Use of Technology in Banking Sector of Bangladesh
Today, information and communication technology has become the heart of the banking sector and banking industry is at the heart of every robust economy. Electronic banking system has become the main technology driven revolution in conducting financial transactions.
Technology has already enabled most of the banks in Bangladesh to introduce innovative products to their customers in the form of ATM/POST facility, Mobile/Tele banking, Web banking, ‘Anytime’ and ‘Anywhere’ banking, etc. Customers of banks have felt the positive impact of technological solutions implemented by banks. Banks play a vital role in developing the economic and social conditions of a country.
The major share of the profit of banks generally comes from spread. But the profitability of banks is under tremendous pressure because of continuous shrinking of spread. It becomes important for banks to reduce the cost per transaction for increasing spread that in turns will increase the profitability of banks. Use of technology in banks reduces the cost. Banks have realized that cost of transaction drastically reduces from brick and mortar structure of the branch to online delivery channels like ATM, POS Terminal, Mobile Phone, Internet, etc. Each of these channels has its own specific advantages in terms of improved customer service and reduced transaction cost.
The basic difference between online banking and traditional banking is that, in traditional banking the customer has to visit the branch for the basic banking needs viz. withdrawal or deposit of cash, transfer of funds, statement of accounts etc. Online-business saves customers’ time. Bank also enjoys lower overheads, establishment, premises and maintenance costs, which results in reduction of transaction cost. Low transaction cost is one of the main reasons why online business is getting popularity. Worldwide transaction cost of ADCs are decreasing as number of online (branch less) transactions are increasing very rapidly.
ICT Infrastructure of Banks
According to the Bangladesh Bank (BB) guideline, commercial banks are categorized as Category-1 and Category-2. Category-1 means Centralized ICT Operation for managing core business application solution through Data Center (DC) with backup assets for continuation of critical services including Disaster Recovery Site (DRS)/Secondary Data Center to which all other offices, branches and booths are connected through WAN with 24/7 attended operation. Category-2 means Decentralized ICT operation for managing distributed business application solution hosted at DC or operational offices/branches with backup assets for continuation of critical services connected through WAN or having standalone operations.
Branch Automation
Despite the fact that the SOCBs are large in terms of shares in assets and number of branches, they could cover only around 72.3 per cent of their branches under computerization while the PCBs and FCBs brought 99.5 and 100 per cent of their branches, respectively, under computerization.
IT Investment and Sector-wise IT Budget
In tune with the global trends, Bangladeshi banks have been investing heavily in technology infrastructure, solutions and manpower. Possibly, the key purpose of such high investments in IT is to achieve increased productivity, efficiency, profitability and competitive advantage through improved internal and external transaction flow, better access to clients and markets and enhanced reach and quality of products and services. Total investment for IT operations in the banking sector up to 2015 was estimated at Tk. 25,007 crore since 1968 (considering the installation of computer at Agrani Bank in 1968 which was the first installation of computer in the banking sector of Bangladesh).
And in 2015, approximately Tk. 1138 crore was invested on IT processes in the banking segment, excluding central bank In 2015, it is seen that a major portion of the IT budget was used to procure hardware and it was 41.9% of total budget. Second highest budget went to software sector. However, budget for security, training and audit was very poor in last five years. The rest of the budget went to power management, vehicles purchase, stationary procurement and decoration purpose.
Penetration of Computer (PC) and E-mail ID
Number of computers and official E-mail account per hundred employees are two important parameters to understand the automation status of a bank. At the end of 2015, it is seen that about 86% of the bank employees have working terminal (PCs) whereas approximately 77% of the employees (perhaps most of the non-officers have no e-mail id which is not unusual) have official e-mail addresses. Currently we have about 1.73 lac employees in the banking sector and total number of 1,46,253 PCs and 6700 Servers are being used in this sector.
