Page 26 - Banking Finance May 2022

ARTICLE

operation. Getting involved in start-up financing (in response efficiencies having widespread uncertainties associated with
to the BB's call and directives) by the banking institutions the pandemic.
would add another feather to the service dimensions of the
banking institutions of the country. However, this seems a The ongoing critical phase demand greater coordination
deviation from the regular practice of venture capital that among policymakers and market players, agility in decision
intends equity mode of financing. Considering the risks making, and reflection of dynamism. Banks and technology
associated with start-up financing, equity mode might be firms have wider scopeof mutual benefits from deep
more attractive to the financiers. Islamic banks of the cooperation in fields like cloud computing, big data,
country might grab start-up financing comfortably using blockchain, and AI that simultaneously serves the interests
Musharakah mode (equity participation contract). of banks, technology companies, and consumers.
Considering the development of Central Bank Digital
Coordination with Fintech is getting emphasis amongst banks. Currency (CBDC), international coordination might be
Banks have begun collaborating with Fintech to explore point- helpful. Developing countries like Bangladesh could be
of-sale payment and financing and investing in on-boarding benefitted being part of a regional or developing country
mobile financial services. Banks are increasing cooperating platform for CBDC research and experimentation.
with MFS in the process of technology driven transformation.
For example, 'Binimoy', the interoperable digital transaction There is no doubt that the use of digital platforms by banks
is ready to be launched in 2022. First of its kind, this platform to facilitate and expand their customer base is creating new
is expected to allow the flow of money from the wallet to forms of operational relationships between banks and non-
the bank to the vendors- in all directions. By the time, bKash bank technology players. Keeping distance from non-bank
along with 15 banks have signed up for the platform to technology firms and Fintech might be unsustainable while
automate credit rating and credit scoring in near future. adoption and partnering may lead to further consolidation
These trends exhibiting digital transformation in banking can of the banking industry by lowering distribution costs.
be attributable to the changing customer expectations. Several banks are already on the track. This market
transformation is expected to bring improved efficiency to
Collaboration with Regtech continues to rise and financial intermediation, upgraded product diversification,
technological innovation is at the driving seat of the banks' and efficient pricing with potential concerns in terms of
risk compliance initiatives. Despite several compliance technology-driven money laundering and cybersecurity risks.
relaxations in the context of Covid-19, the overall Technology adoption might be the source of several concerns
compliance burden of banks and financial institutions and financial crime risks, however, only embracing
increased. Sustainable banking initiativesmaintained technology can bring the best solution for handling these
consistent trend during the new normal and there was challenges. In this context, shadow or less regulated portion
extensive expansion of health-related CSR activities by of activities should be brought under regulatory and
banks. However, environmental risk management did not monitoring framework.
receive the expected level of attention keeping in mind the
visible cause of the pandemic and long-term sustainable Finally, financial inclusion and environmental risk
approach to the development. management should receive greater impetus in the
transformed, restructured, and technology-driven banking
It is now obvious that the pandemic heightened the urgency operation of the country. And, all these banking
for all banks to reassess their existing business models, core transformations and restructuring efforts might be
systems structure, distribution networks, and commitment ineffective with weak bank governance culture. It is the
to innovation and product flexibility to come up with the three interrelated pillars 'embracing technology',
required level of expectations of the customers with 'environmental risk management', and 'sound governance'
simplified digital solutions. The new banking model must that should get appropriate attention and resource
reflect more agile and capable to address aggressive allocation to address the challenges of the banking industry
competition and shareholders' expectations with greater in this new normal. T

26 | 2022 | MAY | BANKING FINANCE