The Covid-19 pandemic has caused severe and protracted disruptions to the livelihoods of people all around the world, both in developing and developed countries and also in the banking arena of countries. The outbreak is causing widespread concern and economic hardship for consumers, businesses and communities across the globe. The situation is changing rapidly with extensive impacts and many companies failed to address the fast-moving and unknown variables of an outbreak like Covid-19. As a matter of fact, many financial institutions are now under stress. In addition to this, recent interest rate cuts and the economic slowdown have radically made the overall banking environment of Bangladesh even more complex and uncertain. Banks and other financial institutions are now in need of shaping and re-shaping their existing activities and model keeping in mind the following:
l Banks must continue to focus on customers' needs to help them recover from the impact of Covid-19.
l Equally, banks must adapt their operating models to drive efficiency and resilience.
l Risk management thresholds need to be reassessed, and
l Initiation of innovative and digitized banking products and services to serve amidst the Covid outbreak.
Even though of the Covid-19 catastrophe, it creates new opportunities for the banks and NBFIs to rethink and act to get mileage out of the average. As part of the global response to Covid-19, the digital finance has been playing a key role in developing, providing services and innovations that have mitigated, at least partially, the disruptions brought about by the pandemic on multiple aspects of people's lives. The digital and innovative financial solution is thereby enabling and sustaining the flow of cash, credit, deposits, investments, salaries, government-to-persons (G2P) and peer-to-peer (P2P) transfers at national and regional levels. Hence, traditional financial institutions have been forced to radically re-think their business models and delivery mechanisms. From a developmental perspective, this accelerated shift towards a digitalization of financial services can prove to be an unexpected boon for financial inclusion amid the disruptions brought about by Covid-19. Before the crisis, digital finance had already proven to be a fundamental enabler of financial inclusion in developing and emerging economies, especially when it came to reaching and serving the most isolated and financially underserved individuals. Overall, even after the pandemic is over, the trajectory of digital financial inclusion at the global level is bound to be ongoing without doubt.
In Bangladesh, financial institutions may face challenges to provide digital functionality which is simple, fast, customized and convenient because of the lack of well-established model and guidelines, intention to invest, inflexibilities and lack of skilled workforce. Here, the process should be completed faster than the contemporary systems and more importantly can be operated off-sight. Moreover, the system should have contingency layers of operations to adopt potential natural and human-acted bizarre events. As the digitisation is going high, financial institutions should realise that the risk of not providing this level of customer experience will lead to the potential shift in new and existing business to organisations that have succeeded in rethinking legacy processes for a new digital reality. In this new normal era, banks and other financial organisations should minimise the performance gap to be commensurate with the digital transformation. Therefore, banks and NBFIs should now prioritise the strategic goals and adopt digitized financial solution amidst Covid-19 pandemic and its aftermath: 1. Become an intelligent bank, 2. Improve business resilience, 3.Enhance customer centricity, 4. Improve agility, and 5. Create new opportunities in the banking ecosystems
In both retail and corporate segment, the pandemic helped shake up some long-held beliefs about the predominance of the branch when it comes to some general banking services like: new account opening, deposit, withdrawal, transfers, collections, bills pay, account enquiries, submission of applications for loans and advances, account customization and so on. Adding digital consumer banking systems will surely reduce the human effort and ensure customer centricity more conveniently through online-platform or through using kiosks. No one would be surprise anymore in coming days, if mainstream banks and financial institutions start giving this digital experience to customers to avoid gathering on branch premises. And as it is now more normalised as the pandemic is extended from year to year; the banking ecosystem has to modify to ensure flexibility, adaptability, self-sufficiency. Financial institutions in Bangladesh need to create, innovate and collaborate at a pace which has never been imagined before. But it has to keep in mind that to become successful in digital banking transformation; there must be an alignment between all areas of an organisation, starting at the top.
So, without any doubt, it can be uttered that automation is a key tool for banking in the coming years. Next-generation banking automation will enable banks to use sophisticated workflows to execute complex processes. Artificial Intelligence (AI) and technological advancements will render better management of banking services executed at lower operational costs. AI, Data Analytics, and Machine Learning will not only enable a better customer experience but also help effectively process the large volumes of data going through the banking system. Adoption of RPAs (Robotic Process Automations) will offer significant benefits to the KYC/AML processes. Intelligent automation will also help digitise high volumes of documents and data which will make it easier to be extracted, indexed, and uploaded into a KYC (Know Your Customer) /AML (Anti-Money Laundering) compliance system that can then quickly assess risks without any human intervention. RPAs and Machine Learning technologies are also considered now as leveraged to help retail customers in managing account opening applications, accelerating payment authorisations, and setting up standard instructions for automated payments. Upon fetching data from multiple sources, RPA/AI can analyze customer profiles, web data, and past interactions to provide product recommendations and other personalised suggestions - which will definitely reduce the advertisement and brand promotion cost of the organisation significantly.
On the other hand, due to the Covid-19 crisis credit growth and recovery have significantly been affected, innovations in technology models should be deployed to drive lending and revive economic activity. Customization of financial products and Integrated Finance Solutions are two such innovations which can be implemented by banks to analyze micro and macro level market understanding and segment-wise, market-wise product customisations with a view to enhancing potentiality. Integration of APIs (Application Programming Interface) in banking industry will build a sound ecosystem partnerships with corporate and MSMEs which will break the wall of deprivation and also enable tapping into the uncovered areas of financing.
This digital transformation will capture new growth opportunities and create more intelligent customer experiences. Investment in such automation and technological advancement will allow banks to quantify their risk more accurately and offer competitive advantage. Intelligent processes will enable financial organisations to offer value-added services beyond banking and to bring those products/services to the market more quickly and easily with a view to cross-selling.
Nevertheless, to ensure secure transactions, adoption of Block-chain technology will play a key role in transforming the banking sector in Bangladesh. Transactions are not only needed to be secured but also need a level of transparency that will increase the customers' trust in financial organization in automated and digitised banking environment. Block-chain technology would be a major necessity in both traditional and online banking as the financial sector has vast amounts of sensitive data prone to hacking. In addition, to prepare for emerging problems, banks must take a security-by-design approach that weaves their cyber security requirements into all aspects of their digital architecture.
Hence, recovery from the slowdown caused by the Covid-19 pandemic keeping pace with the demands of next-generation customers require banks to embark on a fundamental transformation exceeding their previous efforts. Banking industry of Bangladesh will experience automation and adoption of renewed innovative approaches of connected and collaborative banking. The time is ripe for this sector to leverage technological advancements and collaborative efforts to build resilient business models that help them stay competitive and relevant in the coming years and also to be in line with the PM's aspiration to build 'Digital Bangladesh'.
The writer is Chief Financial Officer of Mercantile Bank Limited, [email protected]