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Challenges of on-line banking
Rafiqul Islam

          The word bank is derived from the Italian word "banca", which is derived from German and means bench. Moneylenders in the Northern part of Italy originally did the business in open areas, where each lender worked from his own bench or table. The banking concept started from here and time-to-time it has changed its nature with the market demand and situation to fulfil the public requirements in the civilised world.
The fundamental function of a bank is to provide services to its clients that involves extending credit with proper documentation for the bank's safety and security. The evolution of banking dates backs to the earliest times, and continues in the present where a bank is a financial institution that provides banking and other financial services to customers. Normally, a bank makes profit from transaction fees on financial services or the interest increase on resources it holds in trust for the account holders while paying them interest on the asset on a daily or monthly or yearly basis, depending on the bank's policy.
To meet the requirements of customers' needs and expectations, online banking has been launched in the with the replacement of offline banking.
Day by day, online banking is becoming more popular, as it offers higher level of services to the customers for managing finances. Online banks can be divided into two types: traditional banks, which also offer online banking, and online-only banks.
Through online banking software the clients of the bank can perform all routine transactions, account transfer, balance inquiries, bill payment, any branch banking and many others. In addition, we can get following benefits from online banking software: Integrated customer/consumer banking, trade finance, lease finance, treasury operations etc.; centralised MIS report facilities for control/security purpose; automatic accounting and bookkeeping; SWIFT interface; advanced security management; electronic messaging; efficient management of money market, foreign exchange; real time IBTA reconciliation, consolidation of affairs, income/expenditure; real time resources position, to facilitate proper allocation of fund; facilities for management reporting, operation reporting and central bank report; real time audit trail for complete control over all activities of the system and internet banking, web banking, phone banking, ATM facilities.
The disadvantage of resorting to online banking is that it takes a long time to set-up the online banking software and get used to the employees with the banking solution.
Internet banking is a very distinctive tool of online banking concept. Internet banking is used for performing electronic payment, downloading a bank statement, transaction etc. over the internet with the help of bank's special secure website. This is highly informative, especially in the banking sector for banking beyond bank-hours and clients can perform banking from anywhere, if internet access is available. Once you have a internet connection and a web browser such as internet explorer to your PC, you will be able to do the same. No special software or hardware is required to perform the internet banking. There is a growing number of online banks which are exclusively online due to comparatively lower cost than the traditional banks.
In our country a few local private banks like Eastern Bank, Dhaka Bank, Dutch Bangla Bank, The City Bank are offering truly centralised online banking facilities and the clients of these banks have access to their online account through the bank's Internet web site.
For implementation of a real-time centralised online banking system, a bank needs to develop in-house software or choose an online banking solution from vendor as per bank's requirements. The preliminary act to install software, a bank needs to assess the computer literacy of the users (employees), communication infrastructure, proper product definition and product flow, experience of the IT personnel and so on. In the 21st century, a huge diversification in banking has emerged between the developed countries and developing countries with respect to international banking practice, technology usage, etc.
In the developed world, all bank employees are used to making transactions through computer. Before starting the implementation of banking software, a bank has to build up the communication infrastructure among the head office, branches, ATM booths, disaster recovery centre etc. In developed countries, strong communication media like VSAT, optical fibre, radio wave and various other medias are available for any location in the country. If the country's infrastructure is developed, implementation of online banking software will be easier than others where the above situation is not available.
In the developing countries like Bangladesh, it is a tremendously challenging task for any bank to install a truly centralised online banking software successfully. The challenges are manifold, such as:
Some users (employees, especially the senior level employees) in the banks are not equipped to handle basic computer operations. Those executives generally assume that computer related works are outside the scope of general banking tasks and responsibilities of data input lies with the computer operators. They also feel comfortable working manually.
There is also a section of employees who are computer literate but with time have become too comfortable with whatever system is in place and will resist any kind of change as this will require adopting to new practices, ideas and skills.
Also setting up of a core banking software means a lot of changes in operational procedures with a tendency towards more centralised operational control, monitoring and guidance with the branches gradually being transformed to pure service and marketing outlet. This is a big cultural change and many executives may feel threatened by this.
So, setting up of online banking software does not comprise only technology challenges, but also a lot of human challenges. The people who will be the actual users of the software must have their perceptions changed and moulded as well as well trained up. They also need to update themselves in terms of international banking concepts, risk exposures, etc. Once the bank can triumph over the above human challenges, the application software project can be expected to go smoothly.
As for technological challenges, the communication facilities required for smooth online connectivity remains a problem. There is no unique and consistent communication infrastructure available in our country, which can be used for online connectivity. Even the largest available data connectivity network from BTTB that offers digital data network services based on optical fibre backbone is not available in all the sites in our country. Their services in general are also considered to be poor and bureaucratic. The private data service providers who offer their services based on mostly radio link and third-party inter-city backbones (usually leased from the mobile operators) have even more limited coverage especially in the rural areas. VSAT based service providers, though they are likely to be able to provide connectivity in most places, are yet to prove their reliability and quality of services. Reliable VSAT based connectivity also tends to be much more expensive. However, the communication industry in general is going through a lot of changes and hopefully should mature soon to be able to provide reliable connectivity at all times and all areas.
A government sector company or any other private sector company needs to take the initiative to build up a strong communication infrastructure for better facilities of online banking, internet use, etc., so that the people can think globally. In the 21st century, not only in Bangladesh, but also all over the world, online banking is no longer a fashion. It is eagerly sought in the highly competitive market especially in the financial sectors.
The writer is Asstt. Vice President, Information Systems & Technology Division, National Bank Limited


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