Challenges and Opportunities in Banking Industry

 

Challengers in the Banking Industry

Banks are facing challenges in several areas,

Regulatory pressure

Regulatory requirements continue to increase, and banks need to spend a large part of their discretionary budget on being compliant, and on building systems and processes to keep up with the escalating requirements.

Increasing competition from financial technology companies

Financial technology (FinTech) companies are usually start-up companies based on using software to provide financial services. The increasing popularity of FinTech companies is disrupting the way traditional banking has been done. This creates a big challenge for traditional banks because they are not able to adjust quickly to the changes – not just in technology, but also in operations, culture, and other facets of the industry.

Consumer expectations

These days it’s all about the customer experience, and many banks are feeling pressure because they are not delivering the level of service that consumers are demanding, especially in regards to technology.

Increased Capital Demands

The number one regulatory change across all legislation is the increased demand for capital in banking operations.

Political interference

A Slow Economy

Criminality

Cyber attacks are increasingly seen as a top concern for bankers.

Opportunities in the Banking Industry

 

Improving Operational Efficiencies

In recent years, advancing customer-facing services such as mobile banking has been a priority for financial institutions. These initiatives were necessary to keep up with expectations of digital convenience and seamlessness that customers have experienced in other industries.

Balancing Human, Digital, and AI

Finding the right balance between human, digital, and AI technologies is likely to be important in recent years.

Acquire or Learn from Fintech

Small and Medium Enterprises Banking

SMEs are defined in a variety of ways by various countries using such parameters such as number of persons employed, amount of capital invested, amount of turnover or nature of the business, etc.

Using the size of capital and the number of employees as the criteria, the Industrial Development Board defines a small industry as an establishment whose capital investment in plant and machinery does not exceed Rs.4 million and the total number of regular employees does not exceed 50 persons. The Department of Small Industries classifies enterprises with capital investment of less than Rs.5 million and fewer than 50 employees as SMEs.

For the purpose of a World Bank Financed Investment Assistant Scheme, financial institutions define SMEs as those enterprises whose investment in fixed assets at original book value, excluding land and building, do not exceed Rs.8 million (US$ 84,000). In the case of projects where the main investment island and buildings (for example warehouses), the total investment in fixed assets, inclusive of the cost of land and building should not exceed Rs.16 million (US$168,000).

INSTITUTIONAL SUPPORT FOR DEVELOPMENT OF SMEs 

The governments who came to power since independence have initiated various measures, from time to time,for the up-liftment of the SME sector.This is reflected in the establishment of various institutions and launching of various programs aim at supporting the sector. By establishing the following institutions,Sri Lanka has tried to boost the SME sector.

• Ceylon Institute of Scientific and Industrial Research (CISIR)
• The Department of Rural Development and Cottage Industries 
• The People’s Bank and The Bank of Ceylon
• Laksala
• Industrial Development Board ( IDB)
• Department of Textile
• The National Development Bank (NDB)
• Small Enterprise Development Division (SEDD)of Ministry of Youth Affairs & Sports
• Regional Rural Development Bank (RRDB)

PROBLEMS ASSOCIATED WITH THE DEVELOPMENT OF SME SECTOR IN SRI LANKA 

A major problem in the SME sector is the shortage of capital due to number of reasons such as lack of access to bank facilities,lack of knowledge of bank procedures, long delays and inability to provide guarantees.Although there are some loan schemes available,the high rate of interest makes the venture unattractive.

The sector has a weak institutional base due to lack of management skills.Management skills are the critical success factors in all of businesses thus Small Business has no exception. Small business does not mean that they are scaled down version of big business.It has to deal with all most all the functions that large businesses have to deal.So,lack of managerial skills of owner/manager may hamper the progress of the business.

The use of obsolete or inappropriate technology results in low productivity,low quality of products,and a high rate of rejection of products,resulting in higher costs to the producer and a reduction in market competitiveness.Again,this is also due to the weak financial base and lack of managerial skills.The weak financial position may hampers the upgrading of technology;expansion of production capacity,production efficiency,and does not allow the firm to go for new and sophisticated technology and spending on training and development of its work force to increase the productivity.In some cases,although fund are available,the management does not utilize them in areas such as training and development as the management do not understand the positive impact of training on business success.

The lack of SME policies and institutional support to protect and encourage SMEs are also hampers the progress of this sector.Specially,small businesses are vulnerable to the changes in the environment.Due to the inherent nature of smallness it will not be able to compete with big businesses.For example,with the introduction of open economic policies in 1977,a large number of handloom textile enterprises had to be abandoned by owners.So,the lack of clear policies, incentives and institutional support will reduced the survival rate and progress of ventures in this sector.

Product evaluation of HNB Bank

Personal Banking products 

Savings

General savings

• Regular savings
• Capital savings
• HNB Adhishtana - a unique savings account that will allow senders of remittances from Middle East and Gulf Region and receivers in Sri Lanka

Higher interest rates based on the account balances 
Free Internet banking for the first year 
Free mobile banking for one year 
Free HNB Visa International Debit Card 
Immediate loan facilities of up to 90% of your account balance

• Money market savings accounts   - A Money Market Savings Account can come in handy for an individual, a corporation or an institution, if you make minimum initial deposit of Rs.500,000/-. based on the inter-bank call money market rate
• Capital transaction rupee  account (CTRM) - All existing Non- Resident Rupee Accounts (NRRAs), Non- Resident Blocked Accounts (NRBAs) and Migrant Blocked Accounts (MBAs) have now merged and re-designated as Capital Transactions Rupee Accounts (CTRAs).

