Electronic Banking On The Rise

Presented by Abdul QayoomSource: Pakistan Economist (Tariq Ahmed Saeedi)

E-BANKINGBanking done electronically is

electronic banking. In other words, it is the products and services provided by the banks by using the electronic

media or internet.

History Of E-Banking

E-Banking made its debut in UK and USA during 1920s. It became prominently popular during 1960s through electronic funds transfers and credit cards. The concept of Web-based banking came into existence, in Europe and USA in the beginning of 1980s. It has been estimated that 40 percent of banking transactions would be done through net at present..

Technology Commencement in Banking

In 70’s, banks started to establish centralized data processing centers.

Essentially the roles of these data processing centers are: collect the handwritten documents from branches compile the documents manual data entry by the operators generate reports for the bank staff and the central

bank execute some banking transactions

Branch Automation

In 80’s, banks started technology investments for the branches.

The first step is offline branches. Terminals connected to local branch computer Second step is online branches connected

centrally. Most of the transactions started to be performed in the central mainframe.

Product Based Banking

In the mid-1980s, banks accepted product based banking and competed with their products.

Banks developed new products for their customers. Credit card Credit deposit account (Super Account) Debit cards

Beside branch, banks brought new channels to give better service to their customers. ATM POS (Point of sale) IVR

Plastic Cards

The plastic card usage grown enormously in last 2 decade.

Plastic card became the main media for bank customers.

Number of credit card in Pakistan:

data collected from BKM

Credit Card Type National Cards International Cards TotalVisa 1,200,704 7,043,834 8,244,538

MasterCard 488,881 4,820,965 5,309,846Other 13,599 36,884 50,483total 1,703,184 11,901,683 13,604,867

ATM

In the mid-1980s, that cash dispensers truly became a worldwide phenomenon.

Now,ATM became the electronic face of banking for most customers.

Beside cash withdrawal, there exist various transaction options from transfer to fund buying/selling.

Alternative Delivery Channels

Anytime, anywhere banking–Telephone Banking– Internet Banking–Mobile Banking–Television banking–Next ???

Telephone Banking

7x24 banking through the phone Main components

Switch IVR CTI(Computer Telephony Integration)

Manage each call using the computerPop up the user information while transferring the

call

Internet Banking

Sample Internet Banking Architecture

• More and more banks are coming to realize that internet is a part of banks' alternative delivery channel strategies activities concentrated in the business-to-consumer segment, focused on retaining clients

• In Internet banking, security is a primary concern. Security concerns have been addressed from every angle within the architecture of the Internet banking application.

Mobile Banking

Current Mobile Banking Applications: SMS Banking WAP Banking

SMS Banking

Basic banking inquiry transactions(balance inquiry, funds, exchange rate inquiry…) are performed by the cooperation of bank and the GSM operator

Security is the main problem

WAP Banking

Wireless application protocol (WAP) is an application environment and set of communication protocols for wireless devices designed to enable manufacturer-, vendor-, and technology-independent access to the Internet and advanced telephony services.

WAP is a global standard and is not controlled by any single company

Various banking transactions offered in WAP environment by banks.

Similar architecture with SMS banking

Smart Cards

About the size of a credit card, a smart card is a plastic card with an embedded microchip that can be loaded with data, used for telephone calling, electronic cash payments, and other

applications, and then periodically "recharged" for additional use. Benefit of smart cards:

enhanced security

off line transaction

programmable card

loyalty

customer information

Rising Trend of E-Banking in Pakistan

Electronic banking (e-banking) and branchless banking transactions continued to show growth momentum as both the volume and value of these transactions displayed a rising trend in the country during the last quarter of the fiscal year (FY2008-09).

According to the Fourth Quarterly Report on “Branchless Banking/ Electronic Banking,” the volume and value of e-banking/ branchless banking transactions in the country reached at 44.5 million and Rs 3.9 trillion respectively showing an increase of 11.1 percent in number and 7.8 percent in value as compared to 6.5 percent increase in number and 11.4 percent increase in value in the previous quarter of FY09 (Jan-March 2009).

During the fourth quarter (April-June) of FY09, the volume and value of online banking transactions in the country reached at 13.7 million and Rs 3.7 trillion respectively showing a growth of 10.8 percent in numbers and 7.4 percent increase in value as compared to 14.8 percent increase in numbers and 11.7 percent increase in value in the previous quarter.

BENEFITS OF E-BANKING

Any time banking Any where banking Cash free banking Reduction in Cost of transaction Easy to make utility payments On-line purchases Competitive advantage Unlimited network Lesser work load Lesser chances of fraud & misappropriation Better profitability Better customer relationship

Drawbacks

Difficult in the adoption of technology

Fear of technologyHigh cost of technologyLack of preparednessRestrictions on usage of technology