BIBM

Course: Certified Expert in E-Banking

Title:
Impact of Information Technology on Banking Business
Enhancement

Submitted by:
Name: Antor Podder
Designation: Junior Officer (G-1)
Organization: Mutual Trust Bank PLC

Date of Submission: March 08, 2025

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 Executive Summary

Information technology has become a power house of the banking sector in Bangladesh. This
sector is the pillar of an economy of a country. Information technology is helping banking
industry to be more efficient. There are many helpful sides of information technology such as
Contact/Call Centre, Automated Clearing House System (ACHS), Electronic Fund Transfer
(EFT), Online CIB, the Core Banking Solution (CBS), and Corporate Intranet System and so on.
The effectiveness is offering better customer services and enhancing business processes.

All the banks in Bangladesh have focused in the information technology platforms in recent
years. The banks have already invested a big amount of money in the platform. The banking
sector build multiple distribution channels like automated telephone banking, internet banking
and so on. Using the information technology platform, banks are developing innovative products
such as mobile banking, ATM services, POST services and others. In Bangladesh, banks have
developed a large ATM and POST networks for providing ATM access for 24 hours for the
customers. Besides offering ATM network services, banks are also providing the access to
VISA/MasterCard. On the other hand the banks have been successful in, reducing operating
costs, improving customer service delivery and minimizing risks.

Nowadays banks are installing POS terminal in hotels, shopping malls, hospitals and any sales
centers. Some banks which are advanced in technology are providing internet banking channel
with a number of easy to use features. The application is providing the customers access to their
accounts from smart phones and tablets. The customers now can do banking from any place at
any time. Mobile banking refers to access to accounts, transfer of funds, statements and other
banking services through dialing the customer service number.

There are many drawbacks of the use of information technology in banking sector. Money
losses, fraud, PIN, password theft and hacking have been happening. Customers' awareness can
be increased by counseling, advertising and distributing leaflets/brochures. Specialized training
on IT security and fraud prevention can be provided to the employees of banks. Awareness of
customers can be increased through proper mobile banking training, highlighting security issues.
(Islam, 2016)

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 Table of Contents

Executive Summary.........................................................................................................................2

Introduction & Background.............................................................................................................3

Findings & Discussions...................................................................................................................4

Recommendations............................................................................................................................6

Conclusion.......................................................................................................................................9

Bibliography..................................................................................................................................10

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 Introduction & Background

Banking environment has become very competitive nowadays. Information technology in

The banking sector has undergone a profound transformation last few years, by the help of
technology. From digital payments to blockchain technology, technology has modernized
financial institutions operations and customer’s service.

The most significant impact of technology on the banking sector is the shift towards
digitalization. With the connection of internet and mobile banking, clients now have access to
different types of banking services from the convenience of their mobile phones. This digital
transformation has improved the speed of banking operations and the efficiency. Besides it has
enhanced the overall customer service experience.

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 Findings & Discussions

As ICT budgets are raising day by day, the bank managements decided that they have to measure
the investments or impacts of ICT on banks. The managements are monitoring whether they are
making the technology investment decisions in the right way and whether such resource
commitments will indeed fetch them the envisaged benefits such as financial returns, business
advantages or enhanced capabilities. The contribution of ICT to bank's performance in case of
productivity and profitability has been considered valuable. This report tries to find out the
impact of ICT on banking business enhancement. Besides, effect of ICT on banking business
output with respect to productivity, efficiency and profitability is also studied.

There are many positive impacts of information technology on the Banking Sector. The biggest
benefit is the digitalization which came after the introduction of information technology in the
banking system. Moreover, the banking process has become more trustworthy and quick. The
information technology even has made the retrieval and maintenance of documents much
quicker. Most importantly, the information technology has improved the CBS system, and all the
branches of a bank now are connected with each other and can access to centralized data center.

By the grace of information technology the invent of the MICR cheque processing system has
reduced the down time of cheque clearance, and now the customers can expect a faster clearance
of their cheques and credit of funds to their accounts.

Without going to the bank, the customers can access their account with the help of internet
connectivity. Every bank is offering internet banking service to its customers. The customers can
have complete access of their account by logging into the internet banking app. They can make
the transactions online. Because of all the services, the transparency of transaction has been
improved.

On the other hand, there is better risk management of banking frauds through the use of
passwords and two-way authentication during the online transactions. The information
technology has also increased the competition between banks, the competition led to better
customer service. Moreover, for the facilities of automatic chequebook printing, CDM machines,

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cheque deposit machines, the banks can provide better and faster services to the customers.
(Impact of IT on Banking Sector, 2020)

On the contrary, there are some negative impacts of information technology on the Banking
Sector. The loss of jobs is the major impact of the information technology in banking system.
The automation has replaced the number of account openings officers and cash officers in every
bank. The threat of cyber-attack is a major loop hole in the information technology-driven
banking system. Customer information and money can be at risk and can be lost in just one blink
if the security is not managed correctly. However, the banks cannot totally avoid the threat but
they can minimize the threat. Minimizing the threats are more than without it. Today
information technology has become the backbone of the banking sector.

