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Online Banking in Bangladesh

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Online Banking in Bangladesh: An Exploratory Study on Dhaka Bank Limited An Internship Report on Online Banking in Bangladesh: An Exploratory Study on Dhaka Bank Limited Course Title: Internship and Viva Course Code: BAN 400 Submitted To Mr. Md. Zillur Rahman Assistant Professor Department of Business Administration Shahjalal University of Science & Technology, Sylhet Submitted By Arup Ratan Paul Reg. no. 2004731002 4th Year 2nd Semester Department of Business Administration Shahjalal University of Science & Technology, Sylhet

Online Banking in Bangladesh: An Exploratory Study on Dhaka Bank Limited Table of Contents Letter of Certificate Letter of Transmittal Acknowledgement Executive summary………………………………………………………………………….

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. 1 Chapter 1 Research Design………………………………………………………….. ……. …2 Chapter 2: Conceptual Framework of Online Banking…………………………. …………6 Chapter 3: Present Scenario of Online Banking in Bangladesh………………………….. 13 Chapter 4: Exploring the Online Banking System of Dhaka Bank Limited………. ……. 27 Chapter 5: Challenges of Online Banking…………………………………………………. 0 Chapter 6: Recommendation……………………………………………………………….. 32 Chapter 7: Conclusion……………………………………………………………………….. 35 References LETTER OF CERTIFICATE I am very pleased to declare that Arup Ratan Paul, Registration No 2004731002, 4th year 2nd semester, Department of Business Administration, Shahjalal University of Science and Technology, Sylhet-3114 has been given with the topic “Online Banking in Bangladesh: An Exploratory Study on Dhaka Bank Limited.

” for researching and writing an internship report on the subject. He has reviewed all the relevant literature and has been surveyed ractically in Dhaka Bank Limited, Laldighirpar Branch, Sylhet, for three months to collect both of primary and secondary data. I have supervised her throughout the preparation of the internship paper. I also certify that the internship paper is an original one and has not been submitted elsewhere previously for publication in any form. He is wished all the best in his effort. ——————Md Zillur Rahman Assistant Professor & Internship Supervisor Department of Business Administration, Shahjalal University of Science and Technology, Sylhet-3114.

LETTER OF TRANSMITTAL To The Chairman, Internship Committee 4th year 2nd year examination’ 2010 Department of Business Administration Shahjalal University of Science and Technology Sylhet- 3114 Through: Md Zillur Rahman, Assistant Professor and Supervisor. Subject: Submission of Internship Report. Dear Sir, It gives me enormous pleasure in presenting here with the internship report on “Online Banking in Bangladesh: An Exploratory Study on Dhaka Bank Limited. ” which was assigned to me as partial fulfillment of the BBA graduation requirement.

The internship program gave the opportunity to have an insight on the Banking sector of Bangladesh through Dhaka Bank Limited. An attempt has been made in this report to get an insight of Online Banking scenario of Bangladesh. I have tried heart and soul to make the report effective and useful. The internship program was very much valuable to me as it helped me to gain experience from the practical field. I am grateful to you for providing me this opportunity of gaining such practical experiences and to know how theoretical knowledge is applied in the real world.

If you need any assistance for further interpretation, please call me up. Sincerely Yours, (Arup Ratan Paul) Reg. No: 2004731002 4th Year 2nd Semester Department of Business Administration Shahjalal University of Science and Technology, Sylhet-3114. ACKNOWLEDGEMENT It gives me immense pleasure to thank a large number of individuals for their cordial cooperation and encouragement who have contributed directly or indirectly in preparing this report. Firstly, I express my gratefulness to Almighty who has enabled me to pursue my study. I am deeply grateful to Mr.

Dr. Md. Nazrul Islam, Head, Department of Business Administration of Shahjalal University of Science and Technology, Sylhet-3114. I would like to thanks from the core of my heart to my honorable supervisor Md Zillur Rahman, Assistant Professor Department of Business Administration Shahjalal University of Science & Technology, Sylhet for his in help every steps of my internship, proper instructions, suggestions and evaluations, which helped me to generate the report in the proper way. I would like express my heartiest gratitude to Mr.

Syed Ahsanur Reza (SVP and Manager, Laldighirpar Branch, Dhaka Bank Limited) and Mr. Suman Banik (FAVP) for their caring supervision. I am also greatly indebted to Mr. Abdur Rahman (Officer), Mrs. Shahrana Wahed (Junior Officer), Mr. Latiful Azad Chowdhruy (SPO), Mr. Uttam Kumer Karmaker (Senior Officer), Mr. Mahbubur Rahman (Principal Officer), Mr. Rahman Subhan (Principal Officer), Mrs. Dipika Dey, Mr. Biplob Kumar Deb and Mr. Mahbub Ul Anam Khan (Probationary Officer) for their intimate care and supervision.

I practically work with them and in this report tried to share their perceptions and feelings on the basis of my realization, from my own point of view. Then at last I shall be grateful to those persons who read this report and who shall get benefit from this report at present and future. Online Banking in Bangladesh: An Exploratory Study on Dhaka Bank Limited Executive Summary Online Banking (or Internet Banking) is a form of Electronic Banking (e-banking) where funds are transferred through an xchange of electronic signal between financial institutions, rather than exchange of cash, checks, or other negotiable instruments. Online banking means the automated delivery of new and traditional banking products and services directly to customers through electronic and interactive communication channels. Customers access online banking services using an electronic device, such as a personal computer (PC), personal digital assistant (PDA), or an Automated Teller Machine (ATM). Online banking services may include ATMs, wire transfers, telephone banking, Electronic Funds Transfers (EFT), debit and credit cards.

In Bangladesh, banking industry is mature now to a great extent than earlier period. Online banking is one of the most demanded and latest technologies in banking sector. Despite huge demand from the business community as well as the retail customers particularly the urban customers, online banking in Bangladesh is still at a budding state due mainly to a number of constraints such as inadequacy of reliable and secure information infrastructure especially telecommunication infrastructure; sluggish ICT penetration in banking sector, insufficient legal and regulatory support and so on.

In Bangladesh, telephone connectivity is inadequate, cost of personal computers are still beyond purchasing capacity of most people, Internet connection is costly, and IT literacy is yet to reach satisfactory level are prime drawbacks. Despite the constraints, efforts by the Bangladesh Bank in modernizing the country’s payment system and commitment by the government in building ‘Digital Bangladesh’ have brought competition among the scheduled banks to improve banking services and rapidly adopt online banking on a wider scale.

In this context, Dhaka Bank Limited is one of the pioneer private banks which introduced online banking along with electronic banking services in Bangladesh realizing the demand of the time. As an integral part of the commitment, “Excellence in Banking”, Dhaka Bank offers the full range of real-time online banking services through its all Branches, ATMs and Internet Banking Channels. The Bank has launched Online Banking service, joined a countrywide shared ATM network and has introduced a co-branded credit card.

