The idea of a cashless society is not new. Nowadays, technological innovations and new payment methods aim to replace the old system of bartering with cash. To facilitate daily transactions, EBLis launched Bangla QR payment solution in its EBL SKYBANKING application on September 02, 2020. This corresponds to debit cards, credit cards as well as MFS in Bangladesh. The special feature of the new system is that it focuses on contactless payment using Quick response Where QR code technology. Traditional banks and financial institutions will now be able to access contactless and interoperable transaction systems.
Importance of the cashless payment system
The importance of a cashless payment system is immense considering several factors. There is a long held idea that “money is king”. Although cash remains the main economic player in the world, its advantages are far less than those of the cashless payment system.
The reason is mainly due to the disadvantages of using cash. Physical currency facilitates counterfeiting. It is also susceptible to theft.
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There is also the sunk cost of transporting, counting and storing physical currency. There is also a bar on international transactions as local currencies do not work for payments abroad. Cash-based economies are also at a higher risk of corruption.
All of these disadvantages of a cash-based economy can be overcome by the introduction of a cashless payment system.
What is Bangla QR by EBL? How it works?
Bangla QR is an interoperable QR-based payment solution. This is a step forward in the cashless and contactless payment system in Bangladesh. The payment system is based on the mVisa platform which brings all the utilities and services of Visa without the need for a POS machine.
Although transactions based on QR codes have taken place in Bangladesh, these transactions are not directly regulated by the central bank. Rather, transactions are carried out by the own regulation of fintech services like bkash and Nagad.
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It is important to note that none of the existing contactless payment systems in Bangladesh are a direct service from a bank. Rather, it is limited to fintech organizations. Bangladesh Bank has created a regulatory guideline for the contactless payment system. This was done to streamline the system. And Bangla QR is the direct product of the new political directive.
Bangladesh bank opted for merchant presented QR code transaction or EMVQRCPS. It allows a user to scan a QR code displayed by the merchant and make instant payments.
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Banks and lenders rely exclusively on Point of Scale (POS) for the payment gateway through their card or online banking app. The online banking app is also designed for internal and external account funds transfer rather than merchant payment. The Bangla QR will help eliminate the need for point-of-sale machines and bring lenders closer to MFS in terms of paying merchants.
EBL was the first bank to adopt Bangla QR as a payment option in 2020. It is the first large private bank in Bangladesh to switch to the platform as a payment solution. However, it was not just aimed at going cashless.
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Bangla QR potentials by EBL
EBL Managing Director Ali Reza Iftekhar believes this new payment option horizon will be a great addition to ensuring health security by going contactless during this troubled time of the pandemic. The MFS sector itself has brought the banking sector to a large part of the unbanked people in the country. Now, major financial institutions and lenders can play a key role in making their services more easily accessible, like that of MFS.
In the context of Bangladesh, beyond existing mobile financial services, there are other online money services such as debit cards, credit cards, e-wallets, bank accounts and prepaid cards. Bangladesh Bank aims to create a uniform payment solution for all these services. The aim is also to include MFS to better streamline cashless payment systems and bring efficiency. Rather than having a multiple QR code option, this will be a system for everyone.
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There are approximately 15.99 Lac credit cards and over 1.93 crore debit cards in circulation in the country. Of these, more than 80% are based on the Visa platform. There is a huge opportunity here for all banking institutions to tap into this new payment system. In recent years, people’s banking habits have changed. As more and more people embark on the digital transaction, the service is expected to be even more popular among young people.
EBL itself has over 5 Lac debit cards and 1.6 Lac debit cards in circulation. Initially, the bank plans to work with 2 to 3,000 traders. Sequentially, they plan to include more traders and sectors in this payment system.
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The emergence of the cashless payment system in Bangladesh
Even though the pandemic has accelerated the use of a cashless payment system in Bangladesh, the system itself is not new. A cashless payment system, especially QR code based transactions, entered Bangladesh through the MFS.
A record 40 million users are registered in the Nagad network, one of the main MFS in Bangladesh. The company has a daily transaction of over 400 crore. bKash is also another major player in the industry with over 2.2 million registered customers.
The services have been particularly popular among young people due to the seamless and instant performance of cashless payments.
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However, almost 71% of overall economic transactions still take place in the traditional cash payment system. As a country, Bangladesh still has a long way to go to properly implement the cashless payment system. However, measures like the MFS and the Bangla QR are making the process increasingly simple and penetrable for the general public.
Bangla QR is a positive step towards making Bangladesh a cashless society. The contactless payment system offers a huge opportunity for banks to compete with MFS in retail transactions. Increased competition will only help make the transaction process more transparent and open up new opportunities. The change in people’s trading habits will not happen overnight. However, this is still a significant leap towards digital economic growth.
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