Research Analyst
Nov 22 - 28, 2010

Evolution in human culture has been consummated by the development of new technologies. The last few years have witnessed supreme changes throughout the world. Technology is affecting the life of every individual in this present age.

Due to increase in technology usage, the banking sector's performance increases day by day. Online banking is one of the technologies, which are getting recognition around the globe. Online banking is also becoming the indispensable part of modern day banking services. It is expected that 60 per cent of retail banking dealings will be online in ten years' time.

There are many customers around the world, who are accepting this technology very quickly but in growing countries like Pakistan, the adoption ratio is very high. There are many banks in the country, which are providing these facilities to customers. The financial institutions have many customers around the country; therefore, they need their banks online so that they can easily access it from anywhere.

In the country, almost 50 per cent of the clients shifted from traditional banking to online banking system. The core reason of this transfer is perceived usefulness, security, and privacy provided by online banking.

During financial year 2010, Pakistani banks have increased their online branch network from 6,040 to 6,671 showing a growth of 10 per cent compared to 14 per cent growth in the previous year. The share of online branches in the total branch network has increased from 68 per cent to 73 per cent. Similarly, during the same period 2010, banks have added 466 new ATMs in their network, bringing the total number of ATMs in the country to 4,465, reflecting a growth of 11.7 per cent compared to 28.1 per cent growth last year. As of June 30, 2010, total number of cards in circulation has reached 10.5 million as against 8.9 million last year showing a growth of 18 per cent.

During FY10, in terms of volume, Real time online branch (RTOB) transactions increased by 28.2 per cent compared to 28.3 per cent last year. In terms of value, the amount increased by 19.7 per cent compared to 1.7 per cent last year. However, during FY10 ATM transactions registered an increase of 27 per cent compared to 34 per cent last year. In terms of value, the amount of ATM transactions increased by 35 per cent compared to 48 per cent in the previous year. Apart from cash withdrawal, ATMs are also used for inter-bank funds transfers, cash deposits, payment of utility bills, etc. In Pakistan, on average, daily 71 transactions were executed per ATM during the year.


(JUNE 30, 2010)




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Furthermore, the total number of POS (Point of Sale) terminals reached 52,049 compared to 49,715 last year showing an increase of five per cent during June 2010. In terms of volume, POS transactions in the country reached 15.7 million showing a decrease of 14.3 per cent compared to 4.5 per cent increase recorded in the previous year. In terms of value, the amount of transactions reached Rs75.4 billion showing a decrease of 15.8 per cent compared to 30 per cent increase recorded last year. Strict policy measures taken by banks regarding issuing credit cards are believed to be the main reason behind this decline. Transactions through call centers or IVR during FY10 were one million involving an amount of Rs7.1 billion. This shows an increase by eight per cent in volume, but 16 per cent decrease in value compared to 13 per cent increase in volume and 15 per cent decrease in value last year.

The internet banking also includes payments and electronic fund transfers (EFT). During FY10, banks reported 2.96 million transactions involving an amount of Rs141.2 billion, which shows an increase of 41 per cent in volume and 107 per cent increase in value compared to an increase of 59 per cent in volume and an increase of 56 per cent in value last year.

More recently, some banks in the country are offering financial transactions through mobile phone. The volume of transactions was 371,052 for FY10 compared to 71,240 transactions recorded last year. In terms of value, it reached Rs1.89 billion compared to Rs16 million last year. E-banking composition has increased from 32.3 per cent to 36.4 per cent in terms of volume of transactions, whereas in terms of value, it has reached 10.76 per cent compared to 9.25 per cent last year.


Despite high discount rates, the banking sector has managed to raise profits by 11 per cent by the end of 3Q10, compared to the same period last year. SBP announced further tightening of the monetary policy, setting the rate at 13.5 per cent on Sep 2010. Lending rates will as a result go up, further dampening private sector investment and thus reducing advances for banks.

Online banking in Pakistan has shown tremendous growth over the last year. It has also achieved better efficiency and won customer satisfaction because of high reliance on advanced technologies and integration of systems at regional and global levels.