72% of transactions in Bangladesh still cash-based as informal economy dominates

Despite Bangladesh Bank's push towards a cashless society, more than 72% of all monetary transactions in the country are still conducted in cash, according to the central bank's latest payment system report.

While digital transactions are gradually increasing, cash continues to dominate, especially in large-value exchanges. People tend to rely on cash or cheques for high-value payments, while using digital platforms mainly for small and medium transactions.

As per data in the payment system report, between December 2023 and December 2024, cash remained the primary mode of financial exchange across the country.

According to Bangladesh Bank data, in December 2024, 71.72% of all transactions took place in cash. The total transaction value that month stood at Tk19.58 lakh crore, up from Tk18.53 lakh crore in December 2023. During the same period, more than 45 crore cash transactions were recorded – accounting for 53% of all transactions. 

The Bangladesh Payment System Report, recently released by the central bank, compared digital and non-digital transaction trends over the past 12 months. It found that both the total amount and number of transactions conducted in cash were higher than those made through digital platforms.

Bangladesh Bank noted that formal payment systems in the country are broadly divided into large-value and retail-value payments. Large-value payments are mostly settled through cheque transactions under the Bangladesh Automated Cheque Processing System (BACPS).

Economists and bankers say that while the central bank's campaign for a cashless society is well-intentioned and necessary for economic modernisation, the dominance of the informal economy, where cash transactions are more common, remains a major challenge.

Speaking to The Business Standard yesterday, Zahid Hussain, former lead economist at the World Bank's Dhaka office, said, "There's a saying that 'cash is king,' and indeed, cash still dominates. Most cash transactions take place in the informal sector. Unless these businesses are brought into the formal system, building a cashless society will remain a major challenge."

He added that key sectors such as transport, agriculture, and wholesale-retail trade operate largely outside the banking network. 

"Many large businesses in these sectors prefer to remain informal to avoid taxation and regulatory scrutiny," he said.

Zahid believes that if the foundation for building a cashless society is based on old practices, where people still prefer cash transactions, it will be a major challenge to make the transition to a truly cashless system.

Talking on the issue, Md Touhidul Alam Khan, managing director and CEO of NRBC Bank, pointed to structural and behavioural barriers.

"The primary reasons include the lack or limited availability of accessible point-of-transaction systems for individuals, coupled with a general reluctance and limited awareness about digital financial services," he said.

"Additional factors such as high internet costs, unavailability of smart devices, limited digital literacy, and low financial inclusion, particularly in rural areas, foster dependence on cash transactions. Trust issues with online platforms further contribute to this trend, hindering widespread adoption of digital channels," he added.

Noting that cultural factors also play a part, he said people often prefer cash to maintain privacy or avoid disclosure. High-value payments are frequently made in cash to bypass documentation, taxation, or banking scrutiny.

However, he noted signs of progress. He said, "Bangladesh is still in transition compared to neighbouring countries, but there's an upward trend. The growth of digital wallets, mobile banking, and QR code-based payments shows positive momentum."

"Achieving a comprehensive transition requires concerted efforts in effective implementation, raising public awareness, and improving access to technology. While progress is visible, the shift remains gradual, and the country is still in the transition phase," Touhidul added.

Mustafizur Rahman, distinguished Fellow at the Centre for Policy Dialogue (CPD), told TBS, "Bangladesh still relies heavily on cash-based transactions. Strengthening digital infrastructure is essential if we are to achieve the planned shift to cashless payments. Many educated people still hesitate to use digital platforms. But once established, a cashless society would also reduce the cost of printing money."

Bangladesh Bank has taken several steps to promote cashless payments, including awareness campaigns across districts. Businesses are now required to enable QR code-based payments for trade licence issuance or renewal.

Two years ago, the central bank launched the Bangla QR, a national QR code standard for retail transactions. Currently, 43 banks, five mobile financial service (MFS) providers, and three payment service providers (PSPs) are part of the system.

The government aims to make all transactions cashless by 2031 as part of its Smart Bangladesh 2041 vision, which rests on four pillars – Smart Citizens, Smart Economy, Smart Government, and Smart Society.

Countries such as Sweden, Finland, the Netherlands, the United Kingdom, Canada, Australia, China, and South Korea are among the global leaders in reducing cash dependency.

Digital transactions on the rise

Despite cash's dominance, digital payments are showing growth. Bangladesh Bank data indicate that the share of digital transactions was highest in April and June 2024 – at around 56% – driven by Eid spending, social safety net disbursements, and annual sales campaigns.

The lowest share, 47%, was recorded in December amid year-end settlements and cash withdrawals. In terms of value, digital payments peaked in November at 35%, likely due to institutional transfers, while April saw the lowest share at 20%.

Throughout the year, digital transactions consistently accounted for around 56% of total volumes.

NRBC Bank CEO Touhidul, "A cashless economy can enhance financial discipline, improve transparency, and strengthen tax collection. It also cuts the cost of handling cash, accelerates transactions, and supports fiscal stability."

"Overall, a cashless framework fosters financial inclusion, reduces economic leakages, and contributes to sustainable economic growth," he said.