Whitepaper on Evolution of the Payment Industry of Bangladesh

Whitepaper on evolution of the payment industry of Bangladesh
June 2016
WHITE PAPER on
Payment Industry of Bangladesh

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Table of Contents
1. Background............................................................................................................................................................. 1
2. Payment Systems in Bangladesh ............................................................................................................................. 2
3. Payment instruments in Bangladesh ....................................................................................................................... 3
4. Evolution of Payment instruments in Bangladesh......................................................................................................... 3
4.1 Cash....................................................................................................................................................................... 3
4.2 Paper Based (Cheque, Demand Draft, Pay Order etc.) ............................................................................................ 4
4.3 Internet (Electronic Fund Transfer)......................................................................................................................... 4
4.4 ATM/Debit/Credit Card.......................................................................................................................................... 4
4.5 MFS (Mobile Financial Service)............................................................................................................................... 5
4.6 Foreign Remittance................................................................................................................................................ 5
4.7 Gift-cards/Closed-loop cards? ................................................................................................................................ 5
4.8 Money Transfer & Telegraphic Transfer ................................................................................................................. 6
5. Payment Instrument’s Technological Advancement...................................................................................................... 7
5.1 Automated Cash Counting & Cheque Processing .................................................................................................... 7
5.2 EMV Technology .................................................................................................................................................... 7
5.3 MFS (USSD based).................................................................................................................................................. 7
5.4 OTP & SMS Alert .................................................................................................................................................... 7
5.5 NFC & Tokenization................................................................................................................................................ 8
6. Regulatory Authority’s Payment Systems strategy........................................................................................................ 9
6.1 Real Time Gross Settlement (RTGS)........................................................................................................................ 9
6.2 NPSB (National Payment Switch Bangladesh)........................................................................................................10
6.3 Payment & Settlement..........................................................................................................................................11
7. Current Payment Scenario in Bangladesh ....................................................................................................................12
8. Bangladesh Payment Domain’s Key Players.................................................................................................................15
8.1 Central Bank of Bangladesh...................................................................................................................................15
8.2 Commercial Bank ..................................................................................................................................................15
8.3 MFS (Mobile Finance Services)..............................................................................................................................17
8.4 Smart Card/ Plastic Card Vendors/Suppliers..........................................................................................................17
8.5 Payment Networks ...............................................................................................................................................20
8.6 Payment Gateways/Facilitators ............................................................................................................................21
9. Non-traditional Payment Platform: .............................................................................................................................23
9.1 Micro-Finance Institute:........................................................................................................................................23
9.2 Payment/ Fund Transfer via Courier Services ........................................................................................................23
10. Future Trends of the Payment Industry of Bangladesh...............................................................................................24
11. Legal & Regulatory Framework..................................................................................................................................26
12. Sources of Information ..............................................................................................................................................27

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Copyright © 2016. All Rights Reserved
1. Background
Payment has always been an integral part of human life. It’s the mechanism that enables smooth
transfer of funds between buyers and sellers, and/or between banks/financial institution. In the
modern society, no economic activities are possible without the transfer of money. In this sense, we
can easily say, that payment systems are one of the most significant social infrastructures. Starting
from the ancient barter system to the latest tap N pay, the payment industry has seen some amazing
landscape of evolution globally. Over the time, technological advancements were introduced and
ideas integrated considering one single goal; ensuring convenient payment method. Convenience
became priority for mass, which triggers industry experts to think about payment security as well.
During last couple of decades, payment industry has seen a lot of innovations. In any country, central
bank and commercial banks play a key role in payment systems. However, the people on the street
seldom or never notice their role and importance of payment systems. That is why, payment systems
have sometimes been regarded as the “behind-the-scenes activities,” which are not seen by a large
audience.
In the early days, the payments among the banks used to be made by exchanging paper payment
instructions, which is called the “paper-based payment system”. But, as the number of payments
increased dramatically, it became very difficult to process paper work with paper instructions and
manual handling. Therefore, people tried to utilize information technology (IT) with regard to the
payment system. This endeavor resulted in developing the payment systems using the computers and
networks. The use of mobile technology these days for funds transfers has increased dramatically and
the market wants payment services that offer speed, convenience, ubiquity, safety and value for
money.
The payment system plays a pivotal role in circulating funds all over the economy. If some
malfunctions were to happen to a payment system and hinder the flow of funds, the impact would be
extraordinary and disruptive. The economic activities and functions of financial markets would
become completely paralyzed. Therefore, we can conclude that payment systems are social
infrastructures that support all economic activities, including commercial activities and financial
transactions. A safe and efficient payment system is an important mechanism that props up the
functions of financial markets and the financial system.

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2. Payment Systems in Bangladesh
With a Hundred and Sixty Six Million people and a growing Per Capita Income of USD 3’100,
Bangladesh is one of the rising economies in South East Asia. Traditionally, The Central Bank is key the
role player in the existing payment system of Bangladesh. Imposing regulations, amending infra-
structural changes, introducing new service enhancing securities related to payment, all basically
comes from this entity. The commercial banks are mostly responsible for providing general and
specialized banking services to the mass people.
Until 2009, Bangladesh’s banking system had been following a paper based transaction route. After
that, with the supportive role of Bangladesh Bank, it moved towards an automated banking system
that is compatible with international standards. In the provision of Bangladesh Bank's order, it is said
under 7A (e) that Bangladesh Bank will have to promote, regulate and ensure a secured and efficient
payment system. From 2009 onwards Bangladesh Bank has issued as many as six sets of regulations
starting from automated cheque clearing, BFTN, electric fund transfer and, of late, mobile service. In
2013, they introduced agent banking system. In the meantime, both government and private banks
have invested a good amount of resources to make the system automated and updated both
horizontally and vertically.
The financial system of Bangladesh comprises following 3 major categories- Formal, Semi-Formal &
Informal sectors. In case of payment system, all the related players are considered as a part of formal
sector. Where Central Bank is the key decision maker and ensures following functionality-
 Prevent systemic risk, thereby maintaining financial stability
 Promote the efficiency of payment systems and instruments
 Ensure the security of and public trust in the currency as the settlement asset
 Safeguard the transmission channel for monetary policy
A well-functioning payment system ensures the efficient and safe execution of monetary policy
operation and facilitates the smooth and homogenous transmission of monetary impulses. The
smooth functioning of payment systems is a precondition for users' confidence in these systems and,
ultimately, public confidence in the local currency.