A process is also underway to provide e-business facility to the bank’s clientele through Online and Home banking solutions. Page 1 of 35 Online Banking in Bangladesh: An Exploratory Study on Dhaka Bank Limited Chapter 1 Research Design 1. 1 Objectives of the Study 1. To explore the present scenario of online banking in Bangladesh. 2. To exhibit the online banking system of Dhaka Bank Limited. 3. To identify major challenges of online banking. 4. To make the necessary recommendations to solve the problems of online banking. 1. Research Methodology This report is mainly prepared by the secondary sources of information and some few primary sources of information like. The research was an exploratory approach and data collection and analysis are qualitative in nature. For this purpose, different recognized census, government rules, regulations, policies, and laws, news papers, national and international journals, periodicals have been consulted. Besides this, Internet has been widely used since the report focuses on Online and Electronic Banking system.

Data collection and analysis were made during the Internship period at Dhaka Bank Limited. The website of Dhaka Bank Limited was an important source of secondary data. Primary Sources: Though the report is based on secondary data, some primary data have also been used. Primary data have been collected from different sources and methods which include direct observation in the bank branch during the internship period, discussion with professionals and experts and questioning concerned persons. The observation method helped find factual data and real-time analysis.

Expertise in online banking fields gave their valuable feedback which has been an important source of primary data. Secondary Sources: Numerous secondary sources were used for preparing this report. The secondary sources include Dhaka Bank’s Annual Report 2009, Internet, different journals about e-banking and online banking, books, newspapers and other publications. Internet has been used as the major source of secondary data because of its relevance with the topic. Bangladesh Bank’s publications helped find recent data.

Previous reports on this topic also helped evaluate the report from different aspects and collect important usable secondary data. Page 2 of 35 Online Banking in Bangladesh: An Exploratory Study on Dhaka Bank Limited 1. 3 Limitations of the Study 1. The report has limited focus on Computer and Internet security issues associated with Online Banking 2. The report being exploratory and qualitative in nature has fewer quantitative data 3. Largely dependent on secondary data 4. Inconsistency in the findings because of varying opinions and researches on the same fields of information

Page 3 of 35 Online Banking in Bangladesh: An Exploratory Study on Dhaka Bank Limited 1. 4 Literature Review With the extensive technology innovation and telecommunication, we have seen new financial distribution channels increasing rapidly both in the numbers and form, from ATMs, telephone banking, PC banking to internet banking. (Earring Wood and Story, 1996). Developing alternative distribution channels is not only important in terms of reducing costs and improving competitiveness, but also in terms of financial institution’s ability to retain the existing customer case. Kimball and Gregor, 1995) as well as to attract new customers. Sathye (1999) proposed a model for Internet Banking in Australia is significantly influenced by variables of system insecurity, case of use awareness of service and its benefits, reasonable price, availability of infrastructure and resistance to change. The transformation from traditional brick-and-mortar banking to E-Banking has been Automatic Teller Machine (ATM) and thus the retail banking industry witnessed significant and extensive change.

Formally, E-banking comprises various formats or technologies, including telephone (both land line and cell phone banking, direct bill payment (EFT), and PC or internet banking (Power, 2000). Weitzman, (2000), Lassar, Manolits and Lassar, (2005), Ehou and Chou (2000) identified five basic services associated with online banking: view account balances, and transaction histories, paying bills, transferring funds between accounts, requesting credit card advance, and ordering checks.

Majority of banks of banks is planning to introduce ICT for integration of banking service and new finance service, which will play a vital role in bringing efficiency in financial sector (Raihan, 2001). The most commonly factors are ease of use, transaction security, convenience and speediness (Wan, Luk and Chow, 2005). A Survey of Electronic Banking, Electronic Cash and Internet Gaming (2003), has defined electronic banking as “an umbrella term for the process by which a customer may perform banking transactions electronically without visiting a brick and mortar institution”.

The following terms all refer to one form or another of electronic banking: personal banking,(pc) virtual banking, on line banking, home Banking, remote electronic banking, and phone banking are the most frequently used designations, (Joris, Claessens, Valentine Dem et. al,2001),on line electronic banking system give everybody the opportunity for easy access to their banking activities. These banking activities may include; retrieving an account balance, money transfers (Between a user’s accounts, from user’s account to someone else’s account) retrieving an accounting history.

Page 4 of 35 Online Banking in Bangladesh: An Exploratory Study on Dhaka Bank Limited E-banking is a form of banking where funds are transferred through an exchange of electronic signals between financial institution, rather than exchange of cash, checks or other negotiable instruments common wealth bank of Australia, (2006) defined E- banking as “a range of banking services that utilizes electronic equipment”. Electronic equipments are ATM machine card (plastic), PIN, password, code or net code etc.

With the extensive technology innovation and telecommunication we have seen new financial distribution channels increasing rapidly both in the numbers and form, from ATM’s, telephone banking, PC banking to internet banking. A broad range of financial distribution channels must be available to deliver varying services needs of customers segments (Earring wood and story, 1996). Developing alternative distribution channels is not only important in terms of reducing costs and improving competitiveness but also in terms of a financial institution’s ability to retain the existing customer case Kimball and Gregor, 1995) as well as to future attract new customers. Sathye (1999) proposed a model for Internet Banking Adoption, which argued that the Intention of Internet Banking in Australia is significantly influenced by variables of system insecurity, case of use awareness of service and its benefits, reasonable price, availability of infrastructure and resistance to charge. The Willis Report (1997 in Sathye, 1999) stated that the technology must be reasonably priced relative to alternatives for customers to adopt.

Otherwise the acceptance of the new technology may not be viable from customer’s stand point. Customers today are more conscious of the expenses associated with the banking as they are generally better informed about alternative option. The total costs incurred in using Internet Banking must be minimal or competitive (Joyawardhena and foley, 2000). The transformation from traditional brick-and-mortar banking to E-banking has been automatic teller machine (ATM) has the retail banking industry witnessed such significant and extensive change.

Formally, E-banking comprises varies formats or technologies, including telephone (both landline and cell phone banking, direct bill payment (EFT), and PC or internet banking (Power, 2000); Weitzman, 2000; Lassar, Manolits and Lassar, (2005), Ehou and Chou (2000) identified five basic services associated with online banking: view account balances, and transaction histories; paying bills, transferring funds between accounts; requesting credit card advanced; and ordering checks. Page 5 of 35 Online Banking in Bangladesh: An Exploratory Study on Dhaka Bank Limited

Chapter 2 Conceptual Framework of Online Banking 2. 1 Electronic Banking Electronic Banking or e-banking refers to the banking environment in which banking information as well as transactions moves and conducted through electronic medium. It includes any technology that that enables a bank to do business electronically. E-banking has different aspects like Internet banking, Online Banking and e-payments. E-banking may be understood as term that covers all these ways of banking business electronically.

