Electronic Banking Is Bringing Momentum to Our Economy with Its Different Product & Concept
A brief over looking in e-banking What is E-banking? E-banking, or electronic banking, refers to all types of banking transactions performed electronically, without visiting a brick-and-mortar bank. Terms such as PC banking, Internet banking or online banking are sometimes used instead. For customers, this means performing actions such as paying bills, checking balances on their accounts, transferring funds and purchasing financial instruments remotely, using a personal computer.
Two Types of E-Banking Most high-street banks today offer some e-banking services while still retaining physical offices. Their clients usually open an account at a physical branch and then use online banking for regular transactions. However, there are also Internet-only banks, which do not have any branches customers can go to. In some cases, such banks offer their services across national borders.
History According to "Banking and Finance on the Internet," a book edited by Mary J. Cronnin, online banking was first introduced in the early 1980s when four New York banks--Citibank, Chase Manhattan, Chemical and Manufacturers Hanover--offered home banking services. The systems were quite difficult to use and did not prove to be very popular. In the U.K., it was Nottingham Building Society that in 1983 offered the first electronic home banking system.
How it Works In order to use e-banking, customers need access to a personal computer and Internet connection. When they register for e-banking, they are asked to provide a login name and password. Additionally, each time they want to access their account they might be required to answer a security question, which minimizes the risk of someone else accessing their account.
History of Financial Sector in Bangladesh
Financial sector of Bangladesh, like most developing countries, is dominated by banking enterprises. Banks at early stages of history of Bangladesh were nationalized and paper based.
In the early 1980s, the Government of Bangladesh began to reform the financial sector. Private banks were allowed to enter the market and two nationalized commercial banks (NCBs) were decentralized and another nationalized bank was converted into a limited liability company and partially privatized. Currently, the banking sector comprises of four NCBs, five government-owned specialized banks dealing with development finance in specialized sectors, 30 private commercial banks (PCBs) and ten foreign commercial banks (FCBs) .
IT Initiation in Bangladesh • Computer use started back in 1964 by Atomic Energy Center, Dhaka and in the Universities, first main frame computer came to Bangladesh in 1964 • In June, 1996 the government decided to allow private companies to act as Internet Services Providers (ISPs) using VSATs. • In June 1997, the Government of Bangladesh appointed a Committee to look into the problems and prospects of export of software from Bangladesh. The Committee submitted its report in September, 1997. • The government took a decision on June, 1998 to withdraw all import duties and VAT from all computer hardware and software. This has brought the prices of computers down to a level affordable by middle income households.
Technology in Banking • Few banks started using International banking software like IFlex, Finacle, temenos, etc. For the same reason Oracle as a backend and High configuration servers like IBM RISC etc. started being used during early 2000’s. • Beside CBS, banks also started investing to implement other software like HR system, CRM, ERP to automate operation and business activites. • Banks also started implementing on high availability infrastructure like Data centers, strong channels during this time to support high scale of use of banking services. • Call Center and IVR was another milestone for banking industry to take customer experience one step ahead so that customer started getting their information right from home or anywhere just by making a phone call. • To facilitate the customer service from home, another step is SMS Banking where customer started getting basic banking information by sending SMS codes. • During this period few banks implemented Internet banking as well. • While debit card using at ATMs has become very popular for carrying plastic money for banks, but still cost vs return of ATM booth was high. That is why Banks started thinking of sharing ATMs. That is where bank started connecting to the internal switching network like VISA, MasterCard etc. and also have begin establishing national switching network like Q-Cash, Omnibus, etc. • As technology use increased rapidly, the Central bank issued risks and regulatory compliance guidelines. • Bank responded by implementing software for regulatory compliance and risk management. • At the beginning of 2001, new concept of banking for small enterprises called SME Banking started in Rural Bangladesh (BRAC Bank being the pioneer).
• As connectivity is an issue in such places, SMS and Mobile based communication came into more attention. • Another business driver for banking is Remittance (especially international). To facilitate customer experience sending money from exchange houses overseas, automated systems started being implemented for automatic procssing of instructions from exchange houses and verifying and then paying the beneficiaries.