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3. Payment instruments in Bangladesh
Payment instruments are an essential part of a payment system. In a simple word, Payment
instruments are the elements that are being used to transfer payments between individual or financial
institution. The safety and efficiency of payment instruments are important for both maintaining
confidence in the currency and keeping the economy running smoothly. In Bangladesh, cash/cheque
is still the most important payment instrument with a wider acceptance level. In last few years due to
change in global payment arena and the improved mindset among local customer base, money
transfer via internet and mobile is slowly gaining confidence. In general, at this moment following
instruments are well accepted as standard payment instrument in Bangladesh.
 Cash
 Paper Based (Cheque, Demand Draft, Pay Order)
 ATM/Debit/Credit Card
 Internet (Electronic Fund Transfer)
 MFS (Mobile Financial Service)
 Foreign Remittance
 Gift Card/Close Loop Card
 Money Transfer/Telegraphic Transfer
4. Evolution of Payment instruments in Bangladesh
The mode payment has seen lots of changes over time. Where, cash still remains as a major
instrument for transaction in the developing part of the world. In a mature economy like some
parts of Europe and America, china and a few parts of Africa, the regulators and market controllers
are encouraging people to move from cash to cashless transaction and that is increasing more
transactions via plastic money, wireless transfer of balance over mobile and internet. The scenario
in South East Asia is still in an early phase where MFS is slowly taking over Cash transactions. In
recent year’s people has also moved a lot towards plastic money and electronic fund transfers
over internet. Earlier e-transfers of money was limited to personal level only; but now in
commercial sectors many organizations are moving towards e-transfer to avoid paper & time
hassle.
4.1 Cash
Cash is the simplest example of a payment instrument and said before that, cash is still used for
most payment transactions (in number, not in value) in developed countries like Bangladesh. The
physical standards to protect cash from forgery vary by country and might have features with
respective spec (unique size and color, denomination, special paper and security features (ink,
watermark, micro text, see-through features, line structures etc.). In Bangladesh, one major

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movement was the introduction of cash counting machine which has reduced the cash handling
hassle a lot while saving time for both customers and the counter officers.
4.2 Paper Based (Cheque, Demand Draft, Pay Order etc.)
Paper-based payments are mostly considered as a safe instrument for payment in the commercial
level due to its in built paper based authentications. The major disadvantage of paper payments
is that they require physical handling and transportation to enable the exchange between parties.
Paper based instrument has seen some major improvements when Bangladesh Bank has initiated
the Bangladesh Automated Cheque Processing Systems (BACPS) on 7th October 2010 in the Dhaka
Clearing House area. BACPS uses the Cheque Imaging and Truncation (CIT) technology for
electronic presentment and payment of paper instruments (i.e. cheque, pay order, dividend &
refund warrants, etc.). The system supports both intra-regional and interregional clearing and is
based on a centralized processing center located in Dhaka and in designated clearing regions.
There are two types of cheque clearing under BACPS, i.e. High Value (HV) and Regular Value (RV)
Cheque clearing.
4.3 Internet (Electronic Fund Transfer)
Electronic payments are instructions passed between banks without reliance on paper processing
or shipment. These systems are ideal for high volume, repetitive payments such as wage and utility
bills and for moving large, time sensitive payments. Electronic payments are not always cost
effective for high volume, low value payments that are not time sensitive, particularly in emerging
countries with limited access to technology. In Bangladesh since 2010, the use of internet banking
has increased dramatically due to more banks offering electronic fund transfer facilities with
improved security integrated to the system. This allowed lots of corporate moved in to e-transfers
than paper based money transfer. In recent times, most corporate house prefers e-transfer when
high value transactions are involved.
4.4 ATM/Debit/Credit Card
Card-based payments are used for consumer payments made at the point of sale (POS). Examples
of card payments are ATM cards, credit cards and debit cards. In Bangladesh plastic money was
introduced in late 80s and credit card was introduced in late 1996 by Standard Chartered Bank.
Gradually all banks started offering ATM/ debit cards for their account holders and DBBL played a
vital role here to offer different varieties of cards for different types of consumers. The plastic
money saw a significant movement in late 2010 when few major commercial banks (BRAC, SCB,
City Bank, EBL) started to push credit cards among their customers with lucrative shopping
benefits. This movement encouraged a big chunk of customers to move from cash transactions to

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cashless mode. Increased number of POS acceptances in various commercial places played a vital
role for increased card usage.
4.5 MFS (Mobile Financial Service)
MFS recorded phenomenal growth in Bangladesh in terms of financial inclusion. The biggest
achievement of MFS was to capture the unbanked population by availing them a comfortable and
simple money transferring facility. With MFS sector now has more than 17 million customers
among which 80% are unbanked population. Even though Bangladesh’s central bank has approved
more than 20 licenses to offer mobile financial services, more than 80 percent of transactions are
through a single company—BKash. BKash launched in the second half of 2011, grew to 2 million
accounts by the end of 2012, expecting to have 13 million registered accounts by the end of 2016.
4.6 Foreign Remittance
Foreign Remittances from more than 10 million citizens abroad are very important for Bangladesh
and it is one of the key sources of foreign exchange. The country’s economic stability is critically
dependent on this to a certain extent. Bangladesh is experiencing substantial growth in remittance
field since couple of months. A huge increase in manpower export, backed by the central bank's
proactive measures to facilitate the inflow through formal channel, is believed to have driven the
remittance growth.
4.7 Gift-cards/Closed-loop cards?
Merchant Gift Cards or Gift vouchers are slowly getting acceptance at the consumer level in
Bangladesh market. One of the initial example of Gift card in Bangladesh is Prize Bond. It is still
quite popular among many customers due to its intrinsic monetary value and a future scope of
availing bigger draw able amount. Limited number of merchants are offering prepaid gift cards
-
200
400
600
800
1,000
1,200
1,400
1,600
USD(ml)
Remittance (USD/ml)/month (Data of 2015 & 2016)

