Thursday, 28 September, 2023

Digital Banking - a New Hope

Digital Banking - a New Hope

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Brigadier General Md Munirul Islam

While reading a book named “One Man’s view of the world” written by Lee Kuan Yew, the first Prime Minister of Singapore, I came across a Vietnamese word “Doi Moi”; which means “Renovation or Innovation”. It is a general term used in Vietnam to the economic reforms initiated in 1986. As per UN General Assembly decision held in November 2021, Bangladesh will be out of the Least Developed Countries (LDC) and step in as Developing Country on November 24, 2026. During this transformation, lot of renovation works are ongoing in different forms. In many cases, innovations are done too. Bangladesh has shifted from analogue to digitization. Now, we are planning to move forward for making Smart Bangladesh in future. To my understanding Allah (SWT) has given us two eyes in the front side of our face. These two eyes help us to think ahead, to move forward, to make the future plan, to see above the horizon and then progress further. A good plan by a nation helps for her advancement.

From Lee Kuan’s book we find that he was a child in 1920, it took him one hour on a bullock cart to travel from Bedok (Eastern part of Singapore) to his grandfather’s rubber state in Chai Chee (Just two miles away). In 1930s, he was a university student in England. Usually, it took him three weeks to go to London by ships; i.e. Brotanno (A Trans-Atlantic Liner for carrying troops). In 1950s, sea plane used to travel between Singapore and UK. It took four to five days, which would land in Cairo, Karachi and Colombo, before reaching Singapore. Today, a flight between Singapore and London takes 12 hours. The advancement has brought profound changes in their lives. In recent past, lot of progress has been done in our country too. As there is no limit for advancement, so we have always scope for development in every corner. Digital banking system in Bangladesh is one of such stepping forward to a new horizon.

Recently, Bangladesh Bank (BB) has issued a circular for establishing Digital Bank in Bangladesh. In the circular it has mentioned that as digital innovation is modifying the landscape of the financial system all over the world, therefore BB recognizes the role of digital platforms and use of Artificial Intelligence (AI) to make a robust, efficient and secured financial system. BB has decided in principle to issue license for digital banking system pursuant to section 31 of the Bank Company Act 1991. It must be a public limited company. Initial minimum paid-up capital is BDT 125.00 crore by the sponsors, minimum share holding stake by each sponsor is 50.00 lac taka.

In a very simple term, digital banking can be defined as banking done through any digital platform, away from all paper work like Cheques, pay-in-slips, demand drafts etc. It means availability of all banking support through online. The shift from traditional to digital banking is gradual but remains ongoing. It involves high level of process automation and web-based services. It allows the customers to access financial data through desktop, mobile, ATM services and other electronic gazettes having internet facility. History of digital banking can be traced back to 1960. At that time banks started using computers to automate few banking functions; i.e. account management, processing checks etc. In 1960s, Bank of America introduced the first ATM. In 1980s Citi Bank started first online banking. Due to increased use of internet, online banking portals were developed in 1990s to 2000s. Thus online banking was getting popular due to its convenience. Use of smart phone got popular in the late 2000s and early 2010s. Banks started offering mobile apps to their customers to access their accounts from smart phones. Now, technological advancements like AI will have a major positive impact on the future of digital banking.

Digital banking will allow a customer to operate his/her account 24/7, in any terrain, in any weather, in any form and in any fashion. It gives complete flexibility to the customers. It does not need to make any earlier plan to go to a traditional bank. Online shopping is getting very popular for all ages and sex. Online payment is very easy in digital banking. Digital banking will lower the use of currency. It promotes cashless society. Thus, digital banking will restrict the circulation of black money in the society.

Every coin has its opposite side too. The same may happen in digital banking too. As the software engineers prepare the solutions, the hackers use their brain to find out the counter measures and loopholes of the solutions. So, is digital banking completely safe? Probably there is vulnerability. So, lots of security systems need to be installed. A security should be in many layers. Passwords should be strong, confidential and changed regularly. Public network and devices to be avoided, user’s name and passwords for banks should not be saved here and there, no confidential information to be shared. Getting in-person customer support will be difficult except online support. It there is any disruption in technology or no access to internet then digital banking is not possible.

China is already a cashless economy. A large amount of payment is done through mobile phone and e-payment using Wechat pay and Alipay. WeBank recognized as “Best Global Digital Bank” in 2023 by the Asian Banker. This Bank started functioning in December 2014. NuBank based in Brazil is the largest digital bank by valuation. Chime is the biggest digital bank in the USA, with over 13.1 million users. As of 17 October 2022, 75 digital banking units are operational across 75 districts in India. There is at least one digital banking unit set up in each of the 29 states. The bank of Scotland is the first bank to provide electronic home banking services to its clients in 1985. The first website for banking services was launched by Standard Credit Union in 1994 and is a milestone in the history of digital banking.

Till today, there is no digital bank operating in Bangladesh. A total of 52 domestic and foreign entities have applied to the central bank for the license to set up digital banks. A consortium of 10 (ten) private banks have collaboratively taken the initiative to launch a digital bank named ‘DiGi10’ (Digital Bank PLC). The banks are: Trust Bank, City Bank, Mutual Trust Bank, Eastern Bank Limited, Dutch Bangla Bank Limited, Prime Bank, Pubali Bank, National Credit and Commerce Bank, Mercantile Bank and Midland Bank. Four state owned banks Sonali, Agrani, Janata and Rupali Bank want to set up another digital bank. State run MFS provider Nagad, bkash, Banglalink and digital services company Pathao have applied to set up a digital bank as well.

The banking industry is undergoing major transformation in recent time. Technology is playing a master role in shaping the future. The rise of digital banking will be a game-changer in the banking sector of Bangladesh. If digital transformation in banking sector can be done honestly, then customer loyalty on digi banking will increase in manifolds.


The writer is a Director, Trust Bank Limited