Banking IT Evolutions in Bangladesh • In early 80’s few Banks in Bangladesh used MS Office Suites in PCs for maintaining banking accounts, transactions and back office analysis and generating office records and letters. • At the beginning of 90’s, FoxPro has become very popular and started a kind of revolution for database applications and banks begun using FoxPro for Core banking activities. • During mid Nineties, few banks have started deploying banking software building inhouse. These software are mostly VB based while backend was mostly using MS SQL while some were oracle based. • Also during this time few Bangladeshi software companies started producing banking software like PCBank, MBS, Ababil, Florabank, Bexibank for the banks and few banks have started using these. These systems are mostly distributed. • During mid of 2000s, banks concentrated more to establish a centralized banking concept. Banks started implementing networking first among the cities and then eventually to remote areas to facilitate online/centralized banking services to the customers. • ATM machine and switching system is a revolution for banking industry in Bangladesh which drastically increased the use of banking by the people. SCB is the first bank to implement it at around 1998/99
Features of Electronic Banking in Bangladesh Electronic banking idea developed in Bangladesh since 1992 through several multinational banks. But most of the local and foreign banks have maintained electronic banking in their all branches. Some common features of electronic banking in Bangladesh:
1. 24- hours cash deposit & withdrawal facility from any branch 2. Quick cash withdrawal without waiting in a queue 3. Account activities enquiry 4. Statement request through ATM/Debit/Credit Card 5. Transfer own funds to other account number in the same bank 6. Present Balance enquiry 7. Deposit or Mail cash or cheque(s) (Cross cheques) through mechanical device. 8. Changing Personal Identity Number (PIN) 9. Cash deposit via ATMs.
Benefits of E banking • Since e-banking offers some smart services, it benefits both banks and customers compared with traditional banking system. Among others, attractiveness of e-banking includes: –
lowers transaction cost;
provides 24-hour services;
ensures increased security and control over transactions;
reduces fraud risk; performs higher volume of transactions with less time;
increases number and volume of value payments through banks;
allows remote transaction facilities that replace physical presence of a customer in a bank branch and; increases transaction speed and accuracy.
• On the other hand, traditional banking is time-consuming and more costly and therefore, e-banking is replacing traditional banking all over the world. Present Status of e-Banking • At present, several private commercial banks (PCBs) and foreign commercial banks (FCBs) offer limited services of tele banking, internet banking, and online banking facilities working within the branches of individual bank in a closed network environment. • As a part of stepping towards e-banking, the FCBs have played the pioneering roles with the adoption of modern technology in retail banking during the early 1990s whereas the state-owned commercial banks (SCBs) and PCBs came forward with such services in a limited scale during the late 1990s. • Moreover, the banking industry as a whole, except for the four specialized banks (SBs), rushed to offer technology based banking services during the middle of the current decade. • The existing form of e-banking that satisfies customer demands in banking activities electronically throughout the world are PC banking or PC home banking that include online banking, internet banking, mobile banking, and tele banking.
Number of E-bank in Bangladesh progress over the years
45 40 35 30 25 20 15 10 5 0
Some E-banking product providing by Bank operating in Bangladesh Online banking:
• Transactions in online banking are performed within closed network for which the customers use specialized software provided by the respective banks. • At present, 29 scheduled banks offer any-branch banking facilities through their respective banks’ online networks that provides facilities like transaction through any branch. • Inter-bank transactions or transaction between inter bank branches are yet to be exploited…
• Internet banking refers to the use of internet as a remote delivery channel for banking services which permits the customers to conduct transactions from any terminal with access to the internet. • Only 7 banks are providing some banking services via internet that include account balance enquiry, funds transfer among accounts of the same customer, opening or modifying term deposit accounts, cheque book or pay order request, exchange rate or interest rate enquiry, bills payment, account summary, account details, account activities, standing instructions, loan repayment, loan information, statement request, cheque status enquiry, stop payment of a cheque, refill prepaid card enquiry, password change, L/C application, bank guarantee application, lost card (debit/credit) reporting, pay credit card dues, view credit card statement, or check balance. • The core banking activities like fund transfer to third party within the same bank have just started…Cross border transfer not possible as yet!
Tele banking • Tele banking refers to the services provided through phone that requires the customers to dial a particular telephone number to have access to an account which provides several options of services. • Despite huge potential, tele banking services have not been proliferated enough in the daily banking activities in Bangladesh. • Only four banks so far provide few options of tele banking services such as detail account information, balance inquiry, information about products or services, ATM card activation, cheque book related service, bills payment, credit card service and so on. • Funds transfer between current, savings and credit card account, stock exchange transactions etc are still inaccessible through tele banking in Bangladesh.
