Saturday, May 25, 2024


Dhaka Tribune

Crossing the digital divide

The digital revolution is here to take banking to the next level, but are we ready to reap the rewards?

Update : 17 Aug 2023, 05:07 PM

I decided to write about digital banking while queuing to deposit a check while at the same time getting notifications on my phone about Bangladesh Bank getting record applications to grant digital bank licenses. The irony that I might have to spend more than an hour processing my humble cheque while getting national policy news in nanoseconds really makes you wonder about Bangladesh’s Great Digital Divide.


The Great Digital Divide (GDD) is my pet name for digital solutions that exist on paper versus their practical applications in real life. My take on the overall GDD concept is that like so many things in Bangladesh, the gap between theory and practice on a whole number of issues including legislation, the transport sector, law and order, etc is significant: Nice, pretty promises made on paper that never get delivered in reality. I want to be proven wrong, but I think digital banking will unfortunately not buck this trend.


Promises, promises


First let’s take a quick look at the promises made by digital banking. There are quite a few, and spoiler alert, most sound very feasible. The essential promise of digital banking is this: It promises a more transparent relationship between customer and the bank. 


It all started during covid when we were shown a glimmer of the potential of digital banking. Trapped within our homes, local mobile financial services (MFSs) like Bkash and Nagad showed us that everyday banking needs like paying utility bills, depositing money into our banks or paying credit cards can just as easily be done from sitting in our living rooms. Fast forward a few years and  completing big chunks of retail banking through an app has become much more of a norm rather than an exception for many. 


And digital banking works both ways: Financial institutions reap steady rewards as well. The disruption caused by covid within banks and non-banking financial institutions (NBFIs) to relationships with their customers have made them look for solutions beyond that provided by brick-and-mortar institutions. The covid years have made it very palpable that working from home, dealing with clients, managing services, etc can all be easily completed online. 


Hence the recent excitement and one might argue necessity shown by local banks to apply for digital banking licenses that will soon be handed out by Bangladesh Bank.


Making preparations


Almost a quarter of conventional Bangladeshi banks are preparing to establish digital banks to expand their reach to their customers who have become comfortable in their tech savvy ways.  Ten private banks have already formed a consortium to set up a digital bank -- Digi10 Bank PLC -- while Bank Asia and Brac Bank have also shared their decisions to become sponsors for two digital banks. MFCs and Telcos are not far behind, with industry giants Bkash, Nagad, Banglalink, and Grameenphone also showing strong interest. 


So are we all set for a digital revolution that will completely change the way we bank? Will the GDD tsunami wash away banking inefficiencies, waiting times, and interactions with bored banking customer agents? Not quite. Because remember that part where I mentioned the schism between theory and practice? Turns out that just putting ‘digital’ before banking services will not make you immune to reality in Bangladesh.


And the reality is digital banking does not exist in a vacuum. The covid years have also made it very patent that incumbent Bangladeshi banks do not have a digital framework or a digital skeleton ready to fall back on. Just like the digital multiverse that encompasses transport, law and order and the telecom sector to name a few, the quality of digital banking can only be as good as the overall digital services in our economy.


And that’s where the bad news begins.


Speed of a snail


Let’s start off with the fundamental problem: Connectivity. Digital banking in Bangladesh will heavily rely on internet connectivity and existing technological infrastructure. And here is the bad news: Bangladesh has ranked 121st out of 141 countries in terms of mobile internet speed, according to Ookla’s Speedtest Global Index of 2022. Our download speed is a mere 14.34 Mbps. To put this into perspective, our neighbour India ranked 79th with a maiden download speed of 25.29Mbps. 


The repercussions for digital banking is obvious: In areas with even average connectivity or during network outages, customers may face difficulties getting basic services like accessing their accounts or conducting simple transactions. 


Then there is the cost aspect. A report by VPN provider Surfshark revealed that people in Bangladesh pay 6.9 times more for internet access than the rest of the world. With inflation affecting the most basic amenities, potential customers would rather buy food for their families instead of spending extra to pay their electricity bills online, such a tradeoff becoming inevitable. 


But the elephant in the room is security, or lack thereof. Digital banking opens up new avenues for cyber-criminals to exploit vulnerabilities and commit fraud. For every text message I receive about how easily I can now pay my electricity bill through an app, I get five more on how transferring Tk500 to an unknown Bkash number will secure me a foreign job. Despite robust security measures, cyber-attacks, phishing attempts, and data breaches remain potential risks, and customers may still fall victim to such threats. 


The irony is receiving advice on cybersecurity from Bangladesh Bank when hackers had stolen $101 million from their accounts in 2016 by hacking the central bank IT system. To the consumer, the message reads loud and clear: If our own government cannot protect itself, how are they going to protect you?


I am not pessimistic about digital banking and crossing the Great Digital Divide. Certain aspects of the journey are inevitable and have already begun, with no turning back. But there is a difference between starting a journey with lessons gleaned from previous experiences, and starting it completely blind. 


I want to end by reminding readers that banking is not the first component of our society that has gone digital; almost a decade ago, I could already report my mobile phone as stolen sitting in front of a laptop, or even sell my laptop using my laptop. The point is that the digital banking journey is part of a generational shift, with other sectors like law and social networking already starting much earlier.


It would be remiss for the pioneers of the banking journey not to learn from their fellow passengers.  If it is not significantly easier, cheaper, and safer for me to use an app to pay my bills, I will keep on walking to the nearest brick and mortar bank to get the job done. Traversing the Great Digital Divide will have to wait. 


Faruq Hasan is Senior Manager, Farming Future Bangladesh. He writes about political economy, and the development sector. 

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