Assignment on The current status and the prospect of Ebanking in Bangladesh
Group 02
Department Of Finance University Of Dhaka
Executive Executiv e Summary Summ ary E-Banking is web-based Banking. Now a day due to emerging global economy, e-commerce and ebusiness have increasingly become a necessary component of business strategy and a strong catalyst for economic development. As a third world developing country, Bangladesh is far behind to reach the expected level of global banking system. At present the banks in Bangladesh are using the limited electronic banking services. E-banking product and services include wholesale products for corporate customers as well as retail and fiduciary products for individual customers. Foreign commercial banks and private commercial banks are relatively in a better position to provide on line banking services. Dutch bangle bank is acting as a pioneer in this sector. Customers who are habituated with online banking thinks that online banking services are relatively good then manual system, but they not satisfied with the quality of services and bank personnel behavior to that extent. Although E banking activities are experiencing lots of limitation and constraints such as lack of awareness and human capital, inadequate infrastructure, this sector has a high prospective. People are now getting interested in online transaction and government has laid out some plans for developing ICT infrastructure. Bangladesh bank take some major initiative in this regard and nationalized bank should concentrate in improving their online services spread and quality.
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Table of Contents Section Contents
Page number
1
Introduction
6
2
Overview on E banking Economic aspects of E banking
10
3 3.1 3.2 3.3 3.4 3.5
Present status of E banking in Bangladesh
13
4 4.1 4.2
Problems and prospects of e banking in BD
Product and and services available in BD
14
Customer response
16
Dutch Bangla bank Ltd. as a pioneer
21
Comparative analysis among 5 banks
28
Findings and analysis
34
SWOT analysis Limitation and constraints of e banking in Bangladesh
4.3
35 36 38 39
Prospect of e banking
5
Potential policies and implication
42
6
Summing up
44
7
Bibliography
45
3
Introduction
1.1: Origin of the study This report is prepared for Mr. Dewan Mostafizur Rahman Course instructor of “E commerce and E banking (F-404)” (F-404)” Department of Finance at University of Dhaka as a partial requirement of the course.
Our course instructor has assigned the students of the Department of Finance, BBA 14th batch to make a report on “ the current status and prospect of E banking in bangladesh ”. The standard procedure for
the long, formal report is followed here as part of the instruction of the course instructors.
1.2: Objective of the Study There are several objectives to conduct the study. These are:
(F-404)” course To fulfill the partial requirement of the “E commerce and E banking (F-404)” th
offered in BBA program in 14 batch.
To gather adequate adequate knowledge knowledge about present present status, problems and prospect of E banking in Bangladesh.
Enhance individual performance.
To improve our skills on report writing.
To meet the curiosity in this stated subject.
1.3: Methodology The information for the report was collected from secondary sources.
Secondary data has been collected from various publications and survey reports.
We use sampling for analyzing current status of E banking in Bangladesh. For this purpose we use stratified sampling. Our sampling consists of five bank from three different sectors of private commercial bank, foreign bank and nationalized bank.
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Dutch bangle bank limited
Private commercial bank
Eastern bank limited
Private commercial bank
Dhaka bank limited
Private commercial bank
Standard chartered bank limited
foreign bank
Sonali bank limited
nationalized bank
1.4: sour c ce o f d at a We collected our data from websites of the mentioned bank and various survey report and other publications.
1.5: Li mi t ta t i io ns Every study has some limitations. We faced some usual constraints during the completion of our report. The major limitations are:
Lack of experience acted as constraints in the way of careful exploration on the topic.
Busy working conditions.
5
Chapter 02
Ov er v vi i e w on E bank i in g
6
E banking The term Internet Banking or E-Banking Internet both are used as supplement. E-Banking is the o ne of the major part of E-Financing. E-Banking is web-based Banking. In other words E-Banking refers to the banking operations, which is done over World Wide Web. However, more comprehensive and wellestablished definition is given by the United Nations Conference on Trade and Development (UNCTAD). This definition covers almost almost all area of E-Banking. E-Banking. Internet banking refers to the deployment over the Internet of retail and wholesale banking services. It involves individual and corporate clients, and includes bank tr ansfers, payments and settlements, documentary collections and credits, corporate and household lending, card business and some others (UNCTAD, 2002) . E-Banking information architecture is modeled as client-server architecture. A client operating through a PC linked to Internet opens the special E-Banking site of his bank and then, using a set of special secure numbers, gets access to his bank accounts and has the opportunity to consult them, as well as to make all necessary payments and transfers from his personal accounts. When the transaction number is exhausted the bank sends him a new set of numbers for his individual transfer sessions. In some cases the bank provides customized software. The bank software program can also be utilized offline, for example for preparing the payment orders offline and then making the actual order online. The client receives all numbers separately, mainly by mail. The bank also provide clients with similar facilities in its premises so that clients can use the bank equipment such as an ATM or a special facility linked to the main terminal facility called Multimat, permitting them to effect the same account examination, payment and transfer operations without consulting the bank staff. Now a day due to emerging emer ging global economy, e-commerce and e-business have increasingly become a necessary component of business strategy and a strong catalyst for economic development. The new information technology is becoming an important factor in the future development of financial service industry, and especially banking industry.
Economic Aspect of E-Banking In Bangladesh Advantages of e-banking in Bangladesh: Bangladesh:
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There are a substantial number of educated unemployed youth forces, with ability to re ad and write English exist in the country. They can be trained within a required skill in a short time.
Short term Benefits: Reduce extra time; Increase productivity and efficiency; Eliminate duplication and wastage; Cut down maintenance, and shortage cost; Curtail security cost.
Long-term benefits: Create new opportunities of jobs for jobless; Participate in the country’s economic health; Proper
planning and monitoring; Proper use resources.
Job creation: The issue of computers eliminating jobs of people is quite emotional and painfully real. But it has two sides that automation will eliminate certain types of job job like record keeper and also create jobs like administrator, system analyst, programmer, operator etc. and help to reduce unemployment problem.
Contribution to GDP: Banks with a national economy, work towards building national capital, increasing national savings and mobilizing investments in trade and industry.
