E-banking: An Essential Sector in Banking Industry

E-banking in Pakistan

Master's Thesis, 2012

63 Pages



We thank Almighty ALLAH for giving us the courage and the determination, as well as guidance in conducting this study, despite all difficulties. We wish to acknowledge the following people for their valuable contributions.

We also extend our heartfelt gratitude to our instructor, Dr. Noor Ahmed Memon; you were so wonderful to us. You made us believe that we had so much strength and courage to preserve even when we felt, lost. You showed us light in a tunnel where everything was dark. You were very tolerant and determined to see us through. You were such wonderful motivator even when the copying seemed tough for us. We aspire to emulate you.

We are highly obliged to our parents for their help and assistance in our project.

Finally, we thank all those who assisted, encouraged and supported us during this study, be assure that Allah will bless you all for the contributions you made.

We thank you all.


This dissertation is submitted in the Institute for Business and Technology for the degree of MBA (Management Science).

I, hereby, declare that no portion of the work referred to in this dissertation has been submitted in support of any application for another degree or qualification of this university or any other institution of learning.

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Our this research report is based on the E-banking technology in which customers can access more accurate, faster and quick banking services from the computerized banking system. This system has been adopted by the international banks as well as by the local banks in Pakistan to give efficient services to their customers. The purpose of our research work is carried out to release the importance of E-banking in banking industry, which is being implemented by the banks for providing the electronic services to the customers and to what extent E-banking is growing and giving the benefits to both the customers as well as the bankers. This research work will also help to determine whether the E-banking services are efficient, accurate and rapid in banking industry.

1.1 Introduction
1.2 Purpose of study
1.3 Research Objectives
1.4 Hypothesis
1.5 Research Methodology


1.1 Introduction

In Pakistan, foreign banks initiated in mid 1990 the concept of Electronic banking practices. Domestic banks also adopted the technology and E-banking services like ATM cards and debit cards in late 90’s. The swift improvement in electronic distribution channels has produced tremendous changes in the financial industry in last couple of years, with a rising rate of change in technology. The world is changing at an amazing rate and one of the key forces behind the changes occurrence to business today is Technology. The developments happen in information and communication technology are escalating competition in financial institutions all over the globe. The execution of highly developed technologies is important to achieve a cutthroat benefit. In the world of banking, the development of E-banking has a huge effect on improvement of more flexible payment methods and more user friendly banking services. Recently, the banking industry was very much exaggerated by the technology advancement that transformed the way banks deliver their services, using technologies such as ATMs, tele-banking, the Internet, credit cards, and electronic cash. Electronic banking is a term for the process by which a customer may perform banking transactions electronically without visiting the bank itself. E-banking refers to systems that enable bank customers to access accounts and general information on bank products and services through a personal computer (PC) or other devices. There are many benefits of E-banking as it provides ease to monitor accounts, shop, pay the utility bills, buy thing, take part in auction e.g. Amazon.com and E-Bay, and transfer money from anywhere at any time, it reduces costs, it saves time, and reduces the physical efforts. It is like e-business in banking industry. E-banking is also called as "Virtual Banking." E-banking is a result of the evolving potential of bank’s customers. In Pakistan, the banks want to provide the services which are well-organized, speedy and enhanced the banking system due to the competition among the banks.

1.2 Purpose of Study

E-banking refers to systems that enable bank customers to access accounts and general information or bank products and services through a personal computer (PC) or other device. The purpose of this research paper is to find out whether E-banking is an essential sector in banking industry. As we know that E-banking is new in Pakistani market, we would be highlighting the impact of E-banking and its acceptance in the local market.

1.3 Research Objectives

The reason of this study is to assess the various aspects Electronic Banking and to identify either E-banking is efficient sector in banking industry of Pakistan and we will also assess its feasibility and applicability with respect to individual and corporate consumers.

More particularly the objectives are:

- To review the history and development of electronic baking in the Pakistan. It will facilitate the readers in recognizing the evolution of Electronic Banking and will consequently enable them in evaluating its need in present times. To focus on the growth of Internet banking, as internet banking is becoming familiar in Pakistan.
- To learn banks offer internet banking facilities to their customers.
- To find out whether the people of Pakistan are aware of E-banking.
- To find the critical benefits that bankers and customers expect for them while using electronic banking.
- How can the online banking environment (websites) are described.
- How customer can be entertained within E-banking environment.
- To know the role of government of Pakistan in the execution of the proposed online system.

1.4 Hypothesis

We have included four hypotheses in our research report. We will be using both qualitative and quantitative data to prove our research. The hypothesis that we have taken in this research paper are as follows:

1. E-banking has made flexible payment methods.
2. Impact of E-banking on cost & time reduction.
3. Impact of E-banking in monitoring of account.
4. E-banking provides competitive advantage.

1.5 Research Methodology

This research report is based on both the quantitative and qualitative Research and data are gathered from primary and secondary sources. Secondary sources include research papers of other authors; State bank website, books, news, articles and other internet blogs and primary source include Questionnaire.

Instruments: To collect Primary Data our instrument through which we collect the data was the Questionnaire.

Design: The measurement instrument used to carry out this research was a Questionnaire containing closed ended questions. This method was chosen primarily due to ease in handling and recording Information, ease in deducing and inferring and for collection purposes. The questionnaire was in English. This reduced the non response rate and the respondents easily verbalized and comprehended the answers

Procedure: The research study is conducted to examine the outcomes and responses of our sample In order to measure the growth, benefits and awareness of E-Banking in Pakistan.

