FinTech, Digital Transformation in the Financial

Sectors, and Bank 4.0

Md. Foysal Hasan

Assistant Professor

Bangladesh Institute of Bank Management (BIBM)

BBA(MIS) & MBA(MIS), University of Dhaka

Certified FinTech Practitioner, LIBF

Some Facts…
The world’s biggest bank, with no actual Cash- Bitcoin
The world’s largest taxi company, owns no vehicles- Uber
The world’s most popular media owner, creates no content- Facebook
The world’s most valuable retailers, has no inventory-Alibaba
The world’s largest accommodation provider, owns no real estate-
Airbnb
Rethinking Business Model
“Banking is heading towards its Spotify moment. Intermediaries
disappear or get marginalized unless they discover new ways of adding
value. Look at what has happened to recorded music companies or
book shops. Banks are the primary intermediaries of the financial
world, so their margins will fall unless they reinvent what they offer
their customers and how they work.”
Peter Sands, CEO Standard Chartered (2013)
Focus on innovation in three main areas
• Improving your operations: “Make things cheaper and more efficient”,
such as creating the paperless branch

• Improving your customer experience: “Make things easier and simple”,

an example being mobile banking

• Developing new areas of business: “Make things different and generate

new areas of revenue”, for example with P2P payments
Disruption in Financial Services
Unbundling Bank of America
We are in the midst of two overlapping Industrial
Revolutions
 Industry 4.0 to Bank 4.0
AI & ML

3D Printing
Bank 4.0 ▪ AI/ ML
▪ Blockchain
Cloud & Edge Computing ▪ Cloud Computing
▪ Big Data
▪ IoT
Robots & Cobots Finance 4.0 ▪ RPA
▪ AR and VR

Autonomy Vehicles
Industry 4.0 Healthcare 4.0

5G Network
Agriculture 4.0
Genomics

IoT Education 4.0

Big Data

Quantum Computing
The Rise of Finance 4.0
Grow with FinTech

FinTech
FinTech Firm

TechFin RegTech
The Struggle for Survival: Turtle Hatchlings
on the Atlantic Coast

Each year, along the coastal dunes from Florida to the Carolinas, tens of
thousands of turtle hatchlings emerge from their shells and make a
perilous dash to the ocean. Dodging hungry seabirds above and
predators below—often in shark-inhabited waters—their journey is a
dramatic test of survival. Despite overwhelming odds, a few make it
through, thanks to stealth, instinct, resilience, and a bit of luck.
FinTech Firms
The promise of Fintech companies is neatly summarized in a speech by
the Bank of England’s Mark Carney (Carney 2017):
■ Consumers will get more choice, better-targeted services, and keener
pricing.
■ Small- and medium-sized businesses will get access to new credit.
■ The financial system itself will become more resilient with greater
diversity, redundancy, and depth.
■ And most fundamentally, financial services will be more inclusive;
with people better connected, more informed, and increasingly
empowered.
FinTech and Banks: Friends or Foes?
How do banks partner with fintech
companies?
• Referral Partnership
• Fintech as a Vendor
• Private-Label/White-Label
• Hybrid Model
• Joint Venture
• Front-End Fintech Partnership
• Fintech Investment or Acquisition
Key Technologies Driving Finance 4.0 and FinTech

• Artificial Intelligence and Machine learning

• Blockchain
• Cloud Computing
• Data Analytics
• Application Program Interface (API)
• IoT
Artificial Intelligence
Artificial Intelligence (AI) is the simulation of human intelligence processes
by machines, especially computer systems.
Goals of AI
• TO CREATE EXPERT SYSTEMS- The system which exhibits intelligent
behavior, learn, demonstrate, explain and advices its user.
• TO IMPLEMENT HUMAN INTELLINGENCE IN MACHINE- Creating
systems that understand, think, learn and behave like humans.

NATIONAL STRATEGY FOR ARTIFICIAL INTELLIGENCE OF

BANGLADESH
What is Blockchain?
• A blockchain is essentially a digital ledger of transactions that is
duplicated and distributed across the entire network of computer
systems on the blockchain.
• Each block in the chain contains a number of transactions, and every
time a new transaction occurs on the blockchain, a record of that
transaction is added to every participant’s ledger. The decentralized
database managed by multiple participants is known as Distributed
Ledger Technology (DLT).
• National Blockchain Strategy: Bangladesh, January 2020
Use of Blockchain in Banking, Insurance &
Finance
• Digital Asset Management
• Inter-bank Settlement
• Trade finance
• P2P Lending
• Anti-Money Laundering
• Digital Currency
• Credit rating
• Insurance
• Pension
• Payment
• Stock Market
Cloud Computing
• Cloud computing is a model for enabling ubiquitous, convenient,
on-demand network access to a shared pool of configurable computing
resources (e.g., networks, servers, storage, applications, and services)
that can be rapidly provisioned and released with minimal
management effort or service provider interaction. The three main
Cloud Computing models are Infrastructure as a Service (IaaS),
Software as a Service (SaaS), and Platform as a Service (PaaS).
• Guidelines on Cloud Computing (V1), March, 2023 by BB
Application Programming Interfaces(API)

