Assignment of Digital Banking

1 The Present scenario, Prospects and Obstacles of Implementation of Digital Banking in Bangladesh

Introduction

In this age of information technology, electronic communication is the cornerstone of a

country for its business, every government agency and economy. Modern banks play a

pivotal role in promoting economic advancement of a country. Digital banking which is also

known as electronic banking is a modern banking system that delivers the new and traditional

banking products and services to the customers electronically. In Bangladesh, the growth of

digital banking is beset with several infrastructural, institutional, and regulatory limitations

such as inadequate availability of reliable and secure telecommunication infrastructure,

absence of a backbone network connecting the whole country, poor ICT (Information and

Communication Technology) penetration in the banking sector, lack of skilled manpower and

training facilities, absence of supportive policies, guidelines, rules and regulations relating to

e-transactions and the like. Despite the constraints, efforts by the Bangladesh Bank in

modernizing the country’s payment system and commitment by the government in building

‘Digital Bangladesh’ have brought competition among the scheduled banks to improve

banking services and rapidly adopt digital banking on a wider scale. This paper represents the

present scenario, prospects and obstacle of the implementation of digital banking in

Bangladesh how it is up surging, makes our country with more state of the art facilities and

also highlights some downsides and recommendations of overcoming the downsides of

electronic banking.

Objectives of the Study

Our intention and purpose to this study has taken into consideration to accomplish the

following objectives:-

To explore the Structure of digital banking in Bangladesh

To find out the common sorts of digital banking in Bangladesh

To assess the existing digital banking scenario in Bangladesh

To explore the prospects of digital Banking in Bangladesh context

To discover the development of digital banking in Bangladesh

To search the electronic services offered by various bank in Bangladesh

Limitations of the study

There has no excess research work in Bangladesh perspective particularly. The study covered

very limited information about the context. The data of implementation of digital banking are

not yet counted for many banks and it is not implemented through a number of branches as

well. The scope of the study was also constrained by limited available self-funding.


Digital Banking, Its Products & Services

Digital banking

The full extent of what digital can offer customers goes beyond the basic mobile and internet

banking services that are now widely provided, although there is still value to be obtained for

many banks from simply delivering these basic services well. Digital banking will evolve into

a richer set of offerings, providing new value for banks and their customers through a new

‘digital feature set’, based on innovations in: user experience; mobile devices and networks;

social media and collaboration; customer analytics; and channel integration. Digital Banking

– a new concept in the area of electronic banking, which aims to enrich standard online and

mobile banking services by integrating digital technologies, for example strategic analytics

tools, social media interactions, innovative payment solutions, mobile technology and a focus

on user experience.

Digital banking or internet banking or online banking are analogous and defined as the

conduct of banking services by using electronic delivery channels such as ATM, telebanking

and PC banking. Under this banking process, the branches of a bank are connected

electronically in such a way so that a client or a customer of a particular bank can draw the

money or make deposits anytime anywhere of the country or the world. Large number of

banks world-wide offer e-banking/web banking/internet banking, whereby their customers

manipulate their personal finances and execute transactions via the internet. Banks and others

financial institutions advertise frequently on the significance and convenience of the e-

banking facilities.

Digital Banking is an umbrella term for the process by which a customer may perform

banking transactions electronically without visiting a brick-and mortar institution. The

following terms refers to one form of electronic banking: personal computer (PC) banking,

Internet banking, virtual banking, online banking, home banking, remote electronic banking,

and phone bank. PC banking and Internet or online banking is the most frequently used

designations. It should be noted, however, that the terms used to describe the various types of

electronic banking are often used interchangeably.

Digital Banking in Bangladesh

In recent years the banking industry has undergone massive changes in providing service to

their customers by using information technology. Developments in information technology

and telecommunications have set in a motion an electronic revolution in the Bangladeshi

banking sector. Foreign Commercial Banks (FCBs) in Bangladesh are playing a pioneer role

in introducing modern financial products and services. Private Commercial Banks (PCBs)

have started to follow the same pattern. On the other hand Nationalized Commercial Banks

(NCBs) and the Specialized Banks (SBs) could not yet show notable performance regarding


the issues. But due to the demands of the time, they are now taking initiatives to launch

modern and innovative products and services.

