Green University of Bangladesh

Dissertation Report
“E-payment system in Bangladesh
and challenges for E-Retailer”

Prepared By:

Md. Sujan Sarker

Id: 130106014
Major in MIS & Minor in Accounting
Dept of Green Business School

Supervisor:

Dr. Shah Md. Safiul Hoque

Associate Professor of Management Information System
Green Business School
Green University of Bangladesh

Date of Submission: 30/03/2017

Contents
Chapter 1 Introduction: ................................................................................................................................. 3
Chapter 2 Literature Review ......................................................................................................................... 4
Chapter 3 E-payment System in the world wide........................................................................................... 6
Chapter 4 E-payment system available in Bangladesh ................................................................................. 9
Credit Card and Debit Card payment system: ........................................................................................ 10
Easy Pay Way: ........................................................................................................................................ 10
Payoneer MasterCard: ............................................................................................................................. 11
Case On Delivery (COD): ....................................................................................................................... 11
Digital Wallet or E-Cash:........................................................................................................................ 11
Online stored value payment systems: .................................................................................................... 15
Chapter 5 Survey on E-payment system in Bangladesh ............................................................................ 16
Chapter 6 Discussion & Conclusion ........................................................................................................... 22
Chapter 7 Bibliography & Reference.......................................................................................................... 23
 Chapter 1 Introduction:

The whole world has already been converted into a virtual world. People, institutions and
organizations; all are doing their work virtually. The most impactful sector was the business
sector.. As a developing country, Bangladesh has not been left behind in the internet use.
According to the Bangladesh Telecommunication Regulatory Commission (BTRC), the internet
users in Bangladesh is 40832.387 thousands subscribers in august, 2014. Undoubtedly,
Bangladesh has a massive target customer for online business. Whenever a great number of
target customers are available, the potential business starts to emerge. That‟s how the emergence
of e-commerce was visible in the early 2000. In the beginning of the e-commerce in Bangladesh,
payment issue or payment system was a big problem for the consumers to shop online. The only
valid and trustworthy option was Cash-on-delivery option. But the scenario changed, when
Bangladesh Bank launched National Payment Switch Bangladesh (NPSB) which brought every
bank into a common platform for payment systems in December, 2012 . Now the consumers who
are shopping online or getting involved in any kinds of online transaction can use their
debit/credit card. As one can say that the online transaction scenario has been improved in
Bangladesh in recent times. Bangladesh is in its baby steps to establish E-commerce industry. A
lot of research work has been done before the launch of NPSB and also after the launch of the
NPSB. All the researchers have pointed out to the direction that what measures should be taken
to make things better for the online consumers. Online sellers have been trying to make things
easier for the consumers. Various e-commerce sites are launched.
 Chapter 2 Literature Review

Online shopping in Bangladesh is a new idea and since the e-commerce protocol by the
government of Bangladesh it has become much easier and is now popular in Bangladesh. A
recent survey[which?] shows that Bangladesh is an emerging market for the online sectors and it
has a growing market of around 2 billion BDT. The introduction of 3G mobile internet boosted
the online retail industry significantly. The main items sold are clothing, electronics, toiletries
and gifts.

There are a number of free classified websites and online shopping marketplaces in Bangladesh,
including Othoba.com, Ekhanei.com, Bikroy.com, Lamudi, Carmudi, and Kaymu. According to
Prothom Alo in 2014, about 1.5 to 2 million people shopped online every year, and the market
was growing by 15% to 20%. According to MetrixLab, internet users in Bangladesh had 1 billion
used goods in their stocks worth BDT 147 billion in 2014. According to Bangladesh Bank,
around 1 million \clients accessed mobile banking, and over 100 crore transactions were made
through mobile banking accounts by 2014.

