ELECTRONIC BANKING IN BANGLADESH

ELECTRONIC BANKING IN
BANGLADEH: PRESENT STATUS,
FUTURE PROSPECTS & CHALLENGES
ELECTRONIC BANKING IN BANGLADESH

A Report On

ELECTRONIC BANKING IN BANGLADESH:

PRESENT STATUS, FUTURE PROSPECTS & CHALLENGES

By

Nusrat Saragin, Mahmuda Yesmin, Sharmin Sultana, Sazzad Sakib, Najmul Hasan

School of Business

July, 2013

UNIVERSITY OF ASIA PACIFIC (UAP)

ELECTRONIC BANKING IN BANGLADESH 3

A Report On

ELECTRONIC BANKING IN BANGLADESH:

PRESENT STATUS, FUTURE PROSPECTS & CHALLENGES

By

Group Name : The Doers

Name Registartion No.

Nusrat Saragin 10202024
Mahmuda Yesmin 10202001
Sharmin Sultana 10202022
Sazzad Sakib 10202035
Najmul hasan 10202045

Prepared for

Nazreen Tabassum Chowdhury

Lecturer

School of Business

University of Asia Pacific

 ELECTRONIC BANKING IN BANGLADESH 4

Letter of Transmittal

July 11, 2013

Nazreen Tabassum Chowdhury

Lecturer

Department of Business Administration

University of Asia Pacific

Dhanmondi, Dhaka-1205.

Subject: Submission of a report on Electronic Banking in Bangladesh: Present Status,

Future Prospects & Challenges.

Dear Madam,

This is a great pleasure for us to submit the report on Electronic Banking In Bangladesh:
Present Status, Future Prospects & Challenges which we have been assigned to work on. As
a requirement of the course FRL - 305, we have tried our level best to show our skills and
potentiality to prepare this report.

So, we therefore, hope that you find it in order. We beg your kind advice and suggestion for
any mistake.

Sincerely yours,

Nusrat Saragin

Mahmuda Yesmin

Sharmin Sultana

Md. Sazzad Sakib

Najmul Hasan
 ELECTRONIC BANKING IN BANGLADESH 5

ACKNOWLEDGEMENT

We would like to take this opportunity to convey our heartfelt appreciation to them whose

blessing and cooperation was important to complete this report. At first, we would like to pay

our gratitude to the Almighty Allah who gives us the power to prepare this assignment.

We are greatly indebted to Ms. Nazreen Tabassum Chowdhury, Lecturer, DBA, University of

Asia Pacific, for her whole-hearted cooperation and supervision towards us during the

practical orientation. Her suggestions and comments to make this report was really a great

help for us.

Lastly, we would like to give many special thanks to all seniors and faculties, University of

Asia Pacific, for giving us good advice, suggestion and for inspiring us in some cases.
 ELECTRONIC BANKING IN BANGLADESH 6

CONTENTS

TITLE PAGE

1. Introduction ........................................................................................................................ 8
2. Literature Review ............................................................................................................... 9
3. Objectives of the Study .................................................................................................... 10
4. Methodology of the Study................................................................................................. 10
5. Limitations of the Study.................................................................................................... 11
6. Characteristics of E-banking............................................................................................ 11
7. Different Forms of E-banking...................................................................................... 12
7.1. Tele-banking .......................................................................................................... 13
7.2. PC Banking or PC Home Banking......................................................................... 14
7.3. Internet Banking .................................................................................................... 14
7.4. Online Banking....................................................................................................... 14
7.5. Mobile Banking ............. ....................................................................................... 15
8. Current Scenario of E-Banking in Bangladesh .............................................................15
9. E-banking Products Available in Bangladesh ........................................ 18
10. Prospects of E-Banking in Bangladesh ........................................................................ 23
11. Advantages of E-Banking in Bangladesh ..................................................................... 24
11.1. Benefits from the Banks Point of View .................................................... 25
11.2. Benefits from the Customers Point of View............................................ 26
12. Policy Implication ......................................................................................................... 27
13. The Challenges & Constraints on Internet Growth in Bangladesh .............................. 28
14. Opportunities for a better Internet support ..................................................................28
15. Recommendations .........................................................................................................29
16. Conclusion.................................................................................................................... 30
Bibliography
 ELECTRONIC BANKING IN BANGLADESH 7