Benefits from the banks’ point of view: From the banks’ view point, the first benefits for the banks offering e -banking services is better
branding and better responsiveness to the market. The other benefits are possible to measure in monetary terms. The main goal of every company is to maximize profits for its owners and banks are not any exception. Automated e-banking services offer a perfect opportunity for maximizing profits.
Benefits from the customers’ point of view: The main ben efit from the bank customers’ point of view is significant saving of time by the automation of banking services processing and introduction of an easy maintenance tools for managing customer’s
money. The main benefits of e-banking are as follows: Increased comfort and timesaving-transactions timesaving-transactions can be made 24 hours a day, without requiring the physical interaction with the bank. Quick and continuous access to information. Corporations will have easier access to information as, they can check on multiple accounts at the click of a button.
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Better cash management. E-banking facilities speed up cash cycle and increases efficiency efficiency of business processes as large variety of cash management instruments is available on Internet sites of banks. Private customers seek slightly different kind of benefits from e -banking. Reduced costs: This is in terms of the cost of availing and using the various banking products and services. Convenience: All the banking transactions can be performed from the comfort of the home or office or from the place a customer wants t o. Speed. The response of the medium me dium is very fast; therefore customers can actually wait till the last minute before concluding a fund transfer. Fund’s management. Customers can download their history of differ ent accounts and do a “what -if” analysis on their own PC before affecting any transaction on the web.
Economical benefits: E-banking serves so many benefits not only to the bank itself, but also to the society as a whole. E banking makes finance economically possible: I.
Lower operational costs of banks
II.
Automated process
III.
Accelerated credit decisions
IV.
Lowered minimum loan size to be profitable.
Potentially lower margins: I.
Lower cost of entry
II.
Expanded financing reach
III.
Increased transparency.
Expand reach through self-service: I.
Lower transaction cost
II.
Make some corporate services economically feasible for society
III.
Make anytime access to accounts and loan information possible.
9
Chapter 03
C ur r re nt St at us o f E bank i in g i n Bangl ad esh
10
Present status of e-banking in Bangladesh As a third world developing country, Bangladesh is far behind to reach the expected level of global banking system . According to a report published in The Daily Star (4th April,2010) Bangladesh ranked 118th in the global Network Readiness Index in 20 09-10 up from 130th a year ye ar ago, showing an upward trend in the information and communication technology sector.
Banking industry in Bangladesh Total numbers of Banks in Bangladesh are forty seven. Banking sector in Bangladesh on the basis of utilization of electronic devices can be subdivided into into three groups I.
Foreign Commercial Banks Banks and Private Commercial Commercial banks especially especially 2nd(except few banks) and 3rd generation Private Banks :Fully Online banking;
II.
1st generation private banks and and some 2nd generation Private Private Commercial Banks: Medium range Online banking system ;
III.
Nationalized Commercial Banks , Specialized Banks and and Few foreign Bank branches of this subcontinent :Low grade online banking system.
At present the banks in Bangladesh B angladesh are using the limited electronic banking services. It is expected that bank can attain more profit and offer better services to its customers by, introducing on line banking facilities.
Online banking practice in foreign banks: The foreign commercial banks operating in Bangladesh like Standard Chartered Bank , Citi Corp. N.A. and the HSBC are the pioneers to introduce the electronic banking facilities. They provide ATM, Debit Card, Credit Card, Home Banking, Internet Banking, Phone Banking, on line line banking etc. services
Online banking practice in indigenous banks Among the indigenous banks, the Private Banks are ahead of the public banks. Prime bank ltd. , Dhaka bank ltd., BRAC bank ltd., Dutch-Bangla bank ltd. , Eastern and Mercantile bank ltd., ar e already stepped on towards electronic banking banking facilities. Apart from from these banks, Mutual Trust Bank ltd., also also introduced ATM service. Among the four Nationalized Commercial Banks (NCBs), (NCBs), Janata bank ltd., has some access to the electronic banking facilities. Bangladesh Bank, the Central Bank of Bangladesh, is also trying to formulate the wide structure st ructure of electronic banking facilities. All of these private banks offering limited on line banking services. Most of these banks only offer services by providing ATM card. Most of them do not offer wide range of internet banking facilities which is the main advantages of e-banking. Can deposit money in any branch and withdraw money from ATM machine- is treate d the best ebanking facility available in Bangladesh While electronic money transfer starts in a limited edition. Sonali
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and Agrani bank ltd., is also providing on line banking services in a limited scale. Rupali Bank ltd. is also developing on line banking. BASIC bank which is 100 percent public owned but served as private sector banking has a technological advancement.
E banking software supplier: Local software companies have been starting competition to supply useful complete banking software with all the basic features of banking module. However, many forms of e lectronic banking services are not possible to offer in Bangladesh at this moment due to the technology backwardness, infrastructural underdevelopment and legal infrastructure.
Bangladesh bank’s stand in connection to E-banking: E -banking: According to the report published in The Financial Express(3rd November,2009) Bangladesh Bank gave the ground breaking directives to commercial banks through a circular issued on 2nd Novemebr,2009, saying that from now on their clients can pay power, water, gas and phone bills from bank accounts and transfer funds within a bank or to other banks. The central bank said that online payments will be treated like any other cash transaction although it reminded the banks that these money transfers would be regulated by the country's strict Anti-Money Laundering Act. Meanwhile, Bangladesh bank started Automated Automated 11Clearing house on trail basis from from 8th November, 2009.Bangladesh Bank also declared that the clearing house won’t accept any
cheque from 1st April 2010 if size of the cheque is not as per the t he guideline of the MICR system. But in developed nations MICR procedure is now replaced by more sophisticated procedure such as cheque truncation process.
The country had only about 400,000 credit card holders at the end of June last year, according to Bangladesh Bank Payments and transactions by credit cards were nearly Tk11 billion in June 2008 --- one of the lowest in the world.
In Bangladesh digital divide among the Dhaka city and rest of t he country is conspicuous. E-business as a whole is confined among very few business organizations and on line banking business is expediting process of the e-business of the country.
