'Digital banks will be a huge boost for country's cashless move'

Tanvir A Mishuk, a serial digital entrepreneur, has spearheaded a revolution in Bangladesh's mobile money industry. Through Nagad, he has successfully brought around 85 million people into the fold of financial inclusion. 

Now, he is gearing up to embark on a new venture in the form of a digital bank. Tanvir is one of the first individuals in the country to advocate for the concept of a digital bank over the last three years — a vision that is on the cusp of becoming a reality. 

In an exclusive interview with The Business Standard, Tanvir, founder and managing director of Nagad, shared insights into his visionary approach to reshaping the financial landscape through a revamped banking system. 

Why is there such a huge rush for digital bank licences? 

I think the rush for digital bank licences is a response to the changing landscape of our financial sector, the growing demand for digital services and the potential for financial inclusion and innovations. Many entrepreneurs are now coming forward to tap into this new wave in banking with innovative solutions catering to our digital-savvy people. 

It is good news that many new players want to enter digital banking. The Bangladesh Bank's conducive operational guidelines, such as a low initial paid-up capital amounting to Tk125 crore and a capital requirement of Tk50 lakh for an individual shareholder, have largely contributed to the genuinely entrepreneurial people's rush to set up a digital bank. 

However, it is up to the central bank to decide on the number of digital banks it wants to give licences to initially.  

Nagad looks to establish a digital bank to grow into a full-fledged financial solution and offer its customers all financial services on a single platform. Now, our customers seek more than what we offer in the form of lending and savings options. But we have regulatory limitations as a mobile money operator. 

The shift in people's interest to digital platforms for financial services proves that establishing a digital bank is the need of the hour. We will step up with a blend of mobile money and banking services, thus scaling the entire bank to the size of a smartphone.  

Why are traditional banks opting for digital bank licences despite already having online banking services?

Brick-and-mortar banks have high operating costs as they have to maintain branches with the required manpower to cater to customers' needs. That is why they cannot afford to take their services to every nook and corner, although they underwent digital transformation. 

Besides, they cannot serve all equally because of such high costs and thus prefer big clients for investments.  

On the other hand, a digital bank does have a very low overhead cost as it runs solely through its digital platform with little or no physical presence. This cost-efficiency has attracted many of the conventional banks, who now plan to reach out to many unbanked and underbanked people through digital means.

Many financial services are now available at our fingertips, thanks to the fast digital evolution of banks in our country, triggered by the global pandemic. The core banking aspects, such as money transfers, withdrawals, utility bill payments and shopping, now can be done online using our mobile phones. 

But for anything more, we still need to visit bank branches. A digital bank will ensure all banking services that customers get at a traditional branch, but online.

How will digital banks save time and cost for overall banking operations and customers? 

With banking continuing to evolve, only a digital bank can offer customers a 24/7/365 experience without requiring physical presence. The entire process will be done digitally. Thus, it will save time and costs.

Digital banking will make customers' lives easier by allowing them access to banking services anytime. In terms of costs, it is easily understandable that digital banks will have lower operating expenses than traditional ones as they do not have physical infrastructure but rely more heavily on technology to provide customers with many services. This translates into lower charges and interest rates for customers. 

Another essential feature that makes digital banking popular worldwide is speed. Digital banks process transactions faster than traditional banks do because of the speed and efficiency of their digital platforms. 

For example, a digital bank can provide its customers with instant loans. In our case, we will assess credit rating using our IT team-developed "Bangla AI" before giving a loan approval and the subsequent disbursement.

Moreover, our digital bank will offer personalised financial management tools and services to meet customers' needs. 

Then what will be the salient differences between digital banks and online banking services of conventional banks?

Online banking, operated through websites and apps of conventional banks, differs from digital banks. 

When we think about the digitalisation of banking infrastructure, the online banking terminology comes into mind. And many people confuse digital banking with online banking. But they are two distinct concepts. 

We cannot entirely rule out bank visits in online banking as we find only core banking services this way. Online banking is a technology that can only complement branch-based banking, but cannot substitute an entire branch. 

In the case of digital banks, the entire banking service is accessible via the Internet. Using a digital bank app, we will have access to all the services we can now get at a traditional bank branch, thus eliminating paperwork hassles.

Will digital banks face more cyber security threats? How will they protect customer data?

Cyber security threats are a global phenomenon that every online service faces. Digital banks are no exception. 

Our utmost priority is to safeguard customer data. Keeping in mind the launch of a digital bank, we have already employed various strategies and technologies to mitigate any threats. 

We will have to monitor our systems and networks for any sign of suspicious activities. Thus, we will significantly enhance the protection of our customer data. 

Cybersecurity is an ongoing process that requires vigilance and adaptability to respond to evolving threats. Building a strong gate, if you keep it unlocked, is pointless — you are still exposed to danger.  

Nagad has joined hands with Paytm, a leading global financial technology company, to get technological support and combat cyber threats effectively. Paytm has a robust security shield to protect the information of customers. 

Besides, they are developing an artificial intelligence-based system to assist financial institutions like Nagad in capturing possible risks and frauds. I can assure you that it will be a protected system. 

What will be the advantages of the growth of digital banks in Bangladesh? Are there any obstacles, too?

Digital banks will provide financial services to underserved and unbanked populations in remote areas, boosting financial inclusion and eventually leading the country towards its goal of a cashless society. 

With lower operating costs, such banks can offer customers more competitive rates and fees. They will also offer 24/7 access to banking services, making it convenient for customers to manage their finances anytime.

To help a digital bank grow in Bangladesh, we must ensure uninterrupted access to high-speed internet in rural areas to facilitate people's adoption of digital services. 

Besides, many potential customers in rural areas may lack digital literacy and hesitate to use digital banking services. So, they need to have familiarity with technologies. Also, the cybersecurity threat is another obstacle.  

Will you have enough skilled manpower to run digital banks?

The idea of a digital bank is totally new in Bangladesh. So, there is no denying the fact that there is a shortage of manpower. 

Having realised this, Nagad has been developing a skilled workforce to ensure the smooth operation of its digital bank. We have also installed state-of-the-art technologies. We are well-equipped and can begin serving our customers once we get the digital bank licence.