Future services and opportunity of commercial

bank in Bangladesh

Hafizur Rahman,Robin
American International University-Bangladesh
11-18244-1
Finance & Accounting

In future the commercial banks will provide some services

and opportunity in Bangladesh. E-Banking or internet banking is
the next stage in the development of banking services in
Bangladesh. The banking system in the country was known for
their stability and also stubbornness. The public banks in the
country always resisted to any kind of change in their working
styles through strikes and walk outs. E-banking is viewed as the
means of providing traditional services in a modern way. Ebanking is already started but not fully in Bangladesh. So, there is
a big chance to established fully services and opportunity.
E-Banking:
The term Internet Banking or E-Banking Internet both are used as
supplement. E-Banking is the one of the major part of E-Financing. EBanking refers to the banking operations, which is done over World
Wide Web. Internet banking refers to the deployment over the Internet
of retail and wholesale banking services. It involves individual and
corporate clients, and includes bank transfers, payment sand settlements,
documentary collections and credits, corporate and household lending,
card business and some others. E-Banking information architecture
is mod eled as client-ser ver architecture. A client operating
through a PC linked to Internet opens the special E-Banking site of
his bank and then, using a set of special secure numbers, gets access
to his bank accounts and has the opportunity to consult them, as well as
to make all necessary payments and transfers form his personal accounts.
When the transaction number is exhausted the bank sends him a new
set of numbers for his individual transfer sessions. In some cases the bank
provides customized software. The bank softw are program can also
be utilized offline, for exampl e for preparing the payment orders
offline and then making the actual order online. The client receives

all numbers separately, mainly by mail. The bank also provide clients with
similar facilities in its premises so that clients can use the bank equipment
such as an ATM or a special facility linked to the main terminal facility
called MultiMate, permitting them to effect the same account
examination, payment and transfer operations without consulting the bank
staff.

services of E-banking:
There are various types of e-banking services like
SMS banking, Tele Banking, Push and Pull services, ATM,
Fast Track etc. The ter ms PC banking, online banking,
Internet banking, Telephone banking or mobile banking
refer to a number of ways in which customers can access their
banks without having to be physically present at the bank branch. Ebanking may be understood as term that covers all these ways of banking
business electronically
.

Tele-banking
Tele-banking service is provided by phone. To access an
account it is required to dial a particular telephone number and there
are several options of services. Options included Checking account
balance Funds transfer between current, savings and credit card
accounts Bill payments ,Stock exchange transaction ,Receive statement via
fax Loan payment information.

PC Banking
The increasing awareness of the importance of literacy of computer
has resulted in increasing use of personal computers through the entire
world. Furthermore, incredible plummet of cost of microprocessor has
accelerated the use of computer. The term PC banking is used
for banking business transacted from a customers PC. Using the PC
banking or home banking now customers can use their personal
computers at home or at their office to access their accounts for
transactions by subscribing to and dialing into the banks Intranet
proprietary software system using password.

Internet Banking

Internet banking would free both bankers and customers of the need
for proprietary software to carry on with their online banking
transactions. Customer behavior is changing rapidly. Now the financial
service is characterized by individuality, independence of time and place and
flexibility. These facts represent huge challenges for the financial service
providers. So the Internet is now considered to be a strategic
weapon for them to satisfy the ever- changing customers demand
and innovative business needs.

Mobile Banking
Act ually mobile banking is a variation of Internet
banking. Mobile banking is a good example of how the lines
between the various forms of e-banking are becoming
gradually blurred. Due to the new transmission technol ogies
such as WAP (Wireless Application Protocol), portable terminal
like mobile phones, personal digital assistant (PDA) or small handheld PCs are providing bank customers with access to the Internet and thus
paving the way to Internet banking. It assures immense flexibility and
makes the financial services independent of time and place. However,
the use of mobile banking is still in a nascent state. The slower transmission
speed of the WAP standard and the limited amount of information
available are just two of the factors inhibiting the use of those terminals.

Opportunity of E-Banking in Bangladesh:

The infrastructure covers the major cost of any electronic banking
system. But its a matter of huge investment for a country like
Bangladesh. But fortunately Bangladesh Railway has a high-speed
optical fiber network parallel to the railway path owned by Bangladesh
Railway which has a total capacity of about 2.5 Gbps. This fiber optic
network covers almost every important parts of the country. S o , i t i s
an opportunity to use it as the backbone network of
e l e c t r o n i c b a n k i n g i n Bangladesh. Some of the multinational
companies like Grameen mobile phone company, Ranks ITT of
Bangladesh have already started to use
this high-speed optical fiber network and they are providing their services
even in rural area. So we can utilize this opportunity incase of E-banking in
Bangladesh
.