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E-banking product available in Bangladesh E-banking product and services can include wholesale products for corporate customers as well as retail and fiduciary products for individual customers. Ultimately the product and services obtained through internet banking may mirror product and services offered through other bank delivery channels. A brief description of e-banking products are described below Automated teller machine:
An automated teller machine (ATM) is a computerized telecommunication device that provides a financial institution’s customers with a method of financial transaction in a public space without a need
for a human clerk or a bank te ller. Debit card:
A debit card is a plastic card which provides an alternative payment me thod to cash. While making purchases. The amount of a transaction is typically displayed on a card reader, after which the customer swipes the card and enters the pin number. There is usually a short delay while the EFTPOS (electronic fund transfer at point of sale) terminal contact the computer network (over a phone line and mobile connection) to verify the authorize the transaction. Credit card:
A credit card is a system of payment named after the small plastic card issued to users of t he system. A credit card is different from a debit card in that it does not remove money from the user’s account after
every transaction. In the case of credit card the issuer lends money to the customer. It is also different from a charge card though this name is sometimes used by the public to describe credit cards. This requires the balance to be paid in full e ach month. In contrast the credit card allows the customer to revolve their balance at the cost of having interest charged. Credit card facility fully fully can not be extended in the country, as common common gateway between financial institutions can not be established. Pricing mechanism of the products of country is not competitive, rater it is very much volatile. This creates a negative impact on the customers’.
Point of sale (POS):
This means a retail shop or a checkout counter in a shop or a variable location where a transaction occurs in this type of environment. Additionally point of sale sometimes refers to the electronic cash register system being used in an establishment. Point of sale system are used in restaurants, hotels and stadiums as well as retail environment in short , if something can be sold, it can be sold where a point of sale system is in use.
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Check Truncation:
This is such a service in which a financial institution doesn’t return the rejected checks with the monthly statement to their customer, rather they provide statement of rejected checks with their monthly statements. The banks store the rejected checks for a certain time period (usually 90 days). During this time period a customer can adjust /rectify the account if any imbalance is found between his own record and the bank statement provided by the bank. After the expiration of the stipulated period the rejected checks are spoiled and the bank maintains a micro film copy for a period. Home banking:
At first bank introduced telephone bill payment (TBP) so that customer could be able t o do their banking activities from their home. The next version for the home banking was Video Home Banking (VHB). The internet is expected to be a major factor for home banking. Retail Automated Clearing House Service:
It is an electronic network for financial transaction. ACH process large volume of both credit and debit transactions which are originated in batches. ACH credit transfers including direct deposit, payroll payment and payments to contractors and vendors. ACH debit transfers including customer payment of insurance premiums, mortgage loans and other kinds of bills. Businesses are also increasingly using ACH to collect the customers’ online rather than accepting credit or debit cards.
Wire transfer:
Wire transfer is a process which ensures fast and appropriate timing of fund transfer from the sender to the recipient. This kind of transfer of money could be either within the country or abroad. Funds are transferred under the following network: FED wire ( federal reserve communication system) Bank wire CHIPS (clearing house interbank payment service) SWIFT ( the society for worldwide interbank financial telecommunication) : M remittance
For sending foreign remittance four nationalized banks and fifteen private banks banks are working collaboratively with mobile phone service operators. Recently remittance could be sent in Bangladesh by banking channel through account transfer (normally takes 3 working days) or in the form of instance cash (takes 24 hours). Foreign resident people can se nd their money and PIN (personnel identification number) through mobile phone. As a result money transfer becomes relatively easy, quick and hassle free. But this system also superseded by mRemittance system. Mobile remittance service or mRemittance was introduced in the country opening doors to millions migrants workers to help tr ansfer their hard –earned money easily, effectively and most importantly ,swiftly. The first ever remittance
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service for Bangladesh was jointly launched by two local banks –Dhaka Bank ltd. and Eastern Bank ltd. – and the country’s second largest mobile operator ,Banglalink.
Security measures of e-banking:
The security of a system is the extent e xtent of protection against some unwanted occurrence such as the invasion of privacy, theft and the corruption of information or physical damage. At this system is developed through the internet there is a big chance of hacking through our system. Current browser s counter security threats with a network communication protocol called secured sockets layer (SSL). SSL is a set of rules that tells computers the step to take to improve the security level of the communication. Corporate automated clearing house:
The automated clearing house (ACH) is an electronic network for financial transaction. ACH processes large volumes of both credit and debit transactions. Which are originated in batches other retail and fiduciary products and services may include balance inquiry, funds transfer, downloading transaction information, bill presentment and payment, loan application, investment activity and other value added services. Other E-banking services available in Bangladesh: Core Banking Cluster Banking Phone Banking SMS Banking Various Cards ATM Shared (VISA/MASTER) ATM own (VISA/MASTER) PC Banking Banking KIOSK Offline Branch Computerization E-payment The credit card is available from VISA, MasterCard and VANIK. Some foreign banks provide electronic fund transfer (EFT) services. It is at an early stage and used on a very limited scale. Microchips embedded Smart Card is also becoming popular in the country, particularly for utility bill payment. Automated teller machine (ATM) is expanding rapidly in major cities. A group of domestic and foreign banks operate shared ATM network, which drastically increase access to this type of electronic banking service. The network will gradually be extended to other parts of the country.
Customers’ Response: Out of five hundred customers’ who have been using on line banking system, following results have
been gathered from the questionnaire through using snowball sampling technique. technique. In following table
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Customers’ Response who have been be en using on line banking system (% of Respondents who expressed “Yes” comment) is presented.
Comment
Dhaka(In percentage)
Chittagong(In percentage)
On line Banking services is relatively good than
79%
65%
On line banking provides good Customer service
72%
61%
Just in time services in Banking can be provided
56%
48%
Bank Personnel behave properly
52%
56%
Dealing officer is well conversant about their
48%
47%
51%
44%
67%
61%
manual system
respective Desk work Technologically improved but quality of banking services worsen off Better E-business environment
16%
On line Banking services is relatively good than manual system
19%
On line banking provides good Customer service
12% 17%
Just in time services in Banking can be provided Bank Personnel Personnel behave properly
11% 12%
Dealing officer is well conversant about their respective Desk work
13%
Technologically improved but quality of banking services worsen off Better E-business environment
This survey result demonstrate that people thinks that online banking services are relatively good then manual system, but they not satisfied with the quality of services and bank personnel behavior to that extent.