APIs, or application programming

interfaces, are tools that enable software
to communicate and preform a series of
tasks. In banking terms, we grant secured
access to financial services to third-party
platforms, helping companies build
products around banking services.
Big Data Analytics
• Big data analytics is the use of advanced analytic techniques against
very large, diverse big data sets that include structured,
semi-structured and unstructured data, from different sources, and in
different sizes from terabytes to zettabytes.
• As you build your big data solution, consider open source software
such as Apache Hadoop, Apache Spark and the entire Hadoop
ecosystem as cost-effective, flexible data processing and storage tools
designed to handle the volume of data being generated today.
Big Data Analysis for Credit Risk Management
Internet of Things (IoT)
• IoT is a network of devices connected through the internet which
obtain and transmit data. Internet of Things is the independent
communication occurring between objects that allow the optimization
of operations, reduction of costs, boosting productivity, and
improvement of lives.
Decentralized Finance (DeFi)
• Decentralized Finance (DeFi) is a new financial paradigm that
leverages distributed ledger technologies to offer services such as
lending, investing, or exchanging crypto assets without relying on a
traditional centralized intermediary.
• Users typically engage with DeFi via software called dapps
(“decentralized apps”), most of which currently run on the Ethereum
blockchain.
People are engaging with DeFi
• Lending
• Getting a loan
• Trading
• Saving for the future
• NFTs
Examples of decentralized finance companies are AllianceBlock, Jeeves, Coinbase,
HYPR Corp, Sommelier, Stobox Technologies Inc., Teller, Cion Digital, and Symbiont.
 Customers want financial products and
services that are built into their daily activities
Embedded finance
• Embedded finance is non-financial companies offering financial
products and services. It could be an e-commerce merchant providing
insurance, a coffee shop app that offers 1-click payments, or a
department store’s branded credit card.
• It is estimated that the market size of global embedded finance across
the entire value chain will grow from US$264b in 2021 to US$606b in
2025.
Examples of embedded Lending
• “Buy now, pay later” may be one of the most visible and common
forms of embedded finance seen by online shoppers. It appears during
the online checkout process, at the moment consumers are
contemplating their available funds. These offerings typically provide
monthly or weekly payment installments over a predetermined period
with no interest. Popular companies offering buy now, pay later
solutions include Klarna, Affirm, and Afterpay.
Steps to Prepare Your Business to Embrace
Finance 4.0
• Re-align Your Finance Team’s Mission and Strategy
• Upskill and Reskill Your Team
• Invest in Technology
• Stay Abreast of Competition and Market Trends
Question and Answer
Thank You All
CLEARING AND COLLECTION OF
INSTRUMENTS: BACH, BACPS,
NIKASH-BEFTN, RTGS, AND NPSB

Md. Foysal Hasan

Assistant Professor
Bangladesh Institute of Bank Management (BIBM)
 PAYMENT SYSTEMS
▪ Payment systems responsible for smooth transfer of
money. Financial institutions accept, collect, and process a variety
of payment instruments, and participate in clearing and settlement
processes.
▪ In some cases financial institutions perform all of these tasks, but
increasingly, independent third parties play an important role in
payment systems operation.
* 37
BANGLADESH AUTOMATED
CLEARING HOUSE (BACH)
▪ BACH has two components: The Automated Cheque Processing
System and the Electronic Funds Transfer.
▪ Both the systems operate in batch processing mode
▪ Transactions received from the banks during the day are processed at
a pre-fixed time and settled through a single multilateral netting figure
on each individual bank's respective books maintained with the
Bangladesh Bank.
 TYPES OF PAYMENT
SYSTEMS
RETAIL PAYMENT SYSTEMS

▪ Bangladesh Automated Cheque Processing System (BACPS)

▪ Nikash-Bangladesh Electronic Funds Transfer Network (BEFTN)
▪ National Payment Switch Bangladesh (NPSB)

