As I entered adulthood into the world of banking more than a decade ago, I remember that I used to wonder why my father, a business man, always used to maintain his bank accounts at the traditional, not so digital at the time, government banks only. I, on the other hand, had my preferences set for private sector bank accounts offering a range of easily available services starting from ATM cards to credit cards to internet banking. Then few years ago, I started making an effort to become more financially conscious about where I choose to bank at, when my widow aunt’s last bit of savings were frozen for cash out due to one of the infamous banks at the time defaulting on payments to many many of their powerless and innocent clients due to the bank’s insolvency to pay out due to a huge corporate loan scam investigation.
I would not like to take a position here as to who used to make the better judgment call as to the credibility of banks to trust their money with - my father with an affinity to trust state-owned banks or me with the affinity to trust my money at the hands of foreign renowned banks. But what does run an alarm to many is the thought that the new digital bank guideline may open up the doorway to a pool of small fish investors with lot less lower paid-up capital that they need to put up as opposed to conventional banks, putting their clients at a whole array of risks to face if things go down the wrong lane. For instance, Bangladesh Bank has set the minimum capital requirement for a digital bank at BDT 125 crore, while for conventional banks, it is BDT 500 crore.
Some fear that what’s even more worrying is that digital banks will apparently make it easier to access loans and the due diligence checks might not be adequate. And the fear may not be unwarranted since quiet a number of financial institutes have made a scam name for themselves when entrusted with loan disbursements.
Few have also expressed concerns that all digital banks in Bangladesh are set to operate as Public
Limited Company (PLC), and they would like to know more about the exposure that this may put clients towards volatilities in the stock markets.
Others worry about the readiness of cybersecurity systems in the country when hackers can steal a billion overnight. At home, many women and the elderlies in particular may also be vulnerable to misuse of their control over money from unauthorized friends and families unless appropriate biometric safeguards are put in place.
On the other hand, not only has the digital bank guidelines gained interests of existing banks, financial institutes, mobile financial services and fintechs, but from ride-sharing companies to e-commerce sites to pharmaceuticals to hotels and gas pumps, everyone seems to want a stake as an expert to do business in this new financial sector in question.
The Executive Director of the Centre for Policy Dialogue’s (CPD), Dr. Fahmida Khatun, recently shared that the minimum limit of paid-up capital was also one of the key reasons for companies without any experience in handling banking services to line up for opening up digitalbanks. The macro-economist also questioned whether the Bangladesh Bank has adequate preparations to regulate such banks. In contrast, columnist Afsan Chowdhury points out that allowing existing commercial banks in the competition may not seem fair and ethical, since what is stopping traditional commercial banks from already giving their clients digital services?
Other issues that are not yet clear are what would be the transferability of the financials within the digital bank systems? Will the digital banks be allowed to monopolize on consumers’ money like our existing mobile financial service (MFS) platforms also? While I love using bkash for example, I don’t like the fact that when I sometimes have to pay up to someone with a Nagad account for instance, inter-exchange of money between the two MFS is not possible, which have also costed me higher transaction costs a few times due to double burden to pay up.
Yes, more and more digitalization of the financial sector would be a welcome move to consumers, especially to those of the digitally literate. But instead of aiming for financial inclusion via unchartered domains, what may be more essential may be for the brick-and-mortar state owned banks to bring themselves up-to par with the digitalized banking platforms and services already being offered by many of the private sector banking arena.
Expansion of the portfolios of digital service offerings by the already existing and successful
MFS operators may also bring in more to the pot of rural-urban financial connection in the country tapping into their already existing extensive networks, rather than expecting people to learn something new overnight also.
Another thing I find interesting about the inclusivity of MFS services for example is its network of agents that many at times help bridge the gap among the not so digitally literate. Even when it comes to banks, I like having the option to have a branch to show up at when in need of trouble shooting. Such may also point out to the need for a more hybrid solution in place than going completely paperless and office-less in the name of cost-efficiency and smart banking.
Mehzabin Ahmed is a development professional.