City Bank in collaboration with American Express yesterday launched an end-to-end payment solution which would reduce the cost of doing business in Bangladesh.
Called the American Express B2B Expense Management Solution, it creates a cashless transaction system between companies and distributors.
At present, distributors pay for the goods bought from a company either through demand drafts, telegraphic transfer or cheques, a time-consuming and cost-inefficient process.
The company will now recommend credit limits for its distributors.
Under the new payment solution, City Bank will instantly pay the company for the goods bought by its distributors, and the distributors will get an interest-free credit period to pay back the bank.
The system, essentially, assures companies of earlier payments without creating an incremental liability and eliminates the cumbersome and expensive 'cash' component and cash management from distributors' daily businesses.
The companies will have to pay 'service charge' to the bank, depending on the lending period and volume of transactions.
The solution will streamline and automate companies' distribution payment chain, Mashrur Arefin, deputy managing director of City Bank, said at the unveiling of the system.
Once implemented, distributors adopting the solution will enjoy improved operational efficiency, as invoicing and payments will be electronically processed and will gain cost savings through an interest-free credit period, he added.
Rubel Aziz, chairman of City Bank, said the payment solution will give companies a better cash flow over time and cost savings, which, in turn, will enable companies to have better management of their working capital for expansion or more profitable activities.
Rahimafrooz Distribution and Reckitt Benckiser Bangladesh have already signed on to the system to implement on their distributor network.
“The solution simplifies the entire collection process, so our personnel will now be able to concentrate on our core business of selling and distribution,” said Mudassir Murtaza Moin, managing director of Rahimafrooz Distribution.
“As the world's leading consumer goods company, we have to constantly seek ways to innovate and take the approach of thinking out of the box. Our association with American Express B2B Expense Management Solution is just another start,” said Nayan Mukherjee, finance director at Reckitt Benckiser Bangladesh.
Aziz Al Kaiser, former chairman of City Bank; Pranav Barthwal, vice-president for global merchant services and partner card services at American Express; and Sohail RK Hussain, managing director of City Bank, were present at the programme.

The number of active registered VAT-payers to double in 5 years
The World Bank yesterday approved $60 million (about Tk 470 crore) in interest-free credit to help modernise Bangladesh's value added tax (VAT) administration and increase tax revenue.
The credit has been offered under a VAT improvement programme that will increase the number of active registered VAT-payers to 85,000 within the next five years compared to around 35,000 now, the WB said in a statement.
The project will introduce automation, including online VAT taxpayer services, and improve transparency in the VAT administration system.
The project will also support the government in implementing the new VAT law, which comes into effect next year, and aims to provide better services and reduce administrative costs for taxpayers, the statement added.
A finance ministry official said the government has already taken a Tk 551.52 crore project for implementing the new VAT law, a major part of the amount being provided by the WB.
Under the project, the government will purchase specialised software, which the cabinet committee on purchase will approve tomorrow.
The National Board of Revenue, taking the WB consent, has recommended giving work order to a France-based company -- Bull SAS -- for the specialised software that would cost around Tk 86 crore.
The project will have four components for operational modernisation, an integrated VAT management system, institutional strengthening and capacity building, and programme management.
“Improving Bangladesh's ability to raise tax revenue is critical for faster economic growth and overcoming poverty because the country needs more resources to invest in infrastructure and human development,” said Johannes Zutt, WB country director for Bangladesh.
The project will include regular disclosure of performance information to the public so they can monitor progress with the project, including the tax collection, said Tracey Mary Lane, team leader of the VAT Improvement Programme project.    "It will also introduce a contact centre for taxpayers to get more information on the new VAT law and how to file as well as file complaints.”
The use of an automated system will help the VAT wing to be more effective in resolving disputes and finding irregularities, Lane said.
The project aims for the ratio of VAT to gross domestic product to increase by at least 1 percentage point of GDP by 2019, the WB said. The VAT to GDP ratio for fiscal 2012-13 is 3.7 percent.
Through VAT operational modernisation, the project will promote new electronic systems for registration, filing and tax payments, which can reduce both administration and compliance costs.
By introducing an integrated VAT management system, the NBR has decided that each of the three tax types develops separate application software, rather than an integrated revenue management system for all taxes. For this, the tax administrator is going to purchase commercial-off-the-shelf (COTS) software, which is developed, tested and placed on the market by a vendor, instead of developing it in-house.
The VAT and income tax application would share a common database platform “oracle”, according to project documents.
The same platform along with the new unique TIN (taxpayer identification number) as the single identifier for all taxpayers would facilitate integration and harmonisation between wings at the database level.
The system will be based on a centralised platform to which all VAT and tax offices as well as call, data and processing centres will have access.
The WB said the project will also support the VAT administration system to become fully compliant with the Right to Information Act. The introduction of vigorous management information system will enable the administration to detect irregularities and initiate remedial measures.
The project will introduce new business processes and a centralised processing centre for efficiency gains, as well as improve the approach to tax audits, and refunds.