The following illustration depicts the different form of e-banking services: Internet Banking Telephone Banking Any Branch Banking EFT (Electronic Fund Transfer) EPS (Electronic Payment System) Online Banking SWIFT, ELDORADO E-Banking POS, ATM booths Plastic/E-Money Debit/Credit/ATM Cards Mobile Banking SMS Banking 2. 2 Types of E-banking: PC Banking: The increasing awareness of the importance of literacy of computer has resulted in increasing use of personal computers through the entire world.

Furthermore, incredible plummet of cost of microprocessor has accelerated the use of computer. The term ‘PC banking’ is used for banking business transacted from a customer’s PC. Using the PC 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’ Intranet proprietary software system using password. Page 6 of 35 Online Banking in Bangladesh: An Exploratory Study on Dhaka Bank Limited Internet Banking: Customers need an Internet access service to handle this ype of banking. As an Internet Banking customer, he/she will be given a specific user ID and a confidential/secret or secured password so that they can access to their own account. Here customer can able to see the ledger balances, transfer his money, request something towards bank, etc. Virtual Banking: Virtual banks are banks without bricks; from the customer perspective, they exist entirely on the Internet, where they offer the same range of services and adhere to same rules and regulations of central banks.

Telephone Banking: Telephone banking refers to the services provided through phone that requires the customers to dial a particular telephone number to have access to an account which provides several options of services. Despite huge potential, telephone banking services have not been widened enough in daily banking activities in Bangladesh. Only four banks so far provide a few options of telephone banking services such as detail account information, balance inquiry, information about products or services, ATM card activation, cheque book related service, bills payment, credit card service and so on.

Funds transfer between current, savings and credit card account, stock exchange transactions etc are still inaccessible through telephone banking in Bangladesh. Mobile banking: Mobile banking (also known as M-banking or SMS banking) is a term used for performing balance checks, account transactions, payments etc. via a mobile device such as a mobile phone. Mobile banking is most often performed via SMS or the Mobile Internet but can also use special programs called clients downloaded to the mobile device.

The standard package of activities that mobile banking covers are: mini-statements and checking of account history; alerts on account activity or passing of set thresholds; monitoring of term deposits; access to loan statements; access to card statements; mutual funds/equity statements; insurance policy management; pension plan management; status on cheque, stop payment on cheque; ordering check books; balance checking in the account; recent transactions; due date of payment (functionality for stop, change and deleting of payments); PIN provision, change of PIN and reminder over the internet; blocking of (lost/stolen) cards; domestic and international fund transfers; micro-payment handling; mobile recharging; commercial payment processing; bill payment processing; peer to peer payments; withdrawal at banking agent;3 and deposit at banking agent. Despite huge prospects, only a few banks adopted mobile banking in Bangladesh during the last year. Page 7 of 35 Online Banking in Bangladesh: An Exploratory Study on Dhaka Bank Limited 2. Online Banking On line banking is a service provided by many banks, and Financial Institutions that allows one to conduct banking transactions over the Internet using a personal computer, mobile telephone, or handheld computer (such as a “personal digital assistant”). Through on line banking one may be able to: • • • • Access accounts round-the-clock, even on weekends See balances on line and find out whether checks or deposits have cleared Transfer funds between accounts Receive and pay bills on line(without check writing, envelopes, or stamps) 2. 4 Common Online Banking Services: Banking transactions can range from something as basic as a retail account balance inquiry to a large business-to-business funds transfer. On line banking services, like those delivered through other delivery channels, are typically classified based on the type of customer they support.

The following table lists some of the common retail on line banking services offered by banks are as follows: • • • • • • Account management Bill payment and presentment New account opening Investment/Brokerage services Loan application and approval Business-to-business payments 2. 5 Online Banking Components On line banking systems can vary significantly in their configuration depending on a number of factors. Banks should choose their online banking system configuration, including outsourcing relationships, based on four factors: • • • • Strategic objectives for on line banking; Scope, scale, and complexity of equipment, systems, and activities; Technology expertise; and Security and internal control requirements.

Page 8 of 35 Online Banking in Bangladesh: An Exploratory Study on Dhaka Bank Limited Banks may choose to support their on line banking services internally. Alternatively, Banks can outsource any aspect of their on line banking systems to third parties. The following entities could provide or host (i. e. , allow applications to reside on their servers) on line banking-related services for banks: • • • • • • • • Another financial institution, Internet service provider, Internet banking software vendor or processor, Core banking vendor or processor, Managed security service provider, Bill payment provider, Credit bureau, and Credit scoring company. 2. Required Physical Infrastructure for Online Banking Internet: The Internet is a global system of interconnected computer networks that use the standard Internet Protocol Suite (TCP/IP) to serve billions of users worldwide. It is a network of networks that consists of millions of private, public, academic, business, and government networks of local to global scope that are linked by a broad array of electronic and optical networking technologies. The Internet carries a vast array of information resources and services, most notably the inter-linked hypertext documents of the World Wide Web (WWW) and the infrastructure to support electronic mail. Intranet: An intranet is a private computer network that uses Internet Protocol technologies to securely share any part of an organization’s information or network operating system within that organization.

The term is used in contrast to internet, a network between organizations, and instead refers to a network within an organization. Sometimes the term refers only to the organization’s internal website, but may be a more extensive part of the organization’s information technology infrastructure. It may host multiple private websites and constitute an important component and focal point of internal communication and collaboration. Page 9 of 35 Online Banking in Bangladesh: An Exploratory Study on Dhaka Bank Limited Hardware: The essential hardware required to build a complete online banking system includes: ? ? ? ? ? ? ? ? Personal Computers Servers Routers Firewalls Modems Switches POS (Point of Sale) Terminals ATM (Automated Teller Machines) booths

Software: For conducting online banking operations several software are now available such as FLEXCUBE, a banking software which enables banks to process and store banking transaction data and making payments through a dedicated client-server network. Different banks use different types of software depending on the cost and other factors. Electronic Money (E-Money): Electronic money (also known as e-currency, e-money, electronic cash, electronic currency, digital money, digital cash or digital currency) refers to money or scrip which is only exchanged electronically. Typically, this involves the use of computer networks, the internet and digital stored value systems.

