Fintech non-adoption to create risks for banks: ICT professionals

Staff Correspondent | Published: 00:00, Jan 22,2020


Traditional banks, which are not adopting financial technology or fintech, would be at risk of losing competitiveness, academics and professionals cautioned at a discussion on Tuesday.

They made the warning at the discussion on ‘outsourcing in financial service sector’ organised by the Bangladesh Institute of Bank Management and the Bangladesh Association of Call Centre and Outsourcing at the BIBM auditorium in the capital Dhaka.

ICT minister Zunaid Ahmed Palak and BIBM director general Md Akhtaruzzaman, among others, attended the workshop.

Despite a slow progress in adopting financial technology by the country’s financial institutions, Tk 7.8 lakh crore or 20 per cent of the country’s total Tk 38.89 lakh crore financial transactions were executed using fintech.

Although there are risk issues in adopting fintech by the financial institutions, transaction cost can be reduced significantly by using technologies, academics and professionals said.

Business process outsourcing entities can play a vital role in adopting of financial technology by the financial institutions, said BIBM associate professor Md Mahbubur Rahman Alam in his presentation,  adding that the BPOs, however, were facing several challenges too.

The challenges for the BPOs include poor investment, involvement in frauds, existence of the company and poor support, Mahbubur said.

Instead of focusing only on call centre outsourcing, he suggested that BACCO members should focus on services like banking security operations centre, cyber emergency response team for banks, KYC verification, employee monitoring, system monitoring, early alarming for fraudulent transactions (BI), employee verification (ethical status using social media analytics), customer awareness and education, deposit collection, inactive customers, activating inactive agent banking accountholders and payment processing.

Speaking about the cost efficiency in technology-based banking, Mahbub said that per transaction average cost in branch-based banking was 60 times higher than the mobile banking transaction.

For instance, worldwide average cost per transaction for the banks through branch was Tk 90.3 while the cost through mobile banking was Tk 1.5, through internet Tk 1.75, through agent Tk 32.21 and through ATM or fast track Tk 52.1.

Mentioning about the country’s dependency on Indian companies in adopting technology or installing core banking solutions, the BIBM professor said that the incapability of local companies was the main reason.

Before the year 2005, 18 banks used foreign software for their core banking systems that increased to 27 during 2011-2017. On the other hand, 45 banks used local entities’ service for CBSs and the number dropped to 19 during 2011-2017.

In another presentation, Devnet Limited chairman AKM Sabbir Mahbub mentioned the importance of digitisation in the financial sector and the country’s banks’ weakness in the area in the global context.

Mentioning that the BPOs can play a vital role in facilitating adoption of upgraded technology by the financial sector specially the banks, Sabbir said that technology adoption by BPOs across the world was very high.

He also mentioned that the Bangladesh Bank’s guidelines on outsourcing arrangements should be upgraded based on the industry requirement.

Although the management specifically the managing directors are mostly reluctant to take the risk of technological upgradation as it might not give return in short term, the board of directors should go for the upgradation due to its long-term benefit, Sabbir said.

‘As we are heading towards cashless society, the delay in adopting the technology would not be good for the financial sector,’ he said.

BACCO president Wahidur Rahman Sharif said the BPO industries were facing trouble in getting banking outsourcing jobs abroad as the BPOs did not have experience in dealing with banks.

As banks are shy of outsourcing services, the local BPOs are deprived of getting experience, he said, adding that the telecom sector gave them the break in gathering experience by the way of handling their services.

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