APPLICATION OF E-BANKING

IN BANGLADESH

GROUP - F

Submitted to TASMIA TAHLILLecturer, Faculty of Business Studies Premier University, Chittagong

Submitted by 1. Abdul Karim-081811290722. Robiul Hossain-0818112918 3. Avijit Biswas- 0818112945 4. Emran Hossain-0818112919 5. Saibal Nath-0818112948 6. Mahiur Rahman-0818112917 7. Sudipta Saha-0818112940 6th Semester Section : ‘G’ Batch :18

INTRODUCTION

E-banking is a form of Banking where funds are transferred through on exchange of electronic signals between financial institution, rather than exchange of cash, checks or other instruments.

E-Banking

The following chart exhibits the definition of E-Banking.

  E-commerce  E-Finance E-Money

E-Banking Other Online finance Service & Products ATM Service Internet Banking SMS Banking Telephone Banking Electronic Fund transfer SWIFT Channel

E-Banking For many consumers, E-Banking means 24 hours access to cash

through an ATM or direct deposits of Paychecks in to checking & saving account.

Electronic Banking can be defined as- “an Umbrella term for the process by which a customer may per for banking transaction electronically without visiting a brick and mortar institution.”

E-Banking is the waves of the future. It provides enormous benefits to consumers in terms of cash and cost of transactions, either through internet, telephone or other electronic delivery channel.

Through E-Banking smaller banks could compete by offering portals to the services offered by larger banks. Bank could use E-Banking in order to gain competitive advantage.

Present status of E-banking in Bangladesh

• E-Banking satisfied customer demand in Banking activities electronically throughout the would. At present, several private commercial banks (PCBs) and Foreign commercial Banks (FCBs) in Bangladesh offering services of Tele-banking, internet Banking and online banking facilities within the branches of individual Bank in a closed network environment. It is expected that banking can earn profit and offer better services to its customers by introducing online Banking facility more and more.

E-banking and Bangladesh

Foreign banks through successful use of a global network have increased timeliness and accuracy of information, benefiting its customers, employees and also management.

A broad spectrum of E-banking services, a subset of electronic finance, is available in Bangladesh with different degree of penetration.

Eastern Bank Limited

Eastern Bank Limited Internet banking application addresses the needs of small, individual and corporate account holders of the bank. This application provides a comprehensive range of banking services that enable the customer to meet most of their banking requirements over the net. . The transactions that are supported by the internet banking provided by Eastern Bank Limited are Account operations and Inquiries, Fund Transfers and Payments, Utility Bill Payments Deposits, Loans, Session Summary etc.

Bank Asia

Bank Asia symbolizes modern banking with innovative services in Bangladesh. It has centralized Database with online ATM, SMS and Internet query service. Bank Asia has 21 ATMs as a member of ETN along with eleven other banks. It is the pioneer amongst the local banks in introducing innovative products like SMS banking, and under the ATM Network the Stellar Online Banking software enables direct linking of a client’s account, without the requirement for a separate account.

BRAC BankBRAC Bank deployed a layer of security system for its Internet Banking. BRAC Bank uses the most advanced commercially available Secure Socket Layer (SSL) encryption technology to ensure that the information exchange between the customer’s. Computer and BRACBank.com over the internet is secure and cannot be accessed by any third party.

HSBC

Business Banking Account enables a person to receive credit of all the cash or cheque deposits along with inward remittance and make all local payments and provide access to the wide range of services for the business requirements. With Easy Pay Machines both HSBC and Non-HSBC customers can make deposits and pay their utility bills, credit card payments and etc.

SCB

Standard Chartered offers the client a comprehensive range of Cash Standard Chartered offers the client a comprehensive range of Cash through a wide range of operating systems, sweeping transaction accessories with the provision of reporting features or other special functions.

Status of Bangladesh in Adopting Banking Technology 

It is imperative for the Bangladeshi commercial banks to embrace the latest technological changes in offering banking services. More and more banks now using different software to do their banking operations (Table 1), which has established the arguments in favor of using technology. Many Bangladeshi commercial banks initially started with some locally produced banking software and at present many of them are now upgrading the previously obtained software.

Name of the banks Banking Software

ATM Present Previous

Sonali Bank Bexibank 4000+, PC BankKernel Banking System, Flora Bank.

