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Safety concerns, poor infrastructure holding back digital payment

Star Business Report
Digital payment has not taken off in a big way in Bangladesh in the absence of infrastructure and interoperability and safety concerns, experts said yesterday.
“There is an unprecedented opportunity to grow digital transactions in Bangladesh,' said Tom Crawford, public policy advisor of FTI Consulting, a global business advisory firm based in Washington DC.
Cashless payments are growing fast across the world, including Asia, because of its greater convenience. Yet, cash remains king in Bangladesh, despite the great advances made in ICT.
Subsequently, the Association of Bankers, Bangladesh (ABB) and The Daily Star joined hands and organised a roundtable on building a pay-ment ecosystem for digital Bangladesh and its challenges and opportunities at The Westin Dhaka.
"Trust and reliability matter," said Syed Mahbubur Rahman, chairman of ABB, citing the mindset of many savers as a case in point.
A section of the savers park their funds with state banks despite private banks' offer of higher returns.
"We will have to give comfort to the clients about digital transactions by developing a secure system."
Moreover, people will have to be
encouraged to adopt the electronic paymentsystem.
Rahman, who is also the managing director of Dhaka Bank, urged the central bank to relax its mandatory policy of routing all card transactions through the National Payment Switch Bangladesh (NPSB) in a bid to mitigate the risks of cyber attacks.
"If the NPSB collapses for any reason, the entire banking transaction system will be disrupted," he added.
Abul Kashem Md Shirin, managing director of Dutch-Bangla Bank, echoed the same as Rahman on the routing all transactions only through the NPSB.
"There should be an alternative to NPSB,” Shirin said.
A regulatory framework is needed to set security standards for the electronic payment system, Crawford said. "The government and the private Sector should work together to build a secure payment system."
Merchants can be subsidised to create value in card payment to encourage people to use the electronic payment system, he added. "The two things that most important for spreading out the digital payment system are confidence and convenience," said Mahfuz Anam, editor and publisher of The Daily Star.
People go for the digital payment system for convenience and resist the system for lack of confidence.
Subsequently, formulation of a legal framework for the system should be the number one priority.
"By merely creating confidence among the people can expedite the adoption of the digital payment system."
For instance, 90 percent of the payment for e-commerce purchases is made with cash on delivery due to low confidence, headded.
Only 5 percent of the total transactions in the country takes place through cards, said Lila Rashid, general manager of the Bangladesh Bank's payment systems department.
And even then, 89 percent of the card transactions are for cash withdrawal from the ATM booths.
"This is frustrating," she said.
Internet banking accounts for only 1 percent of the total transactions. "This is very insignifi-
cant when we are trying to promote electronic payment."
This is because people still do not have confidence in cards or the electronic payment system.
Banks are also reluctant to provide the internet banking facility, which is the future of the electronic payment system, she said.
Currently, about 33 banks provide the service and even then not all of them provide the gamut of internet banking facilities.
Of the banks that have full-fledged internet banking service, only 13 banks are connected with the NPSB, accordingto Rashid.
Many banks are not interested in adopting the new technology because of low returns to investment, Shirin said.
Bangladesh has made impressive growth in mobile financial services, said Dianne Rajaratnan, Asia Pacific Lead at the Better Than Cash Alliance, a United Nations partnership of governments, companies and international organisations to accelerate the transition from cash to digital payments.
The faster growth showed the potential of the digital payment system, she added.
Despite various challenges, lots of progress happened in the digital payment system, said Pial Islam, managing partner of pi Strategy, who moderated the session.
Only by building confidence can the remote people be brought under banking channel, said Anis A Khan, managing director of Mutual Trust Bank.
Agent banking is working tremendously in taking banking services to the remote people, he added.