HIGH VALUE PAYMENT SYSTEMS

▪ Real Time Gross Settlement (RTGS) Systems

FEATURES OF BACPS
SINCE OCT.2010
▪ Clearing House Instruments design with MICR code line
▪ Image exchange instead of physical movement of instruments
▪ New Clearing Time Frame for prompt (day end) settlements
▪ Central Image Archive at Bangladesh Bank
▪ Whole country under Single Clearing Network
▪ Daily average transaction :
▪ HighValue cheque - volume 10,000 and value Tk. 4,500 crore
▪ Regular value cheque - volume 90,000 and value Tk. 3,000 crore
* 41
ELIGIBLE ITEMS AND
INSTRUMENTS
▪ Savings Bank Account

▪ Pay Order

▪ Current Account Cheque

▪ Government Cheque

▪ Cash Credit Account Cheque

▪ Credit Card Cheque The MICR encoded payment

items are eligible for clearing
▪ Dividend Warrant

▪ Foreign Taka Demand Draft

▪ Demand Draft

▪ Foreign Currency Cheque

▪ Refund warrant

▪ Foreign Currency Demand Draft

43
 PRESENTING BANK'S
RESPONSIBILITY
▪ Certifies that the front and back images of the BACPS-Eligible Item is a copy of the original
instrument
▪ Verifies the prima facie genuineness of the instrument with due diligence and with ordinary
care.
▪ Agrees to make the original BACPS eligible item available within seven (07) calendar days for
inspection during normal business hours, if requested by the Paying Bank.
▪ Agrees to inform BACPS within 30 minutes of settlement if any mismatch found
 PAYING BANK'S RESPONSIBILITY
▪ The drawer bank, branch
▪ Name of drawer
▪ Payee's name must be present
▪ Valid date (must not be stale or post-dated)
▪ Amounts in words and figures match
▪ MICR Code line must be present
▪ Alterations are counter-signed
▪ Crossings are present
▪ The drawer's signature in the electronic scanned copy should be identical
to the authorized signature at the bank
PAYING BANK'S
RESPONSIBILITY
▪ Process the item in accordance with these Rules ; i.e .will check the fund availability
of the account and will verify the customer's signature mentioned on the presented
item;
▪ Verify via positive pay instructions before payment of items carrying the value of the
required limit as set by the Bangladesh Bank from time to time
▪ Use appropriate return reason code for non- payment of any clearing instrument
▪ Provide notice of stop payment [via e-mail, phone or any other media] to the
Presenting Bank in the case of failure to return an item within the return cut- off [due
to unavoidable circumstances or technical issues and on the same business day]

▪ Agrees to inform BACPS within ? minutes of settlement if any mismatch found

RETURN REASON CODES
 PENALTY
The Bangladesh Bank may impose penalties under section 109 of the
Bank Company Act, 1991 (amended on 2013) for misuse and
non-compliance of the operating rules or/and on:
▪Customer complaints, such as delayed sending payment instrument and
delayed credit to the customer's account;
▪Participant Complaints-such as Incorrect Return Reason;
▪Any other situation Bangladesh Bank authority deems fit for applying
penalties.
 Nikash-Bangladesh Electronic
What is BEFTN
Funds Transfer Network (BEFTN)
Since Feb.2011
Bangladesh Electronic Funds Transfer Network, BEFTN is a highly
reliable and efficient nationwide batch-oriented funds transfer system,
which provides for the inter bank payment and settlement of electronic
debits and credits.
FEATURES OF EFT

End to end electronic (required no instrument).

EFT transaction may both be debit or credit.
PARTICIPANTS IN BEFTN
EFT DEBIT AND CREDIT
Examples of credit entries Examples of debit entries

• Payroll private and government • Utility bill collection

• Dividends/Interest/Refunds of IPO • Equal Monthly Installments(EMI)
• Business to business payments (B2B) collection
• Government tax payments • Government tax collection
• Government vendor payments • Government license fees collection
• Customer‐initiated transactions • Insurance premium collection
• Inward Foreign remittances • Mortgage payments collection
• Domestic remittances • Club/Association subscriptions collection
NIKASH-BEFTN SESSIONS
Sessions Time
Session-1 12 AM to 11:59:59 AM
Session-2 12 PM to 2:59:59 PM
Session-3 3 PM to 11:59:59 PM
National Payment Switch Bangladesh
Since Dec.2012

