How Open Banking could be Bangladesh’s next frontier of financial innovation

Bangladesh has repeatedly demonstrated its ability to leapfrog traditional financial infrastructure. With more than 180 million people, over 200 million mobile financial services (MFS) accounts, and a rapidly expanding fintech sector, the country has laid the groundwork for a digital financial revolution.

Yet a critical layer remains missing. Despite remarkable progress in digital payments and financial technology, Bangladesh still lacks a formal Open Banking framework and a structured API economy. Without these foundations, financial data remains fragmented, innovation remains uneven, and customers have limited control over how their financial information is used.

Open Banking represents a fundamental shift in how financial services operate. Rather than treating customer data as the property of banks, it allows individuals to authorise the secure sharing of their financial information with third-party providers such as fintech firms, insurers, and lenders. Through standardised Application Programming Interfaces (APIs), financial institutions can become part of a broader ecosystem that delivers more personalised, competitive, and accessible services.

For Bangladesh, the issue extends beyond technology. Open Banking has implications for financial inclusion, economic competitiveness, regulatory modernisation, and the country's broader digital transformation agenda. The challenge now is whether policymakers can establish the architecture needed to unlock its full potential before fragmented arrangements become entrenched.

Building an ecosystem

APIs are the foundation of any Open Banking system. They allow financial institutions and authorised third parties to exchange data and services securely and efficiently.

Different APIs serve different functions. Payment Initiation APIs enable third parties to trigger payments directly from a customer's account, supporting real-time payment systems such as India's UPI and the UK's Faster Payments network. Account Information APIs provide access to balances and transaction histories, helping power credit assessment and financial planning tools. Product APIs make information about financial products more transparent, increasing competition and consumer choice.

Identity and KYC APIs simplify digital verification and onboarding. This is particularly relevant in Bangladesh, where the National Identity Card database already provides a strong foundation for digital identity services. Notification APIs can also enable real-time alerts, such as informing lenders when a salary has been deposited, allowing automated loan repayment systems to function more efficiently.

To support these capabilities, Bangladesh needs a standardised API gateway governed by Bangladesh Bank. Without common standards, every bank develops its own proprietary systems, forcing fintech firms to build separate integrations for each institution. This increases costs, slows innovation, and creates barriers for smaller players. Similar challenges prompted the creation of India's Account Aggregator framework and Singapore's APIX platform.

Open Banking can generate significant benefits for all participants in the financial ecosystem.

For banks, concerns about revenue loss are often overstated. International experience suggests that Open Banking can improve profitability in multiple ways. Access to real-time transaction data enhances credit assessment, reducing non-performing loans and provisioning costs. Digital verification lowers operational expenses and makes small-ticket lending more viable. Better data also enables banks to reach previously underserved retail and SME customers.

Open Banking can also create entirely new revenue streams. API marketplaces have become profitable businesses in several countries. Singapore's DBS Bank, for example, generated substantial additional income through API-driven services, while estimates suggest banks can generate millions of dollars annually through API monetisation.

Fintech companies benefit from access to structured, real-time financial data. This allows them to develop more accurate credit-scoring models, facilitate lower-cost account-to-account payments, and offer value-added services such as budgeting tools and investment platforms.

Customers gain greater control over their financial data. They can access faster loan approvals, more personalised services, seamless cross-bank transactions, and a wider range of competitive financial products through a single platform.

Expanding financial inclusion

The strongest case for Open Banking in Bangladesh lies in its ability to deepen financial inclusion.

Although MFS account ownership has expanded dramatically, access to credit, insurance, and investment products remains concentrated among urban, educated, and formally employed populations. Millions of individuals and businesses remain outside the reach of formal financial services despite participating in the digital economy.

Open Banking can help bridge this gap through alternative credit scoring. Fintech firms can use MFS transaction histories, utility payments, and e-commerce activity to build reliable credit profiles for people who have never maintained traditional bank accounts. These digital footprints can make previously invisible individuals visible to lenders.

The impact could be especially significant for small and medium enterprises. Bangladesh's 7.8 million SMEs contribute roughly a quarter of GDP yet receive less than 5 percent of total bank credit. Open Banking can embed financial services directly into the digital platforms SMEs already use, including enterprise software systems, online marketplaces, and supply-chain applications.

Women's financial inclusion could also improve substantially. When identity verification, credit assessment, and product delivery can be completed through smartphones, barriers related to documentation, social norms, and distance from physical branches become less restrictive.

