Customer confidence is crucial for a functioning cashless economy

The Bangladesh Bank (BB) has embarked on an ambitious journey to fundamentally alter how crores of citizens spend, save and transfer money. Over the past decade, the rapid expansion of mobile financial services (MFS), internet banking, and digital infrastructure has altered the landscape. Despite that, the country remains anchored to a cash-dominated reality.

The structural obstacle is a complex gridlock of economic friction, digital illiteracy, and deep-seated consumer mistrust. To achieve the central bank’s definitive roadmap—which mandates that 75 percent of national retail transactions be settled digitally by July 2027 before transitioning to a fully cashless economy by 2031—policymakers must recognise that technology alone cannot change human behaviour. The transition requires an aggressive regulatory shift that makes digital architecture demonstrably cheaper, safer, and more universally accessible.

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The rapid promotion of Bangla QR, which has scaled to an impressive 9.63 lakh registered merchant outlets facilitating nearly 66 lakh transactions, stands as a testament to the institutional push. Under the latest directives, the Bangladesh Bank has mandated that all commercial banking and MFS providers replace their proprietary, siloed QR codes with this unified, interoperable standard. Furthermore, the continuous deployment of the National Payment Switch Bangladesh (NPSB) and the open-source Instant Payment System (IIPS) aim to eliminate transaction barriers across fragmented financial networks. Still, a contradiction persists: why would a rational citizen abandon cash if the digital alternative comes at a cost? A retail landscape where cash remains completely free to pass from hand to hand will always outperform a digital ecosystem that charges fees for every transaction.

To unlock the stagnant potential, the central bank must transition to a true “zero fee” framework. First, interbank ATM withdrawals, which currently cost up to Tk 30 for high-value transactions, must be entirely free of cost. The current NPSB interoperability levies, encompassing the 0.15 percent fee for bank-to-MFS transfers and the steep 0.85 percent tax on cross-MFS and merchant settlements, must be fully subsidised or removed. Second, small-scale retailers and micro-merchants using Bangla QR must be completely exempted from any settlement fees or cash-out charges when handling supply chain costs. Third, institutional rewards and remittance-style incentives must be ensured. Mirroring the highly successful 2.5 percent state incentive for remittances, the government should introduce a 2 to 3 percent direct cashback or sovereign tax rebate for consumers who use digital payment channels for utilities, mass public transit, and essential commodities.

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Fourth, small traders and street vendors who actively settle transactions through digital means should be granted multi-year corporate tax holidays alongside automated eligibility for low-interest nano-loans. Fifth, a vast portion of the rural populace remains unable to navigate complex authentication workflows, smartphone user interfaces, and mobile banking applications. The state must mobilise its extensive network of union digital centres (UDCs) to host community-based financial training bootcamps. Meanwhile, financial literacy and cyber safety frameworks must be formally integrated into the secondary and higher secondary national academic curricula.

No variable in the cashless equation is more vital than consumer confidence. Consumers will often tolerate minor transactional delays, but they are unlikely to tolerate the lingering fear that their lives’ savings could be compromised in an instant. Studies by the Bangladesh Institute of Bank Management (BIBM) confirm that fear of cyber fraud, sophisticated SMS phishing, and identity theft remain the primary deterrents to digital migration.

Encouragingly, some institutions have demonstrated that risk mitigation is entirely achievable. Many commercial entities have significantly fortified the security architecture, incorporating rigid device-binding protocols, universal multi-layered OTP verification, and compulsory biometric authentication safeguarding crores of digital consumers. To formalise this level of defence across the entire industry, the central bank must mandate universal fingerprint or facial verification protocols before the authorisation of any high-value transactional transfer, and the immediate establishment of a digital consumer protection fund to guarantee rapid, full financial reimbursement for victims of institutional cybercrime.

The transition towards a cashless society is far more than a technical upgrade; it is a fundamental reconfiguration of the social contract between the state, the financial apparatus, and the citizens. If executed with systemic empathy, a digitised economy will radically suppress structural corruption, lower cash handling expenses, optimise tax transparency, and formalise the massive parallel informal economy. However, that future will remain elusive unless the concerns of ordinary consumers are prioritised over the profitability of financial intermediaries.

Milon Kumar Dash is senior officer at Sonali Bank PLC.

Views expressed in this article are the author's own. 

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