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The cheque's in the ether
Clients crowd counters of a bank in Dhaka. The new electronic funds transfer system allows organisations to make deposit to any domestic bank account in one day at low cost.Photo: STAR
This month, a team of specially trained officers of the Bangladesh Bank, staff from each of the country's 48 banks, and a dozen different technology vendors are doing the final testing of the most advanced electronic cheque-processing systems in the world. Already, the system has been run in production for 24 hours and even several days at a time. Within weeks, it will take over from the country's ancient, manual system.
In most countries, this took many years, in a step-by-step evolution. Those with slightly advanced cheque-clearing systems had to develop a migration path from one system to another. But advantage can sometimes be taken from adversity. Bangladesh's system was so outdated and so many had passed through the stages that we could leapfrog to the most modern system.
Bangladesh Bank management decided to jump to a system with cheques captured at the bank of deposit, and only the digital cheque images and data moving electronically with full security. A machine captures the front and back, and the magnetic-ink data of up to 500 cheques a minute.
The new electronic funds transfer (EFT) system, set to be online next year, is even faster and more efficient. It will allow organisations, public and private, to make deposit electronically to any domestic bank account in one day at very low cost. Banks will be able to offer customers anywhere in the world online bill payment via the internet.
Jumping from a manual to a state-of-the-art system has never been done on this scale. It was years in the making. Every bank had its own branch-numbering system, for example. To work effectively, automated payments require a unique number for every bank branch in the country. And efficient cheque processing meant that the size and layout of every cheque at every bank had to be standard, with special ink across the bottom to be machine-read.
So many things had to change. A new paper standard had to be set for the cheques to easily pass through machines. Vendors had to learn to print them. Banks had to order them. Every bank had to have a secure data link to the Bangladesh Bank, including a back-up link -- and a separate link to a back-up site, with a back-up link to that site as well.
The UK's Department for International Development funded experts, hardware and software to make it all happen. But the team of officers the Bangladesh Bank assembled for the Bangladesh Automated Clearing House (BACH) project was as impressive. In fact, their unswerving commitment to BACH has meant that their “bankers hours” were very long indeed.
The systems will do more than just speed payments. They will increase accuracy and control; help control illegal activity, such as money laundering; help move money internally; and provide a safe, efficient way to deliver payments from workers overseas.
World Bank studies show that countries that modernise payment systems average an extra 1 percent in gross domestic product. Now 1 percent may not sound like much, but it accumulates, year after year, to provide a major lift.
Once the specifications and tender were set, Crown Agents ran the procurement on behalf of DFID, selecting a consortium of vendors lead by the local tech firm Dataedge Ltd. The vendors got busy putting together the hardware and software, but the best code and chips might have foundered without “buy-in”.
One of my favourite mottos is: Technology is easy to change; people are hard. So the BB team began educating staff, not only in the BB, but in each of the country's banks. The team's guidelines called for a BACH manager to be appointed in every bank branch, and it began persuading them. There were doubters; but even the sceptical ones eventually came on board.
BACH is just one facet of the Bangladesh Bank's modernisation program. With the World Bank, for example, the BB is installing a system to automate other activities that are manual today, and prepping a data warehouse to consolidate financial information from all bank branches to enable the electronic submission of financial records.
A credit information bureau is in the works. Also in development: a national switch to interconnect the ATMs of all banks in the country and allow bank ATM cards to be used for in-store purchasing.
While e-commerce requires information and access first, payments are a critical piece. Bangladesh will soon have a national platform for e-payments. The launch of the EFT system, with more capabilities to come, is a ambitious program and a key part of Digital Bangladesh.
Three years ago, my partner and I developed specifications both for a modern cheque imaging and automation system and for an EFT system. Today, the hardware for EFT is installed and it will be fully online next year. My work is almost done, but my life is forever changed. I learned so much about this country -- about mother language, the fight for independence, about the many who struggle to survive every day yet are open, friendly and industrious and I made many new friends.
I noticed that last month my home city, Los Angeles, designated a neighbourhood as Little Bangladesh. I think I know more about what that means now than most of my countrymen -- and I'm proud of that. I also trust the economists that designated Bangladesh as one of the “11 Tigers” -- economies that are far behind today but have the potential to become major forces in the future.