• Mobile banking (also known as M-banking or SMS banking or M-Commerce) is a term used for performing balance checks, account transactions, P2P payments, bill payments, etc. via a mobile device such as a mobile phone. • Mobile banking is most often performed via SMS or the Mobile Internet but can also use special programs called downloadable applets on the mobile device, via USSD or via Sim Browser. • The standard package of activities that mobile banking covers are: –
mini-statements and checking of account history;
alerts on account activity or reaching of a pre-set thresholds;
monitoring of term deposits; access to loan statements;
access to card statements; mutual funds/equity statements;
P2P payment (using Digital Wallets);
Utility Bill payment;
status on cheque, stop payment on cheque; ordering check books;
balance checking in the account; recent transactions;
Buying good and/or services from Mobile merchants.
Most popular E-banking product in Bangladesh ‘Atumated teller MachineATM’ ATM: An automatic teller machine or automated teller machine (ATM) is an electronic device which allows a bank's customers to make cash withdrawals and check their account balances at any time without the need for a human teller. Many ATMs also allow people to deposit cash or cheques, transfer money between their bank accounts or even buy postage stamps.
Image of an Automated teller Machine-ATM Bangladesh Banking Industry: History of ATM • •
Standard Chartered Bank, Bangladesh installed the 1st ever ATM in the country in 1996. ANZ Grindlays Bank also installed ATMs (04) in Bangladesh in 1997. Those ATMs went live in 1998. All the ATMs were installed in Dhaka.
• • • • • • •
An international visa transaction took 15 secs during that time. HSBC installed ATMs (03) in 1998. AMEX installed 3 ATMs in 1999. In 2004, ETN (now Cash Link) installed 12 DIEBOLD ATMs. Till 2004, the total number of ATMs in BD were around 50. DBBL started installing ATMs in full swing since 2006 with 50 DIEBOLD ATMs. BRAC Bank had installed its 1st ATM in 2005.
Bangladesh Banking Industry: Competitive Analysis of ATM Strength till Dec, 2009
Ot h e r , 4 0 , 4 %
The C i t y , 3 0 , 3 % HS BC, 30 , 3%
EB L , 5 0 , 5 %
S CB, 5 3, 5%
E- C a sh , 8 0 , 7 %
D BB L, 5 0 0 , 4 5 %
Q- C a sh , 12 0 , 11%
HSBC The City B B L, 18 1, 17 %
Some other new E-Banking product: Magnetic Ink Character Recognition Cheque(MICR): A form of Electronic Cheque. MICR stands for Magnetic Ink Character Recognition In olden days cheques were validated and passed manually. The account numbers had to manually validated and tagged. This MICR is a magnetic code that is printed on the bottom of the cheque. When the cheque is placed under a MICR reader, the machine would automatically identify the account number and details of the person who issued the cheque.
Electronic Check Conversion converts a paper check into an electronic payment at the point of sale or elsewhere. In a store, when you give your check to a store cashier, the check is processed through an electronic system that captures your banking information and the amount of the check. Once the check is processed, you're asked to sign a receipt authorizing the merchant to present the check to your bank electronically and deposit the funds into the merchant's account. MICR cheque has the same features that a electronic cheque has.
Sample of MICR Cheque
Start of MICR The central bank (10.4.2010) directed the banks to issue the machine-readable magnetic ink character recognition (MICR) cheques, which can be verified online. Bangladesh Bank (BB) has also asked the banks to give their branches necessary guidelines. • •
The BB said no clearing house in the country will accept non-MICR cheques after November 1. The BB in a circular also said MICR cheques will have to be issued from all branches of the banks in the district towns by August 19.
The banks will have to phase out such cheques by October 31.
The central bank on May 31 this year stopped clearing all non-MICR cheques at about 1100 branches under Dhaka Clearing House.
After a trial run on August 4, the automated clearing house will formally start functioning in Dhaka.
