Usage of technology in every sphere of life is in the core of 4th Industrial Revolution (4IR). The financial
Sector is at the forefront of 4IR
globally and Bangladesh is not an exception of that. Technological Innovations
in financial services popularly known as Fintech brings disruptions to the
conventional banking system. However, the wide acceptance of technology by this
millennium generation forced financial market to revisit and adjust the way of
doing business by adopting technology. Two aspects of such digital revolution
in banking business are: (i) Digitization and (ii) Digitalization. Banking
digitizing means converting currently manual or paper-based documentation into
digital format and changing the business rules/procedures to accommodate those.
Whereas digitalizing of banking is a whole new way of doing business.
Digitalization of Banking or Digital Banking is the application of technology
to ensure seamless end-to-end electronic processing of banking operations/
transactions. Digital Banking is also known as Electronic Banking, Cyber
Banking, or Virtual Banking which can be conducted from anywhere. Usually it
works in state through processing manner, initiated by the client, ensuring
maximum utility to the client in terms of availability, usefulness and cost.
For bank, it reduces operating costs, minimizes errors and enhances services
i.e overall provides a better user experience as a whole. Financial
technologies e.g. Internet of Things, Blockchain Technology, Augmented reality
(AR), virtual reality (VR), Open APIs, Big Data , Machine Learning, Robo
advice, Smart contracts and Cloud computing, etc. could be used separately or
all together to bring numerous benefits to the financial system as well as to
consumers.
This new business model of Digital
Banking is getting very popular throughout the world especially at the retail
level. Traditional banks understand the growing customer demand for digital
access and convenience and aware of the emergence of new competition within and
outside the banking industry. Banks also recognize adoption of various existing
and emerging technologies will optimize their workflow and lower operational
costs. On the other hand, the Fintech companies successfully address the gaps
left by traditional financial institutions along with new product development
and innovating existing products and services. The agility to adopt the latest
technologies, combined with best practices from other industries has enabled
Fintechs to develop these competitive advantages. From the experience of other
countries it has been found that, collaboration between traditional banks and
Fintech firms often resulted in the best form of digital bank. Countries like
Australia, Brazil, Singapore, Hong Kong, Malaysia, UAE, KSA have already successfully implemented Digital
Banking to meet the ever growing client demand. The prospect of such banking
services in Bangladesh has already been partially demonstrated by the Mobile
Financial Services providers in the country like Rocket, bKash and others. But
it is important to remember that every benefit has some inherent risk. High
proliferation of Digital Banking also fight with certain associated risk e.g.
Security Risks, Breach of Privacy, Disparity in Services, Cybercrime, Systemic
risks, etc. So, for the particular targeted client segment of Digital Banking
who wants to experience the benefits of improved consumer experience, benefits
of reduced costs, and to have greater transparency in all services also need to
develop a richer insight into own financial well-being along with actionable
advice on steps. Regulators also need to take appropriate stance to strike the
balance between innovations customer protection and monetary policy
transmission. Banks in Bangladesh have already realized the importance and
opportunities of Digital Banking in the country and are experimenting different
models like creating partnership with MFS to offer banking services or creating
subsidiaries with Fintech firms for offering digital banking services. However,
necessary policy to unleash the opportunity created by Digital Banking is to be
adopted by the regulators to materialize the concept of Digital Banking.
Therefore, Digitalization of Banking industry is no longer an option, it’s a
simple bare necessity – the collaboration of banking and Fintech will be the
key to flourish.