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Retail banking in Bangladesh

9th November, 2015

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
dont 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 dont 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 cant 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 middleclass. 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 cant 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.