Computer, modern technology and ICT have widely implemented area for gathering the

financial needs through saving customers access time worldwide. Now customers can easily

utilize the tools of ICT to know their accounts, check balance, transfer balance and even pay

bills online. However, it is very common in global term but here in Bangladesh, it is slightly

difficult and not yet implemented properly. In the context of Bangladesh, there are several

special services that are growing.

Core Banking

Internet Banking

Mobile Banking

Electronic Funds Transfer

Any Branch Banking

Banking KIOSK

SWIFT

MICR

ATM

Online Banking

Credit Cards and Debit Cards and so on.

Core Banking:

It refers to a situation where a group of banks provides customer service together or a part of

service. A customer may enjoy any sort of service from any bank under the group. It requires

affiliation among the group. For example, account holder of some other banks can use the

ATM kiosks of DBBL's.

Internet Banking and Mobile Banking:

It depicts that banks are providing services through internet facility and it provides 24 hours

banking services. Internet banking and mobile banking are two newest additions in banking

sector of Bangladesh. HSBC and SCB is the pioneer to provide internet-banking service. In

Bangladesh, Brac Bank's provides first complete mobile financial service named "bKash" in

2011 later on DBBL, Prime bank and some other banks have taken this initiative.

Electronic Funds Transfer and Any Branch Banking:

Electronic Funds Transfer (EFT) refers a process of sending money from one bank account to

another without having any paper money transaction. Majority of the FCBs and PCBs

provide this facility. On the other hand, any branch banking service refers where an account

is reachable from any branch of a particular bank and clients can transact through any branch

of the bank.


Banking KIOSK and MICR:

Bangladeshi customers are familiar with the term ATM booth that also provides KIOSK

Banking. It provides flexibility to the customers to conduct their banking transactions through

the KIOSK machine. The technology has been adopted in Bangladesh in 2009. It is a

character recognition technology used mainly by the banking industry to make easy the

processing of cheques.

ATM (Automated Teller Machine):

Banking service clients in Bangladesh are familiar with ATM services is a self-service. It is a

device for providing teller services for customers of the banks. It works in the form of

banking Kiosks or Electrical Fund Transfer (EFT) activities and so on. DBBL has around

2000 ATM kiosk around the country and it is leading in ATM service providing (DBBL,

2013). However, major services are:

Cash withdrawal

Deposit of cash.

Funds transferring between accounts

Bill payment

Full-statement producing

Balance and information enquires

Request for cheque book

Notice of withdrawal

Credit cards and Debit cards service:

A wide range of established banks like SCB, HSBC, Citi Bank and some other private or

state owned bank provide credit card service in the place of cash currency. The major

categories of credit card in Bangladesh

Credit Card

VISA and Master Card Credit Cards

On the other hand, debit cards are linked directly to the bank account of its holder. Almost

every bank now provides debit card service although some state owned banks do not have

this facility.

Since digital banking offers some smart services benefiting both banks and customers

compared with traditional banking system, it has become imperative to make necessary room

for the scheduled banks to flourish digital banking. Among others, attractiveness of digital

banking includes: it lowers transaction cost; provide 24-hour services; ensure increased

security and control over transactions; reduces fraud risk; performs higher volume of

transactions with less time; increases number and volume of value payment through banks;

allows remote transactions facilities that replace physical presence of a customer in a bank

branch and; increases transaction speed and accuracy.


Present Scenario of Digital Banking in Bangladesh

In this age of information technology, electronic communication is the cornerstone of a

country for its business, every government agency and economy. Digital banking as a

segment of electronic business, which, in turn, encompasses all types of business

performed through electronic networks. Electronic channels are used for both business to-

business and business-to- customer transactions, such as ordering goods, delivering

software or paying for such transactions. E-banking is considered to be a segment of e-

business to the extent that banks are involved in the conduct of business transactions via

electronic media; other non-banking financial products and services (e.g. insurance), not to

mention products and services from other sectors of business may be sold electronically as

well.