For the first time in Bangladesh BRAC Bank limited has introduced e-commerce program for all VISA cardholders. Electronic Commerce is a convenient and affordable way to buy and sell products or services online. E-Commerce software and service enables individuals to maintain an online business while performing transactions right from the Web. It is the fastest, convenient and cost effective way of making transaction through web site. Cardholder's Benefits -Search and find what they are looking for instantly, -Choosing from a variety of options such as size and color, -Viewing any or all of product specifications and photographs, -Purchases will be delivered directly to their door, -Order products without leaving their home, -Security knowing every transaction is secure, -Checking how much they have "spent" before committing to a purchase Merchantďż˝s Benefits -Overhead cost of an e-commerce web site is generally much less than the cost of a physical storefront , -Seller has the ability to reach customers all over the world rather than being limited to a certain geographical location, -Increase in sales volume, -Everything is maintained through secure software so need less human intervention, -No cash handling risk,
SMS Banking of Brac Bank ltd Features -Instant Account Balance & Mini Statement -Fixed Deposit Maturity Alarm High Value Transaction Alert Account status change alert -Welcome alert (for account opening) Payment (loan) failure alert -Cheque clearing failure alert For balance Enquiry
For Last Few
For Current Outstanding Balance of Credit
Card: Transaction format in Cell phone-Massage option
Prepaid Gift Card
Standard Chartered Gift Card - The perfect gift for every occasion! At Standard Chartered, we believe you are unique in style and taste. We also know how important it is to get it absolutely right when it comes to buying gifts for someone special. Now with Standard Chartered Gift Card, your quest for the perfect gift is over.
Itâ€™s convenient! Leave behind the days of spending your evenings at the shopping malls trying to find the right gift. Now you can choose a Standard Chartered Gift Card as your gift; which you can load-up with the amount of your choice. As this is a Visa Card, the recipient has the option of using this Card to buy his/her product of choice from outlets* across the country that accept Visa Cards electronically. The recipient can also withdraw Cash from the ATMs any time of the day. After each transaction through a Gift card, the pre-paid value is automatically deducted for the same amount. The Card remains valid for 18 months from the issuing date to allow the user to wait for the right opportunity to spend.
Designed for every occasion! Keeping in mind the diversity of the occasions for which you would need the Gift Card, we have four attractive design options for you to choose from:
Based on your requirement, you can load-up your Gift Card for any amount ranging from Tk. 1,000 to Tk. 100,000; while paying only a nominal issuing fee. Moreover, you can pay for the Gift Card through cash or your Standard Chartered Credit Card/Account.
It’s safe! If your Gift Card is lost or stolen, your gift is not. You can easily get a replacement Card by contacting our 24-hour Contact Centre at 01819 399999 or 8961151 any time, any day.
It’s personalized! The Gift card can be readily purchased from any of our Branches in Bangladesh. We have Instant-Issue Cards with pre-printed messages which you can pick-up to meet your immediate need. You can also personalize a Gift Card with the recipient’s name and a personal message by applying for the same at any of our branches and we will have it ready for you within 5 working days.
It has exciting discounts! In the welcome pack, please find a discount booklet full of special offers available exclusively to the Standard Chartered Gift Cardholders.
It’s for everyone! Everyone can enjoy the benefits of the Standard Chartered Gift Card, even if you do not have an account or a Credit Card with Standard Chartered.
Prepaid Travel Card
Standard Chartered Travel Card – the best way to carry your money abroad! Remember the carefree days of your yesteryears, when traveling used to be just fun and without any uncertainties? With our Prepaid Visa Travel Card (denominated in US Dollars), you can re-live those days while leaving the worries related to money matters with us. This is a Prepaid traveler’s card that gives you a secured and hassle-free travel experience.
It’s against your Personal Travel Quota! You can purchase a Travel Card from any Standard Chartered Branch for any amount upto your entitlement of Foreign Currency in a calendar year as per the Personal Travel Quota
guidelines of Bangladesh Bank. So you will buy this Card in Bangladeshi Taka and then use it anywhere in the world, in the currency of the country you are traveling to.
It’s convenient! With the Travel Card, your days of worrying about finding a Money Changer in a foreign land are over! Your Travel Card is more secure than currency or travelers cheques and is more convenient to carry. Moreover, unlike Cash Dollars or Travelers Cheques, you do not need a travel plan (i.e. Visa & confirmed Ticket) to obtain a Travel Card. So, instead of wasting your time on your financial needs before any trip when you actually have millions of other things to take care of, get your Travel Card today and relax for the rest of the year.
