Sep 26 - Oct 2, 20

In the absence of online banking network during 1990s, most of the banking transactions in Pakistan were conducted at the bank branches in person and manually. The advent of information and communication technology and availability of faster and reliable internet connections since last decade have facilitated the development of e-banking channels in the country for conducting online transactions. Internet has made banking easier more efficient and allowed banks to offer newer services and innovative products to their consumers thereby further reducing the need to stop by a bank branch.

Online banking enables customers to perform all routine transactions such as cash withdraw, account transfers, balance inquiries, bill payments, and stop-payment requests.

Since e-banking encompasses broad range of established and emerging technologies, the word like 'online banking' and 'electronic banking' are used interchangeably in various countries. Internet is used as a primary medium of communication between the core banking application and various e-Banking channels famously known as Alternate Delivery Channels (ADCs). In Pakistan, however, said segregation is quite different from the international practice.

As evident from the quarterly reports on the Retail Payment Systems published by the State bank, online banking in Pakistan accounts for those transactions that are conducted at online branches commonly known as real-time online branches (RTOBs) of a commercial bank. The rest of the transactions conducted over ATMs, POS terminals, telephone (IVR) and internet are considered as e-banking transactions.

The scope of RTOBs is limited to intra-bank (on-us) transactions and for their account holders only. For example, Bank Al-Habib offers online banking facility to its account holders at their designated online branches all over Pakistan. Cash is accepted at any online branch for crediting accounts at another branch.

While analyzing the quarterly reports on the retail payment systems available at the SBP website, it has been observed that online banking (RTOB) transactions have recorded a consistent growth from merely 10.4 million transactions in 2005 to nearly 68 million transactions in 2010. Similarly, the value of these transactions has also increased from Rs2.79 billion in 2005 to Rs18.12 billion in 2010.

The quantity of RTOBs has also increased from 3,264 in 2005 to 7,036 online branches in 2010. This implies that out of total 9,483 bank branches of different commercial banks, 7,036 (or 74 per cent) branches were providing real-time online banking facilities to account holders in Pakistan.


NARROW MARKET BASE: Poor communication infrastructure and non-availability of internet facility to larger strata of population have been cited among the main issues faced by various commercial banks offering online banking facility to their account holders in Pakistan. As reported by Internet World Stats, with more than 187 million population (2011 estimates), the internet facility in Pakistan is available to merely 20.4 million (or 10.9 per cent) people. Resultantly, a consumer in Pakistan seems to be more comfortable with brick-and-mortar (including ATM) banking model.

Lack of Awareness and Know-how: As observed, most of the accountholders are not aware about the online banking facilities and how to use them? The banks, in this regard, need to start a comprehensive awareness program for their consumers informing them about the online products and services and the benefits of using these real-time facilities.

In addition, the employees are also needed to be properly trained for effectively managing the online portfolio of their bank.

LACK OF REGULATORY FRAMEWORK: The regulatory environment for the banks to indulge into or offer online banking facilities is not propitious. Availability of a proper regulatory framework will, therefore, encourage banks to develop and expand their online banking network and offer innovative products and services to their consumers on their branch network across the country.

SECURITY BREACHES: By allowing the employees and consumers to access the bank's systems and applications through internet can create several security issue as well as unnecessary reputation risk for banks until otherwise properly monitored and secured. Few stories of hackers draining online bank accounts in different countries are still fresh in our minds. In this reference, banks needs to deploy necessary security measures and required procedures to safeguard their virtual networks and core banking applications from hackers and disgruntled employees

LIMITED SCOPE: At present, the scope of online banking is limited to intra-bank (on-us) transactions and for the existing account holders, which in fact hindered the growth of online banking culture in the country.

HIGH TRANSACTION COST: Banks offering online banking facility usually charge high transaction fee on various online transactions form their consumers despite of the fact that online banking provides several benefits to the banks including substantial savings.


Real-time or online banking provides immense benefits to the banks and the consumers for conducting day to day transactions. For banks, it provides increasing efficiency, substantial reduction in cost, new customers, and also streamlining the branch banking operations to a greater extend.

For customers, it provides a greater convenience, increasing ease of use, cost savings, and also providing another avenue of cash withdrawal, transferring and deposition funds from different locations in a real time mode.


As far as the opportunities are concerned, in the presence of a huge untapped consumer base, the volume and value of online banking transactions can substantially be increased in Pakistan by way of developing a necessary physical and virtual infrastructure since the increase in online banking transactions correlates with the spread of faster and secure broadband connections. As of 31 December 2010, the total share of online banking transactions accounted for only 31 per cent of the total e-banking transactions as mentioned in the SBP quarterly reports on the retail payment systems.

Increasing awareness among the accountholders and trained employees will provide the banks another opportunity to increase online banking volume on their networks and reduce operational costs and customer counters in their branches.

Greater opportunity is also available with the State bank to Pakistan, especially after the enactment of Payment Systems & Electronic Fund Transfer Act by the parliament in 2007, to issue regulations on online banking for the benefit of industry, safeguard the consumer interest and encourage new entrants or banks to offer online banking facility.

By taking appropriate measures, the scope of online banking can be expended to accommodate the walk-in customers and other banks in the network thus facilitating inter-bank (or off-us) online transactions. Banks also need to invest on their infrastructure to bring in more branches online thereby developing an online banking culture in the country.