The Developing countries are transforming into digital in all the aspect in terms of this belief that it might change the country into a developed one. Also it is not unrealistic as ICT or digitization is such tools to change the economy of a developing country considering the adoption of it in worldwide. These Waves of change from the digital world are dramatically reshaping customer behavior and expectations in banking also. Banks and financial organizations have improved their services as a financial intermediary through adopting various IT solutions. Technology now has become an opportunity that facilitates banks’ organizational structures, business strategies, customer services and related functions.
Consumers around the world are quickly adopting digital banking. Incumbent only have a short period to adjust to this new reality or risk becoming obsolete.
Dr. MD. Abdur Razzaque MP, Chairman, Standing Committee on Ministry of Finance, said-Cashless economy will enhance the digital movements of the county in all the aspect of development activities based on online. And online transaction reduces corruption and enhances the economical growth. So we should come forward and work together to get the best out of this digitalization. We also need to move forward to establish the e- governance and need to have mass level awareness. Finally awareness should be transform into action and I am optimistic about it.
Digitalization in banking does not only mean online banking, internet banking, mobile banking or Cards as paperless banking rather it is the application of new technologies to transform the existing banking business model into a new banking business model. A model which will itself produce new customer base, unveil new financial services, ensure faster and seamless services to clients with reduced operational cost, zero error, ease of use and apparently, maximum security. The digital transaction is a flawless and non-traditional system involving one or more participants, where transactions are effected without the need for cash. Digital transaction involves a constantly evolving way of doing things where financial technology companies collaborate with various sectors of the economy for the purpose of meeting the increasingly sophisticated demands of the growing digital users.Generally Implementing technology in the financial industry is a necessity for the survival of businesses as customers seek lower cost alternatives to traditional financial services specially in developing industry.
Md. Tajul Islam MP, Chairman, Standing Committee on Ministry of Power, Energy and Mineral Resources said-About 90% people of our country are using mobile phone and most of them are also using mobile internet. The mobile penetration is huge here having the features and smart phones in a affordable price. We can maximize this facility if we can connect it with all the digital movements like digital business, services and payments. But we have very limited usages of digital transaction which is creating a flaw towards digital economy. The key reason is the awareness and security. Though the Government Banks has their own mindset that will take time to change and transformation, the private and public sector collaboration may results good to aware people and educate them in security matter. It also enhances their trust in digital payments and digital business. Thus helps the country to have a digital economy.
Introduction of Digital Transaction & and current scenario
During the 1990’s, the growing popularity of electronic banking made the use of non-cash transactions and settlements popular among the residents of some of the most technologically advanced nations of the world. Digital payment methods became well established in countries across the world by the 2010’s. Growth in digital payments occurred across all regions, with developing markets experiencing the highest rates — 16.7 percent — and mature markets growing at 6.0 percent, although mature markets still account for 70.9% of total global volumes. For the first time, China surpassed the U.K. and South Korea in digital transaction volumes, taking fourth position among the top ten markets globally, behind the U.S., Eurozone and Brazil. The value of digital transactions nationwide (provisional) on electronic payments released by the Reserve Bank of India (RBI). Bangladesh has 8.5 lakh digital transactions per month and the value of the transaction is 5890 corer. Among the Digital transaction1, 550,101 consumers are using internet banking. In the end of 2016 the card user reached only in 9.3 million in our country out of 40 million account holder. The daily card transaction is about 4 lakh. Then the mobile banking about 13 corer people have the access to mobile and bkash has the huge subscriber here.
Sabur Khan, Former President of Dhaka Chambers of Commerce, said-This is interesting to know that 47% card users age is in between 18-25 years and 44% of online purchase are completed by the young students of our country. So their involvement in digital transaction and digital business cannot be ignored. To increase their involvement in digitalization they need to be educated as they don’t have enough knowledge in security and transaction fraud issues. For their understanding and considering their future involvement with industry those issue need to be add in their academy curriculum to study .it would be better If industry people come forward to help the academia to redesign the curriculum. It will help the future leader to prepare themselves according to the industry demand.
Opportunity of Digital Transaction and Card as a mode:
This continued growth in digital payments globally presents opportunities for banks to provide such services to customers while corporate also benefit from a more efficient financial supply chain. Cards remain the fastest growing digital payments instrument since 2010, while check usage continues to decline. It is the sigh to transform the economy in cash less. More over the opportunities of digital transaction is huge to enhance the economy. Also card is one of the modes which can easily make it happen.
