Future Banking In Bangladesh 3c4v2p

Future services and opportunity of commercial bank in Bangladesh

Hafizur Rahman,Robin American International University-Bangladesh 11-18244-1 Finance & ing

In future the commercial banks will provide some services and opportunity in Bangladesh. E-Banking or internet banking is the next stage in the development of banking services in Bangladesh. The banking system in the country was known for their stability and also stubbornness. The public banks in the country always resisted to any kind of change in their working styles through strikes and walk outs. E-banking is viewed as the means of providing traditional services in a modern way. Ebanking is already started but not fully in Bangladesh. So, there is a big chance to established fully services and opportunity. E-Banking: The term Internet Banking or E-Banking Internet both are used as supplement. E-Banking is the one of the major part of E-Financing. EBanking refers to the banking operations, which is done over World Wide Web. Internet banking refers to the deployment over the Internet of retail and wholesale banking services. It involves individual and corporate clients, and includes bank transfers, payment sand settlements, documentary collections and credits, corporate and household lending, card business and some others. E-Banking information architecture is mod eled as client-ser ver 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 s and has the opportunity to consult them, as well as to make all necessary payments and transfers form his personal s. 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 softw are program can also be utilized offline, for exampl e 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 MultiMate, permitting them to effect the same examination, payment and transfer operations without consulting the bank staff.

services of E-banking: There are various types of e-banking services like SMS banking, Tele Banking, Push and Pull services, ATM, Fast Track etc. The ter ms ‘PC banking’, ‘online banking’, ‘Internet banking’, ‘Telephone banking’ or ‘mobile banking’ refer to a number of ways in which customers can access their banks without having to be physically present at the bank branch. Ebanking may be understood as term that covers all these ways of banking business electronically .

Tele-banking Tele-banking service is provided by phone. To access an it is required to dial a particular telephone number and there are several options of services. Options included Checking balance Funds transfer between current, savings and credit card s Bill payments ,Stock exchange transaction ,Receive statement via fax Loan payment information.

PC Banking The increasing awareness of the importance of literacy of computer has resulted in increasing use of personal computers through the entire world. Furthermore, incredible plummet of cost of microprocessor has accelerated the use of computer. The term ‘PC banking’ is used for banking business transacted from a customer’s PC. Using the PC banking or home banking now customers can use their personal computers at home or at their office to access their s for transactions by subscribing to and dialing into the banks’ Intranet proprietary software system using .

Internet Banking

Internet banking would free both bankers and customers of the need for proprietary software to carry on with their online banking transactions. Customer behavior is changing rapidly. Now the financial service is characterized by individuality, independence of time and place and flexibility. These facts represent huge challenges for the financial service providers. So the Internet is now considered to be a ‘strategic weapon’ for them to satisfy the ever- changing customers’ demand and innovative business needs.

Mobile Banking Act ually mobile banking is a variation of Internet banking. Mobile banking is a good example of how the lines between the various forms of e-banking are becoming gradually blurred. Due to the new transmission technol ogies such as WAP (Wireless Application Protocol), portable terminal like mobile phones, personal digital assistant (PDA) or small handheld PCs are providing bank customers with access to the Internet and thus paving the way to Internet banking. It assures immense flexibility and makes the financial services independent of time and place. However, the use of mobile banking is still in a nascent state. The slower transmission speed of the WAP standard and the limited amount of information available are just two of the factors inhibiting the use of those terminals.

Opportunity of E-Banking in Bangladesh: The infrastructure covers the major cost of any electronic banking system. But it’s a matter of huge investment for a country like Bangladesh. But fortunately Bangladesh Railway has a high-speed optical fiber network parallel to the railway path owned by Bangladesh Railway which has a total capacity of about 2.5 Gbps. This fiber optic network covers almost every important parts of the country. S o , i t i s an opportunity to use it as the backbone network of e l e c t r o n i c b a n k i n g i n Bangladesh. Some of the multinational companies like Grameen mobile phone company, Ranks ITT of Bangladesh have already started to use this high-speed optical fiber network and they are providing their services even in rural area. So we can utilize this opportunity incase of E-banking in Bangladesh .

