The Present scenario, Prospects and Obstacles of Implementation of Digital Banking in Bangladesh

Introduction
In this age of information technology, electronic communication is the cornerstone of a
country for its business, every government agency and economy. Modern banks play a
pivotal role in promoting economic advancement of a country. Digital banking which is also
known as electronic banking is a modern banking system that delivers the new and traditional
banking products and services to the customers electronically. In Bangladesh, the growth of
digital banking is beset with several infrastructural, institutional, and regulatory limitations
such as inadequate availability of reliable and secure telecommunication infrastructure,
absence of a backbone network connecting the whole country, poor ICT (Information and
Communication Technology) penetration in the banking sector, lack of skilled manpower and
training facilities, absence of supportive policies, guidelines, rules and regulations relating to
e-transactions and the like. Despite the constraints, efforts by the Bangladesh Bank in
modernizing the countrys payment system and commitment by the government in building
Digital Bangladesh have brought competition among the scheduled banks to improve
banking services and rapidly adopt digital banking on a wider scale. This paper represents the
present scenario, prospects and obstacle of the implementation of digital banking in
Bangladesh how it is up surging, makes our country with more state of the art facilities and
also highlights some downsides and recommendations of overcoming the downsides of
electronic banking.
Objectives of the Study
Our intention and purpose to this study has taken into consideration to accomplish the
following objectives:

To explore the Structure of digital banking in Bangladesh

To find out the common sorts of digital banking in Bangladesh
To assess the existing digital banking scenario in Bangladesh
To explore the prospects of digital Banking in Bangladesh context
To discover the development of digital banking in Bangladesh
To search the electronic services offered by various bank in Bangladesh

Limitations of the study

There has no excess research work in Bangladesh perspective particularly. The study covered
very limited information about the context. The data of implementation of digital banking are
not yet counted for many banks and it is not implemented through a number of branches as
well. The scope of the study was also constrained by limited available self-funding.

The Present scenario, Prospects and Obstacles of Implementation of Digital Banking in Bangladesh

Digital Banking, Its Products & Services

Digital banking
The full extent of what digital can offer customers goes beyond the basic mobile and internet
banking services that are now widely provided, although there is still value to be obtained for
many banks from simply delivering these basic services well. Digital banking will evolve into
a richer set of offerings, providing new value for banks and their customers through a new
digital feature set, based on innovations in: user experience; mobile devices and networks;
social media and collaboration; customer analytics; and channel integration. Digital Banking
a new concept in the area of electronic banking, which aims to enrich standard online and
mobile banking services by integrating digital technologies, for example strategic analytics
tools, social media interactions, innovative payment solutions, mobile technology and a focus
on user experience.
Digital banking or internet banking or online banking are analogous and defined as the
conduct of banking services by using electronic delivery channels such as ATM, telebanking
and PC banking. Under this banking process, the branches of a bank are connected
electronically in such a way so that a client or a customer of a particular bank can draw the
money or make deposits anytime anywhere of the country or the world. Large number of
banks world-wide offer e-banking/web banking/internet banking, whereby their customers
manipulate their personal finances and execute transactions via the internet. Banks and others
financial institutions advertise frequently on the significance and convenience of the ebanking facilities.
Digital Banking is an umbrella term for the process by which a customer may perform
banking transactions electronically without visiting a brick-and mortar institution. The
following terms refers to one form of electronic banking: personal computer (PC) banking,
Internet banking, virtual banking, online banking, home banking, remote electronic banking,
and phone bank. PC banking and Internet or online banking is the most frequently used
designations. It should be noted, however, that the terms used to describe the various types of
electronic banking are often used interchangeably.

Digital Banking in Bangladesh

In recent years the banking industry has undergone massive changes in providing service to
their customers by using information technology. Developments in information technology
and telecommunications have set in a motion an electronic revolution in the Bangladeshi
banking sector. Foreign Commercial Banks (FCBs) in Bangladesh are playing a pioneer role
in introducing modern financial products and services. Private Commercial Banks (PCBs)
have started to follow the same pattern. On the other hand Nationalized Commercial Banks
(NCBs) and the Specialized Banks (SBs) could not yet show notable performance regarding

The Present scenario, Prospects and Obstacles of Implementation of Digital Banking in Bangladesh

the issues. But due to the demands of the time, they are now taking initiatives to launch
modern and innovative products and services.
Computer, modern technology and ICT have widely implemented area for gathering the
financial needs through saving customers access time worldwide. Now customers can easily
utilize the tools of ICT to know their accounts, check balance, transfer balance and even pay
bills online. However, it is very common in global term but here in Bangladesh, it is slightly
difficult and not yet implemented properly. In the context of Bangladesh, there are several
special services that are growing.

