Bangladesh’s economy has traditionally been reliant on cash, with a population of over 100 million adults, only eight million using debit cards and less than one million using credit cards. However, this reliance on cash is expected to shift as the economy matures, supported by the growing adoption of electronic payments and the rise of e-commerce.
The government’s “Digital Bangladesh” initiative is playing a crucial role in driving the e-commerce boom in the country. With the e-commerce sector poised for significant growth—projected to expand by 40 percent per month over the next three years, according to the eCommerce Association of Bangladesh (e-CAB)—there is tremendous potential for leveraging technology to create seamless and secure digital commerce experiences.
The e-commerce industry in Bangladesh began its journey in the 1990s but faced challenges like low internet penetration and a lack of online payment facilities. The game-changing milestones came in 2009 and 2013 when Bangladesh Bank introduced online payment systems and allowed the use of credit and debit cards for online transactions. This shift opened the door for e-commerce to thrive across Business-to-Consumer (B2C), Customer-to-Customer (C2C), and Business-to-Employee (B2E) segments.
Despite this growth, there are several challenges that need to be addressed to fully unlock the potential of Bangladesh’s e-commerce sector. Key areas requiring intervention include the development of efficient delivery mechanisms and infrastructure, increasing merchant acceptance of electronic payments, driving consumer adoption, and improving security against online fraud.
The transition to electronic payments in e-commerce faces resistance due to a strong behavioral preference for cash-on-delivery (CoD). According to a report by Kaymu, CoD still accounts for 95 percent of payments, significantly hindering the growth of online transactions. CoD is costly for sellers, particularly with high product return rates (around 35 percent more than other payment methods) and the complexities involved in handling cash collections and transfers.
Other factors impeding the adoption of electronic payments include low financial literacy, concerns over security, and the lack of user-friendly interfaces. With the increasing use of mobile phones for e-commerce, it is crucial to establish a solid foundation for digital payments supported by robust infrastructure.
The government and industry stakeholders must collaborate to foster confidence in digital payments. Raising awareness about the benefits of e-payments, simplifying the merchant onboarding process, and incentivizing businesses to accept electronic payments will be essential in increasing adoption.
To support the growth of e-commerce, the government should facilitate mechanisms for online payments to government agencies and waive additional charges on digital transactions. Ensuring that financial institutions comply with the highest data security standards, such as the Payment Card Industry (PCI) Security Standards, and adopting point-to-point encryption technology will also strengthen trust in digital payments.
The government must also promote the adoption of second-factor authentication (2FA) to address security concerns, offering consumers an extra layer of protection when transacting online. A strong fraud monitoring system should be in place to detect and prevent fraudulent activity quickly and efficiently.
As Bangladesh integrates more with the global economy, ensuring that citizens have easy access to international e-commerce markets, and that foreign entities can engage in local transactions, will be crucial for fostering a thriving digital economy. By addressing these challenges and investing in the necessary infrastructure, Bangladesh can unlock the full potential of e-commerce, creating opportunities for both local businesses and consumers.
As the e-commerce industry grows, it is important that all stakeholders—industry players, financial institutions, regulators, and payment facilitators—work together to bridge the gaps in electronic payment adoption and ensure the country’s seamless digital transformation.