Executive Summary

Electronic banking, or e-banking, is the term that describes all transactions that take place

among companies, organizations, and individual and their banking institutions. In the mid-

1970s for the first time some banks offered customers e-banking in 1985. E-banking or

electronic banking has created tremendous opportunities for the banking industries all over

the world. Now it has become the waves of the future. It provides various forms of benefits to

consumers in terms of case and cost of transactions, either through internet or other electronic

channels available. For many consumers in the world electronic banking means 24-hours

access to cash. And Bangladesh is not an exception to it. Adoption of this information

technology in banking offers opportunity for reduction of both paper and people. Electronic

Banking System is a very efficient form as it offers instantaneous verification and transfer

and reduces the flow of pricey papers in the record keeping process of the banks. It allows

banks to spread out their markets for fixed deposit taking and credit extension conducts as

well. It also gives banks the opportunity to provide new products and services and build up

their competitive position in contributing existing payment services. Moreover, e-banking

could reduce operating costs for banks. More generally, the continued development of

electronic banking may contribute to improving the competence of the banking system and to

reducing the cost of retail transactions both nationally and internationally.

 ELECTRONIC BANKING IN BANGLADESH 8

1. Introduction

In todays world, change is an everlasting reality. Now every day the past is replaced by

dynamic present and the dynamic present is being substituted by more challenging future as

well. Who cannot keep pace with this continuous changes are intended to collapse in the race.

Science and technology is changing the way for financial institutions to perform their

different banking activities. Life has never been so easy, secure, and lavishing. Science and

technology have made this possible for us. But a new technology brings with it not only the

potential for success but also a never-ending series of questions regarding its design, its value

to its users, ultimate use and acceptability. Electronic banking is a method by which a

customer may perform banking transactions electronically without visiting a brick-and-

mortar institution. E-banking has become a global phenomenon now. It is a precious and

influential means driving development, supporting growth, promoting innovation and

enhancing competitiveness. Technological innovations have been identified to contribute to

the distribution channels of banks and these electronic delivery channels are collectively

referred to as electronic banking.

The advancement of banking technology has been driven by changes in distribution channels

as evidenced by automated teller machine (ATM), Phone-banking, Tele-banking, PC-banking

and most recently internet banking. The developed country as a part and parcel of their

economy is now using electronic banking or online banking.

While monetary establishments took steps to implement e-banking services within the mid-

1990s, several shoppers were hesitant to conduct financial transactions over the online. It

took widespread adoption of electronic

commerce, supported trailblazing corporations like America on-line,Amazon.com and

eBay, to form the concept of paying for things on-line

 ELECTRONIC BANKING IN BANGLADESH 9

widespread. By 2000, 80 p.c of U.S. banks offered e-banking. Client use grew slowly.

In 2001, Bank of America became the primary bank to high three million on-line banking

customers, over twenty p.c of its client base. On-line customers evidenced a lot of loyal and

profitable than regular customers. In Oct 2001, Bank of America customers dead a

record three.1 million electronic bill payments, totalling over $1 billion. In 2009, a report by

Gartner cluster calculable that 47 p.c of U.S. adults and thirty p.c within the UK bank on-

line.

Electronic banking is comparatively new conception in Asian country. Erstwhile solely the

foreign banks operative in Asian country likes normal hired Bank, HSBC, etc provided it.

These foreign banks managed to realize competitive advantage with the introduction of

electronic banking for the primary time in Asian country. As result

the native industrial banks began to loose their market to those foreign industrial banks. so

that they reacted terribly quickly. Initial time it absolutely was combined, currently a number

of the banks area unit providing Electronic-banking services even entirely. Japanese Bank

Ltd. is that the leading native industrial banks in Asian country to supply first electronic

banking services.

