Wage disbursements through digital payment methods is effective for employees since it helps increase cost savings and improves their ability to mitigate unanticipated financial shocks, according to a recently available World Bank (WB) research.
Before a fresh payroll system was introduced in June this past year, nearly 90 % of the country's workforce received their wages in cash, that was both frustrating and difficult given the quantity of disbursements that would have to be made.
Millions of staff, especially those found in the garment sector, then began to receive their wages directly through their banks accounts or perhaps a mobile financial service (MFS) when local loan providers started disbursing salaries from the federal government stimulus packages.
The study styled "Understanding how to navigate a fresh financial technology" was conducted with an example of 3,136 workers.
"The digitalisation of the wage payment system is welcomed as it has many good sides," said Md Towhidur Rahman, president of the Bangladesh Apparels Personnel' Federation.
Still, employees sometimes complain about the deduction of costs such as service demand when cashing out from an MFS but at least now there are no such expenses when working with an automated teller machine (ATM), he added.
Besides, periodically the workers cannot obtain profit a timely manner because the brokers of MFS companies like bkash, Rocket and Nagad sometimes don't have enough money on had to help make the large disbursements, especially on payday.
In terms of ATMs, there is a shortage of booths in the more remote areas and the staff quite often forget their passwords.
They even take assistance from others, including the booth's security guard, to complete transactions which puts them at risk of hacking.
"So, cash transaction companies should sit collectively to fix those problems in order that nobody faces such an issue," Rahman said.
Despite these disadvantages, digital payment methods have been a blessing because the workers very little longer need to stand in prolonged ques to gather their salaries, according to Nazma Akter, president of Sammilito Garment Sramik Federation.
The study found compelling evidence of learning-by-doing in terms of adopting a digital payment method.
Workers in the payroll account treatment condition interact with the account more often, develop greater rely upon technology, learn to utilize the bank account without assistance and how to prevent common consumer financial risks, it said.
Individuals with comparatively decrease literacy, financial knowledge and prior control above household finances reap the benefits of contact with the technology generally from accumulating savings but usually do not necessarily learn to use the financial technology found in the most cost-effective fashion.
Alternatively, individuals with higher levels of literacy, financial encounter and prior control over household funds benefit by understanding how to use the technology better and sidestepping common consumer coverage risks.
"We additionally examine the impact of introducing monetary technology at scale and find suggestive proof positive industry externalities of customer learning: inexperienced buyers are less inclined to face extra expenses in areas with bigger payroll accounts adoption," the WB said in its findings.
"We look for that channelling wage repayments into an account creates a solid incentive to activate with the bill and find out about the top features of the technology in a manner that is not attained by account opening by itself," it added.
Channelling wage payments in formal accounts may be the obvious next thing with potentially large positive implications for usage of finance and consumer learning in low and middle-profit countries, where wage payments are still predominantly manufactured in cash.
However, the analysis also reveal several barriers that could impede the adoption of payroll accounts.
First, companies may fear resistance from workers because of a lack of trust in the technology, mainly because evinced by the analysis.
Second, an important barrier to scale-up may be insufficient documentation seeing that the analysis found that many employees did not have enough documentation and had to depend on identification and guarantees supplied by their company to open an account.
Third, some employers may choose to avoid the transparency that is included with payroll accounts and may require nudges from regulators to look at them.
Many staff from rural areas are attracted to the relatively substantial, regular salaries paid on the garment industry and try to save a portion of their pay cheques.
However, due to high bank account maintenance fees, minimum amount balance requirements, and documentation requirements, staff in the garment sector usually are unbanked.
"During our intervention, even large businesses in the sector even now paid wages completely in income," the WB said.
Moreover, presently there are significant sociable barriers that prevent low-income households from dynamic participation found in the formal bank operating system.
Anecdotally, many personnel reported certainly not feeling comfortable using bank branches or mobile money agents, despite having clear savings goals, it added.