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Deployment of technology in financial sector

Published on 10th Feb, Edition 6, 2014


In Pakistan banks were the first to deploy technology as they had funds and also wanted to enhance their footprint. On top of that it was growing pressure of the corporate sector to make banking more efficient. Banks went for mainframe computers and soon also started processing bills of utility companies. After a while utilities installed their own systems. However, the real revolution came with the advent of personal computers. Development of local area networks and introduction of World Wide Web offered new vistas. Introduction of debit/credit cards necessitated creation of ‘electronic highways’ and it is difficult to forecast the limit. One point is very clear that technology has become such an integral part of a person’s life that he/she often does not realize the benefits being reaped.

Pakistan has around 11,000 commercial bank branches. To offer real time services banks offer online banking and also facilitate account holders to use their debit and credit cards convergence of computer and telecommunication became a must. The ever growing branchless banking, fully supported by the central bank was deemed necessary to extend outreach. There is no doubt that only a small percentage of Pakistan’s total population have bank accounts and the efforts are being made under ‘financial inclusion’ program to facilitate the public at large.

In this regard banks joined hands with cellular companies and the first move was to allow the agents of cellular companies to collect payment of utility bills. This on one hand reduced traffic to bank branches but on the other hand freed people from the limitation of limited banking hours. Now they can pay their utility bills at their own convenience. With the customers building confidence in the technological and service support of telecom companies a host of services are now being offered, the most popular being sending/receiving cash. This has freed people from opening and maintaining accounts with commercial banks, going to bank branches.

One may say that introduction of prepaid paid system by telecom companies created an elaborate network of agents. To facilitate clients extensive technology-based networks had to be created. With introduction of new applications, cellular phone users can enjoy an elaborate range of services. Joint of hands between banks, particularly microfinance banks and telecommunication companies allows the least educated to reap the benefits of technology. The convergence is growing at an unprecedented rate. Presence of hundreds and thousands of agents of cellular companies in nock and corner of Pakistan provides confidence to commercial banks to offer new facilities. This has created job opportunities for millions of people as the agents have grown from selling pre-paid card and transferring ‘easy load’ to provider of banking service.


Equities market

Pakistan’s equities market is also one of the key beneficiaries of technology. Now all the three stock exchanges operating in the country have elaborate trading platforms, there is a clearing company and a depository, Pakistan offers ‘paperless’ environment. It is on record that in the past deployment of technology ensured uninterrupted operation by handling trading of over one billion shares and its clearing and transfer. The added advantage is that many brokerage houses offer ‘online trading’ facility that allowed an investor to trade while anywhere in the world. It is true that he/she has to route all his sale/purchase request through a broker, but the real advantage is that execution of a sale/purchase can be executed through a click.

It is not a secret that foreign investors have substantial stake in Pakistan’s equities market. While it is true that their interest is vibrant due to many companies offering attractive return but mainly because the investors enjoy the facility to sell/purchase instantly. The added advantage is that they can see movement of prices and also ensure transfer of shares to their accounts, which they can also view any time.

The story started with introductions of KATS and creation of Central Depository Company (CDC) and National Clearing Company of Pakistan (NCCP) are also the products of technology. Creation of these facilities has made trading a ‘click away’. In the past authentication of shares and their transfer to investors’ account used to take days. But with the introduction of paperless environment, the job has not only become faster but probability of tempering has also reduced to very low.

Pakistan Mercantile Exchange (PMEX), country’s only commodities exchange is also an example of successful deployment of technology. While at many exchanges trading times are specified, PMEX offers 21-hours trading facility.

While use of technology often raises a question that what could happen in case of failure of the system or a disaster. In Pakistan back up or disaster recovery sites have been created that ensure uninterrupted operations in case the main site develops malfunctioning or destruction. Over the years adequate firewalls have been develop to avert cyber attacks successfully. However, there is no room for complacency and the endeavors must continue.

While it is true that a lot has changed, the change has also become much faster. Convergence of information technology and telecommunication has helped in not only bring down cost per transaction but also minimizing time. This could be best understood that one can deposit/withdraw cash from his/her account from anywhere in the country instantly using ATM and online facilities.

However, it is necessary to bring it to the notice of State Bank of Pakistan that in certain areas there is ‘over population’ of ATMs because bank branches are located too close to each other. Ideally, after the introduction of 1-Link the number of ATMs installed in an area should be ‘optimized’, this has specific reference to bank branches located on I. I. Chundrigar Road in Karachi.


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