Bangladesh has 57 commercial banks. When you consider the size of the economy, this number is much more than what we require.
However, a few local commercial banks here are obviously not lagging far behind their global peers. But there are some differences.
The way the multi-national banks manage risks, structure, and package new products and solutions are still of superior quality than that of the local commercial banks. Especially with regard to large loans, cross-border loans, structured finance products as well as structured trade finances -- the differences are evident.
If one would go for arranging a large finance for a government or private entity, or want to conduct monetisation of the asset or cross border M&A for some large corporations, still the multi-national banks will be your preference.
This is because the global banks with their knowledge base, corporate governance, research capability, knowledge about how the global economy runs, and more importantly because of their regularly updated risk management practice -- are still ahead in the race.
As mentioned, a few local banks are also adopting the global best practices and becoming smarter. They too are using and applying the processing or service delivery platforms of same origin, from the same vendor in their respective banks, whether it is ERP, core banking, or customer relationship management solution.
On the customer service side, I would say many local banks are now, in a way, more aggressive than their foreign peers. Foreign banks, because of their overly strict compliance requirements or at times market knowledge gap, are a bit shy in providing a lot of services to the clients.
If you do have an adequate and modern service delivery platform, efficient customer service model, and quality management behind the wheels, I don’t see any reason why the local banks cannot become like DBS in Singapore or ICICI of India. Some of the local banks are doing really well in offering world class products and services, though yet at a smaller scale.
For the local banks which are doing really well, I would like to give credit to their people at the top. The people in those bank’s policy-making positions have gone for centralisation of their banking operation. They have brought in changes to their customer on-boarding and risk management processes. They have gotten themselves prepared for a broader, effective, adequate, forward-looking service delivery and IT model.
Especially, I would rate card division and retail banking division of few local banks to be at par with any of the global banks in the world.
I have not only worked with some of the global banks here in Bangladesh, I have also audited many global bank branches in Europe, North America, Asia, and Africa. Based on my experiences, I believe that if these local banks make adequate investment on their people, knowledge, product development, as well as solution building and most importantly have proper risk management culture in place, they will be able to become at least regional banking giants.
Heists and security
After the central bank cyber heist last year, the security systems of the commercial banks were put under scanner. A few banks came forward to take expert services to boost their cyber security measures, majority are yet to.
To provide full-proof security solutions, the famous “Big Four” and others do things like ethical hacking, vulnerability assessment, and penetration test (VAPT). They do these because they want to make sure that clients are safe from any possible cyber threat, IT threat, or any possible technological threat.
We need an overhaul of our whole banking management -- the way they think, decide, and implement
These firms cover the whole security overhauling from different angles. We have to understand that investing in IT has become imperative now.
In older days, we used to see the recruitment of a lot of manpower in the airlines industry. Now you don’t need a number of co-pilots to run a large aircraft, it has been automated and the job of co-pilot, to a large extent, is being done by the cutting edge autopilot systems which are much more effective.
You can say it is going to be the same for the banking industry in near future.
There had been a lot of talk regarding technological transformation for the banks in the last one year but only few have actually been done to get out of perilous situations.
One reason for this can be, the entire banking industry of Bangladesh is, in most cases, promoter driven. They still rely mostly on the traditional thinking process which has possibly led them to success till now. It is very hard for a head of IT of a bank to bypass the higher authority, who usually comes from traditional or typical banking background, to create an intellectual pressure on the board to go for technological transformation.
Property and protection
Protecting intellectual property right (IPR) has been a major issue all over the world. In Bangladesh, still the practice of protecting IPR is far from the practice prevalent in the developed countries.
Global tech giants feel that there is no level playing field here in Bangladesh due to the prevalence of pirated software. Even the large banks and corporations are using pirated software. This is a very unsafe situation. Also, this situation prevents global tech giants to open their customer service centers here because they cannot see the business to be in their compliance comfort. It has become a vicious cycle.
Time to think about the future
I believe with the technological advancements, issues like patenting and IPR are becoming extremely important and Bangladeshi institutions, especially the banks, should start adopting those. Otherwise, they will suffer in the future.
The thought process of the people sitting behind the wheels is still confined within traditional business development and recovery of loans.
They are yet to understand that there is a greater room for improvement beyond that. So we need an overhaul of our whole banking management -- the way they think, decide, and implement.
Time has come for the banks to take Fintech much seriously. Fintech comprises of three elements -- technology, platforms, and capable people. Fintech redefines how banks are going to borrow and lend money.
More importantly, Fintech is going to transform the entire landscape of payments. It would enable industry outsiders like MNOs to behave like a bank and create new business models.
Mamun Rashid is a leading banker and economic analyst in Bangladesh.