FEATURES INFRASTRUCTURE
▪ ATM Interoperability (56 Banks). ▪ No. of ATM : 13,530
▪ POS Interoperability (55 Banks) ▪ No. of POS : 1,10,089
▪ Internet Banking(41 Banks)
REAL TIME GROSS
SETTLEMENT (RTGS)
RTGS is an electronic inter-bank settlement system where
transfer of funds take place from one bank to another on a
`real time’ and on `gross’ basis.
Settlement in `real time’ means transaction is not subjected
to any waiting period. `Gross settlement’ means the
transaction is booked in central bank’s account on one to one
basis without netting with any other transaction.
 BD-RTGS System
Since Oct.2015
FEATURES
• More than 11,231 online branches of 60 scheduled commercial
banks and 18 Non-Bank Financial Institutes are currently
connected to this system.
• Besides customers transaction, BD-RTGS System are facilitating
Financial Institution’s transaction, Inland foreign currency
transaction, Customs Duty e-Payment, VAT e-Payment and other
important Government’s Payments.
 Typical cost for payments

• Cheques are expensive

and have increasing
fraud risk.
• Electronic payments are
more secure and timely
• EFT transactions cost
much less then other
payment alternatives
 CHALLENGES AHEAD
▪ Security :
▪ Continuous improvements (and investment)
▪ Collaboration with other authority
▪ Access to NID database
▪ Access to BTRC database
▪ Assess and introduce new initiatives (FINTECH)
▪ Cloud technology
▪ Crypto currency
▪ Blockchain and Distributed Ledger Technology (DLT)
Thank You

? ? ?
Alternative Delivery Channels
&
Electronic Payment Systems

MD. Foysal Hasan

Assistant Professor
Bangladesh Institute of Bank Management
Total Branches
Total Deposit(crore taka)
Total Advance(crore Taka)
 Total Number of Accounts (Millions)

Type of Accounts 2016 2019 2022

Deposit (Branch) 81.4300 106.6000 136.2498 Total Number of Transactions (Millions)
Advance (Branch) 10.1400 10.8300 12.3109
Types of Transactions 2016 2019 2022
MFS Agent 0.7100 0.9700 1.5546
MFS Clients 41.1000 79.6000 191.0636
Deposit (Branch) 977.1600 1279.2000 1634.9972
Agent Banking Agents 0.0023 0.0079 0.0152
Advance (Branch) 121.6800 129.9600 147.7305
Agent Banking Clients 0.5251 5.2578 17.4789
Total Card (Credit Card, Debit Card, etc.) 170.9100 253.4200 455.3299
Credit Card 0.9500 1.5400 2.1159 Internet Banking 7.7600 15.2300 66.2169
Prepaid Cards 0.1800 0.4100 3.3840 Mobile Banking 1473.2000 2589.8000 5045.9000
Internet Banking 1.5300 2.4700 66.2169 Agent Banking 4.2000 49.4600 173.9868
Total 136.5675 207.6857 430.3897 Clearing (BACPS, EFT, RTGS, etc.) 144.5400 180.0211 667.7808
Growth in 2019, 52% Compared to 2016 and 107% in 2022
Total 2899.4500 4497.0911 8191.9421
Compared to 2019.

To do the same amount of Transactions we need

❑ 10.86 Lac Employees Compared to Productivity of Growth in 2019, 55% Compared to 2016 and 82% in
2022 Compared to 2019.
1980
❑ 9.44 Lac Employees Compared to Productivity of 1990
Growth of Delivery Channels

Internet/App
Year ATM CDM CRM POST Branch MFS Agent Agent Outlet
Terminal

2018 10280 1324 126 48228 10281 943510 6932 873443

2019 10924 1407 254 58527 10568 1098221 11319 2472151
2020 11923 1527 780 73229 10671 1266795 15977 3245333
2021 12831 1698 1200 92086 10939 1412767 19247 4439938
2022 13434 1094 2489 103055 11139 1554637 20836 6252634

Source: ABB Summit 2023\Updated Excel Data from BB.xls

Comparisons of ADCs

Number of Volume of
Number of
Transactions Transactions
Accounts
 Call Center

Other
Branch

Customer Bank
Internet

Mobile

POST

Kiosk

Branch
ATM
 "Banking is necessary, but banks are not."- Bill Gates

A Truly Online Banking is a fully automated real-time, any where, any time, any way banking service.
Alternative Delivery Channel (ADC) include all the ways of serving customers outside of physical branches and are often
enabled by technology. The ADCs in banking sector include-

Internet/App Banking
ATM, CDM, CRM
POS Terminals
Call Center/Help Desk
Mobile Banking
Agent Banking
Booth/Sub-branch
MFS
 Internet Banking
A banking facility through which the customers are able to perform a number of monetary and non-monetary

transactions, using the internet, through the bank’s website or application. It only requires an active internet

connection and a laptop or smartphone for use. Internet Banking also referred to as i-banking or net banking.

