Why Are Traditional Banks Struggling to Go Digital?

Every month, Abdul Haque, a 52-year-old fabric trader in Narayanganj, closes his shop early on the day his supplier’s payment falls due. He walks to his bank branch, fills in a paper slip, waits in a queue and pays a pay order fee. His bank has an app. He downloaded it twice. The first time, it asked for a password he could not remember. The second time, it locked him out after three wrong OTPs and told him to visit the branch.

His 22-year-old son pays his own bills, tuition and phone recharge from bKash in seconds. “My son’s phone is a bank,” Haque says. “My bank is still a building.”

That gap, between a country that has embraced mobile money and banks that still run on branches and paper, is one of the biggest puzzles in Bangladesh’s financial system. Almost every bank now offers internet banking. Bangladesh Bank wants three-quarters of retail transactions to be digital by 2027. Yet most bank customers have never used any digital service at all.

How digital are Bangladesh’s banks today?

On paper, the progress looks real. Bangladesh Bank data show 58 of 61 banks offer internet banking, and 85.7 lakh customers used bank apps in November 2025, up from 71.66 lakh in June. Internet banking transactions have stayed above Tk 1 lakh crore a month since June 2025, The Daily Star reported in January 2026.

But the base is huge. A Bangladesh Institute of Bank Management (BIBM) study of 32 banks found that about 75% of customers remain outside any digital banking service, and that banks overall are still at an “evolving and in progress” stage of digital maturity, The Financial Express reported in November 2025.

Indicator	Figure
Banks offering internet banking	58 of 61
Bank app users (November 2025)	85.7 lakh
Monthly internet banking transactions	Above Tk 1 lakh crore since June 2025
Bank customers using no digital service	About 75% (BIBM study)
Customers dissatisfied or neutral about digital services	48% (BIBM study)
Bangladesh Bank target	75% of retail transactions digital by 2027

Most digital activity is also concentrated in a few banks and in big cities. The most common use of bank apps is simply sending money to mobile wallets such as bKash and Nagad, followed by cash withdrawal, bills and mobile recharge.

Why are traditional banks struggling to go digital?

1. Old, disconnected core systems

A bank’s app is only as good as the system behind it. Many Bangladeshi banks run core banking software installed years ago, with cards, loans, deposits and the app sitting in separate systems that do not talk to each other well. The BIBM study named these “siloed” core systems as one of the main things holding back digital maturity. That is why an app may show an old balance, fail during peak hours, or send customers to a branch for simple tasks such as changing a phone number.

Replacing a core system is expensive, slow and risky. A failed migration can freeze accounts for days. So many banks add new features on top of old foundations instead, which makes apps slower and harder to secure.

2. Bad loans leave little room for long-term investment

Defaulted loans reached Tk 6,06,555 crore at the end of June 2026, or 32.78% of all loans, Dhaka Tribune reported. Banks with that much bad debt must set aside money to cover losses, and several have needed support or mergers. Five troubled Islamic banks were merged into Sammilito Islami Bank at the start of 2026. When a bank is fighting to stay solvent, a multi-year technology overhaul easily slips down the list.

3. Money spent on boxes, not people or security

Banks do spend on technology. But an earlier BIBM study found that of the Tk 1,666 crore banks spent on IT in 2020, 71% went on software and hardware, only 5% on security and 3% on training. The same study found half of bank employees had very poor IT knowledge, The Business Standard reported. Technology bought without trained people to run it, and without staff who can help customers use it, delivers far less than it should.

4. Security fears, and security that confuses

Bangladesh’s banking sector carries deep scars. In 2016, hackers stole $81 million from Bangladesh Bank’s account at the New York Fed, in an attack linked to North Korea’s Lazarus Group. In 2019, about $3 million was taken from three private banks through ATM withdrawals abroad. In early 2025, client financial statements said to come from City Bank were advertised on underground forums, though the bank said no unauthorised transactions took place, The Business Standard reported. Experts quoted in that report pointed to legacy systems that are not regularly patched, weak authentication and a shortage of skilled security staff.

That earlier BIBM study counted up to 630 cyberattacks a day on banks and rated 52% of banks at high cyber risk. One result is that many banks respond with layer after layer of friction: repeated OTPs, device binding, passwords that expire, and lockouts that can only be fixed at a branch. These steps are meant to protect customers, but when they are poorly explained, they push people like Abdul Haque back to the queue.

5. Customers who were never taught

The BIBM study named a knowledge and literacy gap as the single biggest barrier to mass adoption. Outside big cities, patchy internet connections and fear of fraud add to the problem. Mobile wallets grew partly because they were simple from day one: a phone number, a PIN and an agent nearby. Most bank apps were designed for people who already understand banking.

6. A branch-first culture at the top

Many banks still measure success by branches opened and deposits collected face to face. “Senior officials often are not receptive to upgrading security protocols,” Arif Mainuddin told The Business Standard. The same caution often applies to redesigning products for digital use. Digital teams that sit far from the board find it hard to win budgets against the branch network.

