Online banking transactions in Bangladesh amounted to nearly Tk 50,000 crore in May 2023, a 142 per cent rise year-on-year, Bangladesh Bank data showed.

This illustrates a significant shift in consumer behaviour towards digital banking and underscores the growing preference for digital banking solutions.

The advent of online banking, mobile applications, and contactless payments has changed how individuals manage their finances and payments. This, coupled with the proliferation of smartphones and advancement of mobile technology, has been empowering a consistent rise of mobile banking applications.

In-person cash handling and branch visits are all transitioning to online adoption. Smartphone users can access their accounts, make purchases, transfer funds, pay bills, and even invest digitally. International payments to and from the country can also be made.

The rise of an open banking framework enables traditional financial institutions to collaborate with third-party providers and promotes innovation and customer-centricity.

Additionally, Bangladesh has been witnessing a rise in fintech startups. This is making traditional banks adapt, collaborate and further catalyse innovation.

Payment service providers like Visa are at the forefront of such a shift, shaping how people manage finances in a world of emerging payment technologies.

Digitalisation in the banking sector holds the potential to enhance financial inclusion, particularly through mobile banking applications. This transformation could empower previously underserved and underbanked individuals and businesses.

In the near future, digital banking will support increased transparency, reduce financial risks, and improve economic efficiency. Extensive data generated by digital transactions may spur growth of microfinance and lending for small and medium enterprises.

While adapting to this transformation, ensuring data privacy and addressing the digital divide is of paramount importance. Regulatory frameworks must evolve to keep pace with the dynamic nature of the digital banking landscape, safeguarding consumer rights.

Digitalisation brings comprehensive banking solutions right to the fingertips. In this journey, the banking system must continuously adapt and evolve. The integration of new systems into the industry is not merely a leap forward; it's the continuation of a legacy of innovation.

In this context, the Bangladesh Bank invited applications a few months ago from entrepreneurs interested in establishing digital banks.

The minimum required paid-up capital for a digital bank was set at Tk 125 crore compared to the Tk 500 crore requirement for a conventional bank to secure a license. This may make it easier for interested parties to acquire a stake. The central bank move is expected to enhance efficient delivery of financial products.

It's time for the government, regulators, and financial institutions to foster a comprehensive environment where digital banks can thrive. By embracing these innovative banking solutions, Bangladesh can expedite its journey towards becoming a digitised and smart nation, characterised by a cashless society.

The author is head of Visa Consulting and Analytics, India and South Asia.