INTERVIEW WITH SYED SHARIQ WAQAR, BANKING ANALYST

KHALIL AHMED
(feedback@pgeconomist.com)

May 2 - 15, 2011

PAGE: YOUR VIEWS ABOUT PROGRESS OF E-BANKING IN PAKISTAN.?

SHARIQ WAQAR: The level of banking, a few years back, was confined to the four walls of branch. With the entry of private banks, having limited number of branches, investment in technology was chosen, as alternative, to overcome this deficiency. The advent and common use of internet, leading to e-commerce, forced the banks globally to incorporate e-banking. Pakistani banks are still far behind their global counterparts. One such example is complete lack of merchant accounts in Pakistan.

According to the State Bank's Second Quarterly Report on retail e-payments and paper based instruments released late last month, the volume and value of e-payments transactions in the country during the second quarter of FY10 reached 46.4 million and Rs4.1 trillion respectively showing an increase of 0.2 percent in number and 6.1 percent increase in value as compared to four percent increase in number and 0.3 percent increase in value in the previous quarter.

The report said the use of electronic channels has showed a consistent growth as during the second quarter contribution of electronic transactions in total retail transactions recorded at 35.3 percent in number compared to 35.7 percent share recorded during the previous quarter. In terms of value, the electronic channel's composition recorded at 10.90 percent against 10.1 percent share recorded in the previous quarter.

However, lately a task force was established to study and implement formation of electronic clearing house (ECH). Simultaneously, the local banks also went for online banking, though still not a norm. Another step forward was installation of ATMs by the banks. While some banks have their own ATMs, some other banks started using a dedicated network. In this system, an ATM card holder of a particular bank could use teller machines installed by all the sponsors of this network. The system is working to a satisfactory level. According to Kolachi (2006), Pakistani banks provide the following online banking services.

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

(2) PAYMENT: Transfer of funds, credit cards payments, direct payments, and 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 download.

PAYMENTS THROUGH MOBILE PHONES

There are a few banks, which offer transactions through mobile. These transactions include payment through mobile (other than utility bills payment), utility bills payment, and intra customer account fund transfers and inter customer account fund transfers.

The number of transactions reported was 77,543 for the current quarter compared to 54,009 transactions reported for the previous quarter. In terms of value of transactions, it was reported at Rs381 million compared to Rs152 million recorded in the previous quarter. As of December 2009, six commercial banks were offering mobile banking facility and out of Rs381.0 million value of transaction Rs364.6 million belonged to intra customer account fund transfer transactions through mobile.

PAGE: WHAT SHOULD BE DONE TO ENCOURAGE CUSTOMERS TO USE ELECTRONIC MEANS IN BANKING?

SHARIQ WAQAR: Nowadays, creating and maintaining customer loyalty has become a strategic mandate in bank industries. With the development of technology, it is important for banks to keep customers and encourage customers use their e-banking (electronic banking). In this research, we classified bank customers into three groups: stayers, satisfied switchers, and dissatisfied switchers. The results of the empirical analysis confirm four concepts. First, dissatisfied switchers have higher levels of involvement and lower purpose to use the same bank's internet banking than satisfied switchers do. Second, stayers have lower levels of involvement and lower purpose to use the same bank's internet banking than dissatisfied and satisfied switchers. Third, dissatisfied switchers are more loyal and trust to their current banks and higher purpose to use the same bank's internet banking than satisfied switchers and stayers. Finally, stayers have more loyalty and trust to their current bank and higher purpose to use the same bank's internet banking than satisfied switchers. Though efforts are being made to increase the number of online branches, it is still a capital intensive proposal. It is getting popular in urban areas, but has not become common in rural areas, mainly due to low literacy level in the country. However, some analysts believe that with the passage of time, confidence in the system and increasing use, traffic to branches in urban areas will go down considerably.

PAGE: WHAT IS YOUR OPINION ABOUT TRAINING EMPLOYEES IN E-BANKING?

SHARIQ WAQAR: Online banking is also one of the technologies which are fastest growing banking practices nowadays. It is vital to extend this new banking feature to clients for maximizing the advantages for both clients and service providers. The service providers have to well train their employees as they manage seminars, training session for employees and make their employees perfect in the criteria of e-banking in Pakistan.

PAGE: YOUR VIEWS ABOUT COST OF E-BANKING BOTH FOR CLIENTS AND FOR BANKS.

SHARIQ WAQAR: One factor prohibiting use of the newly offered services is its high cost. The banking sector terms this nominal, keeping in view the level of convenience. Saying this, they still believe that cost can go down further with the increased use of these facilities. It is also believed that while the use of these facilities is low due to apprehensions about security, clients take refuge behind high cost. A factor slowing down the process in this area is capital-intensive nature of these operations. The investment in technology by the commercial banks is affecting the payouts to shareholders as well as the depositors. The banking sector experts term this only a brief phase.

PAGE: WHAT CHANGES HAVE SURFACED AFTER THE INTRODUCTION OF ATMS IN PAKISTAN?

SHARIQ WAQAR: Pakistan has passed through its introductory phase and now it is moving towards new avenues. After introductory phase, customers are well aware of e-products and are now demanding more sophisticated services. Electronic banking is the latest in the series of technological wonders of the recent past. ATMs, tele-banking, internet banking, credit cards and debit cards have emerged as effective delivery channels for traditional banking products. In Pakistan, foreign banks took the lead by introducing ATMs and credit cards in the mid 1990s, and domestic banks followed the suit in the late 1990s.