Trends of Mobile Financial Services and the Impact of Using Electronic Modes of Transaction on Cash-Based Transactions in Bangladesh

Abstract Despite a pervasive lack of financial literacy, Bangladesh has made remarkable progress in financial inclusion through the rapid increase of Mobile Financial Service (MFS) accounts. MFS accounts per hundred people are found to have increased more than six times within eight years, accelerating the country's financial inclusion. Although a rapid penetration of MFS is observed, the pace of adopting electronic modes of MFS transactions as a substitute for cash-based modes of MFS transactions lags compared to the overall usage of MFS in the country. Time series data analysis, applying the Autoregressive Distributed Lag (ARDL) model, demonstrates that electronic modes of MFS usage are causing a significant reduction in the share of traditional cash-based MFS usages as a long-term impact. The findings of the study serve as a basis for strategic decision-making for policymakers and allow industry players to explore innovative approaches in response to the changing dynamics of the market. JEL Classification: G210, C320, O310 Keywords: Electronic Transaction , MFS Penetration , Financial Literacy , Financial Inclusion