Bangladesh – The Rising FinTech Star in South Asia

Asia has some of the largest and fastest-growing economies globally, and it is home to countless FinTech startups. The FinTech market in Asia-Pacific is expected to cross $150 billion by 2025. According to EY Global FinTech Adoption Index 2019, China and India led the FinTech Adoption Index at 87%. Bangladesh, a neighbor to both these fastest-growing FinTech markets, is accelerating its FinTech adoption by leveraging mobile technology.

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Digital Payments is the largest FinTech segment in mature and upcoming FinTech markets alike, mainly because of the acceptance and implementation of mobile technologies. Bangladesh is one of the economies where the Payments segment (FinTech) is performing well because of mobile phones.

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FinTech in Bangladesh

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The current startup ecosystem in Bangladesh is valued at $1.45 billion and has the potential to reach a $10 billion valuation. Financial inclusion in the country increased from 16% in 2011 to 37% in 2018. Despite remarkable progress, Bangladesh remains one of the economies with the largest unbanked population. All FinTechs put together process $4 billion in monthly transactions. The Remittances segment is catching up owing to money transfers by expatriates. Lending and Personal Finance are the other segments that are registering growth.

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Key challenges faced by FinTechs in Bangladesh:

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• Lack of financial and technological literacy, a large unbanked population
• Most SMEs not unified under a formal financial system
• Conventional banking system mostly not user friendly
• Poorly regulated banking industry
• Low VC investments
• Low interoperability among payment players

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Bangladesh’s innovative FinTech approach is based on Mobile Financial Services (MFS). MFS refer to branchless banking or mobile banking services offered to banked and unbanked population groups at reasonable rates. Using MFS, consumers in remote locations can add money to their mobile accounts at nominal charges without visiting a physical branch. MFS are registering steady growth in the country, with bKash leading the way. Contactless transactions due to COVID-19 have accelerated e-wallet adoption. Bangladesh has 85 million MFS-registered accounts. Digitized payments of utility bills and wages of private-sector workers have increased amid the crisis.

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Banks lead the FinTech transformation in Bangladesh. Popular MFS offerings include bKash (BRAC Bank), mCash (Islami Bank Bangladesh), UCash, and Islamic Wallet (Al-Arafah Islami Bank). Some banks have launched their FinTech platforms. Dhaka Bank Limited (DBL) has introduced diversified services and uninterrupted banking, and Bank Asia is planning to form a neobank targeting the youth. Islami Bank Bangladesh plans to launch real-time online investment banking.

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Regulators Are Adopting a Progressive Approach

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Bangladesh Bank issued MFS guidelines and permitted 28 banks to provide mobile finance under a bank-led structure to boost financial inclusion. Taking into account the National ICT Policy 2018, the Information and Communication Technology Division of Bangladesh is working on implementing an Interoperable Digital Transaction Platform (IDTP) to offer Application Programming Interfaces (APIs) to FinTechs. Bangladesh Bank has recently introduced a regulatory innovation office for FinTechs under its payment systems department.

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FinTech in Bangladesh is a fine example of a public-private partnership targeting double-digit growth. Here are some initiatives taken by the country to promote FinTech:

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• Licenses granted to 16 leading banks to offer MFS in the country
• Policy reforms for alternative investment instruments, such as venture capital funds, and to enable fund of funds by banks and NBFIs
• Dedicated collaboration acceleration programs such as Vision 2025 to create a startup- and VC-friendly ecosystem
• Digital Financial Services (DFS) Lab, a joint initiative by Bangladesh Bank and a2i, has been developed (groundwork for regulatory sandboxes)
• A $1 million support fund for the startup sector from the ICT division of the government
• Separate private entities allowed to operate as payment service providers and payment system operators

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bKash – The First and Only FinTech Unicorn in Bangladesh

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bKash, a mobile financial services and payments system, leads the digital payments market with 80% of the existing MFS market. It is backed by BRAC Bank and receives investments from Ant Group. Its business model is based on technology merged with an agent network present in every other block. bKash features a solution for money transfer, mobile recharges, and utility payments, among others. Beneficiaries can receive cash at a participating agent’s location or partnered locations of Western Union or ATMs.

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About 80% of the current workforce has family in rural areas. The migrant population in cities such as Dhaka and Chittagong faces challenges in sending money home on a regular basis. bKash takes financial services to remote, rural areas that are difficult for other institutional financial service providers or banks to reach because of the high cost.

