Retail banking in Bangladesh

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Mamun Rashid is an economic analyst and columnist of the daily sun

Any airlines cabin crew, while descending or upon touching the ground would tell you- 'thank you for the opportunity to serve you'. Indian Spice Jet would tell you –'we knew you had many options to fly; thank you very much for choosing Spice Jet'.
Bangladesh has 56 commercial banks.
Though most of them might not have a dedicated retail or consumer banking division or as such a retail or consumer banking head, they are opening retail or individual banking accounts or delivering banking services to individuals - be it current, savings or term deposits, NFCD or RFCD accounts, credit card, debit card, auto or mortgage loans or inward or outward remittance services to individuals. Most of the banks historically may be focused on corporate or commercial clients; however, they are increasingly trying to enter the retail banking space to draw a balance between their institutional and retail deposits, loans and more importantly bring down the cost of deposits as well as increase the yield on assets. Banks don't need posh branches to attract institutional or corporate clients mostly looking for better interest or exchange rates. I would guess, banks are unknowingly or less preparedly building costly or more than required space branches in fact to attract individual clients with many options to go. 'Thank you night' today may only focus on large borrowing clients, but days are coming while the large current or savings account holders in the banks are going to be the chief guests in these gala nights. Any North American or European Bank would tell you - you make more money from retail banking than commercial or corporate banking. If not, risk adjusted return is much higher in retail banking. With increasing investment in 'wealth management' or 'privileged banking', banks are going to make more money from retail offerings to wealthy citizens than synthetic product driven investment banking.
Three years back I was attending a three day long 'bankers' summit' at Brac Centre for Development Management (BCDM) at Savar. Dr. Farashuddin, the former governor of the central bank, though supported the new bank license case but was particularly disappointed with the 'product scarcity' or very few product offering in our banking sector. Banks don't have much to say, when the clients want them to package a solution. Treasury management or liquidity management or data mining is weak in most of the banks. They do have well-decorated branches but no retail banking. Most of the energy of the marketing or sales staff goes after mobilising term deposits, while transaction banking has already been proven as a better tool to bring down deposit expenses with better payable and receivable management. Banks come up with costly advertisements: retail product launching (for senior citizens or kids) in the front pages of the leading newspapers.  But when the senior citizens or parent of the kids go to the branches to buy the products the branch staff give a weird look. Less and less number of bank CEOs are ready to talk about their age old information technology platform.
One does not need to go far, if he or she just looks at India, Sri Lanka or even Pakistan; their banking sector have diversified product base with 'state of the art technology' to handle the emerging demand of the clientele. Yes, we have come across a long way with regard to 'dictated lending', 'classified loans' or 'interest suspense' culture - courtesy our development partners. The way our private sector has come up, the way their solution demand has increased and individuals are moving on, all our age old 'service model' would soon become redundant. Things are going to be fiercely competitive in the coming days with our good and large clients demanding more and more; their successors becoming ruthless regarding which bank should get their bulk of the business or even their new business.
None of the 56 banks (including 9 new ones) should forget that its clients especially the good ones now have 56 options but for it - only one option, to be able to serve its' client better to get a better pie of their wallet. That can't happen if our banks, new or old, do not continuously invest on their people, more products and most importantly processing or delivery platform. Like it or leave it - people, product and technology platform would increasingly be the deciding factors the banking in Bangladesh. And there too, how banks are making their individual clients happy - be it a business owner, CFO, marketing head or even a junior accounts or sales person. Banks' branding would also largely depend on how they serve retail clients or resource their customer facing staff in their branches. Bank branches should soon become their retail sales and service centre, not for processing letters of credit or commercial loans.
US based Boston Consulting Group (BCG) in its recent report on Bangladesh has reinforced the fast growing middle and affluent class in Bangladesh and the rise of consumerism. BIDS in its recent report showed - by 2030, 33 per cent of our population will belong to middle-class. So what? Type of their demand will shift, they can afford more to buy newer things and more importantly they would demand better financing or banking solutions. Internet banking would rise, so is ATM and credit card usage. Most of the chairmen or MDs can't realise now in next 10 or 15 years if not early, the need for teller in the bank branches would come to 'zero' or nearer to zero. If not 'nil', least number of people will visit bank branches for withdrawal of cash. Individuals, more importantly young technology driven clients, would dictate the terms for banking too. It is high time, our banks do realise the need of the future - a more globalised and technology driven world.

Source: http://daily-sun.com/post/89683/Retail-banking-in-Bangladesh[/size]

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