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Fast emerging and challenging banking technologies

Published on 8th Feb, Edition 04- 2016

Customer awareness should be increased to encourage use of ATM, credit cards and Internet banking

Consumer financing has emerged out as one of most prolific aspects of banking in Pakistan. Consumer financing products include credit cards, personal loans, auto loans and housing mortgage. It not only contributes towards facilitating the life patterns of consumers, but it also proves to be a source of improvement for the image of banks. Banking sector witnessed unprecedented growth after 2001 due to low interest rate and product innovation in consumer financing. A need is, however, felt to strengthen the regulatory mechanism for strengthening the consumer financing sector in the country.

Effective delivery channel

Credit cards in Pakistan’s banking industry evolved with the introduction of credit cards by Habib Bank, the country biggest bank, a couple of decades ago when it launched the gold card. Then Citibank launched its Citibank Pakistan Visa Card in the 1990s. Then the Muslim Commercial Bank, the National Bank of Pakistan and Bank of America soon followed suit with their own credit cards. Presently, the various credit cards used in the country include Balance Transfer Card (used to transfer a high interest balance onto a low APR credit card), Instant Approval Card (offering instant approval on select credit cards from specific banks), Business Credit Card (offering an expense management service that facilitates keeping track of outgoing business money), Student Credit Card (used for high school and college students with lower credit limits and fewer incentives to help keep their spending in check) Prepaid Credit Card (used to control spending.) and Reward Credit Cards (rewarding purchases in the form of Cash Back).

Initially, Internet banking was launched in Pakistan to provide a limited number of services. In 2002, the government of former President Pervez Musharraf took a landmark step for promotion of electronic banking in the country by promulgating the Electronic Transaction Ordinance 2002, which provided legal recognition of digital signatures and documentation reducing the risks associated with the use of electronic media in business.

Today, ATMs, tele-banking, Internet banking, credit cards and debit cards have emerged in Pakistan as effective delivery channels for traditional banking products. In Pakistan, foreign banks took the lead by introducing ATMs and credit cards in the mid 1990s, and domestic banks followed in the late 1990s.


A credit card, offering valuable benefits for both consumers and banking industry, is a flexible payment tool accepted at millions of locations worldwide. Credit cards provide access to unsecured credit. They offer interest-free payment from time of purchase to the end of the billing period. They provide instant payment of purchases and allow for instant receipt of goods and services. They provide all-time access in a day. They give fraud protection with zero liability to the consumer in cases of fraud.

Moreover credit cards offer air travel points, car insurance, damage and loss insurance and extended warranty programs. The retailers that accept credit cards receive fast and guaranteed payment, which can reduce line-ups at checkout.


Consumers with credit cards from banks, however, must be protected by constitutional regulations that require disclosure of the interest rate at the time of solicitation or application, and on monthly statements.

The statements must include itemized transactions, the amount you must pay on or before the due date in order to have the benefit of a grace period. The regulations require disclosure of the previous month’s payments and the current month’s purchases, credit advances, as well as interest and non-interest charges. Rules on advertising must also be regulated. The experts have identified the key issues hitting the growth of consumer financing in the country. These issues include the high interest rate, high inflationary impact, unsolicited financing, deteriorating quality of services, lack of consumer education, poor information disclosure practices, intimidating recovery practices, loosing competitiveness in international trade, and weaknesses in regulatory framework.

Information and communication technologies (ICT) have transformed the global economy bringing about a revolutionary change in the financial sector. This revolution finds manifestations today in shape of innovative banking products and services such as Automated Teller Machines (ATMs), Internet banking, tele-banking and so on.

Online banking has introduced non-traditional channels of delivering services in the banking industry. Pakistan needs to place ICT on its priority list to keep pace with the advancement in technology and minimize digital divide. The government needs to take measures for creating a conducive environment for technological innovation and its effective use in financial sector. The banks offering mobile banking services need to develop aggressive marketing plans and campaigns to attract customers to visit the agent location for their banking transactions.

The Internet, ATMs, POS devices and mobile phones are the examples of online banking technologies, which serve to deliver a set of banking services and are part of distribution channels that may be used either separately or in conjunction to form the overall distribution channel strategy. Branchless banking may also complement an existing bank branch network for giving customers a broader range of channels through which they can access financial services.

Customer awareness

Customer awareness should be increased to encourage use of services such as ATM, credit cards and Internet banking. The banking sector still requires expansion and upgradation of the ATMs to overcome customer complaints in recent years.

The banks must ensure provision of uninterrupted ATM services to customers and take responsibility for resolution of all types of issues emerging from outsourcing of ATM replenishment. ATM is the predominant alternate delivery channel of e-banking that leads the retail level e-banking/online services in terms of volume.

The banking industry in Pakistan faces tough competition unleashed in the global arena. The banking sector still needs to take effective measures for improving and strengthening its competitive position vis-à-vis the foreign banks. The banking industry must be able to meet increasingly complex banking needs if it is to flourish.

The country cannot catch up with its Asian neighbors India and China in terms of economic development without making investment in new banking technology. In the Asian economies, the relative wealth increases among the population and a burgeoning middle-class has brought greater demand for banking facilities and investors and businessmen are also looking for more supportive financial services, with a demand for financing solutions, hedge funds, and asset-based securities.


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