Evolution of mode of financial transaction and its way forward in Bangladesh

It is of no surprise that in Stone Age days we used to rely on barter system to trade where goods were exchanged for goods. With time money came into play which carried certain values and got accepted as a payment medium for transacting goods and services. It all started with 'Barter System' back in 9000 B.C which was first chronicled in Egypt. Nonetheless, barter system was not smooth and more importantly a self-sustainable solution. There were always arguments going on because it was difficult to conduct trade with equally valued goods. For instance, crops were exchanged for oil where oil is clearly more valuable and thus in most cases, one party had to bear loss.
So let's look back a little which might help us to comprehend the transitions that occurred overtime. In 19th century with Industrial revolution, the banking system became very popular amongst people. This popularity and globalization of banks led to many inventions like credit card invention in 1950, invention of one of our very essential machines for daily use, ATM in 1967 etc. During the early days, checks with carbon 14 (a radioactive substance) were used in ATM and maximum of £10 could be withdrawn at a time. The extension of ATM network opened the way for the rise of debit cards. In 1983, the first telephone banking service (needed to use a television set and a telephone set for the transaction) was introduced by The Bank of Scotland. It was named 'Homelink' and was offered for the Nottingham Building Society customers. This telephone banking service certainly paved the way for internet banking. In early 1990, banking system expanded vastly into the web which also helped to gain customers' trust. Bank of America needed more than 10 years to acquire 2 million customers using internet banking. In 1997, the very well-known electronic payment system 'Speedpass' was launched by Mobil Oil Crop via which consumers could pay for fuel at the pump. At the end of the 20th century, the first online money transfer company PayPal appeared. PayPal facilitates the process of online money transfer at a very low cost. In 2017, PayPal's annual payment volume was approximately $451.27 billion. The evolution of fintech continued and with the beginning of new millennium, it became a smoother version in 21st century.
And if the inventions of so many financial services were possible with the advent of Industrial revolution, it is wise to say that 21st century came in bearing the revolution that ought to give people financial freedom. 21st century is time of Bitcoin/blockchain/crypto currencies. In 2008 a paper on crypto currency was posted by Satoshi Nakamoto which led to the launching of Bitcoins (a cryptocurrency) in 2009 during the period of financial crisis. Bitcoin is a digital or cryptocurrency without being controlled by any central bank or administration. It can be used within the peer-to-peer bitcoin network and no intermediaries are needed for the transaction. Transactions are recorded on blockchain which the most trusted crypto company is. Blockchain is basically a collection of data where data are added to the block and get linked up with other blocks, thus creating a blockchain. Today, the Blockchain is increasingly being adopted by fintech firms for facilitating fast cross-border money transfers. In the 2014's update of iOS Apple introduced Apple pay where consumers would be able to pay through the device itself. Moreover, by 2016 the Blockchain industry had obtained more than a billion dollars of venture capital investment and recognition with over 35 blockchain projects.
Although the picture of global fintech evolution looks extremely lucrative, it's time we move the lens towards Bangladesh to see how Fintech industry is helping our economy to grow.
Earlier Bangladesh was considered as a frontier market i.e. a developing country which is more developed than the least developing countries. Nonetheless, taking over its position in Fintech Market was an intensifying move to emerge from frontier market. Introducing Fintech was a dire need as a huge amount of people (around 35 million) was deprived of the modern financial facilities for the last 400 years. According to IMF data, it is known that Bangladesh's economy is the second fastest growing economy of the world at a rate of 7.1 per cent. A GDP rate of around 6 to 7 per cent is being maintained over the past decade. Moreover, the GDP growth rate is expected to be increased to 10 per cent in next 5 years. Being one of the fastest growing economies where only 19 per cent of 160 million people have banking access (Source: Bangladesh Bank, June 30, 2017), Financial Technology is certainly the best solution to bring the people under the umbrella of international financial service and escalate the economic growth. Among others, one of the main advantages of Fintech is, consumers can do international or local transaction faster than ever before. According to the report of World Bank, Bangladesh is the one of the highest recipients of remittance. Moreover, Fintech makes the transactions faster, more efficient, hassle free as it can be done with Smartphone or computer. The huge success of mobile banking service of our country Nagad and BKash is a proof that customers now prefer this smooth process of transaction. Further, Fintech is helping to expand the SME (small and medium enterprises) sector of our country. Since Smartphone is available even in rural areas, people from those areas can easily make transactions for their business. Expansion of SME can also help to a great extent to reduce unemployment. People can be self-employed which will eventually reduce migration and therefore will help to make the urban area livable. Furthermore, it is believed that Fintech is going to be one of the most important factors to achieve Government's goal of building a 'Digital Bangladesh' which they intend to achieve by 2040.
Having said that, the percentile of people using the fintech services doesn't aptly represent the rest of the population. In rural areas, there are still people who tend to feel secure by keeping money in their houses or small banks made from mud. Most Bangladeshis are devoid from certain basic rights, one of them being no access to finance. Such individuals suffer from the unavailability of mechanisms which can keep their money safe or be put into schemes that can generate higher returns for them in the future. This in turn leads to an absence of financial mobility, which prevents them from making decisions, thereby hindering their living standard and thus serving as a grave injustice that they are facing. Having the access to financial services is a mandatory right for every individual. As the people currently lack such a basic right to finance, it should be the main purpose of the designated people to create an access to present this right to these people, which I firmly believe can provide them with the financial control and literacy needed for a mobile and efficient wealth management. As such, they would be willing to seize. Alleviating poverty is a complex issue and a one-dimensional approach is not enough to factor any change. I strongly believe people who are at the center one this problem must be empowered and enlightened. Only through collective efforts can we build a sustainable ecosystem that can render poverty alleviation. Our goal as a nation should be to at least bring 15 per cent of our unbanked population into our ecosystem in next one year and grow at a geometric progression. Once they gain a financial status, they have access to easier, safer. cheaper and a much more reliable means of conducting transactions and ease their business and achieve self-sufficiency. As these individuals thrive and become contributing members of the society, collectively it will push our economy and increase their standards of living.
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Monsurul Aziz is the Head of Brand Marketing of Nagad.
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