It’s widely accepted! You can use your Travel Card for purchases at Merchants' Establishments worldwide that accept Visa Cards through an electronic point-of-sale (POS) terminal. The transaction amount is directly debited from your Travel Card balance. Your Visa Travel Card is welcomed at over 13 million Merchant Establishments across the globe displaying the symbol.
It’s your key to instant cash! The Travel Card can be used to withdraw cash at over 850,000 Visa ATMs worldwide. You will be provided a PIN with your Card, which you can use to draw cash anywhere in the world in the local currency of the country where you are traveling.
It’s personalized! The Travel Card is personalized with your name for your own security. After applying for the Card at any of our branches, it will be ready for you within the next five working days.
It’s safe! Your Travel Card is a whole lot safer that carrying cash, because it is protected against misuse at ATMs with your Personal Identification Number (PIN). If you loose your Travel Card, please immediately contact our 24-hour Contact Centre at (+88) 01819 399999 or (+88 02) 8961151 any time, any day and report the loss.
It’s easy to track! An eStatement of your Travel Card will be e’mailed to you every month, absolutely free of charge at upto three e’mail addresses of your choice. This will allow you to be on the top of your money matters, even when you are traveling.
Prospects of Electronic Banking • The government’s emphasis on building a ‘Digital Bangladesh’, setting up ICT parks, allocation for developing ICT infrastructures, waiving of taxes on computer
• • •
peripherals and other measures including the automation program of banking sector led by the Bangladesh Bank and competition among the scheduled banks in improving customer services have accelerated the prospects of e-banking in Bangladesh. Out of a total of 6,565 branches in 2006, 2,426 were computerized of which 651 branches of 22 PCBs and 7 FCBs together were providing any-branch-banking facility under respective bank online network. During the period, the number of ATM booths and POS terminals stood at 478 and 4,647 respectively covering 6 important merchant outlets in six divisional cities and some other important district towns in Bangladesh while 43 banks became the member of SWIFT and 25 banks adopted router connection. The Bangladesh Railway owns a high-speed optical fiber network (1,800 km) parallel to the railway path that covers most of the important parts of Bangladesh. This optical fiber network can be used as the backbone network of e-banking in Bangladesh. It is encouraging that some of the FCBs and PCBs are already using this optical fiber network for conducting online transactions, ATM and POS services. In addition, Bangladesh Bank is implementing the RPP project for modernizing national payment and settlement system. It is expected that the BACH including BACPS and BEFTN would start functioning from September 2009 followed by the development of inter-bank online network. The project plans to go for real time gross settlement (RTGS) by 2012. It has been made mandatory for all head offices of the scheduled banks to be connected with Bangladesh Bank for satisfying BACH and BEFTN. These efforts would allow the scheduled banks to be connected to each other for conducting inter-bank online transactions in near future and this would expedite the introduction of e-banking in Bangladesh.
Threats: Operational risk Operational risks arises from the fact of some external events , processes, systems, people etc. in the execution phase error occurred due to internal failure of processes, systems etc . External event causes serious operational risk due to natural disaster. It sometimes arises from the part of customers such as misuse of system and inadequately designed and implemented electronic business system. Security risks Operational risk arises with respect to the controls over access to a bank’s critical accounting and risk management systems, information that it communicates with other parties and, in thec a e o f e l e c t r o n i c m o n e y, m e a s u r e s t h e b a n k u s e s t o d e t e r a n d d e t e c t c o u n t e r f e i t i n g . C o n t r o l l i n g a c c e s s t o b a n k s ys t e m s h a s b e c o m e increasingly comple x due to expanded computer capabilities, geographical dispersal of access points, and the use of various communication paths, including public networks such as the Internet. It is worth noting that with electronic financial transaction, a breach of security could resulti n g f r a u d u l e n t l y created liabilities of the bank. For other for ms of electronic banking, unauthorized access could lead to direct losses, added liabilities to
