Technologies reshaping financial industry

In October 2018, Gartner, the world's leading research and advisory company, predicted that digitalization would make 80 percent of traditional financial firms irrelevant by 2030.

Two years have passed since the prediction was made and 10 years are left. But being in Bangladesh, I see the changes, and I will not be surprised if Gartner's forecast turns into a reality even before the few years left of its timeframe.

Indeed, before and after Covid-19, there have been two separate worlds in every aspect, and not only in the financial sector. Technologies started reshaping the financial industry even before the pandemic, but the process accelerated after the health crisis hit the globe.

Traditional firms are already struggling to stay relevant, while fintech companies and other non-traditional players are gaining a higher market share.

In Bangladesh, we are still awaiting digital banking. We hope regulators will act fast to introduce this kind of banking, which has already been introduced in the Indian market and has been readily available in developed countries for years. 

There are already some digital financial service providers in Bangladesh. The services are popularly called mobile banking and a few banks have embraced block-chain technologies on a limited scale and rolled out products and services.

The pandemic that has changed the overall digital mapping of the world has expedited the process, and the momentum in the financial sector will only get pace in the years to come.

Though Bangladesh is a laggard when it comes to online banking, let alone digital banking, Covid-19 has had such a profound impact on the sector that a full-fledged digital bank might not be a totally impossible proposition.

The digital financial service has shown the way as to how many services financial institutions can provide during this pandemic. Mobile wallets have seen a massive rise among users and usage since the beginning of the pandemic. Transactions through the MFS industry doubled in the middle of Covid-19, and the upward trend has continued.

At a time when many people have stopped visiting branches of banks for fear of catching the virus and people have faced movement restrictions because of the lockdown, a vast number of people have still been able to carry out financial transactions because of the digital financial providers. 

Fast-growing platforms like Nagad are also capitalizing on the new normal by handling people's challenges. Nagad is using state-of-the-art technology for opening accounts and dealing with transactions. We have partnered with the mobile carriers and any mobile phone users can open an account simply by dialling *167# anytime, which is a globally recognized innovation. This innovation has boosted our transactions as people can transfer funds to their Nagad wallets from banks easily, send money to non-Nagad users, pay bills and purchase products.

In order to facilitate these services, Nagad is using artificial intelligence. We are now working on block-chain and trying to engage the world's most sophisticated company in this field, such as Ripple and some others.

Even within the banking industry, an increasing number of people are using online banking and other solutions, and many of the clients are likely to carry out their financial transactions even if the pandemic disappears. And all of these are happening through riding on technological advancement.

It is true that the banking industry in Bangladesh has gone through a massive transformation from manual to electronic banking solution in the last two decades. It has automated branches and introduced a core banking system to deliver internet banking, online banking and e-payment services.

As of 2019, about 99.21 percent of branches had online banking facilities in Bangladesh, where foreign commercial banks had 100 percent online banking, followed by private commercial banks with 99.98 percent and state-run commercial banks with 98.12 percent. And there were about 31 lakh internet banking customers in Bangladesh, according to Bangladesh Bank data.

At the same time, we see that banking transactions are dependent on paper or documents and people need to visit branches for most of their banking activities.

Banks have not become branchless as we see in other parts of the world. By having the situation linger, we are depriving our citizens. We have every chance to play our role in enhancing services to citizens and help grow the economy by introducing digital banks.

Digital banking, which refers to the application of technology to all banking activities, will make customer experience easy and convenient. Customers can easily access full-fledged banking services round-the-clock from anywhere, from any devices. Visiting branches will be obsolete as everything will be done through technology. Nagad is fully ready with technologies to introduce digital banking. It will take only a few weeks to roll it out after getting the regulator's approval.

As far as I know, a few banks started using emerging technologies like block-chain and are offering transformational opportunities for the financial sector. Block-chain is revolutionizing the speed and efficiency of transactions. Its impacts may be significant for banks, thanks to real-time settlement, lower risks and increased automation.

Standard Chartered Bangladesh has executed the country's first-ever block-chain transaction by issuing a letter of credit for a local garment manufacturer allowing it to buy imported textile items. And HSBC Bangladesh has executed the first-ever cross-border block-chain letter of credit transaction in the country. This technology is reshaping our business and needs to be introduced at a personal level.

And the most important thing is that the government has adopted a national strategy on block-chain in March 2020, giving us a direction on the issue.

Riding on the government's Digital Bangladesh bandwagon, the growing availability of bandwidth, mobile phone and internet users, the country can introduce digital banking much earlier than it was thought in the past.

After Nagad introduced the digital KYC (Know Your Customer) in March 2019, the central bank also rolled out electronic-KYC last year, giving a much-needed boost to digitalization. In order to reap the benefit, the industry needs to invest in technologies and put in place a digital transformation plan.

We can also think of a hybrid model where most products and services will be given to customers as much digitally as possible, and physical presence will be as low as possible.

Currently, there are 9.64 crore mobile money accounts in a country of 17 crore. If we can introduce some core banking services in the digital financial service channel, it will further the digital banking agenda in Bangladesh and bring more people under the financial sector.

Writer: Managing director of Nagad, the country's second largest digital financial service provider.