Digital banking – prompt service at lower costs

Years back, people were extremely dependent on post offices to send money to their near and dear ones through 'money order'.  But the money used to take a week or more to reach the recipients. Despite having emergency, people were required to wait in queues in banks either to withdraw or deposit money,

The same happened in the case of payment of utility bills. Now the situation has changed to a great extent. One can easily do all these things easily. Anyone can send money using his/her mobile phone. People can also do their banking online through the mobile phones, computers and laptops anytime, either from their homes or offices.

This has happened mainly because of a vast expansion of mobile network and access to internet facilities and a steep rise in the users of mobile-phones and ICT devises across the country over the last decade. The country's banks and financial institutions have already adopted various products and services on the back of such ICT technologies.

Digital banking does not only mean online banking, internet banking, mobile banking or paperless banking, but it is also the applications of new technologies to transform the existing banking business model into a new banking operations.

The digital banking is a model that generate new customer base, introduce new services and improve and prompt service delivery to clients at comparatively lower costs.

Keeping these in view, banks and other financial institutions are gradually switching over to digitalisation.

Among the digital banking and financial services, mobile banking has made a phenomenal growth over the years both in terms of volume of transactions and number of clients. At present, mobile banking services provided by banks or other financial institutions allow its customers to carry out a range of financial transactions remotely through using mobile devices.

According to the central bank data, some 17 banks are providing mobile financial services. The number of clients has now stood at 7.59 million in June 2017, of them 53.7 million were registered ones. Besides, the volume of average transactions through mobile banking is estimated at Tk 10 billion per day with the number of average transactions reaching 6.0 million per day.  

Among others, cash transactions, person to person (P2P) transactions, salary disbursements, utility bill payments, payments against goods and services also take place through mobile financial services. From legal and regulatory perspective, only the bank-led model is allowed to operate in Bangladesh.

On the other hand, the use of plastic money - credit and debit cards -has been on the rise in the country. Currently, around 9.0 million debit cards and nearly 1.0 million credit cards are in use in the country. The monthly transitions through debit cards are estimated at Tk100 billion and that of nearly Tk 7.50 billion through debit cards, data from banking sectors suggest.

There has been a growing use of plastic money (cards) for shopping purposes and also for making payment for other products and services like purchase of air tickets, payment of taxi fares etc.

Apart from the rapid growth of mobile financial transactions and use of plastic money, extent of online banking has also been on the rise over the years.

But, despite having a rapid growth, the digital banking or financial transactions has some challenges also. Fraudulence, heists, hackings, cyber attacks, acts of illicit fund transfers and terror-financing are among the major challenges or threats.

The world's biggest cyber theft occurred in 2015, through which hackers stole Bangladesh Bank's reserve fund kept with Federal Reserve Bank in New York in 2015 can be cited as an example. Moreover, a series of heist incidents also took place at different automated teller machine (ATM) booths in Dhaka through using counterfeit plastic money (cards) more than a year back.

Apart from such heists, incidents of frauds, cheating and transfer of illicit fund are claimed to have taken place occasionally in the forms of mobile financial transactions.

A study reveals that ransomware -- a type of malicious software that block access to the users in to their system or computers -- attacks that took place across the world had costs US$1 billion in 2016, a study said, adding cyber crime damage will cost $6 trillion by 2021 from $3 trillion in 2015.        The central banks of Bangladesh has already put in place a set of regulatory frameworks including policy guidelines, coupled with establishment of a National Payment Switch (NPS) system in order to promote, regulate and ensure a secure and efficient financial transactions. But, still there remains a challenging task for ensuring proper monitoring and enforcement of such policies and regulations.

Apart from the oversight and regulatory aspects, many banks, financial institutions and service providers are yet to be equipped with sufficient skills and infrastructures to cope with any emerging or untoward situation in respect of digital financial transactions.

According to a study of the Bangladesh Institute of Bank Management (BIBM), which was presented at a seminar recently, no bank in Bangladesh is now ready to face data-centre collapse.  

Another study of the BIBM has revealed that around 70 per cent employees of banks and financial institutions are not aware of cyber security or threats. Moreover, about 26 per cent of banks do not have proper security awareness programmes, according to the study.

Considering the overall situation, one can suggest that apart from having time-bound policies and regulatory frameworks, there is an urgent need for strengthening the oversight and capacity of authorities and service providers concerned to deal with ever-growing digital banking and mobile-based financial transactions in the country.

Development of skilled manpower through conducting necessary training programmes and adoption of advanced technologies and infrastructures are also seen necessary in the wake of growing cyber threats and other challenges to this effect.

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