Roundtable organised by EBL and The Daily Star focuses on e-payment

Analysts attend a roundtable on the electronic payment system, organised by Eastern Bank and The Daily Star yesterday.

Banks and telecom operators yesterday urged the government to immediately create an integrated platform enabling them to access the national identity database for checking the authenticity of information.   
Mobile operators have to follow a similar process as banks when signing on new customers, so there is an urgent need to set up a common platform where the legitimacy of information, photograph and national identity card (NID) can be verified, Vivek Sood, chief executive of Grameenphone.    
He went on to urge the central bank and Bangladesh Telecommunication Regulatory Commission to come up with a solution.
Sood's comments came at a roundtable on the pros and cons of electronic payment system in Bangladesh, co-organised by Eastern Bank and The Daily Star at The Daily Star Centre in Dhaka yesterday.
As per law, the Election Commission can share the NID database to only government agencies, said Debdulal Roy, deputy general manager of Bangladesh Bank, adding that the central bank is using the NID database for anti-money laundering and counter-terrorist financing.
Provided the Election Commission changes the law and gives permission to the central bank, BB will open a portal to share NID data with private banks and non-banking financial institution.
In that case, BB will behave like a service provider and not a regulator, Roy added.
Meanwhile, Sood called for wider use of the mobile banking platform. At present, it is only being used for cash in and cash out, when other services such as salary disbursement and utility bill payment can be done just as easily via mobile banking, he said.
“It is time to move to the next stage.”
Sood said the country holds great potential for mobile banking as there is no other way to transact if one goes to the rural areas.
Mobile banking, however, has some pitfalls, which Ali Reza Iftekhar, chief executive of Eastern Bank, pointed out.
At present, the formalities to get replacement SIM cards are lax. Anyone can walk in and get a replacement SIM card against a number, to which a mobile banking account may be registered. “It, therefore, poses threat to the mobile banking payment system.”
The EBL CEO urged the central bank to immediately come up with a robust dispute management policy for such cases of fraud.
“Actually, Bangladesh Bank is pushing us to go for national payment solutions without mentioning dispute and fraud management policy.”
In his speech, Iftekhar highlighted opportunities and challenges in e-payment: it opened new business avenues, but some risks such as cyber crimes and money laundering emerged as big threats to the system.   
Syed Mohammad Kamal, country manager for Bangladesh of Mastercard, stressed the need for convergence of cards and mobile wallets for greater reach of financial services.
Acceptance capability of cards is still very low as there are around 8,500 merchants in the country, whereas the number of mobile banking agents stands at 260,000, he said.
“So it is the right time to have a proper eco-system between banks, cards and mobile operators. If we can do it, we can work for each other.”    
Kamal also sees a lot of room for growth of card business in Bangladesh. Currently, the country has a total of around 40 million unique bank accounts but only seven million are debit cardholders and one million are credit cards.
Hassan Zaman, chief economist of BB, said the share of cash and e-payment is going up due to higher economic growth.
He said the central bank has its own interest in promoting e-commerce: BB spends around Tk 400 crore annually for printing notes.
While the practice of electronic fund transfer (Bangladesh Electronic Fund Transfer Network) is growing in the country, it is not growing at the expected rate due to lack of awareness, despite the system's full-proof security.
Zaman said the central bank is set to allow Paypal to operate in the country, important to foster international transaction.
Muhammad A Rumee Ali, chairman of bKash, a leading money transfer service provider, said the country will be a leader in mobile financial services within the next five years if the present growth trend continues.
He urged the regulators to hold constant dialogue with stakeholders for minimising frauds.   
M Manjur Mahmud, director and chief operating officer of DataSoft, stressed the need for reducing the cost of transferring money from one place to another.
“The cost of sending money from place A to B in the country is still expensive. For instance, in Latvia, cost of sending money is less than one paisa.”      
Kamal Quadir, chief executive of bKash, however claimed that the cost of sending money through mobile banking is one of the lowest in the world. He said bKash charges 1.8 percent of the total remitted amount.       
Ershad Ahmed, general manager for regulatory affairs of Banglalink, highlighted the need for proper coordination between the central bank and BTRC for further development of mobile financial services.
Salehuddin Ahmed, managing editor of The Daily Star, called for greater awareness of mobile financial services.
Shahnoor Wahid, editor of The Daily Star's special supplements, also spoke in the session moderated by SA Chowdhury, former chairman of Bangladesh Krishi Bank and a former managing director of Sonali Bank.

