Embracing digital banks for economic growth

A new era has begun in the banking world of Bangladesh with the announcement of the guidelines on the establishment of Digital Banks. As per media report, 52 applications have already been submitted by banks, financial institutions, mobile financial service providers, mobile operators, ridesharing, food delivery platforms, IT service providers, energy companies, pharmaceutical companies, corrugated sheet manufacturers and foreign financial technology companies etc. Such interest being shown by a diverse group of institutions is encouraging. This digital bank known as Neo Bank seems to be new in Bangladesh, but it is already a reality in other countries. Emerging technology ideas and innovations are often sourced from developed countries. The use of emerging technologies in financial services is also learnt from them. This has helped the least developed as well as developing countries resolve problems in some areas of their operations. Therefore, many countries are taking initiatives to make the digital bank concept into a reality. By reducing dependence on cash transactions, the branchless digital banking system will take the country forward on the path of 'Smart Bangladesh'.
Let's take a look at the cost involved in cash-based transactions. Bangladesh Bank calculated the annual cost of cash dependencies based on a survey carried out by McKinsey & Company, a US-based management consulting firm, published a report. The survey report states that Bangladesh has to spend Tk. 90 billion annually and the maintenance cost of printed money is about 0.50 per cent of the country's GDP. The US credit rating agency Moody's Investors Service conducted an analysis of card usage in 70 countries, showing that if card usage increased by 1.0 per cent, GDP growth in developing countries would increase by 0.02 per cent and in developed countries by 0.04 per cent. So it is seen that economic growth and development can be achieved if cash dependence can be reduced.
Digital banking has been practiced in the country for a long time albeit in a limited scale. After the publication of the latest guidelines, the opportunity to open digital banks has come formally. Products and services of the digital banks need to be designed using the best available technology, as guidelines indicated. Globally, a good number of banks are now in operation,
The reason for the popularity of digital banks is that by ensuring the best utilisation of technological advancements they can provide more convenient and customer-friendly financial services to their clients at a low cost.In our country also customers will want to get fast service at low cost. Therefore, the ability of digital banks to make service processes fast and service procedures smooth is an important part of standard as a digital bank and will play an important role in the market.Customer service will be more modern and improved if digital banks keep the following points in mind.
EASY ONBOARDING IN DIGITAL BANKING
Digital on-boarding in banking is a process that gives customers automated access to financial products and services. This may include opening an account with a digital bank or neobank, taking out a loan and other services.Many would-be licensed digital banks may have an easy and fast on-boarding system but those who are new to this digital platform need to pay more attention to this issue. Otherwise, they will lag far behind other competitors having pre-existing network of physical touchpoints. Because this is where the primary service starts and where a customer's interest is created. Section 9.7 of Digital Bank's Guidelines of the BB has offered the option of offering virtual cards or QR codes or advanced technology-based products to customers. And in this way digital banks will be able to reach other customers by the existing network.
24/7 SERVICE
24 hours service is one of the main features of Digital Bank. Therefore, there is a need to have a technology-based dispute resolution process for service delivery and day to day transaction dispute resolution. Section 9.3 of the Digital Bank Guidelines does also mention the dispute resolution mechanism based on Artificial Intelligence (AI) supported technology. In this case, this service can be provided through AI-supported chatbots. So how quickly the technology is able to settle everyday transaction disputes to keep competing digital banks in mind. This issue may affect customers regarding digital banks. However, technological neutrality has somewhat compromised by specifying the technology rather the functions it needs to address. The option of business plan from the interested groups may raise alternative viewpoints and business justifications to counter on.
USE OF ALTERNATIVE CREDIT SCORING SYSTEMS
Digital banks should have the facility to process loans quickly. In that case, Section 9.22 of the Guidelines state that alternative credit scoring systems supported by AI may be used. According to Section 9.10, Digital Bank can give loans to all sectors except foreign trade, medium and large industries. Using this alternative credit scoring system will facilitate customer credit risk analysis. Therefore, competing digital banks will take a step forward in service delivery if they can present innovative loan products to customers. It also needs us to remind that the credit scoring models are culture specific rather universal, and banks are making thousands of calibration before finding a suitable one to scale.
INTRODUCING INNOVATIVE DIGITAL FINANCIAL PRODUCTS AS PER CUSTOMER DEMAND
Digital banks need to introduce innovative digital financial products and constantly modernize their features according to customer needs. In this regard, digital banks must ensure the use of AI, Machine Learning, Blockchain and other advanced technologies as per Section 9.4 of the Guidelines.
When customers get the above benefits from digital banks, they will be able to differentiate digital banks from traditional banks. And in this way digital bank has the opportunity to generate more interest from the commercial side. Digital bank has the potential for securing the top position in the banking world of the country.

A. S. M. Ahsan Habib, Certified Digital Finance Practitioner (CDFP) and Manager of Shimanto Bank Limited
Email:ahabib46@gmail.com