Fintech in Bangladesh
Bangladesh is still trailing behind other affluent countries when it comes to employing technology to automate and digitalize banking transactions.
Bangladesh's financial institutions have been chastised for a lack of effort to enhance financial inclusion, inadequate customer service facilities, a lack of information technology (IT) risk management, and inefficient operations due to the use of suboptimal technology. Financial institutions in Bangladesh are still battling to recruit and retain consumers as the world shifts to increasingly digital forms of transactions. It's past time for the United States to catch up.
Customers can now obtain banking services from anywhere thanks to technological advancements. It's a technology that improves and replaces existing systems. Everything from money transactions to server management is covered. Fintech can provide you with simple transactions or smart management systems.
Mobile Financial Services (MFS), like bKash, Nagad, Rocket, SureCash, Trust Axiata Pay (TAP), and Upay, are very popular and loved by the people of Bangladesh nowadays. These institutions cater to around 35 million people with an annual credit of over USD 7 billion. They have done an incredible job to successfully bring a vast majority of people under the umbrella of digital financial services. So let's dive into what is next for Fintech in Bangladesh and how it can improve the financial landscape. Most of the information is taken from some research firm, some news paper besides some fintech companies websites.
Digital banking has the potential to transform the lives of people who work in the informal economy. MFS and Agent banking are important components of the financial inclusion plan because they provide low-income and disadvantaged persons with low-cost access to financial services. MFS transactions have increased by roughly 30% year over year, while deposits have increased by 108.38% year over year in agency banking until March.
Financial Institutions can Know Their Customers Better
It's no surprise that Big Data, Machine Learning, and Artificial Intelligence are driving many business decisions in the modern age. Financial services in many countries use big data to screen potential clients. The system can do extensive background checks in a flash. All these can help to reduce and prevent money loss for loaners who can assess the viability of a loan or investment. The whole system is intuitive, smooth, and easy to use and most of all, it gives accurate results and predictions.
For financial institutions in Bangladesh, this technology is crucial. The percentage of bad loans and poor investments is staggering with 11.4% of recipients defaulting. In the first quarter of 2021, defaulted loans accounted for 8.07% of total outstanding loans. Fintech which assists in digitally retrieving customer data and calculating expected loss can help reduce that percentage by a significant amount. They can not only reduce time but also improve customer satisfaction.
Substantial Security Benefits
Financial institutes in Bangladesh are far behind in cyber security and risk management. Recently, 147 public and private organizations - including banks and non-bank financial institutions (NBFIs), came under cyber attacks. Bangladesh Bank itself has often faced cyber-attacks which led them to lose millions of dollars.
Integrating artificial intelligence and machine learning for fraud detection, blockchain systems, and regulatory technologies (RegTech) with financial services, will help build a secure system. E-KYC can also help in preventing money laundering activities by enhancing customer identification and authentication processes.
Fintech-enabled payment processing can help bring more cash transactions under the formal sector, thereby mitigating malpractices, improving transparency, and providing better fund protection for customers. Digital payments can also reduce the amount of money to be printed, thus reducing the risks of counterfeit money. It can also help financial institutions maintain consistency in their operations and reduce the risks of error.
Bangladesh's financial markets where stocks, bonds, etc. are sold could see a significant transformation by leveraging Fintech. Starting from financial advisory, domestic and international online trading platforms to using technology to improve regulation in stock exchanges, the potential for Fintech in Bangladesh is massive. Wealth management, for example, has been one of the financial services that have been disrupted in a big way by FinTech. With the implementation of big data, artificial intelligence, blockchain, and other supportive technologies like RegTech, the financial markets will work more efficiently and securely.
Fintech companies in Bangladesh should be encouraged to help create accessible and affordable consumer credit products such as peer-to-peer (P2P) lending platforms, crowdfunding platforms, and alternative credit scoring apps. Insurance companies in Bangladesh should widely accept insurance in their operations for wider availability of insurance products, increased accountability, and transparency.
The Future of Fintech in Bangladesh
No matter how you slice it, the future is with Fintech. The technology has enormous potential for growth, innovation, and cost savings. There are lots of untapped opportunities in Bangladesh. Innovation in financial services should go hand in hand with growth as the country graduates to a developing nation.
Out of 83 countries, Bangladesh ranked 78th on the Global Fintech index 2021; declining 17 points since last year. This slow adaptation of technology may hinder the country's growth. (Source: Dhaka Tribune)
It is time for the Bangladeshi financial landscape to adopt Fintech. We should leverage our younger population, a growing number of mobile subscribers, and millions of internet users to boost more Fintech disruption and adaptation. To achieve sustainable growth, it is essential for financial institutions and the government to prioritize Fintech going forward.
Fintech in Bangladesh has totally changed the financial landscape. There have been several growing fintech companies in Bangladesh over the years. Since the pandemic has inspired people into cashless transactions, fintech companies in Bangladesh have welcomed this opportunity to make a meaningful and noteworthy impact in Bangladesh.
Bangladeshi Tech Entrepreneur