In Bangladesh, there are a total of 56 scheduled public and private banks. Here there are four

state owned commercial banks (Nationalized Commercial Banks- NCBs) have 3496

branches, five specialized banks (DFIs) have 1311 branches, 39 local private commercial

banks (Private Commercial Banks-PCBs) have branches of the scheduled banks in the

country. The banking system of our country, depending on computerization can be classified

into three categories:

(i.) Completely computerized

(ii.) Partially computerized

(iii.) Not computerized

A good number of technology driven services are provided to the customers by the Private

Commercial Banks (PCBs), Foreign Commercial Banks (FCBs) and Nationalized

Commercial Banks (NCBs).

The FCBs operating in Bangladesh like Standard Chartered Bank and HSBC are the

pioneers to introduce technology driven banking facilities. These banks provide services like

ATM, debit card, credit card, Point of Sale (POS) services, internet banking, phone banking,

any branch banking, Electronic Fund Transfer (EFT). Along with these services Standard

Chartered Bank is providing KIOSK service to its customers.

Electronic Fund Transfer (EFT), SWIFT and MICR cheque are being provided by all the

banks. All the banks except Uttara Bank are providing any branch banking to the customers.

All banks have debit card facilities for their clients except Citi Bank NA. First Security

Islami Bank Limited, Uttara Bank Limited and Citi Bank NA have no own ATM booth. First

Security Islami Bank Limited is going to establish their own ATM booth. They have

already selected the palace for 100 ATM booths and expect to launch within very short

possible time.


Chart: The percentage amounts of Technical Services of Digital Banking in Bangladesh

Source: Research work by Chowdhury and Ullah 2013

Electronic Payment methods of E-Banking in Bangladesh

In Bangladesh, the growth of credit card market has been very high for last couple of years.

At present, the different electronic banks are using different types of electronic payment

methods.

The different payment methods are as follows: (Automatic Teller Machine), E-cash, Q-cash,

Ready cash, MoneyGram etc.

ATM has unveiled the horizon of Electronic Banking of 21st Century. Through ATM,

customer can avail non-stop online teller service without going to the specific branch of the

member bank. The facilities of ATM card are given below

ATM card holders can withdraw cash from ATM at any time.

Customers can make transactions from any of the machines with logo ‘E-cash’

installed at different places in the city.

Utility bills like WASA, TITAS, DESA, BTTB, Grameen, AKTEL, and City Cell

phone bill etc can be paid through ATM.

Now different customer of different banks can deposit their monthly instalment of

their deposit schemes.

The machines are located in convenient places where customers usually deal with money

matters. So they can easily avoid risk of cash carrying by using ATM card.

78.95%

50% 39.47%

63.16%

100% 97.37% 92.11%

73.69%

97.37%

65.79%

7.90%

100% 100%

0% 0.00%

20.00%

40.00%

60.00%

80.00%

100.00%

120.00%

Percentage


Customer Satisfaction of Electronic Banking

According to J Power, online banking is the preferred transaction method among banking

customers. One reason is that online banking is faster than visiting a bank and standing in

line to see a bank teller. Before 5 years the banking services were based on branch. People

were served from the bank where they have accounts. But at present most of the banks are

under the network and anyone can draw money wherever he likes. Suppose if anyone opens

an account in Dhaka bank in any branch then he is ordained to withdraw the cash even from

belkuchi, Sirajgonj branch or anywhere from any branch of Dhaka bank. The balance of

clients account is kept on line and within a fraction of second he may debit or credit it from

anywhere of the country. Now they need not to be worry for their cash handling with taking

great risk like snatching or high jacking.

On the other hand people can withdraw their money through ATM card and wherever they

need. It depends on the availability of the ATM booths. Earlier people had the opportunity

to withdraw cash during the transaction period of the respective branch where they have

account. But now you are entitled the opportunity to withdraw cash at any time like

evening, night or even at midnight. The banks call it any time banking. People may draw

money at their convenient booth while wandering in the busy town.

