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Electronic payment growing, but slowly

Citi official speaks on how e-system cuts cost of fund transfer

Md Fazlur Rahman
Bangladesh can beat market expectations in moving toward cash-less and convenient electronic fund transfers from paper-based bank transactions through increasing awareness, a top banker said.
"If Bangladesh keeps the momentum it now has it could well be one of the markets that exceed expectations," said Noel Saminathan, managing director and head of cash products at Citibank for Southeast Asia.
"But a lot of work and persistence need to go into getting this right," he told The Daily Star in an interview recently.
Saminathan was recently in Dhaka to launch a roadshow on electronic fund transfer organised by the US-based bank.
In Bangladesh, banks are yet to fully embrace the electronic fund transfer (EFT) services even four years after its launch due to lack of awareness and incentives among bankers about the cost-effective, quicker and securer system.
Only 18 transactions were processed through EFT per day when the system was launched in 2011. Now, 55,000 transactions are cleared a day, according to the central bank.
At present, Tk 5,000-6,000 crore are cleared through the electronic system every month on average, which is 5 percent of the whole transaction volume of the banking sector, leaving the rest to the costly and timeconsuming paper-based system.
Saminathan, who has been with Citi for 17 years, said Bangladesh can do more.
"At least 20 percent transactions are expected to be channelled through electronic payments in five to 10 years in a growing market. That does not mean that newer markets can't leapfrog."
He thanked Bangladesh Bank for putting in place the right infrastructure to support the growth of electronic fund transfer.
"It is good to see that e-payment agenda is a national priority in Bangladesh."
Saminathan said electronic payment has been around for many years and is not a new service to the banking world. However, it has taken a while for many countries to fully adopt
electronic payments.
He however understands the cause for the delay, as cash has been the primary means of storing value and exchanging money as a whole in the region.
Fully embracing EFT will be an evolution for markets such as Bangladesh, he said.
EFT is a robust, costless and secure system, which allows banks to settle transactions easily. "Though the volumes are not there today, there is a good set of rules around it."
Saminathan said the banking sector, the central bank and vendors all seem to be very much aligned where the country wants to go in electronic payments. "This is the first and most important criterion for getting this right."
The challenges to EFT are significant as well.
"It is a very entrenched practice of using paper-based instruments. So, people's behaviour and acceptance of something different is going to be the number one challenge to working through. There are many things that need to be done, and education is just the one part."
The industry needs to come together and give real confidence to the users that the new way of paying is as safe, convenient and cost-effective from what they were doing before."
“That needs very active communication and dialogue, addressing concerns. It will take time. At the same time, it can be accelerated with a very concerted effort.”
Banks charge between Tk 100 and Tk 500 for pay orders and demand drafts and sometimes the charge is waived depending on the customers-banks relationship. The central bank has however banned banks to charge their customers under EFT - a fact many bankers have blamed for the less-than-expected volume of transactions using EFT.
"If the whole transactions in banks come under EFT, the whole amount of money will be saved," Saminathan said.
Bangladesh Bank has established a good set of guidelines but still a lot of clarity is needed in terms of unique scenarios that banks come across and how to deal with it, he said.
Banks also have to apply the same standards consistently.
"There should also be dispute resolution mechanism so if there is any error in the process or dissatisfaction there is always going to be an independent party to resolve."
He said in a market like Bangladesh, EFT can be fairly impactful. "It is not just about the use of paper in the non-EFT system. More importantly, because of the physical movement of the paper-based instruments, there are various means of transportation that use resources. If you add paper cost and fuel burning, you will see and understand the green agenda of the electronic payment."
The central bank is poised to begin the Real Time Cross Settlement in 2015, which will clear transactions within 2-3 minutes of initiation, from the current time requirement of one working day.
"This is the very infrastructure that any country needs to drive the electronic payment, ” the career banker said.
Citi Bangladesh has been a frontrunner in promoting EFT to its clients and their payers since the inception of the system.
The bank processes about Tk 270 crore worth of payments through the EFT every month and receives Tk 240 crore of incoming EFT in favour of its clients in the same time. Its electronic to paper ratio is over 40 percent in both payments and collections.
Citi will continue to educate the markets and various stakeholders, said Saminathan.
"We will build and provide solutions for clients for their specific needs, leveraging on the electronic payment infrastructure, ” he said, adding Citi already works with tax authorities in a number of countries in Asia to help companies submit tax and make the payments through the bank's platforms.
The objective of the Citi road-show is to reduce paperbased processing from the entire payment industry and thus boost efficiency in the economic system.
Citi will organise five workshops this year in Bogra, Jessore, Comilla, Mymensingh and Sylhet
fazlur.rahman@thedailystar.net