Time to Open Outward Digital Remittances

Bangladesh’s cross-border payment eco-system has historically evolved in a cautious and tightly regulated manner, reflecting the country’s broader macro-economic priorities of exchange control, reserve stability, and financial integrity.

At present, outward remittances are primarily facilitated through traditional SWIFT channels and international card networks such as MasterCard, VISA, and American Express. 

These channels effectively support travel-related expenditures and permissible online payments. However, they represent only a partial adaptation to the rapidly changing landscape of global digital commerce.

Since 2011, Bangladesh has taken policy initiatives to promote the repatriation of service income including inward remittances against freelancing services through Online Payment Gateway Service Providers (OPGSPs) and other foreign payment solution providers.

Despite this, foreign participation in Bangladesh’s digital payment space remains notably limited. This raises a fundamental question: why are global payment operators reluctant to engage meaningfully in Bangladesh?

A key reason lies in the asymmetric nature of the current framework. Foreign operators are allowed to facilitate inward service income, but they are not permitted to participate in outward remittance flows. From a commercial perspective, this creates a structurally unbalanced business model.

Service income flows are relatively small compared to wage remittances, limiting the revenue potential for these operators. Consequently, the incentive for global payment providers to invest in integration, compliance, and infrastructure in Bangladesh remains weak.

In contrast, international card schemes thrive because they operate on both sides of the transaction spectrum. They enable outward payments -- whether for travel, subscriptions, or e-commerce -- while also supporting inward settlements through merchant acquiring networks.

This two-sided market structure ensures sustainable business viability. Therefore, extending a similar opportunity to foreign digital payment operators could fundamentally alter their engagement with Bangladesh.

Allowing foreign operators to participate in outward remittances -- under a controlled and bank-intermediated framework -- could be a game-changing policy shift. Such a move would transform these operators from passive recipients of inward flows into active participants in the broader payment ecosystem.

As supply-side actors, they would have strong incentives to establish standing arrangements with Authorized Dealer (AD) banks, invest in local integration, and expand service offerings.

The proposed bank-intermediated framework offers a prudent and balanced pathway to achieve this transformation. It ensures that while innovation and competition are introduced, regulatory oversight and financial discipline are not compromised.

Under this framework, AD banks would play a central role as gatekeepers and settlement authorities. They would establish formal arrangements with Cross-Border Digital Payment Service Providers (CBDPSPs), encompassing foreign payment platforms, OPGSPs, and other legitimate solution providers.

All transactions would be routed through AD banks, ensuring compliance with foreign exchange regulations, AML/CFT requirements, tax obligations, and reporting standards.

A cornerstone of the framework is the introduction of Digital Value Accounts (DVAs). These accounts, maintained with CBDPSPs in the name of individual users, would function as controlled digital wallets for cross-border transactions.

Crucially, each DVA would be linked to a Master DVA or settlement account maintained by the AD bank. This hierarchical structure ensures that individual accounts do not operate independently outside the regulatory perimeter.

The requirement for real-time or near real-time system integration between AD banks and CBDPSPs is particularly significant. It enables full visibility into transaction flows, account balances, and usage patterns.

In addition, the maintenance of mirror ledgers within the banking system ensures that all transactions are recorded, monitored, and reconciled in a robust and transparent manner. This addresses one of the key regulatory concerns associated with digital payment platforms -- the potential loss of control over cross-border financial flows.

From a usability perspective, the framework allows for a wide range of permissible transactions. These include travel-related foreign exchange releases, online purchases of goods and services, subscription payments, IT-related expenses, visa processing fees, and hotel bookings.

By setting transaction limits per transaction for general e-commerce, the framework could strike a balance between facilitating genuine user needs and preventing misuse. Importantly, the framework also integrates with existing foreign currency account structures such as Export Retention Quota (ERQ) and Resident Foreign Currency Deposit (RFCD) accounts.

This creates additional flexibility for exporters and businesses, allowing them to use retained foreign exchange balances for legitimate cross-border expenses through DVAs. Such integration enhances the efficiency of foreign exchange utilization and reduces reliance on fresh currency conversion.

Another notable feature is the provision for acquiring and settlement services for non-residents. AD banks may facilitate payments by foreign DVA holders at local merchant points, thereby strengthening Bangladesh’s participation in global digital commerce. This could have positive spillover effects on tourism, freelancing, and cross-border service exports.

From a regulatory standpoint, the framework maintains strict controls. All outward remittance services under this arrangement would require prior l acknowledgement from central bank. AD banks would be responsible for ensuring compliance with KYC, Customer Due Diligence (CDD), and AML/CFT requirements. Regular reporting to the central bank would be mandatory, ensuring continuous oversight.

One of the most critical safeguards is the requirement that all unutilized balances in DVAs remain under the effective control of AD banks. These balances would be subject to repatriation, reversal, or adjustment in accordance with prevailing regulations.

This provision ensures that foreign exchange is not indefinitely parked outside the formal banking system. The broader economic implications of this framework are substantial.

First, it would significantly enhance digital financial inclusion by providing individuals and businesses with more accessible and efficient cross-border payment options. Second, it would facilitate the growth of Bangladesh’s digital economy, particularly in sectors such as freelancing, software services, and e-commerce. Third, it would improve the country’s attractiveness as a market for global payment providers, fostering competition and innovation.

At the same time, the framework aligns with the central bank’s core objectives of maintaining exchange control discipline and safeguarding financial stability. By anchoring all transactions within the banking system, it avoids the risks associated with unregulated or decentralized payment channels.

Critically, this approach also addresses the long-standing issue of underdeveloped service export channels. By creating a more vibrant and interconnected payment ecosystem, it can help unlock the potential of Bangladesh’s service sector, which remains underrepresented in the country’s external accounts.

However, successful implementation will require careful coordination among stakeholders. AD banks must invest in technology and compliance capabilities to support real-time integration and monitoring. Regulatory authorities must develop clear operational guidelines and supervisory mechanisms.

At the same time, engagement with global payment providers will be essential to ensure that the framework is aligned with international standards and market practices.

In short, the introduction of a bank-intermediated framework for cross-border digital payments represents a forward-looking policy initiative that balances innovation with control. By allowing foreign payment operators to participate in outward remittances under a regulated structure, Bangladesh can unlock new opportunities for digital trade, financial inclusion, and economic growth. 

The time has come to move beyond a one-sided inward-focused model and embrace a more dynamic and integrated approach to cross-border payments.

Such a shift is not merely a technical adjustment -- it is a strategic repositioning of Bangladesh in the evolving global digital economy.

Tashzid Reza works in a trade finance company operating as a liaison office in Bangladesh.