May 23 - 29, 20

Electronic banking has become the need of the hour as it will not only enhance business volumes of banks but also increase their outreach to un-banked areas.

Banking experts told PAGE that the use of enhanced technology has improved the retail banking model and spurred the development of new electronic retail products through alternate delivery channels including the ATMs, mobile phones/branchless banking and the point of sales (POS).

AS per the statistics the Automated Teller Machines (ATMs) are the predominant alternate delivery channel of e-banking being used by the customers and lead the retail level e-banking/online services in terms of volume. Of the total e-banking transactions during July-September 2010, ATM transactions represented 59 percent of the total volume, he said and added that the development of robust and reliable system providing easy access throughout 24/7 and readily supply of quick cash without waiting in long queue is the key behind high volume of ATM transactions. As the number of ATMs continues to grow with increasing branch network, volume of ATM transactions is also expected to grow further.

As per data made available to PAGE, as of September 2010, banks have 4270 onsite automated teller machines.

According to experts, growth in the e-banking, particularly the enhanced ATM network has been made possible through the joint efforts of the State Bank and the banking sector. The State bank over the years has developed enabling regulatory framework covering general and specific areas of information technology and e-banking.

They pointed out that the rapid development of e-banking capabilities, in addition to benefits, carries risks of its own. From the banking perspective, mitigation of these risks is imperative, a pre-condition for which is to first recognize risk and, then take steps to address and manage them in a prudent manner according to the fundamental characteristics and challenges of e-banking services, they said.

They said the SBP needs to closely monitor the rising cases of e-banking frauds and it should carry out information systems inspections for all major banks including foreign banks, Islamic banks and microfinance banks. The consumers complaints vis-a-vis non-functioning of ATMs need to be addressed.

Experts further said the banking industry should take more steps to prevent frauds in e-banking transactions. Common citizens are using more and more debit cards and internet banking in Pakistan as a result online transactions have increased exponentially. Therefore, the banks must make special arrangements to avert fraud incidents, the experts said. "Branchless banking has increased manifold and the facility is offered from many under-services areas, which has increased the chances of fraud in the electronic banking transaction," they said. Therefore, banks are required to be more vigilant and develop infrastructure that can support anti-fraud mechanism, they added.

Nevertheless, continuing technological innovation and competition among existing banking organizations and new entrants have allowed for a much wider array of banking products and services to become accessible and delivered to retail and wholesale customers through an electronic distribution channel such as e-banking. However, the rapid development of e-banking capabilities carries risks as well as benefits, experts said.

Risks linked with e-banking needs to be addressed with legacy computer systems and the increasing dependence of banks on third parties that provide the necessary information technology. While existing risk management principles remain applicable to e-banking activities, such principles must be tailored, adapted and, in some cases, expanded to address the specific risk management challenges created by the characteristics of e-banking activities.