What are the uses of Internet Banking?

AAA Model for smooth access to Internet Banking.

 Internet Banking
There are three types of Internet banking:

• Basic Level or Informational

• Intermediary or Communicative

• Advanced or Transactional
List of Top 10 Internet Banking Apps In Bangladesh

• SC Mobile App
• Citytouch
• EBL SKYBANKING
• BRAC Bank Astha
• My Prime
• AB Direct
• iSmart
• CellFin
• NexusPay
• MTB Smart Banking
 Automated Teller Machine (ATM) and
Cash Recycling Machine (CRM)
Automated Teller Machine, popularly known as ATM is one of the most common and initial service
provided under e-banking. It is not just a machine with which you can withdraw cash as and when
required, it also allows you to check account status, transfer fund, deposit fund and many more.
ATM Working process
ATM/CRM Specifications

• ATM Types- In Bangladesh two types of ATMs are available - Lobby

type and Through-The-Wall type
• ATM/CRM Manufacturers- The top four brands of ATMs/CRMs are:
Diebold, NCR, Hitachi, Wincor-Nixdorf
• Computer: Each ATM has a computer in it. A latest processor is used
for the computer. One GB RAM, 80 GB HDD, 10/100 Base T
Ethernet USB, Ethernet Adapter are integrated with the computer.
• Display: 15” / 17” color display – LCD or Touch Screen
ATM/CRM Specifications(Cont..)

• Protocol: Two protocols – NDC+(NCR Direct Connect+) and D912

are used to communicate with the switch.
• Key Pad: Encrypted / EPP(Encrypted Pin Pad, PCI Compliant)
Standard keyboard with functional keys are used with ATM/CRM.
• Printers: Two printers – a Consumer Printer and a Journal Printer are
provided with an ATM.
• Dispenser: Dispenser is a unit which counts and dispenses money.
Dispenser uses vacuum pick or Friction Pick technology for counting
and dispensing money.
ATM/CRM Specifications(Cont..)

• Security: ATM/CRM vaults are provided with dual combination lock,

as two officers are required to open the vault. The safe is available in 2
standards – UL291(Underwriters Laboratories Standard 291) and
CEN(Central European Norm). CEN is stronger than UL291.
• Accepting cash at CRM: CRMs have cash deposit option. The cash is
deposited as bundle. The CRM counts the cash in different
denominations and re-fills the dispensing cassettes. Thus requirement
of number of cash feeding at CRM is much lower than that in ATM.
Denomination available at ATM/CRM
• Number of denomination available in ATM/CRM depends on the
number of cassettes that can be inserted in an ATM/CRM.
• A cassette can hold 2000 notes
• Thus if two cassettes are loaded with Tk.500 notes and another 2
cassettes with Tk.100 notes, total amount of taka that can be loaded
into an ATM/CRM at a time is….
One-time and monthly expenditure for an
ATM/CRM booth
The one-time investments in an ATM/CRM booth are as follows:
• Price of ATM/CRM, Advance to the landlord, Price of UPS, CCTV,
Air Conditioner, Cost of construction of booth, and decoration.
The monthly recurring expenditures are as under:
• Rent of the booth, Electricity cost, Salary of 3 Security Guards
engaged in 3 shifts, Cash sorting and feeding charge, Link charge,
Maintenance charge for ATM/CRM, UPS, CCTV, AC and booth,
Proportionate Switching System cost, Proportionate Data Centre
manpower and maintenance cost.
How ATM/CRM works in case of cash withdrawal?
 ATM Banking
ATMs can also be categorized based on the labels assigned to them.
• Green Label ATMs- Used for agricultural purposes
• Yellow Label ATMs- Used for e-commerce transactions
• Pink Label ATMs- Specifically for females to help avoid the long queues and waiting
time

