Key challenges faced by Fintech in Bangladesh :

The financial institutions of Bangladesh have been repeatedly criticized for their lack of effort to improve
financial inclusion, poor customer care facilities, lack of risk management of information technology (IT),
and inefficient operations due to the usage of suboptimal technology. The world is moving on to more
digital forms of transactions where financial institutions in Bangladesh are still struggling to gain and keep
more customers. It’s time for the country to catch up.

Bangladesh’s innovative Fintech approach is based on Mobile Financial Services (MFS).MFS

refer to branchless banking or mobile banking services offered to banked and unbanked
population groups at reasonable rates.Despite the fact that the journey of MFS and online banking
started in Bangladesh ten years back, the country’s fintech industry is still growing at a relatively
slow rate. One of the causes for this is the people of Bangladesh’s lack of financial and
technological knowledge. As a result, Bangladesh has a higher proportion of unbanked people
than neighbouring nations. The investment for tech adoption and innovation is relatively low in
the case of the country’s conventional banks and financial service providers. According to the
head of the Bangladesh Association of Software and Information Services (BASIS), the country’s
fintech industry is lagging behind due to a lack of financial inclusion and technical adaptation.
Apart from that, lack of interoperability between the banking and financial industries at policy
level, as well as inadequate rules and restrictions on foreign transactions are some of the causes
for the stagnation in Bangladesh’s fintech sector. The key challenges that are faced by Fintech in
Bangladesh are as follows ;

1.Lack of financial and technological literacy, a large unbanked population

2.Most SMEs not unified under a formal financial system
3.Conventional banking systems mostly not user friendly
4.Poorly regulated banking industry
5. Low VC investments
6. Low interoperability among payment players.

The crippling absence of MFS interoperability

For the fintech industry to grow at a much faster rate, integrated system solutions or “Wallet
Interoperability” is a much-needed step.Mobile wallet interoperability will allow customers
to send and receive money from various mobile wallets. Using the facility, you will be able to
send your money from one wallet to another with just a few clicks. But at present, digital
wallets in Bangladesh function in a closed-looped ecosystem, making it impossible, for
example, to send money from a bKash wallet to a Nagad or Rocket one. User will not be able
to transfer fund to all operators and banks and paid some fee or cost.

Cryptocurrency and bitcoin :

The biggest disruption fintech brought in payments services was crypto-currency. Bangladesh
is one of the few countries in the world that consider bitcoin and all other types of
cryptocurrencies as "hostile". Bangladesh Bank considers bitcoin and other cryptocurrencies
as illegal under the Foreign Exchange Regulation Act, 1947, and the Money Laundering
Prevention Act, 2012. However, there is much debate on how these laws can be enacted in
court since the central bank never correctly defined bitcoin as a currency or commodity.

Blockchain technology :
Technological challenges of blockchain systems involves several issues such as,privacy,
cryptocurrency security, data storage, scalability, interoperability, complexity. Although
technological development in the financial field is not new and it must be said, we could
consider bitcoin and blockchain technology behind it, as the most notorious disrupter of the
last decade and the precursor of the whole escalation of the creation of financial technologies
companies. Blockchain is as a distributed, decentralized, public ledger and to improve
cybersecurity in relation to user data, decrease transaction validation Time and minimize
transaction related cost. But not all of them do so, a situation that puts the security of user
data at risk.