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Some major reason of customer dissatisfaction
ATM’s fall short of money
Slow bandwidth of internet may delay the transfer rate. (radio link and cable are used for internet)
Bankers make delay to provide PIN number whenever client lose his
Credit or Debit card
Charges are higher for the card.
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Dutch Bangla Bank Limited as a pioneer Number of branches Number of customers Number of ATM Number of fast track
96 branches 1.50 million 1295 50
Core Banking Software: The
truly online
core banking software,
Flexcube has
been
running
since
2004. To ensure
better customer customer service, service, the bank is upgrading its core core banking banking software from its present version to Flexcube Universal Banking Solution (UBS). In parallel, the t he whole setup of hardware is being upgraded to cope with the increased volume of transactions from different delivery channels. The core team formed in this regard are working day-night in configuring & testing of the new system which is expected to go live soon.
Oracle FLEXCUBE Core Banking Oracle FLEXCUBE Core Banking helps banks overcome the challenges of intense competition, reduced margins, and increased customer expectations by creating a unique competitive advantage built upon improved profitability and an extended customer reach. With Oracle FLEXCUBE Core Banking, banks gain a cost advantage through straight-through processing and exception handling. In addition, the solution supports regulatory requirements in key markets through a highly secure data management system, which can easily integrate with third-party solutions at your bank. Working in concert with Oracle Industry Reference Model for Banking, a comprehensive repository of industry-specific processes, Oracle FLEXCUBE Core Banking's application architecture supports agile and business processes management using Business Process Execution Language (BPEL), service-oriented architecture (SOA), and a Web services-based model. It enables integration of all third-party applications, including in-house banking software, to facilitate simple and complex business processes.
KEY TECHNICAL CAPABILITIES
24/7 processing of large transaction volumes, with high availability Multiple delivery channel support, including branches, ATMs, point-of-sale terminals, call centers, mobile devices, and internet banking An XML Web-based user interface with context-sensitive help Security management covering application and role-based access Online validations and automated exception processing Centralized, decentralized, and combination deployments Ease of integration with existing systems using flexible Java Platform, Enterprise Edition technology
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Operational risk management controls, including limits, collateral, and nonperforming assets
Upgradation of Switching Software A remarkable percentage of delivery channel ATM. As
transactions of DBBL are
such, it is equally
performed
using
the
most
popular
important to have a strong switching software to
handle different types of transactions as well as high volume of transactions. Considering this, the
bank
better
is upgrading its switching software too. The upgraded software
and
will
not
only
ensure
quick response to the requested transactions, it will also be capable to handle EMV
transactions.
EMV Issuing & Acquiring All the ATMs and POS terminals of DBBL are EMV-compliant. The EMV security policy has been introduced by Europay, MasterCard and VISA jointly to protect capturing card data and duplication of a card. We are the first first Bank in Bangladesh Bangladesh to ensure ensure such security to our valued customers. customers. DBBL has introduced EMV compliant chip based Mastercard cards and VISA Cards for the first time in Bangladesh which is the most secure card in the world. EMV compliants and accepts the following cards: •
EMV compliant chip cards of all the banks in the world;
•
Non-EMV Visa & MasterCard cards of all the banks in the world;
•
DBBL's proprietary cards (Nexus).
It took 3 years for D BBL to implement what Visa and MasterCard both deem as the future card standard. It encompasses the digital age and the new technologies that have emerged in the electronic age. Visa and MasterCard both realized that the normal card is 40 years old and the amount of fraudulent transactions were loosing customers billions. North America will be have NexusPRO card compliant by 2016. But now DBBL already t he only fully NexusPRO compliant and certified. DBBL's entire infrastructure (including ATMs) have had a costly upgrade to enable NexusPRO to Bangladesh. Brief Detail of How NexusPRO Works
Normal cards use a magnetic strip at the back of the card. The information and security on that magnetic strip is stationary and does not change. Hence it can be e asily duplicated. But NexusPRO's processor uses its processor to fully digitally lock all the information. It prevents the information from being copied as the processor 'generates' security codes rather than store it. It is a form of encryption. But NexusPRO goes even further. Visualize a series of locks and keys. Every lock has a corre sponding key. customer account at DBBL has a digital lock, while your NexusPRO card is a digital key to access it. When a fraudlent card tries to access your account, DBBL knows that the correct digital key is not pre sented and denies access. Further more, DBBL re places the account lock every second. But because a genuine
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NexusPRO card can generate the correct key using the processor, it can access open the account lock at that very moment. The next instance DBBL changes the account lock again, and your NexusPRO card has to generate the k ey again using its unique processor. The NexusPRO system also prevents one NexusPRO card from accessing another NexusPRO card. This is because all processors are unique. All NexusPRO cards generate keys differently and DBB L is aware of all the differences and knows which card is which so they can access only their authorized accounts. However this was just a brief overview how your NexusPRO card works. The detailed workings are more secure and even more revolutionary.
Mobile ATM Booth DBBL has put its level of innovation and standard of customer support to a new height by setting another milestone in the history of banking sector by adding two units of Mobile ATM booths to its existing ATM network. DBBL has become the first bank bank in the country to provide such unique service and convenience to the customers. The DBBL Mobile ATM Booth, which is outfitted in a custom-made van, is available anywhere anytime and allow customers to deposit cash / cheque, withdraw cash, inquire account balance, print mini statement, pay utility bills and to access all other services offered by a standard ATM.
