Bangladesh’s economy is heavily reliant on cash, with only a small portion of the population using debit or credit cards. However, as the country’s economy matures, a shift towards digital payments is beginning, driven by the government’s “Digital Bangladesh” initiative and the growing e-commerce sector. While progress is being made, much work remains to foster the full potential of digital payments.
The e-commerce industry in Bangladesh has seen significant growth, with predictions indicating a 40% increase in monthly growth over the next three years, according to the eCommerce Association of Bangladesh (e-CAB). Initially hindered by a lack of online payment options and low internet penetration, the industry began to thrive after Bangladesh Bank introduced online payments in 2009 and 2013, allowing the use of credit and debit cards for online transactions.
While the sector initially focused on Business-to-Business (B2B) transactions, it has now expanded to include Business-to-Consumer (B2C), Customer-to-Customer (C2C), and Business-to-Employee (B2E) models. Despite this growth, the Bangladeshi e-commerce ecosystem is still evolving and faces challenges such as improving delivery mechanisms, increasing merchant acceptance, and driving consumer adoption of digital payments.
A significant barrier to the widespread adoption of digital payments in e-commerce is the deep-rooted preference for cash. According to a report by local e-commerce player Kaymu, cash-on-delivery (CoD) accounts for 95% of payments, a trend that contrasts with Western markets. CoD transactions pose several challenges, including high return rates—about 35% more than online payments—complicated supply chain processes, and increased costs for sellers. The collection and handling of cash also adds administrative burdens and the potential for pilferage, while also lengthening the settlement cycle to over two weeks.
Additional obstacles include low financial literacy, security concerns, and a lack of user-friendly interfaces. With the rise of mobile e-commerce, addressing these challenges is crucial for the industry’s continued growth. Leading e-commerce companies in Bangladesh, such as Chaldal.com, MeenaBazar.com, and Foodpanda.com, have already seen success, but for broader growth, more efforts are needed.
To drive digital payment adoption, several measures are necessary. First, educating consumers about the benefits of e-payments and building their confidence in online transactions is essential. Developing user-friendly mobile interfaces and ensuring seamless transaction experiences will also encourage adoption. Moreover, improving telecom and internet connectivity to ensure universal access will boost e-commerce growth. Simplifying the merchant onboarding process and offering incentives for accepting digital payments can drive acceptance in high-usage categories such as government payments, utilities, and online shopping.
Other recommendations include facilitating online payments for government services, including tax payments, and waiving additional charges for digital transactions. The introduction of second-factor authentication (2FA) can also help reduce security concerns among hesitant users. To prevent data theft and ensure secure transactions, the payments industry must adhere to the highest security standards, including PCI compliance and point-to-point encryption.
As Bangladesh increasingly integrates with the global economy, ensuring that citizens have access to international e-commerce markets—and vice versa—will be key. For the e-commerce sector to make a significant contribution to Bangladesh’s economy, a robust infrastructural framework and collaborative efforts from the industry, financial institutions, regulators, and payment facilitators are crucial. This will ensure a smooth transition to a cashless, digital economy, benefiting both consumers and businesses.