Bangladesh can draw important lessons from countries that have already implemented Open Banking.

The United Kingdom demonstrated how regulatory intervention can rapidly create a level playing field through standardised API requirements. Singapore adopted a collaborative approach, encouraging innovation through voluntary participation and government facilitation. Nigeria introduced a phased implementation model that is particularly relevant to Bangladesh because of similarities in financial inclusion challenges and mobile money adoption.

India offers perhaps the most useful example. Its Account Aggregator framework, built on the broader India Stack infrastructure, enables consent-based sharing of financial data across banks, insurers, mutual funds, and public institutions through a unified architecture.

Bangladesh does not need to replicate any single model. Instead, it can combine India's Account Aggregator approach, Singapore's collaborative framework, the UK's technical standards, and Nigeria's phased implementation strategy to create a system tailored to local realities.

Some foundations are already in place. Bangladesh Bank has established the National Payment Switch Bangladesh (NPSB) and is developing the Interoperable Digital Transaction Platform (IDTP). These initiatives provide a logical starting point for a broader Open Banking framework.

At present, however, the country's data-sharing landscape remains fragmented. bKash and Nagad have established bilateral arrangements with banks for transfers, salary disbursements, and credit services. Government agencies have also begun seeking financial information for tax administration and document verification purposes.

While these developments demonstrate growing demand for data sharing, they lack common standards, security safeguards, and consistent customer consent mechanisms. The longer these informal arrangements persist, the more difficult standardisation will become.

Building the framework before it's too late

Several challenges must be addressed before Open Banking can be implemented successfully.

The first is regulatory fragmentation. Financial oversight in Bangladesh is divided among Bangladesh Bank, the Bangladesh Securities and Exchange Commission (BSEC), the Insurance Development and Regulatory Authority (IDRA), and the Microcredit Regulatory Authority (MRA). Without coordination, implementation risks becoming fragmented across sectors. A dedicated inter-regulatory working group would help create a unified approach.

The second challenge involves data privacy. Although the Personal Data Protection Ordinance was approved in October 2025, detailed implementing regulations must ensure that Open Banking consent requirements are clearly defined and enforceable.

Cybersecurity presents another major concern. Expanding API connectivity increases potential vulnerabilities. Robust safeguards, including OAuth 2.0, OpenID Connect, modern encryption protocols, and zero-trust security architecture, should form the baseline requirements for all participants.

Infrastructure limitations also remain significant. Many banks continue to rely on legacy systems that are not designed for API-based integration. A phased modernisation strategy will therefore be necessary. At the same time, digital and financial literacy programmes must help consumers understand how their data is used and what consent-based sharing actually means.

Several policy actions could accelerate progress.

Bangladesh Bank should establish a dedicated Open Banking Working Group, publish a national roadmap, introduce API standards aligned with global frameworks such as ISO 20022 and FAPI, and expand regulatory sandbox opportunities for fintech firms.

Commercial banks should invest in API-ready infrastructure, develop Banking-as-a-Service partnerships, and collaborate on shared systems for KYC verification, fraud prevention, and consent management.

Fintech companies must prioritise security, governance, and responsible data management while focusing innovation on areas such as SME financing, agricultural lending, and remittance services.

The government and development partners should operationalise the Personal Data Protection Ordinance, support nationwide financial literacy initiatives, and help fund shared infrastructure such as API gateways and consent-management systems.

The most important lesson from international experience is that Open Banking works best when it is treated as public infrastructure rather than a competitive advantage for a few dominant institutions. Like roads, electricity networks, or telecommunications systems, its value increases when access is broad, secure, and interoperable.

Bangladesh stands at a pivotal moment. Its mobile-first population, expanding digital infrastructure, and dynamic fintech sector have already created the conditions for an Open Banking transformation. What remains missing is the regulatory, technical, and institutional architecture capable of turning isolated innovations into a cohesive ecosystem.

The countries that have moved decisively in this direction have not simply improved financial services. They have expanded participation in the economy, reduced barriers to opportunity, and given citizens greater control over their financial lives.

For Bangladesh, the question is no longer whether Open Banking will arrive. The real question is whether the country will build the framework proactively and inclusively—or allow fragmented arrangements to shape the future by default. For millions of underserved citizens seeking access to credit, insurance, investment, and other formal financial services, the answer could define the next phase of the country's digital and economic transformation.

A Y M Mostafa is CTO and SEVP at Prime Bank. 

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.