The further classification says that there are onsite ATMs and offsite ATMs. The onsite
ATMs are situated within the bank campuses, while offsite ones are present in different
locations. Offsite ATMs assure that people can withdraw cash if they can’t go to the bank.
 POS
• POS stands for Point of Sale. POS terminal is a small device installed by a bank at shops,
hotels and offices of a merchant. The customer buys the good and services from the
merchant, and if wants to pay the bills using his debit/credit card, the merchant uses the
POS device to swipe or insert the card for settlement of his bill.
POS Specifications
• Brand: Three popular brands of POS terminals are: Hypercom, Verifone and
Ingenico.
• RAM: 2 MB – 8 MB Flash
• Processor: ARM(Advanced RISC Machine) 32 bits / 32 bits RISC(Reduced
Instruction Set Computing)
• Magnetic Card Reader: ISO 1/2/3
• Smart Card Reader: EMV level 1 & 2 and ISO 1/2/3
• Encryption: Triple DES(Data Encryption Standard)
• Printer: Thermal
• Display: Graphic, 128x64 pixels; Backlight
• Communication: GPRS(General Packet Radio Service )/ PSTN(Public Switched
Telephone Network)
Mobile Financial Service(MFS)
• Mobile Financial Services (MFS) to offer convenient payment mode
which is cost efficient and prompt for the underserved,
un-banked/under-banked and low income group of population of our
country.
• Bangladesh Bank will allow only scheduled commercial
Bank/Financial Institution/ Government Entity-led MFS
(Bank/FI/Government Entity-led MFS) in Bangladesh.
Permissible model for MFS providers
• MFS providers in Bangladesh will be led by scheduled commercial
banks or financial institutions licensed by Bangladesh Bank or
Government Entity.
• The minimum paid-up capital requirement of a subsidiary
model-based MFS provider is Bangladeshi Taka Forty five (45) Crore.
Growth of Mobile Banking from 2015 to 2020

2016 2017 2018 2019 2020

No. of Approved Banks 19 19 19 19 19

No. of Banks Offering MFS 17 18 18 16 15

No. of Agents 710,026 786,459 886,473 971,620 1,058,897

No. of Customers 41,078,524 58,825,414 67,519,645 79,555,079 99,336,198

No. of Active Customers 15,874,325 21,065,321 37,323,000 34,646,000 32,327,000

No. of Total Transaction (Millions) 1,473.24 1,875.64 2,272.75 2,589.8 3,172.0

Total Transaction Amount (Billions BDT) 2,346.92 3,146.62 3,788.85 4,343.18 5,616.0
 MFS Status
Serial no. Description Amount in November, 2023 Amount in June, 2024

1 No. of Banks currently providing the Services 13 13

2 No. of agents 1701943 1807657

3 No. of registered clients in Lac 2200.86 2310.30

4 No. of active accounts in Lac* 824.98 918.13

5 No. of total transaction 542074508.00 642733275

6 Total transaction in taka(in crore BDT) 119669.19 155704.72

7 No. of daily average transaction 18069150.00 21424443

8 Average daily transaction (in crore BDT) 3988.97 5190.16

The future of banking largely depends on MOBILE
TECHNOLOGY
Electronic Payment System-Digital Cash, Plastic
Card, QR Code, PSO & PSP
Payment Systems
•Payment systems responsible for smooth transfer of money. Financial
institutions accept, collect, and process a variety of payment
instruments, and participate in clearing and settlement processes.
•In some cases financial institutions perform all of these tasks, but
increasingly, independent third parties play an important role in
payment systems operation.
Electronic Payment Systems
• An electronic payment system refers to a method of making financial
transactions through electronic means, typically using computers or
mobile devices. These systems enable individuals and businesses to
send and receive payments electronically, replacing traditional
methods such as cash or checks. Electronic payment systems are
widely used for online shopping, bill payments, peer-to-peer transfers,
and various other financial transactions.
Digital Cash vs Virtual Currency
• Digital cash typically refers to electronic representations of physical
currency, such as coins and banknotes, issued and regulated by a
central authority like a government or a central bank. Examples:
electronic bank deposits, prepaid cards, and mobile money services
offered by financial institutions.
• Virtual currency, on the other hand, is a type of digital currency that
exists solely in electronic form and is not issued or regulated by any
central authority. Instead, it operates on decentralized networks based
on cryptographic principles. Example: Bitcoin, Ethereum
Plastic Money
• Plastic money consists of plastic cards on which information (about
one’s bank account, card holder’s name, expiry date) is encoded,
allowing you to make transactions online from ATMs/e-terminals
instead of using cash or cheques.
• Plastic money is the generic term for all types of bank cards, credit
cards, debit cards, smart cards, etc.
Basics of Card Technology
Features of a Plastic Card
Basics of Card Technology
Magnetic Stripe
A magnetic stripe, or magstripe, stores information about a cardholder on a magnetic strip
attached to a card. The information includes the cardholder's name, account number,
expiration date, card verification code and more.

EMV Chip
EMV is short for Europay, Mastercard and Visa: the three companies that created the EMV
standard. EMV cards store cardholder information on a metallic chip.

EMV chips generate unique transaction codes for each transaction, making it much harder to
counterfeit or replicate card information compared to the static data on a magnetic stripe
Common Types of Card Frauds
❑ Card Skimming at ATMs
Fraudsters install skimming devices on ATMs to steal card information and PINs when users
insert their cards.

