Bangladesh Bank released the “Sustainability Rating 2021”, and it offers an interesting perspective on how dynamic the changes within the financial services space are in the country. Here’s some obvious proof. Four banks and three NBFIs that made it to the list in 2020 could not retain their much-coveted spot in 2021. This simply suggests that banks and NBFIs in Bangladesh must up their digitization game and will probably have to do more than the bare minimum to be able to stay ahead in the race. Even as the space is getting more competitive; especially in a post-pandemic fueled digital economy, the onus is on banks and NBFIs to take stock of the constantly evolving needs and embrace change to remain relevant and sustainable for the longer haul of things.
In this blog, let’s look at two crucial aspects within the sustainability context. One, let’s dig beyond the surface and analyze the kind of challenges that banks in the region are presented with. Two, as a natural step, let’s identify ways in which technology and digitization can positively impact sustainability goals.
- Replacing legacy systems with modern digital solutions: Typically, the conventional banking framework in the country, despite its foundational strength has seen several operational inconsistencies in the wake of the pandemic. Owing to several years of underinvestment, existing core banking systems and applications were thrown off guard in 2020, exposing their incapability to support the market’s changing dynamics and expectations. To compound this problem, operation and maintenance costs of these legacy systems takes a huge toll on the bank’s bottom line. System modernization is therefore a key driver for positive change, and when instituted correctly can turn things around for the better.
- Need for renewed regulatory focus: Banks in Bangladesh have long been facing challenges in their integration into the global economy. This can be in part due to the unchecked growth of NPAs that is probably a result of a lack of good governance. The absence of a stringent set of regulations that can be universally applied results in banks lacking in transparency, accountability, and compliance. The lack of structured and vetted credit rating bodies, poor information reporting and disclosure mechanisms are all part of the same problem.
- Need for enhanced focus on banking customer experience: There is a long-standing relationship between service quality and customer loyalty within the banking industry. Factors such as trust, security, responsiveness, and tangibility within digital banking frameworks need to be addressed to meet growing customer expectations in Bangladesh. Deloitte’s Digital Banking Maturity Study EMEA and Digital Leadership reports show that merely building a great product doesn’t automatically translate to strong competitive advantage. That is where customer experience and satisfaction work as key differentiators, especially with digital transformation in the mix. So, put your best foot forward and differentiate yourself by providing a seamless, secure, and dynamic customer experience along various touchpoints. How can this be tackled? By championing the cause of technology-driven solutions that put the customer at the front and center of the banking user experience.
- Need for a cultural shift/mindset shift: There are growing expectations among both the young and old in the country to avail of user-friendly services that are more than just traditional bank visits driven by lengthy paper-driven processes. Even though complete financial inclusion still looks like an uphill task, customer expectations fall into a wide spectrum that can be tackled by a unique cultural mindset shift. A knee-jerk reaction of scrapping all traditional systems and replacing them with slick digital systems is a recipe for disaster. A wise move would be to address the challenge by integrating digital experiences into traditional banking branches and paving the way for sustained business and customer success.
With these challenges laid out, what are the action items for Bangladesh banks as they prepare for sustainability goals in the digital economy?
Action plan: Shift from reactive to responsive
Simply put, perseverance toward continuous technological innovation with a mindset for digital transformation is probably the way forward. To be able to achieve the goal of sustainability in the long run, banks will need to reorient their strategies from reactive to responsive. Agility, continuous innovation, and customer experience should take precedence over everything else for banks to stay relevant and competitive in the digital economy we are heading toward.
It is crucial for banks and financial institutions to be prepared to embrace technology at the right time and pivot when necessary to keep pace with market demands. It is in this context that financial service organizations have a more significant role to play. By leveraging cutting-edge technologies, they should assume the role of a collaborative partner that hand-holds banks at every step of their journey toward digital transformation, rather than merely being a transactional vendor.
On that note, here’s a case study on how we helped our customer, , to meet several sustainability indices through a rapid digital transformation that scored high on the customer experience metric.
We can’t be prouder as they made it to the top of the sustainability list for 2021 by taking the right steps at the right time toward digitization. Want to create such success stories with digitization? Get in touch.