Bangladesh Bank plans to form a company for the supervision of e-commerce platforms such that clients can feel secure in purchasing products and services from the digital outlets.

The company will set up IT infrastructure called Universal Escrow Service (UES) to facilitate electronic transactions and monitor the country's e-commerce platforms, said Bangladesh Bank officials.

The central bank formed a committee led by its executive director, Mohd Humayun Kabir, to form the entity.

However because of the lockdown, the panel is yet to sit to discuss details about the formation of the entity, said an official of the central bank who is a member of the committee.

Banks, payment service providers and e-commerce platforms may be allowed to invest their funds in the company. The central bank may also invest to form the entity that will act as a payment system operator (PSO).

The PSO refers to an entity licensed by the BB for operating a settlement system for payment activities between/among participants of which the principal participant must be a bank or financial institution maintaining accounts with Bangladesh Bank for meeting cash reserve requirements.

The company will have to keep Tk 100 crore as paid-up capital to start its operations.

Under the IT infrastructure of the company, payments will be cleared to e-commerce platforms after customers receive their purchased products or services.

At present, some e-commerce platforms deliver products or services to clients even 3 to 4 months after the payments have been made by clients.

The e-commerce platforms have grossly misused the scope, putting an adverse impact on the country's entire e-commerce system.

Many clients alleged that they had failed to receive their products or services on time as per the commitment of e-commerce platforms.

The development comes after a recent Bangladesh Bank inspection report on the e-commerce juggernaut Evaly that sounded off alarm bells.

The central bank official, however, said there was no correlation between setting up the company and the Evaly issue as the banking regulator took the initiative in April.

But, the controversy created by Evaly has proved the importance of forming the UES once again.

On top of this, the commerce ministry had earlier formulated e-commerce guidelines, in which it suggested the central bank set up the UES.

Banks, non-bank financial institutions, e-commerce platforms, and the central bank's national payment switch will be connected with the UES, such that financial transactions can be settled smoothly.

Customers, banks or e-commerce platforms will not need to spend any money to get service from the platform, meaning that the service is completely free for all stakeholders involved in the e-commerce ecosystem.

Despite that, the company will be able to make profit.

The BB official explained that a good portion of money will be available between the period of payments made by clients and products delivered by e-commerce platforms.

For instance, many clients of mobile financial services do not withdraw all their money from accounts immediately, helping the companies to invest the amount in the treasury bills and bonds.

This practice will also be applicable for the PSO and it will be allowed to invest the fund in the government securities, said the central bank official.

A board of directors will govern the company where a high official of the central bank will act as chairman.

Besides, banks that invest funds to form the company will also be allowed to hold directorship in the company.

The central bank official said the ongoing strict restriction on movement had created some barriers in speeding up the process of forming the company.

The official said clients' confidence on e-commerce platforms would increase manifold, which would subsequently increase cashless transactions.

Transactions through e-commerce platforms stood at Tk 1,183 crore in May, up 164 per cent year-on-year and 30 per cent from a month ago, showed data from the BB.

The volume of the transactions will certainly expand when the central bank sets up the infrastructure, said the BB official.

This will attract many fintech to invest their funds in the market, which will also increase the number of clients in e-commerce platforms.