Online shopping is a way of shopping where the buyer can order a product or service by using
internet. Virtual world is showing its impact as the days are passing by. We are literally living on
the virtual world. As this article is about the acceptance of online shopping in Bangladesh, some
prior researches done on the subject of Online Shopping will be discussed in this segment.
A significant amount of research work has been done on Online Shopping. A large group of
researchers has pointed out the possibilities of Online Shopping. Others pointed out on the
drawbacks and at the same time they provided necessary suggestion to make Online Shopping
more useful for the online consumers. Online retailing is a more convenient shopping channel for
consumers because online stores offer greater time savings [5]. That is one of the most prime
reason people want to prefer online shopping. But there is another prime issue which is „Trust‟.
Lack of trust is one of the most frequently cited reasons for consumer‟s not shopping online [6].
Consumers may not be buying due to the risks associated with internet shopping, such as the
possibility of credit card fraud, the inability to touch or feel something before buying it [7].Wee
& Ramachandra has mentioned in their research that the reasons for not buying from online are
lack of security,
lack of physical contact, uncertainty about product quality and distrust of retailer[8]. These
reasons are similar to the studies which were based on the trust issue.To solve this trust issue,
Lee & Turban (2001) proposed a theoretical model for investigating the four main antecedent
influences on consumer trust in Internet shopping, which are trustworthiness of the internet
merchant, trustworthiness of the internet as a shopping medium, infrastructural factors and other
factors[6]. They have considered security third party certification as contextual factors and
company size and demographic variables as other factors. Wang, Chen & Jiang (2009)
mentioned in their study that online activities and knowledge are very much associated and
linked with the trust of consumers [9]. On the other hand, the motivators for online
shopping were available 24/7, easy use, less stress and time saving[10]. Ahn, Ryu&Han (2004)
categorized the activities of internet shopping in two ways. One is Online (System, information
& service quality) and the other one is offline (Product delivery)[11]. Some costs of buying from
an online store such as shipping and handling charges, or delayed consumption during the
delivery period exceed those costs associated with buying from a traditional store [12]. It is
always a big issue that the time of the product delivery and the charge of the product delivery
should be less. Logistics, product delivery and customer service have been one of the most
important factors of online shopping [13] [14] after the trust issue. Liu & Arnett (1997) has
divided the activities of e-business as „Pre‟, „Online‟ and „Aftersales‟[15]. Many researchers
have done their research work on the basis of the attitudes of the online shoppers.
On the basis of the behavioral attitudes of the consumers, researchers have categorized the online
shoppers. According to Kau, Tang, and Ghose (2003), there are six kinds of online shoppers.
They are on-off shopper, comparison shopper, traditional shopper, dual shopper, e-laggard and
info surfers. Jaillet HF (2003) mentioned that the behavior of the consumers can vary whether
the consumers are „expert‟ or „novice‟. „Expert‟ shoppers are those who know their product well.
„Novice‟ shoppers are those who do not have that much knowledge about the product. Their
behaviors vary on their product knowledge [17]. One study conducted by McKinsey &
Company tested the online behavior of 50,000 active internet users and identified six different
groups of online shoppers- Simplifiers, Surfers, Bargainers, Connectors,
Routiners&Sportsters[18].
 Chapter 3 E-payment System in the world wide

An e-commerce payment system facilitates the acceptance of electronic payment for online
transactions. Also known as a sample of Electronic Data Interchange (EDI), e-commerce
payment systems have become increasingly popular due to the widespread use of the internet-
based shopping and banking.

Over the years, credit cards have become one of the most common forms of payment for e-
commerce transactions. In North America almost 90% of online retail transactions were made
with this payment type.

There are companies that enable financial transactions to take place over the internet, such as
PayPal. Many of the mediaries permit consumers to establish an account quickly, and to transfer
funds into their on-line accounts from a traditional bank account (typically via ACH
transactions), and vice versa, after verification of the consumer's identity and authority to access
such bank accounts. Also, the larger mediaries further allow transactions to and from credit card
accounts, although such credit card transactions are usually assessed a fee (either to the recipient
or the sender) to recoup the transaction fees charged to the mediary.

Methods of online payment:

Credit cards constitute a popular method of online payment but can be expensive for the
merchant to accept because of transaction fees primarily. Debit cards constitute an excellent
alternative with similar security but usually much cheaper charges. Besides card-based
payments, alternative payment methods have emerged and sometimes even claimed market
leadership. Wallets like PayPal and Alipay are playing major roles in the ecosystem. Bitcoin
payment processors are a cheaper alternative for accepting payments online which also offer
better protection from fraud.
Net banking:

This is a system, well known in India, that does not involve any sort of physical card. It is used
by customers who have accounts enabled with Internet banking. Instead of entering card details
on the purchaser's site, in this system the payment gateway allows one to specify which bank
they wish to pay from. Then the user is redirected to the bank's website, where one can
authenticate oneself and then approve the payment. Typically there will also be some form of
two-factor authentication.It is typically seen as being safer than using credit cards, with the result
that nearly all merchant accounts in India offer it as an option. A very similar system, known as
iDEAL, is popular in the Netherlands.

