e-banking: A long way to reach optimal level

Electronic banking (e-banking) has been growing in the country at a fast rate especially in the last few years. Bangladesh Bank is playing the key role in this growth as it is providing enabling environment as the regulator of the financial sector. It has continued its effort to frame  regulations to improve quality of banking service and ensure its security. Nevertheless, both the quality of service, delivered by e-banking channels, and the level of security of transactions, still have many shortcomings.  
In fact, the country has witnessed in the current calendar year more than one forgery in the ATM (Automated Teller Machine) booths due to lack of adequate security measures. But, heist of the country's $101 million foreign exchange reserve heavily shook the central bank. The reserve heist clearly showed lack of security and protection of domain of the country's central bank. It has also put the moral authority of the Bangladesh Bank to regulate and supervise banking and financial institutions especially in the area of electronic banking.
In spite of all these troubles, there is no way to backtrack from e-banking. The policy should be to make e-banking more secure with different safeguard measures. In fact, e-banking in Bangladesh is much different from what it was a decade ago. It is clearly reflected in the infrastructure of e-banking, mainly laid down by the National Payment Switch Bangladesh (NPSB).  The central bank started the NPSB to facilitate inter-bank electronic payments originating from different delivery channels. The channels are: ATM, Point of Sales (POS), internet and mobile applications. The NPSB is facilitating the expansion of retail payment networks and promoting e-commerce throughout the country. At present, 51 banks are fully operating card services to their clients. So far, inter-bank ATM transactions of 49 banks and inter-bank POS transactions of 41 banks are being routed through the NPSB. The NPSB has proved to be helpful for the economy. Not only it has energised the overall financial sector, but also common people find it easier to do their banking transactions. 
Another important component of e-banking infrastructure is Real Time Gross Settlement (RTGS) system. Though formally initiated last year, most of the banks are yet to come under the system.      
MOBILE BANKING ON LEAD: Mobile banking is leading e-banking in the country. It is a system that allows customers of any bank or financial institution to make his or her financial transactions using a mobile phone. It has significantly targeted the unbanked population of the country while regular bank account holders are also enjoying its benefits. Statistics tell the fact.  Annual mobile banking transaction posted a huge 37 per cent growth in the last fiscal year (FY16). The central bank statistics revealed that the value of the financial transactions through mobile banking system reached Tk 1.96 trillion (Tk 196,061.5 crore) in the last fiscal year which was Tk 1.42 trillion (Tk 1,422,928.2 crore) in FY15. 
Cash-in is the most popular mobile banking service followed by cash-out. Both the services account around 80 per cent of the total transaction while person-to-person transaction was around 19 per cent.
Not all the banks are offering the Mobile Financial Service (MFS).  Currently, only 28 banks are providing the service across the country and bKash, a Brac Bank initiative, is the market leader in this service. Bangladesh's post office is also offering the service with the cheapest service charge.  
Despite being very convenient, especially the facility of instant fund transfer, the risk of fraudulence is also there. This needs to be minimised. Moreover, there is a growing tension between banks and mobile phone operators on the future direction of the MFS. It is because the government is yet to finalise the regulatory guideline of the MFS which will determine whether it will be bank-centric or operator-centric. Experts and stakeholders are divided on their opinion on this issue. 
PLASTIC MONEY BOOM: Plastic money, the generic term of bank-issued debit, credit and pre-paid cards, is also growing. Growing number of people is now using plastic money to avoid long queues in banks' counters to withdraw cash or risk of carrying cash. 
ATM is now the most preferred destination for withdrawing instant cash.  Withdrawal of cash from the ATM increased by around 26 per cent in FY16. Total ATM transaction stood at Tk 1.04 trillion or Tk 1047.64 billion (Tk 104,764 crore) in 8,571 ATM booths across the country at the end of June 2016. In FY15, banks' clients withdrew some Tk 832.40 billion from 6,800 ATM booths across the country. 
ATM transaction, however, faced a shock in February last when several fraudulences and hacking in a few booths were unearthed. Later, some more such attempts were detected. To recover the customers' confidence, Bangladesh Bank has instructed all the banks to set up anti-skimming devices in all their ATMs.  So far, around 5,000 ATMs are equipped with anti-skimming devices. 
Other risks associated with the ATM transaction are also there. Criminal groups are active on abducting people and forcing them to use their ATM cards for withdrawing cash. This is, however, problem of general law and order. To withdraw cash through ATMs, customers generally use debit cards. Almost 99 per cent transactions are based on debit cards issued by the banks. Charges for withdrawing cash from ATM are still high, especially in a shared booth.  
Plastic money has also gained popularity among customers as they are gradually opting for electronic payments while shopping in departmental stores and malls as well as paying bills in hotels and restaurants. 
Transactions through point-of-sales (POS) machines increased by around 21 per cent last year. Some Tk 128.07 billion had been transacted through POS in the last fiscal year while the amount was Tk 105.90 billion in FY15. Though the amount is still very small, it will increase in near future.  Central bank statistics showed that around 60 per cent of the POS transaction was done by using debit cards while the rest using credit cards. Customers have to swipe their debit or credit cards in the POS devices so that transactions are settled electronically. Currently, there are 32,000 POS across the country in different departmental stores, restaurants, hotels, clubs and other business services centres.
Electronic commerce or e-commerce transaction, based on debit and credit cards, is another segment of e-banking which is still at a nascent stage. This transaction posted 38.5 per cent growth in FY16. Central bank latest data showed that value of e-commerce stood at Tk 3.82 billion in the last fiscal year which was Tk 2.76 billion in FY15. Of the total transaction, some Tk 2.80 billion was based on credit card while the rest amount on debit card. The available statistics also showed that around 61 per cent of the card-based e-commerce transaction took place internationally while the rest 39 per cent within the country. 
E-commerce is known as business transaction, buying and selling of products and services, or  transmitting funds or data over an electronic network, primarily the internet. Bangladesh Bank has, however, data of e-commerce transactions completed through use of debit and credit cards only. The actual value or volume of transactions of e-commerce is much more and not properly estimated by any authority.  A good amount of e-commerce transaction is settled through mobile banking system. 
LAGGING BEHIND: But the country's financial sector still lags behind in internet banking. Annual internet banking transaction stood at Tk 255.24 billion only at the end of FY16, which was Tk 183.58 billion in the previous fiscal year. 
There is no common platform for internet banking in the country and banks are operating on a limited scale without any inter-bank transactions. Internet banking, also known as online banking or web banking, usually allows a user to execute financial transactions through the internet. It offers the customers almost every service traditionally available through a local branch.
Another area is Bangladesh Electronic Fund Transfer Network (BEFTN). Though the central bank initiated the platform in 2010, most of the banks are not using the platform fully.  For example, transferring fund electronically from an account of one bank to another account of another bank is not fully operational. Thus, clients are facing typical problem of fund transfer. They have to go for cash transfer or payment  in cheque. Reluctance of many banks to use BEFTN on inter-bank fund transfer needs to be addressed properly. 
Finally, the overall safety and security measures are critical to run e-banking with an optimal outcome. Globally, e-banking is facing series of security risks. Bangladesh is not free from these. Continuous upgradation of security measures is a big challenge. Good governance is crucial. As banks run on mutual trust, without good governance,  trust can't be sustained and restored. With technological innovation, growth of e-banking has to continue. But the growth has to be supported by good governance in every sphere of the financial sector, particularly in banking.

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