Banks go tech-smart to cut costs of business

Banks in Bangladesh are increasingly adopting technology-driven products to fast-track services to their clients at reduced costs.

The products and services include debit card, credit card, ATM (automated teller machine), POS (point of sales), online banking and Swift.

“It would have cost us a lot if we had provided the same services in a traditional way as we did by ATM last year,” said Abul Kashem Mohammad Shirin, deputy managing director of Dutch-Bangla Bank Limited (DBBL) that has over 350 ATM booths across the country.

DBBL transacted Tk 300 crore on average a month by ATM in 2008.

Technology-driven products are cost-saving, said Reazul Islam, senior vice-president and head of IT of AB Bank. A transaction by a human teller costs no less than Tk 50, but it is much lower for an ATM, he said.

Of the use of technology-driven bank products, Mohammad Shirin said demand for ATM services is rising rapidly followed by online and internet banking.

A few private commercial banks (PCBs) and foreign banks also offer limited customer services over the internet.

Only two banks adopted online services and one foreign bank adopted ATM services in 1998, but the number reached 29 and 26 respectively at the end of 2006, the central bank said in a research.

On the other hand, the number of banks offering credit card, popularly known as plastic money, increased from two to 15 in the same period.

Compared with other innovative services, adoption of POS was relatively slow. The number of banks that adopted the services increased from one to 10 banks.

In the same period, banks made intense efforts in introducing Swift services. In 1998, only four banks offered the services, with the number rising to 43 by the end of 2006. Swift is a Society for Worldwide Inter Bank Financial Telecommunication.

Debit card that allows customers instant cash transactions round the clock was introduced in 1999. The number of banks that issue debit cards rose to 22 by 2006.

"Banks have adopted technology-driven services to ensure transparency and save time, not to make profit," said Syed Masodul Bari, head of IT of Al-Arafah Islami Bank.

This is still a subsidised service for many banks.

“The products can benefit from it in the long term,” said Reazul Islam.

Although modern and innovative technology-driven products and services are convenient for the customers, the services still cover a small part of total transactions, the BB research observed.

“Banking in rural areas is mostly dominated by traditional products which are often time-consuming,” the BB research found.

In the backdrop, the central has taken initiatives to encourage the banks to adopt efficient methods such as automated cheque processing system, introducing cheques having MICR features, developing existing payment settlement system, and automation of the banking system so that commercial banks can extend coverage in offering modern services.

The services will help the customers in urban and rural areas, the BB said.

A total of 48 banks operate in Bangladesh. Of which, 30 are private, nine foreign and nine state-owned. All the banks have around 7,000 branches across the country.>