Covid-19 has accelerated technology adoption across the board. A key sector that has witnessed a boom is financial services, viz. mobile financial service (MFS), cards, and other alternative payment methods. Fintech has unpredictably and truly arrived in Bangladesh.

MFSs in Bangladesh operate under a bank-led structure. Banks are also facilitating digital financial services (DFS) through mobile applications and e-banking portals. Recent health and movement restrictions resulted in registered MFS users increasing by 24 per cent (around 2 crore new users) between January of 2020 and 2021, where the number and volume of transactions increased by around 30 per cent and 36 per cent respectively.

Electronic funds transfer (EFT) transactions, or digital transfers between bank accounts, increased nearly 2.5 times between February and June 2020.

Debit and credit card transaction volume also increased by 24 per cent and 16 per cent respectively, and 23 million cards were distributed in the country by January 2021.

Cards became crucial instruments of contactless payment, ushering in the use of alternative and internet banking channels.

To make transactions even safer, contactless cards that use near-field communication (NFC) technology are being issued by several banks.

This rapid growth and changing consumer behaviour are largely spurred by the Covid 19 outbreak and led by fintech and there is room for far more increase.

Digital transaction of remittance is also growing. In 2020, Bangladesh received $19.8 billion in inward remittances, 7.6 per cent increase from 2019.

Online platforms such as RemitPrime, launched by Prime Bank, and MyCash, a platform launched in Singapore, allow direct transfers to any bKash wallet in Bangladesh.

Crowdsourcing platforms have also entered the market, such as iFarmer, which aims to democratise investment and financing of the agricultural sector.

Businesses are also accepting online payments using the SSL Commerce platform. As the online infrastructure continues improving, adoption and volume of daily transactions through alternative channels will rise exponentially.

Banks that have invested in IT and digital banking infrastructure stand to gain considerably.

To drive the future of fintech in Bangladesh we need to progress towards a cashless society. Key here is wallet interoperability, allowing users of different MFS platforms to conduct transactions among themselves.

After postponing the launch of interoperable services in November 2020, it is under testing again by the central bank and expected to hit the market soon.

This would facilitate digital transactions and an essential impact of interoperability would be shifting the focus of MFS providers from customer acquisition through price competition, innovation and awareness.

Blockchain technology also is witnessing growth. It is revolutionary in enhancing and improving online security, given shared ledgers and authorisation systems, instead of a centralised data framework, essentially making hacking and altering records almost impossible.

With rising popularity of cryptocurrencies such as Bitcoin, blockchain is likely to cause the greatest upheaval in financial markets and economic systems.

Due to the decentralised nature of cryptocurrencies, the wealth management industry is likely to be affected significantly. Currency markets will also undergo revolutionary changes if cryptocurrency sustains popularity.

A lot of major organisations are investing in blockchain technology since it is viewed as the future of IT and the way customers interact with their platforms. While blockchain-based cryptocurrencies are currently illegal in Bangladesh, usage of this technology of shared ledger and authorisation has high potential to bring security and pace in current financial transactions.

For example, recently Standard Chartered Bangladesh successfully executed Letter of Credit services using the Contour blockchain network. HSBC also showcased the same strength.

When the pandemic reached Bangladesh, the government prioritised fintech, named MFS as emergency services, and encouraged its use.

The limits for withdrawals and total transactions were also raised. The Payment Systems Department of the Bangladesh Bank mandated that payments for workers in the garment industry would be done through MFS, leading to the registration of nearly 2 million RMG workers.

It is evident that fintech in Bangladesh is growing rapidly and still has much potential left to unlock.

Because of the scope, scale, and dynamism of fintech, the segment is regulated, but it is essential to simplify aspects that ease the hassles and allow business continuity.

Effective cybersecurity measures also need to be in place to protect the user's data, funds, and privacy.

The writer is a partner at PwC Bangladesh. Opinions expressed in this article are entirely his own.