Digitalisation in banking: Are we fully safe?

The banking sector is the heart of the economy, while information and technology have become the heart of the banking sector. In the last few years,  the banking sector has witnessed a tremendous transformation. The business operation of the banking sector has become totally dependent on the computerised system.

The concept of "digitalisation" has become a global slogan. In the banking sector, "digitalization" does not mean only paperless banking; rather it is the application of new technology that transforms the existing business model to a new business model.

For the last decade, information and technology have contributed significantly to the growth of the banking sector. Within this period the taste and demand of the customers have changed drastically. They have shown apathy towards the traditional banking system. Considering the taste of the customers, banks are now emphasising on bringing new products like ATM, Mobile Banking, Online Banking, Internet Banking, Tele-Banking, "Anytime" and "Anywhere" etc.

Banks are investing in establishing technology-based infrastructure. Some banks have already developed their in house IT system. According to Bangladesh Bank, at present 87 percent of banks branches are online and 8 percent are partially online. Only 5 percent of the branches do offline banking. It is notable that, 78 percent of the rural branches in Bangladesh are now online.

Previously banks would focus on branch expansion. But setting up a new branch is a lengthy process. In this regard, banks are now focusing on ATM booths to bring the banking service to the doorstep of the customers. Moreover, ATM is getting popular among the customers day by day. People are becoming reluctant to carry money with them. Rather, they prefer to use a card for any transaction. That's why banks are focusing more on the establishment of ATM booths all around the country.

Earlier, ATM booths were seen in the urban areas only, but now banks have started to set up ATM booths in rural areas also. Besides, expanding the ATM, banks are giving much emphasis on the POS (Point of Sale) terminal also.

Many banks have installed POS terminal in many shops, hotels etc. Though the number of ATM is increasing, ATM installation is quite costly. As an alternative of ATM, banks are moving towards the Cash Deposit Machine (CDM) and Cash Recycling machine (CRM). The CDM is quite similar to an ATM that allows one to deposit cash directly into one's account using the card. In our country, near about 1,403 CDM machines have been installed.

While, the CRM is a dual function machine that can take a deposit, process the notes and then use that for withdrawal. According to the Bangladesh Bank, there are 237 CRM machines all around the country.

Mobile banking is one of the latest additions to financial service. Previously, the mobile phone was used only for talking. But now it is used for banking purposes, where banking services can be rendered through mobile banking. Tele-banking is another new invention of modern banking that enables customers to perform a range of financial transactions over the telephone.

Beside schedule banks, Bangladesh Bank has recently brought some reforms in their operations. As a part of these reforms, massive changes have been made in the reporting system. As a part of regular activities, all the banks have to submit some reports to the Bangladesh Bank.

Among these reports, some are paper-based and some are paperless. The Integrated Supervisory System (ISS) is a computer-based system by which not only Bangladesh Bank supervises and monitors the activities of the banks but also the respective banks can also monitor the activities of the branches.

Bangladesh Bank has introduced automated CIB, which provides credit information electrically. BACH (Bangladesh Automated Clearing House) was initiated in 2010 and replaced the ancient clearing system which allows interbank's cheques transaction instantly.

BEFTN (Bangladesh Electronic Fund Transfer Network) is another milestone of the banking system by which fund can be transferred from one account to another account within a particular bank or across multiple institutions. The commencement of RTGS (Real Time Gross Settlement) brought a revolution in the country's banking system by which final settlement can be done instantly.

But, now the main question is – whether our technological infrastructure is fully protected or not? The answer is quite worrisome because we have not developed any strong technological infrastructure yet. There is no specific guideline regarding IT fraud. Rather, there are lots of loopholes in our poor IT infrastructure. IT audit is not conducted here compulsorily. Even the number of skilled IT auditor is very few here.

This becomes more pertinent during the ongoing lockdown when more and more people are being forced to rely on digital banking.

The customers of our banks are not skilled and aware enough about the IT risks at all. The ignorance of the customers in using digital products is also responsible for the recent online frauds. For example, we the customers have a common tendency to handover the card to the hotel boy or to the shopkeeper for making any payment. But most of us have no idea that just the card number, expired date and the CVV number is sufficient to do a fraud transaction. Thus, taking these advantages, the miscreants are conducting online frauds frequently.

It is to be noted that, a few years ago in South Korea, the banking sector was attacked by hackers. As a result, a lot of banks went out of service. Even the ATMs were out of service for hours. Now the question is if the world's most technologically sophisticated country's banking sector can be attacked by hackers, then what will happen if such a massive attack takes place in our country?

No banks can ensure the safety of their customers properly. To protect the ATM fraud, all ATMs must be equipped with a video camera. Although, almost all the banks demand that their cards are EMV and chip-based, most of the ATMs in Bangladesh cannot read the chip. So, ATM should be EMV compliant. All the banks should run a campaign to educate their customers for secured use and electronic banking. Banks should introduce e-KYC (Electronic-Know Your Customer) form that will reduce the possibility of any forgery.

Finally, the deposit of the depositor is an "Amanat" to the bankers as well as to the banks. The Digital Transformation has been made only for the betterment of the customers. Its main mission, vision and objective is to make the customers' life easy and comfortable. If the banks fail to provide safety to its customer's deposits, then the cry of customers losing money will never stop. Gradually, customers will lose their confidence in digital banking tools.

Md. Mizanur Rahman is a banker, working at Pubali Bank Limited, Board Division, Head Office, Dhaka. He is also an Associate Member of the Institute of Chartered Secretaries of Bangladesh (ICSB).