❑ Card Cloning and POS Fraud

Cloned cards are created using information stolen from point-of-sale (POS) machines.

❑ Phishing Scams
Fake emails or messages pretending to be from banks or retailers trick victims into revealing
card details.

❑ Lost or Stolen Card Fraud

A thief finds or steals a physical card and uses it for unauthorized purchases.
 Common Types of Card Frauds
❑ Online Card-Not-Present (CNP) Fraud
Fraudsters use stolen card details to make online purchases without needing the physical
card.

❑ Data Breaches
Large-scale cyberattacks on databases storing cardholder information result in massive
fraud.

❑ Social Engineering Attacks

Fraudsters manipulate victims into revealing card information over phone calls or social
media.
Common Types of Card Frauds
❑ Mail Theft
Cards sent via mail are intercepted and used before the intended recipient receives them.

❑ Fake Online Shopping Portals

Fraudsters create fake websites to collect card details during purchases.

❑ SIM Swapping and OTP Fraud

Fraudsters gain access to a victim’s SIM card to intercept OTPs and authorize fraudulent
transactions.
Techniques Used by Fraudsters

Card Hidden Camera Fake Keypads

Trapping

Social Engineering Malware Attacks

Payment System Operator (PSO)
• PSO shall be licensed by Bangladesh Bank;
• PSO shall provide the payment services as approved in its license;
• PSO shall not issue e-money or payment instrument in any form.
• Settlement of transactions shall be done through scheduled
commercial bank.
Examples: IT Consultants Ltd , Software Shop Limited(SSL),
ShurjoMukhi Ltd etc.
Payment Service Provider (PSP)
• PSP shall be licensed by Bangladesh Bank;
• PSP shall provide the payment services as approved in its license;
• PSP may issue e-money or payment instrument under terms and
conditions of its license and subsequent rules and regulation of
Bangladesh Bank;
• PSP shall maintain ‘Trust Cum Settlement Account’ with scheduled
commercial bank.
Examples: iPay Systems Ltd, D Money Bangladesh Ltd, Progoti
Systems Ltd. Etc.
Bangla QR
• Bangladesh Bank in consultation with the stakeholders has developed
a National QR Code Standard for Retail Payment named ‘Bangla QR’
for open loop interoperable QR code based payments.
• Merchant will display its QR code and customer will scan the QR
code using his/her financial institution’s solution
Thank You
Blockchain Technology in Banking

Md. Foysal Hasan

Faculty Member & Coordinator of CEEB
Bangladesh Institute of Bank Management (BIBM)

October 27,
2020
Discussion Topics
□ Concept of FinTech, and TechFin
□ Technological changes and financial services
□ Some disruptive technologies in banking and financial services domain
□ Basic concept of Blockchain (BC) Technology
□ Working process of BC and its security issue
□ Potential BC Application Domains: Bangladesh Perspective
□ BC Applications in banking and finance
□ Some findings from a research conducted by BIBM on Relevance of Blockchain for Banks in
Bangladesh
□ Some case studies on Blockchain applications in banking

105
FinTech and TechFin
Fintech, or financial technology, is the term used TechFin references a technology firm that
to describe any technology that delivers financial determines an improved approach to deliver
services through software, such as online financial products as part of their wide-ranging
banking, mobile payment apps or even offering of services. Google, Facebook, Amazon,
cryptocurrency. and Apple (GAFA) in the United States and
Baidu, Alibaba & Tencent (BAT) in China are
some of the primary examples of TechFin
companies.

106
Technological Backgrounds of FinTech
□ Application Programming Interface (API)
□ Cloud Computing
□ Big Data and Analytics
□ Artificial Intelligence and Machine learning
□ Blockchain
□ IoT

108
What is Blockchain?
A blockchain, as the name implies, is a chain of digital “blocks”
that contain records of transactions. Each block is connected to all
the blocks before and after it.
Blockchain is a Distributed Ledger System (DLT)

109
The blockchain technologies composed of six key
characteristic
□ Decentralized The basic feature of blockchain, means that blockchain doesn't have to rely on centralized
node anymore, the data can be record, store and update distributed.
□ Transparent. The data's record by blockchain system is transparent to each node, it also transparent on
update the data that is why blockchain can be trusted.
□ Open Source. Most blockchain system is open to everyone, record can be check publicly and people can
also use blockchain technologies to create any application they want.
□ Autonomy. Because of the base of consensus, every node on the blockchain system can transfer or
update data safely, the idea is to trust form single person to the whole system, and no one can intervene
it.
□ Immutable. Any records will be reserved forever, and can't be changed unless someone can take control
more than 51% node in the same time.
□ Anonymity. Blockchain technologies solved the trust problem between node to node, so data transfer or
even transaction can be anonymous, only need to know the person's blockchain address.