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these days of different values. Customers are still using gift cards/vouchers as an unconventional
gift items.
4.8 Money Transfer & Telegraphic Transfer
Telegraphic Transfer or Telex Transfer, often abbreviated to TT, is a historic term used to refer to
an electronic means of transferring funds abroad. A transfer charge is often charged by the
sending bank and in some cases by the receiving bank. Money Order is another form fund transfer
that can be availed through post office in Bangladesh. However, both of these fund transferring
technologies are becoming almost obsolete due to the available alternatives.

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5. Payment Instrument’s Technological Advancement
Payment system is evolving globally and Bangladesh is not out of this process as well. The country’s
central bank has imposed several regulations and introduced technologies that has helped the
industry stakeholders to integrate improved service in the system which enabled the users to get
access toward advanced payment methods.
5.1 Automated Cash Counting & Cheque Processing
In Bangladesh, one major movement was the introduction of cash counting machine which has
reduced the cash handling hassle a lot while saving time for both customers and the banks. Paper
based transactions has seen some significant changes in transactions rate (60% increased) as well,
when central bank introduced Bangladesh Automated Cheque Processing Systems (BACPS) on late
2010.
5.2 EMV Technology
Plastic card became significantly popular among the customers due to wide merchant
acceptability and convenience over carrying cash. Increased no. of card users triggered the
security concern for industry professionals. That’s why many banks are coming up with EMV Card
instead of traditional Magnetic Strip Card these days. EMV over Mag Strip can be considered as a
major breakthrough, because in this scenario, security has been increased without compromising
the convenience of a plastic card.
5.3 MFS (USSD based)
People were demanding for more convenience in payment style and that’s how MFS came in to
the field. Initial operation started based on USSD and heavily dependent on MNO network.
However, marketers are trying to introduce application based service because of the increased
no. of smartphone users.
5.4 OTP & SMS Alert
Security became a critical concern for many formal financial institutes due to the increased usage
of plastic card products. Many banks are offering online shopping via debit/credit card these days
and while increasing convenience, this also brings a matter of secured transaction. The
introduction of OTP (One Time Password) while doing online transactions is one of the key
milestone in the payment industry of Bangladesh which enabled the plastic card users to make
secure and safe online payment. Instant SMS alert on ATM cash withdrawal, retail purchase via
card are also security measures that almost all commercial bank has implemented in their system.
Several online gateways are facilitating online transactions on multiple e-commerce sites and that
is engaging customers more in to online purchase.

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5.5 NFC & Tokenization
While globally many financial institutions are trying to introduce wireless payment via contact less
EMV Cards or using NFC based smartphones; Bangladesh is still lacking behind in several aspects.
One of the key setback is lack of NFC enabled handsets and also NFC enabled POS hardware’s
unavailability. Industry players are also quite not aggressive to go with relevant investment.
However, low cost technologies are encouraging smartphone manufacturers to come up with
handsets having NFC and fingerprint features and this might encourage industry deal breakers to
introduce new handset in the market soon. Bangladesh Bank and other trend setters are still
exploring the options of introducing advanced tech like HCE (Host Card Emulation) & Tokenization
which will turn the plastic card in to a virtual form while maintaining both security and
convenience.

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6. Regulatory Authority’s Payment Systems Strategy
A well-defined strategy acts as the guiding flagship for any attempt. Considering that, Bangladesh Bank
published a 'Strategic Plan 2010-2014' highlighting the foremost near and medium term strategies for
the development of payment and settlement systems of Bangladesh. Most of these goals are already
achieved by this time while others are in the implementation process. To be with the trend, Payment
Systems Department (former DCMPS) has revised the earlier strategies and devised newer priorities.
The new strategy has been set to – "Develop effective and efficient currency management alongside
establishing fast and secure electronic payment systems for facilitating financial inclusion".
PSD has also revised the earlier objectives and devised newer priorities. Importance are given to
implementing newer payment platforms i.e. National Payment Switch (NPS), e-Payment Gateway and
Real Time Gross Settlement (RTGS) while upgrading the required legal and regulatory framework
befitting the electronic payment platforms.
Newly set objectives for Modernizing country's Payment and Settlement Systems are listed below -
 Establish required legal and regulatory framework for electronic payment systems.
 Promote and encourage the use of electronic funds transfer, mobile financial services, e-
commerce, m-commerce, shared ATM, POS, etc.
 Establish National Payment Switch (NPS) for facilitating electronic payments originating from
different delivery channels e.g. ATM, POS, Internet, Mobile, etc.
 Establish e-Payment gateway.
 Establish Real-Time Gross Settlement (RTGS).
6.1 Real Time Gross Settlement (RTGS)
An RTGS system is a gross settlement system of money or securities in which both processing and
final settlement of funds transfer instructions can take place continuously (i.e., in real time). It will
enable instant settlement of high value local currency transactions as well as government
securities and foreign currency based transactions. As it is a gross settlement system, transfers
are settled individually, i.e., without netting debits against credits.
An RTGS system can thus be characterized as a fund transfer system that is able to provide
continuous intraday finality for individual transfers. In RTGS or large-value funds transfer system,
the transmission and processing of payment messages are typically automated or electronic, while
settlement takes place in central bank funds. Along with these individual interbank transactions
all other Deferred Net Settlement Batches (DNSB) such as BACPS, BEFTN or NPSB will settle their
net position through RTGS system, RTGS in turn will be linked to BB core banking solution.