Electronic Funds Transfer (EFT) and direct deposit are all examples of electronic money. Also, it is a collective term for financial cryptography and technologies enabling it. Plastic Money: Plastic money is a plastic card issued by banks or financial institutions with a magnetic stripe or chip that holds machine readable identification code (account number, customer’s personal identification number, and other such information readable by ATMs). Bank cards are used for electronic commerce (with magnetic stripe readers or via Internet) and for banking transactions through Automated Teller Machines (ATMs). Types of plastic money include: Page 10 of 35

Online Banking in Bangladesh: An Exploratory Study on Dhaka Bank Limited Credit Cards: Credit Card can be called as an equivalent of a loan sanctioned by the bank to its customers. Credit card facilitates and makes it possible to “Use First and Pay Later” the specified amount of credit as per the agreed terms of sanction. This card facilitates the cardholder to purchase goods and services from the merchant establishments and shops through the collaborating credit card companies like VISA, MasterCard, Maestro, and Cirrus. Debit Cards: A Debit Card provides for online electronic payment like Credit Card but from savings or current accounts of the cardholder for purchases.

This card is a deposit access product where cardholder uses his own money in his bank account through the debit card on the principle of “Pay First and Use Later”. Debit card contains the symbol or hologram of collaborating company such as VISA, MasterCard, Maestro and Cirrus etc. ATM Cards: ATM Card can be used to withdraw money, deposit money, balance enquires, deposit bills in the account. The cardholder must maintain a savings bank account or current account with the bank. On issuance of card, the cardholder is intimated a four digit secret Personal Identification Number (PIN). The cardholder is always required to maintain safely the PIN to prevent fraudulent activity.

ATM Card-cum-Debit Card: ATM Card-cum-Debit Card can be used both as an ATM card and Debit card as a method of payment when purchasing goods and services in Bangladesh and Overseas. The cardholder is responsible for all transaction made by the use of the card. In Bangladesh most of the debit cards issued by banks are also ATM cards. For example, Dhaka Bank Limited, DBBL, SCB, HSBC, BRAC Bank and other banks operating in Bangladesh provides ATM Card-cum-Debit Card. Smart Card: The smart card is an amazing piece of technology. It is the size of a regular ATM card but is capable of storing over a 1000 times more data. The data can be encrypted and hence the card is completely temper-proof.

The card can also be personalized to the holder by printing personal and other details on the card face. Page 11 of 35 Online Banking in Bangladesh: An Exploratory Study on Dhaka Bank Limited Automated Teller Machines (ATM): Full elaboration of ATM is “Automated Teller Machine” which acts like a teller point in a bank who takes and gives money over the counter. ATM is same as teller point but it run automatically through identity like card and password. It does not need any slip or Cheque but it is very much based on A/C holder’s ATM card and it’s Password. Those who are entitled for ATM card, bank has provided them a password against every single card. This is like a debit card.

People can deposit their money in a bank account and they have entitled withdraw their money through ATM card, which is applicable for 24 hours a day and 365 days in a year. It has different name such as ATM, 24 hours banking card, money link card, e-cash, ready cash etc. In Bangladesh, some multinationals incepted the ATM booth in Dhaka since 1992-93. The Grind lays Bank was the pioneer in Bangladesh then after Standard Chartered Bank, American express Bank, HSBC, Bank Asia, Dutch Bangla Bank, Dhaka Bank and other local private banks are the followers. Point of Sales: Point of sale (POS) or checkout is the location where a transaction occurs.

A “checkout” refers to a POS terminal or more generally to the hardware and software used for checkouts, the equivalent of an electronic cash register. A POS terminal manages the selling process by a salesperson accessible interface. The same system allows the creation and printing of the voucher. Electronic Funds Transfer: Electronic funds transfer or EFT refers to the computer-based systems used to perform financial transactions electronically. An EFT is the electronic exchange or transfer of money from one account to another, either within the same financial institution or across multiple institutions. Electronic Payment System: Electronic payment is an integral part of electronic commerce.

Broadly de-fined, electronic payment is a financial exchange that takes place online between buyers and sellers. The content of this exchange is usually some form of digital financial instrument (such as encrypted credit card numbers, electronic checks, or digital cash) that is backed by a bank or an intermediary, or by legal tender. Page 12 of 35 Online Banking in Bangladesh: An Exploratory Study on Dhaka Bank Limited Chapter 3 Present Scenario of Online Banking in Bangladesh The commercial banking system dominates Bangladesh’s financial sector. Bangladesh Bank is the Central Bank of Bangladesh and the chief regulatory authority in the sector. The banking sector of Bangladesh comprises four categories of scheduled banks.

These are four state-owned commercial banks (SCBs), five state-owned development finance institutions (DFIs), thirty private commercial banks (PCBs) and nine foreign commercial banks (FCBs). The number of banks remained unchanged at 48 in 2008. These banks had a total number of 6886 branches as of December 2008. The number of bank branches increased from 6717 to 6886 owing mainly to opening of new branches by the PCBs during the year. Online Banking in Bangladesh is yet to develop according to international standard. At present, several private commercial banks (PCBs) and foreign commercial banks (FCBs) offer limited services of telephone banking, internet banking, and online banking facilities working within the branches of individual bank in a closed network environment.

As a part of stepping towards e-banking, the FCBs have played the pioneering role with adoption of modern technology in retail banking during the early 1990s whereas the state-owned commercial banks (SCBs) and PCBs came forward with such services in a limited scale during the late 1990s. Moreover, the banking industry as a whole, except for the four specialized banks (SBs), rushed to offer technology based banking services during the middle of the current decade. The existing form of e-banking that satisfies customer demand in banking activities electronically throughout the world are PC banking or PC home banking that include online banking, internet banking, mobile banking, and telephone banking.

Before depicting the entire scenario of Online Banking in Bangladesh a brief introduction of the overall banking sector of the country is necessary. 3. 1 Supported Infrastructure All types of Electronic Banking operations require a well-established ICT infrastructure throughout the country. Online Banking largely depends on the country’s overall ICT infrastructure, legal environment and skilled human resources. At present the infrastructure for Online Banking is not satisfactory because of high cost and low penetration rate. This is one of the reasons for which the entire banking sector is still out of online system. Page 13 of 35 Online Banking in Bangladesh: An Exploratory Study on Dhaka Bank Limited There is also lack of technically skilled human resources.

Computer and Internet is still out of reach of general people of the country. The following statistics will provide a detailed synopsis of the overall situation of the supported infrastructure for implementing Online Banking. The infrastructure of a country is very important for implementing online banking. For online banking major cost is to setup backbone network. Fortunately Bangladesh Railway has a high-speed optical fiber network parallel to the railway path owned by Bangladesh Railway. Its total capacity is about 2. 5 gigabits per second. This fiber optic network covers almost every important parts of the country. 1 Bangladesh has been connected with the information superhighway on the 20th May, 2006.

