Taka Pay Card is a new domestic payment card launched by Bangladesh Bank as an alternative to international payment cards like Visa, Mastercard, and American Express. It will enable digital payments within Bangladesh through the National Payment Switch Bangladesh (NPSB) system.
The key features of Taka Pay Card are:
- It is a domestic payment card that can be used for payments and withdrawals only within Bangladesh, at least in the initial phase.
- It will be accepted on all ATMs, points of sale terminals and online platforms in Bangladesh which accept digital payments.
- Transactions will be processed via the NPSB payment switch run by Bangladesh Bank instead of international card networks. This is expected to reduce costs and foreign exchange outflows.
- Initial issuers are 3 leading banks – Sonali Bank, City Bank and BRAC Bank. More banks are expected to introduce it over time.
- It will be launched as a debit card first but credit card variants are planned for the future.
- The cards will use magnetic stripe technology initially but will migrate to more secure EMV chip technology in the future.
- It has been developed in partnership with French company Fime to reduce reliance on foreign card network firms.
- Can potentially be used in India later for withdrawals and payments, once cross-border acceptance is enabled.
Why is Bangladesh Launching Taka Pay Card?
Bangladesh has seen a rapid growth in digital payments over the last decade driven by regulatory initiatives, growth of ATMs, rising internet and smartphone adoption, youth demographics and bank led campaigns. However, most digital payments still rely on international card networks like Visa and Mastercard which entails the following drawbacks:
- Foreign Exchange Outflows: The outflow of foreign currency in the form of fees and charges to international card networks is estimated to be around Tk 300 crore yearly. Taka Pay will reduce this outflow.
- High Costs: Fees charged by global card firms are ultimately passed on to merchants and consumers leading to higher costs of digital payments. Domestic networks could potentially lower costs.
- Data Security: Reliance on foreign networks poses data security and privacy risks. Domestic payments data can be better protected with local networks.
- Interoperability: By linking to the NPSB system, Taka Pay Card will provide wider interoperability between bank accounts, cards and wallets compared to individual payment platforms.
- Financial Inclusion: Domestic cards could promote financial inclusion by weaning more users away from cash to digital payments due to potentially lower costs.
- Route to Regional Networks: Taka Pay Card could later be linked to multilateral regional payment systems like RuPay of India to reduce reliance on Western payment firms.
How will Taka Pay Card function?
Taka Pay Card will function similar to any other digital debit or credit card with some key differences:
- It will be affiliated to the National Payment Switch Bangladesh (NPSB) which connects ATMs and payment systems of all banks in the country.
- Instead of routing via Visa or Mastercard, authorization and settlement of Taka Pay transactions will happen over the NPSB network.
- Cards will be issued by banks to their customers like regular debit or credit cards. Sonali Bank, City Bank and BRAC Bank are the initial issuers.
- It can be used to withdraw cash from ATMs of any bank, make payments on POS machines and for online transactions.
- Transactions will reflect in the bank account linked to the card, like regular debit cards. Credit card variants may be launched later.
- Banks will promote the card to merchants to install POS machines accepting Taka Pay. Its acceptance may start with larger stores and then expand.
- Tokenization, fraud monitoring, dispute resolution and other aspects will be as per NPSB standards similar to any domestic card network.
- Bangladesh Bank will define customer protection guidelines, security protocols, pricing norms and other operating regulations for the system.
What are the benefits of Taka Pay Card?
Taka Pay Card offers several advantages over existing payment options:
Lower Costs: By avoiding fees paid to Visa, Mastercard etc, the cost of card transactions could come down benefitting consumers and merchants.
Control over Data: Transaction data will reside within the country offering greater security and enabling localized innovation.
Interoperability: Taka Pay will be accepted across all platforms under NPSB enabling seamless payments.
Financial Inclusion: Domestic cards could promote wider adoption of digital payments, especially in rural areas.
Reduced Forex Outflows: Lower reliance on foreign card networks will reduce outflows on transaction fees and charges.
Standardized Technology: Eventual migration to EMV chips could bring standardization in cards enhancing security.
Building Local Capacity: The system will result in building domestic capacity in payment networks, data analytics and payment technology.
Opportunities for Innovation: Local control and available data can enable introducing innovations for merchants and consumers.
Route to Regional Systems: Links to regional networks like RuPay (India) and MyDebit (Malaysia) could be enabled later.
What are some of the challenges and limitations?
While Taka Pay offers significant benefits, there are some limitations and challenges to be addressed:
- Acceptance Infrastructure: Investment is required to install POS machines, upgrade ATMs and enable online acceptance of Taka Pay across Bangladesh.