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6.2 NPSB (National Payment Switch Bangladesh)
One of major breakthroughs in the history of Bangladesh’s payment system was initiation of NPSB
in 2012. It is a common platform for the country's commercial banks for electronic payments with
an intention of revolutionizing E-commerce in Bangladesh. NPSB enables customer using a credit
or debit card of any bank to draw cash from any ATM and POS (point of sales) in the country. Thus
transaction costs have gone down significantly as the transactions are routed through the NPS
instead of Visa, Master or Amex card networks abroad. Moreover, purchase and sale can be done
with cards through internet within the country (Integration still in process). NPS will facilitate easy
access to funds, an increase in tax revenue, more flow of money in the economy, and financial
inclusion. Individual payment platforms introduced by different banks will be abolished once all
banks join the common platform. At present, transactions among 42 (out of 56) banks are being
routed through NPSB. NPSB connectivity diagram is following- (Figure-1)
NPSB
ATM
POS
Payment Gateway
Internet
MFS
Bank

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A view of historic transactions through NPSB is given below:
National Payment Switch Bangladesh comparative summary statement April, 2015
Serial no. Description Amount (in April, 2015)
1 No. of Banks connected with NPSB 48
2 No. of total transaction 4,55,518
3 Total transaction amount in taka 267,35,60,600
4 No. of daily average transaction 15,184
5 Average daily transaction amount in taka 8,91,18,686
6.3 Payment & Settlement
A well-functioning payment system ensures the efficient and safe execution of monetary policy
operation and facilitates the smooth and homogenous transmission of monetary impulses. The
smooth functioning of payment systems is a precondition for users' confidence in these systems
and, ultimately, public confidence in the currency. Central bank has a strong interest in promoting
safety and improving efficiency in payment systems as part of their overall concern with financial
stability. Following is the Settlement system diagram (Figure-2)
Financial stability requires efficient and convenient settlement procedure. Central bank plays a vital
role here by implementing procedures and amending required changes to ensure a smooth
operational settlement system which allows players from different payment arena to interact and
exchange settlement requirements.

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7. Current Payment Scenario in Bangladesh
Being a growing economy with a sensible GDP, Bangladesh is still falls under developing nation
category where the population is slowly changing their perception in terms of payment and economic
involvement. Due to the nature of the business, wide availability of acceptance points and small
amount transferability, cash still remains as a leading mode of payment in Bangladesh. However,
Internet penetration, increased mobile phone subscriptions, rapid expansion of effortless MFS
services are encouraging people to try out more cashless methods. Following graph will give a visual
representation of the current payment scenario (May-2016) of Bangladesh-
Introduction of Plastic Money in early 80’s and credit card in mid-90’s changed the scenario of the
Bangladesh payment system quite a lot. Commercial Banks & marketer made a combined effort to
made purchase through plastic money more beneficial. Despite of that, customer also realized that
carrying card than cash will be more secure, convenient and pocket friendly.
13%
1%
0%
1%
0%
2%
0%
83%
Payment Method(%)/Month/BDT- (chart-1)
Paper
based
EFT
Credit Card
Debit Card
I-Banking
M-Banking
Agent
Banking
Cash
92%
8%
No. of Users (May, 2016)- (chart-2)
Debit Card
Credit Card
Payment
Instrument
Amount
(Cr.)/Month
Paper based 128,971.70
EFT 7,075.60
Credit Card 535.22
Debit Card 10,853.28
I- Banking 2,184.00
M- Banking 16,376.11
Agent Banking 314.52
Cash (Bank
Deposits only)
808,184.80
Type of Card No. of Users
(May, 2016)
Debit Card 8,652,212
Credit Card 743,507
Total Card 9,395,719

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Regarding plastic money the following data explained the usage pattern of card consumers as per the
age group-
Referring to a relevant survey, 34% of the credit card users have a credit limit of 500, 000 BDT or
equivalent in USD. Plastic money transactions are also increasing gradually. Following tables shows
the trend –
Month No. of Transactions (Credit Card) No. of Transactions (Debit Card)
Nov-15 840,571 11,599,529
Dec-15 922,951 12,188,909
Jan-16 925,007 11,959,045
Feb-16 857,999 15,907,129
Avg. Monthly Transaction 886,632 12,913,653
Internet Banking played a critical role in the changing dynamics of the payment system of Bangladesh.
Considering all major banks started offering I-banking services with diversified features keeping (EFT)
electronic fund transfer facility as the prime goal. Significant internet penetration growth also played
a vital role in the rapid growth of EFT.
2000 2007 2009 2010 2011 2012 2015
Users 100,000 450,000 556,000 617,300 5,501,609 8,054,190 53,941,000
Population 134,824,00 137,493,99 156,050,88 158,065,84 158,570,53 161,083,80 168,957,74
% Pen. 0.10% 0.30% 0.40% 0.40% 3.50% 5.00% 31.90%
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%
0
20,000,000
40,000,000
60,000,000
80,000,000
100,000,000
120,000,000
140,000,000
160,000,000
180,000,000
Internet Penetration in Bangladesh - (chart-3)
Users Population % Pen.
% usage (Out of Total
Debit Card Users)
Age Group
42 % (21-30)
32% (31-40)
21% ( 41 and above)
5% (10-21)
% usage (Out of Total
Credit Card Users)
Age Group
28 % (21-30)
51% (31-40)
21% ( 41 and above)
0% (10-21)

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This has reduced physical hassle for the customers and the integrated security in the I-banking facility
has added an extra dimension to the overall payment system security in terms of (EFT) electronic fund
transfer mechanism. Following graph shows the current I-banking penetration in brief-
As said before, due to high mobile penetration and affordable internet availability people has
gradually started to consider mobile banking as a strong alternative of traditional payment methods.
The below graph will give a glimpse of the current mobile banking state-
607,730 607,511
626,771
620,095
595,000
600,000
605,000
610,000
615,000
620,000
625,000
630,000
No. of Transactions
Internent Banking Transaction Snapshot/Month- (chart-4)
November-15 December-15 January-16 February-16
1 2 3
Year 2014 2015 2016
No. of Subscribers 28,625,131 34,303,615 35,875,017
2014 2015 2016
28,625,131
34,303,615 35,875,017
0
5000000
10000000
15000000
20000000
25000000
30000000
35000000
40000000
No. of Mobile Banking Subsrcibers- (chart-4)
Year No. of Subscribers

