How investment in tech helps DBBL maintain strong performance amid global crisis

Dutch-Bangla Bank Limited (DBBL) started investing in technology back in 2004, setting up the largest ATM network and introducing debit cards. Almost 20 years later, this investment is helping the bank reap high returns, allowing it to maintain excellent performance even amid three years of crises — the pandemic and Russia-Ukraine war. 

In an interview with The Business Standard, Abul Kashem Md Shirin, managing director and CEO of DBBL shared his experience of investment in technology for almost two decades. 

How is the bank getting returns from its massive investment in technology?

We have prioritised technology since 2004, which has now started to give us returns. The bank set up a massive ATM network across the country. It also introduced debit cards at a time when bank customers were not aware of these.

When I joined the bank as its head of IT 18 years back, we were not getting any bankers to join as head of cards as nobody was interested. However, they were interested in work for the credit card division. But the bank wanted to start its card division with debit cards as credit cards were already a known product. So, I had to take charge of the card division as well. 

People accepted debit cards very willingly and DBBL gained its popularity fast due to this debit card. It is because the debit card allowed customers to withdraw money at any time from any place, even outside banking hours. This transaction convenience helped the bank to achieve a huge customer base. The bank now has 1.5 crore debit card holders, which was only 30,000 when the product was first introduced. 

The bank is also the pioneer of mobile financial services in the country with Rocket and the number of clients is 3 crore at present. The huge customer base of 4.5 crores could not be served through only manpower, it also needed technology to serve them all. 

Investment in technology helped the bank create a huge customer base, which in turn helped the bank get small deposits and reduce the cost of funds. In 2004, the share of fixed deposits was 80%, which has come down to only 7%, and low cost deposits like current and savings account shares rose to 93%. 

Despite offering low interest rates, depositors prefer to keep their money with DBBL because of the service. Customers who keep money in their current account don't care about the deposit rate; convenience is important to them. 

The bank started technology investment with Tk100 crore and now the figure stands at Tk1,200 crore. The bank invested heavily in setting up a data centre to secure customer data. If customer data is lost, it will be a great disaster as the bank does not know who has how much in deposits. Now the bank has two data centres of the highest level of international standard. DBBL is the first private sector bank to set up a Tier-4 data centre in the country.

How was the financial performance of the bank amid this global crisis?

Financial performance of DBBL continued to grow in the last three years even amid the pandemic and the global economic crisis. The bank has a strong capital base with a 15.55% capital adequacy ratio, much higher than the regulatory requirement of 12.5%. Strong capital allows a bank to face any future stress.   

Deposit of the bank grew by 9.12% and loans and advances grew by 13.95% from the end of December 2021 to the end of December 2022. The operating profit and the net profit of the bank in 2022 was Tk1,236.2 crore and Tk566.2 crore, respectively. At the end of 2022, the EPS was 8.14 and the Capital adequacy ratio was 15.55% with Tier-1 capital at 11.33%. If we compare these parameters with other peer banks (top performing banks), I must say that Dutch-Bangla Bank performed excellently amid the ongoing global economic crisis.

What security risks do you see for customers in digital transactions?

Prevention of malware is the main challenge for digital transformation and security of customer data. Hackers inject malware into the bank's computer network. Malware searches for the supervisory passwords of mission critical servers and databases, and then sends these passwords to the hacker, using which the hacker makes transactions to siphon off large amounts of money. 

Preventing malware needs awareness among employees and investment of a big amount of money. Banks also need to invest heavily in certification and in installing Tier-4 data centres. Certifications like PCI DSS and ISO27000 give confidence to the board and higher management that their bank is safe from hackers. 

What does DBBL aim to achieve in the next five years?

Dutch-Bangla Bank is a leading tech-savvy bank in Bangladesh. The bank will continue to stay in this position in coming years. In terms of performance in business parameters, DBBL is among the three top performing banks in Bangladesh and it will continue to secure its position in coming years. 

The bank will continue to increase its capital level from its yearly profit to strengthen its footing and to be ready for unknown shocks in future, if any. To elaborate further, at a micro-level, Dutch-Bangla Bank will improve its loan concentration, improve credit mix by reducing share of large loans, reduce its NPLs, continue to maintain present cost of fund proposition, and maintain adequate liquidity in both local and foreign currency. 

Moreover the bank will continue to invest heavily in technology, IT security, and quality manpower.

What challenges do you see in the banking sector in the coming years amid high inflation and rising dollar prices?

Many of the banks in Bangladesh may encounter pressure on negative or negligible deposit growth, credit growth and profitability. The banks which cannot transform digitally will lose their customers as the new generation of customers are very smart and tech-savvy. The banks which will not invest in IT security will face hacking and lose millions of dollars or billions of taka. And the big challenge will be maintaining the current level of NPLs. 

What initiative should banks take to manage default loans in line with IMF conditions?

Not only large borrowers, but nowadays, retail and SME borrowers are also becoming classified due to the ongoing global economic crisis. Banks may help the really affected borrowers by rescheduling their portfolio. Banks also need to strengthen their recovery and law departments to face the willful borrowers very strictly.