ONLINE BANKING IN PAKISTAN

ATIF HASSAN (atif.hassan@dacb.edu.pk)
Aug 24 - 30, 2009

Online banking (or internet banking) allows customers to carry out financial transactions on a secure website operated by conventional or virtual bank. The banking trends in developed countries indicate that technology is now acting as an important factor for improving customer retention in comparison to past practices.

During early 1990's, banks were basically testing the grounds to introduce information technology into its marketing strategy, but late 90's saw a completely diverse turn where online banks were introduced and competing with banks that had physical existence. A revolt began incorporating services and value added features that were widely accepted by the customers.

A huge number of banks in Pakistan are now shifting from the wait-in-queue to online banking facilities for its customers. Many banks have now joined the information technology era of creativity and are providing their customers technology to facilitate customer growth and retention of current customers. The launch of the ATM facility is one-step in this direction.

Banking sector of Pakistan has gone through incredible technological changes and invested massive amount of funds in development of information technology networks, and launched internet based online banking information systems to maximize operational capacity and minimize costs.

These online banking systems are helpful both for banks as well as for customers.

By offering online facilities to the customers, banks can take advantage from much lower operating costs, as these services require less staff and less physical branches. For users, online banking services provide convenience, speed, and anywhere anytime availability. In addition, the use of online banking trends in banking sector will continue to expand, as today's financial organizations are quickly undergoing changes due to globalizations of the markets, socio-economic changes and advancements in information technology, thus creating a strong competitive situation. Therefore, banks for their continued existence should assimilate new technologies to increase efficiency, quality of service, and competitive advantages.

The Government of Pakistan has encouraged the online banking with the endorsement of the Electronic Transaction Ordinance 2002. This important step provides legal recognition of digital signatures and credentials reducing the risks related electronic crimes.

Presently, almost all commercial banks in Pakistan have setup their own ATM networks, issue debit, and credit cards and have joined one of the two operating ATM Switch Networks.

Pakistani banks are providing the following online banking services and products:

(1) Inquiries: Account statement inquiry, account balance inquiry, check statement inquiry, and fixed deposit inquiry.

(2) Payment: Transfer of funds, credit cards payments, direct payments, utility bills payments.

(3) Request: Cheque book requests, stop payment requests, demand draft requests, new fixed deposit requests.

(4) Download: Customer profile, statement download, other information and guidelines.

There will be a huge acceptance of online banking with the passage of time with growing awareness and education. Many people are shifting to online banking and are readily accepting the usefulness of this opportunity. Online banking service allows customers to manage their accounts from any place at any time for minimum cost. It gives abundant compensation to the client in terms of price and ease. It is a fast rising trend among public in Pakistan as well.

Many factors are attracting the customers like ease of use, perceived usefulness, security, and privacy. Perceived usefulness is defined as the degree to which a person believes that using a particular technology would improve job performance while perceived ease of use is the degree to which using IT is free of effort for the user.

Many elements of the information technology equation are completely missing in Pakistan. First of all, the literacy rate of Pakistan determines how many users of internet this nation truly has. Secondly, limited banks have started online facilities. Thirdly, the overall atmosphere is not conducive to introduce sophisticated software that works on data mining and customer retention. If we only get the banking processes and operations into action and expect an exponential growth of education in this country, we can really work on appreciating the advantages of online banking. A huge majority of customers are accepting online banking culture because of many favorable factors including usefulness, security, and privacy.

(Author is a lecturer in Defence Authority College of Business, Karachi)