Notable turning points in Bangladesh's transition to a cashless society include the development of the Interoperable Digital Transaction Platform (IDTP) and the rapid expansion of Mobile Financial Services (MFS). A closer look, however, reveals a regulatory "Catch-22" that could stifle the very innovation the central bank is trying to promote. As a safeguard for both consumer confidence and financial stability, Bangladesh Bank has correctly implemented a bank-led model for MFS, requiring banks to own a majority stake (51 per cent) in subsidiaries. Although this structure is essential for a new market, it frequently deters FinTech startups that are solely focused on technology and thrive on independence and agility. While the regulation was intended to protect the ecosystem, it unintentionally prevents disruptive, high-cost technological solutions from entering international markets.
Additionally, although the idea of a Regulatory Sandbox was created to enable the testing of novel products in a controlled setting, its full potential has yet to be realised. The market opportunity may change by the time a product passes the compliance hurdle, stifling the first-mover advantage that is crucial for FinTech success. This can occur if the Sandbox is not used promptly or efficiently.
First, the central bank must establish a clear, expedited process with key performance indicators (KPIs) for product testing and deployment within the Sandbox, particularly in domains such as blockchain applications and artificial intelligence (AI)-based credit scoring. Second, for non-lending FinTech operations that are not systemically significant-such as wealth management or insurance aggregation-the government should consider implementing a tier-based licensing scheme. This could increase competition and specialisation by enabling tech-focused, non-bank organisations to operate with proportionate capital requirements. "Safe innovation," not "zero risk," should be the goal.
Suraiya Fahmida Twinkle
Bachelor of Business Administration
North South University
suraiya.twinkle@northsouth.edu