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Electronic banking: scope and prospects

Published on 17th Nov, Edition 46, 2014


Pakistan’s Information Communication Technology (ICT) sector has witnessed tremendous growth during the last 15 years or so. Banking sector, though for the wrong reasons, has managed to keep pace with the ICT sector’s fast-paced growth. The abolition of fractional reserve system in 1971 and the post-crisis ‘Quantitative Easing’ have generated a spate of US dollars. These dollars, traveling on the vehicle of foreign trade, have infused the entire global economic system. To maintain parity, the leading economies have been forced to print additional local currency. The process has bloated the entire world financial sector. Pakistan is no exception; its banking assets have been doubled from five trillion to ten trillion during the last six years. One positive impact has been the development of synergy between ICT and banking sectors, in the shape of electronic banking.

First introduced in the US during early eighties, electronic banking has seen an early period of non-acceptance, if not outright failure. With the constant improvement in technologies and introduction of new techniques, the idea finally clicked and got astounding global recognition. With the risk factor being its Achilles heel, the advanced economies not only keep on improving on rules and regulations but also timely alert users of e-banking about the latest moves and techniques of the unscrupulous. The techniques generally used by the ‘attackers’ are: phishing and pharming, cross-site-scripting, keylogger, Trojan horses etc.

The Commonwealth Bank of Australia has recently amended its rules and regulations pertaining to e-banking. One of the amendments states:

“If you agree to enter into agreements electronically or to electronically sign documents, you must do everything you can reasonably do to protect your Client Number and password from becoming known to any other person including by installing and maintaining up to date antivirus, antimalware and firewall software on your Electronic Equipment.”

In Pakistan, e-banking has witnessed constant growth with the combined efforts of ICT and banking sectors and support from the state bank.

ATM 51,607 517 55,734 558
Real time online branches 22,853 7,228 22,959 7,068
Point of sales 4,047 21 4,387 22
Call centers 158 2 157 2
Internet banking 2,426 126 2,933 144
Mobile banking 1,118 7 1,319 10
E-Banking (Total) 82,209 7,901 87,489 7,804
ATMs 6,449 6,757
Online branches network 9,946 10,013
POS 33,189 33,748
Credit Cards 1,271 1,088
Debit Cards 19,575 20,267
The ATM only Cards 920 962

The comparative infrastructure figures show a rising growth trend in country’s e-banking sector. The declining trend in credit cards is reminiscent of the past, overly aggressive marketing when excessively sold credit cards not only burnt the fingers of the banking sector but also hurt the uninitiated users of this facility. The experience has taught the banks to be more prudent and the customers to be more discreet.

Unlike conventional banking, it is not only the urban section of the society that has benefitted from e-banking, but the rural segment is also enjoying the fruits of this facility by using it to solve its day to day problems especially the transfer of money and payment of bills. However, much needs to be done on the rural side to extend the outreach of e-banking. Simple rural folks usually avoid entering the imposing brick and mortar precincts of the banking industry. They are more at ease visiting the POS that is usually located in one of the shops of their locality, run by unassuming people like themselves. This important segment of society needs to be reached in a most uncomplicated and unsophisticated way with a minimum documentation hassle and maximum appeal to pursue them to become part of this ongoing growth process.

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