110
Database vs. Blockchain Architecture

111
Core Components of Blockchain Architecture

□ Node - user or computer within the blockchain architecture (each has an independent copy
of the whole blockchain ledger)
□ Transaction - smallest building block of a blockchain system (records, information, etc.)
that serves as the purpose of blockchain
□ Block - a data structure used for keeping a set of transactions which is distributed to all
nodes in the network
□ Chain - a sequence of blocks in a specific order
□ Miners - specific nodes which perform the block verification process before adding
anything to the blockchain structure
□ Consensus (consensus protocol) - a set of rules and arrangements to carry out blockchain
operations

112
113
Components of a block

114
How to Get Consensus?
Consensus function is a mechanism that make all blockchain nodes have
agreement in same message, can make sure the latest block have been added to
the chain correctly, guarantee the message that stored by node was the same one
and won't happened “fork attack", even can protect from malicious attacks.

❑ Proof of Work(PoW)
❑ Proof of Stake (PoS)

115
Types of Blockchain Architecture
Private Blockchain Public Blockchain

116
Smart Contracts
□ With a shared database running a blockchain protocol, the smart
contracts auto-execute, and all parties validate the outcome
instantaneously and without need for a third-party intermediary.
□ Ethereum is an open source blockchain platform combining
Smart Contract.

117
118
Security Issues of Blockchain

□ The Majority Attack (51% Attacks)

□ Fork Problems (Source Required)

119
Application domain with potential Stakeholders
(Ministries)
Application Domain Use-cases Potential Stakeholders
(Ministries)
Identity Application E-KYC Ministry of Information;
Domain Reputation System Ministry of public
administration; Ministry of
commerce
Finance Application Pension Ministry of Finance; Ministry
Domain Payment of Commerce; Ministry of
Stock Market disaster and relief; Ministry
Subsidies of Education;
Land Application Domain Mutation Ministry of Land;
Registration
Verification
120
 Application domain with potential Stakeholders
(Ministries) (Cont.)
Application Domain Use-cases Potential Stakeholders
(Ministries)
Agriculture Application Procurement Ministry of Agriculture; Ministry
Domain Disintermediation of Food; Ministry of Fisheries
Agricultural Insurance and livestock;
Commerce Application Consumer Protection Ministry of Commerce; Ministry
Domain VAT of Finance;
Fraud Detection of Consumer
Products
Banking/Insurance Digital Asset Management Ministry of Commerce; Ministry
Application Domain Inter-bank Settlement of Finance,
Trade finance
P2P Lending
Anti-Money Laundering
Digital Currency 121
Credit rating
 Application domain with potential Stakeholders
(Ministries) (Cont.)
Application Domain Use-cases Potential Stakeholders
(Ministries)
Document Verification Government Certificate Ministry of Education;
Application Domain Educational Certificate Ministry of Primary and Mass
education,
Supply Chain Application Agricultural Supply Chain Ministry of power, energy and
Domain mineral resources;
Medicine Supply Chain
Smart City Application Smart Infrastructures Ministry of posts,
Domain telecommunications and
Citizen Services information technology;

122
Some use cases of blockchain technology in banking
□ Payments, Especially Cross-Border Payments
□ Trade Finance
□ Digital Identity Verification
□ Syndicated Lending
□ Credit Reports for Businesses and Individuals
□ Crowdfunding (ICOs)
□ Peer to Peer (P2P) Transfers

123
Likelihood that blockchain will change the way your bank does
business in the next 3 years

124
Opinion of CxO’s Regarding blockchain Technology

125
Greatest disruption resulting from blockchain initiatives in
the next 3 years

126
Relevance of Blockchain Technology

127
Most Significant Advantage of Blockchain Over
Existing Systems

128
Security of Blockchain

129
Likelihood Your Bank Will Implement Blockchain
Technology In The Next 3 Years

130
Percent of Banks by Investment Plan

131
 Case Study
□ SCB Started using Blockchain Applications in Trade
Finance in Bangladesh.
□ IPDC Finance uses Blockchain in Supply Chain
Financing.
□ ICICI, Kotak, Axis among 11 to launch
blockchain-linked funding for SMEs

132
Is blockchain the future of banking and will it
replace traditional banks?

133
 Question and Answer Session

THANKS FOR PATIENCE HEARING

134