The global market for electronic transactions is growing at a phenomenal rate and this trend will continue in the coming years, taking aggregate market to trillion of dollars by the year 2006.
Pakistan must further develop its e-commerce infrastructure, and e-readiness of the banks and other financial institutions. The financial institutions view its development as an opportunity to increase customer satisfaction, provide value-add to existing products, and lower operating costs.
Recent international and more specifically regional trends show that because of more mobile customers, banking is becoming less associated with branch access and more with round the clock availability of one's financial data and resources, multiple channels of delivery with the internet playing a dominant role.
The automation of the banking sector in Pakistan has also been moving forward at a brisk pace and even though in absolute terms we still have a lot of work to do, the percentage growth in the automation of bank branches in very impressive. The foreign and the private banks are certainly leading the way and have made significant strides and continue to automate more branches, bringing them on-line with the central banking applications.
Pakistan's economy has been growing at a pretty fast pace over the last few years, and though people still question the impact of this growth on the masses, there is no denying the fact that the growth has been widespread, and not restricted only to traditional areas such as agriculture.
Among the many sectors that have grown at a rapid pace in recent years, information technology and telecommunications stands out. And the growth in this sector has not only had a major effect on the quality of life of the people, but the benefits have also translated into major revolutions in other sectors as well. One area that has benefited immensely from this unprecedented growth in the IT sector is banking, with the culture of banking at least moving towards a change, if not completely changed thus far, with the advent of the IT phenomenon.
With knowledge regarding the use of technology growing every day, a large number of people are moving away from the traditional style of banking, where people had to wait for hours to get a cheque cashed, or deposit an amount into their accounts. And so has disappeared the phenomenon of eight-hour banking. Most banks offer up to 30,000 rupees of cash withdrawal a day from Automated Transaction Machines, installed at all major cities and locations. And these ATMs are functional round the clock.
Also, the concept of branch banking has almost died, as most banks are now offering online branch connectivity, with the facility of deposits and withdrawal from any branch of the concerned bank all over the country.
"It is (ATMs) much much more convenient. Yu don't have to get out of the office during working hours, plus you can even get out money on holidays," says Rafiq Ahmad, who works with a local airline.
And he is not the only one who thinks like this. The huge popularity, and in fact, the demand for e-banking products, such as ATMs, had led to massive investment and expansion by banks and financial institutions in this regard.
According to the State Bank of Pakistan, the number of ATMs has more than doubled and their transactions and online branch network of banks have more than tripled since 2000. And the best part of this whole expansion is that this has been a broad-based one, with local banks as involved as the foreign banks. According to a report, the number of online branches amongst Pakistani banks have increased from less than 400 in 1999 to more than 2,000 at present, whereas distribution of E-enabled plastic cards amongst banking consumers have increased from less than 300,000 in 1999 to more than 1.6 million. The percentage of electronic banking transactions is now close to five percent for Pakistani banks. Numbers of ATMs in Pakistan has tripled in the last five years to around 800 ATMs across 30 major cities. Analysts and industry experts believe that the trend for continuous progress in e-banking transactions and products would continue at a very fast pace.
Last year, an agreement was reached among all the banks after which the ATM users from all the banks were connected to "1-Link" and "M-Net" ATM sharing switches.
And this is just the beginning. "If you ask from a customer's point of view, he would like to have as much facilities and convenience as possible," said Faizan Agha, who works at a foreign bank. "All the banks now realise this, and which is why more and more online products are being introduced," he said.
Analysts say banks are not only offering products to attract new customers, but also to retain the existing ones. "It is not only a matter of expansion, but of survival as well," says an industry analyst. "With so much being offered all around, why should somebody stick to a bank who offers only the conventional cheque and token system."
And this seems very true. Even in e-banking, ATMs now seem to be a thing of the past. Now, as the exposure of the people in Pakistan is growing, they are demanding more and more. Even local banks have now come up with products and services which one could have never imagined in the previous decade. Banks like the United Bank Limited and Union Bank are competing with the like of Standard Chartered and Citibank by offering online transactions and services, right from the convenience of your office or bedroom, and just through a click on the desktop connected with the internet.
