Bank, fintech collaboration to improve financial services

A strategic partnership of banks, fintech and mobile financial services (MFS) could boost Bangladesh's banking sector by delivering better, cheaper and more inclusive services, according to the top executives of some lenders in the country.

Technology adoption in the banking sector must be aligned with the business strategy or else it might not be fruitful, they said.

These comments came at two panel discussions, styled "technology capabilities that are a must in today's era of digital transformation" and "digital transformation on the CEO agenda", at the ABB Digital Transformation Summit 2023.

Organised by the Association of Bankers, Bangladesh (ABB), the two-day summit began at the Pan Pacific Sonargaon Dhaka yesterday.

Sohail RK Hussain, managing director of Meghna Bank, said digital technology allows banks to tie in with third parties such as fintech and MFS to offer financial services, such as payments, lending, savings and insurance, as well as create frictionless customer experiences.

As the customer base is going to be segmented into many parts, strategic partnerships with other organisations will enable banks to use large footprints, especially with MFS.

He then said increasing the use of AI-based chatbots could reduce human effort and improve customers' experiences with banks.

Digital technology allows banks to tie in with third parties such as fintech and MFS to offer financial services, such as payments, lending, savings and insurance

— Sohail RK Hussain MD of Meghna Bank

"We now have to look at how we can onboard customers and provide services as cheaply as possible. Digital transformation is here, it has been here for a while but the Covid-19 pandemic has made us all realise how effective it can be," Hussain added.

He went on to say that the affluent and middle classes are expected to account for about 15 per cent of the country's population by 2030.

At present, there are 18 crore mobile subscribers with 90 per cent of the population having access to the internet, and these are giving banks huge potential to leverage on, Hussain said.

Syed Mahbubur Rahman, managing director of Mutual Trust Bank, said commercial banks have also found a new avenue for co-creating products and services with MFS.

"In a way, the MFS world is a road to the cashless society because had this not been there, we would not have reached here," he added.

Abul Kashem Md Shirin, managing director of Dutch-Bangla Bank, said there are now three categories of banking customers.

The first one features those who are very tech-savvy but do not visit bank branches, booths or MFS agents as they want end-to-end cashless transactions.

Another type is hybrid, where they withdraw money from the booth or agent and pay to the merchant in cash but pay utility and other bills electronically.

The third category of customers come at the age of over 50. These people visit branches and make cash transactions.

The first category of customers is growing and are mostly aged below 35, he added.

Regarding cloud-based banking, Shirin said regulatory relaxation is needed to adopt critical software solutions, such as core banking, credit card, mobile app, internet banking, MFS and payment gateway.

There is in-house software that can now be hosted in the cloud in accordance with the regulation.

"The journey of cloud-based banking has started and will continue to grow as it is cost-saving," he added.

Selim RF Hussain, managing director of Brac Bank, said digital technology is itself an enabling platform or business strategy that helps achieve basic business objectives such as generating shareholder value.

"So, it is very important to plan what our digital transformation will be all about, what it is set out to achieve. If it is not planned well, if it is not aligned with the institution's business strategy, it is bound to fail," he added.

Hussain then said digital transformation has to be an initiative that aims to increase revenue, reduce cost, increase returns on equity and access to customers, and it must be fully aligned with the business objective.

Mashrur Arefin, managing director at City Bank, said digital transformation in banking means doing things better and at a lower cost.

"We don't need to go digital if it generates high-cost deposits and hurts business. We need simplified things so that accounts are opened easily," he added.

Ali Reza Iftekhar, CEO of Eastern Bank d, said digital adoption for a bank must come from the top of the organisation.

Adaptability is important, so if the leaders cannot implement the adaptive leadership concept, it would be very difficult to adopt the digital platform, he added.

Humaira Azam, managing director of Trust Bank, said banks will have to adapt to digital transformation as there is no other way.

She also said cyber security is not strong enough in Bangladesh.

"In our country, we had quite a number of attacks as far as banks are concerned," she added.

Afzal Karim, managing director of Sonali Bank, said the post-Covid situation expedited their digital transformation as the lender is now going through massive change.