Banks will have to embrace digital means extensively compared to what they have adopted so far to digitalise services, or else they will be unable to keep their businesses afloat, said a top banker.
"Considering this, Bank Asia has taken preparations to transform its manual banking services into digital ones," Md Arfan Ali, managing director of the lender, told The Daily Star in an interview recently.
The existing payment methods have been going through major transformation across the globe, and the quick response (QR) code will get huge popularity to keep up with the time, sweeping aside the manual payment methods, he said.
The central bank rolled out an interoperable QR code in January as part of its effort to give a boost to cashless transactions.
The uniform digital payment method, namely "Bangla QR" will help clients pay bills while purchasing goods and services by way of using mobile applications of banks, mobile financial service (MFS) providers, and payment service providers (PSP).
A QR code is a type of barcode that can be read quickly by a digital device, and it stores information as a series of pixels in a square-shaped grid.
Clients have to scan the code by using a smartphone to make payments for products purchased from the stall.
A question has surfaced: how rural people will use the QR code?
The central bank has recently decided to allow small businesses to open micro-merchants to resolve the problem.
As per the initiative, the small businesses -- vegetable vendors, owners of small shops or tea stalls -- are now permitted to accept bills from the clients' accounts and credit cards by using merchant accounts.
Bank Asia, which started its business in 1999, has already opened around 14,000 micro-merchant accounts, for which the lender had already begun to attach Bangla QR code, Ali said.
"QR code will bring a revolutionary change in the modules of the payment systems. The lender commenced its preparation several years ago as part of its efforts to expand banking services for the rural people," Ali said.
The bank plans to set up financial kiosks in 87,000 villages of the country, and it has already built such outlets in 5,000 villages.
The kiosks help clients make settlement through QR code payment, transfer money from one account to another, and pay utility bills as well as disburse subsidy among the underprivileged.
The use of point of sales (POS) terminals, physical credit card and automated teller machines will reduce significantly in the years ahead when the QR code will get momentum, said Ali, who took over the helm of the bank in 2016.
He started his banking career at Arab Bangladesh Bank in 1991 and joined Bank Asia in 1999.
Although the use of ATM and POS has been on the rise in Bangladesh, clients of many countries are distancing themselves from the payment module thanks to the expansion of QR code, he said.
The use of cash will decrease to below 15 per cent than the current level within the next 20 years in the country.
Bangladesh has made impressive strides in digitalising banking services since the mid-90s.
For instance, the MFS industry has gained tremendous popularity in recent years, and Bangladesh has become one of the countries where the digital mode is prevalent in terms of the number of clients and amount of transactions.
Bank Asia rolled out agent banking in 2014 in continuation with the branchless banking, said Ali, who achieved an MBA from the Institute of Business Administration under Dhaka University.
"People now show a huge interest in agent banking as they can take loans and keep deposits with the platform easily," he said.
Bank Asia, the pioneer in introducing agent banking in the country, has realised that banking services can be expanded to commoners swiftly by using digital financial services (DFS).
The lender lent Tk 5.61 crore to small businesses through one of its agent banking outlets located in Adamdighi under Bogura district.
The outlet was established to extend financial services to small businesses under the Shawl Handloom and Specialised Clothes cluster. Some 119 entrepreneurs have so far taken loans from the outlet with the help of agent banking.
Entrepreneurs in many remote areas like Adamdighi now enjoy financing from banks, which is changing their businesses as a whole, Ali said.
The examples of both MFS and agent banking proved that there is no scope to escape from DFS as banks will have to completely depend on the IT-based banking services, he said.
"This digitalisation will also strengthen the accountability of businesses as it will help the government mobilise more taxes."
The global economy spends around 0.5 to 1.5 per cent of its gross domestic product on managing physical cash. Digital money will help in decreasing the expenditure needed for cash management.
The requirement of human resources will not decrease when DFS takes centre stage as they will have to run the machine. But bank officials will have to improve their IT knowledge, according to Ali.
"DFS will help in distributing capital proportionately between rural and urban areas as well."
The banker says as much as 70 per cent of total loans are concentrated in Dhaka and Chattogram, creating an imbalance and depriving other regions of funds.
Banks are in a risky situation due to credit concentration. If the economic activities in the two zones face any debacle, the whole financial sector will face a dire consequence.
"So, we should try to reduce the credit concentration risk soon. Setting up new economic zones will help in reducing the risk," he said.
Less developed areas should get more focus to disburse loans, and the DFS will help do so.
Ali hoped that the ongoing business hardship deriving from the coronavirus pandemic is a temporary phenomenon, and the economy will overcome the situation shortly.
The resilience of the people in Bangladesh is extraordinary, which has helped Bangladesh do better than other nations during the pandemic.
In addition, remittance has given a huge breathing space to the government in managing macroeconomic stability.
"The robust foreign reserves will insulate us from unexpected external shocks," Ali said.
The global commodity market now faces a trend of price escalation. As a result, the economy may need more US dollar to settle import bills in the coming days.
The reserves, which recently crossed $44 billion, will give an extra advantage to tackle the situation beyond a doubt.
"The excess liquidity that has ballooned on the back of the robust reserves will reduce once the economy starts firing on all cylinders," Ali said.