Future of banking

The global banking industry is undergoing transformative change. This shift, driven by technology and artificial intelligence (AI), is reshaping many long-established banking practices. Here are some of the key trends shaping the sector worldwide.

Trade finance, for instance, is evolving into automated digital platforms that enable seamless transaction processing. These platforms connect enterprise clients and their entire ecosystems, like suppliers, distributors and others, to banks and funders, reducing the cost of financing. They may be bank-led or independent marketplaces providing funding opportunities for micro, small and medium-sized enterprises.

With the rise of the internet and mobile banking, visiting a physical branch may soon become a thing of the past. Millennials and Gen Z, who are mobile-first and constantly online, prefer to carry out all their transactions through apps. In Bangladesh, with its large young population, banks should act now to engage this generation through digital channels. For those who still rely on cash, ATMs and cash deposit machines can facilitate basic transactions without the need to visit branches.

Cash is costly for banks to manage. One solution could be introducing a small transaction charge, such as 0.15 percent for deposits or withdrawals above a certain threshold, say Tk 10,000, and setting a cap on the number of monthly cash transactions. Small retailers often reject card payments due to the 2 percent fee, which eats into their slim margins. A pilot scheme could waive charges for card and QR code-based transactions for several years to help retailers transition from cash to digital payments more affordably.

As Bangladesh moves towards a cashless economy, there is a strong case for introducing a "Digital Taka." A central bank-issued digital currency (CBDC) would make 24/7 fund transfers possible while ensuring the trust and stability lacking in privately issued digital currencies or stablecoins. Bangladesh could also explore bringing in worker remittances through global banks with 24/7 cross-border USD clearing capabilities.

Most banks still rely on manual, paper-based account opening. This is outdated, especially when the National ID already includes a photograph. The entire process should be digitised so that customers can open accounts directly through a mobile app by filling in the required fields.

Artificial intelligence and emerging technologies are also transforming banking operations. Blockchain is being used in documentary trade transactions, while digital signatures through tools like DocuSign simplify account opening and contract signing. Optical character recognition (OCR) converts manual documents into a digital format swiftly, and AI helps detect fraud and identify emerging credit risks early. Moving from physical servers to cloud-based systems can also cut technology costs significantly.

The writer is a former Asia head of supply chain finance at Citibank, NA, and former head of product and platform solutions at TASConnect, a Standard Chartered Ventures portfolio company. He can be reached at https://www.linkedin.com/in/parvez-murshed-a818508.