Banks must invest in digital tech for survival

FE REPORT | Friday, 26 May 2023

Banks must invest heavily in adoption of digital technology for their existence in the highly competitive market in this era of fourth industrial revolution (4IR), said Chairman of the Association of Bankers, Bangladesh (ABB) Limited Selim R. F. Hussain.
Terming the digitisation progress in the entire banking industry 'slow', he said some 7-8 banks have made good progress while others haven't.
The banks urgently need to come out of the decade-old legacy banking and move ahead with short-term, medium-term and long-term investment plans to stay alive in the market, he observed.
"It will be difficult for the banks, especially those that will not invest in technology, to find existence in the next five to seven years. It's a do-or-die situation…survival of the fittest," he told a group of reporters on the sidelines of the two-day-long digital transformation summit that ended on Thursday.

The chairman of the ABB - the apex body of managing directors and CEOs of the country's scheduled banks - said automation in the areas of core banking system, card management and basic payment system will not be enough for the sustainability of the banks.
"Banks need to step into the next level of digitisation. Investing in only technology will not work unless the banks give the same focus on investment in developing human resources, process upgradation and cyber security," he said.
Asked if the banks can afford such investment at this time when the lending entities are under immense pressure amid growing NPL (non-performing loan) buildup, rising costs of fund and downward trend of NIM (net interest margin), Mr Hussain said certainly there is a pressure on the banks because of falling profitability.
Alongside taking effective measures to reduce the legacy of old NPLs, he said steps are also required to prevent future scope of bad loans.
At the same time, the profitability-enhancing mechanism needs to be strengthened, added the ABB chairman. "If the banks are not profitable, how would they invest in the area? But I think additional investment will be needed."
Citing example of Singapore-based DBS bank, one of the world's leading technology-driven bank, Mr Hussain said the DBS bank executive told the summit that it took the digitisation move 10 years ago with three-tier investment plan - short-term (one year), medium-term (1-3 years) and long-term (more than 3 years).
"Now see, where does the bank stand today? It is one of the leading technology driven banks of the world. We need to do something like that," added Mr Hussain, also managing director and chief executive officer of BRAC Bank Limited.
Responding to another question, the ABB chief said the commercial banks will have to give similar investment priority on digital technology, enabling human resources and cyber security.
"Weakness in the security structure can spell catastrophe in any bank. To avert such risks, we need to invest in technology, manpower, process development and cyber security. This is a must."
The ABB arranged the summit so that the banks can get enough knowledge regarding the digital transformation process from the world's leading institutions like banks and IT firms, added Mr Hussain.
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