💳 What Are NPSB and BEFTN? A Complete Guide to Electronic Banking in Bangladesh

💳 What Are NPSB and BEFTN? A Complete Guide to Electronic Banking in Bangladesh
Learn what NPSB and BEFTN are, their roles in electronic banking, and how they ensure fast, secure, and paperless financial transactions across Bangladesh.

1. Introduction
The rise of digital technology has completely changed the way we handle money. Today, most
financial transactions are completed electronically—faster, safer, and without the hassle of
physical cash. In Bangladesh, this digital revolution is largely driven by two major systems: NPSB
(National Payment Switch Bangladesh) and BEFTN (Bangladesh Electronic Funds Transfer
Network).
Both platforms, established by the Bangladesh Bank, have transformed traditional banking into a
modern, interconnected financial network. This article explores what NPSB and BEFTN are, how
they work, and their impact on digital banking in Bangladesh.

2. Table of Contents
1. What Is Electronic Banking?
2. What Is BEFTN?
3. How the BEFTN System Works
4. Key Features and Benefits of BEFTN
5. Common Uses of BEFTN
6. Limitations of BEFTN
7. What Is NPSB?
8. How NPSB Works
9. Key Functions and Benefits of NPSB
10. NPSB vs BEFTN – Main Differences
11. Importance of Secure Digital Transactions
12. Challenges in Digital Banking
13. The Role of Bangladesh Bank
14. Future of E-Banking in Bangladesh
15. Final Thoughts

3. 1. What Is Electronic Banking?
Electronic banking (e-banking) refers to the use of digital systems to perform financial transactions
without physical documents or cash. It allows users to transfer funds, pay bills, withdraw money,
or make deposits through ATMs, mobile phones, and online portals.
E-banking saves time, reduces transaction costs, and ensures efficiency. Systems like BEFTN and
NPSB are core infrastructures behind this innovation in Bangladesh.

2. What Is BEFTN?
BEFTN, short for Bangladesh Electronic Funds Transfer Network, is a centralised payment
system introduced by the Bangladesh Bank.
It allows individuals, businesses, and government institutions to electronically transfer funds from
one bank account to another. BEFTN functions on a batch processing system, which means
transactions are collected and processed together at specific times during the day instead of
instantly.

3. How the BEFTN System Works
BEFTN transfers go through several stages:
1. The originating bank (payer’s bank) collects payment details from the sender.
2. The bank sends these details to Bangladesh Bank’s central clearing house.
3. Bangladesh Bank validates and sorts the data, then sends it to the receiving bank.
4. The receiving bank credits the beneficiary’s account.
This process ensures that transactions are secure, authenticated, and traceable.

4. 4. Key Features and Benefits of BEFTN
BEFTN has transformed financial transactions in Bangladesh. Its key features include:
• Faster fund transfer compared to cheques or cash deposits.
• Low transaction cost as it reduces manual labour.
• High accuracy due to automation.
• Supports both debit and credit transactions.
• Safe and secure, backed by the central bank’s encryption protocols.
For businesses, BEFTN is especially beneficial for salary disbursement, vendor payments, and
large-scale transactions.

5. Common Uses of BEFTN
BEFTN is widely used for:
• Salary and pension payments
• Vendor or supplier payments
• Utility bill payments
• Insurance premium collections
• Government benefit transfers
Essentially, BEFTN helps create a paperless banking environment.

6. Limitations of BEFTN
Despite its efficiency, BEFTN has a few limitations:
• It is not real-time; transactions may take hours or up to one business day.
• Reversal is difficult once a payment is processed.
• It requires internet connectivity and system synchronisation across all banks.
Nevertheless, BEFTN remains one of the most reliable systems for electronic fund transfers in
Bangladesh.

5. 7. What Is NPSB?
NPSB (National Payment Switch Bangladesh) is another initiative by Bangladesh Bank to unify
all banks’ card and ATM networks under a single digital platform.
Before NPSB, customers could only use their debit or credit cards at ATMs of their own bank.
NPSB made it possible to use any ATM or POS terminal across different banks—creating a truly
interconnected financial network.

8. How NPSB Works
NPSB acts as a real-time transaction switch that connects all banks, ATMs, and POS systems.
When a cardholder uses an ATM or pays via a POS machine:
1. The transaction request is routed through NPSB’s central system.
2. The system verifies and transfers information between banks instantly.
3. The money is deducted from the sender’s account and credited to the receiver’s—within
seconds.
This real-time settlement makes transactions faster and more convenient.

6. 9. Key Functions and Benefits of NPSB
NPSB’s contributions to the banking sector are immense:
• Inter-bank ATM access – Customers can use any ATM nationwide.
• Real-time transaction processing – Instant fund transfers.
• Enhanced security – End-to-end encryption and fraud detection.
• Cost-saving infrastructure – Reduces the need for separate bank networks.
• Nationwide coverage – Connects urban and rural financial services.
It has significantly improved financial inclusion by making banking more accessible to remote
populations.

10. NPSB vs BEFTN – Main Differences
Feature BEFTN NPSB
System Type Batch Processing Real-Time Processing
Primary Use Fund transfer between bank accounts ATM & POS transactions
Transaction Speed Same-day or next-day Instant
Best For Businesses and salary transfers General customers and card users
Operator Bangladesh Bank Bangladesh Bank
While BEFTN is designed for scheduled fund transfers, NPSB supports real-time, card-based
transactions.
Together, they build a robust digital banking network for Bangladesh.

7. 11. Importance of Secure Digital Transactions
As digital transactions increase, cybersecurity becomes critical. Both BEFTN and NPSB use
advanced encryption and multi-layered verification to prevent fraud.
However, users must also follow safe practices:
• Never share PINs or OTPs.
• Avoid public Wi-Fi for transactions.
• Regularly monitor bank statements.
Digital trust depends equally on technology and user awareness.

12. Challenges in Digital Banking
Despite rapid progress, digital banking in Bangladesh still faces challenges:
• Limited rural digital literacy.
• Occasional server or connectivity issues.
• Fraudulent phishing attempts.
• Lack of awareness about online transaction safety.
Ongoing training and awareness campaigns are helping bridge this gap.

13. The Role of Bangladesh Bank
Bangladesh Bank oversees the entire electronic payment system, ensuring reliability, compliance,
and security. It regulates both BEFTN and NPSB, connecting banks under a single, secure
network.
The central bank also collaborates with commercial banks to expand interoperability and prepare
for future innovations such as instant mobile-based fund transfers and cross-border digital
payments.

8. 14. Future of E-Banking in Bangladesh
Bangladesh’s vision of a “Smart Cashless Economy” is strongly supported by BEFTN and
NPSB. The introduction of mobile wallets, QR payments, and AI-based fraud detection systems
will further strengthen the country’s digital infrastructure.
Soon, we can expect:
• Real-time BEFTN fund transfers
• Unified mobile and card-based payment systems
• Enhanced cyber resilience and data security
The country’s financial system is evolving rapidly towards digital excellence.

9. 15. Final Thoughts
The National Payment Switch Bangladesh (NPSB) and Bangladesh Electronic Funds
Transfer Network (BEFTN) are the backbone of Bangladesh’s digital financial transformation.
While BEFTN simplifies bulk and interbank transfers, NPSB ensures seamless real-time ATM and
card transactions across all banks. Together, they have made digital banking fast, reliable, and
accessible to everyone—from corporate entities to ordinary citizens.
These systems not only improve banking convenience but also contribute to Bangladesh’s goal of
becoming a fully digital economy.

Source: ekhon.tv – What Are NPSB and BEFTN?