2. Literature Review

With the wide-ranging technology innovation and telecommunication,

new monetary distribution channels are increasing quickly each within the numbers and type,

from ATMs, phone banking, computer banking to web banking. Developing another

distribution channels isn't solely essential in terms of reducing prices

and rising aggressiveness, however conjointly in terms of economic institutions ability to

ELECTRONIC BANKING IN BANGLADESH 10

retain the prevailing client case also on attract new customers. Sathye (1999) projected a

model for web banking in Australia that is extensively influenced by variables of system

insecurity, case of use awareness of service and its edges, cheap worth, accessibility of

infrastructure and resistance to vary. The transformation from ancient brick-and-mortar

banking to E-Banking has been cash dispenser Machine (ATM) and therefore the

retail banking system witnessed important and intensive amendment. Formally, E-

banking includes varied formats or technologies, together with phone and

computer or web banking. The foremost normally factors ar easy use, dealing security,

convenience and speediness.

3. Objectives of the Study

The main objectives of this study are as follows:

Overview on the concept of e-banking.

Present the current scenario of E-banking in Bangladesh.

Examine the future prospects and challenges of e-banking in Bangladesh.

4. Methodology of the Study

The report has been prepared mainly on the basis of secondary data. Information has been

collected from different related publication materials, books, journals, newspapers,

magazines, articles etc. Besides this, internet has also been used as an additional source of

information.
ELECTRONIC BANKING IN BANGLADESH 11

5. Limitations of the Study

Shortage time period.

Shortage of books and published sources were in Bangladesh.

The study was based on limited variable. Difficulties faced to collect the desire

information.

6. Characteristics of e-banking

E-banking is on the edge to fill the void. In todays fastest world economy there are only

a few opportunities to create a big difference and several opportunities to build a slight

difference. Banks and other financial institutions always try to grab all these

opportunities.

In the modern age, the whole world has become like a global village and people are

getting closer day by day through different information and communication tools based

on digital system. So, modern age can be phrased as a digital age.

E-banking mainly depends on computer and different types of information technologies.

Now a days various kinds of operations have been launched for providing seamless e-

banking operations. The transactional websites offer the customers the opportunity to

carry out transactions through the particular banks website either by setting off banking

transactions or buying different products and services. Banking transactions can series

from a retail account balance inquiry to a large business-to- business funds transmit.

Electronic banking service can be categorized depending on the type of customers they
ELECTRONIC BANKING IN BANGLADESH 12

offer services. Some familiar retail and wholesale e-banking services provided by

financial institutions are shown in the following table:

Retail Services Wholesale Services

Account Management Account Management

Bill payment and presentment Cash management

New account opening Small business loan applications, approvals,

or advances

Customer wire transfers

Investment/Brokerage services Commercial wire transfers

Loan application and approval Business-to-business payments

Account aggregation Employee benefits/pension administration

7. Different Forms of E-banking

There are a number of ways through which customers can operate their accounts even

without being present physically at the branch of that particular bank. These are the

different forms of e-banking like PC or PC Home Banking, Online Banking, Internet

Banking, Telephone Banking, Mobile Banking etc. These forms of e-banking assist banks

electronically to cover all the manners of banking business.

ELECTRONIC BANKING IN BANGLADESH 13

Figure 1: Types of E-banking

7.1 Tele-banking

This banking service is operated by phones. The customer or client just needs to dial a

specific phone number to get access in their accounts. Through this service customers can

enjoy various options of services. Service provided under tele-banking includes:

Inspect the balance amount of accounts

Transfer money between current, savings, deposit and credit card accounts

Clear the different bill payments

Stock exchange transaction

Receive statement through fax machines

Give information about loan payments

ELECTRONIC BANKING IN BANGLADESH 14

7.2 PC Banking or PC Home Banking:

PC banking requires the usage of personal computer to operate the banking activities. On the

other hand, customers using PC home banking customers needs personal computers at home

or outside the banks offices to get access their accounts for transactions. This system

requires passwords. Mainly, PC banking or PC home banking can be categorized into two

such as online banking and Internet banking.

