ELECTRONIC BANKING

Electronic banking as a segment of electronic business, which, in turn, encompasses all types
of business performed through electronic networks. Electronic channels are used for both
business-to-business and business-to-customer transactions, such as ordering goods,
delivering software or paying for such transactions. E-banking is considered to be a segment
of e-business to the extent that banks are involved in the conduct of business transactions via
electronic media; other non-banking financial products and services (e.g. insurance), not to
mention products and services from other sectors of business, may be sold electronically as
well n other words, e-banking is not a banking product; rather, it describes the way
transactions are conducted. Establishing E-banking infrastructure has been a challenging task
for the developing countries like !angladesh. "t present, there is no infrastructure for
performing Electronic-banking activities in !angladesh. #owadays, in fact, banks are
involved in e-business in a variety of ways, including cooperation with nternet service
providers ($%&s), the issuing of e-money or the execution of payments.
!ut in general we can define Electronic !anking according to the service provided-
"utomatic deposit and withdrawal of money.
'uick transfers of funds from one account to other, even to another bank.
%ayment of utility bills, salary, opening of (), being in the home or the office.
!alance en*uiry, receipt of transaction statement.
nstructing the broker.
+isabling the lost debit card or credit card, checking accounts.
"pply and issuance for new debit , credit card or checkbooks.
DIFFERENT FORMS OF ELECTRONIC BANKING
-he terms .%) banking&, .online banking&, .nternet banking&, .-elephone banking& or&
mobile banking& refer to a number of ways in which customers can access their banks without
having to be physically present at the bank branch. E-banking may be understood as term that
covers all these ways of banking business electronically.
Tele-banking: -ele-banking service is provided by phone. -o access an account it is
re*uired to dial a %articular telephone number and there are several options of services.
/ptions included )hecking account balance 0unds transfer between current, savings
and credit card accounts !ill payments $tock exchange transaction 1eceive statement
via fax (oan payment information.
PC Banking: -he increasing awareness of the importance of literacy of computer has resulted
in increasing use of personal computers through the entire world. 0urthermore, incredible
%lummet of cost of microprocessor has accelerated the use of computer. -he term .%)
banking& is used for banking business transacted from a customer&s %). 2sing the %) banking
or home banking now customers can use their personal computers at home or at their office to
access their accounts for transactions by subscribing to and dialing into the banks& ntranet
proprietary software system using password.
3 -ypes of %) !anking
!asically, there are two types of %) banking.
3 -he first type is online banking, in which bank transactions are conducted within closed
networks. -he customer needs speciali4ed software provided by his bank.
3 -he second type is nternet banking, which 5erman banks have been offering since the mid-
nineties, although the only product they were offering at the time was information. 2nlike
closed networks, nternet banking permits the customer to conduct transactions from any
terminal with access to the nternet.
3 nternet !anking
nternet banking would free both bankers and customers of the need for proprietary $oftware
to carry on with their online banking transactions. )ustomer behavior is changing rapidly.
#ow the financial service is characteri4ed by individuality, independence of time and place
and flexibility. -hese facts represent huge )hallenges for the financial service providers. $o
the nternet is now considered to be a .$trategic weapon& for them to satisfy the ever-
changing customers& demand and nnovative business needs. "de*uate legal framework and
maximum security are the two essential factors for nternet banking. -he comprehensive
security infrastructure includes layers of security from the network to the browser, including
sophisticated encryption that protects customers& from intrusion when they access the bank
over the public network.
3 6obile !anking
"ctually mobile banking is a variation of nternet banking. 6obile banking is a good example
of how the lines between the various forms of e-banking are becoming gradually
!lurred. +ue to the new transmission technologies such as 7"% (7ireless "pplication
%rotocol), portable terminal like mobile phones, personal digital assistant (%+") or small
hand-held %)s are providing bank customers with access to the nternet and thus paving the
way to nternet banking. t assures immense flexibility and makes the financial services
independent of time and place. 8owever, the use of mobile banking is still in a nascent state.
-he slower transmission speed of the 7"% standard and the limited amount of information
available are 9ust two of the factors inhibiting the use of those terminals.
3 /ther forms:
;. "ny branch banking, anywhere banking.
<. $6$ banking.
=. Electronic fund transfer system.
>. )ard-+ebit, "-6 card and credit card.
?. @irtual banking.