The High Court yesterday questioned the legality of the promotion of two officials of BASIC Bank to deputy managing director.
Respondents have two weeks to explain why the promotion of Ruhul Alam and Md Selim should not be declared illegal, according to a court rule.
Justice Tariq ul Hakim and Justice AKM Shahidul Huq passed the order after hearing a petition filed by two suspended BASIC Bank officials, Zainal Abedin Chowdhury and Khandker Shamim Hasan.
Bangladesh Bank, finance ministry, BASIC Bank, Alam and Selim have been made respondents to the rule, petitioners' lawyer Imam Hossain Tarek told The Daily Star.
Alam and Selim have been promoted from general manager in violation of the relevant rules, Tarek alleged.

Interest spread rate in the banking sector increased further in March as 24 scheduled banks failed to maintain the rate below five percentage point in accordance with the central bank’s directions.
According to the latest Bangladesh Bank data, the overall interest spread, the gap between the interest rate on credit and deposit, stood at 5.15 percentage point in March against 5.06 percentage point in February. The interest spread rate in January was 4.99 percentage point.
A BB official told New Age on Thursday that the interest spread rate in the banking sector increased consecutively in the last three months as credit demand from the private sector increased in the period.
The BB data showed that the year-on-year credit growth rate in the private sector stood at 11.46 per cent in March whereas it was 10.73 per cent in February.
He said the central bank had asked the managing directors of the scheduled banks in a bankers’ meeting, held on February 18, to maintain their interest spread rate below five percentage point.
But, the banks ignored the central bank directives and set higher interest rate on their lending, they said.
The officials said that the interest spread rate in the banks had declined to five percentage point in the majority months of 2013 as the businesspeople received lower credit than the normal situation amid political unrest over the process of holding the general elections.
The interest spread in the banking sector may increase more in the coming months if the central bank does not take initiative in this connection, the BB official said.
‘Besides, a number of banks in the last year faced a lower operating profit than the previous year due to the sluggish business amid political unrest. The banks will try to act an aggressive banking to earn a quick profit by increasing the interest rate on lending’, he said.
Against the backdrop, the banking sector will plunge in a hazardous situation if the central bank fails to curb the rate of interest of the banks, he said.
The weighted average rate on lending stood at 13.36 percentage point in March which was 13.40 percentage point in February while the interest rates on deposits were paid at 8.21 percentage point from 8.34 percentage point in February, the BB data showed.
The 24 banks that failed to maintain the rate in accordance with the central bank’s directions are: AB Bank, Bangladesh Commerce Bank, Bank Asia, BASIC Bank, BRAC Bank, Citibank NA, Commercial Bank of Ceylon, Dhaka Bank, Dutch-Bangla Bank, Eastern Bank, Habib Bank, HSBC, IFIC Bank, Jamuna Bank, National Bank, ONE Bank, Premier Bank, Prime Bank, Pubali Bank, Standard Chartered Bank, Social Islami Bank, The City Bank, Uttara Bank and Woori Bank.
The interest spread rate in the state-owned commercial banks stood at 3.64 percentage point in March, that of state-owned specialised development banks at 3.46 percentage point, that of private commercial banks at 5.31 percentage point and that of foreign commercial banks at 8.78 percentage point.