Core Banking
Internet Banking
Mobile Banking
Electronic Funds Transfer
Any Branch Banking
Banking KIOSK
SWIFT
MICR
ATM
Online Banking
Credit Cards and Debit Cards and so on.
Core Banking:
It refers to a situation where a group of banks provides customer service together or a part of
service. A customer may enjoy any sort of service from any bank under the group. It requires
affiliation among the group. For example, account holder of some other banks can use the
ATM kiosks of DBBL's.
Internet Banking and Mobile Banking:
It depicts that banks are providing services through internet facility and it provides 24 hours
banking services. Internet banking and mobile banking are two newest additions in banking
sector of Bangladesh. HSBC and SCB is the pioneer to provide internet-banking service. In
Bangladesh, Brac Bank's provides first complete mobile financial service named "bKash" in
2011 later on DBBL, Prime bank and some other banks have taken this initiative.
Electronic Funds Transfer and Any Branch Banking:
Electronic Funds Transfer (EFT) refers a process of sending money from one bank account to
another without having any paper money transaction. Majority of the FCBs and PCBs
provide this facility. On the other hand, any branch banking service refers where an account
is reachable from any branch of a particular bank and clients can transact through any branch
of the bank.

The Present scenario, Prospects and Obstacles of Implementation of Digital Banking in Bangladesh

Banking KIOSK and MICR:

Bangladeshi customers are familiar with the term ATM booth that also provides KIOSK
Banking. It provides flexibility to the customers to conduct their banking transactions through
the KIOSK machine. The technology has been adopted in Bangladesh in 2009. It is a
character recognition technology used mainly by the banking industry to make easy the
processing of cheques.
ATM (Automated Teller Machine):
Banking service clients in Bangladesh are familiar with ATM services is a self-service. It is a
device for providing teller services for customers of the banks. It works in the form of
banking Kiosks or Electrical Fund Transfer (EFT) activities and so on. DBBL has around
2000 ATM kiosk around the country and it is leading in ATM service providing (DBBL,
2013). However, major services are:

Cash withdrawal
Deposit of cash.
Funds transferring between accounts
Bill payment
Full-statement producing
Balance and information enquires
Request for cheque book
Notice of withdrawal

Credit cards and Debit cards service:

A wide range of established banks like SCB, HSBC, Citi Bank and some other private or
state owned bank provide credit card service in the place of cash currency. The major
categories of credit card in Bangladesh
Credit Card
VISA and Master Card Credit Cards
On the other hand, debit cards are linked directly to the bank account of its holder. Almost
every bank now provides debit card service although some state owned banks do not have
this facility.
Since digital banking offers some smart services benefiting both banks and customers
compared with traditional banking system, it has become imperative to make necessary room
for the scheduled banks to flourish digital banking. Among others, attractiveness of digital
banking includes: it lowers transaction cost; provide 24-hour services; ensure increased
security and control over transactions; reduces fraud risk; performs higher volume of
transactions with less time; increases number and volume of value payment through banks;
allows remote transactions facilities that replace physical presence of a customer in a bank
branch and; increases transaction speed and accuracy.

The Present scenario, Prospects and Obstacles of Implementation of Digital Banking in Bangladesh

Present Scenario of Digital Banking in Bangladesh

In this age of information technology, electronic communication is the cornerstone of a
country for its business, every government agency and economy. Digital banking as a
segment of electronic business, which, in turn, encompasses all types of business
performed through electronic networks. Electronic channels are used for both business tobusiness and business-to- customer transactions, such as ordering goods, delivering
software or paying for such transactions. E-banking is considered to be a segment of ebusiness to the extent that banks are involved in the conduct of business transactions via
electronic media; other non-banking financial products and services (e.g. insurance), not to
mention products and services from other sectors of business may be sold electronically as
well.
In Bangladesh, there are a total of 56 scheduled public and private banks. Here there are four
state owned commercial banks (Nationalized Commercial Banks- NCBs) have 3496
branches, five specialized banks (DFIs) have 1311 branches, 39 local private commercial
banks (Private Commercial Banks-PCBs) have branches of the scheduled banks in the
country. The banking system of our country, depending on computerization can be classified
into three categories:
(i.)
(ii.)
(iii.)