Mobile Banking Around 87% of the total population of Bangladesh is un-banked. To bring such a huge population into the banking channel, DBBL is implementing a system to launch mobile banking soon. The project is in its final stage now. With this facility any person having a mobile number will be able to use his number as a bank account. In this mobile account they will be able to do the following:
Cash deposit to any Agent of DBBL
Cash withdrawal from any Agent of DBBL
Cash withdrawal from DBBL ATMs
Funds transfer to another mobile account
Utility bill payment, Tuition fee payment, Air time top-up.
Receive remittance from home and abroad
Salary disbursement
Disbursement of Govt. allowances
Merchant Payment
Balance Inquiry
Automated Teller Machine (ATM) Customers get various types of services in these ATM booths like:
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1. Cash Withdrawal 2. Balance Inquiry 3. PIN change 4. Fund Transfer (within Accounts) 5. Mini Statement 6. Cheque Book Request 7. Statement Request 8. Bill Payment for
DBBL Credit Card
GrameenPhone
CityCell
TeleTalk
Bangla Link
Alico Premium
Electricity Bill etc.
Customers of other Banks can enjoy the DBBL ATM facilities with some conditions. The Banks connected with DBBL ATMs are: 1. Southeast Bank 2. The City Bank 3. United Commercial Bank 4. Standard Bank 5. National Credit & Commerce Bank 6. Bank Asia 7. Mercantile Bank 8. Trust Bank 9. Mutual Trust Bank 10. First Security Bank 11. Dhaka Bank 12. AB Bank 13. IFIC Bank 14. Janata Bank 15. Jamuna Bank 16. Eastern Bank 17. Pubali Bank 18. Sonali Bank
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In the month of December, 2010 the total number of Cash withdrawal from ATMs was 230 million and the corresponding amount of withdrawal was Taka 13.20 billion.
Almost 1.74% of total withdrawals was from from ATMs
Fast Track To provide uninterrupted quick and faster service, the Bank has introduced Fast Tracks (FT) in the country. These FTs are comprised of several ATMs, Deposit Kiosks and Customer Service help desk officers. The customers have the faclity to deposit cash or cheque, withdraw cash, pay utility bills etc at the FT. DBBL has setup 50 FTs within 6 months of introducing it.The activities of FT are summarized below 1. Cash Withdrawal: 2. Cash Deposit. 3. Account Opening 4. Customer Request Form A list of such services is given below: I.
Customer's request form for Account Transfer
II.
Cardholder's Request form for a new Debit Card (MasterCard Debit / Maestro / Visa Debit/Visa Electron) or Credit Card (MasterCard / Visa)
III.
Request form for Replacement of a C ard (Debit/Credit) for any of the following reasons:
IV.
Request for re-issue of PIN. Re-issue of PIN may be requested by a customer who have forgotten his PIN or in the fear that his PIN may be compromised to another person.
V.
Request for Account LinkageAuto debit
VI.
Request form for refund of Cash not dispenses from ATM but account debited.
VII.
Application form for availing Internet, SMS & Alert facility on bank account
5. Delivery of Captured Card
Electronic banking for businesses: Dutch-Bangla Bank offers a complete electronic banking facility for companies around the clock. Most multi-nationals use this service because it is advanced, secure and affordable. DBBL creates a custom banking service to suit any business of any size. The services have a wide range that includes cash flow services, distribution banking and salary accounts. If a company knows what type of custom and tailored banking service they need, DBBL can provide it instantly and at minimal cost (usually free of charge). DBBL has created Employee Banking program which allows:
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Seamless and error free distribution of salaries
Providing emploees with timely salary payments
Lower manpower needed
Reduces cash theft and misapporpriation
Transactions are properly logged for your easy reference
Highly secure way of distributing money
No cash at hand in the office, all cash finally distributed through the largest ATM network in Bangladesh
Electronic Student Booth (ESB) This is another innovative banking offered by DBBL. The booths will mainly be setup in educational institution campus or nearby locations. The booths will contain ATM and deposit kiosks where the customers & students can withdraw & deposit money and pay tuition fee for the institute. In addition to these, there are multiple computers with internet connectivity which can be used by the students for accessing DBBL internet Banking facility. DBBL has setup its first ESB at Eden Girls' college, Dhaka. Many ESB are in the pipeline.
Internet Payment Gateway (IPG) DBBL again has been the first bank in the country to have an Internet Payment Gateway. With the help of this, any person in home or abroad can do financial transactions using DBBL's proprietary cards/ MasterCard/ Visa credit. They can purchase goods and services from e-commerce e -commerce web sites, called e-merchants e-merchants and pay pay bills online sitting at their office office or home using using a card.
Call center Considering the growing number of customers, card holders & transactions, DBBL has setup a Call center. It is a world renowned Cisco hardware-based call center comprising of all the services a call center can provide, e.g, Interactive Voice Response (IVR) by virtue of which the customer will be able to choose his options using the keypads of a cell phone and listen to the responses related to his account or card or transactions from the system or though live agent. The customers can dial at 16216 from any land or mobile mobile phone and go to IVR or Live agent, and get desired services.
Human Resource Management System & Remittance Management System DBBL has developed a number of in-house software for its own requirements. The Information Technology Division has successfully developed and implemented two such systems namely Human Resources Management System (HRMS) and Remittance Management Systems (RMS). The HRMS helps in maintaining all information of employees of DBBL while RMS helps in managing and monitoring local and foreign remittances.
Implementation Impleme ntation of Multi-factor Authentication Authentication for Internet Banking
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DBBL is considering to offer some transactions through Internet banking which were not possible due to security reasons. To cope with world's latest technology to provide transaction security, DBBL is considering multi-factor authentication for some of such transactions like Third Third Party Funds Transfer using Internet, e-commerce transactions and foreign remittance transfer from overseas remittance houses to DBBL
Green IT Dutch-Bangla Bank has always been careful about environment. DBBL has taken initiatives to make its IT infrastructure as "Green IT". Environment friendly options like virtualization, virt ualization, power management and proper recycling habits towards certifying our data centers as as "Green" are under under our active consideration.
New Data Center and DRS DBBL has set up its new data center and DRS to accommodate all the above setups. The DBBL's data center is one of the most sophisticated data centers of the country equipped with state-of-the art design, security and sophistication.