Whenever the banks advertise or promise that people may be able to get these services, then

the expectation level of the customer rises sharply and wants to get that benefit from the

banks. If the banks fail to mitigate the requirement of the customer then dissatisfaction

occurs. The services are –

• E-payment

• E-cash facilities

• 24/7 day services

• Bills paying

• ATM facilities

• SMS banking - (Access financial information at fingertips)

o Access the account information anytime from anywhere

o Request for check book and account statement

o Make cheque status enquiry

o Place stop- cheque instruction

o Make utility bill payment

• Internet banking

• E statement:

o Ease of access

o Multiple mailing (Mailing to more than one mail address)

The Real Phenomena in Our Country

In our country people are satisfied with their banks ATM, Internet, SMS banking

facilities. Now people free less tension to transfer their money from Dhaka to Chittagong or

even where the banks are on lined. They need not carry the money whenever go for

shopping. They can use Visa Card, Master Card and they are able to draw money from


the nearest booth of market through ATM Card. The cards are like Plastic Money as the

bankers say it.

There is Some Discrepancies also in many cases people have some complaints also.

Sometimes it is common that-

ATM’s fall short of money

Slow bandwidth of internet may delay the transfer rate. (radio link and cable are

used for internet)

Bankers make delay to provide PIN number whenever client lose his Credit or

Debit card

Charges are higher for the card.

Measuring all the factors we may tell it in a nut shell that people should be satisfied cause

their problem have been lessened and now they need not wait in a queue to deposit or

withdraw the money. They even pay their mobile phones bills and all utility bills through

SMS. The average online transaction takes less than three minutes to complete, compared to

over seven minutes of combined wait and transaction time with a branch teller. Products

once offering only via brick and mortar banks are now offered through their online services,

such as free checking and above mentioned facilities.

Scope of Electronic Banking in Bangladesh

The infrastructure of a country is very important for implementing electronic banking. For

electronic banking major cost is to setup backbone network. Fortunately Bangladesh

Railway has a high-speed optical fiber network parallel to the railway path owned by

Bangladesh Railway. Its total capacity is about 2.5 gigabits per second. This fiber optic

network covers almost every important parts of the country.

Bangladesh has been connected with the information superhighway on the 20th May, 2006.

It is a landmark of ICT sector of Bangladesh. The cable network covering some 786 miles

across the country from the Bay of Bengal will provide a fiber-optic link with a data

transfer capacity of 10 gigabits per second compared to the 150 megabits per second

bandwidth now used by the state- owned BTTB and dozens of private Internet Providers.

The following figure shows the growth of Internet users of our country.

Figure: Internet user growth in Bangladesh


From the figure we see that the Internet users of our country are increasing every year.

After connecting with the information superhighway, the total country will be connected

by fiber optic backbone; certainly it will be a milestone for infrastructure of implementing

electronic banking in Bangladesh. In Bangladesh most of the banking hardware are

available. The hardware available for electronic banking is entirely procured from foreign

origins with a local distributor. Electronic banking operation hardware includes;

servers, workstation, printers, scanner ATM, POS terminals, etc and networking hardware

includes switch, Router, V-SAT connectivity etc. All hardware is available in our country. At

the head office level 95.45 percent of banks use banking software, 46 types of different types

of software are in use in different banks in Bangladesh. Among the banking software used in

the banks 51.47 percent have been developed in house, 47.06 percent are off-the-shelf

[OTS], only 1.47 percent are using both OTS and in house software (Rahman, 2001).

Majority of the software are developed locally both for cost reason and convenience with the

local business practice.

Benefits of Digital Banking in Bangladesh

Digital banking is now a global phenomenon. Digital Banking is transforming the financial

services industry through various impossible innovations. The quantity of cross-border

trading and other financial activities is increasing geometrically make possible by technology.

It has been made possible by technology, particularly information technology to generate,

collect and process information about bank operation and bank customers efficiently and

effectively. It provides the ability to create more effective systems of controls in individual

institutions and in the market themselves. Compared to the paper based operation, Electronic

Banking Systems, in its most proficient form, offer instant verification and transfer and

reduces the flow of costly paper in the record keeping process.

Benefits of digital banking in Bangladesh

Electronic business can add value through knowledge management as it helps to attain new

services to the customers. Successful e-business depends on sharing of strategic knowledge

for which dissemination of the information and free flow of knowledge around the globe is

required. On line banking can provide twenty four hours banking facilities. Through

electronic data interchange customers are able to draw money from one branch to another.

Letter of credits can be sent through SWIFT or electronic fund transfer from one country to

another can be feasible. Actually on line banking provides faster, reliable services.