Completely computerized
Partially computerized
Not computerized

A good number of technology driven services are provided to the customers by the Private
Commercial Banks (PCBs), Foreign Commercial Banks (FCBs) and Nationalized
Commercial Banks (NCBs).
The FCBs operating in Bangladesh like Standard Chartered Bank and HSBC are the
pioneers to introduce technology driven banking facilities. These banks provide services like
ATM, debit card, credit card, Point of Sale (POS) services, internet banking, phone banking,
any branch banking, Electronic Fund Transfer (EFT). Along with these services Standard
Chartered Bank is providing KIOSK service to its customers.
Electronic Fund Transfer (EFT), SWIFT and MICR cheque are being provided by all the
banks. All the banks except Uttara Bank are providing any branch banking to the customers.
All banks have debit card facilities for their clients except Citi Bank NA. First Security
Islami Bank Limited, Uttara Bank Limited and Citi Bank NA have no own ATM booth. First
Security Islami Bank Limited is going to establish their own ATM booth. They have
already selected the palace for 100 ATM booths and expect to launch within very short
possible time.

The Present scenario, Prospects and Obstacles of Implementation of Digital Banking in Bangladesh

Chart: The percentage amounts of Technical Services of Digital Banking in Bangladesh

120.00%
100% 97.37%

100.00%
80.00%
60.00%
40.00%

78.95%

100% 100%

97.37%

92.11%
73.69%

63.16%

65.79%

50%
39.47%

20.00%

7.90%

0%

0.00%

Percentage

Source: Research work by Chowdhury and Ullah 2013

Electronic Payment methods of E-Banking in Bangladesh

In Bangladesh, the growth of credit card market has been very high for last couple of years.
At present, the different electronic banks are using different types of electronic payment
methods.
The different payment methods are as follows: ( Automatic Teller Machine), E-cash, Q-cash,
Ready cash, MoneyGram etc.
ATM has unveiled the horizon of Electronic Banking of 21st Century. Through ATM,
customer can avail non-stop online teller service without going to the specific branch of the
member bank. The facilities of ATM card are given below
ATM card holders can withdraw cash from ATM at any time.
Customers can make transactions from any of the machines with logo E-cash
installed at different places in the city.
Utility bills like WASA, TITAS, DESA, BTTB, Grameen, AKTEL, and City Cell
phone bill etc can be paid through ATM.
Now different customer of different banks can deposit their monthly instalment of
their deposit schemes.
The machines are located in convenient places where customers usually deal with money
matters. So they can easily avoid risk of cash carrying by using ATM card.

The Present scenario, Prospects and Obstacles of Implementation of Digital Banking in Bangladesh

Customer Satisfaction of Electronic Banking

According to J Power, online banking is the preferred transaction method among banking
customers. One reason is that online banking is faster than visiting a bank and standing in
line to see a bank teller. Before 5 years the banking services were based on branch. People
were served from the bank where they have accounts. But at present most of the banks are
under the network and anyone can draw money wherever he likes. Suppose if anyone opens
an account in Dhaka bank in any branch then he is ordained to withdraw the cash even from
belkuchi, Sirajgonj branch or anywhere from any branch of Dhaka bank. The balance of
clients account is kept on line and within a fraction of second he may debit or credit it from
anywhere of the country. Now they need not to be worry for their cash handling with taking
great risk like snatching or high jacking.
On the other hand people can withdraw their money through ATM card and wherever they
need. It depends on the availability of the ATM booths. Earlier people had the opportunity
to withdraw cash during the transaction period of the respective branch where they have
account. But now you are entitled the opportunity to withdraw cash at any time like
evening, night or even at midnight. The banks call it any time banking. People may draw
money at their convenient booth while wandering in the busy town.
Whenever the banks advertise or promise that people may be able to get these services, then
the expectation level of the customer rises sharply and wants to get that benefit from the
banks. If the banks fail to mitigate the requirement of the customer then dissatisfaction
occurs. The services are
E-payment
E-cash facilities
24/7 day services
Bills paying
ATM facilities
SMS banking - (Access financial information at fingertips)
o
Access the account information anytime from anywhere
o
Request for check book and account statement
o
Make cheque status enquiry
o
Place stop- cheque instruction
o
Make utility bill payment
Internet banking
E statement:
o Ease of access
o Multiple mailing (Mailing to more than one mail address)
The Real Phenomena in Our Country
In our country people are satisfied with their banks ATM, Internet, SMS banking
facilities. Now people free less tension to transfer their money from Dhaka to Chittagong or
even where the banks are on lined. They need not carry the money whenever go for
shopping. They can use Visa Card, Master Card and they are able to draw money from