Internet banking facilities:
Account Summary The Customer will be able to view the list of Current, Saving, Term De posit and Loan accounts with the current balance.
Account Details The Customer can choose a particular account and see the account details including unclear fund, limit, interest accrued etc.
Account Activity The customer can see or print his transaction activity in a given account for a particular period. Transfer Funds The customer can transfer funds from one of his accounts to another of his accounts within the bank.
Pay Bills The customer can pay his utility bill (like Electricity, WASA, GAS, Telephone, Mobile, ISP etc.) Standing Instructions The customer can setup, modify or delete standing instructions for transferring fund from one of his account to another account (his account or 3rd party).
Open/Modify Term Deposit The customer can open a term deposit by transferring funds from one of his current or savings accounts with the bank. He can also modify the TD and redeem / part-redeem it.
Loan Repayments The customer can make payment of the loan installment from his CASA account.
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Statement Request The customer can make a request for account statement for a required period. The bank will manually service this request.
Cheque Book Request The customer can make a request for a Cheque book. Cheque Status Inquiry The customer can choose an account and enter the Cheque number for w hich the status should be viewed.
Stop Payment Cheque The customer can mark his Cheque leaf as stop payment. Interest Rate Inquiry The customer can query on the interest rat es on CASA & Term Deposit Products. Foreign Exchange Rate Inquiry The customer can query on the Foreign Exchange (FX) Rates using this function. Refill Pre-Paid Card The customer can buy a refill number for his pre-paid mobile phone or ISP link. Change Password The customer can change his Internet Banking Password using this function.
Additional Internet Banking Features for Corporate Banking
Letter of Credit The customer can initiate the LC application through Internet Banking. Bank Guarantee The customer can initiate the Bank Guarantee through Internet Banking. Limits Query The customer can view his Loan Limits and Limits Utilization through Internet Banking
Comparative Comparativ e analysis among fiv f ive e banks ban ks For our analytical purpose we pick 5 banks from three different segments. One of the banks is DBBl which is pioneer in online banking banking in Bangladesh. From other local commercial banks in Bangladesh Bangladesh we pick eastern bank limited and Dhaka bank. From foreign banks we chose Standard Chartered Bank Limited and Sonali Bank Limited from the public banks.
Number of ATM
DBBL
EBL
Dhaka Bank
1295
74
24
25
Standard Chartered Bank Limited 48
Sonali Bank Limited
22
Number of branches Number of branches having SWIFT code Core banking software Phone banking SMS banking Internet banking Various cards
96
49
54
25
1191
12
23
19
17
31
Flexcube
Oracle Flexcube UBS
Flexcube
eBBS
CISCO System
IVR
Flexcube Flexcube
Flexcube Flexcube
Flexcube Flexcube
O/S WAP iBanking
Card Suite(AIX, Oracle)
Trans Master for Prepaid Credit and Debit Card
CARDPRO
eCAPS
Tranzware,Compass Plus
Shared ATM
Internet banking facilities:
Account Summary Account Details Account Activity Transfer Funds Pay Bills Standing Instructions Open/Modify Term Deposit Loan Repayments Statement Request Cheque Book Request
DBBL
EBL
Dhaka Bank
Standard Chartered Bank Limited
Sonali Bank Limited
√
√
√
√
X
√
√
√
√
X
√
√
√
√
X
√
√
√
√
√
√ √
√ X
√ √
√ √
X X
√
√
√
X
X
√
√
√
X
X
√
√
√
√
X
√
X
√
√
X
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Cheque Status Inquiry Stop Payment Cheque Interest Rate Inquiry Foreign Exchange Rate Inquiry Refill PrePaid Card
√
X
√
√
X
√
X
√
√
X
√
√
√
√
X
√
X
√
X
√
√
X
X
√
X
DBBL
EBL
Dhaka Bank
Standard Chartered Bank Limited
Sonali Bank Limited
√
√
√
√
√ √
√ √
√ √
√ √
√ X X
X
√
X
√
X
DDBL
EBL
Dhaka Bank Limited
Standard Chartered Bank Limited
Sonali Bank Limited
√
X
√
√
√
√ √
√ √
X X
√ X
X X
√
X
√
X
Cards and others:
Debit card Credit card Visa and master card Travel card
Others:
Mobile banking Fast Track Electronic Student Booth (ESB) Internet Payment Gateway (IPG) Call center New Data Center and DRS Green IT
√
√ √
√
27
Online remittance transfer Employee banking program
√
X
X
√
28
X
X
Location of ATM: ATM: Basis of comparison: Metropolitical areas: Governed by City Corporations, these are the cities of Bangladesh. Such as:
Dhaka
Chittagong
Khulna
Rajshahi
Shylet
Borishal
Rangpur
Municipal areas: Governed by, Municipal Corporations, these are the towns in Bangladesh.
DBBL ATMs in cities dhaka
chittagong
khulna
shylet
borishal
rangpur
DBBL location of ATMs
rajshahi
metr metrop opol olit itan an are area a
muni munici cipa pall area area
3% 1% 1%
10%
2% 23% 14% 77% 69%
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EBL ATM locations cities
Standard chartered ATM locations
towns
cities
towns
4%
17%
83% 96%
SBL ATM locations cities
DBL ATM locations
towns
cities
towns
13%
22%
78%
87%
percentage of ATMs cities to towns 120% 100% e l t i T s i x A
80% 60% 40% 20% 0%
DBBL
SC
E BL
DBL
SBL
cities
77 %
96%
83 %
87 %
78%
towns
23 %
4%
17 %
13 %
22%
30
Finding and analysis Private commercial banks and foreign banks offer a broader E-banking services then state owned banks. Nationalized banks operate more branches having SWIFT code then foreign and private commercial banks. Private commercial banks and foreign banks use more updated banking software then nationalized banks. Foreign banks operate more ATMs in cities or urban area then private and nationalized banks. All of the banks in our sample tend to have and establish more ATM booth in metropolitan areas where population density is higher.
Foreign commercial banks and private commercial banks are relatively in a better position to provide on line banking services. services.
