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Thursday, May 5, 2016, Baishakh 22, 1423 BS, Rajab 27, 1437 Hijri

Talking On Banking
Mobile banking: Are we ready to face challenges?
Faruk Ahmed
Published :Thursday, 5 May, 2016,  Time : 12:00 AM  View Count : 122

Do you remember when writing checks at the grocery store was normal? Can you recall those drives to the bank branch to transfer money to your savings? How about those times you had to call to check your account balances?
When we discuss on banking services, mobile banking now comes at the fore front after non banking financial institutions. But the one question is hitting our mindsets, are we ready to face challenges ahead?  
Banking looks very different today. Because, people have already started storing their money outside the banking sector and making payments that are not tied to a formal bank account. Payment business brought to banks USD 1.3 trillion or 34 per cent of their global profits, according to McKinsey. That is why Bill Gates once said that banking will always be needed but banks as we know them could easily disappear. New entrants to the market, new business models, changing customer expectations and fragmentation of traditional services are all contributing to put traditional banks under pressure.
The new landscape has put severe blow on the brick-and-mortar banks all over the world. Bangladesh is no exception. Mobile Financial Services (MFSs) is an integral part of the financial system in Bangladesh. Competition has been intensified and new risks have been emerged. Reports from McKinsey and Deloitte suggest that the next big challenge - the impact of fintech firms - needs their imminent attention. But the question is are we ready to face the challenges. Will this race ever stop?  
To answer thise questions, let we put our eyes in the growing mobile banking industry where three MFSs bkash, DBBL Mobile Banking and Islami Bank m-Cash are now leading the market with more than 60 per cent of market share lies with bCash. The central bank provided 10 licenses to banks to offer the full range of mobile financial services. The bKash service is provided by BRAC Bank, while Dutch Bangla Mobile Banking of Dutch Bangla Bank and Islami Bank m-Cash of Islami Bank Bangladesh Limited are fully bank led model.
All MFSs are now operating businesses under the central bank's guidelines on "Mobile Financial Services for Banks" issued in 2011 which clearly stating a choice to make the market bank-led. However, the central bank has advocated for mobile operators and microfinance organizations to be active partners.
Market analysts say the success of NBFIs and MFSs is mostly depends on their ability to contain risk, adapt to changes and tap demand in markets that are likely to be avoided by the bigger players. In the absence of effective financial regulations, non-bank financial institutions can actually exacerbate the fragility of the financial system, while inadequate security measures in payment system can diminish the trust of customers.
Since not all NBFIs are heavily regulated, the shadow banking system constituted by these institutions could wreak potential instability. A prime example would be the 1997 Asian financial crisis, where a lack of NBFI regulation fueled a credit bubble and asset overheating. When the asset prices collapsed and loan defaults skyrocketed, the resulting credit crunch led to the 1997 Asian financial crisis that left most of Southeast Asia and Japan with devalued currencies and a rise in private debt.
So, a stable regulatory environment will provide opportunities to NBFIs and MFSs to continue to grow in the financial ecosystem and create meaningful financial inclusion and employment opportunities in the remote corners of the country.
The recent ATM scams with some private banks' booths and the ongoing concern over the cyber attack on Bangladesh Bank's reserve have made both market operators and regulators about the future challenges in mobile financial services in the country. And the following questions have been raised by many:
Is the central bank capable to monitor transactions through mobile phone devices? Are the customers' interest protected by the MFSs providers under non-bank model? Should CEOs depend on foreign IT service providers, who keep data outside the national boundary to make money for them?
And certainly, the answers of the above questions will define the destination of NBFIs and MFSs to shine the shadows, I am sure.

Editor : Iqbal Sobhan Chowdhury
Published by the Editor on behalf of the Observer Ltd. from Globe Printers, 24/A, New Eskaton Road, Ramna, Dhaka. Editorial, News and Commercial Offices : Aziz Bhaban (2nd floor), 93, Motijheel C/A, Dhaka-1000. Phone :9586651-58. Fax: 9586659-60, Advertisemnet: 9513663, E-mail: [email protected], [email protected], [email protected].