7.3 Internet Banking:

Internet banking is free both bankers and customers to continue with online banking

transactions. Now a days the manners of customers is changing rapidly. The service

provided by banking institutions is branded by distinctiveness, independence of time &

place and flexibility. It is now considered as a Strategic weapon to provide satisfactory

and innovative services to the ever-changing customers according to their diversified

needs. Ample legal framework and utmost security are the two crucial factors for Internet

banking. This security infrastructure assures security from the network to the browser.

7.4 Online Banking

Online banking facilities are growing at an international level right now in Bangladesh.

Currently, 29 listed banks offer facilities like transaction through any branch under the

respective bank online network; payment against paid order or pay order encashment,

demand draft encashment, opening or redemption of FDR from any branch of the same bank;

remote fund transfer, cash withdrawal, cash deposit, account statement, clearing and balance
ELECTRONIC BANKING IN BANGLADESH 15

enquiry within branches of the same bank; and L/C opening, loan repayment facility to and

from any branch of respective bank under its own online network.

7.5 Mobile Banking:

Truly mobile banking is another form of Internet banking. It is a good example of how the

differences among various types of e-banking are becoming gradually unclear with time.

Because of the availability of new transmission technologies such as WAP (Wireless

Application Protocol), mobile phones, personal digital assistant (PDA) or small hand-held

PCs, the access to the Internet has been easier for bank customers. Therefore, it has also

paved the way of Internet banking for todays clients of the financial institutions. It makes

the different banking services free of time and place and thus offers enough flexibility.

Nevertheless, the application of mobile banking is still in a promising stage.

Other forms include:

Any branch banking/ anywhere banking.

SMS banking.

Electronic fund transfer system.

Card-Debit/ ATM card and credit card.

Virtual banking.

8. Current Scenario of E-Banking in The Banking Sectors of Bangladesh:

Being a third world developing country, Bangladesh has still a long way to go to meet the

expected level of global banking system. According to a report published in The Daily
ELECTRONIC BANKING IN BANGLADESH 16

Star (4th April, 2010) Bangladesh was ranked in 118th position in the global Network

Readiness Index in 2009-10 up from 130th a year ago. This report showed a rising trend in

the information and communication technology sector of our banking systems.

Banking industry in Bangladesh

There are currently 47 Banks in Bangladesh. Based on proper deployment of electronic

devices in the banking sectors of Bangladesh, it can be subdivided into three groups:

Fully Online banking: Foreign Commercial Banks and Private Commercial banks

especially 2nd (except few banks) and 3rd generation Private Banks.

Medium range Online banking system: 1st generation private banks and some 2nd

generation Private Commercial Banks.

Low grade online banking system: Nationalized Commercial Banks, Specialized

Banks and Few foreign Bank branches in the subcontinent.

Currently limited electronic banking services are being used by the banks in our country. But

it is estimated that banks can achieve more profit and provide better services to its customers

by utilizing the online banking facilities properly.

Online banking practice in foreign banks:

The foreign commercial banks in Bangladesh are far advanced in terms of using the e-

banking facilities in banking operations. Banks like Standard Chartered Bank , Citi

Corporation, N.A. and the HSBC lead the way to launch & use the electronic banking

facilities. They make available ATM, Debit Card, Credit Card, Home Banking, Internet

Banking, Phone Banking, on line banking etc. services for their respective customers.
ELECTRONIC BANKING IN BANGLADESH 17

Online banking practice in indigenous banks

The Private Banks are ahead of the public banks in case of the local banks. Prime bank ltd.,

Dhaka bank ltd., BRAC bank ltd., Dutch-Bangla bank ltd., Eastern and Mercantile bank ltd.,

are already stepped forward to provide the electronic banking facilities. Mutual Trust Bank

ltd., have also introduced ATM services. Among the four Nationalized Commercial Banks

