How can fintech realise its full potential in Bangladesh?

The term "fintech" has drawn significant attention in recent years in Bangladesh by actively reshaping traditional financial systems. Fintech, a simplified term for financial technology, concerns using technological advancements to enhance and accelerate conventional financial services and transactions. 

Fintech comprises various products and services – e-banking, e-wallets, mobile banking, mobile financial services (MFS), peer-to-peer borrowing and digital cash management systems. Bangladesh is now home to a total of 198 fintech startups.

The fintech industry is currently undergoing rapid evolution, characterised by the emergence of notable trends such as online payments, electronic investment, crowdfunding and digital currencies. 

According to Statista, a global market research organisation, fintech's digital investment market in Bangladesh is expected to be $55.5 million in 2023 and is likely to expand by 35.8% by 2024, leading to an estimated market value of $909 million by 2027. 

At its underlying structure, fintech is a disruptive force that threatens the conventional framework of the financial sector while simultaneously opening up new avenues for the development, expansion and improvement of financial services. However, before jumping headfirst into the widespread implementation of fintech, it is crucial to conduct research and weigh the pros and cons. 

Fintech must provide enhanced accessibility, efficiency and customer-centric solutions to conventional financial services to balance the impact of existing market disruption. While conventional financial services are often associated with high transaction fees, fintech solutions have the potential to dramatically lower operating costs for both the service providers and the customers of those services. 

Furthermore, it is worth noting that the emergence of fintech has significantly heightened consumer expectations in terms of convenience, simplicity and customised services. The paradigm shift calls for conventional financial institutions to undertake necessary upgrades, lest they face the terrifying prospect of losing their clientele to more pioneering and forward-thinking rivals.

Fintech offers a multitude of opportunities for a variety of stakeholders. The provision of fintech services for individuals and firms that have previously been overlooked or underserved by traditional financial systems may facilitate financial inclusion, thereby fostering economic development and financial equity. This has the potential to raise digital investment, startup activity and employment opportunities, all of the factors that might contribute to the strengthening of the overall economy. 

Although automation has been detrimental to traditional financial systems, FinTech may improve efficiency by cutting down on errors and automating financial operations. Notably, FinTech offers data-driven insights, relying extensively on predictive analytics and artificial intelligence (AI). 

The use of AI, machine learning , deep learning and big data has become more prevalent in today's business decision-making practices. Numerous countries have adopted the practice of using big data to cluster prospective end-users. These insights have the potential to provide significant information for improving high-stakes decisions and to facilitate the recognition of consumer behaviours, control risk and predict prospects. 

Most importantly, fintech solutions have the capacity to surpass geographical limitations, facilitating the global accessibility of financial services to consumers. This has the potential to create exciting opportunities for remittance fighters. 

Furthermore, fintech can impart understanding to users on financial concerns, personal savings, financial planning and financial well-being. This can enhance digital financial literacy across demographics.

Finally, prior to stepping foot in the market, it is important for industry leaders, policymakers and government officials to carefully analyse and respond to the following questions: Do firms effectively articulate their objectives in a manner that promotes operational excellence? Does this technology fit well with our existing technology setup? To what extent does the fintech solution exhibit ease of use and user-friendliness? 

Industry leaders, policymakers and government officials also need to make sure that the firms set up training and support for customers and fintech agents who use this emerging technology. To what extent the government can regulate the implementation of relevant laws and regulations, such as those of legality, compliance, data security, privacy and anti-money laundering, needs to be considered as well. By carefully evaluating all of these factors through extensive research, businesses may make informed decisions about the use of fintech solutions.

However, several studies on technology adoption in Bangladesh have shown that factors such as social influence, sentiment (emotions), online rumours and fraudulent activities have a substantial effect on the adoption of new technologies. 

Recently, Bangladesh has experienced several virtual or digital financial scams, notably the MTFE scam, threatening public trust in FinTech. Hence, it is important to develop resilient financial security systems that can be effectively deployed through the utilisation of blockchain technology. Blockchain eliminates third-party intermediaries from financial activities by using peer-to-peer transactions and distributed protocols that have the potential to digitise the whole trade finance life cycle. This, in turn, enhances the level of security and efficiency.

The success of new technology largely depends upon the development of user-friendly interfaces that are thoughtfully designed to meet the user's needs, preferences and usability. Intuitive design, simple onboarding, user-centric language, easy-to-understand navigation, smooth and hassle-free transactions, and listening to the users, i.e., users' feedback, could be key characteristics of a user-friendly fintech application. 

Last but not least, the promise of fintech to create new solutions, boost efficiency and equalise financial services has a beneficial influence on society's financial well-being as well as accelerating the growth of businesses and the nation's economy as a whole. Subsequently, it empowers consumers to make well-informed decisions, maximise their financial goals and utilise financial services with higher flexibility and versatility.

Dr Najmul Hasan is an Assistant Professor and Researcher in Information Systems at BRAC Business School, BRAC University, Dhaka. 

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions and views of The Business Standard.