Changing Future!!

The total banked population of Nepal is approximately 30%, which means that 70% of the population is stilled unbanked (the population that don’t use banks or don’t know how to use the banking facility). In spite of the workout of the central bank to inspire banks to provide banking services to larger population, the ratio of banked and unbanked population is same since five years. Its stagnant over the years. It’s not changing. This is a proof that the central bank’s effort is not sufficient to change the statistics and banks are not motivated enough to improve anything. They are indifferent about providing desired services to the public. Its seems they are just focused on short term profit.

Many of the analyst (from Nepal) claim that constant ratio of unbanked population is due to illiteracy and the poverty (of population that are unbanked). But the statistics from other countries with similar economic status suggest different. The proof that illiteracy and poverty cannot hinder the usage and development of the banking service is Kenya. The economic and literacy status of Kenya is similar – not equally good as – to ours. Still the number of banked population has surged over the years. And, to this date, almost all of the population use the banking system for almost all of their transaction of the fund. Kenya has seen the transformation in the banking usage and we too can revert the number (70% being the banked population).

ATM (Automated Teller Machine), that accepts deposit and provided withdrawal facility was developed to address the then problem - customers not being able to use the banking channel on holidays and off – office hours. The problem of working hour of banking being similar to those of other business and time needed to process the order of the customer was addressed through the machine. Since then, apart from ABBS and DBMS, major innovation targeting the customers (innovation that customers feel) has not been developed. The services the banking industry offer to the customers are same over the years. They have turned boring. There are lots of paper work to carry out a small transaction adding to the unwillingness of the customers to go to banks. On top of that, the increasing busy life style of people don’t allow them to spend their valuable time standing in queue to obtain the service anymore.

If we look around the world - statistics of banked population is stagnant almost in most part of the world. Even in USA, some research shows that the banked population is only 30%*. There may be various reasons behind this like

• unwillingness of the banks to address the market demand
• inability of the banks to offer right products or services to the public
• inability of the banks to blend with the changing technology
• inability of the central bank to provide proper guidance to the banks about their operation

However, the major reason behind stagnant (worse, decreasing) banked population may be banks not being able to shape the product to meet the life style of its customers and their products being costly (borrowing) or too cheap (deposits). In other words the major issues are, ‘wrong market promotion strategy’ or ‘inability of the banks to follow right channel of providing services at the time the customers want’.

So, what can be done to improve the banking habit of people of our country? The answer is pretty simple and obvious in this era of technology, E-Banking (system that allows customers to use banking facility via mobile network and internet).

Why?

Some of the research of Nepalese banking shows that one reason behind people not going to banks is the bank’s building and the infrastructure look too modern and sophisticated to match the living status of people. They fear to enter into banks. On the contrary, they do not fear to use the mobile (smart) phones. The Census of Nepal states that 64% percent of the population in Nepal carry mobile phone and the network access of the major companies that provide the telecom services (Nepal Telecom, Ncell and Smart Cell ) is good throughout Nepal (all 75 districts). The number of mobile using population will further increase. The transformation in the banking usage pattern in Kenya was possible due the usage of this channel (mobile banking), the easiest and most customer friendly way of banking. Not only Kenya, many of the developing and the developed economy are using the channel to diversify and widen their products and customer base. There is a good prospect of usage of this channel in Nepal too.

How?

E-banking system is simple and easy system to use. It is customer friendly. The customers, whether they use smart phones or normal phone, can use this system. For smart phones and normal phone that support applications there are applications developed to be used to access banking facility. For those phone that don’t support such applications, banking facility can be used through commands that can be sent through SMSs. Since, most of the people use compatible sets that accept such application the system can be used easily throughout Nepal. According to the census of Nepal, 2068 the literacy rate of Nepal is 76.92% so everyone that uses mobile phone can read and write. And for simplicity, the application can be made language convertible, i.e. usable in English and Nepali.

What Can be Done?

Banks can integrate their daily transaction system and e-banking channel, like they did when they introduced ATMs to support the withdrawal and deposits. Since e-banking supports the transfer of fund and payment of money through any place and time, it is more complex then just integrating ATMs. E-Banking is available 24 hours a day and throughout the year hence availability of systems and security of data is always an important issue. Any unauthorized access to data or any disturbances in systems can result in deterioration of relation with the public. Also, threats from computer viruses, frauds and terrorism are increasing. This requires considerable budget for IT development and management for fraud prevention and disaster recovery systems, which may include investment in encryption technologies, other security measures and maintaining two parallel sets of systems to ensure full time availability.

Some of the things that banks can do to prevent e-banking frauds are

• information security controls
• internal controls
• dual control: one person can make a mistake, other can find the error - the possibility of two persons making the same mistake at the same time is negligible
• control of suspicious activities: controlling the withdrawal up to some limit. If an account is dormant for years and the transaction is unexpected the account holder must be informed.

Development of e-banking acquires high-value customers and it enables the execution of time-sensitive financial transactions anywhere - anytime, provides the opportunity to strengthen relationships with existing customers and encouraging them to become loyal. E-banking helps the enhancement of the banks brand loyalty by granting customers flexible access to financial information and accounts. Also, in Nepal, ATMs don't guarantee consistency, reliability and availability. E-banking can help address this issues, offering significant potential to grow market awareness through word-of-mouth. 

How will it help?

One of the reason that people don’t go to bank is the branches and ATMs are located at some specific places and people need to separate time from their schedule to go to the banks. Like people ‘do’ shopping, they want to ‘do’ banking as well. They don’t want to go to the banks. They want a banking facility that they can use 24*7, whenever and wherever they want for any activities like shopping, transfer of fund, recharge of accounts, payment and transactions. The e-banking provides exactly what the customer wants. Hence in terms increase the customer base of the banks. Through e-banking banks can have access to remote places where the construction of the physical infrastructure like ATM or branches are not possible. In fact, at current times, there are banks that don’t have physical existence but are very popular among its customers.

*As per the article presented by Bret King, Father of modern banking, 2009.