CURRENT SCENARIO OF E-BANKING IN BANGLADESH
Electronic banking is relatively new concept in !angladesh. 0ormerly only the foreign banks
operating in !angladesh like $tandard )hartered !ank, 8$!), etc provided it. -hese foreign
banks managed to gain competitive advantage with the introduction of electronic banking for
the first time in !angladesh. "s result the local commercial banks started to loose their
market to these foreign commercial banks. $o they reacted very *uickly. 0irst time it was
combined, now some of the banks are offering Electronic-banking services even solely.
Eastern !ank (td. is the leading local commercial banks in !angladesh to offer world-class
electronic banking services. n terms of adoption of E-!anking we can divide our banking
sector in to three basic categories
;. )lassical !anks.
<. 6odern !anks.
=. Electronic !anks.
CLASSICAL BANKS
)lassical bank includes those commercial banks, which don&t provide or provide very little E-
banking facilities. n our country these category mainly includes mainly A
3 #ationali4ed )ommercial banks
;. $onali !ank
<. Banata !ank
=. "grani bank
>. 1upali !ank
Specialized bank
;.!angladesh $hilpa !ank (!$!)
<. 1a9shai Crishi 2nnayan !ank
=. !ank of $mall ndustries and )ommerce !angladesh (td.
>. !angladesh $hilpa 1in $angstha (!$1$)
?. !angladesh Crishi !ank (!C!)
3 (ocal private commercial banks-
;. -he /riental bank ltd.
<. 0irst security bank ltd.
=. $ocial investment bank ltd.
>. "l "rafah bank
?. -he $tandard !ank (td.
D. !angladesh )ommerce !ank (td.etc
-hese banks are termed as classical because this !angladeshi banks still now mainly follows
the manual procedure for securing the valuable information and assets of customers. Except
"grani bank and Banata bank these banks are still in infant level automation. !oth of these
two banks has launched "-6 card sharing with other banks and E0-$ like 1eady cash, '-
)ash other than these two facilities, these banks has no other E-!anking facilities like /nline
banking, 8ome banking, nternet !anking. "ll the #)!s in !angladesh use the software
named as !exibank. !esides this they also use two most widely used software named %)
bank and #C"$8 developed by the !angladesh !ank.
-hese classical banks have no centrali4ed database system. "s a result they always lack the
re*uired effective coordination among different units, re*uired information to make right
decision at right time, incurs high overhead costs. -he branches of these classical banks are
not connected through ("# or 7"# or 6"#. -he proper coordination and harmoni4ation
between branches and head office of these banks are very much weak. -hey cannot take
proper decision at proper time and manage their loans and deposit portfolio achieved client
satisfaction. $ervices provided by these banks in the classical stage are outdated and lacks the
competitiveness.
!ut it is a matter of hope that the top management of these commercial banks is seriously
thinking about full automation of their operations both at the branch level and at the head
office level.. !ut to do this they face some common problems like A
3 8uge #umber of branches all over the !angladesh even outside the country and for the
purpose of automation huge investment is necessary.
3 6ost of the branches are in the rural areas where there are no modern digital communication
facilities.
3 6ost of the users or clients of the banks are poor and uneducated village people having no
knowledge about electronic banking and cannot afford it at the current cost level.
3 6ost of the officials of these banks in the classical stage especially the state owned ones are
aggie and cannot understand and are reluctant to accept modern electronic banking. -o turn
around these banks at first the outdated mentality of these officials of the classical banks.
n spite of these shortcomings all these banks in the classical stage are trying to convert
themselves into the modern electronic banks and make them able to compete with other
commercial banks
MODERN BANKS
)urrently some of the banks of !angladesh are providing electronic services to their
customers we cannot say they are completely following electronic way. !ecause they offer
some of the functionalities of the complete electronic banking like intra-bank transactions,
(etter of )redit (()) and foreign exchange etc. n case of inter-bank transactions, central
bank authority handles the procedure all the banks are termed as modern banks this is the
largest segment of commercial banks among the three. -hese commercial banks which are
much more innovative, flexible, and proactive in their operation. -hey are *uite at home in
managing their assets and liabilities. !anks as well as employees are beneficiated after
implementing nformation technology in !ank because this system has some advantages over
traditional system. "dvantages are as follows:
3 %rocess handling becomes faster. t includes day end process, month end process,
monthly,yearly interest calculation; fixed deposit receipt process, scheme process and loan
process etc.
