E-commerce companies, including Evaly, will no longer get payments before customers get their products, the government said on Thursday.
In the case of a client making advance payment using credit and debit cards of banks or mobile financial services, a third-party company that works as payment gateway will hold the money until the products are delivered, said Additional Commerce Secretary Hafizur Rahman after a multilateral meeting on financial management of e-commerce companies.
The decision was prompted by a report of Bangladesh Bank revealing that e-commerce giant Evaly had collected money in advance from customers, luring them with heavy discounts, but failed to deliver products on time. Its huge gap between assets and liabilities increases the risk of a large number of clients and vendors left unserved and unpaid at some point of time.
The new payment process for online purchases will likely come into effect around the end of next week.
Meanwhile, a few banks, including Dhaka Bank, Bank Asia and Brac Bank, withdrew permission to use their cards for online purchases from 10 e-commerce outlets, including Evaly. The others are Alesha Mart, Dhamaka, E-orange, Sirajganj Shop, Aladiner Prodip, Qcoom, Boom Boom, Adyen Mart and Needs.
The development came on the heels of a report published on Tuesday 22 June by The Business Standard based on the central bank's report on Evaly.
E-commerce activities boomed with more and more people preferring online purchases in the throes of a pandemic. While many big and small entrepreneurs strive for goodwill by ensuring quality and on-time delivery, others offer hefty discounts and fail to deliver products despite taking full payment in advance.
The e-commerce outlets have continued with their dubious business policies because the sector has been left unregulated. The commerce ministry has been sitting on draft guidelines for about a year.
New payment method within a week
The commerce ministry will send a letter about the new payment method to the central bank by next Sunday or Monday, Hafizur Rahman said.
Mezbaul Haque, general manager of the central bank's Payment Systems Department, said the method would be enforced as soon as the central bank received the letter.
Several financial institutions such as SSL Commerce, bKash, City Bank, Eastern Bank, Brac Bank and SIBL act as payment gateways now. But there are no specific guidelines on how long they should take to transfer the money from customers to e-commerce companies.
Banks and mobile financial service providers usually pay utility service providers within 3-4 days after receiving payments from customers.
"We will issue a circular notifying the financial institutions that they must not pay the e-commerce platforms without the customers' go-ahead," Mezbaul said.
The customers will not have to send any text messages to the payment gateway companies after receiving the products. Rather, the e-commerce platforms will have to submit the delivery receipts signed by the customers to the gateways for payments.
Mezbaul Haque said, "We are introducing this as an interim measure since the launching of escrow service will take time."
As soon as the new payment method comes into effect, the banks will resume transactions with the e-commerce platforms, he added.
E-commerce companies will need additional investments
Since the digital outlets in question raise money from new customers to deliver products to old clients, they will have to inject new investments to supply goods to those who have already made advance payments.
The companies will have to arrange funds on their own. Any delivery failure within the deadline will be legally handled under the Consumers' Right Protection Act and the ICT Act.
According to the Bangladesh Bank report, Evaly owes merchants Tk190 crore and has to invest heavily to supply products worth 214 crore to customers who have already placed orders. Otherwise, Evaly will have to take more items on credit from the merchants.
Since the e-commerce company will get payments after product delivery in the new system, it will also require additional investment to buy products from the merchants.
Digital commerce law in the offing
Secretary Hafizur Rahman said the ministry will issue a standard operating procedure next month mandating product delivery within 10 days after the order.
E-commerce companies will have to notify the payment gateways of their inability to meet the deadline in seven days after receiving the orders. Then the payment gateways will refund the money to customers.
But it is yet to be finalised whether the 10-day mandatory delivery time should be applicable for orders waiting for deliveries.
"The central bank has been requested to find a way for customers who have already paid in advance," said Shomi Kaiser, president of the e-Commerce Association of Bangladesh.
Banks, NBFIs alarmed by risky digital payments
Apart from banks, non-bank financial institutions, such as LankaBangla Finance Limited warned their customers, labeling transactions with the e-commerce merchants as risky.
They raised the red flag though Bangladesh Bank is yet to issue any directive regarding money transactions to buy products from the companies, which, according to BB itself, have adopted risky business strategies to lure customers.
If e-commerce merchants fail to refund money, that will cause trouble for banks as customers are paying through credit cards, said Md Arfan Ali, managing director of Bank Asia.
Ali Reza Iftekhar, managing director of Eastern Bank, however, does not see any risk in card transactions with the e-commerce merchants.
"It is the customer who decides where to spend the money," said Iftekhar, also the chairman of the Association of Bankers, Bangladesh.
Currently, four banks – Standard Chartered, EBL, BRAC and The City Bank – hold around 80% market share of the card market.
The total transactions on e-commerce platforms hit an all-time high of Tk911 crore in April this year. Around 1,000 e-commerce firms are listed with the Ministry of Commerce.