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Mobile banking – banking for all

Published on 18th Mar, Edition 12, 2013


In Pakistan, foreign banks initiated in mid 1990 the concept of electronic banking practices. Domestic banks also adopted the technology and E-banking services like ATM cards and debit cards in late 90s were introduced. The swift improvement in electronic distribution channels has produced tremendous changes in the financial industry, especially with a rising rate of change in technology.

The developments happen in information and communication technology are escalating competition in financial institutions all over the globe. Now, the banking industry was very much exaggerated by the technology advancement that transformed the way banks deliver their services, using technologies such as ATMs, tele-banking, the Internet, credit cards and electronic cash. In Pakistan, the banks also want to provide the services, which are well-organized, speedy and enhanced the banking system due to the competition among the banks. Presently, 93 percent of the total bank branches are offering Real-Time Online services. Online banking makes the banking services available at the door-step of the people, especially after introducing the mobile banking.

Mobile phone or cell phone has emerged as another technology in early 2000s to engage in exercise a more and more significant part in business. Though mobile phone has started to serve communication sector at first instance but as numbers of mobile phone users increased, transferring of amount, purchasing products and services using mobiles phones have also increased.

Mobile phone banking services have been successfully launched in various countries, offering the consumers a virtual wallet and a convenient way of transferring and remitting funds through SMS. The codes and messages exchanged in the process are converted to cash at widely deployed distribution channel locations and even retail outlets.

Millions of mobile phone users in Pakistan will have the facility of online banking from their sets. The service enabled mobile phone users to carry out online transactions including money transfer, cash-in, cash-out, person-to-person transfer, bill payments and on-line purchases. The service is a great help to customers since there is no need to carry credit cards or cash with them. The mobile phone banking facility would come as a huge facility to the common man who would not only be able to make easy transactions, but also save time and cost on such transactions. It is said that during couple of years, the transition from manual (paper-based) banking to e-banking has been gradual, yet consistent, in terms of both volume and value of transactions.

Several mobile payment companies and initiatives in EU have failed and many have been discontinued. In Europe and North America with few exceptions such as Austria, Spain and Scandinavian countries the development of mobile payments has not been successful. However, mobile payment services in Asia have been fairly successful especially in South Korea, Japan and other Asian countries (e.g., Mobile Suica, Edy, Moneta, Octopus, and G Cash). NTT DoCoMo has 20 million subscribers and 1.5 million of them have activated credit card functionality in Japan. There are 100,000 readers installed in Japan. The main difference between successful implementations of mobile payment services in the Asia Pacific region and failure in Europe and North America is primarily attributed to the ‘payment culture’ of the consumers that are country-specific.

A mobile payment service in order to become acceptable in the Pakistani market as a mode of payment due to following reasons:

Simplicity and Usability: The m-payment application is user friendly with little or no learning curve to the customer. The customer is able to personalize the application to suit his or her convenience.

Universality: M-payments service provided for transactions between one to another customer (C2C), or from a business to a customer (B2C) or between businesses (B2B). No doubt that the coverage is limited to domestic level but one can hope that spread its network to regional and global level. Payments are possible in terms of both low value micro-payments and high value macro payments.

Security, Privacy and Trust: A customer able to trust a mobile payment application provider that his or her credit or debit card information may not be misused. Secondly, when these transactions become recorded customer privacy is not lost in the sense that the credit histories and spending patterns of the customer is not openly available for public scrutiny. Mobile payments have to be as anonymous as cash transactions. Third, the system is foolproof, resistant to attacks from hackers and mobile snatchers. As it is using public key infrastructure security, biometrics and passwords integrated into the mobile payment solution architectures.

Cost: The m-payments are not as much costlier than accessible payment mechanisms to the extent possible. As m-payment solution should compete with other modes of payment in terms of cost and convenience.

Speed: The speed at which m-payments are executed must be acceptable to customers and merchants.