3 n traditional system, to accomplish audit, government officials need to go to every bank.
"fter - implementation they do not need to go to banks rather they can collect the same
information through network and audit report can be generated within few minutes.
3 n traditional system it is time dependent to transfer money from city to remote area and also
a matter of some investment. +uring the transfer time the money is idle so it&s a great loss for
the bank as well as customers. Electronic system can be used to transfer money within a few
seconds (ntra-bank).
"ll these modern banks have somewhat common features like-
-rying to launch or at least have planned to initiate online banking -ele banking etc in
near future.
-rying to follow marketing strategies of others.
%roviding "-6 card and in some cases credit card facilities.
nitiating modern banking concepts like one-stop services, serving the underserved
market, and continuously updating their service and product portfolio.
%roviding *uick transfer of remittances with the help of international money transfer
unions like 7estern 2nion, Express 6oney and 6oney 5ram.
0ollowing are some of those commercial banks, which fall with in modern banks category in
our country, which provide "-6 services on shared basis and planning to provide online
banking and any branch banking.
%ubali !ank (td.
6ercantile !ank (td.
#ational !ank (td.
nternational 0inance nvestment and )ommerce bank (td
2nited )ommercial !ank (td.
2ttara !ank (td.
#ational )redit and )ommerce !ank (td.
%rime !ank (td.
-he 6utual -rust !ank (td.
$tate !ank of ndia
8abib !ank (td
"rab !angladesh !ank (td.
$outheast !ank (td.
$ome of the electronic banking services provided by these modern commercial banks are
described below:
3 Electronic fund transfer services:
0) bank ltd. 6ercantile bank ltd. %ubali bank ltd. "! bank ltd "grani bank is providing
electronic fund transfer services on shared basis in the name of '-cash.
3 )! 1eport 5eneration:
!angladesh !ank has the access to all other banks so it is very easy task to maintain an
integrated database of all customers specifying their credit and debit information with each
bank
3 "-6 )ard:
6utual trust bank, %rime !ank ltd. -he %remier bank ltd. is currently providing individually
debit card facilities under the brand name of @$". !esides the )ity bank ltd. is providing
another debit card which offers dual currencies withdrawal facilities. !ut the card processing
period of these banks is relatively lengthy than that of $tandard )hard !ank.
3 "ny branch !anking:
"t present 6utual -rust bank ltd. $tate !ank of ndia, 8abib !ank (td. #ational !ank of
%akistan are offering any branch banking to all their clients. 6ercantile !ank (td. 0) bank
ltd. #)) bank ltd. /ffer any branch banking services to only a selected group of clients who
are ready to pay an amount of extra annual fee for the usage of these service. #ational !ank
ltd. 2nited )ommercial bank ltd. $outheast bank ltd. %rime bank ltd. are hoping and
arranging to provide any branch banking services.
S!"#$a%e &ed
"ll the modern banks uses two common software developed by !angladesh bank named
#C"$8 for check clearing purposes and %) bank for maintaining the ledger of clients.
!esides +haka !ank ltd. and Eastern bank ltd. uses 0(EE)2!E, 6ercantile bank ltd. and
6utual -rust !ank ltd. uses 0(/1" !ank, the )ity bank ltd. and "rab !angladesh !ank ltd.
uses 0#")(E.
Elec#%!nic Bank
Electronic banking as a segment of electronic business, which, in turn, encompasses all types
of business performed through electronic networks. !anks in this category are more
electronically service oriented than the above-mentioned commercial banks. Electronic bank
include those commercial banks, which uses sophisticated computer and networking
technology to carryon their day-to-day banking business. "ll of their business process in
maintained and executed electronically. 0ollowing are those banks, which fall in the class of
Electronic !anks
-wo fundamental aspects of electronic banking are the nature of the delivery channel through
which activities are performed, and the means for customers to gain access to those channels.
)ommonly delivery channels include .closed& and .open& networks. .)losed networks& have
no such membership re*uirements. )urrently, widely used access devices through which e-
banking products and services can be provided to customers include point of sale terminals,
automatic teller machines, telephones, %)s.
8ere we divide the electronic banks in to two categories.
". (ocal Electronic )ommercial banks:
;. Eastern !ank (td.
<. !1") !ank (td.
