The Next Frontier for Fin Techs in Bangladesh

Zahedul Amin
April 5, 2016
The Next Frontier for Fin Techs in Bangladesh

The Next Frontier for Fin Techs in Bangladesh – Part 1

As a Bangladeshi, often times it is impossible to not be exposed to the world of Mobile Financial Services (MFS). From making fund transfers to completing online and off-line transactions, Fin Tech has significantly improved the lifestyle of our population. While MFS has made significant in-roads in our day to day lives, it is certainly the tip of the ice berg while considering the gamut of solutions that Fin Tech is offering globally.

Before delving further into the issue, it is important to shed light on the definition of Fin Tech, which is a line of business based on using technology for providing financial services. A Fin Tech’s business model can only be considered viable, if services provided are superior to existing solutions, while costing less than the incumbent’s existing cost structure. Fin Tech potentially needs to have the disruptive element for re-aligning the status quo, while remaining within the existing legal structure.

Fin Techs can broadly be segregated into four segments – Asset Management, Banking Technology, Crowd Sourcing and Crypto Currency. While many startups are offering tech based financial services products and services in US and EU; for a tightly regulated country like Bangladesh, service offerings are largely limited. With the recent hacking incident involving stolen funds from Bangladesh Bank, policy makers are unlikely to become more liberal in the near future.

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Fin Techs Across the Globe

Fin Tech is growing at a phenomenal pace, driven by growing demand in an industry ripe for disruption. Traditionally, the financial services industry had been dominated by different financial institutions, with nebulous cost structures and opaque rules and regulations. Higher costs and lack of knowledge have been contributing to a large population remaining outside the purview of banking services.

With rising internet penetration, Fin Tech has become a viable avenue for providing services to the digital consumer class, not only in developed countries, but also in different developing countries as well.

Fin Techs across the world

Source: thefinancer, 2015

Fin Tech is Growing in Asia

In China and India, a number of Fin Tech ventures have made a name for themselves by breaking into the threshold of Unicorns. Given the growing number of people entering the middle income threshold, scope of growth for these burgeoning Fin Techs will further amplify. Bangladesh also has a number of emerging Fin Tech initiatives, but the growth is mainly confined in the category of MFS.  Some major Fin Tech firms in China, India and Bangladesh are illustrated below:

Fin Techs across Asia, especially China, Bangladesh, and India

In terms of, Fin Tech is receiving a lot of attention from prominent VCs and firms. Alongside, larger corporates are joining the bandwagon by making strategic investments in the segment.

In for 2014, Fin Techs globally received investments worth USD 14 billion in 2014 (Source: CBI insights), while the investment in Asia Pacific region exceeded USD 3.5 billion.

Investments into Fin Techs across different regions

Source: CBI Insights

Among different Fin Tech technologies, ‘block chain’ backed bitcoins are the most exciting, potentially opening up an alternate transaction channel eschewing the formal banking system. The ‘block chain’ technology makes hacking difficult, which results in more secured transactions. Bitcoin technology has been facing a number of recent controversies, starting from fluctuating value against the US dollar to regulatory bottle-necks.

Despite facing a number of persistent challenges, Fin Tech has the potential for disrupting the financial services industry by re-defining finance as we know it today.

The second part of the write-up will focus on the potential of Fin Tech in Bangladesh.

WRITTEN BY: Zahedul Amin

Zahedul Amin is an entrepreneur and consultant with 14 years of experience working for development agencies, private enterprises and government entities. He co-founded LightCastle Partners—a consulting firm looking to foster inclusive economic growth for Bangladesh and beyond. He has extensive research experience and loves to solve development challenges adopting a systemic approach. He holds a Bachelor’s and Master’s degree from IBA (Institute of Business Administration), University of Dhaka. Zahed has extensive experience in private sector development, landscape studies, impact assessment, financial assessments, market entry studies, banking, non-profit, and private & development sector consulting across 20+ sectors in Bangladesh including the Apparel Sector. He has successfully led 120+ projects while working with top-tier clients like The Gates Foundation, WFP, IFC, H&M Foundation, The World Bank, UN Agencies, EKN, BRAC, SNV, Ashoka, WaterAid, among others. Zahed is an International Visitors' Leadership Program (IVLP) alum, an entrepreneurship Fellow at the State University of New York (SUNY) and an Acumen Fellow.

For further clarifications, contact here: [email protected]

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