PayPal:

PayPal is a global e-commerce business allowing payments and money transfers to be made
through the Internet. Online money transfers serve as electronic alternatives to paying with
traditional paper methods, such as cheques and money orders. It is subject to the US economic
sanction list and other rules and interventions required by US laws or government. PayPal is an
acquirer, a performing payment processing for online vendors, auction sites, and other
commercial users, for which it charges a fee. It may also charge a fee for receiving money,
proportional to the amount received. The fees depend on the currency used, the payment option
used, the country of the sender, the country of the recipient, the amount sent and the recipient's
account type. In addition, eBay purchases made by credit card through PayPal may incur extra
fees if the buyer and seller use different currencies. On October 3, 2002, PayPal became a wholly
owned subsidiary of eBay. Its corporate headquarters are in San Jose, California, United States at
eBay's North First Street satellite office campus. The company also has significant operations in
Omaha, Scottsdale, Charlotte and Austin in the United States; Chennai in India; Dublin in
Ireland; Berlin in Germany; and Tel Aviv in Israel. From July 2007, PayPal has operated across
the European Union as a Luxembourg-based bank
Paymentwall:

Paymentwall, an e-commerce solutions providing company launched in 2010, offers a wide

range of online payment methods that its clients can integrate on their website.

Google Wallet:

Google Wallet was launched in 2011, serving a similar function as PayPal to facilitate payments
and transfer money online. It also features a security that has not been cracked to date[when?],
and the ability to send payments as attachments via email.[4]

Mobile Money Wallets:

In developing countries the banked population is very less, especially in tier II and tier III cities.
Taking the example of India, there are more mobile phone users than there are people with active
bank accounts. Telecom operators, in such geographies, have started offering mobile money
wallets which allows adding funds easily through their existing mobile subscription number, by
visiting physical recharge points close to their homes and offices and converting their cash into
mobile wallet currency. This can be used for online transaction and eCommerce purchases.
Many payment options such as Airtel Money and M-Pesa in Kenya , ATW are being accepted as
alternate payment options on various eCommerce websites.
 Chapter 4 E-payment system available in Bangladesh

Bangladeshi internet shopping as the internet becomes more usable to Bangladesh; it'sclear-cut
that online sales will spring up. This is ahead to more accessibility of online buys. Competitor
will become fast-growing as online shopping raises and so Bangladeshi retailers shouldn't be left
alone. The online retail industry is getting more significant as the internet carries on rising in
signification in Bangladesh. Bangladesh internet site Directory for Online Shopping especial
wholesale & retail choice of e-commerce internet site and first-class stores. Aside from
international market, local businesses are also moving towards e-commerce. Mobile Phone
Companies (e. g. Flexiload, GP Bill Pay Services); Banks (e.g. Online Banking, bkash),
Shopping Malls (e.g. Buying and Selling using Credit Card), hotel and ticket bookings are a few
of them Despite being an under developed country, selected segments of the Bangladeshi
business community has embraced technology with reasonable success. Starting in early 1990s,
internet in the country has witnessed a phenomenal growth, and has made quite promising moves
towards e-commerce. The central bank (Bangladesh Bank) gave the green signal for the e-
commerce transactions in Bangladesh in 2009. Following the beginning of the e-commerce era in
the country, Dutch Bangla Bank (DDBL) launched IPG named Nexus-Gateway in 2010 and
BRAC Bank, in the same year. This gave interested e-merchants of Bangladesh to get connected
and receive payments from the buyer‟s credit or debit cards (such as MasterCard or Visa) for
their goods and services. Very recently Bangladesh Bank has launched the National Payment
Switch (NPS) in December, 2012, at a cost of $5 million (40 crore TK around) funded by the
World Bank. It took more than three years to install it. NPSB would work as a common platform
for all banks for all types of electronic transactions, including internet banking, mobile banking,
POS (point-of-sale), cash withdrawal, deposit and utility bill payments by using cash card, debit
and credit card. It is here to be noted that, at the primary stage the NPS was also supposed to
settle payments of the international credit and debit card holders issued by the local banks in
foreign currency. But due to tight monetary policy of the government the offshore settlements is
not possible under the NPS system. At present, as a started out with e-commerce they attempt to
establish an effective platform in Bangladesh. Additionally, they are wishing customer support to
establish a well platform to e-commerce in Bangladesh.
Credit Card and Debit Card payment system:
Credit Card payment system has become a popular e-payment system of Bangladesh.
Here is the list of the bank of Bangladesh who issue credit card for individuals.
1. AB Bank
2. Agrani Bank
3. Al-Arafa Islami Bank
4. Bank Asia Limited
5. Dutch-Bangla Bank
6. Eastern Bank Limited
7. HSBC Bangladesh
8. Janata Bank
9. Mercantile Bank
10. Mutual Trust Bank
11. National Bank
12. Prime Bank
13. Standard Chartered Bank
14. Social Islami Bank
15. Shajalal Islami Bank
16. United Commercial Bank
17. Uttara Bank

