The increasing excitement around going all digital in terms of transactions of monetary funds is interesting to think about, but to delve deeper into the topic, one must first understand the meaning of cashless. Being cashless could be traced back to the barter system before the invention of cash altogether. What is cash if not a medium for exchanging goods? It’s just a figment of imagination that humans collectively agreed upon in order to have a more centralized system in terms of trade. To better regulate these trades, there needs to be a system to calculate transactions that ensures there isn’t any foul play involved. This is where the excitement of cashless transactions comes in: every digital transaction is documented and can be traced back to its source. So, in terms of a cashless society, it would be an ideal financial ecosystem if everything was implemented perfectly, which is a utopian way of thinking about it but not very realistic. It also raises an important question: will the idea of going all cashless fold upon itself as the crypto market has in the past few months? Not all technology is good technology, and not all of it can be a force for good in the future. These are the avenues that need to be addressed when going forward with any sort of project or policy regarding digital modes of financial transactions.
The central bank of Bangladesh took the initiative to go cashless earlier this year with the Quick Response (QR) Code-based technology ‘Bangla QR’. Following the success of Mobile Financing Systems (MFS) such as bKash, Rocket, and Nagad, it seemed like a timely move to have a more centralized system in place to make digital transactions. Bangla QR aims to unite all the banks and MFS under the same gateway, which would ensure an easy payment method for all types of vendors. The interesting thing about Bangladesh Bank’s take is that it focuses on street vendors and uses a charge-free program. That would mean micro-merchants such as hawkers and rickshaw pullers could use it without any loss of revenue. The goal of Bangladesh Bank is to go completely cashless by 2027, which seems like a rushed timeline considering most of the country is still using cash currency as their main method of transaction. The question of whether it is realistic or not is quite valid considering the current circumstances.
The issues with going all cashless are not limited by any means. Firstly, the implementers of ‘Bangla QR’ themselves were subjected to a massive cyber-attack back in 2016, which led to $81 Million of funds being stolen from their digital vaults. The issue of hacking is a major concern in the situation of digital transactions; the case of ‘Forever 21’ in the USA could be looked at as an example. In December of 2017, the famous clothing brand was subjected to a breach in their security system due to some tricky hacking and the human error of some of their employees. This resulted in some of their outlets not being able to use online payments for 7 months. In the case of cyber-attacks, if such big brands face more than half a year of drawbacks, we can only imagine what the smaller vendors will go through. The lack of knowledge about these things is a major problem; not all small vendors, specifically the elderly population, are familiar with the technology. The already established QR systems of bKash and Nagad sometimes glitch and have issues in terms of payment. Being a new service, all of them will have bugs. In a recent mugging report in the capital, the muggers held someone with a weapon and made them take out all the cash they could from ATMs and MFS accounts. These things also need to be addressed. It needs to be remembered that criminals often get creative, and from past cases, it is to be expected that it will continue in the digital space as well. The authorities need to be prepared for these sorts of issues.
As research titled "The Phenomenon of Trade-Based Money Laundering in Bangladesh: A Critical Review" suggests, money laundering in the shadow economy in this country is prevalent by using legitimate businesses as a front. These businesses use under-invoicing or over-invoicing as a method of laundering money in and out of the country, making their illegitimate money legitimate. So, when a company doesn’t accept digital payments, or if they strongly discourage it, that behaviour itself should be considered suspect. Although it is very encouraging to imagine an economy where all the transactions are documented and there is no room for fraud, in reality it is quite impossible. Thieves and people with ill intentions will always be a part of society, but limiting the actions of these people by going digital can be a step in the right direction. Society must place more importance on moral education. Although the consensus is to have a lot more computer programmers, if those computer programmers are somehow morally corrupt, we’re going to have bad actors rather than the good ones we need. There also needs to be a lot more incentives to use cashless payments all across the board, and in some cases, strict implementation of cashless technology so there isn’t any way to under- or over-invoice to launder money. The case of Sweden can be looked at as an example. Retailers are legally entitled to refuse coins and notes in Sweden. Ideally, banks and financial institutions and their executives need to be a lot more tech-savvy and have around-the-clock monitoring of transaction activities. The use of AI technology is also an option if the right programme can be created. As it stands, maybe incentivizing Less Cash Bangladesh instead of Cash Less could be a feasible solution for the foreseeable future.
Kazi Shams Mohsin Rhid is a Research Intern at the Centre for Governance Studies.
Views in this article are author’s own and do not necessarily reflect CGS policy.