customers or other problems. A variety of specific access and authentication problems could occur. For example, successful att ack by h a c k e r s v i a I n t e r n e t h e / s h e c a n c a u s e s e v e r e d a n g e r b y accessing confidential customer information. Some of the threat may occur like Replay attack Besides the external attack, an e-banking s i t e m u s t b e w e l l e q u i p p e d t o d e a l w i t h s o m e i n t e r n a l b a d p r a c t i c e l i k e e m p l o y e e f r a u d : employees could surreptitiously acquire confidential information of the customer for some evil aspects. System design, implementation and maintenance A bank faces the risk that the systems it chooses are not well designed or implemented. For example, a bank is exposed to the risk of an interruption or slow-down of its existing systems if the electronic banking system it chooses is not compatible with user requirements. The rapid pace of change that characterizes information technology presents banks with the risk of systems obsolescence. Furthermore, rapid technological change can mean that staff may fail to utilize the power of newly adapted technology for e-banking. Customer misuse of products and services As with traditional banking services, customer misuse, both intentional and inadvertent, is another source of operational risk. In the case of e-banking this sort of risk is predominating i f a b a n k d o e s n o t a d e q u a t e l y e d u c a t e i t s c u s t o m e r s a b o u t security precautions such as au thentication information, credit card n u m b e r e t c . S u b s e q u e n t l y , t h e b a n k m a y i n c u r financial losses because of transactions customers did not authorize. Strategic risk from management perspective Financial institutionâ€™s board and management should understand e-banking risks and evaluate the risk and cost to minimize associate risks prior to offer eb a n k i n g s e r v i c e . Strategic risks result from (bad) business decisions taken by management. Specifically, the d a n g e r o f n o t b e i n g a b l e t o k e e p u p w i t h r i v a l t e c h n o l o g i e s i s t h e s o u r c e o f t h e g r e a t e s t strategic risk. Technology is so important for e-banking operations that there is a correspondingly great needs to invest in new technologies. Innovators assume most of the risk. It is often impossible to foresee whether a new product will survive on the market or whether a project can be successfully brought to conclusion. Failed IT projects can raise the amount of misallocated investment; thus, instead of reducing costs, e banking would have precisely the opposite effect. Therefore, some institutions are pursuing t h e s t r a t e g y o f imitation. Such banks not only save costs on IT development but also have the advantage of knowing that a technology has proved to be feasible and that the market has shown initial signs of acceptance. A major disadvantage of this strategy is that if circumstances cause the technology to be entered into production too late, the market segment could already be occupied. The rapid pace of innovation in e-business is requiring banks to make e-banking strategy decisions as quickly as possible, since technological innovation and customersâ€™ tastes may radically change. Frequently there is no way to predict which technology and which terminals (e.g. mobile phones, television set, PDAs ) will prevail. Missteps in the planning and implementation of strategy engender considerable risks. The responsibility for these decision lies with the senior management of the bank. Reputational risk
Banking business is especially sensitive to fluctuations in confidence. There fore reputation risk, particularly in a relatively new field of business, r e p r e s e n t s a s p e c i a l challenge for banks. Customers’ confidence in their bank can be shaken if the bank is not able to provide secure and trouble-free e-banking services. The same is true if services such as responding to inquiries or processing orders are not performed at the speed that customers have come to expect in the ‘electronic age’. Other risks Traditional banking risks such as credit risk, liquidity risk and market risk are also present in e-banking sectors. Credit risk It is the risk that counter-party will not settle an obligation for full value, either when due or at any time thereafter. Banks engaging in e-banking activities may extend credit via non-traditional channels, and expand their market beyond tradi tional geographic boundaries .Inadequate procedures could heighten credit risk for banks. Banks engaged in electronic bill payment programs may face credit risk if a third party intermediary fails to carry out it o bligations with respect to payment. Liquidity risk It arises from a bank’s ina bility to meet its obligations when they come due, without i n c u r r i n g u n a c c e p t a b l e l o s s e s , a l t h o u g h t h e b a n k m a y u l t i m a t e l y b e a b l e t o m e e t i t s obligations. Liquidity risk may be significant for banks that specialize in electronic money a c t i v i t i e s i f t h e y a r e unable to ensure that funds are adequate to cover redemption and settlement demands at any particul ar time. In addition, failure to meet redemption demands in a timely manner could result in legal action against the institution, and lead to reputationaldamage.12 Market risk Market risk is the bank of losses in on and off balance sheet p o s i t i o n s a r i s i n g f r o m movements in market prices, including foreign exchange rates. Banks accepting foreign currencies in payment for electronic money are subject to this type of risk. Besises those risk, our banking sector moving positively .Following record says so--Services 80s ATM POS CDM Utility Payment Internet Banking Phone Banking/ IVR SMS Banking Intra-Bank Fund Transfer Inter-Bank Fund Transfer Inter-Bank Domestic ATM & POS
90s ANZ, SCB Amex, SCB
