Stakeholder engagement vital for interoperable payment system

Stakeholder involvement is the key to the success of an interoperable instant payment system, yet this was missing when Bangladesh introduced its first digital platform "Binimoy" a few years ago, according to Snigdha Ali, country lead of Inclusive Financial Systems (IFS), an initiative of the Gates Foundation.

Explaining why Binimoy failed to take off, she said the platform had been built by the ICT Division without involving the Bangladesh Bank (BB).

"That was a gap from the very beginning. There was little to no stakeholder engagement at any stage of Binimoy's development and deployment," Snigdha said in an interview with The Daily Star.

An interoperable instant payment system (IIPS) is a national network that lets individuals and businesses transfer money between accounts at different banks and mobile financial services -- like bKash, Nagad or Dutch-Bangla Bank -- instantly and 24 hours a day.

For example, a garment worker in Dhaka could receive her salary directly into her bKash account from an employer's Sonali Bank account within seconds. She could then pay for groceries or a rickshaw ride via QR codes without using cash. This would help create a digital trail for every transaction, curbing corruption, widening the tax net and supporting a more formal economy.

If the IIPS were a football match, bKash, Nagad and the banks would be the players, while the BB typically would be both referee and rule-maker.

After Binimoy's failure and its subsequent suspension by the central bank, BB is now preparing to pilot a new IIPS next year. There are plans to expand it gradually. The Gates Foundation will provide financial and technical support to the initiative.

Awareness efforts similar to the oral saline campaign of the 1980s will be needed to popularise digital payments and build confidence

— Snigdha Ali, Country lead of Inclusive Financial Systems of Gates Foundation

"We learned from the central bank's previous experience. That is why we began dialogue and stakeholder engagement even before the project goes live, so we hear from the industry and do not repeat the same mistake," Snigdha said.

On the benefits of IIPS, she said, "For example, consider a bank that has already invested heavily in onboarding clients. Once it joins IIPS, the lender automatically gains access to millions of customers already integrated into the system. Likewise, those customers also gain access to the bank. They do not have to be direct clients of that bank to send or receive money through it."

On several recent occasions, BB Governor Ahsan H Mansur said the economy bears an annual burden of around Tk 20,000 crore due to cash management.

Referring to it, Snigdha said, "An interoperable digital payment ecosystem could sharply reduce these costs, increase transparency and drive formalisation."

Jason Lamb, deputy director of IFS at the Gates Foundation, said Bangladesh is learning from international experience.

"In Pakistan, the State Bank launched its national instant payment system Raast for interoperable digital payments at zero transaction cost. Within two and a half years, Raast grew to 46 million users and boosted financial inclusion from about 20 percent to 30 percent," he added.

Snigdha said that as IIPS allows seamless transfers between banks, mobile financial service providers and other financial institutions, this removes the need to withdraw and redeposit cash when sending money across platforms.

"For example, a person with a mobile wallet will be able to send funds directly to a bank account without intermediaries. Such convenience will save time and reduce costs, particularly for rural and low-income groups. In government-to-person payments, the system is expected to cut leakages and ensure beneficiaries receive transfers instantly and securely," she said.

However, both the IFS officials cautioned that challenges remain. Fraud is a reality in digital finance worldwide, and new systems often invite new scams. While fraud cannot be eliminated entirely, they said risks can be reduced through strong security standards, awareness campaigns and responsive regulation.

According to them, consumer literacy and trust will also be vital. Many Bangladeshis, especially in rural areas, remain unfamiliar with digital transactions.

Snigdha said awareness efforts similar to the oral saline campaign of the 1980s will be needed to popularise digital payments and build confidence.

"Trust is easy to lose and hard to build," Lamb said, warning that consumer protection mechanisms must be in place from the outset.

On affordability, he suggested that BB could mandate zero transaction fees for customers, at least in the early stages, to encourage uptake. Providers could later earn revenue through services such as credit, insurance or digital commerce.

"Lowering costs would be especially important for rural households and women, who often face barriers to accessing formal financial services. By making digital transactions cheaper and more useful, IIPS could integrate millions of underserved people into the financial system," Lamb said.

Both officials said the financial sector will expand rather than shrink, as new business opportunities arise.

They said banks, MFS providers and fintechs will need to adapt their models, focusing on lending and value-added services rather than charging per transaction.