It is a landmark of ICT sector of Bangladesh. The cable network covering some 786 miles across the country from the Bay of Bengal will provide a fiber-optic link with a data transfer capacity of 10 gigabits per second compared to the 150 megabits per second bandwidth now used by the state owned BTTB and dozens of private Internet Providers. The following figure shows the growth of Internet users of our country. 2 Total Internet Users 000s 500 450 400 350 300 250 200 150 100 50 0 Year 2000 Year 2001 Year 2002 Year 2003 Year 2004 Year 2005 Year 2006 Year 2007 Total Internet Users 000s From the figure we see that the Internet users of our country are increasing every year.

After connecting with the information superhighway, the total country will be connected by fiber optic backbone; certainly it will be a milestone for infrastructure of implementing online banking in Bangladesh. In Bangladesh most of the banking hardware are available. The 1 2 Islam, Monirul, (March 06, 2005) “Proposed ICT infrastructure for E-bankingin Bangladesh”. 2007-2008 Annual Report of BTRC. Page 14 of 35 Online Banking in Bangladesh: An Exploratory Study on Dhaka Bank Limited hardware available for online banking is entirely procured from foreign origins with a local distributor. Online banking operation hardware includes; servers, workstation, printers, scanner ATM, POS terminals, etc and networking hardware includes switch, Router, V-SAT connectivity etc. The software support for internet banking, i. e. FLEXCUBE is available in Bangladesh.

Again Bangladesh Government is working on the copyright law and the preservation of intellectual property act. After the successful implementation of all these policies and strategies we are expecting that more than 50% of the banks will be offering internet banking facilities which is now 12% only. 3 3. 2 Status of Computerization of Banking System in Bangladesh The banking system of our country, depending on computerization can be classified into three categories: (i. ) Completely computerized (ii. ) Partially computerized (iii) Not computerized. Standard Chartered Bank Ltd. , City Bank NA, American Express Bank, HSBC, Dhaka Bank Limited etc. are completely computerized banks in our country.

All private and state owned banks are partially computerized and not computerized. The overall picture of computerization in the banking sector of our country is presented in the following table. 4 Table-3. 1 Computerized Branches in different types of Commercial Banks Branches with various facilities Computerized Branches Number of Branches Linked within branches Number of Branches Linked with other branches Availability in Banks NCBs PCBs FCBs 19% 38% 100% 3% 0. 86% 1% 22% 76% 76% The overall computer density in the banking sector is 1. 64. For foreign commercial banks (FCBs) the computer density is 45. 34, where as for NCBs the ratio is only 0. 41. The specialized bank scenario is almost same as the NCBs, 0. 43.

On the other hand, private commercial banks have comparatively higher ratio, 4. 94. As a whole 81. 81 percent banks do 3 Md. Ibrahim Khalil, Iqbal Ahmad, and Md. Delwar Hossain Khan, Internet Banking: Development and Prospects in Bangladesh. 4 Ibid. Page 15 of 35 Online Banking in Bangladesh: An Exploratory Study on Dhaka Bank Limited not have any local area network (LAN), 30 percent have WAN (Wide Area Network) but for some banks many branches are outside of WAN connectivity. 5 At present, all the foreign banks in our country are using online banking system. They have invested a lot for their automation banking services. For this reason, they are increasing market share every year.

They are the pioneer of implementing online banking systems in Bangladesh, but now most of the private banks of our country are using online banking systems. Figure 3. 1: Bank Branches, Computerized Branches, and Branches providing anyBranch-banking Facility under Online Network 6 Table 3. 2: Computerization of Bank Branches by Categories, 1998-2006 7 1998 NCBs SBs PCBs FCBs Total 2. 65 1. 96 38. 54 100. 00 9. 20 1999 4. 14 2. 04 46. 32 100. 00 11. 74 2000 7. 02 2. 18 67. 67 100. 00 18. 95 2001 8. 35 2. 06 85. 86 100. 00 23. 91 2002 10. 09 4. 20 95. 67 100. 00 28. 61 2003 11. 89 4. 20 97. 76 100. 00 31. 10 2004 14. 43 4. 39 98. 45 100. 00 33. 50 2005 16. 12 4. 35 98. 90 100. 00 35. 42 2006 16. 38 4. 38 98. 99 100. 00 36. 95 Md. Moktar Ali, Rafiuddin Ahmed, Arifur Rahman, Md.

Moshiul Azam, Electronic Banking in Bangladesh: Potential and Constraints 6 Mohammad Mizanur Rahman, Innovative Technology and Bank Profitability: The Bangladesh Experience, Working Paper Series: WP 0803, Bangladesh Bank, December 2007. 7 Ibid. 5 Page 16 of 35 Online Banking in Bangladesh: An Exploratory Study on Dhaka Bank Limited Figure 1 and Table 2 together provide the overall picture of computerization in the banking system of Bangladesh during 1998-2006. In 1998, out of 5,860 branches (NCBs 3,619; SBs 1,173; PCBs 1,056; and FCBs 13), only 539 branches (NCBs 96; SBs 23; PCBs 407; and FCBs 13) were computerized, and only two FCBs were providing any branch banking facility connecting a total of six branches under their respective on line network.

By the end of 2006, a significant improvement in computerization can be observed especially by the PCBs. Out of 6,565 branches (NCBs 3,388; SBs 1,347; PCBs 1,776; and FCBs 54) in 2006, a total of 2,426 branches (NCBs 555; SBs 59; PCBs 1,758; and FCBs 54) were computerized of which 651 branches of 22 PCBs, and 7 FCBs were providing any branch banking facility under respective bank online network. Figure 3. 2: ATM Booths and POS Terminals in the Banking System, 1998-2006 8 One FCB introduced ATM and POS services for the first time in Bangladesh in 1992 and 1997 respectively. By the end of 1998, the bank has set up five ATM booths and 20 POS terminals in different locations of Dhaka city.

Other categories of banks, such as PCBs, NCBs, and one SB gradually adopted both the services as a part of market competition in offering better customer services. Figure 2 shows that growth rate in adoption of POS terminals was higher compared with ATM booths during the 1998-2006 period. By the end of 2006, the number of ATM booths and POS terminals stood at 478 and 4,647 respectively covering important merchant outlets in six divisional cities and some other important district towns in Bangladesh. Mohammad Mizanur Rahman, Innovative Technology and Bank Profitability: The Bangladesh Experience, Working Paper Series: WP 0803, Bangladesh Bank, December 2007. 8 Page 17 of 35 Online Banking in Bangladesh: An Exploratory Study on Dhaka Bank Limited 3. Present Status of Online Banking in Bangladesh Last couple of years shows dramatic improvement in the awareness situation in the banking community regarding the comprehensive application of ICT. Majority of banks is planning to introduce ICT for integration of banking services and new e-finance services, which will play a vital role in bringing efficiency in the financial sector. Foreign banks are the pioneers in adopting electronic finance in Bangladesh. Most of the foreign banks are using the computerized transaction system and taking advantage of the superior technology by attracting customers and providing inter-branch and interbank linkage.

