The 21st Century business world, especially, service sector is carried out in a multifaceted, competitive and rationality manner that is characterized by evolving many factors that are often unpredictable.
It is the era of business-mentality-society where people behave rationally. Thus, effective utilizations of IT can play important roles in today's market competition on promoting products of service-sector for sustained revenues.
Banks sector is no exception. On the go banking is known to be a vital product where mobile banking is the latest with a rapid progression in Bangladesh.
In a recent study, Institute of Cost & Management Accountants of Bangladesh (ICAB) interviewed a total of 200 customers of bKash, Dutch Bangla Mobile Banking, M-Cash and U-cash located in Dhaka City.
The ICAB reported on satisfaction issues that over 50 percent of the population found to be over satisfied and only 8.3 per cent found to be dissatisfied. Another study entitled: Incentive under Market System, authored by the current author, published in academic journal reports that mobile facilitation of banking services in practice is becoming significantly profitable to parties involved.
Here customers are competing for a comparative time-saving-option and the vendors or service providers are competing for a comparative option that can effectively marginalize its operating costs and then enhance revenues.
The Private Commercial Banks (PCBs) are today more desperate than ever before in market competition. Similarly, on-the-go or mobile banking is beneficial to customers because it allows saving in the form of time values. Overall, it keeps the customers to be compatible with modern technology usage in modern lifestyles for conveniences.
With this win-win setting, nothing is wrong with this business motto in any competitive market as long as the practice fits in within bank regulations. However, the PCBs has stepped up taking further advantages of this global transitional move by promoting a range of electronic services for generating additional incomes, as reported by e-paper, the Financial Express, Bangladesh.
Many PCBs offer incentive for enhanced usage of on-the-go banking where customers are sometime over charged. It warrants for ensuring a secured customers' transactions for upholding IT progression for all.
It is crucial in case of remittances where documentations are needed to complete, as reported by e-paper, the Financial Express. Firstly, customers and service-providers in banking process are engaged in some kinds of contract by nature where paper documentation is a past.
These weaknesses in digital banking including bKash for remittances are causing to be exploited in competitive market. Secondly, getting hacked of bank-accounts is no surprising in today's financial world where crooked actions of some bank-employees influence the crime. Lastly, as reported, PCBs rip-off customers by hitting customers with fees for overdraft, over limit numbers and through third party transactions.
However, these abuses in digital services are causing a digital-dilemma - "undermine digital progression". This monetization process derives up the living cost of society. Here rich becomes richer because they are the ultimate vendors of services where digital banking serves as money making machine.
In aim to marginalize the digital-dilemma, this study takes on the challenge and proposes a scheme: Voluntary Insurance Option. It can serve as a new product of banking services. So, what is it? How should it work in practice?
The proposal should be known as a Voluntary Insurance Programme in the 21st Century market competition of financial sector. Since customer's participation is absolutely voluntary, under the program, insurance will be attached to customer's account, if customer wants it.
Under the programme, the bank will take extra measures for ensuring risk-free on-the-go banking services. In case of remittances, a third party can introduce the program and provide services so that risk-free on-the-go banking can be ensured. The programme will allow transferring the risk away from its premium-payers. With this maxim, the voluntary insurance programme can ensure an enhanced security of digital banking services in Bangladesh and beyond.
How does it work in practice?
While opening a bank account, individual may choose the option of digital services by signing up along with the insurance programme. Signing up with insurance programme is absolutely voluntary. Here participant will be paying say 1.00 TK as insurance premium monthly.
This amount of the premium is an additional to yearly bank-service fees that are charged by many banks in Bangladesh. By signing up, the bank and the customer get into the contract where the customer now finds his on-the-go services to be protected, which ensures the customer to be risk-free.
In case of remittances, customer, if not a bank accountholder, may choose the option of the programme and pay instant premium so that the remittances can be covered under the programme.
Rather detailing on how the programme would work, it is important to discuss on issues such as risk-free preferences, internal driving forces and individual's decision to participate. Let us assume, all individuals are risk-averse, which means they always prefer a certain to an uncertain outcome.
Additionally, this model ensures extra utility to those who get a sense of "warm glow" from using digital services. This is because, warm glow is defined as an increase in utility resulting from enjoying modern life-style embedded with digital banking in addition to utility generated by having risk-free (insured) banking services.
Warm glow individuals get utility simply from the act of using it. Thus, once access is confirmed and usage is made, warm-glow-individuals have received their maximum utility and they are indifferent between traditional and modern banking services.
Conversely, customer, who does not feel 'warm glow' but uses secured digital services, would gain utility from knowing that their access to digital are risk-free and then from using the services.
Based on ideas of risk-aversion and utility maximization, it can be stated that if the programme can transfer the risk away from the customer, the customer will have more incentive to use digital services, which can contribute to digital progression for all.
In this context, the ideas of 'warm glow' is relevant and important because here customer will not fully feel 'warm glow' if s/he uses just digital but not fully secured digital services where risk-free services are not free of charges.
Logically, uninsured digital-service-user will be always worried about running into rip-off, which is an opposite of being 'warm glow' environment. In this case, the individual's utility will accumulate from using the services and will feel warm-glow of having digital and risk free services under the proposal.
In conclusion, it would not be overstated claiming that while banks have done a relatively good job of providing digital services, there are still some pitfalls associated with it. Banks have overcome market failures, asymmetric information and then issues with trustworthiness, but its customers and its lifelines are still facing considerable risk and uncertainty.
While the proposal is a novel concept and provides a solid starting point for making on-the-go banking more attractive, it deserves further scientific study on customers' preferences.
Akim M Rahman, PhD (USA) is teacher in the Canadian University of Bangladesh