The Present scenario, Prospects and Obstacles of Implementation of Digital Banking in Bangladesh

the nearest booth of market through ATM Card. The cards are like Plastic Money as the
bankers say it.
There is Some Discrepancies also in many cases people have some complaints also.
Sometimes it is common that ATMs fall short of money
Slow bandwidth of internet may delay the transfer rate. (radio link and cable are
used for internet)
Bankers make delay to provide PIN number whenever client lose his Credit or
Debit card
Charges are higher for the card.
Measuring all the factors we may tell it in a nut shell that people should be satisfied cause
their problem have been lessened and now they need not wait in a queue to deposit or
withdraw the money. They even pay their mobile phones bills and all utility bills through
SMS. The average online transaction takes less than three minutes to complete, compared to
over seven minutes of combined wait and transaction time with a branch teller. Products
once offering only via brick and mortar banks are now offered through their online services,
such as free checking and above mentioned facilities.

Scope of Electronic Banking in Bangladesh

The infrastructure of a country is very important for implementing electronic banking. For
electronic banking major cost is to setup backbone network. Fortunately Bangladesh
Railway has a high-speed optical fiber network parallel to the railway path owned by
Bangladesh Railway. Its total capacity is about 2.5 gigabits per second. This fiber optic
network covers almost every important parts of the country.
Bangladesh has been connected with the information superhighway on the 20th May, 2006.
It is a landmark of ICT sector of Bangladesh. The cable network covering some 786 miles
across the country from the Bay of Bengal will provide a fiber-optic link with a data
transfer capacity of 10 gigabits per second compared to the 150 megabits per second
bandwidth now used by the state- owned BTTB and dozens of private Internet Providers.
The following figure shows the growth of Internet users of our country.

Figure: Internet user growth in Bangladesh

The Present scenario, Prospects and Obstacles of Implementation of Digital Banking in Bangladesh

From the figure we see that the Internet users of our country are increasing every year.
After connecting with the information superhighway, the total country will be connected
by fiber optic backbone; certainly it will be a milestone for infrastructure of implementing
electronic banking in Bangladesh. In Bangladesh most of the banking hardware are
available. The hardware available for electronic banking is entirely procured from foreign
origins with a local distributor. Electronic banking operation hardware includes;
servers, workstation, printers, scanner ATM, POS terminals, etc and networking hardware
includes switch, Router, V-SAT connectivity etc. All hardware is available in our country. At
the head office level 95.45 percent of banks use banking software, 46 types of different types
of software are in use in different banks in Bangladesh. Among the banking software used in
the banks 51.47 percent have been developed in house, 47.06 percent are off-the-shelf
[OTS], only 1.47 percent are using both OTS and in house software (Rahman, 2001).
Majority of the software are developed locally both for cost reason and convenience with the
local business practice.

Benefits of Digital Banking in Bangladesh

Digital banking is now a global phenomenon. Digital Banking is transforming the financial
services industry through various impossible innovations. The quantity of cross-border
trading and other financial activities is increasing geometrically make possible by technology.
It has been made possible by technology, particularly information technology to generate,
collect and process information about bank operation and bank customers efficiently and
effectively. It provides the ability to create more effective systems of controls in individual
institutions and in the market themselves. Compared to the paper based operation, Electronic
Banking Systems, in its most proficient form, offer instant verification and transfer and
reduces the flow of costly paper in the record keeping process.

Benefits of digital banking in Bangladesh

Electronic business can add value through knowledge management as it helps to attain new
services to the customers. Successful e-business depends on sharing of strategic knowledge
for which dissemination of the information and free flow of knowledge around the globe is
required. On line banking can provide twenty four hours banking facilities. Through
electronic data interchange customers are able to draw money from one branch to another.
Letter of credits can be sent through SWIFT or electronic fund transfer from one country to
another can be feasible. Actually on line banking provides faster, reliable services.

Benefits of nation:

Increased productivity: The rapid mobilization of funds through digital banking can
ensure increased productivity of economy and proper use of the resources
Contribution to GDP: Banks with a national economy, work towards building
national capital, increasing national savings and mobilizing investments in trade and
industry.