(NCBs), Janata bank ltd., offers some kinds of electronic banking facilities. Bangladesh Ban

is also planning to originate an extensive structure of electronic banking facilities. All of

these private banks are offering the online banking services at a limited level. Most of these

banks only offer services by providing ATM card among all the e- banking services. But

many of them do not offer the other forms of internet banking facilities whereas a major

advantage of e-banking is to deposit money in any branch of that particular bank and

withdraw money from ATM machine. But electronic fund transfer are being parcticed in a

limited edition. Sonali and Agrani bank ltd., is also providing on line banking services in

an inadequate scale. Rupali Bank ltd. is also in the same track like others. BASIC bank which

is 100 percent public owned but served as private sector banking has a technological

advancement.

E banking software supplier:

Now the software companies in our country have started to provide the required banking

software. On the other hand, it has not been possible to offer many kinds of electronic in our

countrys banking services till now due to the technology backwardness, infrastructural

underdevelopment and legal infrastructure.

ELECTRONIC BANKING IN BANGLADESH 18

Bangladesh banks stand in connection to E-banking:

According to the report of The Financial Express(3rd November,2009) by Bangladesh

Bank, a circular giving the ground breaking directions to commercial banks was

published on 2nd Novemebr,2009. According to this circular the clients will have the

opportunity to pay power, water, gas and phone bills from bank accounts and transfer

funds within a bank or to other banks.

The online payments will be considered just like other cash transactions though it

reminded the banks that these money transfers would be regulated by the country's

strict Anti-Money Laundering Act.

Bangladesh bank has also initiated the Automated 11 Clearing house based on trail

base from 8th November, 2009. The Central Bank also acknowledged that the any

cheque which size is not as per the guideline of the MICR system will not be accepted

by the clearing house from the very 1st of April 2010.

In the year of June, 2011 there were almost 400,000 credit card holders. According to

Bangladesh Bank, credit card payments and transactions were approximately Tk

11billion in June 2008 which is one of the lowest in the world.

9. E-banking Products Available in Bangladesh

The products and services provided by e-banking mainly include wholesale products for

corporate customers as well as retail and fiduciary products for customers individually.

These product and services are like the mirror of the particular banks services offerings. The

available e-banking products are described briefly below:

ELECTRONIC BANKING IN BANGLADESH 19

Automated teller machine:

An ATM or automated teller machine is a computerized telecommunication machine that

offers customers of a bank to do their financial transactions in a public space. And they dont

even need a human clerk or a bank teller to help them.

Debit card:

A debit card is a plastic card that grants a customer an optional payment method to cash. The

transaction amount is usually displayed on a card reader, after which the customers wipes the

card and enters his secret pin number. There is generally a short interruption while the

electronic fund transfer at point of sale or EFTPOS terminal contact the computer

network over a land phone or a mobile phone to verify the authorization of the transaction.

Credit card:

A credit card is another system of payment. It is a small plastic card issued to a client for

his/her usage. It is different from a debit card as it does not take out money from the users

account after each transaction. Here the issuer lends money to the customer. It is also

dissimilar from a charge card though this name is often used by the communal to describe

credit cards. Here, the balance needs to be paid completely after each month. In contrast the

credit card permits the customer to turn round their balance with the cost of having interest

charged. Features given by a credit card cannot be extended fully in a country, as common

gateway between financial institutions cannot be established. Moreover, the pricing

mechanism of a countrys products is not reasonable always. It is very much unstable. This

creates a pessimistic impact on the customers.

ELECTRONIC BANKING IN BANGLADESH 20

Point of sale (POS):

Point of sale refers to a retail shop or a counter in a superstore or any shop or a erratic

location where a transaction occurs in this type of situation. The electronic cash register

system is being used under this method for an establishment. This system can be seen

being used in restaurants, hotels and stadiums as well as retail environment. In other words,

we can say if something can be sold, it can be sold where a point of sale system is in use.