Corporate Intranet System and Internal Communication
Some of the banks have their in-house developed system having a revolutionary impact in implementing the paper-free communication inside the bank. An internal web portal that holds features like circulars, messaging, news, instant notices, employee profiles, on-line leave processing, on-line requisition, on-line cheque requisition, MIS reports from CBS data and many more.
Human Resource in IT Department
Today ‘IT Department’ is the most important department in any bank which was hardly found a decade ago. This departments works like a power-hose of a bank. Most of the IT departments are headed by DMD equivalent executives. Approximately, 3500 IT professionals has been working in those departments.
Core Banking Software (CBS)
Using the CBS Systems, banks are providing real-time online banking services to its customers. It has also the capability to provide centralized MIS and ad hoc reports. Moreover, it is also helping to ensure seamless flow of information in a secured manner at all levels of the management. In today’s highly volatile and competitive business environment, a centralized robust CBS that can accommodate all the electronic delivery channels is a must for survival in the race of competition.
Data Communication Infrastructure
Reliability of data communication link is a matter of the utmost importance for smooth operation of online banking. Optical fiber transmission system is more reliable compared to other transmission links. A decade ago it was a dream to get an optical fiber connectivity in Bangladesh. But, recent development of the optical-fiber network of the country have brought huge opportunities for banks to run online banking activities easily. Following table shows that banks are now trying to give more priority to use optical fiber link compared to other links to ensure stable online data services. Moreover, around 94% banks use dual links for online branch, ATMs or ADCs.
Internet Banking
Bangladeshi customers are now able to do banking from any place of the globe at any time by using Internet technology.
ATM Banking
Besides expanding the ATM networks, the banks are also giving emphasis on increasing their POST network covering the major outlets for ease of purchase for the customers. Many banks have installed POS terminals in major shops, hotels, sale centre, etc., all over the country. POST allows all types of debit card and credit cards for making transactions.
Mobile Financial Services (Mobile Banking)
Mobile banking is a term used for performing banking activities via a mobile device such as a mobile phone. The developments in mobile phone density in Bangladesh, with 132 million subscribers, present a unique opportunity to leverage the mobile platform to meet the objectives and challenges of financial inclusion.
Banks are already carrying out activities such as disbursement of inward remittances, financial transactions through agent/ bank branch/ ATM/ mobile operator outlet, payments of business organizations (such as utility bills) by individuals, payment of individuals by business organization (such as salary distribution) payment of individuals by Government (such as old-age allowance, freedom fighter allowance, etc.), payments of Government by individuals (such as tax payments), individual to individual transactions (from one registered mobile account to another registered mobile account) and other transactions such as microfinance, overdraft facilities, insurance premiums, etc.
Agent Banking
Bangladesh Automated Clearing House (BACH)
The Bangladesh Automated Clearing House (BACH) started automated cheque clearing from 07 October 2010 by replacing the ancient manual clearing system with automation, which allows inter-bank cheques and similar type instruments to be settled instantly.
Bangladesh Electronic Funds Transfer Network (BEFTN)
The commencement of the Bangladesh Electronic Funds Transfer Network (BEFTN) added a new milestone in the country’s payment and settlement system. BEFTN is the paperless electronic exchange that ensures transfer of funds from one account to another, either within a single institution or across multiple institutions through computer-based systems.
RTGS
Bangladesh Bank is committed to provide a safe, efficient, inclusive and authorized payment and settlement system for the country. The introduction of the Real Time Gross Settlement (RTGS) system is another milestone of the country’s financial sector development. RTGS is a central processing and settlement facility system which was launched on 29th October 2015.
Online MIS in Banks
A separate MIS department can ensure precise, timely and accurate generation of MIS report. Generation of MIS report from various departments and sending it to the management at right time is a challenging job. For this reason, a separate MIS department gives benefit to an organization especially if the organization is very large.
Call Center
Giving importance to customer satisfaction and easy access to banking services, 48% banks have established its high tech contact Centre. IVR, integrated with CBS and Card system that enables customers to do banking by any phone system as well as consultation with Call Centre agents (Phone banker)
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