The retail banking industry in Bangladesh is at an important turning point. Traditionally, banks have expanded through physical branches, mobile financial services, and agent networks. However, the rise of a digital-first generation demands a fundamental shift in how financial services are delivered. To stay relevant and competitive, banks must embrace innovative models like embedded finance and Banking-as-a-Service (BaaS), which offer transformative opportunities to make financial services more accessible, intuitive, and seamlessly integrated into everyday digital experiences. Embedded finance refers to integrating banking services—such as payments, loans, insurance, and savings—into non-financial digital platforms. This allows users to access financial tools without visiting a bank or opening a separate app. For example, a small shop owner in Dhaka could secure a microloan via their digital point-of-sale system, using real-time sales data. Similarly, an e-commerce user might receive instant credit based on purchasing history, while farmers could access tailored loans through agricultural apps aligned with crop cycles. These scenarios are increasingly feasible due to the widespread adoption of mobile financial services and the growth of gig economy platforms in Bangladesh. BaaS underpins embedded finance by enabling banks to offer services like eKYC, account setup, payment processing, and loan disbursement through APIs. This allows fintechs and enterprises to integrate banking functions into their platforms, creating tailored financial products within existing ecosystems. Platforms such as ShopUp or online wholesalers can leverage supply chain data to offer microcredit to MSMEs that lack formal credit histories or collateral. Similarly, gig workers on platforms like Pathao or Foodpanda can benefit from embedded financial tools—such as real-time payments, micro-savings, or insurance—directly within their work apps. For instance, travel insurance could be bundled with bus ticket purchases, agricultural insurance offered via farming apps, or health coverage accessed through mobile health services. These innovations could help expand insurance penetration, which has remained below one percent for decades. To further promote financial inclusion, banks could collaborate with fintechs and payroll services to introduce automatic micro-savings triggered by salary or bonus payments. This gentle approach can encourage better money habits in communities that lack sufficient resources. Additionally, partnerships with educational or lifestyle apps could enable microloans for tuition or savings options, helping users manage university expenses more effectively. In conclusion, while Bangladesh’s banking sector has made notable progress, embracing embedded finance and BaaS is essential to meet the evolving expectations of a digital-first population. These models can drive financial inclusion, empower small businesses and gig workers, and build a more responsive and integrated financial ecosystem across the country.