2000s Most Banks BBL, DBBL, City, Prime, NBL, .. SCB, City, BBL, .. SCB, DBBL, BBL, Dhaka, .. DBBL, SCB, BBL, .. SCB, BBL Most Banks Most Banks Eldorado OMNIBUS
Transaction International Transactions
VISA, MasterCard, Amex
Take the Challenge & look forward: A well functioning e-banking network is dependant on availability of a backbone network connecting the whole country; • reliable and secure information infrastructure including telecommunication infrastructures; • ICT penetration in the banking sector; • skilled operational personnel;
• legal and regulatory frameworks. • The government, Bangladesh Bank and scheduled banks are parties to these issues. Therefore, both individual and joint efforts are needed to overcome the constraints in promoting e-banking in the country. • In respect to technology adoption, the PCBs and FCBs have achieved greater successes relative to other bank categories but their coverage is concentrated mainly in urban and semi-urban areas. • The rural parts of Bangladesh still remain outside of their services. Since the SCBs and SBs have branches throughout the country including the rural areas, penetration of technology in banking activities of these two categories of banks are crucial to widen the spread of e-banking services. • For this purpose, the management of these banks might allocate a part of their yearly profit for ICT penetration in banking activities and human resources development supported by achievable targets. • In addition, several steps may be contemplated in order to accelerate the adoption of e-banking. • Internet penetration is a key factor for the growth of e-banking. Christensen (2001) reports that the take off phase of Internet banking needs at least 30 percent Internet usage among the population. • Moreover, since Internet penetration alone is not adequate for online banking expansion, the government may provide subsidy for surfing cost, organize training facilities with private partnership, widen multiple access facilities like web, telephone, ATM, etc., and initiate motivation programs for the users and the target population. • Moreover, adequate legal framework and security are essential for flourishing internet banking. • VSAT operating license should not limit the bandwidth. Moreover, high bandwidth charge is another constraint in widening internet access to a greater number of people. Therefore rationalizing the charges could make the use of internet affordable to all. • As a part of building digital Bangladesh, measures are needed to improve existing ICT infrastructure and address relevant issues including governance and institutional strengthening.
• A package of required rules, acts, laws, and regulations pertinent to e-banking adoption and development may be formulated. • In this respect, lessons and experience of countries that have already expanded ebanking can act as useful guides. The Bangladesh Bank may consider the following steps: –
Take steps to orient bank officials on benefits of e-banking. For instance, BB may offer short courses (e.g. using the Bangladesh Bank Training Academy) on e-banking including analysis of costs and benefit from the perspectives of customers and the banks, present status, and opportunities and challenges. To avoid risks involved in e-banking, risk mitigation policies and strategies need to be adopted as a part of the package approach to implementing e-banking.
For the scheduled banks, it is important to: – – – –
review their business strategies and create the required space for adopting ebanking services in order to remain competitive and attract new customers. strengthen ICT department through providing training to IT personnel and procuring required hardware and software. create separate unit in each branch for rendering ICT related operational activities under the supervision of the ICT department. train all staff in basic ICT related matters in phases.
Educational Institutions like Dhaka University, etc. could contribute to the development of skilled manpower: In partnership with Banks
In partnership with foreign educational institutions Through Research and Development Through Case studies
Conclusion: Web based banking service or E-Banking, the latest generation of e l e c t r o n i c b a n k i n g transactions, has opened up new window of opportunity to the existing banks and financial institutions. It permits business process re-engineering, serving borderless market, to achievezero latency leading to improvements in customer service levels and better risk management because of real-time settlement. Since its evolution in 90th decade, it is having unprecedented growth. The growth rate is higher in Developed Countries, and comparatively lower in LDCs countries like Bangladesh. The EBanking sector is highly prohibitive for the new entrants although the inception cost is lower with high growth rate .The brand preference of the customer, existing network, physical existence, security and safet y, supplier bargaining power, substitute product of non-banking sectors have made the way thorny. However, new comer with innovative idea and strategy definitely can make position in this
sector. The analysis of the evolution and present status of E-Banking make us some room to make commandments for the government, new entrants and existing e-banks for effective utilization of the opportunity to accelerate the economic growth.