Digital transaction enhances the digital business or e business. Digital commerce has been introduced in Bangladesh in late 90s but till 2008 the development of this sector was not as per expectation. As the key concern the transaction was not completed digitally. During the year of 2009 to 2014 the digital business has been boosted in Bangladesh due to the usages of digital transaction and high speed of internet connectivity. It has impact the market that grown 20% in 2015. But Bangladesh has the potential of digital business having more than 2000 ecommerce business. So the digital transaction should be more effective to enhance its growth. Also the Cross border digital transaction will help the digital business to grow where Credit cards are still the prepared mode of payment for cross border transaction. Moreover cards or digital transaction has impact on Travel for making the travel easy and exciting, in education to offer the best to pay the fees, billing and recurring will become easier and smooth by the use of cards, using of card will enhance retail business, It will also make the government payments& corporate payments faster and easy than before besides ecommerce.
Tapan Kanti Sarkar President of CTO Forum Bangladesh said-Digital Transaction is a revolutionary transformation of financial sector. 60% people of our country have the access of banking service using this blessing of technology. With the positive initiatives of Bangladesh Bank like to introduce RTGS, EFTN the Private banks have been playing the key role to spread up this service. But is not enough because the public banks have the bank accounts more than private, So government banks should come forward to enhance the digital transaction. For digital business or ecommerce we need to have the strong and reliable local player and local platform. Though the card transaction cost is less than the manual transaction but the ATM and POS as infrastructural and maintaining cost is huge than manual. This is need to be improved to increase the transaction. Finally the mass level awareness is very important to increase the digital transaction where Master card and VISA can invest here having the business monopoly here.
why banks should come forward in Cards---
Within the next five years, digital sales have the potential to account for 40 percent or more of new inflow revenue in the most progressive geographies and customer segments. By 2018, banks in Scandinavia, the United Kingdom, and Western Europe are forecast to have half or more of new inflow revenue in most products coming from digital sales. Those in the United States are expected to trail them but are still forecast to see significant new inflow revenue come from digital. Among bank products, savings and term deposits, as well as bank services to small and midsize enterprises, are expected to see more than half of new inflow revenue coming from digital by 2018 (see sidebar “Digitally disrupted revenue”).
Meanwhile, new entrants are moving into the broader financial-services sector in many markets. In China, Alibaba has captured some $100 billion in assets in the second year since its launch of a wealth-management platform, while online giant Tencent is building a financial ecosystem around a large-scale online platform. The realm of payments, already digitized, is seeing more innovation from Apple Pay’s contactless-payment technology. In response, banks must also use digital to innovate and prosper.
Abdul Wahed Tomal, General Secretary of e-Cab, said-To enhance the ecommerce industry growth we need to have a ecommerce business policy where digital payment is a key component. We have already started to work on it. To enhance the digital transaction a central and interrelationship movement is also need among the business players, financial institutions, solutions providers’ government and the government Banks. The government Banks should come forward to adopt the new and innovative technology of transaction that may help the economy to grow. On the other hand ecommerce is fastest growing sector and we don’t have the market readiness to cope up with this speed. So it is also important to enhance digital business and digital transaction afterwards.
Capturing the value of digital
There are four fundamental ways in which digital capabilities can be used by banks to create value. First, digital technologies increase a bank’s connectivity—not just with customers but also with employees and suppliers. This extends from online interactivity and payment solutions to mobile functionality and opportunities to boost bank brands in social media. Second, digital draws on big data and advanced analytics to extend and refine decision making. Such analytics are being deployed by the most innovative banks in many areas, including sales, product design, pricing and underwriting, and the design of truly amazing customer experiences.
Syed Kamal, Head of MasterCard, said-Most of us use debit card to withdrawal money where we can easily use the card for transaction. And that will enhance the digital transaction and the cashless economy. We need to encourage the card or digital transaction and government can play the key role here like India. Indian digital transaction has increased 500% in last four month only because of that the government has banned the use of 500 and 1000 rupees note. So the other hand government can incentivized the digital transaction like the other developing concerns. It will encourage the consumer to use cards and online transaction. We have 40 million Savings accounts and only 22% is offering cards against the accounts. In this digitalization private banks are staying ahead than the public bank though the Public banks accounts number is much higher than private banks. Government can regulate here. Moreover we can use the population as advantage by involving into banking and offering cards. It will increase the number of user. The more we make the digital transaction the more it will enhance its growth.