Foreign banks through successful use of a global network, has increased the timeliness and accuracy of information, benefiting its customers, its employees and also its management. Figure 3. 3: ATM Booths and POS Terminals in the Banking System, 1998-2006 9 One FCB introduced ATM and POS services for the first time in Bangladesh in 1992 and 1997 respectively. By the end of 1998, the bank has set up five ATM booths and 20 POS terminals in different locations of Dhaka city. Other categories of banks, such as PCBs, NCBs, and one SB gradually adopted both the services as a part of market competition in offering better customer services. Figure 2 shows that growth rate in adoption of POS terminals was higher compared with ATM booths during the 1998-2006 period.

By the end of 2006, the number of ATM booths and POS terminals stood at 478 and 4,647 respectively covering important merchant outlets in six divisional cities and some other important district towns in Bangladesh. Mohammad Mizanur Rahman, Innovative Technology and Bank Profitability: The Bangladesh Experience, Working Paper Series: WP 0803, Bangladesh Bank, December 2007. 9 Page 18 of 35 Online Banking in Bangladesh: An Exploratory Study on Dhaka Bank Limited Although some banks are providing online services, the number of customers using this service is very few. A study has been conducted about the percentage of customers who are enjoying the on line services.

The study was conducted during January to October 2007, on 1000 existing customer (Dutch Bangla Bank-200, Prime Bank-200, Brac Bank-200, Premier Bank-200, The Trust Bank-100, and Eastern Bank-100) of the above bank. The result is shown below: Percentage of active online banking service user Active customer of on line Banking 28% 30% Currently not using on line banking Examining routes to use on line banking Did not make comments 2% 10% 30% On line banking is under development: to be operational in 10 months The figure shows that the percentage of active customer using on line services are 30%. The rest numbers of customer are still to take the services or in a position that they are willing to take the online services but are not aware enough about the benefits of on line services. 0 In our country different banks are offering online banking services in different ways, some are offering ATM (Automatic Teller Machine) services, some are tele-banking and some are electronic fund transfer, debit card, credit card etc. The following table shows the different online banking services in our country. 11 Nirmal Chandra Bhakta, Md. Mostafizur Rahman Sarder, Md. Shahid Reza, On line Banking: Bangladesh Perspectives. 11 Md. Moktar Ali, Rafiuddin Ahmed, Arifur Rahman, Md. Moshiul Azam, Electronic Banking in Bangladesh: Potential and Constraints 10 Page 19 of 35 Online Banking in Bangladesh: An Exploratory Study on Dhaka Bank Limited Table-3. 3: Position of Online Banking in Bangladesh (As on May 31, 2009). 12 Serial No. 1. 2. 3. 4. 5. 6. 7. 8. 9.

ATM SMS Banking Electronic Fund Transfer (EFT) Virtual Banking Internet Banking and WAP Any Branch Banking Telephone Banking Point Of Sales (POS) Service SWIFT Channel Various Forms of Online Banking Services Number of Banks having online banking service Percentage (%) (Sample size 40) 0. 75 0. 475 0. 55 0. 175 0. 525 0. 875 0. 525 0. 875 1. 00 0. 775 0. 175 30 19 22 7 21 35 21 21 40 31 7 10. Remittance (Electronic Way) 11. Call Center Figure 3. 4: Number of Clients holding Debit and Credit Cards, 1998-2006 13 Kamrul Hasan, E-Banking in Bangladesh: The Future of Banking. Mohammad Mizanur Rahman, Innovative Technology and Bank Profitability: The Bangladesh Experience, Working Paper Series: WP 0803, Bangladesh Bank, December 2007. 13 12 Page 20 of 35 Online Banking in Bangladesh: An Exploratory Study on Dhaka Bank Limited

Debit card, popularly termed as plastic money or electronic money, was introduced by one NCB in 1999 and by the end of the year the number of customers stood at 2,014. Similarly, Credit card came into Bangladesh’s market in 1997 through one PCB and one FCB; and the total number of customers stood at 1,607 by the end of 1998. Figure 3 shows that the number of debit card and credit card holders were growing moderately during 1998-2006 period except for the period of 2005 and 2006 when the number of debit card holders gave a big jump and stood at 585,465 by the end of 2006. Besides, the number of credit card holders is recorded at 221,100 as of end December 2006. Figure 3. 5: Volume of Transactions through ATM and POS, 1998-2006 14

The total volume of transactions through ATM is recorded at BDT 0. 70 billion during 1999, growing moderately up to 2001, and recording a transaction of BDT 2. 11 billion at the end December 2001. Since 2001, a significant increase in transactions through ATM is observed showing a transaction volume of BDT 37. 19 billion by the end of 2006. Besides, using the POS terminals, the customers made payments of BDT 0. 02 billion during 1999 against their purchase of goods and services which increased to BDT 5. 58 billion by the end of 2006. It is evident from Figure 4 that a significant growth in transactions through ATM is observed relative to POS terminals during 1998-2006.

Mohammad Mizanur Rahman, Innovative Technology and Bank Profitability: The Bangladesh Experience, Working Paper Series: WP 0803, Bangladesh Bank, December 2007. 14 Page 21 of 35 Online Banking in Bangladesh: An Exploratory Study on Dhaka Bank Limited 3. 4 The Bangladesh Automated Clearing House (BACH) The Bangladesh Automated Clearing House (BACH) will be available from November 1, 2010 as per Bangladesh Bank announcement. 15 BACH is a network that enables customers, companies and other establishments (i. e. banks) to complete cheque processing within the participating banks through the BACH. Through BACH clients of banks will get their cheques cleared within one working day and machine-readable cheques, that is, MICR (Magnetic Ink Character Recognition) cheques will be in place by the time.

The traditional cheques take at least three days to be cleared. This payment system will make use of the automated clearing house to enable electronic payments or fund transfers in future, and small and big business houses will be benefited. 15 27 July, 2010, The Daily Star, Business, Banks to enter MICR era. Page 22 of 35 Online Banking in Bangladesh: An Exploratory Study on Dhaka Bank Limited 3. 5 Present status of Electronic Payment System in Bangladesh At present several utility service providers along with many banks have started using electronic payment system in Bangladesh. But the system has still not reached the mass majority of people in the country. Bangladesh Bank has osted an “ICT Guideline” in their web site for the banks and financial institutes to create their own ICT Policy for the security of the online transactions. Nationalized banks like Sonali, Janata, Agrani and private banks like DBBL, Eastern Bank, Standard Chartered, and HSBC etc are using ATMs and POS for payment of utility bills electronically. It is seen that Ready Cash card, Q-Cash card ATMs and POS are the mostly used options for the electronic payment. One of the problems for this is that these services are mostly available in big cities and towns. The people living in remote villages still have no idea that such a service is available. Also the card holder has to be a client of service providing bank to use the ATMs.