Benefits of nation: Increased productivity: The rapid mobilization of funds through digital banking can

ensure increased productivity of economy and proper use of the resources

Contribution to GDP: Banks with a national economy, work towards building

national capital, increasing national savings and mobilizing investments in trade and

industry.


Infrastructure Development: Bank providing e-baking services are developing

themselves in infrastructure thus government face comparatively less burden for

infrastructure development.

Facilitating international trade: banks providing immense banking facility

for international trading especially in readymade garments sector, frozen shrimp, jute

pharmaceuticals sector.

Job creation: unemployment is a great threat to development ,IT development in

banking creating new types of job like system analyst, data control manager etc.

Industrial Development: due to rapid mobilization of savings and facilitating export

and import e-banking is contributing to the faster contribution to Bangladesh.

Benefits of Bank’s:

Profit Maximization: Digital banking leads to lower cost for the banks also ensures

better profit from innovative products in this section thus helps banks to maximize the

profit of the owners.

Expand beyond geographic reach: Digital baking enabling the banks to expand

their services beyond the geographic reach thus becoming internationally competitive.

Rapid growth: Banks providing innovative and fast digital banking service will

experience rapid growth in this industry, will increase its customer base and become a

brand name in banking industry.

Cut down cost: Digital banking services causes low cost of providing services than

manual. It also reduces maintenance cost to bankers

Benefits of customer’s:

Time savings: The main benefit from the bank customers’ point of view was

significant saving of time by the automation of banking services processing and

introduction of an easy maintenance tools for managing customer’s money. The main

benefits of e-banking were as follows:

Continuous access to account information: customers can access to their account

information any time 24 hours a day, 7 days in a week.

Don’t require physical interaction: in case of transaction customers don’t require to

present physically thus fell convenient to transact.

Better cash management: much better cash management can insure through digital

banking ass cash can be easily available.

Reduced costs: This was in terms of the cost of availing and using the various

banking products and services.

Convenience: All the banking transactions performed from the comfort of the home

or office or from the place a customer wants to.

Speed: The response of the medium was very fast; therefore customers actually

waited till the last minute before concluding a fund transfer.

Reduced risk: As cash can be transecting without physical appearance can move with

the help of credit card, smart card it is less risky.


Prospects of Digital Banking in Bangladesh

Information technology environment changes rapidly. It is estimated that the number of

Internet users in Bangladesh will increase in a recent years. The number of physical branches

will be decreased (the profile of physical branches will change to advice and support centres)

and most of the transactions will be concluded via main e-banking channels: online Internet

bank and m-banking services. Rapid growth of e-banking in Bangladesh is expected.

Prospects of Digital Banking in Bangladesh

Recently, the government’s emphasis on building a digital Bangladesh, setting up ICT park,

raising allocation for developing ICT infrastructure, waiving 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 accelerated the prospects of e-banking in Bangladesh.

Optical fibre network as the backbone network of digital banking:

The Bangladesh railway owned a high-speed optical fibre network (1,800 km) parallel to the

railway path that covered most of the important parts of Bangladesh. This optical fibre

network can be used as the backbone network of e-banking in Bangladesh. For example,

mobile phone operators such as GP and Ranks ITT of Bangladesh used this optical fibre

network through which they reached even in rural areas with their services. It is encouraging

that some of the FCBs and PCBs are already used this optical fibre network for conducting

online transactions, ATM and POS services.

Modernizing national payment and settlement system:

Bangladesh Bank was implementing the different projects for modernizing national payment

and settlement system started from 2009 followed by the development of inter-bank online

network. It made mandatory for all head offices of the scheduled banks to be connected with

Bangladesh Bank. 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 smooth the

introduction of e banking in Bangladesh.

Internet services:

Internet services came to Bangladesh with connectivity in 1996. Digital telephone exchanges

established in 389 upazilas and 17 growth centers. Work was underway to cover the rest of

the upazilas under digital exchange system. Meanwhile, Bangladesh joined the information

super-highway by connecting itself with international submarine cable system in 2006. A

total of 159 Internet Service Providers (ISPs) now connected with this system of which 64 are

actively providing services. Internet connection was slow with bandwidth range 32 – 56 kbps

for dial up and 64 – 8 mbps for broadband.


