Nov 22 - 28, 20

A study on e-banking acceptance in India, by Dixit and Datta, published in August 2010 issue of JIBC (Journal of Internet Banking and Commerce) has attempted to make a literary search for the definition of e-banking, pace of its development and forecasts for its future, in the following words:

"The concept of electronic banking has been defined in many ways. According to Karjaluoto (2002) electronic banking is a construct that consists of several distribution channels. Daniel (1999) defines electronic banking as the delivery of bank's information and services by banks to customers via different delivery platforms that can be used with different terminal devices such as a personal computer and a mobile phone with browser or desktop services, telephone or digital television.

(Lau, 1997) has experienced phenomenal growth in recent years. In 2006, Pew Internet and American Life Project reported that nearly half of internet users in United States - 63 million adults - bank online (Fox and Beier, 2006).

Any decision to adopt e-banking is normally influenced by a number of factors. Liao et al. (2008) stress that the success in internet banking will be achieved with tailored financial products and services that fulfill customer wants, preferences, and quality expectations. Mattila (2001) concedes that customer satisfaction is a key to success in internet banking and banks will use different media to customise products and services to fit customers' specific needs in the future. Liao et al. suggest that consumer perceptions of transaction security, transaction accuracy, user-friendliness, and network speed are the critical factors for success in internet banking."

The criteria set for the success of internet banking appear to be logical for developed nations. In case of nations with a low literacy rate and concentration of population in rural areas, the 'awareness 'factor' ranks supreme. And, since awareness is a function of education, any fast-pace development of internet banking in countries like Pakistan can hardly be envisaged. Only 12 percent of our population is familiar with the banking system. A number of programs to achieve financial inclusion are underway but again, their success depends primarily on literacy rate and secondarily on the size of government and banking industry resources committed to these programs.

A recent article by Shaihd Javed Burki spells the change in the views of world economists who now agree to take into account, besides the traditional contributors to economic growth capital and labor - some new and vital factors such as technology, innovation, and labor skills. These newly added three vital factors combine together into a single word "knowledge". Now, the nations need to have a knowledge-based economy to be reckoned as a respectable member of the global economic community. The pioneer work done at the World Bank has resulted in the development of KEI (Knowledge Economy Index). In order to calculate this index, nations' performance in four different key areas is measured on a scale of 0-10. Among South Asian countries, India, Sri Lanka, Pakistan, Bangladesh, and Nepal have indices of 3.97, 3.76, 2.05, 1.66 and 1.65, respectively.



1995 1.64 4.49 1.25 1.78 2.29
Current 1.29 4.46 1.05 1.43 2.05

The table and its data do not make a pleasant reading as we have managed to register a negative growth in all four key areas during the last 15 years. This has happened despite the telecom and IT explosion that has blazed this country during the last seven years or so. Perhaps, the only redeeming aspect is that we are a bit of an innovative nation. However, e-banking, when education and information infrastructure are showing downward trends, can hardly be expected to grow on a sustained and uniform basis.

The urban population, by virtue of its better literacy rate and information infrastructure, has been the major beneficiary of innovative banking products like e-banking and mobile commerce. The rural population influx to urban areas has increased the chances for success of such products. While e-banking requires a higher level of education and technology familiarity, mobile banking or branchless banking has swiftly gained popularity especially among those workers who transfer their earnings from the urban cities - their work places - to their hometowns. Since telecom and IT have great potential to develop timesaving and cost-effective synergies with other sectors of the economy, particularly the banking sector, we have seen a number of business partnerships emerging these days with a variety of innovative products. A notable partnership has been created by the Telenor-Tameer combine. The scheme is popularly known as "easypaisa". In its first year of operations, easypaisa managed transfer of more than eight billion rupees through more than five million transactions. Other telecom companies are bracing to launch similar schemes. One possible combine could be that of Zong and its sister concern Alfalah Bank.

E-banking is generally restricted to the better-educated segment of urban society. Use of internet, by itself, requires a certain level of education and technology familiarity. E-ticketing, online purchase of goods and services, account statement scanning, payment of fees and bills and use of ATM all require more than the basic ability to operate a mobile phone that has come to the people naturally with the ever-increasing teledensity in Pakistan. E-banking will flourish only with the improvement in our KEI index. If 63 million adults in United States banked online in 2006, it was due to a high literacy rate and a much higher Knowledge Economy Index. The telecom revolution in the wake of deteriorating education and information infrastructure levels, is a typical case of lopsided and unplanned growth. The revolution owes much to the negative ways of yesteryears' PTCL when people were made to run from the pillar to the post to acquire a landline connection. Their pent-up urge to communicate openly got a forceful vent when cellular phone technology knocked at their doors. They rose in vengeance and mobbed the cellular market. The teledensity went up like stock indices in a bulls' market. Our banking sector took advantage of this development by introducing mobile banking as common person's product and e-banking as product for those with a better educational background.