Research Analyst
May 23 - 29, 2011

One of the major forces behind the changes confronting the trade and industry today is technology, which is creating new products, services market opportunities and developing more information and system oriented business management processes.

Banking is one of the most technology intensive sectors and is an ideal domain for the successful development of e-commerce.

Internet banking refers to the use of the internet as a remote delivery channel for banking services. For banks, technology has emerged as a strategic resource for achieving higher efficiency, control of operations, productivity, and profitability. This has prompted the banks to embrace technology to meet the increasing customer expectation and face the tough competition.


Paper Based 82,958,898 35,598,041 88,456,807 39,067,546
eBanking (Financial Transactions) 52,584,716 4,650,172 56,423,217 5,462,428
1- ATMs 30,934,413 262,524 32,656,538 287,492
2- POS 3,426,865 15,757 3,618,228 19,747
3- RTOB 16,458,929 4,329,081 18,202,195 5,107,056
4- Mobile 678,149 1,779 766,932 1,678
5- Call Centre (IVR) 214,584 1,848 199,359 1,703
6- Internet 871,776 39,183 979,965 44,753
eBanking (Non Financial Transactions) 17,282,064 - 18,355,813 -
1- ATMs 9,978,491 - 10,098,348 -
2- Internet 3,818,590 - 4,959,826 -
3- Mobile 2,371,367 - 2,267,801 -
4- Call Centre 1,113,616 - 1,029,838 -

Internet banking would help banks present a potentially low cost alternative to brick and mortar branch banking. Internet banking services are crucial for the long-term survival of banks in the world of e-commerce. The market for the internet banking is forecasted to grow sharply in the next few years, affecting the competitive advantage enjoyed by traditional branch banks.

There are a lot of 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 also have a lot of customers around the country; therefore, almost 50 per cent of the clients shifted from traditional banking to internet banking system. The core reason of this transfer is usefulness, security and privacy provided by the internet banking.

However, the Payment Systems infrastructure has retained an overall growing trend for the second quarter of FY11 as 172 ATMs were added to the e-banking infrastructure bringing the number of ATMs in the country to the highest ever level of 4,734 while 309 more bank branches have been upgraded to real time online branches (RTOBs). Now 7,036 bank branches are offering RTOBs out of total 9,483 bank branches existing in Pakistan. The number of plastic cards (i.e. ATM, Debit, and Credit Cards) has also increased by 19.21 per cent compared to the previous quarter. At the quarter end, there were 13.19 million plastic cards in circulation.

The volume and value of overall e-banking transactions in the country during the quarter under review reached 56.42 million and Rs5.5 trillion respectively showing an increase of 7.30 per cent in volume and 17.47 per cent in value compared to the previous quarter. ATM, being the largest channel for e-banking transactions, showed 5.6 per cent increase in number of transactions and 9.5 per cent increase in value which resulted in average value of Rs8,804 per ATM transaction. All other channels of e-banking, except call centers, also witnessed growth, but their share in the e-banking infrastructure composition was comparatively insignificant. This increasing trend was also witnessed in the large value payments settled through Pakistan Real-time Interbank Settlement Mechanism (PRISM), which increased by 12.73 per cent in volume and 13.49 per cent in value of transactions compared to the previous quarter.

The contribution of paper-based payments in total retail payment transactions was 61.06 per cent in terms of volume and 87.73 per cent in terms of value. The rest of the transactions originated from e-banking.


There are some disadvantages too in the online banking system. With hacking and identity theft on the rise, internet banking customers find themselves in quandary that their account information and personal information are safe or not.

In a traditional bank, customers can go to a bank and speak to someone face to face about their problems but in internet bank customers will not likely to have human response that changes on situation promptly. If the internet service goes down, customers get unable to access their accounts including being unable to withdraw money from ATMs or to use customers debit card. Internet banking is a new business in Pakistan but there are plenty of issues, which need to be explored from various perspectives. Internet banking has shown tremendous growth over the last year. Yet, it is winning customer trusts as advanced technologies are emerging and they are connected virtually to not only at regional but also global levels on banking transactions over the World Wide Web.