Most banks see high technology costs, cybersecurity concerns as key barriers

Some 90 per cent of surveyed banks have identified the high cost of technology as the key obstacle to the digitalisation of trade finance in Bangladesh, a research report has revealed.

The report, titled 'Digitalization of Trade Finance: Status and Prospects', also revealed other significant barriers. Some 75 per cent of respondents pointed to cybersecurity concerns, while 60 per cent highlighted system integration gaps.

Besides, 45 per cent of banks identified limited staff expertise and legal complexities as hindrances to digital adoption.

The findings were presented at a workshop organised by the Bangladesh Institute of Bank Management (BIBM) on its Mirpur campus in the city on Monday.

The researchers conducted a primary survey among 30 commercial banks to gather empirical evidence, followed by focus group discussions.

A team led by BIBM Professor Dr. Shah Md. Ahsan Habib conducted the research. The workshop aimed to incorporate more insights from discussants and participants.

Chairman of BIBM Executive Committee and Bangladesh Bank Deputy Governor Nurun Nahar was present as the chief guest at the opening session of the event, while BIBM Director Professor Dr. Mohammad Tazul Islam delivered opening remarks.

BIBM's 'A K Gangopadhyay Chair' Professor Faruq M. Ahmed, Deputy Managing Director & Chief Information Officer of Prime Bank Syed Sazzad Haider Chowdhury, Deputy Managing Director of Islami Bank Bangladesh Mahmudur Rahman also spoke as designated discussants.

The draft research report says that despite decades of automation in other banking areas, trade finance remains one of the least digitalized sectors.

According to the report, banks are generally well aware of and convinced about the necessity of trade finance digitalization.

"Most banks reported clear and consistent benefits from the digitalization of trade finance, noting that automation has significantly reduced processing time for key activities such as LC issuance, bill handling, payments, and reporting. It has also improved operational efficiency by reducing manual steps and lowering error rates," the report said.

The survey revealed that 95 per cent of the banks have adopted partial digital operations, while 5 per cent remain fully manual.

Additionally, 84 per cent of banks reported having a digitalization roadmap, while 16 per cent did not.

The survey also found that 80 per cent of banks highlighted the need for collaboration platforms, 70 per cent for IT investment subsidies, 60 per cent for training programmes, and 60 per cent for clearer guidelines from the central bank.

To support Bangladesh's transition to a fully digital trade finance ecosystem, the report recommended coordinated action across government, regulators, banks, and private-sector partners.

The suggested approach is organised under three main pillars: policy and regulatory reforms, operational transformation in banks and the private sector, and ecosystem readiness.

Speaking at the event virtually, Bangladesh Bank (BB) Deputy Governor Nurun Nahar emphasised that trade finance is the backbone of international commerce.

"For a trading nation like Bangladesh, which aspires to become a trillion-dollar economy, the efficiency, transparency, and resilience of trade finance systems are critical," she said.

Highlighting emerging global technologies, she said that Bangladesh has begun its digital journey as well.

"Initiatives like e-LC processing, automated customs procedures, the National Single Window, and the broader push for cashless and paperless services are strong signals that the country is moving in the right direction," she said.

Among the designated discussants, Faruq M. Ahmed noted that while there has been significant progress in various areas of banking, digitalization in trade finance lags behind the desired level.

He also stressed the importance of making adequate investments and building capacity over the coming years.

Sazzad Haider Chowdhury underscored the need for greater collaboration among stakeholders and for raising customer awareness.

saif.febd@gmail.com