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P r ro bl ems and
Chapter 04
P r ro s pec t ts o f E bank i in g i n Bangl ad esh
32
SWOT analysis As empirical evidence here a SWOT Analysis can be an effective measure . For analyzing the performance of the Internet Banking in Bangladesh the following SWOT Analysis is considered:
Strength
1
2
3
• Internet Banking Banking is still to grow more in Bangladesh; most of the banks are providing several services of E- Banking. Thus, this product will enjoy the benefit of first mover. mover.
• It is cheap for both banks and customers; customers; banks will be able to lower overhead costs and make more profit out of it. Moreover, Moreover, this requires less man power for banks; customers can save time and avoid hassles.
• E- Banking is convenient as the service is available all the tome at just a click away.
Weakness
1
2
• The system may have a problem of security breakdown which refers to the problem of indentification of customers customers who's initiating transaction. As in Bangladesh
• The transaction can only be cancelled via Internet while the Internet infrustructure in our country is not satisfactory satisfactory and supportive to provide all time access to web. So, there comes the problem in executing service with its full functionality. functionality.
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Opportunity
1
2
• Non- Branch Banking is becoming popular in Bangladesh; thus many banks are offreing non- branch banking facilities. A person is able to withdraw or deposit money in any branch of the bank he has account with. Moving to E- Banking gives an edge in such cases.
• All types of internet services are being appreciated and applied by people ofdifferent walks walks as this eases the activities. So, such an attractive attractive offer package provided by E- Banking will be popular everywhere very soon.
Threat
1
• People have concern about security & privacy; htey like to fell money with their hand; they actually don't believe beli eve in virtual money tranfer. tranfer.
2
• In the field of IT new technology is coming everyday. everyday. The one which is very popular today might get obsolete tomorrow. So to have a competitive edge over competitors the banks must always update their services.
3
• Despite the presence of online internet i nternet service in Bangladesh, its scope is underutilized. The reasons include high service charges, lack of awareness, poor telecomminucation systems, government policy, low buying power of potential clients and lack of institutional support.
The strengths and weaknesses are the internal factors of the banks in operation of E - Banking while the opportunities and threats are the external factors.
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Limitation and Constraint Constraint of online onli ne banking system in Bangladesh Lack of awareness and human capital E-business is still not very much progressed in Bangladesh. Mass awareness is not feasible. The country faces problem of developing human-ware. Without preparing human capital at the level of international standard, we cannot be able to compete in global market and successful e-business cannot be feasible.
Unsatisfying services and customer relationship Nationalized commercial banks and specialized banks are lagging behind of on line banking services. Moreover, customers are not satisfied with the quality of the services. They are not also very happy with the behavior of the bank personnel. However, it reveals that e-business especially with the help of on line banking can manage economy of Bangladesh in a far better way as customer relationship management increases.
Unavailability of locally produced software Local Banking software should be developed properly and must have greater accessibility within the country and outside outside the country. country. Moreover, to produce hardware especially computer and its accessories, local entrepreneurs are not taking any sort of strategic planning.
Erstwhile technology Bangladesh Bank should adopt latest technology but due to lack of vision they are adopting old technology i.e. introduction of MICR for Bangladesh Bank automation procedure. MICR system should be substituted by cheque truncation system.
Numerous problems have been identified from the field survey on line banking system in Bangladesh. Some of them are in the followings: Inefficiency and inadequate knowledge of the bank management about the on line banking. Lack of proper Strategic plan to gain and retain market share of the indigenous banks. Lack of international standard communication channel. High cost of establishing on line banking system. Inadequate back and front office management. Lack of integrated plan among the banks and t he Central Bank authority. Inefficient Clearing House Facilities. Inappropriate software and less trust by the Bank authorities on local software.
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Biased-ness of the management of bank towards foreign software. Legal barriers and appropriate policy framework.
Limited number of online customer due to high cost The number of customers taking banking services does not capable to bear the cost of additional equipments like computer, computer accessories , Internet etc. from their own organization or at home. Biometrics should be more strengthened. Using Internet facility still very costly and people has little knowledge in operating computers. A few numbers of cyber café is available but for banking purpose customers do not feel safe to use these facilities. As a result total numbers of customers who are habituated in on line banking systems are limited. In these circumstances investment for establishing e banking facilities seems profitless.
Financial risks Although on line banking has bright prospects, it involves some financial risks as well. The major risk of on line banking includes operational risks (e.g. security risks, system design, implementation and maintenance risks); customer misuse of products and services risks; legal risks (e.g. without proper legal support, money laundering may be influenced); strategic risks; reputation risks (e.g. in case the bank fails to provide secure and trouble free e -banking services, this will cause reputation risk); credit risks; market risks; and liquidity risks. Therefore, identification of relevant risks, and formulation and implementation of proper risk management policies and strategy formulations and implementations implementations are important for the scheduled banks while performing on line banking system.
Prospect of e banking The Bangladesh Railway owns a high-speed optical fiber network (1,800 km) parallel to the railway path that covers most of the important parts of Bangladesh. This optical fiber network can be used as the backbone network of e-banking in Bangladesh. For example, mobile phone operators such as Grameen Phone and Ranks ITT of Bangladesh use this optical fiber network through which they reach even in rural areas with their services (Islam 2005). It is encouraging that some of the FCBs and PCBs are already using this optical fiber network for conducting online transactions, ATM and POS services.
Digital telephone exchanges have been established in 389 upazilas and 17 g rowth centres. Work is underway to cover the rest of the upazilas under digital exchange system. Meanwhile, Bangladesh has joined the information super-highway by connecting connecting itself with international submarine cable cable system in 2006. A total of 159 Internet Service Providers (ISPs) have now been connected with this system of which 64 are actively providing services. Internet connection is slow with bandwidth range 32 kbps to 56 kbps for dial up and 64 kbps to 8 mbps for broadband. Under this scenario, as a part of gover nment
36
decision of building digital Bangladesh, the existing capabilities of ICT sector is likely to increase rapidly in bringing all upazilas under internet services and this will contribute in widening the scope of ebanking throughout the country.
