Local banking software lags behind

Going tech smart is all the rage in today's increasingly dynamic banking world. Be it at home or abroad, big names in the financial services are vying with one another to offer the best services to their clients through state-of-the-art technologies.
As the banks are receiving subscribers and introducing services in growing numbers, they are becoming tech savvy as well. The financial giants are now spending more on automation than ever before.
“Seven or eight years ago, we used to spend not more than Tk 3 lakh for automating each of our bank branches,” said Abul Kashem Md Shirin, deputy managing director of Dutch-Bangla Bank Ltd, a pioneer in banking automation.
“Those were the days when we needed to count separate software and hardware costs for automating our branches,” Shirin said. Since DBBL introduced core banking in its system in 2003, their total automation costs stood at Tk 200 crore through a seven-year span, he added.
Increasing the number of service delivery channels and the volumes of transactions means that the banks are spending more on technology to remain competitive and prove efficient in customer handling.
The local software houses are failing to cash in on the booming automation market, which is partly blamed on the mindset of the banking industry as well as a lack of apt marketing of the homegrown IT companies.
“In the days of distributed software system in the past, most bank branches used to rely on local software for their everyday banking. As core banking gained a secure footing, most of the local bankers switched to foreign software for more advanced solutions,” said Shirin.
“The cost of automation no more depends on the number of branches, rather it depends on the range of latest services offered to the customers and the mode of service delivery channels.”
Although it would cost nine to fifteen times more to install foreign software compared to a local one, most banks are now going for the more expensive option. This trend is labelled by the proponents of local software as 'disturbing'.
“The local software companies often suffer from an image problem as the locally developed products are often perceived to be inferior,” said M Mainuddin Chowdhury, senior executive vice president of Southeast Bank Ltd.
“This is despite their lower installation and maintenance costs and the proven ability to provide the same services,” he added.
Electronic payment systems like debit and credit card as well as automated teller machines have come to define the latest automation expenses, while new forms of delivery channels like SMS banking, internet banking, e-commerce and m-commerce are likely to be the next wave of growth in banking automation.
Against the backdrop, most of the bankers, however, pointed to the enhanced ability of the foreign software to offer the latest range of services and security features compared with their local counterparts.
“Currently, we are using local software for our core banking solution, but we'll switch to a foreign solution when the Basel II will be implemented,” said a top IT official of a bank, asking not to be named.
When asked about their stance, the local software houses, however, often complacently state that they are able to offer services suitable to the local customer base and industry needs.
“There are regulatory compliance issues, which are better addressed in the locally made software,” said Anisur Rahman Khan of Leads Corporation Ltd, a top software solution provider.
“There are no hidden costs involved in the local software; the cost of ownership is also low and the maintenance is easier. Even the implementation of Basel II with the local software services should not prove to be any tricky job.”
Leads' BankUltimus, a real time online core banking solution, has been implemented by a number of local banks.
The industry insiders have long been concerned about the lack of necessary investment in research and development in the local software houses, which they cited as a reason for the homegrown companies lagging behind.