Other options available also include Online Banking which is done by some banks through which the utility bill can be paid over Internet. But this service is yet to be started by other banks. Bangladesh Bank has already started a project on Automatic Clearing House under which the online banking will be implemented in the future. The utility service providers have also taken several steps so that they can work along with the banks to provide the service of electronic payment. PDB, DESA, WASA, BTTB, Titas Gas, DESCO, Grameenphone etc have all made several contracts with different banks to pay their bills electronically using ATMs and other channels. Several Works are still getting carried away by these organizations to introduce new options of electronic payment.

Other government and nongovernment organizations are also making changes in their infrastructure to make them capable of handling electronic payments. 3. 6 Cutting Edge EFT Technologies: SWIFT and ELDORADO Electronic Fund Transfer (EFT) has made transferring funds easier and faster. In traditional banking it took days to process funds to be transferred from one bank to another and to process foreign transactions. With EFT funds can be transferred within minutes from one country to another. In Bangladesh the technologies like SWIFT and ELDORADO are present now. SWIFT is widely used in foreign transactions where funds are transferred to foreign countries for meeting export and import operations.

ELDORADO is used for interbank fund transferring which was previously made by payment orders, demand drafts (DD), telephone transfers (TT) etc. Page 23 of 35 Online Banking in Bangladesh: An Exploratory Study on Dhaka Bank Limited SWIFT SWIFT is a bank owned non-profit co-operative based in Belgium servicing the financial community worldwide. It ensures secure messaging having a global reach of 6,495 Banks and Financial Institutions in 178 countries, 24 hours a day. SWIFT global network carries an average 4 million message daily and estimated average value of payment messages is USD 2 trillion. SWIFT is a highly secured messaging network enables Banks to send and receive Fund Transfer, L/C related and other free format messages to and from any banks active in the network.

Having SWIFT facility, Bank will be able to serve its customers more profitable by providing L/C, Payment and other messages efficiently and with utmost security. Especially it will be of great help for our clients dealing with Imports, Exports and Remittances etc. ELDORADO ELDORADO is a web based Remittance Processing System for Taka payments, which will be interfaced with the Bangladesh Bank ACH (Automated Clearing House) and will run as an independent association of member Banks. In El Dorado transactions will be settled on a bilateral net settlement basis. The system platform will be a direct electronic substitute of present day manual instruments such as DD (Demand Draft), TT (Telegraphic Transfer ) & MT (Mail Transfer) used under existing inter-bank agency agreements.

This remittance engine will be fully compliant with all relevant central bank regulations and will automatically provide the necessary MIS directly to Bangladesh Bank for supervision and monitoring. The essence of the ELDORADO initiative is to create a standardized IT platform that will enable all member banks to execute remittances electronically in the most expeditious manner. From the remitter/beneficiary perspective this would mean extremely quick turnaround times for foreign remittances and for banking intermediaries. This would allow more transactions to be executed with the same level of resources. In this manner the distinct advantages of processing transactions electronically would become palpably clear to processing personnel. 16 16 http://www. eldorado-bd. com/ Page 24 of 35

Online Banking in Bangladesh: An Exploratory Study on Dhaka Bank Limited In Bangladesh nine banks are member of ELDORADO and at present only these banks can transfer funds within each other through ELDORADO. More banks will be members of this service and when all banks will be connected through ELDORADO network only then the true essence of online banking and EFT will be enjoyable. The current member banks are: • • • • • • • • • Al-Arafah Islami Bank Limited Bank Asia Limited BRAC Bank Limited Dhaka Bank Limited EXIM Bank Limited Frist Security Islami Bank Mutual Trust Bank Ltd. Rupali Bank Limited Social Islami Bank Ltd. Services via ELDORADO 1.

Initiate local payment i. e. make a home currency payment to another bank account in the same country. 2. Initiate payment or schedule a payment on instruction basis 3. Payments are template driven and possible to store for future reference. 4. Customer details are populated from customer database maintained in the application. 5. Real-time status checking of payment instruction. 6. Put a payment on hold during initiation or at any stage of the approval cycle. 7. Facility to set standing instruction for periodic interval. ELDORADO will automatically generate alert to initiating bank. If alert is approved then actual message will be generated. 8.

View and print transaction receipts in bank’s templates (with customizable look & feel of bank advice) for a payment. 9. Configure payment requests for additional authentication by using transaction password. Page 25 of 35 Online Banking in Bangladesh: An Exploratory Study on Dhaka Bank Limited 3. 7 Advantages of Online Banking The major advantages of on line banking identified as under: ? ? ? ? ? ? ? ? No personal visit to the branch is required One can access and operate one’s account from anywhere in the country as well as the globe The requirement of staff at branches level could be minimal It makes the banking services easy, convenient, and speedy, oth for the bank as well as the customer Transaction is automatically acquiescent and posted in all required data labels, thus reducing the work loads It lower employee support costs of the bank as well as reduce customer service costs. It brings attitudinal changes in the employees to grip ICT related initiatives. Improved customer service to the clients; it results in higher satisfaction and more sales 3. 8 Online Banking: Through the Eye of Critic Despite all the benefits, certain critics have pointed out that online banking has some negative aspects, a few of which are mentioned here below: ? ? ? The customer often needs a computer, and time to log on the site; Customer must have little bit ICT knowledge (Note: on the perspective of our country most of the customers are not aware about ICT); Many transactions cannot be carried out electronically.

Many deposits and some withdrawals require the use of postal services, which can be slow and unreliable even in developed economies; ? ? ? Sometimes network connection could be down and modem connection could be disconnected; Internet speed may slower, and connection could be loss in the interim period of a transaction, which may bother the clients; Legal framework for recognizing the validity of banking transactions conducted through the net is still not in a frame. Page 26 of 35 Online Banking in Bangladesh: An Exploratory Study on Dhaka Bank Limited Chapter 4 Exploring the Online Banking System of Dhaka Bank Limited Dhaka Bank’s products and services are regularly upgraded and realigned to fulfill customer expectation.

Their delivery standards are constantly monitored and improved to assure the highest satisfaction. The bank specially emphasizes on the service base on technologies. Because the life became very fast and people want take service within sort time. The consumer-banking sector of the Bank deals with number of tasks related to various services. The online products that are recently being offered by the bank are as follows – ? ? ? Accounts: Dhaka Bank provides the Savings Account; Current Account; Short Term Deposit; Fixed Deposit Receipt etc. for the customers. ATM (Automated Teller Machine): Dhaka Bank ATM Cards enable their valued customers to carry out a variety of banking transactions 24 hours a day. Credit Cards: Dhaka

Bank Credit Card has earned wide acceptability and reputation within a very short time. The Bank has developed the process such that it can deliver the Credit Card within only 7 days against security; for unsecured cards it takes only 10 days. ? Phone banking: Dhaka Bank phone banking service allows customers to conduct a variety of transactions by simply making a phone from anywhere. Customers can inquire about the balance in their account, check transaction details or request for account statement by fax or e-mail. ? ? ? ? ? Locker: By this facility customers can put their valuable things such as jewelry items, valuable papers etc. for the safety reason.

