Banking on e-banking
Photo: Zahedul I Khan
Online banking is a relatively new concept in Bangladesh. Like any new technology, along with the potential, it brings with it a rush of questions relating to its design, acceptability and potential risks. In the global banking scenario, cheques are passé now, and new methods of e-banking are widely welcomed. If Bangladesh's banks are to stay within the competition, they will have to move fast and initiate efforts to build the foundations for a good e-banking system. In the system of e-banking, funds are transferred through an exchange of electronic signals between financial institutions, rather than exchange of cash, cheques or other negotiable instruments. With the expansion of global information and communication technology (ICT) infrastructure and internet, e-banking is set to play a pivotal role in the national economy. Newer modes of electronic transactions are being introduced rapidly, from ATMs, telephone banking, PC banking to internet banking. Developing alternative distribution channels is important in terms of reducing costs and improving competitiveness. It also increases the financial institutions' ability to retain and expand their existing customer base. The common factors associated with e-banking are ease of use, transaction security, convenience and speed. Currently, online banking provides five basic services worldwide. It allows the users to view their account balance and transaction history, pay bills, transfer funds between accounts, request credit card advance and order cheques. Some banks also allow services such as stockmarket transactions, and the submission of standardised accounting payment files for bank transfer, to third parties. As technology evolves, different kinds of electronic banking system emerge, each bringing a new dimension to the interaction between the user and the bank. The ATM was the first well-known system that was introduced to facilitate the access of the user to his/her banking activities. Currently, the banks are considering online banking as a powerful "value added" tool to attract and retain new customers, while helping to eliminate costly paper handling and teller interactions in an increasingly competitive banking environment. E-banking is now a global phenomenon. Apart from the developed world, the developing countries are also experiencing strong growth in such transactions. The government's emphasis on building a digital Bangladesh, setting up an ICT park, raising allocation for developing ICT infrastructure, waiving taxes on computer peripherals and other measures, including the automation program of the banking sector have brightened the prospects of e-banking. Bangladesh Railway owns a high-speed optical fibre network (1,800 km) parallel to the railway lines that cover most of the important parts of the country. This optical fibre network can be used as the backbone network of e-banking in Bangladesh. Some banks are already using this network for conducting online transactions, ATM and POS services. Proper software, infrastructure and manpower are important for the implementation of e-banking. Internet penetration is a key factor for the growth of e-banking. The takeoff phase of internet banking needs at least 30 percent internet usage among the population. Moreover, the government may provide subsidy for surfing cost, organise training and widen multiple access facilities like web, telephone, ATM, etc. Moreover, adequate legal framework and security are essential. Mobile banking is a prospective area for two reasons: it covers almost all activities involved in retail banking; and mobile phone network has already been spread all over the country covering more than 30 million people. Because of convenience, a sizeable share of the unbanked people can be brought under the network, especially in the rural areas. In this context, it is important to formulate relevant acts, policies, and adopt guidelines. Although e-banking has bright prospects, it involves financial risks as well. The major risks will come from operation (security risks, system design, implementation and maintenance risks), customers' misuse of products and services, legal issues, strategy, reputation, credit, market and liquidity. Bangladesh is now lagging behind in acquiring the required quality of banking services to effectively compete in the global market. Therefore, the banking system needs upgradation for which urgent measures are needed for the rapid expansion of e-banking.
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