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Banking sector the biggest beneficiary of ITC convergence

Published on 14th Apr, Edition 15, 2014


In Pakistan financial institutions have been the pioneer of technology deployment. This is partly because of the nature of their business and partly because of dealing with their counterparts located in developed countries. The added advantage have been that they have ample funds and also because ‘globally acceptable’ hardware and software are available. They also have on credit ‘development of tailor made programs’ that are Pakistan specific. Deployment of technology has helped them in not only serving their clients better but also extending their outreach. The enormous success achieved in ‘branchless banking’ is only due to ITC convergence.

One of the key issues facing the banks was handling of inward remittance and prompt transfer of cash to the recipients, often located in remote areas. The success achieved over the years can be gauged from the facts that 1) now bulk of the inward remittances, extending one billion dollars per month is being handled by the banks, 2) transfer to designated accounts is possible within couple of working days and 3) improvement in quality of service has helped the clients use formal banking channel rather than ‘hundi’ system. This is evident from the difference between open market and interbank rates. The added advantage is that using formal system is also helping in containing money laundering.

One of the major achievements is that now more than 95 percent of total bank branches offer ‘online’ banking and the biggest beneficiaries are those living in remote area. Introduction of branchless banking allows people to undertake business transactions without even going to a brick and mortar branch. Involving cellular phone companies has made banking the easiest. Another blessing of technology is that now people don’t have to stand in long queues and scorching heat or chilling winter to pay their utility bills. The added advantage is that payment is no longer confined to banking hours but till the time the nearest franchise centre is open of till midnight.

One of the things that goes to the credit of the central bank, all the banks, cellular phone companies and technology providers that the entire system has been operating ‘efficiently’ and has been made robust enough to withstand any malicious effort of ‘cyber’ criminals.

The State Bank of Pakistan has released the Payment Systems Review for October-December 2013 quarter. During the quarter under review, Pakistan Real-Time Interbank Settlement Mechanism (PRISM), the Large Value Payment System of the country processed 141,667 transactions worth more than PKR35 trillion.  This showed an increase of 8.2% and 15% in terms of volume and value respectively as compared to the previous July-September 2013 quarter.

As highlighted the volume of e-Banking transactions in Pakistan has grown considerably over the years. During the quarter October-December 2013 quarter, the volume and value of overall e-Banking transactions grew by 5.1% and 8.7% respectively to the last quarter and by 22.7% and 10% when compared with the same period of the last year. Further, in the composition of total e-Banking transactions, ATM has the highest share of 63.3% in volume but only 7.6% share in value of transactions. Real time online Banking (RTOB) has the highest share of 89.9% in value with 25.2% share in volume of transactions. The remaining portion of transactions in terms of volume is captured by Point of Sale (5.9%), Internet (4%), Call Center (0.2%) and Mobile Banking (1.5%) respectively.

The number of transactions through ATMs reached over 61.7 million in the second quarter of FY13-14. The number of ATMs in the country has reached 7,684 for the quarter ended December, 2013, showing an increase of 10.2% from previous quarter. As on 31st December 2013, for every 100,000 people, there are 4.2 ATMs in the country and during that same period, PKR635 billion was transacted using this channel.

The number of online branches is 10,596 which accounts for around 95% of the total bank branches in the country; around 24.5 million transactions amounting to PKR7.48 trillion were performed via this channel during the quarter under review. As on 31st December 2013, there was around 18.3 Point of Sale (POS) machines for every 100,000 people in the country.

The fastest growing payment channel in the country is Mobile Banking in which the number of transactions increased by 170.7% compared with that in the same period last year. Presently, there are around 1.5 million registered users of Mobile Banking in the country. At end December 2013, two dozen banks were offering Internet Banking services that constitute a Volume share of 4% of total e-Banking transactions. During the quarter under review, 3.9 million transactions amounting to over PKR161 billion were conducted by 1.37 million registered users on Internet Banking. This showed a growth of 5.7% in volume and 2.7% in value of transactions compared to the previous quarter.

The number of Plastic Cards (Debit, Credit and ATM Only Cards) reached 22.38 million showing a decline of 4.2% compared with that in the previous quarter. The Credit cards showed a significant drop of 11.4% compared to the last quarter. In contribution of Plastic Cards, Debit Cards have the highest share of 89.6%.

While the central bank and all other players deserves appreciation a few irritants needs to be removed at the earliest. These include: 1) ATM malfunctioning or without cash on weekends, 2) a charge of PKR15 per transaction if ATM of another bank is used, 3) overpopulation of ATMs in certain areas and virtual absence in other areas, 4) banks offering online banking charging fabulous amounts on cash withdrawal from any other branch. The central banks should also look into malpractices by the issuers of credit cards, charging nearly 40% interest rate of remaining amount if part payment is made, which is outright exploitation of cardholders and must be stopped immediately. Banking Ombudsman must also take note of such atrocities.


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