Bexibank 3000+ Yes

Arab Bangladesh Bank KPATI BEXI Bank Yes

National Bank Ltd. BEXI Bank 4000+, BEXI Bank 3000+, A2Z, and Flora Bank

BEXI Bank Yes

The City Bank Ltd. Finacle Core PC Bank Yes

Islami Bank Bangladesh Ltd IBBS BEXI Bank Yes

Bangladesh Krishi Bank IBS and Flora Bank N/A No

IFIC Bank Ltd. BEXI Bank 4000+ BEXI Bank 3000+ Yes

United Commercial Bank Ltd. PC Bank BEXI Bank 3000+ No

Dutch-Bangla Bank Ltd. PC Bank PC Bank Yes

Standard Chartered Bank EBBS BBS Yes

One Bank Ltd. Micro Banker PC Bank Yes

Bank Asia Ltd. Steller Bexibank 4000+ Yes

BRAC Bank Ltd. Millennium Banking System (MBS)

N/A Yes

The Trust Bank Ltd Kernel Banking

System

Yes

The Premier Bank Ltd. PC Bank 2000 PC Bank Yes

BASIC Bank Ltd EAGLE N/A Yes

Infrastructure

According to a report published in the Daily Star (4th April 2010) Bangladesh ranked 118th in the global Network readiness index in 2009-2010 up from the 130 years ago, showing as upward trend in the information and communication sector. In South Asia, India ranked 43 rd Sri-lanka 72nd, Pakistan 87th and Nepal 124th in the “Global information technology report 2009-2010” released by “The world Economic Forum (WEF) on (3rd April, 2010). As Bangladesh has to go a long way to develop its Network for arranging Digital Bangladesh by the year 2012 and public and private cooperation and statistic alliance is required to develop E-business system in the country.

The Finance minister recently argued a trial launching to operation of the country’s first ever wireless broad bank technology “WIMAX”. He hoped that the “WIMAX” technology will be available at every divisional headquarters within a year (http://www.bangladeshinfo.com)

Various products and forms of E-Banking:

Automated teller machine (ATM): An ATM is simply a data terminal with two input and four output devices. Line any others data terminal, the ATM has to connect to, and communicate through, a host processor. The host processor is analogous to an interest service provider (ISP) in that it is the gateway through which all the various networks becomes available to the cardholder. ATM has two input devices card reader and keypad. For output devices Speaker, Display screen; Receipt printer, cash dispenser.

SMS Banking: SMS Banking allows to do some Banking enquires on mobile phones. It is development to provide transactions related to client’s card account via SMS. The above transaction contains the followings.

i A type transactionii. Individual access code for working with SMS-Banking iii. A sum to be paid (if payment transaction)iv. Identifier of payment (debt)v. Identifier of data.

Tele banking :

Tele-Banking is a form of remote banking which is essentially the delivery of branch financial services via telecommunication devices where the bank customer can perform retail transaction by dialing a touch-tone telephone which is connected by utilizing Automated voice response technology, Tele Banking requires the Account number, PIN a push button telephone etc. It provides following services. •Checking account balance•Interest rate related to information.

Online Banking:

Online banking also called internet Banking. It is a term used for performing transactions, payment etc over the internet through a banks secure website.

Advantages Disadvantages

1. Convenience

2. High transaction speed

3. Efficient and much More effective

1. Star up may take time

2. New Bank site changes

3. Matter regarding trust.

Any Branch Banking: It is the service where an account is accessible from any branch of a particular bank. Now-It is widely known as on-live banking in BD.

Virtual Banks: Virtual banks are banks without bricks. They exist entirely on the internet, where they offer the some range of services and adhere to some rulers and regulation of central banks. Remittance: Banks have grown up relations with many international financial agencies to masters the flow of remittance into the country from the expatriates working in foreign countries some exists in Bangladesh like western money union transfer, Money gram, X press Money.

Call Centre: Call centre affairs a wide range of banking services through its call centre agents. Customers are now getting improved services at a reduced cost. Available services are-Account related Services: Balance inquiry duplicate statement, cheque book request, ATM, loan outstanding etc. Product Information: Deposit accounts, personal loan, savings and current accounts, debit card, rates and tariff inquiry, exchange rates, lending rates, deposits rates etc.

Debit Card:

A debit card is a plastic card which provides an alternative payment method to cash while making purchase. The amount of transaction is typically displayed on card reader, after which the customer swipes the card then enters their PIN Number.

Credit Card :

A credit card is a system of payment name after the small plastic card issued to users of the system. A credit card is different from Debit card in that if does not remove money from the user’s account after every transaction.

Electronic Banking Services in Bangladesh (percentage of Banks)

Product 2000 2001 2002 2003 2004 2005

Tele Banking

20 24 25 28 30 32

Online Corporate Banking

8 12 14 15 18 25

Electronic Fund Transfer

15 18 20 22 25 30

ATM 15.4 28 28 30 35 40

Credit Card

23 - 20 25 28 24

Debit Card

3.8 18 22 28 33 40

Merchant Account Service

3.8 12 15 18 18 20

Internet Banking

7.7 12 15 22 36 45

Future Challenges Posed by bank:

E-Banking is definably beneficial to all the customer but it is not apart from its demerits. There are various challenges Bank may face in future due to following reasons.- The main challenge bank may face due to increased number of hacker. Any time they can Hack any customer’s account. So this Hacking problem has become the major challenge to the banker. Another challenge is the technical (Software) problem. Due to software problem network does not work efficiently. To solve this problem is another challenge for the banker. Due to electricity problem transaction are not performing smoothly.