15
8. Bangladesh Payment Domain’s Key Players
8.1 Central Bank of Bangladesh
The most important and dominant player of Bangladesh’s payment domain is the Central Bank of
Bangladesh. Central Bank also is the regulator of the financial system of Bangladesh. Central bank
control the flow of financial changes, define regulatory frameworks, ensure secured transfer of
funds, introduce technological advancement which ensure smooth and secure operational
relations retains among all the financial institutions in the country. Central bank also have the
authority to bring changes which is required for the betterment of the overall economy. A
country’s payment system is a part of the overall financial system that the Central Bank have
regulatory supervision on.
8.2 Commercial Bank
One of the key players who operates the flow of money in Bangladesh payment market is the
commercial banks. Currently 56 banks are in operational state, where 42 banks are connected with
NPS. Rests are in process of connecting. Commercial banks are increasing their operations in all
possible locations within the country ensuring customer’s satisfaction by full-filling regular banking
demands and augmenting additional baking facilities which indirectly affect the payment
mechanism. Setting up new ATM Booths, engagement of agent banking are movement which is
really triggering banking service in wider scale. It was not very long ago that Bangladesh was
dubbed as an under-banked country. Financial inclusion was a far cry at that time. Discussions were
limited to the challenges, such as lack of knowledge and awareness in financial inclusion in
Bangladesh. A research conducted by the Bangladesh Institute of Bank Management shows that
financial inclusion of the total population was 39.76 percent in 2004 which rose to 56.42 percent
in 2010 due to the opening of 90 lakh Tk 10 farmers' accounts in state banks.
Commercial banks are the main stake holders in terms of plastic money. Due to security concerns,
commercial banks has started to shift from traditional Mag-strip cards to EMV chip card for their credit
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Scheduled Banks
Banks which received licenses to operate under Bank Company Act, 1991 are
called Scheduled Banks
20 Private Commercial Banks are offering Mobile Banking Facility 56.9% of
total adult
population
have
access to
formal
banking
service
30, 285 no. of POS terminal and growing
12,669
Bank Branches
5 SCOBs 3 Specialized
Banks
39 PCBs 9 FCBs
Agent Banking -
241 Agents
State Owned
Commercial
Banks
Established for
Specific objectives
and aiming niche
Private
owned
commercial
banks
Foreign
Commercial
BanksMore than 7,000
ATM Booth

16
and debit card service. However, Mag-strip & EMV both are available in single plastic card to ensure
backward compatibility.
The City Bank has outpaced its rivals in credit card business, thanks to a strong marketing drive with
its American Express cards that offered unique and higher lifestyle benefit to users. Although the
sector has long been going through a slow period, City has grown exceptionally -- 25 percent a year.
Market Share in terms of credit card issuers-
Card based product currently consist 28% share in the current consumer finance product market
profile of Bangladesh. This is certainly an indication that people are moving more towards plastic
money for payment alternatives. The following graph shows the current state of consumer finance
market state of Bangladesh (based on 2015 data)-
44%
28%
11%
28%
20%
14%
14%
7%
11%
0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%
Personal Loan(Secure)
Consumer Goods (loan)
Home Loan
Credit Card
Personal Loan (Unsecure)
Auto Loan
Land Purchase
Professional Loans
Others
Market Share (%) of Consumer Finance Products (2015)-(chart-6)
Leading Banks partnering with KONA for EMV Migration
SL Banks Migration Facilitator
1 NRB KONA
2 NRB Global KONA
3 NRB Commercial KONA
4 National Bank KONA
5 Standard Bank KONA
6 IFIC Bank KONA
7 Jamuna Bank KONA
8 Trust Bank KONA
9 Bank Asia KONA
10 EXIM Bank KONA
11 Meghna Bank KONA
12 Modhumoti Bank KONA
13 Uttara Bank KONA
14 South Bangla Agricultural Bank KONA
15 Mutual Trust Bank KONA
16 EBL KONA
27%
21%
11%
7%
5%
29%
Market Share (%) of Credit Card Issuers (chart-5)
The City Bank Standard Chartered
Brac Bank Eastern Bank
Dutch-Bangla Bank Others

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8.3 MFS (Mobile Finance Services)
Depending on the operation, responsibility and relationship(s) among MFS Solution Provider and
customers mainly two types of mobile financial services (Bank-led and Non-Bank-led) are followed
worldwide. Bank-led model - Every customer has a direct contractual relationship with a licensed
Bank even though the customer may deal exclusively with an agent who is equipped to
communicate directly with the bank server (typically using a mobile phone). Non-bank-led model-
Customers have no direct contractual relationship with a licensed Bank. Bank works behind the
screen to manage the total fund.
In case of MFS, Bank-led models are winning overwhelmingly in almost all countries, the non-bank
led model exists in a few undeveloped countries. A brief snapshot Bangladesh’s MFS market is
below-
Leading MFS-
BKASH, DBBL,
UCASH, MCASH &
MYCASH
In Bangladesh, the Central Bank has concluded this debate and allowed 28 banks to
offer MFS, of which 19 banks have already started to work on their MFS products
and 10 Banks are commercially active.
594, 932 no. of
Agents
BKASH DBBL MYCASH UCASH MCASH 3.8 million
transactions
per day545.85 Cr. BDT/Daily
Transactions volume
135K
Agents
116K
Agents
95K Agents 105K
Agents
86K
Agents
3,905 ATMs 16.61 ml
customers
4.75 ml
customers
0.85 ml
customers
2.20 ml
customers
2.43 ml
customers43 % active
subscribers
MFS Model Non-Bank Bank Bank Bank Bank
Market Share as per subscriber’s base for the MFS players is below –
8.4 Smart Card/ Plastic Card Vendors/Suppliers
With 56.9 % (out of total population) banking penetration and 9.3 million (growth rate of 5%-20%)
debit & credit card users, Bangladesh is one of the thriving market for the smart card manufacturers,
58%17%
8%
8%
6%
3%
Market Share/Subscribers of MFS
bKash (Brac Bank)
DBBL M banking (DBBL)
mCash (Islami Bank)
Ucash (UCBL)
Others (Trust, Bank Asia, FSIB)
MYCash ( Mercantile)

