Bangladesh is slowly but surely on track to being a cashless society even though it remains an overwhelmingly cash-based economy at present, according to the United Nations' Better Than Cash Alliance.

At present, 90 percent of the government-to-business payments in Bangladesh have been shifted to the digital channels, according to the Digital Money Index 2017, a 90-market perspective on digital money readiness developed by Citigroup and Imperial College London. Also, 69 percent of the value of payments made by the government are digital. The value of financial transactions via mobile grew 37 percent in 2016 to reach a yearly total of $24 billion, said the report quoting data from the Bangladesh Bank.

To facilitate digital payments, Bangladesh's central bank has taken a number of initiatives, including electronic fund transfer, national payment switch and internet banking. All these developments have improved Bangladesh's year-on-year score by 8 percent in the 2017 Index. Still, Bangladesh has to go a long way to make the economy less dependent on cash, which facilitates tax evasion and corruption, analysts said.

Cashless transactions accounts for only 6 percent of the total transactions now. A lack of awareness and poor digital infrastructure have been blamed for the trudge towards becoming a cashless society. But, it can all change with the government's active involvement in promoting digital payments and cashless transactions. Syed Mohammad Kamal, country manager of MasterCard, went on to cite the incentives for digital payments extended by the Indian government after its shock demonetisation as an example.

India has offered: a waiver of service tax of 15 percent on digital transactions of up to Rs 2,000, 0.75 percent discount on digital purchase of fuel through credit/debit cards, e-wallets or mobile wallets; and 0.5 percent discount on monthly and seasonal suburban railway tickets. Online rail ticket buyers will also get up to Rs 10 lakh free accident insurance. “We have requested the Bangladesh Bank to come up with similar incentives to promote digital payments in the country,” Kamal told The Daily Star. He also said issuing at least one card against a bank account should be made mandatory. Bangladesh has 40 million bank accounts, but the number of cards is only about 10 million.

In addition to incentives, stakeholders such as utility service providers and educational institutes have to be ready, both technologically and mentally, to render services digitally, said Abul Kashem Mohammad Shirin, managing director of Dutch-Bangla Bank. “Most of the banks and customers are ready, but the payment systems of services providers have to be automated,” he added. Another banker blames the stalemate on the limited purchasing power of consumers and a lack of infrastructure.

Though the per capita income has increased to more than $1,700, the actual purchasing power or real disposable income of the people in Bangladesh is still very low, said Mashrur Arefin, additional managing director of City Bank.

“This is holding back the growth of cards here.”

Bangladesh is still a low-income country, where credit card is seen as a credit facility by banks and consumers alike and not as a lifestyle transaction vehicle. “This makes a huge difference in understanding and appreciating the value of credit cards.”