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Cashless Society: The Next Step of Transaction in Bangladesh? 

A digital economic system has long been introduced in Bangladesh. With the help of private organizations such as Bkash and Rocket, the transfer of finances through electronic means has gained much popularity and has become a means of livelihood for many. The system has a broad application ranging from personal usage to corporate financing. Digitization of the economic system in this way eased the workflow and introduced numerous protection measures to safeguard the transferring of money. However, the economy is only half digitized and protected with only digital mediums to transfer finances from one point to the other.

With the modernization and advancement of technology, true digitization lies with the creation of a cashless society.  The general method of transaction in Bangladesh is through hard cash or paper money. This method acts as an obstacle in the way of creating a perfectly digital economic system. Not only does the traditional method include some inherent risks, but it is also outdated to a point it cannot keep up with other digitized economic systems properly.

A cashless society is an economic idea or situation in which all financial transactions are conducted using digital information rather than physical banknotes or coins. If we go back to antiquity, we can see that cashless civilizations have existed from the beginning of human civilization. Many types of trade were prominent, including some well barter systems. In today’s world, the dominant methods of cashless transactions include Credit and Debit cards, Points of Sale or POS, Mobile Banking, Internet Banking, etc. Some well-known vendors of such transactions are Paypal, Apple Pay, Venmo, Google Wallet, Amazon Go, and a few more.

An economic system without the use or the least use of banknotes contains some positive perks in modern socio-economic structure. Cashless payments minimize multiple business and institutional hazards at once, including employee theft of cash, counterfeit money, and robbery of cash. Furthermore, it lowers the costs of security, cash withdrawal from a bank, transportation, and counting. Making cash payments takes time for both the client and the business or employee. That is why many modern businesses around the world have opted to become cashless in order to benefit from speedier transactions and better efficiency. It is also worth mentioning that, in businesses, customer satisfaction takes precedence. Thus, faster transactions result in more customer happiness, more income, and fewer mistakes.

An easy and hassle-free method of payment has been a global concern. Fully digitized and cashless systems make that rather seamless. When someone travels to a distant nation, they must purchase foreign money. They no longer have to do this with paperless payment solutions since they can conduct transactions straight from their digital payment applications based on the currency conversion rate. Moreover, data regarding finances and economic behavior is a crucial part of any institution, be it the government or other private organizations or even individuals. The government and other entities spend a significant amount of money on conducting periodic sampling methods and surveys to collect data on residents’ real-world interactions. These statistics aid them in the development of various policies. However, the method is expensive, time-consuming, and inefficient. In contrast, all cashless payments are documented financial transactions, allowing the government to easily follow the transfer of money through these data. These data also aid them in the detection of black money as well as other criminal transactions.

More importantly, similar to the fact that a cashless system can prevent the theft of money or mitigate it, to say the least, it can also be a great weapon to fight corruption in any given scenario. Theoretically speaking, if everyone, people and institutions alike, was linked through an end-to-end payment system that created a cashless environment, the movement of money would be completely transparent. Whether it’s private capital or foreign help, everyone digitally linked in a cashless society can see exactly where the money has gone and how it was spent. Any quantity of money discovered outside the framework is immediately detectable and probed.

The doctrine of a cashless society has been adopted and seriously considered by major economies in the world. In a world where even children are able to track their allowances through digital apps, implementing a cashless system has become a predictable future. Sweden is perhaps the prime example of a nation that enterprise a cashless society in the modern era. Sweden was the first country to introduce banknotes, and similarly, they are also the ones to become cashless in most of their economic sectors as well. Sweden is the world’s most cashless society, with just 32 ATMs per 100,000 people and more than 98% of its population owning a debit/credit card. It also ranks among the top countries for mobile payments. Sweden, the first European country to produce banknotes, appears to be one of the first to phase them out.

Furthermore, in November 2020, China’s finance ministers launched the digital Yen pilot program, in which thousands of residents were given the equivalent amount of US$40 to spend in an e-wallet as a test to determine how effectively a Chinese Central Bank digital currency would work. By the time the Chinese Winter Olympic Games began in February of this year, the project was able to collect two years of data and distributed $13.68 billion in payouts. While China still has a large cash-dependent population, the country is aiming to go completely cashless over the next two or three years.

Bangladesh is still largely behind in implementing this fully digitized transaction system. Some entities provide a digital medium of transaction. However, the larger populace of the country is unable to use it properly due to a lack of knowledge and patronage. A lack of trusted digital banking and transaction sources and the lack of authentic initiatives in the matter are also contributing factors.

Despite these factors, however, Bangladesh has, in fact, made moves towards establishing a cashless environment. It received a boost during the COVID-19 lockdown when physical banking and transaction was anything but easy. Digital commerce operations more than doubled from 15% in March 2020 to 30-35% in June 2021, while card usage increased five times, from Tk 225 crore to Tk 1,250 crore during the same time period. Aside from increasing trade, digital payments enabled the government to provide financial aid to individuals in need during the continuing Covid-19 pandemic.

According to the Mastercard Economic Outlook Report, issued in December 2021, digital adaptability has been crucial in higher income across the pandemic, with e-commerce at its center. According to the research, online transactions grew more in nations with greater pre-pandemic digital maturity levels. Some of the elements fueling the expansion of digital payments include the rising adoption of smart credit cards, QR codes, and mobile financial services (MFS), which provide solutions for the unbanked and micro-merchants, as well as interoperability across MFS providers.

Bangladesh has gained great momentum in developing a cashless society and increasing financial access on a large scale. Incentivizing digital payments, allowing contactless debit card payments, and implementing open-loop payment mechanisms on metro railways and other modes of public transit can assist Bangladesh in expediting digital transactions.

The concept of digital economy or e-commerce has been a dream for a long time. With the advancement of technology, that dream is now a reality and offers a possibility of a much clearer future in the economy. Adapting and implementing this concept will only allow the economy of Bangladesh to propel further towards prosperity.

Author- Shiddhartho Zaman 

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