18
vendors, suppliers and relevant facilitators. Following players are active in Bangladesh smart card
market for a considerable amount of time.
Chip Suppliers Card Suppliers Solution Suppliers Hardware Vendor System Integrators
Infineon Kona I X-InfoTech Data card ITCL
NXP Gemallto Data card - Affina VeriFone LOS Technologies
Samsung Future Card TechTrex Wincor Nixdorf Lark Technologies
MonyPal CompusPlus NCR Aamra Technologies
EastcomPeace KonaSL Thales Leads Corporation
AB Notes Safe net Tiger IT
Matica Data Edge Ltd.
NBS Instrumental Clique
CIM DNS Software Ltd.
King Teller Techno media Ltd.
Net world Bangladesh Ltd.
AND Technologies
A brief info about few leading players those who are active in local market are given below-
 Infineon: Infineon Technologies is a German semiconductor manufacturer founded on 1 April
1999 are one key chip supplier in Bangladesh card industry. They also have an off-shore
settlement here name AplombTech BD.
 NXP: NXP Semiconductors N.V. is a global semiconductor manufacturer headquartered in
Eindhoven, Netherland. They are also a key chip supplier for the plastic cards available in
Bangladesh.
 Samsung: Samsung a major manufacturer of electronic components such as lithium-ion
batteries, semiconductors, flash memory and hard drive devices for clients such as Apple,
Sony, HTC and Nokia and a supplier of chips for plastic cards.
 KONA I: KONA I has over ten years of experience as a leading player in the smart card industry.
Starting in 1998 as KEBTechnology, in March 2012, it changed its name to KONA I
(International) reflecting its vision to become the world’s leading smart card company. In
Bangladesh they have their biggest R&D center named Kona Software Lab (KSL). KONA I is also
is a supplier of plastic cards & chip in Bangladesh market.
 Gemallto: Gemallto is an international digital security company providing software applications,
secure personal devices such as smart cards and tokens, and managed services. It is the
world’s largest manufacturer of SIM cards. Gemallto has a strong position in Bangladesh
market as a smart card supplier with their proprietary solution called maltos.
 Future Card: Future Card is an international corporation, expert in the design, manufacturing
and customization of all types of cards, from the most basic plastic cards to the most advanced
smartcards.

19
 Eastcom Peace: EastcomPeace Technology Co., Ltd is a world leading provider and server of
smart card products, related system integration and overall solution, founded in 1998.
 AB Notes: ABnote provides global products and solutions including; smart cards, ID cards, gift
cards, financial cards, and secure documents.
 X-InfoTech: X INFOTECH is a global system integrator and developer of the premium software
solutions for the issuance, management and verification of payment cards and electronic ID
(e-ID) documents.
 TechTrex: TechTrex Inc. (TTI) is a leading provider of turnkey custom solutions for the Card
Issuance and Payment Industries. The company's strength lies in its ability to provide a
comprehensive blend of superior technology and customized software solutions.
 KONASL: Kona SL is a private limited company registered under Companies Act 1994
Bangladesh. It’s a sister concern of Korea Based Smart Card Solution Provider Kona I, Key
business areas include Smart Card Solutions, payment solutions and Security Solutions.
 VeriFone: VeriFone is the global leader in secure electronic POS solutions. VeriFone provides
solutions, services, and expertise that enable electronic payment transactions. VeriFone has
a strong market share in Bangladesh as a POS device supplier.
 NCR: The NCR Corporation is an American computer hardware, software and electronics
company that makes self-service kiosks, point-of-sale terminals, automated teller machines,
check processing systems, barcode scanners, and business consumables. They are the leading
ATM hardware supplier in Bangladesh market.
 Safe Net: SafeNet is the world's leading provider of data encryption, crypto management,
multi-factor authentication, and software monetization solutions. Founded in 1983.
 ITCL: Established in 2000, IT Consultants Limited (ITCL--owns payment processing consortium,
which is popularly known as ‘Q-Cash’) is the local leader in the rapidly evolving arena of
Electronic Payment & Transaction Processing System.
 LOS: LOS Technology has established its network of clients and services since 2011. With
advance communication technology gateways to increasing possibilities, LOS is ready to
provide its clients with exciting solutions from the convergence of banking technology &
information solutions.
 Aamra: Leading IIG, ISP & a local tech reputed tech brand who aims to provide digital services
and connectivity for the local banks to extend limitless dimension. They are one oldest
supplier of ATM & POS hardware to commercial banks in Bangladesh.

