Written by Muhammad Awlad Hossain, Chief Growth and Marketing Officer, TallyKhata
In recent years, Bangladesh has experienced an extraordinary surge in digital transactions. From debit and credit cards, POS machines to mobile banking, online banking, QR codes, multiple channels have emerged to make financial transactions faster and easier.
The convenience of transferring money instantly, paying with a simple tap, or avoiding the hassle of counting cash has made digital payments an attractive alternative.
Yet, despite these advantages, not everyone is embracing the shift. The reality is that the journey toward a cashless economy is not without its obstacles, and understanding both the benefits and the challenges is essential to charting the path forward.
The slow adoption of digital payments in Bangladesh is rooted in two major factors: the limitations of digital infrastructure itself and the business models. Digital payment requires access to certain tools and resources.
First, user needs to have a mobile phone or computer. Without it, there is no way to access a digital account and use send money, payment and other services .
Second, to open a bank or MFS account, a person must present their National ID (NID) or birth certificate, instantly excluding individuals who do not have the necessary documents.
In addition, using digital platforms requires a certain level of digital literacy. People must know how to navigate mobile apps, enter transaction details correctly, or operate ATMs and POS machines. This knowledge gap is especially visible among the elderly and those living in rural areas.
Bangladesh’s payment market adds another layer of complexity with its non-unified multiple business models. Banking, card networks, MFSs, and PSPs operate under entirely different systems, each with distinct core services, pricing, distribution, and operations. Banks focus on deposits and loans, card networks like Visa and Mastercard drive payment processing, while MFSs and PSPs facilitate money transfers and merchant payments. Their business processes and cost structures differ widely, leaving customers confused and often frustrated.
Take Mr. Kashem as an example. He adds 10,000 taka into his bKash account. If he transfers it to a bank, he pays at least one hundred taka. If he withdraws the cash, he pays at least one hundred fifty taka. The same holds true for Rocket, Upay, or TallyPay, although charges may vary. What makes it worse is the lack of interoperability: a Rocket user cannot send money to bKash, and a City Bank user cannot move funds to Upay. MFS-to-PSP-to-bank interoperability is absent.
Contrast this with banks. If Mr. Kashem keeps the same 10,000 taka in a bank account and transfers it to another bank account, the cost is zero. So why are charges so high in MFS and PSP? The reason lies in their distribution-heavy model. Every cash-in and cash-out relies on agents and an extensive operational network, which pushes up costs. Banks, on the other hand, recover expenses through annual account fees and loan interest, which allows them to offer online transfers at little or no cost to customers.
Cash continues to hold an advantage in many scenarios due to its simplicity. A banknote (cash taka) does not require a device, internet connection, or user account. It demands no technical skills.Anyone, regardless of age or background, can use it. A ten-year-old boy can use cash note to buy groceries, while a digital payment would involve owning a device, registering an account with an NID, and understanding how to process the transaction.
Importantly, using cash is free from the consumer’s perspective, though the government and banks bear the costs of printing, distributing, and maintaining currency. Cash also has universal acceptance and interoperability. A 500-taka note can be used anywhere, unlike digital balances, which are locked within their respective platforms.
On the other hand, digital payments have clear strengths that cash cannot match. Digital money travels instantly across long distances - sending funds from Dhaka to Tetulia takes only seconds. It eliminates the risks and logistics of carrying large sums; for example, paying a supplier two crore taka in cash would require extensive security arrangements, whereas a digital transfer is both safer and quicker. Digital transactions increase the financial capacity of the businesses.
Consider a supplier. Earlier he waited to receive cash payments from his buyers. Upon that he was able to pay his raw material providers. It took days, many times a couple of weeks. Now, payment is received on due date at a bank account and paid to providers instantly. Such faster money circulation increases production, sales turnover and economic growth at large.
Moreover, digital payments also remove the problem of counterfeit currency, as all digital money is authentic by design. From an operational perspective, maintaining digital money is far cheaper in the long term than cash. Once created, digital balances can be used indefinitely without the wear and tear associated with physical notes. There is no need for reprinting or replacing damaged currency, and no ongoing expenses for transporting and storing it.
For digital payments to become a universal choice, several steps are necessary. First, access must be made easier for all citizens. Along with prevailing self account opening using own device and NID, this could be achieved by setting up designated points such as shops or service centers where anyone can deposit or withdraw digital money using biometric verification.
Second, transactions should be simplified for small amounts. Allowing usage to fifty thousand taka monthly using only a phone number, email address, or other simple identifier would reduce barriers for casual users.
Third, full interoperability among all payment systems is essential. A truly cashless economy cannot function if money is trapped within individual platforms. Seamless transfers between bKash, Rocket, TallyPay, Upay, City bank, EBL, Brac and other banks, MFSs and PSPs would give users more flexibility.
Fourth, there must be a push for innovative, low-cost, and no-cost payment models that make digital transactions as affordable as using cash.
Finally, the introduction of a government-issued digital currency - accessible to all MFS, PSPs and banks - could provide a standard, cost-free medium for transactions, ensuring uniformity across the market.
The vision of a cashless economy in Bangladesh is both appealing and achievable, but it will require more than technological readiness. It demands inclusivity, affordability, and a deep understanding of local habits and economic realities. Cash remains unmatched in its simplicity and universal acceptance, while digital payments offer speed, security, and efficiency.
Bridging the gap between the two – cash and digital - will require coordinated efforts from policymakers, financial institutions, technology providers, and the public. If the right balance is struck, Bangladesh could see digital payments evolve to a standard, nationwide practice—benefiting individuals, businesses, and the economy as a whole.
About the Author: Muhammad Awlad Hossain, chief growth and marketing officer of TallyKhata and TallyPay, has more than 18 years of experience in fintech, telco, steel, LPG industries. He completed his post graduation from Institute of Business Administration (IBA), University of Dhaka. He can be reached ad awlad_marketing@yahoo.com.