Check Truncation

Under this system financial institutions dont return the rejected checks with the monthly

declaration to their client, rather they provide statement of rejected checks with their monthly

statement. The banks store these rejected checks for a certain period of time which is usually

90 days. A customer can regulate his/her account if any imbalance is found between his own

record and the banks provided statement during this certain period. And once the time is

expired, the rejected checks are stained. But still the banks always maintain a micro film copy

for a certain time.

Home banking:

The telephone bill payment (TBP) was being introduced initially so that customer could

operate their banking activities even being at home. Video Home Banking (VHB) was the

subsequent version for the home banking services. The internet is likely to be a foremost

aspect for home banking.

ELECTRONIC BANKING IN BANGLADESH 21

Retail Automated Clearing House Service:

Retail Automated Clearing House which is also known as ACH is an electronic network for

monetary transaction. This allows processing large amount of both credit and debit

transactions which are originated in groups. The credit transfers of ACH consist of direct

deposit, payroll payment and payments to contractors and vendors. An ACH debit transfer

includes customer payment of insurance premiums, mortgage loans and other kinds of bills.

Businesses are also growing to collect the customers online using ACH rather than accepting

credit or debit cards.

Wire transfer:

It is a procedure which guarantees immediate and appropriate timing of fund transfer from

the sender to the recipient. The transfer of money can be conducted either within the home

country or abroad. Money is being transferred using the following network:

FED wire (federal reserve communication system)

Bank wire CHIPS (clearing house interbank payment service)

SWIFT ( the society for worldwide interbank financial telecommunication) :

M remittance

At present 4 nationalized banks and 15 private banks are operating collaboratively with

telecommunication service operators for sending foreign remittance. Generally it takes 3

working days to send the remittance in Bangladesh now by using any banking networks. And

it needs 24 hours in case of instance cash. Now the foreign resident people can send their

money and PIN (personnel identification number) code using mobile phones. So now the

cash transfer has become comparatively easier, quicker and more hassle free for the users.
ELECTRONIC BANKING IN BANGLADESH 22

But this method is also outdated by m Remittance system. Because mobile remittance service

was launched in Bangladesh to open the doors for those millions migrants workers with an

aim to help them transferring their hard earned money easily, effectively and most

importantly, swiftly. In Bangladesh the first ever remittance service was mutually launched

by two local banks Dhaka Bank ltd. and Eastern Bank ltd. with the countrys second largest

mobile operator Banglalink.

Security measures of e-banking:

Security of any system reflects extent of protection against some unwanted incidents like the

incursion of privacy, theft and the corruption of information or physical damage. As this

method is developed from the internet there is a huge chance of hacking through our system.

Current browsers counter security threats with a network communication protocol named

secured sockets layer (SSL). It is a bunch of rules that directs computers the step to take to

develop the security level of the communication.

Corporate automated clearing house:

The automated clearing house (ACH) is an electronic network for financial transaction. ACH

It allows both credit and debit transactions of larger volumes. The services includes balance

inquiry, funds transfer, downloading transaction information, bill presentment and payment,

loan application, investment activity and other value added services.

Other E-banking services available in Bangladesh:

Core Banking

Cluster Banking
ELECTRONIC BANKING IN BANGLADESH 23

Phone Banking

SMS Banking

Various Cards

ATM Shared (VISA/MASTER)

ATM own (VISA/MASTER)

PC Banking

Banking KIOSK

Offline Branch Computerization E-payment

The credit card is accessible from VISA, MasterCard and VANIK. Some foreign banks also

offer electronic fund transfer (EFT) services. At present it is at a preliminary stage and used

on a very restricted scale. Microchips embedded Smart Card has now also become quite

popular to clear the utility bills. The usage of Automated teller machine (ATM) is spreading

swiftly in major cities of Bangladesh. A cluster of domestic and foreign banks in our country

drive shared ATM services. As a result access to this type of electronic banking service is

increasing radically. The network will spread out to other parts of the country step by step.