To continue the transaction IPS is required. So, transaction cost is increasing.

Problems of the E-Banking

Bangladesh companies are facing problems to state full swing E –banking. According to a report published in The Daily Star (4th April, 2010) Bangladesh ranked 118th in the global network readiness index in 2009-2010 up from 130th a year ago, showing an upward trend in the information and communication sector. Policy maker of the country are not aware about the benefits of E-banking. As such they don’t put significance on proper and systematic development of the process of E-Banking. At present the banks of Bangladesh are using limited electronic Banking services. It is expected the Bank can attain profit and offer better services to its customers by introducing online banking facilities. Credit card Facility full can not be extended in the country.

Inefficiency and inadequate knowledge of the bank mgt about the online banking.Lack of proper strategic plan to gain and retain market share of the indigenous banks. Lack of international standard communication channel. High cost of establishing online banking system.Inadequate back and front office mgt. Lack of integrated plan among the bank and central bank authority. Inefficiency clearing house facilities.

Recommendation to prosper E-BankingTo implement E-banking successfully in Bangladesh following recommendation are give below.

Career path of hardware and software engineers should be property designed. The clearing house operating Operation should be fully automated system.

Initiatives to develop E-banking software through in house built may be taken. Banks should have their own strategic plans to implement the online banking system. The country needs to develop E-business with the help of ICT facilities.

Public and private participation (PPP) for E-business should be encouraged for economic development.

E-business can help to improve total quality mgt this can also ensure quality assurance of the business sector.

SWOT Analysis

To find out the viability of a particular product we must perform a SWOT analysis of the product. This will analysis the strengths, weakness, opportunities, and threats of the particular product. For analysis the performance of internet banking in Bangladesh we the following SWOT analysis is considered.

Strength

•Internet Banking is new in our market. Only a few banks are now offering internet service in solving banking problems. Most of the banks are offering only accounting information online. Actual fund transfer and fund disbursement is not possible in all the banks that are offering internet service. So this product will enjoy the benefit of a first mover.

•It is cheap both for the banks and the customer. The bank will be able to lower down the overhead costs and make more profit out of it. Internet banking will require less manual workers. Again the customers will be abele to save time as well as money for their transaction needs.

•Internet banking is convenient as the service is available all the time at just.

Weaknesses

•Securities breakdown: The system will have a problem with the identification of the individual who is initiating the transaction. In Bangladesh, the identification of an individual is not yet supported digitally. So there will be a problem in moving to the internet era for banking purpose just now. First we will have to develop a digital database of the users of the internet banking services.•The transaction can be cancelled only via internet. The internet infrastructure of our country is not that much supportive to provide all time access to the web. So there will be a problem in executing the service with its full functionality.

Opportunities

•Non-branch banking is becoming popular in our country. Many banks are now offering non-branch banking facilities. A person can withdraw or deposit money in any branch of the bank he has account with. So moving to internet banking will allow the banks to offer non-branch banking facilities. •The internet services are becoming very common to us. So a service offered through the internet will be widely accepted in the near future.

Threats

•People have concern about security and privacy. They like to feel their money with their hand. They actually don’t believe in virtual money transfer. In the field of IT new technology is coming everyday. The one which is very popular today might get obsolete tomorrow. So to have a competitive edge over the competitors the banks must always update their services

Sl. Various forms of E-banking servicesNumber of Banks Having

online modes of service delivery

%

1 ATM 30 30/40=.75

2 SMS Banking 19 19/40 =.475

3 Electronic Fund transfer 22 22/40 = .55

4 Virtual Banking 07 7/40 =0.175

5 Internet Banking & Wap 21 21/40 = .525

6 Any Branch Banking 35 35/40 =.875

7 Tele-banking 21 21/40=.525

8 Point of Sale service 21 .875

9 SWIFT Channel 40 1.00

10 Remittance 31 .775

11 Call center 07 .175

Present status of various forms of E-banking in Bangladesh: Total 40 Banks (both pubic and private commercial banks) who use E-banking

are given through diagram.

Findings of the study

Customers’ Response:

Comment

(In percentage)

(In percentage)

On line Banking services is relatively good than manual System

79%

89%

On line banking provides good Customer service

72%

61%

Just in time services in Banking can be provided

56%

48%

Bank Personnel behave properly

52%

56%

Dealing officer is well conversant about their respective Desk work

48%

47%

Technologically improved but quality of banking services worsen off

51%

44%

Better E-business environment

67%

61%

Customers’ Response who have been using on line banking system (% of Respondents who expressed “Yes” comment)

Conclusion

The present status of-e-banking is not satisfactory in case of virtual banking, call center and SMS banking. Major reason is the security concern. A few problems have been experienced by the IT heads in the banks such as withdrawal of money beyond the limit. This has taken place at ATM booths because there is agreement between banks regarding networking sharing. Gigantic fraud does not take place because there is limit is ATM debit and credit to withdraw money from the banks.

THANKS TO ALL.