A third way that digital creates value is by enabling straight-through processing—that is, automating and digitizing a number of repetitive, low-value, and low-risk processes. Process apps, for example, boost productivity and facilitate regulatory compliance, while imaging and straight-through processing lead to paperless, more efficient work flows. Finally, digitization is a means of fostering innovation across products and business models. Examples of this include social marketing and crowd sourced support, as well as “digitally centered” business models. Besides Bank should consider the followings:
Increasing the revenue from innovative offers and new business model like ecommerce and f commerce
- To capture future customer equity
- Increasing the revenue from new product , distinctive digital sales and using data to cross sales
- Reduce operational and transaction migration cost
- To ensure maximum reach with customer engagement
- To make attractive and cashless banking
- To ensure the safe and faster transaction
- To provide banking anywhere, anytime
- To establish internal e-process
Mr. Ashish Chakroborty, CTO of SSL Wireless, said-Digital economy required digital business development and digital business development depends on some component that needs to be performed perfectly. If we want to have the cashless economy then we should focus on those concern issues. Still we don’t have the POS machines outside of big cities like Dhaka and Chittagong. the situation at present is somewhat like a chicken-and-egg problem. Financial Institutions not willing to roll out more cards concerning that there are not enough POS machines on the other hand merchants have their excuse not to adopt POS machines due to the limited use and lack of cards. initiatives need to be taken to enhance the use of cards. The government bills and citizen service payment can be done in online and institutions can reduced the card issuing and usages charge . If we really want to have a cashless economy then it is the right to do a plan that may results by next one year and half. Lastly, banks need to pay more concentration on rolling out more cards.
Major concern to consider
Bangladeshi banking has come a long way over the last 43 years though still in these days we are unable to do much other than the management of cross-border trade volume increasing. Therefore Bangladeshi banking is confined to large classified loans, small automation, the least possible number of retail banking solutions, low access to Internet banking, concentration of banking limits, or exposure to few groups or families (that too in cash credit) hypothecation of assets, import loans, and term loans There are some reason that need to be addressed to enhance the popularity of card as a potential mode of digital transaction.
Nawat Ashekin, Head of E-Commerce in SSL Wireless, said-Banks need to ‘think digital’ in order to retain and capture transaction banking market share. In our country there are 10 numbers of banks those have the cards but not the approval to use online. So all cards needs to open and functional. And Bangladesh bank does not have any legal hurdle to approve that. On the other hand the existing cards use need to be increased by making online transaction instead of withdrawal the cash only. One-Time Password (OTP) need to establish for a single transaction and can encourage the online EMI. Those will persuade the consumer to make the digital transaction. The Financial institution has its huge business potentials out of digital business. So they need to come frontward to support the sector to grow. The Mass level awareness is also require for its faster growth and banking sector can invest here having the potential returns of investment.
Lack of awareness:
People don’t know enough about the facility and the usages of cards. Also the security measures. The 94.5% cards are using only withdrawal cash from ATM mean plastic to cash and that is not the consequential usages of card. These caused the limitation of its use and growth of digital transaction. And the consumer trust is also a key concern where awareness is very important. Overall Lack of Trust In The Market Are Among The Few Reasons Behind The Slow Growth Of Card Usage In The Country
Zia Ashraf, said-We want the digital business to grow and we are dedicatedly working for its development contributing as entrepreneurs, as we are facing problem both in payment systems and logistic support. Though Bangladesh post office has come forward with some solutions to address the logistic problems but we don’t get such support from financial sector. We have visited banks and insist for cobranded card especially for ecommerce. Moreover lack of awareness consumer pool is not increasing as per it should.
Mr. Anwar of Mitual Turst Bank, said-Infrastructural development is very impotent to increase the cards service across the country. We don’t have the POS in out of the city for that we can’t connect the consumers out of there. To establish pos is expensive as it needs to be imported but we need to increase the POS to enhance digital transaction and use of card. The government can help here to develop a investment friendly policy. All the financial institution with the leadership of Bangladesh bank also can come forward to address the issue to solve. If we convert the cash on delivery into card on delivery then it will increase the digital transaction. We are trying to make it happen. Cobranded card could be a solution along with a common POS.
Limited Access and Short of Of POS Machines: out of 1000 user in Dhaka city the 39% Users Complain About The Networking problem of Booth and 23% User Complain About The Unavailability Of Booth In Nearby .