Easy Pay Way:

Easy pay way is an online payment gateway for Bangladesh Market. They enable e-commerce
businesses to process debit and credit cards online quickly and securely! Through their range of
e-commerce solutions they automate their online payments saving buyer‟s or client‟s time and
money! All debit and credit card transactions are processed in real time directly into your
Internet Merchant Account. Get online faster with our expert e-commerce advice, simple
integration, the widest range of integrated shopping carts, and FREE 24/7 support you can rely
on.
Payoneer MasterCard:
Payoneer MasterCard is a prepaid debit card provided by Payoneer. Payoneer is an online
payment solution offering organizations a global, friendly way to send funds to remote or
dispersed populations, using Payoneer MasterCard. They work closely with Choice bank limited
or First Covenant Bank, which issues their cards and processes the transactions. An industry
leader, Payoneer MasterCard is currently used by more than half a million individuals,
worldwide.The card holder won‟t even need a bank account – which means users in more remote
parts of the world are free from long journeys to find somewhere they can cash a check.
Payoneer MasterCard is now integrated with major freelance outsourcing market places such as
oDesk, Elance, Rent a Coder and so on. They are called as an official partners. Bangladeshi
freelancers can withdraw their online earnings through Payoneer MasterCard using ATMs or
bank transfers.

Case On Delivery (COD):

Still now many e-commerce sites especially C2C and B2C offer and permit the cash on delivery
payment system in e-commerce transaction. Here actual payment occurs when the customer
received the product and paid cash money to the carries

Digital Wallet or E-Cash:

bKash:
bKash Limited, a subsidiary of BRAC Bank, started as a joint venture between BRAC
Bank Limited, Bangladesh and Money in Motion LLC, USA. In April 2013, International
Finance Corporation (IFC), a member of the World Bank Group, became an equity
partner and in April 2014, Bill & Melinda Gates Foundation became the investor of the
company. The ultimate objective of bKash is to ensure access to a broader range of
financial services for the people of Bangladesh. It has a special focus to serve the low
income masses of the country to achieve broader financial inclusion by providing
services that are convenient, affordable and reliable. It was launched its mobile banking
operation in July 2011.This is fast, affordable, secure, convenient and nationwide. More
than 70% of the population of Bangladesh lives in rural areas where access to formal
financial services is difficult. Yet these are the people who are in most need of such
services, either for receiving funds from loved ones in distant locations, or to access
financial tools to improve their economic condition. Less than 15% of Bangladeshis are
connected to the formal banking system whereas over 68% have mobile phones. These
phones are not merely devices for talking, but can be used for more useful and
sophisticated processing tasks. bKash was conceived primarily to utilize these mobile
devices and the omnipresent telecom networks to extend financial services in a secure
manner to the under-served remote population of Bangladesh.

Generally, the payment process is (before that a user must done their registration and
collect their PIN):1)

User login their account using their ID and PIN2)

Choose their suitable payment method and perform the operationFigure 3: The
architecture of bkash
MYCash:
MYCash is a customer centric mobile financial service brought to us by Mercantile
BankLimited (MBL). MYCash commits to deliver a wide range of financial products
andservices through mobile phone to the people of Bangladesh. MYCash has
beenauthorized by Bangladesh Bank to offer and operate Mobile Financial Services.
MYCash promises you to provide a combination of convenient and secured services to
„Make LifeEasy‟.

