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DHAKA: Cash transactions cost Bangladesh’s economy nearly 28 times as much as digital payments, highlighting the potential for substantial savings if the country can reduce its reliance on physical money, according to a Bangladesh Bank study.
The study, titled “The Cost of Cash Study in Bangladesh: A Comparative Analysis of Cash and Digital Payment”, estimated that the annual cost of cash transactions stood at around Tk 1.70 lakh crore in 2023, equivalent to 3.24% of gross domestic product (GDP).
In comparison, the annual cost of digital transactions was estimated at Tk 5,964 crore, or just 0.11% of GDP.
On a per capita basis, cash transactions cost Tk 9,938 annually, while digital transactions cost only Tk 348, the study found.
Mohammad Sirajul Islam, an executive director of Bangladesh Bank, said managing cash involved substantial expenses, from importing raw materials for banknote production to printing, transporting and circulating notes.
Banknotes become old, damaged and torn through regular use and must be replaced, creating recurring costs for the central bank, he said.
Greater use of digital payments could reduce these expenses while helping curb corruption, theft and the misuse of money by maintaining electronic transaction records, he added.
The study estimated that cash handling costs commercial banks around Tk 36,800 crore annually, equivalent to 0.70% of GDP. Consumers incur an estimated Tk 28,000 crore in annual costs, or 0.53% of GDP, while Bangladesh Bank’s own cash management expenses amount to around Tk 400 crore a year.
These costs include printing and distributing currency, transporting and securing cash, operating bank branches and ATMs, and the value of time people spend withdrawing, carrying and using physical money.
The study also highlighted the potential loss of government revenue associated with the shadow economy. It estimated annual revenue losses at Tk 93,300 crore, equivalent to 1.77% of GDP and 54.76% of the estimated total cost of cash transactions.
Even when these potential revenue losses are excluded, the cost of cash transactions remains around 12 times that of digital payments, according to the study.
Despite their lower overall cost, digital payment systems face financial and operational challenges. The study estimated annual revenue from digital transactions at around Tk 2,300 crore, against operating costs of Tk 5,964 crore, leaving a shortfall of approximately Tk 3,664 crore.
High merchant fees, delays in settling payments, limited interoperability between payment systems and unreliable internet connectivity were identified as major barriers to wider adoption.
Fraud, failed transactions, money being transferred to incorrect accounts and limited digital skills also discourage consumers and businesses from using electronic payments.
The study drew on desk research, reviews of payment system data and policies, 21 interviews with relevant stakeholders and five focus group discussions.
It found that cash continued to dominate Bangladesh’s payment landscape despite the expansion of mobile financial services and electronic fund transfers. More than 80% of transactions by number were still conducted in cash.
The report noted that small businesses were particularly sensitive to transaction costs because their profit margins were often low. Additional digital payment fees can further reduce those margins, making transparent information about charges, settlement times and payment procedures essential.
For consumers, digital payments can save time and effort while providing a record of transactions. However, greater confidence in these services will require reliable systems, accessible complaint mechanisms, effective dispute resolution and stronger protection against fraud.
The study stressed that expanding digital payments requires more than technological infrastructure. Affordable services, reliable internet connectivity, user-friendly systems and public awareness are also essential to reducing dependence on cash.
As part of its efforts to promote interoperable digital payments, Bangladesh Bank introduced Bangla QR as a national standard. The central bank set the interchange reimbursement fee for Bangla QR transactions at zero per cent from 1 October 2026 to make the system more attractive to merchants.
The initiative aims to encourage QR-code payments and remove barriers to digital transactions. Its effectiveness, however, will depend on whether merchants and consumers find the system affordable, convenient and reliable.
The study concluded that reducing dependence on cash could significantly lower transaction costs across the economy. Electronic records can also improve financial transparency and help authorities monitor economic activity more effectively.
Sirajul Islam said wider adoption of digital payments could reduce recurring expenses associated with printing, transporting, replacing and managing banknotes.
The transition, however, will require coordinated efforts by Bangladesh Bank, commercial banks, payment service providers, businesses and consumers. The study recommended strengthening consumer protection, improving interoperability, reducing settlement delays and expanding digital payment skills and awareness.
It also stressed the need to make digital payments accessible, affordable and reliable for people across different income groups and types of businesses to realise the full economic benefits of the transition.
