May 23 - 29, 20

Electronic banking builds, as the name implies, an electronic relationship between the banks and customers. It refers to a financial transaction that takes place on auto-teller machine, point of sale, real time online branch, mobile, call centre, or internet.

Pakistan's banking sector has developed a payment system to facilitate banking customers electronically, though this system has an outreach to mainly the urban centres.

When it comes to the individual services, mobile, internet, and call centre banking are yet to enhance their shares in the banking cyberspace of the country dominated by the real-time online and plastic cards transactions. Real time online banking is different from the internet banking in that former takes place when an accountholder utilises services (e.g. cash withdrawal or deposit) in a branch other than its own while latter is executed completely over the internet. Internet banking is an underdeveloped segment of the electronic banking in Pakistan. Out of total 40 banks operational nationwide, only 22 banks provide internet banking facility to its customers.

Since electronic banking is free from the geographical and time constraints, banking experiences of customers are enriched and so is the profitability of the banks that create mirror images of their brick and mortar services on the internet and mobile environments to enhance volume and numbers of transactions.

The electronic banking has overwhelmed virtually all the economies that are seeing robust growth in their financial and banking sectors.

Pakistan has witnessed an unprecedented expansion of the financial sector in general and banking in particular over the last few years owing to the growing interest of the foreign financial players in the profitable banking landscape of the country that still has a large population that does not depend on banks to deposit money or to meet their financial needs. The financial sector's virginity was the only reason that has attracted eye-popping foreign investments in the banking sector during the last five years.

The floodgate of foreign investments was opened really in the financial year 2003 when the country received relatively large foreign investments of $207 million in the overall financial business-in the preceding year financial business got only around three million dollar foreign direct investments. Since then, the gate has been wide open; $242 million in 2004, $269 million in 2005, $329 million in 2006, $930 in 2007, incredible $1.8 billion in 2008, $707 million in 2009, $163 in 2010, and $165 million in July-Apr, 2010-11.

Banking infrastructure is built on the back of exuberant foreign and local banks. Constant development of payment system infrastructure is helping banks in Pakistan to come onboard the e-banking bandwagon, since this has been proved an effective incentive to persuade bankable population towards the banking transactions.

E-banking financial transactions through auto-teller machines, point of sale, real time online branches, mobile, call centre (interactive voice response), and internet are on the rise. Though the volume and amount are still less than the paper-based transactions, the growth pattern shows that e-banking may soon become a first choice for cheque clearing, securities settlement, intraday liquidity facility, and interbank fund transfer that collectively accounted for Rs39,068 billion transactions in Oct-Dec, 2010, according to the latest available quarterly report of State bank of Pakistan (SBP). During the same period, e-banking financial transactions were recorded at Rs5,462 billion. Of that, the largest volume of financial transactions occurred in real time online banking (Rs5,107 billion), followed by auto-teller machines (Rs287 billion), internet (Rs45 billion), point of sale (Rs20 billion), call centres (Rs1.70 billion), and mobile (Rs1.67 billion). Total bank branches were at 9,483 by the yearend. Real time online branches stood at 7,036, automated teller machines at 4,734, and point of sale at 44,383. The retail outlets where payments are electronically made are called point of sale terminals.


Pakistan is acclaimed worldwide for the rapid evolution its telecom industry is going through. The cellular phone has become a household commodity for more than half of the country's population and given the mushroomed growth of mobile phone usage, it is expected that a mobile phone would become a common gadget for every household nationwide however underdeveloped.

Internet cannot penetrate in the masses as fast as the mobile phone technology because of the poor literacy rate. Total mobile subscribers crossed the 100 million mark by the end of last financial year (2009-10). The numbers are rising with each passing day, and reportedly touched 10.5 crores, which are substantial in view of the national population of approximately 180 million. Broadband subscribers rose to 900,648 at the end of last financial year, showing a 100 per cent annual growth rate. Users of wireless and fixed technologies stood at 257,510 and 229,329 respectively.

Internet usage or computer operation requires a formal training. Unfortunately, Pakistan has a poor literacy rate and majority of its population does not have an access to the internet privileges. Instead, mobile usage is popular due to its simple operability. Therefore, few banks have taken assistance of banking applications compatible with the mobile environments to provide financial services to the masses.


It is difficult to single out the cause of rising profits of the banks despite upward trend of the non-performing loans, but indisputably, banks are banking on the customers' responsiveness to the banking services preceded with the exotic marketing campaigns. Of course, high spread rate of seven to 7.5 per cent (a difference between a bank pays on capital acquisition (deposit) from a customer and charges him/her on a loan) has puffed up banking profits as well. Many dub the practice as a short-changing by the banks. Eagerness of the private banks to invest in the profitable government papers to escape the infected assets has also been a prime cause. It is worthwhile to note that five big banks hold more than 80 per cent profits generated by the banking sector. Is the monopoly creating unfair competition or constraining growth of the modern banking is a question that needs a pondering by the SBP that wants to extend the financial outreach to the masses for the betterment of the economy.

Electronic banking speeds up economic activities by executing financial transactions quickly and cost-effectively as compared to the in-store banking services. This can well be harnessed to encourage savings in public.