Bangladesh’s economy is heavily reliant on cash, with only eight million people using debit cards and less than one million using credit cards in a country with an adult population of over 100 million. However, this reliance on cash is expected to change as the country’s economy matures and digital payment adoption increases.
The ongoing “Digital Bangladesh” initiative and the rapid growth of the e-commerce industry present a huge opportunity to foster the transition to digital payments. The e-commerce sector is set to grow by 40 percent per month over the next three years, according to the eCommerce Association of Bangladesh (e-CAB). However, the shift from cash-based transactions to electronic payments faces challenges, such as low internet penetration and financial literacy.
E-commerce in Bangladesh began in the 1990s, but it struggled to gain momentum due to the lack of online payment infrastructure and limited internet access. Major milestones in 2009 and 2013, when Bangladesh Bank introduced online payment facilities and allowed credit and debit cards for online transactions, helped spur the industry’s growth. Today, e-commerce is thriving across various segments, including B2C, C2C, and B2E, although the ecosystem is still evolving to meet the full potential of the industry.
One of the key challenges facing e-commerce is the preference for cash-on-delivery (CoD) payments, which make up 95 percent of all transactions in Bangladesh. CoD transactions are costly for sellers, especially when products are returned. Return rates are approximately 35 percent higher for CoD transactions, and the supply chain becomes more complex as a result. Cash handling can lead to pilferage and lengthy settlement periods, which further complicates operations.
To drive the adoption of electronic payments, several factors need to be addressed, including low financial literacy, fear of security risks, and the need for more user-friendly interfaces. Mobile phones are becoming the primary platform for e-commerce, and it’s crucial to develop payment solutions that are innovative, secure, and supported by a strong infrastructure.
Robust telecom and internet connectivity will play a crucial role in the growth of e-commerce in Bangladesh. Providing universal access will enable customers to make seamless digital transactions, while encouraging merchants to accept digital payments, particularly for high-usage categories like utilities, government payments, and online shopping.
There is also a need to simplify the merchant onboarding process, incentivize merchants, and establish mechanisms for making online payments to government agencies. The adoption of second-factor authentication (2FA) will further secure transactions and reduce hesitation among customers. Additionally, the payment industry must adhere to the highest security standards, such as those set by the Payment Card Industry (PCI) Security Standards Council, to prevent data theft and fraud.
The growth of e-commerce in Bangladesh depends on collaborative efforts between the industry, financial institutions, merchants, regulators, and payment facilitators. By addressing the gaps in the adoption of digital payments, Bangladesh can unlock the full potential of e-commerce and integrate its citizens with the international market.
As the country continues its digital transformation, building the right infrastructure will be essential to ensure the smooth growth and management of the e-commerce industry, which is expected to contribute significantly to the economy and create new opportunities.
