Bangladesh Bank has moved swiftly with regards to digital lenders – as we predicted it would back in June – in contrast to its counterparts in more affluent economies in the region. Malaysia’s central bank, for instance, first talked about allowing digital lenders in late 2020. But the first Malaysian digibank, owned by Grab, did not go live until the fall of 2023. Singapore also needed several years to complete the process. However, Bangladesh Bank approved digital banks in mid-June, opened the application process in the summer, and made its decision on which licenses to issue by late October. It goes to show that in digital banking where there is a need, there can be speed.
The following institutions have been granted licenses in principle: Naqd Digital Bank, Khaadi Digital Bank, bKash Digital Bank, Digi-Ten, DigiAll, Smart Digital Bank, Japan-Bangla Digital Bank, and North East Digital Bank. Under the draft guidelines for digital banks, the online lenders will be required to issue customers bank cards and QR codes as well as use “advanced technologies” like artificial intelligence, machine learning and blockchain to facilitate transactions. Those requirements should be easy for the digibanks to fulfill as they are the type of technologies that fintechs like to focus on regardless of regulatory mandates.
While it is way too early to pick winners, we do think that Bikash Digital Bank will be a competitive player as bKash is Bangladesh’s leading e-wallet. The firm is 51% controlled by BRAC Bank, a leading incumbent lender and 20% by Ant Group, while other shareholders include Money in Motion, the Bill and Melinda Gates Foundation, the International Finance Corporation and Softbank. According to Tellimer Insights, as of June 2022, bKash had 62.3 million customers (of whom 37.5 million were active), 280,000 merchants and 295,000 agents in its network. It facilitated 3.4 trillion taka (US$39 billion) in transactions during the first half of 2022.