Credit where it’s due

Digital banking is likely to take a larger shape as the government is considering issuing dedicated licenses, with Finance Minister Amir Khosru Mahmud Chowdhury recently showcasing digital banking as a cornerstone of the nation's digital economy and financial inclusion strategy. Yet for the financial sector, the critical question is what distinct value they will deliver that traditional institutions have failed to provide.

Digital financial services are already woven into daily life. Millions of Bangladeshis transfer funds, settle bills, and manage small businesses via mobile phones. Yet digital access is not the same as full financial inclusion. Quick Response codes, and mobile financial services, leaving a clear trail of commercial activity.

Yet when a person seeks a bank loan, traditional lenders turn him/her away for lacking formal collateral or an established credit history.

Here lies the genuine opportunity. A true digital bank does not merely port legacy banking onto a smartphone screen. It uses data, modern technology, and redesigned processes to understand merchants, translating real-time economic activity into tailored credit and financial services.

Bangladesh is not starting from scratch. The country possesses a mature digital infrastructure spanning commercial banks, mobile financial services, payment service providers, card networks, and government payment platforms. The missing link is connecting these disparate nodes to convert transactional activity into comprehensive banking relationships. 

A conventional bank may offer a sleek mobile application, yet it remains anchored to physical branches, legacy software, and paper paperwork. A digital bank operates on a fundamentally different blueprint, building onboarding, identity verification, deposits, lending, and risk management as purely digital functions from day one.

At the same time, digital banks are far more than financial technology applications. Under Bangladesh Bank’s regulatory framework, a digital bank must be a licensed public limited company backed by minimum paid-up capital of 300 crore taka, subject to full banking oversight. 

This distinction is very important. Because digital banks hold deposits and extend credit, they carry the same solemn obligations as traditional institutions: robust governance, prudent risk management, solid balance sheets, rigorous cybersecurity, and public trust.

Mobile financial services and digital banks should not be viewed as zero-sum rivals. Mobile operators transformed the economy by democratizing money transfers, cash-in points, and utility payments. But banking extends beyond transactions to encompass long-term savings, risk management, and formal credit. The next frontier involves transforming digital transaction trails into credible financial identities.

Millions of small business owners, female entrepreneurs, farmers, freelancers, and gig workers generate steady incomes without standard salary certificates or conventional collateral. Their digital payment histories contain rich data regarding cash flows and turnover. 

With explicit consent and strict privacy protections, digital banks can deploy advanced analytics and machine learning to assess creditworthiness and design customized products. Naturally, algorithms cannot replace sound judgment; customers must retain the right to understand credit decisions, correct erroneous data, and access effective grievance mechanisms.

True financial inclusion extends beyond account opening figures. A home-based business owner deals with fluctuating sales; a freelancer draws income from multiple overseas clients; a farmer earns seasonally. Their needs bear little resemblance to those of salaried corporate employees. 

Digital banks must tailor products around these operational realities through flexible savings accounts, adaptable credit lines, and frictionless digital onboarding. Success must be measured by whether citizens can save securely, access capital, manage economic shocks, and integrate fully into the formal economy.

Isolating these new institutions would undermine their purpose. If digital banks operate as closed gardens, consumers will simply accumulate additional software without gaining superior service. Interoperability is imperative. Customers must be capable of moving capital seamlessly across commercial banks, mobile providers, and digital lenders via open national infrastructure like the National Payment Switch Bangladesh and Bangla QR standards.

Public sector transactions can accelerate this shift. As taxes, licensing fees, civil service payrolls, pensions, and social safety net disbursements move online, citizens should be free to collect and send payments through any regulated account of their choice. The governing logic must be straightforward: one citizen, multiple secure choices, and a unified financial ecosystem.

Digital banking must deliver more than a fresh user interface for old products. Its true value resides in harnessing data to evaluate risk accurately while maintaining the discipline and accountability that banking demands. Bangladesh has built an impressive foundation through mobile payments and expanding digital infrastructure. The challenge now is combining innovation with institutional trust, and technical connectivity with genuine customer choice. 

The ultimate objective is not a proliferation of banking apps, but the arrival of better banking access.

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Muhammad Shahadat Hossain is a digital banking & financial services professional