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The Cross-Border Influence

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As a FinTech leader in South Asia, India plays a crucial role in fostering innovation. The Digital Bangladesh vision is motivated by the Digital India campaign that provided a thrust to India's FinTech market.

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Indian VC firms are investing in Bangladesh-based FinTechs. Sequoia Capital India and Flourish Ventures recently invested in ShopUp, a Bangladesh-based social commerce platform, which raised $22.5 million in its Series A round. ShopUp helps micro-entrepreneurs set up a storefront on Facebook, access working capital, and automate sales and operational processes. An Indian fashion startup merged with ShopUp around October 2020.

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Enabling the interoperability of payment systems has allowed the Indian digital payment sector to reinvent itself. Bangladesh is following the same path by taking gradual steps.

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Select FinTechs in Bangladesh

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Some FinTechs plan to focus on region-specific coverage, while others plan to expand in South Asian and Middle Eastern markets.

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Here are some noteworthy FinTechs:

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SureCash: SureCash is a re-loadable mobile wallet. It is a mobile financial platform that partners with local banks across Bangladesh. It provides customers with a complete mobile payment service, allowing them to make any transaction (P2P, cash in/out, school and college tuition payments, bill payments, and service payments) through its open payment network.

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PayWell: PayWell, an online bill payment platform, features solutions for mobile recharge, electricity bills, water bills, gas bills, travel tickets, internet and DTH bills, and e-commerce, among others. Its services are available on POS terminals, the Android app, and the web portal.

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iRemittance: iRemittance is used in Dhaka, London, Sydney, and Johannesburg. It provides money transfer software for FIs or MTOs to facilitate money transfer. It offers custom reports and compliance features to fulfill custom compliance requirements. The software platform guides clients on money laundering compliance, effective client management, and remittance accounting and reporting.

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eworld: eworld is a cryptocurrency exchange platform for users to buy, sell, and exchange cryptocurrencies such as Bitcoin, Ethereum, Litecoin, and Altcoin.

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Dmoney: Dmoney is a mobile wallet for money transfers and payments. Users can transfer money to Dmoney wallets and pay for purchases; they can add and withdraw money from bank accounts, pay utility bills, book tickets, make savings, and make donations through the wallet. Dmoney provides a bill collection platform for businesses.

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iFarmer: iFarmer is an online crowdfunding platform for the farming community. It enables individuals to invest in farming and livestock enterprises in Bangladesh. The platform connects farmers, landowners, sponsors, and crop buyers and creates a farming supply chain; it allows sponsors to fund projects for a social cause or share the profits from farming businesses.

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Lebupay: Lebupay is a payment gateway for individuals and businesses. It can be easily integrated with the merchant website and shared through messages and social media for accepting payments such as debit/credit card payments and agent banking.

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Rocket: Dutch-Bangla Bank Limited (DBBL) was the first bank in Bangladesh to launch its MFS or mobile banking, known as Rocket. Rocket app services include cash deposit/withdrawal, ATM, mobile top-up, P2P transfer, money transfer from a bank account to a Rocket account, and government allowance disbursement. It is the second most popular service after bKash.

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Nagad: Nagad, a digital financial service offered by Bangladesh Post Office (a government body), combines the electronic money transfer system and postal cash card service. It can be used for sending and receiving money, P2P money transfer, and mobile top-ups.

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TopUp: TopUp is a mobile recharge app (Android+iOS) featuring solutions for prepaid and postpaid airtime recharge for all telecom operators. It provides services such as online movie ticket booking, point transfer among family members and friends, promo code sharing, and bus and train ticket booking.

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Fintech Is Just the Right Catalyst for Bangladesh To Boost Its Economy

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Using FinTech to benefit the economy by providing adequate financial services to SMEs and startups seems to be the focus of the Digital Bangladesh initiative, which is inspired by the Digital India campaign and the country-wide transformation of the unbanked semi-urban and rural population. The integration of digital financial services (DFS) with microfinance institutions (MFIs) can enable MFIs to reach remote parts of the country.

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In Bangladesh, FinTech can increase government and private investments and reach a large unbanked consumer base. Bangladesh Bank, the central bank of Bangladesh, has also adopted the Digital Bangladesh approach. The government is working on updating the National ICT Policy for universal and more affordable access to digital devices. FinTech can benefit the economy by offering adequate financial services to SMEs and other industry startups. FinTech in Bangladesh is evolving, and it is yet to catch up with global giants.

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