- Promoting Adoption: Banks have to undertake large promotional campaigns for mass-level adoption by consumers and merchants.
- Building Tech Capability: Expertise has to be developed for managing card technology, security protocols, dispute resolution etc.
- Interoperability Issues: Seamless interoperability with other payment channels has to be ensured, else adoption may be impacted.
- Credit Ecosystem: Developing the credit card ecosystem may pose challenges in terms of credit underwriting, collection infrastructure etc.
- Security Risks: Safeguards against frauds, cyber attacks and system outages need to be installed to build trust.
- Coordination Challenges: Coordination between Bangladesh Bank, commercial banks, international partners like Fime and other stakeholders will be critical.
- Integration with Global Networks: Integration with international systems may be required at a later stage for services like cross-border payments.
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What does the launch plan look like?
The launch phase of Taka Pay Card is envisioned as follows:
- It will be rolled out by Sonali Bank, City Bank and BRAC Bank initially on a pilot basis with selected customers.
- The card will be launched as a domestic debit card usable only in Bangladesh. Credit card functionality may be added later based on learnings.
- Issuing banks will push for installation of POS machines at merchant outlets, starting with large organized retailers.
- After the pilot, issuance will be scaled up by these banks before expanding to other banks such as DBBL, IBBL which have expressed interest.
- Bangladesh Bank will monitor adoption, resolve technical issues and release updated guidelines as required during the pilot phase.
- Gradually usage will be expanded through mass card issuance, onboarding more merchants, deploying ATMs and enabling ecommerce payments.
- The roadmap for the next 2-3 years involves migrating to EMV chip cards, tokenization, linking to regional systems (UPI, RuPay etc) and developing credit card capabilities.
How does Taka Pay compare to alternatives?
vs Global payment networks like Visa/Mastercard:
- Taka Pay only works in Bangladesh initially vs Visa & Mastercard’s global acceptance
- Expected to have lower merchant fees owing to domestic nature
- May lack extensive technical capability & experience of global firms
- Provides control over payment data & infrastructure to Bangladesh
vs Domestic cards like DBBL Nexus:
- Nexus is a debit card on its own payment platform, Taka Pay rides on national payment rails (NPSB)
- Taka Pay rollout backed by central bank, roll-out can be faster
- Interoperability may be better with Taka Pay as it plugs into interbank network
- DBBL has own POS network, Taka Pay banks have to build acceptance ground up
vs Mobile Wallets like bKash:
- Taka Pay integrates with bank account via debit card, wallets need to be loaded separately
- Wallets already have large acceptance network across Bangladesh
- Taka Pay acceptance will take time to build up but has more regulatory support
- Wallets useful for small payments, Taka Pay better for larger & recurring transactions
Conclusion
In summary, Taka Pay Card is an ambitious initiative by Bangladesh Bank to develop a domestic digital payments ecosystem and reduce reliance on foreign card networks. It has strong regulatory backing and the potential for rapid mass-level adoption leveraging the underlying interbank infrastructure. However, significant efforts will be needed by participating banks and other stakeholders to build acceptance, promote adoption, ensure seamless interoperability with other payment systems, manage risks and costs and ultimately wean users away from cash and foreign networks. The pilots by the first few banks will provide key insights into launch challenges, technological capabilities required and updates needed in the regulatory framework to create a robust domestic payments network.
Frequently Asked Questions about Taka Pay Card
What is Taka Pay Card?
Taka Pay Card is a domestic payment card launched by Bangladesh Bank as an alternative to international payment cards. It will work on the National Payment Switch Bangladesh for payments within the country.
How does it work?
It functions like a regular debit/credit card but transactions are processed via the interbank network NPSB rather than Visa or Mastercard. It is accepted at all POS machines and online merchants in Bangladesh.
What are the benefits?
Lower costs, control over payment infrastructure, reduced forex outflows, financial inclusion of the unbanked and opportunities for innovation.
What banks are issuing it initially?
Sonali Bank, City Bank and BRAC Bank are the initial issuers in the pilot phase. More banks expected to join later.
Will it be acceptable across Bangladesh?
Yes, it will be accepted on all ATMs, POS machines and merchant websites affiliated to the NPSB payment switch.
Can it be used outside Bangladesh?
No, initially it will only work within Bangladesh. It may be enabled for use in India later.
Is it a credit or debit card?
It is launched as a debit card first. Credit card functionality may be added subsequently.
How is it different from existing card networks?
It is domestic, potentially lower cost, provides local control over infrastructure and is integrated with the interbank network.
What are the challenges in launching Taka Pay Card?
Onboarding merchants, promoting adoption, ensuring interoperability, building technical capability, managing risks are key challenges.