In addition, most banks have 24-hour helpline services to help and support their customer base. You no -longer have to go to the bank to order a new cheque book, or get an account statement, or even to get a pay-order made.
CREDIT AND DEBIT CARDS: Another indication of the growth of e-banking in Pakistan is the rise in use of credit and debit cards. Hardly would now you find a merchant outlet which does not accept these cards. And on the same note, there are only a few banks which are not offering credit cards. Reduction in service charges, brand affiliations o co-branding, and discounts are some of the services being offered by the banks, and this is purely a result of growing competition and customer base.
In addition to the ATMs, credit and debit cards, and online banking, e-business is a phenomenon that can help people in dealing with government institutions on routine basis. And for this purpose, officials say, the government ahs already started concerted efforts. One such example is the recent installation of billing machine by the National Database and Registration Authority, more commonly known as NADRA, where customers can deposit utility bills round the clock. And whats more, they just need a copy of their computerised national identity card, and no extra charges.
Also working on such lines is the National Bank of Pakistan, which plans to automate all 1,200 plus branches, inclusive of automation of the Central Board of Revenue's tax collection. NBP is targeting these branches to be connected through VPN-Dial-up network before the mid of 2006. Utility bills collection automation at the branches and interbranch banking transactions are also being studied for deployment on this newly connected online branch network, according to officials.
Another addition to the e-banking and e-trade in Pakistan is the setting up of interactive business web sites by local merchandises and firms. Nobody in Pakistan could have imagined ordering a book from a local vender instead of Amazon.com, delivered at their doorstep on online payment via a credit card. But this phenomenon is yet to pick up at a rapid pace partly due to t lack of trust and experience on part of the customer.
"I know I will get a pair of shoes if I order it online, but I am sot sure if I will get the right quality on the right time," said Shaista Hussain, a housewife.
"Also, what if the merchant says he has not received my order and my money is wasted?" she questions.
And these are doubts that would be expressed by almost everyone till the time a proper framework and infrastructure is set-up for such type of businesses, and an e-culture becomes ripe in the country.
Officials say the government is very receptive and supportive on e-banking initiatives. Some cyber laws have been already put in place and more are at an advanced stage of approval with the government. Further, the government is also collaborating with the IT industry and private sector business to adopt e-commerce business methodologies, they say.
But having said that, one would surely agree that Pakistan has grown quite smoothly in terms of e-business initiatives, but it still lacks behind if compared with the developed world. And much more needs to be done in terms of ideas and initiatives, as well as building the confidence of the customers in this new type of business in the new era.
ELECTRONIC TRADING: With the introduction of information technology, the face of share trading in Pakistan has virtually changed, and the sole credit from bringing about this revolution can be given to the Central Depository Company of Pakistan Limited, more commonly known as the CDC.
The CDC was incorporated in 1993 and was destined the function of managing and operating the Central Depository System, or CDS. CDS, implemented in Pakistan by an IBM-led consortium - is an electronic book entry system to record and transfer securities. Electronic book entry means that the securities do not physically change hands and the transfer from one client account to another takes place electronically.
The Karachi Stock Exchange (Guarantee) Limited enjoys a 39.8 percent shareholding in CDC, while other partners include the Lahore and Islamabad stock exchanges, the National Investment Trust, PICIC, Habib Bank, Muslim Commercial Bank and others.
Analysts and market players generally agree that the CDC has been instrumental in supporting an effective capital market system in the country. It has not only gained the trust of all stakeholders, but has also helped attract institutional and retail investors both from Pakistan and abroad.
Analysts and officials say that the cost-effective, secured and dependable services provided to the capital financial markets are the key to the success of the CDC.
According to the brains behind the launching of the company, the exponential growth in the Pakistani capital market during the last decade resulted in manifold increase in trading volumes. As a result the physical handling of paper certificates not only became laborious but also time consuming. Therefore, the manual system no longer remained feasible, and resulted in the incorporation of the CDC for the implementation and operation of the CDS.
And it is now a known fact that over the past decade, the CDC has helped the trading system move to a paperless settlement, and also reduced the risk of damaged, lost, forged or duplicate certificates. And top of all, it has resulted in a substantial reduction in time and capital investments for trading.