mCash:
Islami Bank mCash is the Mobile Banking of Islami Bank Bangladesh Limited where the
customers of any mobile company take the 24 hours of mobile banking services from
anywhere of the country without going to any branches. Despite making significant
improvements in all the areas relating to financial viability, profitability, innovation and
competitiveness, there are concerns that banks have not been able to include vast segment
of the population, especially the underprivileged sections and rural people into the fold of
basic banking services. On the other hand, rapid growth of mobile phone users and wider
range of the coverage of Mobile Network Operators (MNOs) has made their delivery
channel an important tool of the trade for extending banking services to the
unbanked/banked population. In order to ensure the access of unbanked people by taking
advantage of countrywide mobile network coverage, Bangladesh Bank given the
permission to start the mobile banking operation for adoption of the unbanked people
who have mobile connection. Taking the growth of Mobile banking into consideration, it
can be the perfect platform for Bangladesh to take financial services to the country's
largely unbanked population in an efficient and low-cost manner.

UCash:

UCash is a complete mobile financial service by United Commercial Bank

Limited(UCBL). UCBL received permission to operate and offer Mobile Financial
Services (MFS)from Bangladesh Bank. UCash is the brand name of the mobile financial
services offered by UCBL.UCBL strongly believes in the idea of “financial inclusion”
and that banking facilities should be accessible to all. UCash has launched its services all
over Bangladesh with the intention to provide banking facilities to the vast majority of
unbanked population of the country. Cash intends to familiarize banking facilities to
those who previously were not able to access banking services. UCash will act as a
catalyst for economic development of the unbanked population by providing prompt, fast
and safe banking products and services

SureCash:

It is the mobile banking and e-wallet service of First Security Islami Bank Limited. The
main features of Sure Cash are following;
1) Convenient
2) Faster Electronic Fund Transfer
 3) Safe Payment System
4) Cash Withdrawal
5) Fund Transfer Facilities
6) Widely Available Throughout the Country
7) Simple Account Opening

Money bookers Skrill:

Money bookers Skrill is an e-wallet newly rebranded as Skrill. It offers its customers a
safe and instant way to transfer money online. They don‟t have to re-enter their financial
details every time they make a transaction. They can send money from credit /debit
card, transfer money to and from their bank account and pay
for onlinepurchase/auctions.Moneybookers Skrill has over 25 million customers and is re
gulated by the UnitedKingdom Financial Services Authority (FSA). Money bookers
Skrill„s worldwide payment network offers businesses access to over 100 payment
options in over 200 countries including Bangladesh and territories through just one
account. More than 120,000merchants use Money bookers Skrill and it is growing
quickly.

Online stored value payment systems:

Payza:

Payza (formerly AlertPay) is a Web sit e that specializes in e-commerce allows users to
transfer funds electronically using e-mail. This site is as like as PayPal. Payza has
officially launched in Bangladesh on February 22, 2012 as the country‟s first online
payment service provider. Payza, in collaboration with Bangladesh-based
CasadaTechnology Ltd, will be providing Bangladeshi freelance IT workers with the
ability to receive international payments, conveniently and affordably, directly
transferred into their local banks. Until now this essential service has not been available
to Bangladesh. Some of key feature of this site are.
 Chapter 5 Survey on E-payment system in Bangladesh

The study is based on the primary data the author collected from the internet users of
Bangladesh. On the basis of those responses, the whole analysis has been made by Google Form
and used to analyze the data.
 Chapter 6 Discussion & Conclusion

The aim of this paper was to show the present scenario of online shopping in Bangladesh. The
psychological impact of the consumers is shown here. Future researchers can use the findings of
this paper for further research. Bangladesh is still in a learning process in the online business.
Consumer to consumer websites is getting very popular here. The payment system still needs to
be improved. The most challenging issue would be building the trust among the consumers about
the online shops. People of Bangladesh do know the positive sides of online shopping. They
know that online shopping saves time and it is very convenient. But they do not know whether
their privacy or security is there or not.

So finally we can say nowadays, there are a few supported online payment methods available in
Bangladesh. But it is all surprising t hat PayPal – the most popular online payment method is not
available here. Bangladesh authority is trying to introduce them. Government should spread the
knowledge of e-commerce‟s benefits across the country to develop this business model. We hope
PayPal will start their operations in near future and the existing systems will be developed by
providing necessary support of the Government of Bangladesh.
 Chapter 7 Bibliography & Reference

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