The overall computer density in the banking sector is 1.64. For foreign commercial banks (FCBs) the computer density is 45.34, where as for NCBs the ratio is only 0.41. The specialized bank scenario is almost same as the NCBs, 0.43. On the other hand, private commercial banks have comparatively higher ratio, 4.94. As a whole 81.81 81 .81 percent bank does not have any local area network (LAN), 30 percent have WAN (Wide Area Network) but for some banks many branches are outside of WAN connectivity. At present, all foreign banks of our country are using online banking system; they are invested a lot for their automation banking services. They are the pioneer of implementing electronic banking systems in Bangladesh, but now most of the private banks of our country are using electronic banking systems. In our country different banks are offering electronic banking services in different ways, some are offering ATM (Automatic Teller Machine) services, some are tele-banking and some are electronic fund transfer, debit card, credit card etc.
Recently, the government’s emphasis on building a digital Bangladesh, setting up ICT park, raising
allocation for developing ICT infrastructure, waiving taxes on computer peripherals and other measures including the automation program of banking sector led by the Bangladesh Bank and competition among the scheduled banks in improving customer services have accelerated the prospects of e -banking in Bangladesh.
37
Chapter
P ol i ic cy y i m pl i ic ca t i io n and c onc l lu si on
05
38
Potential Policy implications To implement e-business successfully in Bangladesh following recommendations are given below:
Successful team building and security system Successful team building with a coherent manner for developing human ware, hardware, software and web ware are required to increase e-business process in a systematic way. Moreover, greater emphasis should be given on security system and to preve nt fraud so that any sort of financial transactions including on line banking payment or any other electronic fund transfer can be properly handled.
Definite career path for hardware and software engineer Career path of hardware and software engineers should be properly designed. Otherwise professionals will be de-motivated and they won’t work with job satisfaction.
Adequate research work Banks and business organizations especially corporate houses should have adequate research, skilled manpower and technology driven strategies in this regard.
Initiatives to develop integrated e – e – banking software Initiatives to develop integrated e – banking software through in house built may be taken. Preference should be given by the bank authority to use local software over foreign software. Common gateway is required so that interbank transactions can be feasible. Bank can charge normal profit to enlarge the market size on the on line banking products. Banks should have their own strategic plans to implement on line banking system. Creating awareness and consciousness among the clients of the banks are also required.
Infrastructure developme development nt Internet penetration is a key factor for t he growth of e-banking. Christiansen (2001) reports that the take off phase of Internet banking needs at least 30 percent Internet usage among the population. Moreover, since Internet penetration alone is not adequate for online banking expansion, the government may provide subsidy for surfing cost, organize training facilities with private partnership, widen multiple access facilities like web, telephone, ATM etc., and initiate motivation programs for the users and the tar get population. Moreover, adequate legal framework and security are essential for flourishing internet banking. VSAT operating license should not limit the bandwidth. Moreover, high bandwidth charge is another constraint in widening internet access to a greater number of people. Therefore rationalizing the charge could make the use of internet affordable to all.
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New ISPs should be attracted into the business for promoting greate r competition in the industry. More high-speed fiber optical data communication infrastructures should be well established for speedy data communication for domestic and global high speed communication system. This will help to attain better e-business including on line banking system. Competitive situation should be arranged so that e-business management can be improved through e fficiency and effectiveness of customer services. The policies relating to long distance and international voice traffic need review to remove impediments to growth of e-commerce that relates e -banking as well. As a part of building digital Bangladesh, measures are nee ded to improve existing ICT infrastructure and address relevant issues including governance and institutional strengthening. A package of required rules, acts, laws, and regulations pertinent to e-banking adoption and development may be formulated. In this respect, lessons and experience of countries that have already expanded e-banking can act as useful guides. BTRC as a regulatory body should work with long t erm vision, mission and fulfillment of goal oriented strategies. They should work as a facilitator rather not creating hindrance. VOIP should be legalized after examining and finalizing proper rules and regulations in the country The Bangladesh Bank may consider the following steps: Take steps to orient bank officials on benefits of e-banking. For instance, BB may offer short courses (e.g. using the Bangladesh Bank Training Academy) on e -banking including analysis of costs and benefit from the perspectives of customers and the banks, present status, and opportunities and challenges. To avoid risks involved in e-banking, risk mitigation policies and strategies need to be adopted as a part of the package approach to implementing e-banking. Mobile banking is a prospective area for two reasons: it covers almost all activities 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 e specially in rural areas with flourishing mobile banking. In this context, it is important to formulate relevant acts, policies, and adopt operative guidelines.
For the scheduled banks, it is important to: review their business strategy and create create the required space for adopting adopting e-banking services in order to remain competitive and attract new customers. strengthen ICT department through providing training to IT personnel and procuring required hardware and software. create separate unit in each branch for rendering ICT related operational activities under the supervision of the ICT department. train all staff in basic ICT related matters in phases.
40
Conclusion: Technology has enabled the world to step into a new arena. To keep pace with advancing world it has become imperative to adapt new technologies in business and banking sector. At present, Bangladesh is trailing behind in acquiring the required quality of banking services to effectively compete in the global market. Therefore, the banking system nee ds upgradation for which urgent measures are needed to create a level playing field for r apid expansion of e-banking in the country. Despite the constraints, more efficient use of existing capabilities in developing the services can pave the way to quality provision of ebanking in Bangladesh.
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Bibliography I.
Muhammad Mahboob Ali (2010). E-Business and on line banking in Bangladesh: an Analysis. AIUB Bus Econ Working Paper Series, No 2010 -03,
II.
Mohammad Azizul Baten, PhD, E-Banking of Economical Prospects in Bangladesh, Journal of Internet Banking and Commerce, August 2010, vol. 15, no.2
III.
Md. Abdul Hannan Mia, Mohammad Anisur Rahman, Md. Main Uddin E-Banking: Evolution, Status and Prospects
IV.
Mohammad Mizanur Rahman , “E-Banking in Bangladesh: Some Policy Implications ”
V.
Websites of concerned bank
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