Submitted to: Mr.
E-Banking in Pakistan: opportunities and challenges
Generally speaking, three factors, quickness, easiness and cheapness have become the catchwords for the competitiveness and usefulness of all the business operations. Particularly it is commonplace today to say that banking is undergoing a radical transformation. The symptoms are new products, new players, new channels etc. This transformation is taking place across all sectors of the banking industry. That is why banks urgently need to improve their ability, to think strategically about IT investments. Only those banks that use their technology resources effectively have the opportunity to secure real competitive advantage in this fast-changing industry through real product or service differentiation.
Secondly, liberalization, privatization and globalization have been recognized as the key elements propelling the world towards the present era, characterized by rapid changes and increased challenges in various fields. In order to meet the challenges of competition unleashed in the global arena, it has become an imperative on the part of captains of various segments of the economy to open up to harvest the advantages that are forthcoming from such global challenges. It is in this context, the most vibrant and important sector, the banking sector, started gearing up to face the challenges of such ground realities. Accordingly, several measures were initiated and implemented for improving and strengthening the competitive position of the banking industry vis-à-vis the foreign banks. Such measures include e-Banking entry into mutual funds and insurance sector business etc.
Thirdly, banking is service-oriented industry, which has peculiarity to implement various social as well as commercial objectives. It is an instrument for the development of the economy of the country. Banks have two roles to play. They create a runway for the free flow of capital necessary for the growth of the economy. At the same time it must attend to lending and deposit mobilization in order to make profit for its survival and growth. Banking, though, is now not a high profit service industry in most countries. In many countries banks are affected by loan losses and this has a great impact on the health of the banks. This has resulted in the poor quality of service. Complaints of deterioration in service are viewed in several quarters. Getting customer patronage and goodwill are becoming a great task and a challenge for banks.
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. Today, a wide range of services are being rendered by banks using the electronic media. Since many years, banks have been operating inter-city transfer of money through demand drafts, mail transfers and telephonic transfers from one city to other or even within the same city and also from bank to bank through telephones. It facilitates availability of funds the next day itself. It is a matter of great satisfaction that the e-Commerce is greatly assisted by the e-Banking through electronic cash cheques and smart cards. It is one of the trend setting paperless mode of effecting payment by two kinds; I) Electronic Credit Clearing, and II) Electronic Debt Clearing. The followings are other delivery channels of e-banking.
It came into operation in the 1970s in the developed countries like the US. It is accessible for corporate customers that have large volumes of payments to effect and dispose of a fully automated accounting system. They can establish a Computer to Computer link with their bank and in this way exchange truly paperless credit transfers which are...