The Present scenario, Prospects and Obstacles of Implementation of Digital Banking in Bangladesh

Infrastructure Development: Bank providing e-baking services are developing

themselves in infrastructure thus government face comparatively less burden for
infrastructure development.
Facilitating international trade: banks providing immense banking facility
for international trading especially in readymade garments sector, frozen shrimp, jute
pharmaceuticals sector.
Job creation: unemployment is a great threat to development ,IT development in
banking creating new types of job like system analyst, data control manager etc.
Industrial Development: due to rapid mobilization of savings and facilitating export
and import e-banking is contributing to the faster contribution to Bangladesh.

Benefits of Banks:

Profit Maximization: Digital banking leads to lower cost for the banks also ensures
better profit from innovative products in this section thus helps banks to maximize the
profit of the owners.
Expand beyond geographic reach: Digital baking enabling the banks to expand
their services beyond the geographic reach thus becoming internationally competitive.
Rapid growth: Banks providing innovative and fast digital banking service will
experience rapid growth in this industry, will increase its customer base and become a
brand name in banking industry.
Cut down cost: Digital banking services causes low cost of providing services than
manual. It also reduces maintenance cost to bankers

Benefits of customers:

Time savings: The main benefit from the bank customers point of view was
significant saving of time by the automation of banking services processing and
introduction of an easy maintenance tools for managing customers money. The main
benefits of e-banking were as follows:
Continuous access to account information: customers can access to their account
information any time 24 hours a day, 7 days in a week.
Dont require physical interaction: in case of transaction customers dont require to
present physically thus fell convenient to transact.
Better cash management: much better cash management can insure through digital
banking ass cash can be easily available.
Reduced costs: This was in terms of the cost of availing and using the various
banking products and services.
Convenience: All the banking transactions performed from the comfort of the home
or office or from the place a customer wants to.
Speed: The response of the medium was very fast; therefore customers actually
waited till the last minute before concluding a fund transfer.
Reduced risk: As cash can be transecting without physical appearance can move with
the help of credit card, smart card it is less risky.

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The Present scenario, Prospects and Obstacles of Implementation of Digital Banking in Bangladesh

Prospects of Digital Banking in Bangladesh

Information technology environment changes rapidly. It is estimated that the number of
Internet users in Bangladesh will increase in a recent years. The number of physical branches
will be decreased (the profile of physical branches will change to advice and support centres)
and most of the transactions will be concluded via main e-banking channels: online Internet
bank and m-banking services. Rapid growth of e-banking in Bangladesh is expected.

Prospects of Digital Banking in Bangladesh

Recently, the governments emphasis on building a digital Bangladesh, setting up ICT park,
raising allocation for developing ICT infrastructure, waiving taxes on computer peripherals
and other measures including the automation program of banking sector led by the
Bangladesh Bank and competition among the scheduled banks in improving customer
services accelerated the prospects of e-banking in Bangladesh.

Optical fibre network as the backbone network of digital banking:

The Bangladesh railway owned a high-speed optical fibre network (1,800 km) parallel to the
railway path that covered most of the important parts of Bangladesh. This optical fibre
network can be used as the backbone network of e-banking in Bangladesh. For example,
mobile phone operators such as GP and Ranks ITT of Bangladesh used this optical fibre
network through which they reached even in rural areas with their services. It is encouraging
that some of the FCBs and PCBs are already used this optical fibre network for conducting
online transactions, ATM and POS services.

Modernizing national payment and settlement system:

Bangladesh Bank was implementing the different projects for modernizing national payment
and settlement system started from 2009 followed by the development of inter-bank online
network. It made mandatory for all head offices of the scheduled banks to be connected with
Bangladesh Bank. These efforts would allow the scheduled banks to be connected to each
other for conducting inter-bank online transactions in near future and this would smooth the
introduction of e banking in Bangladesh.

Internet services:

Internet services came to Bangladesh with connectivity in 1996. Digital telephone exchanges
established in 389 upazilas and 17 growth centers. Work was underway to cover the rest of
the upazilas under digital exchange system. Meanwhile, Bangladesh joined the information
super-highway by connecting itself with international submarine cable system in 2006. A
total of 159 Internet Service Providers (ISPs) now connected with this system of which 64 are
actively providing services. Internet connection was slow with bandwidth range 32 56 kbps
for dial up and 64 8 mbps for broadband.