The Growth in Internet Banking: Numerous factors including competitive cost, customer

service, and demographic considerations – are motivating banks to evaluate their technology

and assess their electronic commerce and internet banking strategies. Some of the market

factors that may drive a bank’s strategy towards internet banking include the following:

Research on Application of Electronic Banking in Bangladesh, Bangladesh Research publications, 2010

Figure: The growth scenario of Internet banking in Bangladesh

1. Competition: The competitive pressure is the chief driving force behind increasing

use of internet banking technology, ranking ahead of cost reduction and revenue

enhancement. Banks see internet banking as a way to keep existing customers and

attract new ones to the bank.

2. Cost efficiencies: Banks can deliver banking services on the internet at transaction

costs far lower than traditional ways. The actual costs to execute a transaction will

vary depending on the delivery channel used. These costs are expected to continue to

decline.

3. Geographical Reach: Internet Banking allows expanded customer contact through

increased geographical reach and lower cost of delivery channels. In fact some banks

are doing business exclusively via the internet – they do not have traditional banking

offices and only reach their customers online.

4. Branding: Relationship building is a strategic priority for most banks. Internet

banking technology and products can provide a means for banks to develop and

maintain an on-going relationship with their customers by offering easy access to a

broad array of products and services. By capitalizing on brand identification and by

providing a broad array of financial services, banks hope to build customer loyalty,

and enhance repeat businesses.

5. Customer Demographics: Internet banking allows banks to offer a wide array of

options to their banking customers. Some customers will rely on traditional 5


branches to conduct their banking business. Other customers are early adopters of

new technologies that arrive in the marketplace. The challenge to banks is to

understand their customer base and find the right mix of delivery channels to deliver

products and services profitably to their various market segments.

As use of the internet continues to expand, more banks are using the web to offer products

and services or otherwise enhance communications with consumers. The internet offers the

potential for safe, fast, and convenient new ways to shop for financial services and conduct

banking business, any day, any time.

Bringing all upazilas under internet services:

Under this scenario, as a part of government decision of building digital Bangladesh, the

existing capabilities of ICT sector was likely to increase rapidly in bringing all upazilas under

internet services and this will contribute in widening the scope of e-banking throughout the

country. The overall computer density in the banking sector was 1.64. For foreign

commercial banks (FCBs) the computer density was 45.34, whereas for NCBs the ratio was

only 0.41. The specialized bank scenario was almost same as the NCBs, 0.43. On the other

hand, private commercial banks had comparatively higher ratio, 4.94. As a whole 81.81%

bank did not have any local area network (LAN), 30% had WAN (Wide Area Network) but

for some banks many branches were outside of WAN connectivity.

Use of online banking system:

At present, all foreign banks of our country were using online banking system; they were

invested a lot for their automation banking services. For this reason, they were increasing

market share every year. They were the pioneer of implementing electronic banking systems

in Bangladesh, but now most of the private banks of our country used electronic banking

systems. In our country different banks were offering electronic banking services in different

ways, some were offering ATM (Automatic Teller Machine) services, some were tele-

banking and some were electronic fund transfer, debit card, credit card etc.

Increasing usage of mobile banking:

For mobile banking, the numbers were hugely promising. A whopping amount of Taka

34,556 crore was transacted which is a 22.36 percent from the previous quarter. The number

of mobile banking customers totalled 2.69 crore during the January-March quarter. These

figures are aligned with the expectations of policymakers and banking experts, all of whom

have been highly optimistic about Bangladesh’s potential in digital banking services. Experts

say, digital payment system in Bangladesh can benefit the considerably large population of

the country as it is more secure, quick and can rid people from the worry of carrying cash in

hand.

In Bangladesh most of the business organizations are running centralized manner. As such

visions, missions, goals of the top management of various organizations are very important.


Top management should change their mind-set and like Bangladesh Bank, they should

encourage e-business process. Top management views are reflected to the mid-level

management and lower level management. Unfortunately most e-business efforts fail for non-

performing visions, missions, goals and tactics at the business processes of the organization.

Government Initiatives for Digital Banking

The Government of Bangladesh has taken some important initiatives to develop our IT sector.

Still we are waiting to see a fruitful change in our Information Technology. However, some

remarkable steps of government are highlighted for information.

