I was talking to a friend from United States, who is in the final stage of receiving a banking license in Sri Lanka. Banking market in Sri Lanka, a country with a population of only 20 million and financial deepening better than many of its South Asian peers, being already saturated, I thought it was going to be a tough game for my friend, to ensure `pay back' to the shareholders within the stipulated time with aspired `return on equity'. However, my friend thought the other way round. He wants to go the `alternate banking way' with more emphasis on credit cards, debit cards, wealth management, mobile banking and internet banking. He also felt, due to the lack of scale, the Lankan commercial and corporate banking is quite saturated and a `new entrant' should obviously be focusing more on `consumer ' or `retail banking' with a focus to reach and, to be more precise, pamper the `individual clients' with better products.
So far consumer banking is concerned 'alternate channel' is coming out to be the `best way' to serve the `emerging client' needs. Credit cards, debit cards, ATM (Automated teller machine), SMS or mobile banking and internet banking have come out as proven tools. Even in Bangladesh, banks are focusing more on and allocating increased resources to establishing or nourishing `alternate channels'. As of December 2012, banks reportedly had 4000 plus ATMs distributed throughout the country, with Dutch-Bangla Bank alone owning 2300 ATMs. Another network named `Q- cash' also reportedly have put up around one thousand ATMs, while another two ATM networks are driven by BRAC Bank's `OMNIBUS' and AB Bank's `Cash link'. All the bank officials confirmed that with the spur of `online' banking the `point of sales' or POS is also on the rise and the country has almost 7 thousand POS as of today. With initial `teething problems' over the `National Payment Switch' (NPS) is expected to gain momentum and the `online banking' is also going to be faster than before.
Country reportedly has 4.6 million debit and credit cards. While the debit card numbers came out to be 4 million and Dutch-Bangla bank again possessing more than 2.5 million debit cards, the credit cards in circulation came out to be 600 thousand, with Standard Chartered bank occupying around 27-28 percent of the market share, closely followed by Eastern Bank, BRAC Bank and The City Bank Limited (AMEX and Visa cards combined) with almost taka 15 billion outstanding credits against the issued cards. Loans against credit card is quite less, because many of the card owners use this as debit cards. At the same time most of the banks are conservative against credit card loans due to the `ticket size' and recovery uncertainty. Most of these cards are again `dual currency' (Taka and USD) cards, while foreign currency exposure is adjusted against `travel quota' and at times against the `export retention quota'. The cards issued are mostly Visa, followed by MasterCard and a small amount of `American Express' cards too.
With the expansion of `mobile' network in Bangladesh and a `bank lead' model in place, `mobile banking' has been gaining momentum. As of December 2012, banks reportedly had 3 million `mobile banking' or `M-cash' clients with the BRAC Bank-driven `bKash' owning 2.1 million clients, followed by Dutch-Bangla Bank (900 thousand clients). The scope to use the large network of the non- governmental organisation named BRAC reportedly has helped the BRAC Bank get more clients. With more people sending money from Chittagong to Gaibandha, Dhaka to Madaripur and across the country, this number is sure to rise and make adequate commercial sense to the banks and add benefit to the clients.
I was quite happy to know, almost 200 thousand Dutch-Bangla Bank clients actively use `internet banking' to know their `account balance', `transfer money from one account to another account', `make term deposit' or `pay utility bills'. I am sure number is more than double in the case of Standard Chartered, BRAC Bank and HSBC. With increasing number of internet, desktop and smart phone users, the number is obviously going to rise. More and more people are going to use `internet 'service to transfer money, pay utility bills and make informed decisions in banking. Many banks in Bangladesh are already using or have been using `short message service' or SMS to let the clients know their large transactions or account balance.
I am sure, the way Bangladesh banking is moving ahead with greater emphasis on retail banking `opportunity space' and innovative schemes. Soon these alternate banking channels will be `mainstreamed' and make more sense for `personal wealth management' as well as `client solutions building'. For that, we need to have clear visibility about the destination with all stakeholders including the central bank extending policy supports continuously. We also need to put in befitting human resource as well as information technology (IT) delivery platform to support these `banking offers' in a predominantly `commercial banking lead environment' in Bangladesh.
Mamun Rashid is a banker and economic analyst.