In Bangladesh, the push towards a cashless society has been met with resistance due to a lack of infrastructure and trust in digital financial systems. A more realistic approach is to focus on reducing cash usage and promoting “less-cash” methods of transaction, such as mobile banking and point-of-sale terminals. This approach addresses the country’s current limitations while still working towards a more digitized economy.
A cashless society refers to a society in which transactions are primarily conducted through electronic means, such as debit cards, credit cards, and digital payments, rather than using cash or physical currency. It does not necessarily mean that cash will no longer exist, but it may become less commonly used. Some countries are moving towards a cashless society with the digitalization of the economy and banking system.
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Why is Less-cash more realistic than Cashless?
Bangladesh has made significant strides in recent years in its push to become a cashless society. However, a fully cashless society may not be a realistic goal for the country at this time. There are several reasons why a less cash society is more realistic than a cashless society in Bangladesh. Some of the factors are as follows:
Limited access to banking services:
A large portion of the population in Bangladesh, particularly in rural areas, still lacks access to formal banking services. This makes it difficult for them to participate in a cashless economy as many of the cashless payments require banking channel.
Fear of fraud:
Many people in Bangladesh are afraid of fraud and scams when using digital payments and prefer to stick to cash transactions. Nahid from bkash and some ghosts in the realm of MFS. Policy Research Institute of Bangladesh (PRI) surveyed 7,279 MFS users from 45 districts and 2,000 agents from 13 districts and reported in March 2022 that 10% MFS users faced fraud. The average size of loss from MFS fraud was about Tk 9,000 and about 30 percent of the fraud victims never had their complaints resolved.
Many digital payment platforms in Bangladesh are not able to connect with each other, making it difficult for customers to use different platforms seamlessly. Even different MFSs are not properly integrated. Same issue is for MFS-banks. However, Binimoy has stepped to resolve this issue.
Limited customer support:
Many digital payment platforms in Bangladesh do not provide adequate customer support, which can make it difficult for customers to resolve issues. As per the PRI survey in March 2022 about 30 percent of the fraud victims never had their complaints resolved. So, people are panicked and may avoid serious payments by cashless payment methods.
Lack of trust in digital transactions:
Many people in Bangladesh, specially the less educated older people, still lack trust in digital transactions and prefer to use cash for their transactions. Many people in Bangladesh are not confident that their financial data will be secure when using digital payments. Data is one of the most valuable assets and it is traded by most of the companies for money or market share.
Reliance on Power:
Power supply interruption may highly impact the capacity and availability of cashless transactions. Think of the situation you have heavy wallet but your phone is out of charge. Or a blackout has made the merchant unable to process digitally and you are helpless to make any transaction.
Lack of digital literacy:
A significant portion of the population in Bangladesh lacks digital literacy and may not be able to effectively use digital financial services. Many people in Bangladesh are not aware of the benefits of digital payments and how to use them.
Limited access to technology:
Many people in Bangladesh, particularly older generations and those in rural areas, do not have access to technology such as smartphones or internet, which is necessary to use digital payment methods.
Limited internet connectivity:
Internet connectivity is still limited in many parts of the country, making it difficult for people to access digital financial services.
Lack of infrastructure:
The infrastructure necessary to support a cashless economy, such as point-of-sale terminals and electronic payment systems, is still limited in many parts of the country.
High cost of transactions:
Many people in Bangladesh still find digital transactions to be more expensive than cash transactions, making it less attractive for them to switch to a cashless economy. Many digital payments platforms in Bangladesh charge high transaction fees, which makes them less appealing to customers. Even some stores of mobile phones and computers will charge you 1.5%-2% if you desire to pay digitally.
Limited use of credit and debit cards:
Credit and debit card usage is still relatively low in Bangladesh, with many people preferring to use cash for their transactions.
Limited acceptance of digital payments:
Many merchants and small businesses in Bangladesh still do not accept digital payments, making it difficult for customers to use digital financial services. Many restaurants and hospitals decline digital payments.
Limited number of e-commerce platforms:
The number of e-commerce platforms in Bangladesh is still limited, which makes it difficult for people to purchase goods and services online.
A limited number of MFS agents and apps:
Mobile banking agents and apps are still relatively limited in Bangladesh, making it difficult for people to access digital financial services. Once, I had to travel few miles to find SureCash agent to pay a govt. fee.
Limited number of payment gateways:
The number of payment gateways in Bangladesh is still limited, making it difficult for people to access digital financial services.
Lack of standardization:
Many digital payment platforms in Bangladesh are not standardized, which can make it difficult for customers to use them and for merchants to accept them.
Limited integration with other services:
Many digital payment platforms in Bangladesh are not integrated with other services, such as e-commerce or bill payments, which can make them less appealing to customers.
Limited number of online marketplaces:
The number of online marketplaces in Bangladesh is still limited, making it difficult for people to access digital financial services.
Reliance on cash in daily transactions:
Many small businesses and vendors in Bangladesh rely on cash transactions for their daily operations.
Limited number of online banking services:
The number of online banking services in Bangladesh is still limited, making it difficult for people to access digital financial services.
Limited number of online banking apps:
The number of online banking apps in Bangladesh is still limited, making it difficult for people to access digital financial services.
Limited digital payment options:
Despite some progress, the availability of digital payment options in Bangladesh is still limited, and many people do not have access to a wide range of digital payment methods.
It is important to know that a cashless society is in fact low-cash, not a cash society.
While the idea of a cashless society may seem appealing, it is not a realistic goal for Bangladesh at this time. The country’s infrastructure, dangers of going cashless and population demographics make it difficult to implement and maintain a cashless system. A more practical approach would be to focus on reducing the reliance on cash and promoting the use of digital payment methods, such as mobile banking and digital wallets. This would allow for a gradual transition towards a less-cash society, ultimately leading to a more financially inclusive and stable economy for all.