IT has been declared as a thrust sector.

Waiving all taxes and duties from import of computer hardware and software.

Hundred percent remittances of profit and capital gains for foreign investors

without any approval.

BTCL's implementation of Digital Data Network (DDN) service.

Decision to link Bangladesh to global highway through 2nd submarine cable link.

National Information and Communication Technology (ICT) Policy has been

approved.

An independent regulatory body, Bangladesh Telecommunication Regulatory

Commission (BTRC) has been established, functioning since 2002.

Recently started the establishment of ICT Park to boost up the country’s ICT

activities.

The govt. is liberalizing telecom sector in phases, with increased participation of

private sector.

Copyright Act 2000 named Intellectual Property Rights (IPR) Law related to ICT

is in the process of finalization and is in the process of enactment by the

Parliament.

Obstacles of Digital Banking in Bangladesh

One of the main objectives of this study was to identify the challenges and potentials of e-

banking in Bangladesh from the perspective of employees and bank customers. The present

survey has shown that legal and security issues, socio-cultural barriers, management-banking,

infrastructural barriers, knowledge barriers, economic barriers issues are accepted as main

challenges for e-banking development in Bangladesh. Bangladeshi commercial banks are

adapting and implementing digital banking gradually, though it cannot be said it is real time

online banking. In this case the private commercial banks are playing the pioneering.

Through the existing system of online banking the branches are linked together with one

another which facilitate smooth coordination among the branches and also with the head

office. In Bangladesh, except very few banks, online banking is limited to the extent-any

branch banking which enables a customer to operate his/her account in any of the branch.

Few Bangladeshi banks are now introducing real time online banking and internet banking.


The major obstacles in implementing Digital Banking in Bangladesh are identified as

follows:

Infrastructural Barriers: Infrastructural barriers are one of the most important

challenges for Digital Banking in Bangladesh. Here, there is not enough

infrastructural support for providing efficient e-banking services. In our country,

telecommunication services are not strong, communication bandwidth is weak,

software is not available in the country and hardware for establishing ATM booth is

costly.

Knowledge Barriers: Digital business is still not very much progressed in

Bangladesh. Mass awareness is not feasible. The country faces problem of developing

trained human resources. There are lack of technological knowledge among the

managers, employees, and customers of bank. Without preparing human capital at the

level of international standard and designing, implementing and monitoring bank’s

information system we cannot be able to compete in global market and successful e-

business cannot be feasible.

Most of the respondents were not fully use mobile banking which caused

another problem to data collection to the researcher.

Sometimes respondent could not answer to questions accurately and to the

point.

The respondents were usually remaining busy with their work. So, the

researcher had to visit some of them even at the work place and researcher

sometimes had to pay more time to meet the respondents.

Most of the respondents did not feel comfortable to answer questions. So

researcher had to pay more time to gain their confidence.

Legal and Security Barriers: In Bangladeshi circumstance lack and limitation of

regulation of law is one of the acute obstacles to Digital Banking. On the other hand,

in an underdeveloped country like ours, frauds are gaining significant potential which

indicates a negative output in our local e-banking sector.

Besides these barriers, our courts doesn’t consider electronic documents as evidence,

so people with a high risk of transaction are not much interested to get e-banking

facilities. Technical issues are also highly connected to e-banking, but in our country

technical securities are very weak an in a high risk of hacking in each moment. So,

customer’s trust in e-banking is still beyond imagination in Bangladesh.

Socio-cultural Barriers: As mentioned earlier, most of the people are not

educated in Bangladesh. So, people are not willing to break the traditional way of

conventional banking and always hold a negative perception regarding Digital

Banking. Another important issue is, banks employees also hold a negative outlook to

Digital Banking thinking of uncertainty of their jobs. On the other hand many


traditional customers prefer paper money and receipts over e-documents for their

ignorance and weakness in English language.

Economic Barriers: In Bangladesh, economic barriers are one of the most

challenges Digital Banking. For providing Digital Banking services to the customer, it

needs for heavy investment regarding new infrastructures. So it is not easy for a bank

to invest huge amount of money for infrastructure of Digital Banking. In our country,

internet cost is also high that is an acute obstacle of e-banking. And our average per

capita income is also very low so that most of the people does not have the ability to

buy the communication equipment like computer, laptops, smart phone. And for these

reason they could not connect to e-banking services even if they want to. And in our

country outsourcing is very costly.

