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Cashless transactions paving way to Smart Bangladesh

Mehedi Hasan
30 Mar 2023 00:00:00 | Update: 30 Mar 2023 00:42:21
Cashless transactions paving way to Smart Bangladesh

Plastic card transactions are growing day by day as consumers, especially the younger generation, now prefer it to cash while the Covid-19 pandemic has propelled it further.

In January this year, automated teller machine (ATM), point of sale (POS), cash recycling machine (CRM), and e-commerce transactions through cards stood at Tk 39,757 crore, up from Tk 14,679 crore in the same month of 2019, which is the pre-pandemic period, the Bangladesh Bank data shows.

The number of cards also increased significantly in the last four years. There were 4, 33,47,155 plastic cards in January this year, up from 2,03,41,933 in the same month of 2019.

Plastic card transactions shot up in recent years due mainly to the rise in e-commerce business and foreign travels, said industry insiders, adding it gained further momentum amid the pandemic.

The number of debit, credit, and prepaid cards as well as transactions through them also increased in recent years.

Between 2019 and this January, transactions via debit cards rose by 177 per cent to Tk 36,765 crore, credit cards by 125 per cent to Tk 2,506 crore, and prepaid cards by 200 per cent to Tk 330 crore, as per the central bank data.

Besides, in January this year, the number of debit cards stood at 3,86,37,515, up from 1,80,32,004 in the same month of 2019.

In the same month, the number of credit cards reached 39,88,104, up from 19,25,238 in January 2019.

Most banks are now adopting digital payment systems, including QR code payments, as part of their cashless payment campaigns, which has helped boost card transactions, said Ahsan Ullah Chowdhury, head of card operations at Eastern Bank.

He said the tourism and travel industry reopened after the pandemic, which is another reason behind the growing card transactions.

Foreign travels picked up when the pandemic subsided and travel bans were withdrawn, he added.

In January this year, foreign currency transactions by cards stood at Tk 620 crore, up from Tk 247 crore in the same month of 2019.

Ahsan further said the on-going economic crisis created by soaring inflation has caused the use of credit cards to grow as people are borrowing more.

The general point-to-point inflation increased by 0.21 percentage points to 8.78 per cent in February this year compared to the previous month.

In 2022, the inflation rate was 8.57 per cent in January and 8.71 per cent in December, according to the Consumer Price Index (CPI), Inflation Rate and Wage Rate Index (WRI) in Bangladesh.

The Eastern Bank official said a growing number of clients are taking out loans through credit cards and that is also why transactions have increased.

The pandemic fast-tracked digital payment systems as people avoided using banknotes fearing they would be infected by the virus, Syed Mohammad Kamal, country manager of Mastercard recently told The Business Post.

He said people are travelling locally and also going abroad in the post-pandemic period, which they could not do during the global health crisis due to bans and restrictions.

Kamal urged the government to provide incentives for encouraging people to opt for cashless transactions.

BB’s cashless campaign

The Bangladesh Bank in January this year started a cashless campaign titled “Cashless Bangladesh”.

Ten banks, three mobile financial services (MFS) providers, and three international payment service providers (PSP) are involved in the campaign.

As part of it, they have equipped many micro traders and street vendors initially in the Motijheel area with QR code payment systems, including the owners of tea stalls, grocery stores, and eateries, as well as cobblers, fruit sellers, and hawkers.

The central bank executive director and spokesperson Md Mezbaul Haque said the campaign started in Motijheel but its aim is to make the whole country cashless. It will gradually be expanded across Dhaka city and then the rest of the country, he said.

He also said some banks and MFS providers provided proprietary QR codes in the past but there was no universal QR code. The central bank has now introduced Bangla QR, through which clients of any bank will be able to make payments, said Mezbaul.

The campaign aims to popularise the interoperable QR code payment system across Dhaka city and bring hundreds of thousands of small businesses, including those owned by lower-income groups, under the digital transaction system.