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The Present scenario, Prospects and Obstacles of Implementation of Digital Banking in Bangladesh

The Growth in Internet Banking: Numerous factors including competitive cost, customer
service, and demographic considerations are motivating banks to evaluate their technology
and assess their electronic commerce and internet banking strategies. Some of the market
factors that may drive a banks strategy towards internet banking include the following:

Research on Application of Electronic Banking in Bangladesh, Bangladesh Research publications, 2010

Figure: The growth scenario of Internet banking in Bangladesh

1. Competition: The competitive pressure is the chief driving force behind increasing
use of internet banking technology, ranking ahead of cost reduction and revenue
enhancement. Banks see internet banking as a way to keep existing customers and
attract new ones to the bank.
2. Cost efficiencies: Banks can deliver banking services on the internet at transaction
costs far lower than traditional ways. The actual costs to execute a transaction will
vary depending on the delivery channel used. These costs are expected to continue to
decline.
3. Geographical Reach: Internet Banking allows expanded customer contact through
increased geographical reach and lower cost of delivery channels. In fact some banks
are doing business exclusively via the internet they do not have traditional banking
offices and only reach their customers online.
4. Branding: Relationship building is a strategic priority for most banks. Internet
banking technology and products can provide a means for banks to develop and
maintain an on-going relationship with their customers by offering easy access to a
broad array of products and services. By capitalizing on brand identification and by
providing a broad array of financial services, banks hope to build customer loyalty,
and enhance repeat businesses.
5. Customer Demographics: Internet banking allows banks to offer a wide array of
options to their banking customers. Some customers will rely on traditional 5

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The Present scenario, Prospects and Obstacles of Implementation of Digital Banking in Bangladesh

branches to conduct their banking business. Other customers are early adopters of
new technologies that arrive in the marketplace. The challenge to banks is to
understand their customer base and find the right mix of delivery channels to deliver
products and services profitably to their various market segments.
As use of the internet continues to expand, more banks are using the web to offer products
and services or otherwise enhance communications with consumers. The internet offers the
potential for safe, fast, and convenient new ways to shop for financial services and conduct
banking business, any day, any time.

Bringing all upazilas under internet services:

Under this scenario, as a part of government decision of building digital Bangladesh, the
existing capabilities of ICT sector was likely to increase rapidly in bringing all upazilas under
internet services and this will contribute in widening the scope of e-banking throughout the
country. The overall computer density in the banking sector was 1.64. For foreign
commercial banks (FCBs) the computer density was 45.34, whereas for NCBs the ratio was
only 0.41. The specialized bank scenario was almost same as the NCBs, 0.43. On the other
hand, private commercial banks had comparatively higher ratio, 4.94. As a whole 81.81%
bank did not have any local area network (LAN), 30% had WAN (Wide Area Network) but
for some banks many branches were outside of WAN connectivity.

Use of online banking system:

At present, all foreign banks of our country were using online banking system; they were
invested a lot for their automation banking services. For this reason, they were increasing
market share every year. They were the pioneer of implementing electronic banking systems
in Bangladesh, but now most of the private banks of our country used electronic banking
systems. In our country different banks were offering electronic banking services in different
ways, some were offering ATM (Automatic Teller Machine) services, some were telebanking and some were electronic fund transfer, debit card, credit card etc.

Increasing usage of mobile banking:

For mobile banking, the numbers were hugely promising. A whopping amount of Taka
34,556 crore was transacted which is a 22.36 percent from the previous quarter. The number
of mobile banking customers totalled 2.69 crore during the January-March quarter. These
figures are aligned with the expectations of policymakers and banking experts, all of whom
have been highly optimistic about Bangladeshs potential in digital banking services. Experts
say, digital payment system in Bangladesh can benefit the considerably large population of
the country as it is more secure, quick and can rid people from the worry of carrying cash in
hand.
In Bangladesh most of the business organizations are running centralized manner. As such
visions, missions, goals of the top management of various organizations are very important.

13

The Present scenario, Prospects and Obstacles of Implementation of Digital Banking in Bangladesh

Top management should change their mind-set and like Bangladesh Bank, they should
encourage e-business process. Top management views are reflected to the mid-level
management and lower level management. Unfortunately most e-business efforts fail for nonperforming visions, missions, goals and tactics at the business processes of the organization.