In Bangladesh there is a large gap between the computerization of foreign

banks and that of local commercial banks (the gap is particularly great
in respect of local public commercial banks) and as regards the state of
their intra- and inter-branch online networks. However, 75 per cent of local
banks are planning to introduce E-Banking, which implies very
dynamic improvements in their ICT use indicators. Virtually all banks
use banking software at their head offices and during the past few
years around one third of local banks has become SWIFT members.
Credit card and point of sale services (POS) are already provided by
a quarter of local banks, while ATM and internet banking are expanding
rapidly especially in major cities.

Description of Proposed ICT infrastructure:

In the above configuration all bocks are symmetric except for the role
of central bank differs slightly.
In central zone (i.e. Dhaka) Bangladesh Bank (Head Office) is connected
with every other Head Office and branch office is connected to its head
office in the same region. Bangladesh Bank(Head office) is given the
legal authority to get any sort of information regarding the transaction
flow from any bank.
In the regions other than Dhaka the role of Bangladesh Bank is
handed over to Sonali Bank Principal Branch if there exists no branch of
the central bank.
In both regions each bank forms a local network (might be wired
or through radio link)where the head office or principal branch play the
central role.
In some relatively remote area (Rangamatee) where total number of
branches of all banks is very few (for instance a total of 5 branches are
there) the above configuration is not a feasible one. In such cases, all
branches, irrespective of banks, should form a local network. This is
because establishment and maintenance cost will be much higher for
a number of very small LAN instead of a single moderately
sized one. Unlike other unit it has no governing entity. Here every
branch communicates directly with its Head Office.
Every Head Office is having its own VSAT to be connected with the
Internet. One is shown in the diagram. Alternatively, Internet

connection can be assured by direct connection with the sub-marine

cable as a future solution. It is shown as the dashed box in the diagram. In
the diagram of the proposed infrastructure the magnified box shows a
special module entitled' others connected with the head office.
It is used to represent to facilitate for the utility bill payments
such as water, gas etc. As a result, customer will be able to pay their
utility bills at any branch of any bank. It would obviously reduce the
immense pressure on some specific branches as being followed now.
Again, it presents some non-banking financial service providers such as
insurance company.
According to the E-Commerce beyond 2000, the banking
and finance sector has been a rapid adopter of E-Commerce
because its products could easily be vir tualized and the product
had priority over place banks can generate revenue through increased
account access fees, and benefit from promotional opportunity to crosssell products such as credit cards and loans.
The advances in Internet security and the advent of relevant
protocols has put banks in perspective again as financial
intermedi aries and facilitators of complete commercia l
transactions via electronic networks and especially via the Interne.
Consumers are increasingly looking for services they can
access from a single entry point. Awareness of competition has motivated
banks to move aggressively in seeking alliances and establishing joint
ventures to maintain their claim to this part of the E-banking infrastructure.
Like there are alliances in the ATM network, Group Network, Money
Transfer Network etc. This is also creating segmentation of
networks where the customers of this networks sometimes unable
to access to others network. Consumer behavior in banking
changed partly as a result of changes in the amount of spare time
available to individuals. Mobility, independence of time and place, and
flexibility has become key words in consumer banking.
The Internet banks serve also as gateways offering identification
and authorization services to a number of third party ser vice
providers. There are user-f riendly opportunities for conducting
business over the Internet with telephone companies, Energy Company, tax

board and other institutions. Demand for those services influences

also the usage rates of Internet bank

Conclusion:
Web based banking service or E-Banking, the latest
generation of electronic banking transactions, has been opened up
new window of opportunity to the existing banks and financial
institutions. It permits business process re-engineering, serving borderless
market, to achieve zero latency leading to improvements in customer service
levels and better risk management because of real-time settlement. The EBanking sector is highly prohibitive for the new entrants although the
inception cost is lower with high growth rate. The brand preference of the
customer, existing network, physical existence, security and safe ty,
supplier bargaining power, substitute product of non-banking sectors
have made the way thorny. However, new comer with innovative idea
and strategy definitely can make position in this sector. The analysis of
the evolution and present status of E-Banking make us some room to make
commandments for the government, new entrants and existing ebanks for effective utilization of the opportunity to accelerate the economic
growth.