10. Prospects of E-Banking in Bangladesh

The communication network of a country is very key to implement the electronic banking

successfully. The foremost cost is to setup backbone network for the utilization e-banking

properly. Fortunately Bangladesh Railway features a high-speed glass fiber network parallel

to the railway path closely-held by Bangladesh Railway. Its total capability is regarding pair

of.5 gigabits per second. This fibre optic network covers nearly each vital elements of the

country. Asian country has been connected with the data superhighway on
ELECTRONIC BANKING IN BANGLADESH 24

the twentieth could, 2006). it's a landmark of ICT sector of Asian country. The cable network

covering some 786 miles across the country from the Bay of geographic area can offer a

fibre-optic link with an information transfer capability of ten gigabits per second compared to

the a hundred and fifty megabits per second information measure currently utilized by the

state closely-held BTTB and dozens of personal web suppliers. The net users of our

country are increasing per annum. Once connecting with the data superhighway, the

overall country is going to be connected by fibre optic backbone; actually it'll be a milestone

for infrastructure of implementing electronic banking in Asian country. In Asian

country most of the banking hardware is obtainable. The hardware obtainable for electronic

banking is entirely procured from foreign origins with an area distributor. Electronic banking

operation hardware includes; servers.

11. Advantages of E-Banking in Bangladesh

Short Term Benefits

Lessen spare time

Increase productivity and efficiency

Remove replication and wastage

Reduce maintenance, and shortage cost

Limit security cost.

Long-term Benefits

Generate new opportunities of jobs for unemployed people

contribute for the economic health of a country

ELECTRONIC BANKING IN BANGLADESH 25

Plan and monitor properly

Utilize the resources appropiately

Job Creation

The total amount of jobless people in Bangladesh was 1.0 million in 1990 - 2001 according to

Bangladesh Bureau of Statistics. Among them 0.2 million were male and 0.8 million female.

The pace of unemployment was 1.1 which was later comprehended to 1.9. Though the

automation of this method would abolish some definite types of job such as record keeper, it

also generated careers for like administrator, system analyst, programmer, operator etc. Thus

e-banking helped in the reduction of unemployment problem of our country to a great extent.

Contribution to GDP

Banks works in order to build national capital, increase national savings and mobilize

investments in trade and industry.

11.1 Benefits from the Banks Point of View

From the banks point of view, the first and foremost benefit by offering the e-banking

services was improved branding and superior responsiveness to the market. The other

benefits were possible to measure in monetary terms. At the end of a day bank is also a profit

oriented organization like others. And a computerized e-banking services offer a great

opportunity to maximize profits.

ELECTRONIC BANKING IN BANGLADESH 26

11.2 Benefits from the Customers Point of View

Time saving is the major advantage for a banks customers because of the automation of

banking services dealing out and foundation of a trouble-free maintenance tools for

overseeing customers money. Other benefits of e-banking are as follows:

Boost up comfort level and save time for doing transactions. And that is even without

any physical communication with the bank.

Fast and seamless access to information.

Make easier for corporations to get access to information as they can verify on

multiple accounts with the click of a button.

Better cash management. It speeds up the cash cycle and increases efficiency of

business processes.

Cut down costs for availing and using a wide variety of banking products and

services.

Convenience was assured as financial transactions can be performed from homes or

offices or from any location a customer desires.

Speed up the response of the medium for fund transfer.

Management of funds has become more reliable and safer:

Economical Benefits

E-banking is beneficial not only for the banking institutions but also for the society as a

whole. E-banking has made possible the finance economically:

ELECTRONIC BANKING IN BANGLADESH 27

lesser functioning costs of banks

Computerized process

Speed up credit decisions

Lower minimum loan size to be beneficial

Potentially lower margins:

Less cost for entry

Enlarge financing reach

Increase transparency

Expand reached through self-service:

Lower transaction cost

Build some corporate services cost-effectively realistic for society

Create anytime access to accounts and loan information possible.

12. Policy Implication

The comprehensive set of e-banking products can help us run our business more effectively

by automating many of our critical banking activities and interacting electronically with our

bank. Initial cost of e-banking may be high, but it can be recovered within a few years.