Financial Risks: Although e-banking has bright prospects, it involves some

financial risks as well. The major risk of Digital Banking includes operational risks

(e.g. security risks, system design, implementation and maintenance risks); customer

misuse of products and services risks; legal risks; strategic risks; reputation risks;

credit risks; market risks; and liquidity risks. Therefore, identification of relevant

risks, and formulation and implementation of proper risk management policies and

strategy formulations and implementations are important for the scheduled banks

while performing e-banking system.

Unsatisfying Services and Customer Relationship: Nationalized

commercial banks and specialized banks are lagging behind of Digital Banking

services. Moreover, customers are not satisfied with the quality of the services. They

are not also very happy with the behaviour of the bank personnel. However, it reveals

that e-business especially with the help of e-banking can manage economy of

Bangladesh in a far better way as customer relationship management increases.

Unavailability of Locally Produced Software: Local Banking software

should be developed properly and must have greater accessibility within the country

and outside the country. Moreover, to produce hardware especially computer and its

accessories, local entrepreneurs are not taking any sort of strategic planning.

Limited Number of Online Customer Due to High Cost: The number of

customers taking banking services does not capable to bear the cost of additional

equipment like computer, computer accessories, Internet etc. from their own

organization or at home. Biometrics should be more strengthened. Using Internet

facility still very costly and people has little knowledge in operating computers. A few

numbers of cyber café is available but for banking purpose customers do not feel safe

to use these facilities. As a result total numbers of customers who are habituated in e-

banking systems are limited. In these circumstances investment for establishing e -

banking facilities seems profitless.


Recommendation and Conclusion

Recommendation

In order to ensure a successful practice of digital banking in Bangladesh, we recommend the

following.

The whole country should be connected under fiber optic backbone for electronic

banking infrastructure as soon as possible.

Digital banking systems should be simple to use, fast and user friendly.

We should develop in house software for our banking system. So it will be cost

effective.

Digital banking services should be standardized so that wherever the solution is used

the customer is familiar with the procedure followed.

Every transaction should have some desirable properties like Authenticity,

confidentially, Unforgivable, Integrity and not reusable.

Government should compel the banking sectors to automate their operation and going

online by a specific period.

Provide adequate training and technological support to develop the manpower.

Proper infrastructure development.

Government should implement the cyber laws to ensure proper security about

customers information

Government should establish proper educational institution to create efficient IT

professionals to support digital banking in Bangladesh.

Developing of integrated digital banking software.

Government, in collaboration with the banks, should educate and inform its citizens

and customers on the workability and effectiveness of Digital banking. This will

increase the confidence level of customers.

The clearing house operation in Bangladesh should be fully automated system.

Banks should have adequate research and technological background in this regard.

Bank can charge normal profit to enlarge the market size on the electronic banking

products.

Political commitment to improve governance and institutional strength is essential for

successful application of digital banking.

BTTB should utilize their extensive network so that the corporate users can connect

their banks and major business institutions. The corporate lines provided by the BTTB

are suitable for e banking and e-business, in the sense of reliable data transfer and

suitable price

As digital bank users mostly use ATMs and POS in most cases, the banks should

emphasize on providing uninterruptible service.


Conclusion

Digital Banking has greater impact in the economy and in the banking sector as well. Making

financial services available to the poorest people is recognized as an important part of poverty

reduction strategies. Technological innovation offers significant hope, although it will result

in fundamental changes to banking delivery mechanisms as well as to the very role of

banking service providers and their relationships with customers. In case of productivity,

efficiency, economic growth, giving optimum service to the customers, electronic banking

has huge contribution as a whole. In order for Digital Banking to continue to grow, the

security and the privacy aspects need to be improved. With the security and privacy issues

resolved, the future of Digital Banking can be very prosperous. Since the world is moving

towards everything, so we should try to overcome all the barriers and also try to develop such

environment that is favourable for the development of digital banking. With the security and

privacy issues resolved, the future of digital banking can be very prosperous.

Documents

Assignment of Digital Banking