Local CBS to help thrive banking sector

With the global economic slowdown and widespread budget cuts, country's local banks can save the Foreign Currency (FC) spending enormously, if they go for locally developed Core Banking System (CBS) & other Banking / FinTech Solutions.
According to Mahmud Hossain, Managing Director & CEO of Millennium Information Solutions Ltd the CBS is not the complete solution for a bank, it is rather the core transactions and data management system. Banks typically require several other sub-systems that integrate with the CBS, for example: alternative delivery channels, regulatory compliance, risk management, statutory reporting, integration with local/global FinTech eco-system, local exchange connectivity (BFTN, NPSB, Clearing etc), Agent banking, Offshore banking etc. Opting for a local solution hence offers efficiency in terms of smoother integrations and better service delivery.
"Only state-owned Agrani Bank Limited's annual cost is Tk 263.73 crore with the use of Swiss technology Temenos, but it could be half of the amount, if the bank uses local CBS," Mahmud Hossain pointed out.
"Following the globally successful trends, our entire local banking and financing industry seriously needs to do prudent investments in their digital transformations to design efficient business processes, improve their CBS and other application User Experiences (UX). Here investments in people, process and technologies are all important, but a well-built robust but extensible and scalable CBS is the foundational business area to consider for the commercial banks," Mohammed Ali, advisor of Premier Bank Ltd told the FE.
A couple of banks have built their own lab-grown CBS and maintain them with a huge number of IT resource personnel, but that cannot be the answer to this problem. It will not be cost-effective in the long run.
Moreover, the latest study advocates that the businesses should concentrate on its own core competency. Building and maintaining software cannot be part of the core area of financial institutions. A financial institution cannot provide the environment required for a quality software company within their management framework, where fostering and nurturing talents, promoting innovation through R&D explorations are key success factors here. Moreover, optimization of resources in this field only could be done by a software company itself rather than a financial institution.
"Identifying the existing visionary companies with robust products and having a long-term and win-win arrangement with them could be a good answer to this puzzle. Moreover, more and more such companies should be built and patronized by the financial institutions and large conglomerates like our neighbouring countries," M Nurul Alam, country coordinator of US-based CGIA (chartered global investment analyst) network-Bangladesh said.
Despite repeated attempts, Md Serajul Islam, the Bangladesh Bank spokesperson could not be reached.
Market insiders said as the government of Bangladesh is promoting the local IT industry especially for the banking sector and has signed an MOU with the Bangladesh Bank facilitating software sale of BDT 300 crore in this sector for the period 2020-2022 as stated by Minister of State for ICT Division Mr. Zunaid Ahmed Palak, MP, the demand for use of local CBS becomes more pertinent.
Besides the above data, there are a total 28 banks including both from the public and private sectors that have been using foreign CBS. The related CBS and other banking solutions expenses data from the private sector banks are not public yet. This might add to the perennial problem of losing the precious foreign currency with unnecessary imports to bleed hard-earned money.
Some banks are using two CBS, one for conventional and other for Islamic banking.
On the contrary, neighbouring Indian banks are using nearly 100% of their locally developed CBS, which saves their hard earned foreign currencies. Rather, the Indian software companies are selling their home-grown CBS and other software products to the international markets. These Indian companies are also implementing and supporting foreign CBS and other software products to countries like us as dealers/distributors/value added partners. Many international CBS and other Banking Solution Providers have their support and production centre in Bangalore and Chennai. The same is the case with the Philippines.
Although there could be very few sporadic outliers, the local banking industry professionals strongly attest the fact that our long matured local CBS can now satisfy all the needed functionalities of our local banking system. In fact, there is not a single banking feature or functionality of any Global CBS that is really in use in Bangladesh, which cannot be performed by the well-built local CBS. We certainly have a scarcity of well-built local CBS, but these are available by now in limited numbers. Moreover, patronization, support and long-term investment are required by institutions or conglomerates, like our neighboring country did to grow more such banking solutions providers.
Moreover, in that case the country could see more decent growth of white-collar jobs, where our talented youths could have been properly utilized. Some 65,000 young professionals get training on ICT-related subjects every year in the country. We are producing a sufficient number of Engineers and IT professionals, and also high quality business graduates (required for the business domain of banking application) from good Universities. However, since the local solutions are not being adopted or properly recognized by the Banks and Financial Institutions with due recognition and respect in terms of pricing and partnering, these resources could not be absorbed or utilized by the good software solution companies.

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