Cross border payments: To become widely accepted the m-payment application must be available world-wide.


In Pakistan, major telecom industries started m-banking with the alliance of different banks, however, there are number of reasons that should persuade banks in favor of mobile phones. They are set to become a crucial part of the total banking services experience for the customers. Also, they have the potential to bring down costs for the bank itself. Through mobile messaging and other such interfaces, banks provide value added services to the customer at marginal costs.

A very effective way of improving customer service is to inform customers better. Credit card fraud is one such area. A bank, through the use of mobile technology, inform owners each time purchases above a certain value have been made on their card. This way the owner is always informed when their card is used, and how much money was taken for each transaction. Such messages also bear the virtue of being targeted and personal making the services offered more effective. They will also carry better results on account of better customer profiling.

Similarly, the bank can remind customers of outstanding loan repayment dates, dates for the payment of monthly installments or simply tell them that a bill has been presented and is up for payment. The customers can then check their balance on the phone and authorize the required amounts for payment.

The customers can also request for additional information. They can automatically view deposits and withdrawals as they occur and also pre-schedule payments to be made or cheques to be issued. Similarly, one could also request for services like stop cheque or issue of a cheque book over one’s mobile phone.

Yet another benefit is the anywhere/anytime characteristics of mobile services. A mobile is almost always with the customer. As such it can be used over a vast geographical area. The customer does not have to visit the bank for ATM or a branch to avail of the bank’s services. Research indicates that the number of footfalls at a bank’s branch has fallen down drastically after the installation of ATMs. As such with mobile services, a bank will need to hire even less employees as people will no longer need to visit bank branches apart from certain occasions.

Even, the banks add to this personalized communication through the process of automation. For instance, if the customer asks for his account or card balance after conducting a transaction, the installed software can send him an automated reply informing of the same. These automated replies thus save the bank the need to hire additional employees for servicing customer needs.

No doubt, customer likes to use the mobile banking technology because of its mobility as they can access the bank anywhere and in any situation. They can transfer their money from one account to another account faster in a user-friendly environment. And also they can check the current status of their account. But all customers of the bank are not ready to use this service because of some security issues. They are not ready to adopt the mobile banking systems as it brings inconvenience to the users assuming that it cannot prevent direct or indirect attacks.

Due to advancement in technology, it is now necessary to provide end-to-end security. It means that if user uses his/her mobile device for mobile banking then the data transacted are secure at the bank end and not at the user end, thus leaving the data vulnerable to attacks. It was noted that it is difficult to provide end security through WAP. The reason is that the data is not encrypted at gateway during the switching of protocol process, which leads to security concern for mobile banking in WAP.

As WAP is used for communication between devices like digital mobile phones, Internet, PDA etc, through WAP customer can realize more functionality of Internet banking. Encryption process is currently used for secure data transmission between bank and users but the problem is that this encryption process is not good enough for the protection of sensitive data between bank and customer. The reason is that security methods require more powerful computing and high storage capacity. If we take Internet banking it is realized that there are powerful computer systems and well defined complex encryption process to ensure the security. Mobile device have low computational capacity and hence we are unable to apply complex cryptographic system.

Another authentication method used in mobile banking is the login method. However, PINS authentication method is an old method and many security issues such as password and ID theft were discovered in this method. In such cases, the secret may be revealed and this results in customer’s distrust on the security service company. Bank should follow some security mechanisms in mobile banking. While the customers and the banks are bound to each other. This security mechanism is done by identifying the customer’s phone number, SIM card number, pin number etc.

Technology is now affordable and more importantly, the development of our own learning has increased ten-folds. Banks need to spend time, money and effort to educate customers about the ease and use possibilities of m-banking and help to alleviate the fear that many customers still have about this new technology and the perceived lack of security in performing Internet-based inquiries and transactions. This customer fear is still the only hindrance that banks have to overcome to generally make easier and convenient service for customers.


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