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The Financial Express

Digitised banking -- Bangladesh perspective

Shah Ahsan Habib | Published: December 24, 2019 21:00:44


Digitised banking -- Bangladesh perspective

'Supportive policy and regulatory environment' is the key precondition for banks' digitisation journey. Bangladesh government's Digital Bangladesh by 2021 vision proposes for mainstreaming ICT for greater welfare of the society. The country's central bank, Bangladesh Bank, has been active in supporting and promoting banks to undertake digitalisation measures by establishing related departments, introducing supportive policies and guidelines. Backed by the initiative of the BB, banks of the country are now using core banking software, and have already automated several operations. Technology has already enabled most of the banks in Bangladesh to introduce digital products to their customers in the form of ATM/POST facility, Mobile/Tele banking, Web banking, 'Anytime' and 'Anywhere' banking, etc. 

BB has also brought notable improvements in digitising banks' reporting system. Banks are required to submit various reports to the central bank as part of their regular activity. Some of the reports are paper-based while some are paperless. Among them Integrated Supervision System (ISS) is a web-based monitoring tool which integrates the existing multifold supervision mechanism of Bangladesh Bank. Not only the central bank but also the scheduled banks can use it for monitoring and supervising their branch offices. The introduction of ISS helped banks to ensure paperless and effective supervision.

Bangladesh Bank introduced automated CIB service which provides credit related information electronically to banks for prospective and existing borrowers. With this improved and efficient system, banks can ensure more effective credit risk management. It is essential for the banks to submit a number of reports to the regulator as part of their regular credit related activities. Most of the reports are submitted either in online/softcopy format or in both hard copy and soft copy format.

BB has also brought about major changes in traditional reporting of trade services. From January 2013, BB has launched online reporting of all inward and outward remittances of authorised dealers (ADs). ADs are required to report transaction online which helps BB, head office of banks, customs, NBR and different ministries to establish greater coordination in formulating policy and for running day-to-day operations. ADs are, therefore, required to report all types of their foreign exchange transactions on a daily basis through web portal. Also the central bank has instructed all banks to submit their exchange position through Rationalised Input Template (RIT) in web portal instead of emails. In order to monitor special FC account transactions, online special foreign currency account monitoring system is used. The introduction of Dashboard and online integration between customs and BB has brought major changes.

No doubt, using technology and greater coordination are paying off the regulator and market players in terms of saving resources and time. To ease the declaration procedure, BB has decided to introduce electronic option to submit EXP Form, with the flexibility of necessary amendments by exporters through Bangladesh Bank online reporting portal for export of goods prior to customs formalities. Accordingly, ADs are supposed to accept EXP Form submitted electronically by their customers, information of which will subsequently be available in customs electronic system. The initiative is helpful to reduce the paper-based documents.

Bangladesh Bank contributed significantly towards facilitating paperless payment. One important development in collection of cheques, handling transfer transactions, operations of clearing house is the introduction of Bangladesh Automated Cheque Processing Systems (BACPS), Bangladesh Electronic Fund Transfer Network (BEFTN), National Payment Switch Bangladesh (NPSB) and Real Time Gross Settlement (RTGS). The main objective of the initiative is to bring the whole country under a single clearing umbrella for ensuring secured and cost-effective inter-bank transactions electronically. The process not only reduces the processing time but also significantly reduces processing related documents.

Regarding technology infrastructure for digitalisation of documents, there is no doubt that the banking sector as a whole has made notable improvements. Alongside multinational banks, some private commercial banks have installed updated technology infrastructure. In Bangladesh, Core Banking Software has been playing the key role for running online banking business. It is helping banks to provide real-time online banking services to their customers through all branches. Customers' touch points like ATM, POS terminal and internet banking give 24/7 banking facilities without using any paper-based documents.

Use of Document Management System (DMS) by some banks has brought a revolution for capturing, archiving and sharing documents. Under this system, whenever a document enters into bank premises, it is captured into the system and linked with the application where it is required.

Online reporting of the central bank improved the entire regulatory compliance frameworks. The technology transformation of the central bank and the banking industry has implications on the use of paper documents, cost and time involvement, and also on the efficiency of overall service delivery by banks. The green banking initiatives in the banking industry is also pushing for the adoption of environment friendly technology and paper saving in banking operation and product delivery. However, several banking operations, product processes, or certain segments of product processes are yet to be digitised.

One important banking operation-- credit related activities needs to be further geared up towards digitisation. Some banks have made the process automated in an attempt to drastically reduce paper-based work. It is the need of the time to process credit related documents electronically as much as possible. Digital transformation has the power to enhance performance and to correct various types of process lapses. It can also improve the core competence of banks and generate opportunities for profitable new business growth.

Similarly, there is the need to simplify the account opening procedure through automation. There is scope of saving huge cost only by reducing the number of pages in the account opening process and other paper-based forms. As a positive move, Bangladesh Bank has decided to simplify the account opening form by reducing the pages of the account opening form and also by introducing e-KYC. Practically, there is scope of saving huge cost only by reducing the number of pages in the account opening and other paper-based forms. Bank can verify the identity of the customer through NID with the central database of election commission as part of the validation process. This effort will obviously help simplify account opening process and ensure reduction of paper-based work.

Banking industry of Bangladesh has been facilitating payment, finance and risk management services to the traders, and thus contributing towards growing global trade integration of the country. Banks have considerable involvement in trade facilitation by engaging in relevant legal enforcements and commercial risk minimisation.

 In regard to digitisation efforts at the level of product processes, while few banks started archiving their trade related data digitally, many banks are still using paper format. There are scattered initiatives; however, banks and the stakeholders are yet to start piloting any upcoming digital solutions.

Certain challenges cannot be avoided while moving towards digitisation.  Security concern is indeed a critical challenge. However, given the immense benefits of technology adoption for better banking, it is expected that security protocols uniformly followed all over the world would pave the way for minimising risks. 

 

Professor Shah Ahsan Habib is director (training) at the Bangladesh Institute of Bank Management (BIBM).

 ahsan@bibm.org.bd

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