Consumer Credit: Dhaka Bank also provides consumer credit facilities with very attractive terms and conditions. Industrial Loan: Loans issued for purchasing equipment, inventories, plants, payrolls etc. Any Branch Banking: By this customers can transact from any branch insight the country. Utility Bill Payment: Customers can pay different utility bill such as phone bill, credit card bill etc. Page 27 of 35 Online Banking in Bangladesh: An Exploratory Study on Dhaka Bank Limited Dhaka Bank Limited has started its Online Banking system in November 2004. Since then it is providing continuous Online banking services to its customers with ensuring high security and reliability.

Dhaka Bank has its own Intranet throughout the country to carry out online operations equipped with latest hardware and software. Any customer can get his/her online banking service through logging in the Bank’s online website, that is, https://ibank. dhakabank. com. bd. The website is accessible from anywhere in the world and uses Secured HTTP protocol which is in fact a strongly encrypted connection less vulnerable to security threats. Through the online banking system of Dhaka Bank a customer can get the following services: • • • • • • • Account Summary: The Customer will be able to view the list of Current, Saving, Term Deposit and Loan accounts with the current balance.

Account Details: The Customer can choose a particular account and see the account details including unclear fund, limit, interest accrued etc. Account Activity: The customer can see or print his transaction activity in a given account for a particular period. Transfer Funds: The customer can transfer funds from one of his accounts to another of his accounts within the bank. Third Party Transfer: The customer can transfer funds from one of his accounts to another customer’s account within the bank. Pay Bills: The customer can pay his utility bill (like Electricity, WASA, GAS, Telephone, Mobile, ISP etc. ) Standing Instructions: The customer can setup, modify or delete standing instructions for transferring fund from one of his account to another account (his account or 3rd party). • • • • Loan Repayments: The customer can make payment of the loan installment from his CASA account. Statement Request: The customer can make a request for account statement for a required period. The bank will manually service this request. Cheque Book Request: The customer can make a request for a Cheque book. Cheque Status Inquiry: The customer can choose an account and enter the Cheque number for which the status should be viewed. Stop Payment Cheque: The customer can mark his Cheque leaf as stop payment. Page 28 of 35 Online Banking in Bangladesh: An Exploratory Study on Dhaka Bank Limited • • • Interest Rate Inquiry: The customer can query on the interest rates on CASA & Term Deposit Products.

Foreign Exchange Rate Inquiry: The customer can query on the Foreign Exchange (FX) Rates using this function. Refill Pre-Paid Card: The customer can buy a refill number for his pre-paid mobile phone or ISP link. Page 29 of 35 Online Banking in Bangladesh: An Exploratory Study on Dhaka Bank Limited Chapter 5 Challenges of Online Banking Online banking is obviously the demand of time. It helps make banking services faster, more convenient, cost-efficient and more productive. But in a country like Bangladesh the implementation of ultimate online banking faces many challenges from different aspects. The major challenges that are faced by banks, govt. financial institutions and entrepreneurs are discussed here. 5. 1 Technology Related Challenges • • • • IT and Telecommunication Infrastructure Issues Capacity/Scalability Problems Availability and Systems Integration Web Site Design and Operational Functionality 5. 2 Management Challenges • • • • • • Regulatory issues Information management Outsourcing problems Security Loss of personal relationship Organizational Structures and Resistance • • • • • Process change Structural change Cultural change Political change Trust issues Adoption/Acceptance issues Clash with other services delivery channels Change management issues Ethical issues Page 30 of 35

Online Banking in Bangladesh: An Exploratory Study on Dhaka Bank Limited 5. 3 Other Challenges • • • • • • • • • • Lack of proper integration of related systems Culture of achieving only short-term targets Non web-enabled business processes Lack of understanding and knowledge, within the organization, about ecommerce Lack of product differentiation and categorization Lack of understanding customer community Difficulties in personalization of products Limited research and development Lack of e-commerce promotion within the organization Lack of understanding that the e-banking initiative is a business critical area and not just a technical issue. 5. Barriers to Online Banking • • • • • • • Access to the Internet Consumer behavior Language and cultural issues Adverse industry trends Fear of competition Security issues Social issues Page 31 of 35 Online Banking in Bangladesh: An Exploratory Study on Dhaka Bank Limited Chapter 6 Recommendations A well functioning e-banking network is dependent on availability of a backbone network connecting the whole country; reliable and secure information infrastructure including telecommunication infrastructure; ICT penetration in the banking sector; skilled operational personnel; and legal and regulatory framework. The government, Bangladesh Bank and scheduled banks are related to these issues. Therefore, both individual and joint efforts are needed to overcome the constraints in promoting e-banking in the country.

In respect to technology adoption, the PCBs and FCBs have attained greater success relative to other bank categories but their coverage is concentrated mainly in urban and semi-urban areas. The rural parts of Bangladesh still remain outside of their services. Since the SCBs and SBs have branches throughout the country including the rural areas, penetration of technology in banking activities of these two categories of banks are crucial to wider spread of e banking services. For the purpose, the management of these banks might allocate a part of their yearly profit for ICT penetration in banking activities and human resources development supported by fixed targets. In addition, several steps may be contemplated in order to accelerate the adoption of e-banking. 6. Recommendations for Overcoming the Challenges: Developing and implementing online banking system in a country like Bangladesh is much challenging. To overcome these challenges the following courses of actions should be taken: 1. Strategy development 2. Channel integration 3. Change management 4. Promote innovation culture 5. Leverage existing brand to deliver new services 6. Reinforce “Trust Relationships” 7. Universal product offering 8. Highly secure, robust environment 9. Manage resistance to change 10. Manage technological issues with care 11. E-channels specific marketing 12. Human resource development Page 32 of 35 Online Banking in Bangladesh: An Exploratory Study on Dhaka Bank Limited 6. Recommendations to the Government: 1. Digital Bangladesh may be activated by 2021 to develop the economy of Bangladesh. Successful team building with a coherent manner for developing human ware, hardware, software and web ware are required to increase e-business process in a systematic way. Moreover, greater emphasis should be given on security system and to prevent fraud so that any sort of financial transactions including on line bank

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Online Banking in Bangladesh. (2019, May 02). Retrieved from https://graduateway.com/online-banking-in-bangladesh-1311/

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