Government Initiatives for Digital Banking

The Government of Bangladesh has taken some important initiatives to develop our IT sector.
Still we are waiting to see a fruitful change in our Information Technology. However, some
remarkable steps of government are highlighted for information.
IT has been declared as a thrust sector.
Waiving all taxes and duties from import of computer hardware and software.
Hundred percent remittances of profit and capital gains for foreign investors
without any approval.
BTCL's implementation of Digital Data Network (DDN) service.
Decision to link Bangladesh to global highway through 2nd submarine cable link.
National Information and Communication Technology (ICT) Policy has been
approved.
An independent regulatory body, Bangladesh Telecommunication Regulatory
Commission (BTRC) has been established, functioning since 2002.
Recently started the establishment of ICT Park to boost up the countrys ICT
activities.
The govt. is liberalizing telecom sector in phases, with increased participation of
private sector.
Copyright Act 2000 named Intellectual Property Rights (IPR) Law related to ICT
is in the process of finalization and is in the process of enactment by the
Parliament.

Obstacles of Digital Banking in Bangladesh

One of the main objectives of this study was to identify the challenges and potentials of ebanking in Bangladesh from the perspective of employees and bank customers. The present
survey has shown that legal and security issues, socio-cultural barriers, management-banking,
infrastructural barriers, knowledge barriers, economic barriers issues are accepted as main
challenges for e-banking development in Bangladesh. Bangladeshi commercial banks are
adapting and implementing digital banking gradually, though it cannot be said it is real time
online banking. In this case the private commercial banks are playing the pioneering.
Through the existing system of online banking the branches are linked together with one
another which facilitate smooth coordination among the branches and also with the head
office. In Bangladesh, except very few banks, online banking is limited to the extent-any
branch banking which enables a customer to operate his/her account in any of the branch.
Few Bangladeshi banks are now introducing real time online banking and internet banking.

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The Present scenario, Prospects and Obstacles of Implementation of Digital Banking in Bangladesh

The major obstacles in implementing Digital Banking in Bangladesh are identified as

follows:

Infrastructural Barriers: Infrastructural barriers are one of the most important

challenges for Digital Banking in Bangladesh. Here, there is not enough
infrastructural support for providing efficient e-banking services. In our country,
telecommunication services are not strong, communication bandwidth is weak,
software is not available in the country and hardware for establishing ATM booth is
costly.
Knowledge Barriers: Digital business is still not very much progressed in
Bangladesh. Mass awareness is not feasible. The country faces problem of developing
trained human resources. There are lack of technological knowledge among the
managers, employees, and customers of bank. Without preparing human capital at the
level of international standard and designing, implementing and monitoring banks
information system we cannot be able to compete in global market and successful ebusiness cannot be feasible.

Most of the respondents were not fully use mobile banking which caused
another problem to data collection to the researcher.
Sometimes respondent could not answer to questions accurately and to the
point.
The respondents were usually remaining busy with their work. So, the
researcher had to visit some of them even at the work place and researcher
sometimes had to pay more time to meet the respondents.
Most of the respondents did not feel comfortable to answer questions. So
researcher had to pay more time to gain their confidence.

Legal and Security Barriers: In Bangladeshi circumstance lack and limitation of

regulation of law is one of the acute obstacles to Digital Banking. On the other hand,
in an underdeveloped country like ours, frauds are gaining significant potential which
indicates a negative output in our local e-banking sector.
Besides these barriers, our courts doesnt consider electronic documents as evidence,
so people with a high risk of transaction are not much interested to get e-banking
facilities. Technical issues are also highly connected to e-banking, but in our country
technical securities are very weak an in a high risk of hacking in each moment. So,
customers trust in e-banking is still beyond imagination in Bangladesh.

Socio-cultural Barriers: As mentioned earlier, most of the people are not

educated in Bangladesh. So, people are not willing to break the traditional way of
conventional banking and always hold a negative perception regarding Digital
Banking. Another important issue is, banks employees also hold a negative outlook to
Digital Banking thinking of uncertainty of their jobs. On the other hand many

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The Present scenario, Prospects and Obstacles of Implementation of Digital Banking in Bangladesh

traditional customers prefer paper money and receipts over e-documents for their
ignorance and weakness in English language.

Economic Barriers: In Bangladesh, economic barriers are one of the most

challenges Digital Banking. For providing Digital Banking services to the customer, it
needs for heavy investment regarding new infrastructures. So it is not easy for a bank
to invest huge amount of money for infrastructure of Digital Banking. In our country,
internet cost is also high that is an acute obstacle of e-banking. And our average per
capita income is also very low so that most of the people does not have the ability to
buy the communication equipment like computer, laptops, smart phone. And for these
reason they could not connect to e-banking services even if they want to. And in our
country outsourcing is very costly.

