Unveiling the Lucrative Fintech Landscape in Bangladesh

In Bangladesh, fintech faces an underpenetrated environment full of potential, with 60 million unbanked adults

Yasser Arafat

Senior Analyst

Bangladesh is emerging as a prominent digital market in the global economy, experiencing unprecedented GDP growth rate of 7.1%[1], resulting in a GDP of US$460 billion[2] in 2022. The nation boasts a large and rapidly digitizing population of 170 million citizens, including 46 million youths. Nearly 100% mobile-ready, Bangladesh hosts 186 million[3] mobile connections, 129 million internet users, and 93 million smartphone users.

In this context, fintech faces an underpenetrated environment full of potential, with 60 million unbanked adults[4]. The World Bank Global Findex Database 2021 reports a 53% penetration of financial services accounts, of which only 38% have accounts in banks, placing Bangladesh in the lower 40% of markets worldwide for financial inclusion. This gap represents fintech’s opportunity, and according to Tracxn[5], a leading startup data platform, Bangladesh is home to 198 officially tracked fintech startups, with the actual number likely to surpass 500. These startups offer a diverse range of services, including payments, alternative finance and credit underwriting, savings, remittances, insurance, blockchain, and financial management, among others.

n this article, we delve into the thriving fintech ecosystem of Bangladesh, exploring key trends, prominent players, and the transformative impact of fintech on the nation’s journey towards achieving comprehensive financial inclusion.

Mobile Financial Services on the Rise

The rapid adoption of mobile financial services (MFS) in Bangladesh is revolutionizing the way people access and manage their money, with more than 200 million accounts registered in the country, 60% from rural locations. Bangladesh Bank reports that MFS handled more than 563 million transactions worth $109 billion in FY 2022–23. Bkash[6], a mobile payment platform enabling top-ups, bill pay, P2P, savings, payment at merchants, and cash out, is the first unicorn in the country, boasting over 70 million registered users, 330,000 agents, 40% female customers, connections to 44 commercial institutions, and facilitating millions of transactions per year. Other leading MFS participants include Rocket, Upay, and Nagad.

Payment Aggregation Simplifying Digital Financial Transaction

Payment aggregation is helping to promote digital payment acceptance across Bangladesh. The country boasts 18[7] companies that have acquired either Payment Service Provider (PSP) or Payment System Operator (PSO) licenses. Prominent PSOs, including SSL commerz, aamar pay, ekpay, surjomukhi, Portonoics, and walletmix, along with PSPs like tallypay, dmoney, pathaopay, chaldalpay, and Ipay, etc. have emerged as key players. PSOs have already initiated Interoperable QR or Bangla QR penetration in collaboration with commercial banks, while startups like buynow.biz and sheba platform serve as QR merchant acquirers, enabling payment acceptance for underserved businesses. These players have integrated various payment methods including cards, mobile wallets, banks, and QR codes, propelling the nation towards adoption of digital payments. The central bank’s data reveals an impressive adoption rate, with approximately 700,000[8] merchants now offering QR facilities, and 44 million credit, debit and prepaid card users transacting through POS, e-commerce, and ATMs. The financial year 2022-23 witnessed 500 million[9] digital transactions amounting to US$48 billion, reflecting a 42% growth compared to FY 2021-22.

Fintech Startups Driving Innovation across Multiple Sectors

Innovation is the lifeblood of Bangladesh’s fintech industry, which is fueled by an increase in entrepreneurialism and technological advancements. Using digital wallets, companies such as Pathao, chaldal, and foodpanda have revolutionized how people pay for ride-hailing services, online groceries, and food delivery services. Pathao is also a pioneer in the local market for Buy Now Pay Later (BNPL), enabling consumers to access credit for purchases on their own platform. The digital lending and invoice factoring industries are growing at an estimated 30% annually, attracting startups such as Bkash, ShopUp, drutoloan, Tredx, InstaCOD, and supply line. These platforms offer microloans to individuals and small enterprises, thereby facilitating financial inclusion and economic expansion. Dana Fintech, Agam etc. are working in the alternative credit scoring segment. Circle Fintech is introducing the country’s first Banking as a Service (BAAS) model in close collaboration with various commercial institutions.

Crowdfunding is another growing area where ifarmer, biniyog, wegro, and epolli are operating. In the field of financial wellness, wagely, mitro, etc. are having impact on the lives of 4 million Ready Made Garments (RMG) sector workers. Bimafy, Green Delta Insurance, Adorsho Prani Sheba, InsureCow etc. are representatives of the insure tech arena’s efforts to transform the Bangladeshi insure-tech industry.

Adopting the Potential of Agro-Fintech

Agro-fintech platforms in Bangladesh, such as iFarmers, WeGrow, Fashol, ePolli, agro ventures, and others have arisen as drivers of agricultural development and financial inclusion. By leveraging technology, these platforms have transformed the farming landscape, empowering over 100,000 farmers to interact with crowd funders and formal financial institutions, resulting in positive effects on the agricultural economy of the nation.

Government Assistance and Regulatory Structure

The success of Bangladesh’s fintech landscape can be partially attributed to government support and the creation of a favorable regulatory environment. The Bangladesh Bank, the nation’s central bank, introduced the Regulatory FinTech Facilitation Office (RFFO) in 2019 to encourage more financial sector innovators to enter the market to promote financial services to the public. In addition, the “Digital Bangladesh” and “Smart Bangladesh” visions have established the groundwork for a digital ecosystem, which promotes financial inclusion through technology and internet penetration. The government’s dedication to innovation and inclusion has attracted investments and partnerships, fostering the growth of fintech.

Opportunities and Difficulties

Despite this significant progress, the fintech industry in Bangladesh still encounters many obstacles. Cybersecurity concerns, regulatory complexities, lack of interoperability, a dearth of early-stage investments, and financial literacy among the populace are crucial areas requiring ongoing focus. Various stakeholders are attacking these challenges: educational institutions are promoting financial literacy and digital skills. As regulatory frameworks evolve, an increasing number of foreign investors are investigating opportunities in Bangladesh’s fintech sector, with venture capital investments in fintech surpassing US$429[10] million in both 2021 and 2022. Softbank, Sequoia, Valar ventures, Startup Bangladesh Ltd., etc. are among the notable investors. Finally, more than 60 %of the country’s population is under the age of 35, promoting the possibility of rapid generational change related to general digital adoption.

Bangladesh’s fintech landscape is a captivating tale of innovation, empowerment, and development. Collaboration between banks and fintech startups, customer-centric solutions, digital infrastructure development, talent development, cyber resilience, and introduction of angel and early-stage investors and helping to fuel this revolution. As the nation continues to ride the surge of digitization and technological advancements, the financial landscape will become more inclusive, transparent, and prosperous. With government support, an entrepreneurial spirit, and a lucrative market, Bangladesh is poised to unleash the full potential of fintech and steer the country toward a brighter, digitally enabled future.

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