Electronic banking may play a vital role in order to promote an automated service to the

potential customers. Ministry of finance can also play some role for conveyance. Arrange

monthly seminar in the banks or in the training academy of the banks to make awareness
ELECTRONIC BANKING IN BANGLADESH 28

about the new technology available in banks. Electronic security and viability may require

taking faith from the potential clients. Communication should be liberalized for technological

advancement. Bank should develop own online software rather depending on other vendors.

13. The Challenges & Constraints on Internet Growth in Bangladesh

Even if several spiky raise can be observed in the growth of internet and internet users, still

there are some barriers in the way to the expansion of internet in Bangladesh. Some of the

reasons are :

Undersized IT sector

Need of proficient use of IT network

No direct access to the information super highway

Inadequate experienced human resources

Underprivileged telecommunication infrastructure

Little computer literacy

Extensive poverty

Low telephone access

Want for of software in the Bengali language

14. Opportunities for a better Internet support

Bangladesh has a nationwide fibre-optic network established by Bangladesh Railway.

Hardly 8% of this fibre-optic capacity was ever used during the years of its life. This

facility can provide outstanding backbone for nationwide voice and data

communication.
ELECTRONIC BANKING IN BANGLADESH 29

To avoid satellite communication and its high cost, we can establish the missing link

to the information super highway if the nation-wide fibre-optic network is allowed to

link up with the high speed fibre-optic backbone in India.

Increase the availability of telephone lines and reduce the service fee to attract many

professionals into internet arena.

Young generation should play a vital role in developing IT industry in Bangladesh.

15. Recommendations

In order to ensure a successful practice of e-banking in Bangladesh, we recommend the

following.

Promote such an e-banking system that is simple to use, speedy and user friendly.

Ensure standardized e-banking services thus it becomes easier for the customer to

follow the procedures wherever the solution is used.

Banking sectors should be induced by Government to automate their operation and

going online by a specific period of time.

Ensure adequate training and technological support to develop the manpower.

Appropriate legal framework.

Develop Proper infrastructure

Government, in collaboration with the banks, should educate and inform its citizens

and customers on the workability and effectiveness of E-banking. This will increase

the confidence level of customers.

The clearing house operation in Bangladesh should be fully automated system.

Banks should have adequate research and technological background in this regard.
ELECTRONIC BANKING IN BANGLADESH 30

As e-bank users mostly use ATMs and POS in most cases, the banks should

emphasize on providing uninterruptible service.

16. Conclusion:

E-banking is like a tool to boost up trade. Now the international trade has already been

renowned by international business community, especially in European Union, North

American and some of the other developed nation like Japan, Singapore, and Hong Kong etc.

Nevertheless e-banking and others linked technologies are still in its early stage in our

country. Now the whole world seems to move towards e-everything. Hence all the barriers

should be removed and also try to develop such an atmosphere that is favourable for the

progress of E-banking. To maintain the continuation of growth of e-banking, the security and

the privacy features need to be improved at first. And thus the potential of E-banking can be

very prosperous. The future of electronic banking will be a system where users are able to

interact with their banks "worry-free" and banks are operated under one common standard.
ELECTRONIC BANKING IN BANGLADESH 31

Bibliography

Muhammad Mahboob Ali (2010). E-Business and on line banking in Bangladesh:

an Analysis. AIUB Bus Econ Working Paper Series, No 2010-03

Mohammad Azizul Baten, PhD, E-Banking of Economical Prospects in Bangladesh, Journal

of Internet Banking and Commerce, August 2010, vol. 15, no.2

Md. Abdul Hannan Mia, Mohammad Anisur Rahman, Md. Main Uddin E-Banking:

Evolution,Status and Prospects.

Ali MM, Ahmed R, Rahman A, Azam MM (2007). Electronic banking in Bangladesh:

potential and constraints. Dhaka Uni. J. Mar. 10: 1-19.

Awal, M.A. (2004), Internet in Bangladesh: past, present and a better future. Asia Pacific

Networking Group.
ELECTRONIC BANKING IN BANGLADESH 32