Financial Risks: Although e-banking has bright prospects, it involves some

financial risks as well. The major risk of Digital Banking includes operational risks
(e.g. security risks, system design, implementation and maintenance risks); customer
misuse of products and services risks; legal risks; strategic risks; reputation risks;
credit risks; market risks; and liquidity risks. Therefore, identification of relevant
risks, and formulation and implementation of proper risk management policies and
strategy formulations and implementations are important for the scheduled banks
while performing e-banking system.

Unsatisfying

Services

and

Customer

Relationship:

Unavailability of Locally Produced Software: Local Banking software

Nationalized
commercial banks and specialized banks are lagging behind of Digital Banking
services. Moreover, customers are not satisfied with the quality of the services. They
are not also very happy with the behaviour of the bank personnel. However, it reveals
that e-business especially with the help of e-banking can manage economy of
Bangladesh in a far better way as customer relationship management increases.

should be developed properly and must have greater accessibility within the country
and outside the country. Moreover, to produce hardware especially computer and its
accessories, local entrepreneurs are not taking any sort of strategic planning.

Limited Number of Online Customer Due to High Cost: The number of

customers taking banking services does not capable to bear the cost of additional
equipment like computer, computer accessories, Internet etc. from their own
organization or at home. Biometrics should be more strengthened. Using Internet
facility still very costly and people has little knowledge in operating computers. A few
numbers of cyber caf is available but for banking purpose customers do not feel safe
to use these facilities. As a result total numbers of customers who are habituated in ebanking systems are limited. In these circumstances investment for establishing e banking facilities seems profitless.

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The Present scenario, Prospects and Obstacles of Implementation of Digital Banking in Bangladesh

Recommendation and Conclusion

Recommendation
In order to ensure a successful practice of digital banking in Bangladesh, we recommend the
following.
The whole country should be connected under fiber optic backbone for electronic
banking infrastructure as soon as possible.
Digital banking systems should be simple to use, fast and user friendly.
We should develop in house software for our banking system. So it will be cost
effective.
Digital banking services should be standardized so that wherever the solution is used
the customer is familiar with the procedure followed.
Every transaction should have some desirable properties like Authenticity,
confidentially, Unforgivable, Integrity and not reusable.
Government should compel the banking sectors to automate their operation and going
online by a specific period.
Provide adequate training and technological support to develop the manpower.
Proper infrastructure development.
Government should implement the cyber laws to ensure proper security about
customers information
Government should establish proper educational institution to create efficient IT
professionals to support digital banking in Bangladesh.
Developing of integrated digital banking software.
Government, in collaboration with the banks, should educate and inform its citizens
and customers on the workability and effectiveness of Digital banking. This will
increase the confidence level of customers.
The clearing house operation in Bangladesh should be fully automated system.
Banks should have adequate research and technological background in this regard.
Bank can charge normal profit to enlarge the market size on the electronic banking
products.
Political commitment to improve governance and institutional strength is essential for
successful application of digital banking.
BTTB should utilize their extensive network so that the corporate users can connect
their banks and major business institutions. The corporate lines provided by the BTTB
are suitable for e banking and e-business, in the sense of reliable data transfer and
suitable price
As digital bank users mostly use ATMs and POS in most cases, the banks should
emphasize on providing uninterruptible service.

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The Present scenario, Prospects and Obstacles of Implementation of Digital Banking in Bangladesh

Conclusion
Digital Banking has greater impact in the economy and in the banking sector as well. Making
financial services available to the poorest people is recognized as an important part of poverty
reduction strategies. Technological innovation offers significant hope, although it will result
in fundamental changes to banking delivery mechanisms as well as to the very role of
banking service providers and their relationships with customers. In case of productivity,
efficiency, economic growth, giving optimum service to the customers, electronic banking
has huge contribution as a whole. In order for Digital Banking to continue to grow, the
security and the privacy aspects need to be improved. With the security and privacy issues
resolved, the future of Digital Banking can be very prosperous. Since the world is moving
towards everything, so we should try to overcome all the barriers and also try to develop such
environment that is favourable for the development of digital banking. With the security and
privacy issues resolved, the future of digital banking can be very prosperous.

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