E-Banking in Pakistan: opportunities and challenges
Generally speaking, three factors, quickness, easiness and cheapness have become the catchwords for the competitiveness and usefulness of all the business operations. Particularly it is commonplace today to say that banking is undergoing a radical transformation. The symptoms are new products, new players, new channels etc. This transformation is taking place across all sectors of the banking industry. That is why banks urgently need to improve their ability, to think strategically about IT investments. Only those banks that use their technology resources effectively have the opportunity to secure real competitive advantage in this fast-changing industry through real product or service differentiation. Secondly, liberalisation, privatisation and globalisation have been recognised as the key elements propelling the world towards the present era, characterized by rapid changes and increased challenges in various fields. In order to meet the challenges of competition unleashed in the global arena, it has become an imperative on the part of captains of various segments of the economy to open up to harvest the advantages that are forthcoming from such global challenges. It is in this context, the most vibrant and important sector, the banking sector, started gearing up to face the challenges of such ground realities. Accordingly, several measures were initiated and implemented for improving and strengthening the competitive position of the banking industry vis-à-vis the foreign banks. Such measures include e-Banking entry into mutual funds and insurance sector business etc.
Thirdly, banking is service-oriented industry, which has peculiarity to implement various social as well as commercial objectives. It is an instrument for the development of the economy of the country. Banks have two roles to play. They create a runway for the free flow of capital necessary for the growth of the economy. At the same time it must attend to lending and deposit mobilization in order to make profit for its survival and growth. Banking, though, is now not a high profit service industry in most countries. In many countries banks are affected by loan losses and this has a great impact on the health of the banks. This has resulted in the poor quality of service. Complaints of deterioration in service are viewed in several quarters. Getting customer patronage and goodwill are becoming a great task and a challenge for banks.
E-Banking made its debut in UK and USA during 1920s. It became prominently popular during 1960s through electronic funds transfers and credit cards. The concept of Web-based banking came into existence, in Europe and USA in the beginning of 1980s. It has been estimated that 40 percent of banking transactions would be done through net at present. Today, a wide range of services are being rendered by banks using the electronic media. Since many years, banks have been operating inter-city transfer of money through demand drafts, mail transfers and telephonic transfers from one city to other or even within the same city and also from bank to bank through telephones. It facilitates availability of funds the next day itself. It is a matter of great satisfaction that the e-Commerce is greatly assisted by the e-Banking through electronic cash cheques and smart cards. It is one of the trend setting paperless mode of effecting payment by two kinds; I) Electronic Credit Clearing, and II) Electronic Debt Clearing. The followings are other delivery channels of e-banking.
TELE-BANKING: It came into operation in the 1970s in the developed countries like the US. It is accessible for corporate customers that have large volumes of payments to effect and dispose of a fully automated accounting system. They can establish a Computer to Computer link with their bank and in this way exchange truly paperless credit transfers which are handled all the way from the originator to the beneficiary’s account without any paper involved.
AUTOMATIC TELLER MACHINE (ATM): This system is known as “Any Time Money” because it allows customers who have an ATM card to withdraw money at any time from the bank without interacting with human teller. Since the ATM machine can be installed anywhere like petrol bunks, markets, railway stations etc, and can well be linked to the main computer. It allows customers to transact with the bank 24 hours a day and 365 days a year. They allow the customers to transfer money to and from accounts to view account information, to deposit cheques or cash, to order cheques, to receive cash etc.
SHARED PAYMENT NETWORK SYSTEM (SPNS): It is a large network of ATMS spread throughout the city. The participating banks issue universal cards to the customers for transacting on this network. Under this system, the following services are offered: Cash transactions, Extended hours service, Across the bank payments, Utility payments, Balance enquiry, Printing of statements of accounts, Cheque deposit, Request cheque book, Standing instructions and statements of Account and Point of sale facilities.
CREDIT CARD/DEPOSIT CARD: The credit card is post-paid card. The customer possessing a credit card needs not carry any cash and is empowered to spend whenever and wherever he wants with his credit card within the fixed limits prescribed by his bank. The debit card is a prepaid card with some stored value. Every time a person uses the card, the merchant who in turn can get the money transferred to his account from the bank of the buyer, by debiting an exact amount of purchase from the card. To get a debit card, an individual opens an account with the issuing bank which gives him a debit card along with a personal identification number (PIN). When he makes a purchase, he enters this number on the shop’s PIN Pad. When the card is swiped through the electronic terminal, it dials the acquiring bank system – either master card or VISA that validates the PIN and finds out from the issuing bank whether to accept or decline the transaction. The customer can never overspend because the system will reject any transaction that exceeds the balance in his account and the bank will never face a default because the amount spent is debited immediately from the customers account. A person can’t operate it in case the telephone lines are down. The major limitation of debit cards is that only the approved shops countrywide accept it.
CORPORATE BANKING TERMINAL (CBT): Large corporate customers can log into the bank’s database and have access to their accounts/transactions from their business houses. This facility has still not been started for customers.
POINT OF SALE (POS) TERMINAL: An electronic funds transfer at the point of sale (EFT POS) is initiated by using a payment card at a retail location. The POS system identifies the card holder and checks whether his account has sufficient funds to cover the purchase. The client enters his PIN and confirms the amount due. Payment is then automatically effected by delivering the card holder’s account with the amount for the purchase and crediting to the retailer’s account. POS installed at petrol stations and large retail shoppers are like ATMS, linked via leased lines to the bank’s network.
Electronic Data Interchange refers to the electronic exchange of structured information relating to business transactions between commercial entities (in some cases also public administrations), generally using telecommunications. The transfer of information related to commercial trade through the banking system, sometimes called financial EDI, includes payment orders remittance information, statements of account and messages linked to by an UN body EDIF ACT (Electronic Data Interchange for Finance, Administration, Commercial and Trade). Reserve Bank Of India, for boosting e-Banking in India has established CUG Satellite Communication Networking i-e. INFINET for the banks and financial institutions. Once the network is completely operationalized, the concept of branch banking will cease to exist and an account holder will be called bank customer and not a branch customer.
ONLINE BANKING: It is doing banking transactions through our home P.C. The banks that do business through net have Websites. The customer clicks into the Website and gets the history of the bank. Then he can demand the necessary application form through the net. He fills in the form and passes it on to the bank. The bank then sends a UPP (Unique Personal Password) for accession to its computer. Therefore, a customer must have a P.C, a modem, an internet browser or a password finance performance. The Online banking is fast gaining ground in Pakistan. Some software companies are also offering network-banking facilities. Information Technology has opened up immense new avenues for developing countries such as Pakistan to use the creativity of their young through bearing and working out and to make a blend use of their brilliant youth for national development. A few hundred thousand pages were on the Internet in 1994, there are now over a billion pages and are being added to at the rate of about a million new pages a day.
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