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 Recommendations

Business Enhancement: ICT has changed the banking business. As a result, ADCs like ATM,
Credit and Debit Card, POST, MFS, Agent Banking, Internet Banking, Call Center Banking,
Banking through Apps, etc. has been introduced very rapidly in Bangladesh. That is threatening
the traditional form of banks. However, to get the maximum benefits of technological
achievement an effective roadmap should be developed by the government with the help of
central bank to achieve the goals of Digital Bangladesh.

Distance of Financial Access Points: In Bangladesh, bank account holders do not have a
bank branch within near distance compared to Mobile Financial Service users and Agent
Banking Point. By using Internet Banking customers can get banking service from anywhere of
the globe without visiting an access point. Banks can solve the distance problem by providing the
internet banking service.

Financial Inclusion: In future FinTech based innovative financial services will lead the
financial sector market. Bangladeshi banks have been trying to get maximum benefits from
FinTech. Innovation of artificial intelligence and big data analytics has given the opportunity to
the financial sector to evaluate complex problems. For example, Mutual Trust Bank (MTB) has
introduced "MTB Avatar," an AI chatbot to assist customers with banking inquiries and provide
financial literacy, aiming for mass financial inclusion and innovation in the Bangladesh banking
industry. A national strategic roadmap may be developed by Bangladesh Bank in collaboration
with other commercial banks to align the financial sector with emerging FinTech products.

Efficiency: It is observed that local banks in Bangladesh are less efficient than foreign banks.
Though over the study period, the efficiency scores of all types of banks have increased for the
usages of information technology in the sector. The private banks have recorded the strongest
gains compared to public banks. Adoption of centralized online banking technology is one of the
factors for improving efficiency in the private and foreign commercial banks. Profitability of
banks has also improved due to the gains in efficiency. Still, profitability of SOCBs and SDBs
are less compared to PCB and FCB.

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Customer satisfaction: Customer satisfaction in banks is a measure of how well banks meet
the needs and expectations of their customers. It is influenced by various factors, such as trust,
people, account offerings, digital channels, and problem-solving. Customer satisfaction directly
impacts any businesses. When the customers are not getting right and quick solution, they get
low satisfaction in the service. The satisfaction level of customers varies in different types of
banks in different location of branches. In some areas customers are very sensitive. (Impact of
ICT on Enhancement of Business and Profitability of Banks, 2021)

Role of Bangladesh Bank: Bangladesh Bank (BB) is playing a pivotal role in promoting a
digital society by embracing fintech. BB is addressing the challenges of the Fourth Industrial
Revolution (4IR) by reconsidering traditional banking models. It has allowed banks to offer
alternative delivery channels, such as Mobile Financial Services (MFS), QR based payment and
e-wallets to improve financial access for marginalized populations.

BB acknowledges the importance of digital platforms in enhancing the efficiency of financial

With that aim, Bangladesh is experiencing a rapid rise in financial inclusion, driven by the swift
adoption of digital technology. The digitization of financial services has significantly
transformed access to finance, proving crucial for fostering a more inclusive economic recovery
in the country. The Central bank played a vital role by guiding and encouraging banks to set a
goal of reaching Digital Bangladesh and offered Retail as well as Corporate products such as
self-onboarding to accounts through DKYC, secured online banking, system-based loan
processing, Nano loans that help Micro Financing, Cash Management to support corporate
client's instant need to receipts and payments, ensuring goods mobility to keep balance of supply
and demand offering supply chain management system, Faster payments processing by
integrating client ERP made entities capable of contributing greater growth of the economy.
(Guideline on ICT Security , 2023)

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 Conclusion

To sum up, technology has fundamentally transformed the banking sector, interaction with
customers, risk management, and restructure of financial institutions operation. Digital
transformation, fintech disruption, data analytics, blockchain, and cybersecurity have become the
fundamentals of modern banking. As technology continues to advance, its impact on the banking
sector will only deepen, presenting new opportunities and challenges for banks, regulators, and
consumers alike. Now it is impossible to provide banking service with the use of information
technology. Most of the banking products and services are directly connected to ICT. For better
efficiency and higher profitability, banks have to ensure safe use of ICT. Otherwise, they will
face information technology related risks. A bank should ensure a sound technical infrastructure,
efficiency of the employees, and interaction with technical developments for better usage of ICT
in the bank. Last of all, ICT security and governance must be ensured for next generation online
banking in Bangladesh.

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 Bibliography

Impact of IT on Banking Sector. (2020). OpenTeQ.

(2021). Impact of ICT on Enhancement of Business and Profitability of Banks. BIBM.

(2023). Guideline on ICT Security . Dhaka: Bangladesh Bank.

Islam, M. S. (2016). ICT in banking industry. The Financial Express .

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