20
 Tiger IT: Tiger IT is local software company who developed a solution for the national ID and
voter registration project for the general election of Bangladesh in 2008. They are in expert in
Smart ID management and security solutions service,
 Data Edge: Data edge limited (data edge) is a leading technology consulting firm in
Bangladesh. They provide Card Management and Personalization Solutions, Lending
Application System Processing, Credit Risk Management System, Debt Collection and
Recovery Solutions, Telephone Banking Solutions, ATM, POS, HEM & Embosser Hardware to
commercial banks.
 Net world: Net World Services Limited is a major security solution provider company in
Bangladesh. Net World Services Limited is the Authorized Distributor of Certis Technology
International Pte. Ltd for the Security products and solutions.
8.5 Payment Networks
Payment network (VISA, AMEX, MC, Discover etc.) is a critical player in the payment system. These
payment network brands provides financial institutions with own-branded payment products that
commercial banks use to offer credit, debit, and prepaid cards for the mass customers. Globally both
VISA and Master Card are leading and the scenario is quite similar in Bangladesh market too.
However close loop networks like DBBL Nexus and QCash are also getting popular due to extended
merchant acceptability scope. In Bangladesh market in terms of transaction volume VISA is leading
from the front. Following is the graphical analysis for all the relevant payment network brand’s
market share-
Visa
50%
MC
32%
Amex
12%
Discover
5%
Nexus
1%
Market Share(%) on
Transaction Volume

21
8.6 Payment Gateways/Facilitators
A payment gateway is an e-commerce application service provider service that authorizes
debit/credit card payments for e-businesses, online retailers etc. In Bangladesh, since last couple of
years, consumer payment dynamics has changed quite a bit. Increased e-commerce business,
affordable internet and flexible debit/credit card has encouraged more online
transactions/payment. This scenario has encouraged several payment gateways/facilitators to
operate in this market. Following are the key players in Bangladesh online gateway industry-
EasyPayWay: EasyPayWay Is a Bangladeshi Payment Gateway provider. We provide you with a fully
automated ecommerce solution that will allow your business to accept online credit card payments
securely in real time. Our secure connection to the global banking network ensures your funds are
safe and protected. The Payment Gateway is developed by The Codero Limited. EasyPayWay is
designed for merchants who attract their clients with alternative payment method. EasyPayWay is
secured by SSL and Payment Gateway is secured by Visa Verified and Master Secured.
SSL Wireless: Software Shop Limited (SSL Wireless) started its journey in 1999 as an associated
company of one of the biggest garments exporting groups in Bangladesh, Concorde Garments. With
its consistent efforts, SSL has been able to become the LARGEST Merchant Solution Provider serving
250+ merchants across the country through its Internet Payment Gateway Solution called
SSLCOMMERZ. Out of the total online transaction in Bangladesh, 40% of those are processed
through this gateway.
Walletmix: Walletmix is an online payment gateway expanded within Bangladeshi online market. It
provides expert e-commerce advice, simple integration, wide range of integrated shopping carts,
and FREE 24/7 support you can rely on.
Portwallet: Portwallet is a simple way to accept payments online in Bangladesh. Portwallet aims to
expand the infrastructure of internet commerce by making it easy to process transactions and
manage an online business. PortWallet was developed by Portonics Limited. Portonics is a
technology consultancy firm based in Dhaka, Bangladesh who specializes in web and software
development, mobile applications and digital marketing.
ShurjoPay: ShurjoPay is an Online Payment Gateway API of shurjoMukhi Limited. ShurjoPay got PSO
(Payment Service Operator) License in Bangladesh awarded by Bangladesh bank.

22
Payza: Payza is an online payment platform that lets you to send and receive money, shop, make
online payments or get paid from almost anywhere in the world. It also has operations in Bangladesh
market with diversified financial service where online payment gateway is critical.
AamarPay: AamarPay is an online payment gateway for Bangladesh. AamarPay is a joint venture
initiative of Soft Tech Innovation Ltd and UK based company.
DBBL Nexus Payment Gateway: DBBL is known to be a trend setter in Bangladesh financial market.
In 3rd June, 2010, Dutch Bangla Ltd. (DBBL) has introduced Internet Payment systems in Bangladesh.
Using their Internet Payment gateway people can purchases services online using their Visa,
Masters, DBBL Nexus and Maestro cards.
QCash Payment Gateway: ITCL introduced Q-cash Payment Gateway (Q-cash PG) to facilitate valued
cardholder’s of buying goods and services and transfer of funds through on-line electronic
payments. It performs authentication of electronic transactions in compliance with 3-D Secure Code
standards and allows customer identification from an issuer as well as acquirer´s side. This solution
has been designed to be apt for issuers and acquirers. All domestic Visa, Master, Pre-paid, Debit and
Credit cards are able to transact through this payment gateway.
BRAC Bank Payment Gateway: BRAC Bank limited has introduced an e-commerce program for all
VISA & MasterCard cardholders. Electronic Commerce is a convenient and affordable way to buy
and sell products or services online. This facilitates the individuals to maintain an online business
while performing transactions right from the Web.

23
9. Non-traditional Payment Platform:
Beside the mainstream players, there are few other players exist in Bangladesh payment system as
well. However, their access to direct payment are somewhat limited due to the nature of business and
changing dimension of the main stream player’s service offering.
9.1 Micro-Finance Institute:
Microfinance is a source of financial services for entrepreneurs and small businesses lacking access
to banking and related services. The two main mechanisms for the delivery of financial services to
such clients are: (1) relationship-based banking for individual entrepreneurs and small businesses;
and (2) group-based models, where several entrepreneurs come together to apply for loans and
other services as a group. In Bangladesh MFI was introduced mostly in rural regions to describe the
supply of financial services to low-income employees, which is closer to the retail finance model
prevalent in mainstream banking.
Current State of MFI in Bangladesh is below –
9.2 Payment/ Fund Transfer via Courier Services
Payment or fund transfer services was introduced in Bangladesh where traditional bank services
was not available. It was mostly targeted small scale business owners who are in product/goods
delivery business nationwide and low-income group of people who has less access to formal
banking system. However both of these above non-traditional entities are losing markets due to
rapid mobile penetration among the population and diversified and low cost MFS services.