=. !ank "sia ltd
>. +utch !angla !ank (td
?. Bamuna !ank
D. slami !ank !angladesh (td.
!. 0oreign Electronic )ommercial banks:
;. $tandard )hartered !ank ltd. ($)!)
<. 8$!)
=. )iti bank #"
>. )ommercial !ank of )eylon (td.
?. 7oori !ank
D. !ank "lfalah etc.
0eatures of the Electronic bank
7ith business processes becoming increasingly digiti4ed, business models, and, with them,
the risk structure of credit institutions, are changing. -he following characteristics of E-
banking are therefore at the center of banking supervisors &interest.
3 /vercomes national borders
/wing to the virtual nature of electronic commerce, the transaction of banking business is no
longer confined to national borders. 6uch the same applies to the relationship between bank
products and non-bank products. -hat means supervisors will need to cooperate even more
closely with foreign supervisory authorities than in the past.
3 +epends on -
-he secure and efficient deployment of )- will become a crucial strategic factor in the
success of electronic banking. Every stage in the value-added chain, from development
through production to the marketing of financial products, is dependent on -. 6ost
importantly, this dependency, coupled with the innovative momentum of the nternet, will
increase the strategic and operational risk faced by banks.
3 )ard services
7ith -!anking one can view complete )redit )ard details. /ne can view )redit )ard
statement, determine the minimum amount due, re*uest for a credit limit increase and even
make an online card payment.
3 Enhances competition
$everal factors have conspired to induce this effect. -he greater ease with which prices and
products can be compared has enhanced market transparency; the market entry barriers for
new competitors have been lowered; the spatial and temporal constraints on competition have
been removed; nternet or online banking customers display little brand loyalty; and e-
banking customers are focusing ever more on costs and profit margins.
CONTRIBUTION AND IM'ACT OF E-BANKING
Electronic !anking has greater impact in the economy and in the banking sector as well.
6aking financial services available to the poorest people is recogni4ed as an important part of
poverty reduction strategies. -echnological innovation offers significant hope, although it will
result in fundamental changes to banking delivery mechanisms as well as to the very role of
banking service providers and their relationships with customers.
-he advent of the digital economy necessitates revisiting our understanding of banking and
microfinance, and our perception of delivery mechanisms.
0ew banks have a fully automated 6anagement nformation $ystem (6$); many use a
combination of manual and automatic systems, and many others use manual systems only.
-he potential of a fully automated 6$ is that it allows a bank to manage its loan portfolio
better, increase efficiency, and enhance transparency and accountability at all levels. -hese
are all vital and fundamental to the on-going maturation of the banking sector.
!ankss can easily extend the benefits of a fully automated 6$ by implementing relatively
simple )- innovations that do not fundamentally alter their service delivery models (e.g.
mobile computing solutions for loan officers).
8owever, even commercial banks will re*uire shared infrastructures and common standards
so that costs associated with providing financial services to a dramatically larger client base
can be reduced.
$hared infrastructures facilitate the flow of information (including financial transactions)
within and between financial institutions, and also integrate institutions and their clients into
the global financial system and the world-wide digital economy.
ntegration of financial institutions including 60s into the global financial system is an
important step to harness the development potential of remittance flows from international
labour migrants.
LIMITATIONS OF E-BANKING
3 8uge #umber of branches all over the !angladesh even outside the country and for the
purpose of automation huge investment is necessary.
3 6ost of the branches are in the rural areas where there are no modern digital communication
facilities.
3 6ost of the users or clients of the banks are poor and uneducated village people having no
knowledge about electronic banking and cannot afford it at the current cost level.
3 6ost of the officials of these banks in the classical stage especially the state owned ones are
aggie and cannot understand and are reluctant to accept modern electronic banking. -o turn
around these banks at first the outdated mentality of these officials of the classical banks.
3 lliteracy is a great problem in consideration of E-!anking activities execution.
CONCLUSION
Electronic !anking has greater impact in the economy and in the banking sector as well.
6aking financial services available to the poorest people is recogni4ed as an important part of
poverty reduction strategies. -echnological innovation offers significant hope, although it will
result in fundamental changes to banking delivery mechanisms as well as to the very role of
banking service providers and their relationships with customers. n case of productivity,
efficiency, economic growth, giving optimum service to the customers, electronic banking
has huge contribution as a whole.