·       Minor Savings

•  Singithi Kirikatiyo below 5yrs
•  Singithi Lama New born to 12 yrs
•  Singithi Surakum foreign Currency

Singithi Surakum is a special account for your child in foreign currency.

• Diridaru Scholarship Scheme

HNB Diri Daru Scholarships for Grade five, O/L, A/L & for special achievements

Benefits offered for HNB Teen account

·       Account Balance	·       Gift Voucher Value
·       Rs. 100,000/-	·       Rs. 5,000/-
·       Rs. 250,000/-	·       Rs. 10,000/-
·       Rs. 500,000/-	·       Rs. 20,000/-

•        Minor Savings Visa

1.HNB Wally-E

2.  Pre-Paid Visa Cards for Teens and Parents

•       Youth Savings

 1.HNB Teen Accounts

  2.    HNB You

•       HNB Salary SMART

Route your salary and get your HNB Shopping Debit Card that gives you the equivalent of 3 times your salary. Get more from your pay, to live the life you want. 

•       HNB FIT Account
•       Senior Citizens

1.Senior Citizens Scheme

If you are 55 or above you are eligible to obtain a HNB senior Citizens’ savings or term account that comes with three special schemes as well as a special privileges card with benefits

2. Sathkara for Gov.Servents

enjoy these exceptional benefits in savings accounts, fixed deposits and personal loans, is to deposit your pension in an HNB Sathkara account

•      Term Deposits

1. Fixed deposits

2. Call Deposits

•           Foreign Currency Accounts

o   Personal Foreign Currency Accounts

o   Business Foreign Currency Accounts

o   Diplomatic Foreign Currency Accounts

o   Foreign Currency Accounts Advantage Accounts

o   Inward investment accounts

o   Outward investment Accounts

o   Senior foreign national special accounts

Loans

·       Personal Loans

•      Shanthi home loans

To buy your first home, move to a new residence, investing in property or looking to switch to a better deal. HNB Shanthi Home Loans have many options available

·       Loans for professionals

Housing and Educational loans at lower rate

•       Cards

o   International debit card

o   HNB Credit cards

o   HNB Travel card

o   HNB Affinity credit cards

•       Remittance
•       Current Account

o   Shareline current accounts

o   Current accounts

• Leasing       
• Pawning

New products

·       SOLO

Payment platform through a mobile app using QR codes. A card less payment system

·       AFFY

Mobile app that can customize their own website with personal products

Corporate banking products

• Trade Services
• Issuance of Bank Guarantees

HNB, with its worldwide network of correspondent banks is one of the foremost issuer of bid bonds, Performance bonds, advance Payments Guarantees, Retention bonds and letters of Guarantee for projects and tenders in Sri Lanka

• International Trade Services

As a premier trade bank in Sri Lanka, HNB has long established correspondent banking relationships worldwide with reputed international banks.

SERVICES IN IMPORTS

1.Letters of Credit.

2.Arranging LC Confirmations through our Correspondent banks worldwide at very competitive rates.

3.Structuring import facilities in line with trading patterns.

4.Issuing of Special Forms of Letters of Credit.

5.Handling of Import Bills on Collection.

6.Issue of Shipping Guarantees.

7.Endorsement of Documents Received-in-Advance.

8.Avalization of Collection Bills.

9.Financing Imports.

10.Facilitation of Entrepot Trade Business.

11.Handling Entrepot Trade Transactions.

12.Processing of Advance Payment/Open Account Transactions.

13.Arranging Marine Insurance facilities for the movement of cargo across International boundaries.

SERVICES IN EXPORTS

1.Advising of Letters of Credit.

2.Handling Transferable Letters of Credit.

3.Confirmation of Letters of Credit.

4.Negotiation of Export Documents Under LC.

5.Handling Export Bills on Collections.

6.Purchase / Discount of Export bills.

7Pre-shipment Facilities.

8.Assistance in Preparation of Export documents.

Treasury Services

Spot transactions are simple contracts to buy or sell currency at spot exchange rates for spot delivery normally within 2 working days.

Islamic Banking Services

Murabaha Import Revolving Facility.

Murabaha Local Trading Revolving Facility.

Diminishing Musharakah – Personal Housing Finance Facility.

Diminishing Musharakah – Commercial Property Finance Facility.

Diminishing Musharakah – Working Capital Finance Facility.

Diminishing Musharakah – Vehicle/Machinery Finance Facility.

Diminishing Musharakah – Project Finance Facility.

Wakala Financing.

Ijara – Vehicle Leasing Facility ( Will be introduced shortly).

Shipping/Bank Guarantee/Letter of Guarantee Facilities.

Letter of Credit – Import Facilities.

Document Handling and Collection Facilities.

Debit Card Facilities.