Unwillingness From Operators At Shop To Handling Cards: the shopkeepers treat handling cards as a hassle and not encourage its acceptance.
A Limited Number Of Credit Cards & Machines In The Market: The financial Institutions are not as focus on cards as it need to be. Even they are not proactive to accept the sentence and not willing to discuss the issue in a common platform somehow.
Mr. Ashik Priyo shop, said-Sometimes our overseas client faced the local verification problem to make the international card transaction. We are expecting the bank will understand our problem and offer a prepaid card service as issuing credit card has lot of formalities. And finally those prepaid user can convert into credit card user. So the bank also has the business here. On the other hand the card should have some promotional offer to encourage the consumer to use cards in transaction on cash.
High interest rates
75.6% Card Users Complained That The outstanding interest Rates after the due date Is High. This is also a reason to discourage consumer to use card. Again there is no proactive marketing towards the consumer along with a standard consumer care service instantly. And Out of 1000 user around the Dhaka city the 46% users think the discounts offers are too limited considering its interest.
Mamun Rashid , Primier Bank, said-Trust and reliability of digital transaction is very important for its growth where awareness is the solution. The cards user should know what he is going to get out of this transaction mode along with its security. Awareness will also educate enough to address the card fraud issue by themselves. On the other hand banks should offers some facility with cards . Consumer habit also need to be change towards online transaction. The banks also need to adopt the direct marketing strategy to enhance its growth.
Scope of the Work to enhance the use of card as digital transaction:
77% out of 1000 people is Bangladesh prepared card more than others for secure digital transaction. But they don’t aware about all the beauty of card transaction due to the lack of awareness and providers disinclination to promote. 172 million card transactions were recorded in the year of 2016 and its financial value was BDT 1.25 trillion. So there is the opportunity for cards.
Mr. Moyeen of Lankabangla said-We need to spread area to use the cards, we are allowing consumer to use card for IPO and its relevant transactions. But the transaction fee is not convenient for higher large-scale transaction. Like if we want to make small transaction through card , the charge is convenient but when it is about the amount of 10 lack then the charge will come 15000 which is not encourage able. To reduce the service cost the financial institutes can work in co framework. And card fraud also needs to address strongly.
Right now 90% ecommerce and f-commerce are using cash on delivery (COD) mode for transaction which is not the right approach which may enhance the business rather to dispirit its cross border business opportunity. Moreover
- Also the mobile money transaction has become a threat for cards transaction as 79% card user think it is easier than card to use and 41% card user has already been using the mobile banking as parallel.
- Out of 1000 user 87% Users agreed that the security awareness campaign will enhance its business.
- 46% users think the discounts offers are too limited considering its interest.
- 43% digital business owners encourage card to transaction
- 47% women entrepreneurs want special cards for their own.
Jabunnessa from Jahangirnagar University said-We are adopting online banking or cards to make the transaction hassle free easy and faster. But it costs a lot more over the instant service facility is not standard enough especially in the government banks to encourage the consumer. Sometime we cannot make transaction from anywhere as RTGS is not implemented in every institution. So we need to consider the infrastructure first then the social culture to use digital transaction finally the government willingness to support the service to enhance.
CEO of Governance Policy Explore Center (GPEC) Razib Pervez, said-Digital Transaction is very important for digital business and digital transformation of the country. The growth of digital transaction is still 38 to 40 percent of total financial transaction. Different component including infrastructure has the limitation that is why the growth of this sector is not encouraging considering the digital movements of the country. A common platform is require where service provider, stake holders, government and the industry people can talk and share their ideas to enhance this transaction to get a cashless economy.
Mrs. Naznin Nahar, CEO of RallyRound, said-Bangladesh is an emerging market to invest. The infrastructure has been addressing accordingly to encourage the foreign direct investment along with local. The country has been focusing the digital transformation in all the aspect so that the country may develop. Digital transformation in financial institution is very important to get a digital economy. It will enhance the digital trade and relevant which will create a digital ecosystem of the country.
The urgency of acting for enhancing digital transaction and use of card is acute. Banks have three to five years at most to become digitally proficient. If they fail to take action, they risk entering a spiral of decline similar to laggards in other industries. Efforts are needed to educate stakeholders, provide more value-added services, and upgrade infrastructure at merchants and corporate.
This story has been written based on a survey among the 1000 card users around the Dhaka city conducted by RallyRound (An event management and research institution)