Govt to issue digital bank licences soon: Finance minister

Highlights:

• Minister links digital banking with inclusion
• Strong digital infrastructure seen as essential
• Stakeholders raise concerns over Bangla QR
• PPRC calls for sustainable implementation roadmap

The government is considering issuing licences for digital banks soon, as digital banking is expected to become part of Bangladesh's digital economy and financial inclusion agenda, Finance Minister Amir Khosru Mahmud Chowdhury said today (19 September).

"Digital banking is going to happen very soon. I have no doubt about it because this is very much part of our digital economy and financial inclusion," he said while speaking at a dialogue titled "Financial Inclusion: Policy Goals, Transactions Ecology and Sustainable Roadmap", organised by the Power and Participation Research Centre (PPRC) at a hotel in the capital.

The minister said digital banking should be rolled out gradually, with particular attention to cybersecurity, digital infrastructure and the integration of credit information.

He also said digital banking should not be treated as a standalone service but as part of a wider financial ecosystem covering reliable internet connectivity, digital payments, financial services and access to formal banking.

He further said strong digital infrastructure was needed before expanding digital financial services.

Digital banking could widen access

Amir Khosru said the new system could bring people currently outside the formal financial system into banking, particularly low-income households, farmers and other underserved groups.

He cited government-backed payment programmes as an example, saying regular digital transactions could encourage people without bank accounts to enter the formal financial system.

Many Family Card beneficiaries, particularly housewives, do not have bank accounts, he said. Regular payments through formal channels could encourage them to open accounts.

A similar process was taking place among farmers receiving payments through the Farmer Card, he added.

"Once people receive payments through a formal system, they have an incentive to enter the banking system," he said.

Stakeholders flag Bangla QR misuse

Participants at the dialogue raised concerns over the removal of the minimum merchant discount rate (MDR) and interchange reimbursement fee (IRF), saying the move had disrupted the business model of mobile financial service (MFS) providers.

They called for stronger regulatory monitoring of Bangla QR, alleging that some agents were diverting MFS funds into bank accounts to take advantage of the zero-fee payment facility.

MDR is a fee paid by merchants to banks and payment service providers for processing digital transactions.

IRF is an interbank service charge paid by the institution providing Bangla QR to the institution whose app is used to complete a payment.

Industry experts warned that if MDR and IRF remain at zero, MFS providers may eventually seek to recover their costs through other charges, including cash-in fees, which could undermine financial inclusion.

'Bangla QR must be embraced, but abuse prevented'

Former Bangladesh Bank governor Ahsan H Mansur said Bangla QR was an important initiative but required safeguards to prevent misuse.

"Bangla QR is something we have to embrace, but at the same time we have to prevent its abuse," he said.

He said addressing the challenges would require several measures rather than a single solution.

"There's no single solution to this issue. It has to be addressed piece by piece," he said.

Mansur said that during his tenure, local governments had been instructed to require businesses seeking new or renewed trade licences to have a Bangla QR facility.

He also highlighted the importance of maintaining a single national QR standard accessible to all institutions and customers.

However, he said this raised the question of whether customers should be required to have smartphones to use the system.

Mansur also said the digital bank initiative had stalled.

"Everything was done during my time. The list was prepared, the criteria were identified, and the process was laid out. But since then, it has never moved forward," he added.

PPRC seeks sustainable roadmap

PPRC Executive Chairman Hossain Zillur Rahman said Bangladesh needed a sustainable roadmap for implementing Bangla QR, incorporating the views of all relevant stakeholders.

He said building a functional digital financial ecosystem required coordinated action across multiple areas and that stakeholders were prepared to contribute to the process.

"The system has to match through a sustainable roadmap approach. It requires a much, much bigger discussion," he added.