Why does going digital matter so much?

The cost difference is enormous. The BIBM study estimated the cost of a single transaction by channel:

Channel	Cost per transaction
Branch	Tk 90
ATM	Tk 52
Agent banking	Tk 32
Internet banking	Tk 1.74
Mobile banking	Tk 1.50

By our calculation, a branch transaction costs about 50 times as much as an internet banking one. A bank that moves even a part of its branch traffic online saves money it could pass on as lower fees or better deposit rates. For customers, it means no queues, payments at midnight, and fewer trips that cost a day’s work.

Which banks are getting it right?

A few banks show what is possible. According to figures shared with The Daily Star:

Bank and app	Reported scale
BRAC Bank (Astha)	Over 12 lakh users, 120+ services, about Tk 20,000 crore in monthly transactions
EBL (Skybanking)	Half a million users; 59% growth in young digital users
MTB (MTB Neo)	2.8 lakh users and Tk 4,000 crore in a month
City Bank (Citytouch)	Among the established digital platforms

What these apps have in common is that they were rebuilt around what customers actually do: send money to wallets, pay bills, transfer instantly through NPSB, open deposits and download statements without visiting a branch.

Will digital banks force the old banks to change?

Competition is coming. On 24 September 2026, Bangladesh Bank gave initial approval to five digital banks, including bKash Digital Bank, Robi-backed Boost Digital Bank and Nova Digital Bank backed by Banglalink’s parent VEON and Square Group, The Business Standard reported. They still need full licences, but once they launch, branchless banks with modern systems will compete directly for young, urban and salaried customers. Payment players such as Pathao Pay and Banglalink’s Mukto Pay are already chipping away at everyday payments. We explain the wider picture in why Bangladesh needs more financial startups.

What needs to change?

• Modern core systems: a phased move to connected platforms, so apps work in real time.
• Security that is strong but simple: app-based approvals and biometrics instead of endless OTPs, with clear Bangla instructions and in-app help to unlock accounts.
• Spending on people: training staff to use, secure and explain digital services.
• Digital literacy drives: branch staff helping customers install and use the app, not just collecting deposits.
• Digital leadership at board level, with budgets tied to digital adoption, not only branch growth.
• A clear data protection law and consistent enforcement of cybersecurity standards across banks.

What does this mean for you?

When you choose a bank, treat the app as seriously as the branch. Read recent app store reviews, check whether you can transfer instantly, pay bills and reset your password without a branch visit, and test the hotline. Our guide on how to choose the right bank for your first account has a simple checklist. And whatever app you use, never share your PIN or OTP with anyone, including people who claim to be bank staff.

Back to Narayanganj

In the end, it was Abdul Haque’s son who sat with him for an evening, reset his password and set up his supplier as a saved payee. The next month, he paid from the shop counter. “It took ten minutes,” he says. “Nobody at the bank ever offered me those ten minutes.”

That, in one sentence, is the problem Bangladesh’s traditional banks have to solve.

Frequently asked questions

Why are bank apps in Bangladesh hard to use?

Many run on old, disconnected core systems, and banks often add heavy security steps without clear explanations. Customers with limited digital experience find them confusing.

How many bank customers use digital banking?

A BIBM study found only about a quarter of customers use at least one digital banking product; about 75% use none. Bank app users reached 85.7 lakh in November 2025.

Is digital banking safe in Bangladesh?

Banks face frequent cyberattacks, but most fraud against customers starts with shared PINs or OTPs. Use the official app, keep your phone locked and never share codes.

Are there digital banks in Bangladesh?

Not yet operating. Five got initial approval in September 2026 and must meet further conditions before launching.

Which bank has the best app?

It depends on your needs. BRAC Bank’s Astha, EBL Skybanking, MTB Neo and City Bank’s Citytouch are among the most used. Check recent reviews and the features you need.

Key words explained

Term	What it means
Core banking system	The central software that records a bank’s accounts, loans and transactions.
Legacy system	Old software or hardware still in use, often hard to update or secure.
Defaulted (classified) loan	A loan that borrowers have stopped repaying on schedule.
OTP	One-time password sent by SMS or app to confirm a login or payment.
Digital bank	A bank with no branches that serves customers fully through an app.
BIBM	Bangladesh Institute of Bank Management, the banking sector’s training and research body.

How we reported this

We used Bangladesh Bank data reported by The Daily Star in January 2026, two BIBM studies reported by The Financial Express and The Business Standard, Dhaka Tribune’s report on defaulted loans, The Business Standard’s reporting on cyber breaches and digital bank approvals, and our own earlier coverage. Bank app figures are those the banks shared with the press and have not been independently verified. The cost comparison is our calculation from BIBM’s estimates.

Editor’s note: Abdul Haque and his son are illustrative, created to show the experience many bank customers describe. They are not real people. All data come from the published sources listed with this article.