy and price hikes, the mentioned amounts are proved to be insufficient, especially when someone wants to stay luxuriously or need to be hospitalized. To me the implementation of travel quota seems like old-school, which is not really applicable in present day’s global economy, and so this should be revised.
Now let me talk about our present money transaction system, a pivotal element of digital economy. At present, most of the payments are limited to a few Mobile Banking or e-Wallet, such as bKash and Rocket. Moreover, most of the people use these wallets only to make smaller payments, generally within BDT. 3000/-,since a number of limitations in depositing and withdrawing money have been applied to these Wallets. For larger payments people still prefer card or cash payments. On the other hand, during e-Commerce transactions, most of the customers prefer to make payment in Cash on Delivery (COD),or occasionally Card on Delivery method, rather than paying online.This is because customers are usually scared to complete their transactions online by using digital payment instruments.To remove this fear, we will have to safeguard customers’ confidential information and data,as well as ensure them that in case of any failure of online payment or product delivery or return, their money will be returned to their account/wallet within a shortest possible time. This will encourage customers to make online transactions more frequently.One of the most important things we should remember that digital payment helps all the parties. It reduces the cost of cash. The other beneficial thing is that you can trace all payments. That helps tremendously to stop all kinds of illegal transactions. Ultimately this creates a positive impact on the country’s economy and increases government’s Tax collection.
The last thing I am going to address is the absence of Interoperable Digital Money Transfer Platform in our economy. As we can see, presently a number of digital money transferring tools including MFSand wallets, such as bKash, Rocket, iPay, UPay etc., are available in the market.We are using these tools to transfer money, pay bills and online purchases. However, these wallets are not interoperable and that’s the limitation. As for example, you can deposit money in your bKash wallet account and can transfer money to other bKash wallet users or agents, but you cannot transfer money from bKash to Rocket or vice versa. In the same way, you can transfer money from specific bank accounts to bKash wallet, but you cannot transfer from bKash to your bank or card accounts. There are also limitations of using different wallets for different purposes. As a result you need to install several apps in your smartphone and manage a number of accounts, wallets and PINs to make different transactions. This is very inconvenient as you cannot track your money properly and cannot use them in case of emergencies. Let’s say for example, you have BDT. 3000/- in bKash, 2500/- in Rocket and 500/- in your UPay wallet. Now in the middle of the night at an emergency you need to pay BDT. 6000/- to a hospital counter that supports only bKash payment. So what will you do? Despite having the required amount of money, you cannot pay the bill now! This incident would surely leave you in trouble and discourage you to deposit money in mobile wallets in future. Now think if these wallets were interoperable, you could have easily transferred the amounts from Rocket and UPay into bKash wallet and made the full payment from bKash at that hospital. That is why I am emphasizing on the interoperability of digital money transfer.
Another issue we face at our existing money transfer system, through Bangladesh Electronic Funds Transfer Network (BEFTN), is that this consumes a lot of times, sometimes 24 to 48 hours. But do we always have that time to spend? Moreover, there are weekends and holidays, when BEFTN doesn’t work till the next working day. I must mention that a fundamental leap forward in the development of digital payment solutions in Bangladesh was the establishment of the National Payment Switch Bangladesh (NPSB). MFS have also developed rapidly with a number of service providers and a fast growing consumer base. Now, we need to develop interoperable platform so that fund transfers can be done in real-time between Bank Accounts and Wallets, Cardsand Wallets, Wallets and Wallets and so on. If interoperability comes live, our country’s digital economy will surely see a radical change and leap one step ahead.Another point to be added here is, while maintaining multiple accounts and wallets are cumbersome for the users, it is also difficult to trace the frauds in specific cases. If we can develop an interoperable platform and make all users to register with their NIDs,the whole system will be easier, more transparent and traceable.To my knowledge, Bangladesh Bank has been concerned about this and trying to do something in this regard. However, the sooner is the better.
To my belief, by developing digital payment and popularizing it among the people, we can improve our country’s economy at large. By ensuring the interoperability of money transfers, revision of travel quota, prepaid cards roll-out, updating the existing regulations on foreign currency remittance and KYC process etc., we can improve our country’s digital economy. With the Vision 2021, we have already made a lot of progress. I see a light of hope since the Government, regulators, stakeholders and leading associations like BASIS and e-CAB are working together to the common objective of an enriched digital economy. Recently, the Prime Minister’s Cabinet gave their approval to the National Digital Commerce Policy 2018, which is a milestone to ensure proper support, law and order in the e-Commerce or Digital Commerce industry.
Working closely with the Government and private stakeholders as well as associations for a long time, I do believe that the change is coming and it’s not too far. We can already say proudly that Bangladesh is no more a poor country.Our development is in pace. We can now speak and compete globally. We have courage and knowledge. Our resources are developing, our solvency is growing. The tech-savvy generation is highly motivated towards digital economy. All we need is proper guidelines, planning, revision of traditional strategies, implementation of advanced and cost-effective technology, and be more sincere in finding the gaps and formulating appropriate policies for the sake of the growth of our digital economy.Finally to say, digital economy is a powerful tool for improving the standards of living.A progress in digital economy will definitely take us closer to reach the milestone of a Digital Bangladesh. Yes, “We cannot have a Digital Bangladesh without a Digital Economy”.
This article is written by Ashish Chakraborty, Director & Chief Operating Officer, Software Shop Limited (SSL Wireless) exclusively for Fintech (Not to be copied elsewhere without permission).