In Bangladesh there is a large gap between the computerization of foreign banks and that of local commercial banks (the gap is particularly great in respect of local public commercial banks) and as regards the state of their intra- and inter-branch online networks. However, 75 per cent of local banks are planning to introduce E-Banking, which implies very dynamic improvements in their ICT use indicators. Virtually all banks use banking software at their head offices and during the past few years around one third of local banks has become SWIFT . Credit card and point of sale services (POS) are already provided by a quarter of local banks, while ATM and internet banking are expanding rapidly especially in major cities.

Description of Proposed ICT infrastructure: In the above configuration all bocks are symmetric except for the role of central bank differs slightly. ► In central zone (i.e. Dhaka) Bangladesh Bank (Head Office) is connected with every other Head Office and branch office is connected to its head office in the same region. Bangladesh Bank(Head office) is given the legal authority to get any sort of information regarding the transaction flow from any bank. ► In the regions other than Dhaka the role of Bangladesh Bank is handed over to ‘Sonali Bank’ Principal Branch if there exists no branch of the central bank. ► In both regions each bank forms a local network (might be wired or through radio link)where the head office or principal branch play the central role. ► In some relatively remote area (Rangamatee) where total number of branches of all banks is very few (for instance a total of 5 branches are there) the above configuration is not a feasible one. In such cases, all branches, irrespective of banks, should form a local network. This is because establishment and maintenance cost will be much higher for a number of very small LAN instead of a single moderately sized one. Unlike other unit it has no governing entity. Here every branch communicates directly with its Head Office. Every Head Office is having its own VSAT to be connected with the Internet. One is shown in the diagram. Alternatively, Internet

connection can be assured by direct connection with the sub-marine cable as a future solution. It is shown as the dashed box in the diagram. In the diagram of the proposed infrastructure the magnified box shows a special module entitled' others’ connected with the head office. It is used to represent to facilitate for the utility bill payments such as water, gas etc. As a result, customer will be able to pay their utility bills at any branch of any bank. It would obviously reduce the immense pressure on some specific branches as being followed now. Again, it presents some non-banking financial service providers such as insurance company. According to the “E-Commerce beyond 2000”, the banking and finance sector has been a rapid adopter of E-Commerce because its products could easily be vir tualized and the product had priority over place banks can generate revenue through increased access fees, and benefit from promotional opportunity to crosssell products such as credit cards and loans. The advances in Internet security and the advent of relevant protocols has put banks in perspective again as financial intermedi aries and facilitators of complete commercia l transactions via electronic networks and especially via the Interne. Consumers are increasingly looking for services they can access from a single entry point. Awareness of competition has motivated banks to move aggressively in seeking alliances and establishing t ventures to maintain their claim to this part of the E-banking infrastructure. Like there are alliances in the ATM network, Group Network, Money Transfer Network etc. This is also creating segmentation of networks where the customers of this networks sometimes unable to access to others’ network. Consumer behavior in banking changed partly as a result of changes in the amount of spare time available to individuals. Mobility, independence of time and place, and flexibility has become key words in consumer banking. The Internet banks serve also as gateways offering identification and authorization services to a number of third party ser vice providers. There are -f riendly opportunities for conducting business over the Internet with telephone companies, Energy Company, tax

board and other institutions. Demand for those services influences also the usage rates of Internet bank

Conclusion: Web based banking service or E-Banking, the latest generation of electronic banking transactions, has been opened up new window of opportunity to the existing banks and financial institutions. It permits business process re-engineering, serving borderless market, to achieve zero latency leading to improvements in customer service levels and better risk management because of real-time settlement. The EBanking sector is highly prohibitive for the new entrants although the inception cost is lower with high growth rate. The brand preference of the customer, existing network, physical existence, security and safe ty, supplier bargaining power, substitute product of non-banking sectors have made the way thorny. However, new comer with innovative idea and strategy definitely can make position in this sector. The analysis of the evolution and present status of E-Banking make us some room to make commandments for the government, new entrants and existing ebanks for effective utilization of the opportunity to accelerate the economic growth.