24
10. Future Trends of the Payment Industry of Bangladesh
Payment industry globally has seen many dimension on regular interval. Bangladesh is not out of
these. Change of market, smartphone entry, diversified banking service and many other internal and
external factors are responsible for these changes. For an example for last couple of years Bangladesh
has seen a massive movement in MFS sectors and increased Plastic Card usage also was quite
noticeable among the banking customers. Some of the key indicators that will define the fate of
payment industry of Bangladesh in next decade are flowing -
 Almost 60% banking penetration directs that we have room to grow in many aspects in the
payment domain.
 About 20 percent of mobile phone users will start using smartphones by the end of this year,
which will boost data consumption, said a top regional official of Ericsson.
 The ongoing efforts of the mobile operators in Bangladesh to improve network capacity and
quality will help boost smartphone penetration manifold in the next five years.
 Lower Internet Cost will encourage people to engage more in to I-banking and e-commerce
payment.
 Bangladesh became one of the top 10 countries in the world for the good subscriber (mobile)
growth.
 Diverse transaction profile indicates that MFS will lead the domain of unbanked population
for next few years for sure. Their recent tie up with Master-Card & BKASH for foreign
remittance inward transfer will also play a vital role here.
 Increased transactions in POS terminals shows that usage of Plastic Card is growing and getting
more acceptance than cash gradually in terms of payment.
 Android becoming more popular among smartphone users allowing scope for local marketers
to work on new payment tech like virtual card/HCE in future.
53%
12.00%
14.00%
4.50%
2.70%
14%
0%
10%
20%
30%
40%
50%
60%
Symphony Walton Samsung Lava Maximums Others
Smartphone Market Share(%) in 2015 (chart-8)

25
Based on this information we can come to a prediction that Bangladesh has started to depend on
Plastic money and the concept of virtual money via MFS is becoming popular. However, increased no.
of android smartphone users are showing potential scope of working on technologies like HCE &
Tokenization. However, that is still heavily dependent on Central Bank’s regulatory changes in the
market and user acceptance will also be a critical consideration on this. Because we may make our
market hardware ready (POS, Phone etc.) but ensuring the user readiness will be the biggest challenge
in next few years for the policy makers, technology manufacturers and the payment players.
The City Bank DBBL Brac Bank
POS (No.) 9500 6500 3500
Transaction (Cr.) 1,450 700 760
Growth(%) Year to Year 34% 30% 32%
9500
6500
3500
1,450
700 760
34%
30%
32%
28%
29%
30%
31%
32%
33%
34%
35%
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
10000
POS Transactions in Bangladesh Growth-2015 (chart-9)
Android
57%iOS
16%
Windows
8%
Feature
Phone
19%
Smartphone Demand in Dhaka in terms of OS (%) (chart-10)

26
11. Legal & Regulatory Framework
In order to give legal and regulatory support to growing methods for electronic transfer of funds,
Bangladesh Bank has governed a number legal and regulatory framework. Existing Legal and
Regulatory Framework of Payment and Settlement Systems of Bangladesh below
 Bangladesh Automated Cheque Processing Systems (BACPS) Operating Rules and Procedures
has been published on 11 January 2010.
 Bangladesh Electronic Funds Transfer Network (BEFTN) Operating Rules has been published
on 11 August 2010.
 Guidelines on Mobile Financial Services for the Banks has been published on September, 2011.
 Guidelines on Agent Banking for the Banks has been published on 09 December 2013.
 Bangladesh Payment and Settlement Systems Regulations (BPSSR), 2014 published on 22 April
2014.
 Regulations on Electronic Fund Transfer Network has been published on 22 April,2014

27
12. Sources of Information
 Online Resources-
 http://www.slideshare.net/SWIFTcommunity/01a-2014-0813-presentation-transformation-of-
payment-and-settlement-systems-in-bangladesh-and-the-subcontinent-v2
 http://digitalmoney.shiftthought.co.uk/governance-and-audit-scope-of-mobile-banking-in-
bangladesh/
 http://www.amtob.org.bd/resource/Mobile%20Financial%20Services%20in%20Bangladesh.pdf
 http://www.thedailystar.net/news-detail-230051
 http://www.ijmo.org/papers/376-A1015.pdf
 http://www1.worldbank.org/finance/PUBS/LISTFLD/list201b.htm
 http://www.cgap.org/sites/default/files/Brief_bKash_Bangladesh_July_2014.pdf
 http://print.thefinancialexpress-bd.com/2014/08/19/51183/print
 http://www.thedailystar.net/electronic-payment-system-in-bangladesh-pros-and-cons-26717
 http://www.thedailystar.net/round-tables/payment-ecosystem-bangladesh-challenges-and-
opportunities-213811
 http://www.assignmentpoint.com/business/banking/beginning-of-credit-card-in-
bangladesh.html
 http://www.paymentscardsandmobile.com/brac-bank-start-accepting-jcb-cards-bangladesh/
 http://www.thedailystar.net/local-banks-lead-e-payment-8232
 http://www.thedailystar.net/business/mobile-cash-transfer-hits-14b-month-101008
 http://www.bloomberg.com/news/articles/2015-07-24/who-needs-a-bank-bangladesh-pushes-
mobile-phones-to-move-money
 Reports & Articles
 MTB Biz Newsletter published
 IFC Report on Bangladesh
 LinkedIn articles on MFS
 Report on Financial Market of Bangladesh
 DBBL Card Division Presentation
 GSMA Report 2015

28
KONA SOFTWARE LAB LTD.
Z Tower House # 04, Road # 132
Gulshan 1 Dhaka 1212, Bangladesh
E- bizdev@konasl.com
W- www.konasl.com
KONA I CO., LTD.
F K-Biz Building, 16-2 Yeouido-dong
Yeongdeungpo, 150-740, Seoul, Korea
E- info@konai.com
W- www.konai.com
KONA SOFTWARE LAB LIMITED
Established in 2012, we are an R&D center and
global solution business wing of South Korean
smartcard industry pioneer, Kona I Co., Ltd. We
manufacture smartcards, develop various
payments and security solutions; and we provide
those to the clients across markets.
Kona is an E2E provider in the industry having
significant market share in Korean local market.
With a view to extending its business area, Kona is
now more focused in overseas markets, and
leveraging its year’s long expertise in EMV and
smartcard domain. Smart, security &
convenience—these are the essence of Kona
solutions.

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