Sample and Data Collection

With respect to data collection, for primary Research we have chosen the students who belong to different universities, employees of different Banks and professional, For Secondary sources we get the information from the State Bank of Pakistan website, there published articles, Blogs, Research journals, Banks website and from Books

Sample size:

Sample size use for the research purpose is 100 respondents. The sample size comprise of either gender (68 Males & 32 Females) with different occupation

Respondent Age Group 19-50 Respondents

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2.1 Literature review

Globally banking is no longer confined to the walls of a branch. Many nations are far in advance then the facilities available in Pakistan. The beginning of E-banking in the country was a bit late, but now serious efforts are made to catch up with rest of the world. Electronic banking is the gesture of the future. It provides immense benefits to clients in terms of the user friendliness easiness and cost of transactions. It also creates new challenges for country authorities in regulating and supervising the financial system and in designing and implementing macroeconomic policy. E-banking operations are mainly performed through the internet, doing payments, receiving stock-exchange information or require account and custody account information. Many customers think that electronic banking means 24-hour access to cash through an automated teller machine (ATM) or Direct Deposit of paychecks into checking or savings accounts. But now electronic banking involves various different types of transactions. Electronic banking is used as a substitute for cheques and other paper transactions. Electronic Banking is initiated through devices like cards or codes that permit the authorized, access to account. Many banks use ATM or debit cards and Personal Identification Numbers for this purpose. Some other forms of debit cards are that require signature or a scan. The payment system infrastructure in Pakistan has shown an overall growth trend As many as 466 more ATMs were added to the population of ATMs bringing the total number of ATMs in the country to 5,200 as per (Payment Status Department), State Bank of Pakistan. The ease resulting to E- banking reduced the volume and value of paper-based transactions in Pakistan. The advancement of banking system emphasized in electronic means, payment transactions constantly increase for the foster development.

Nouman Anwar Dar 1: According to Nouman Anwar E Banking is the one of the main product of E commerce that duly provides services to large population. This advantage is applied among the people in the middle and upper social class however the electronic transactions are still part of the regulation due to its heave technological advancement and its interaction in the public. Due to the continuous development and providing services to the large population banking transactions are more expected to be popular among the customers due to its lower cost and power to reach. In Pakistan, banking has transformed itself from conventional cheques to modernized ATM, Credit/Debit cards and other electronic instruments that are used to process transactions. The payment infrastructure has maintained overall growth trend in the 2nd half of FY11 in Pakistan. Electronic Banking has a different delivery platform by which customer can excess their information through personal computers, mobile phones telephone and digital devices.

Electronic banking consist of any system that uses electronic signal tore place people or paper. Another phenomenon that has been highlighted in his paper was E- Readiness. It is the ability to peruse value creation opportunities facilitated by the use of internet. E-readiness is the capacity of the country to promote available technologies like information and communication technologies, and other digital support for successful implementation of E-banking. Country E-readiness is the measure of facilities and digital relationship that country must have to accept these facilities because it is an essential contributor for economic development of country.

Ahmad Kaleem, Saima Ahmad 2: In this research paper authors discussed the idea of E-banking, Customers perception and benefit of E-banking. The most important factors that give confidence and to attract consumers to use E-banking are lower fees followed by reducing paper work and human error which minimizes disputes. E- banking is that electronic distribution channel which reduces the time and human effort for consumer and bankers this is the reason E-banking has shown its growing trend for last couple of years,

Another reason for which consumers attract towards E-banking has reduced the cost and give 24/7 accessibility to operate their accounts because of the different channels of E-banking that include ATM, Debit and Credit cards.

It has been found that there is positive correlation between convenience and online banking and remarked that a primary benefit for the bank is cost saving and for the customer a primary benefit is convenience. Internet Banking has reduced the percentage of customer visiting to the bank with an increase in alternative channels of distribution that minimizes the queries in the branch.

E-banking also gives the advantage to banks by increased availability and accessibility of more self service distribution which reduces the administrative work and expensive branch network. Internet banking also increases the competition within the banking system and also from nonbank financial institution. Due to internet costumer can easily compare the prices across suppliers quickly and easily. As a consequence this drive price and margin downwards. Now a day banks are providing free online services to attract their customers. Along with the benefits there are certain risks associated with E-banking. Although E-banking provides many opportunities for the banks, it is also the case that current banking services provided through internet are limited due to some security concerns, complexity and technological problem. Hewer and Howcroft used the term “Trust” to describe measure of risk.

Here the term “risk” is in the context of security concern and in the context of trust in one’s bank. Empirical studies found trust in perceive risk have a significant positive influence on commitment and ultimately it leads towards overall satisfaction. Results has shown that the customer still have concerns with the security and the safety aspect of the internet, because there are no specific laws to handle internet banking that is why both the customers and bankers have concern over it. This relates the issues such as unfair and deceptive trade practices by the suppliers and unauthorized access by hackers. Disputes can arise from many sources for example websites are not branches of the banks. It is difficult for court to trace out the forgery.

Dr. Himani Sharma3: In this Research paper it has been discussed that education would be a important for expanding internet banking if customer are convinced about the various advantages of internet banking then they will start asking for this services from their banks and customers will create a pressure on their bank to go ahead with internet banking. It has been illustrated that the adoption rate of ATM users were highly among the young customers. It is found that there are six primary dimensions of E-banking services quality which include:

1. Convenience and accuracy
2. Feedback and complaint management
3. Efficiency
4. Queue management
5. Accessibility
6. Customization.

Mols (1999), agreed that the internet banking is an innovative distribution channel that offers less waiting time and a higher spatial convenience than traditional branch banking with much lower cost structure than traditional delivery channels. Internet banking reduces not only operational cost to the bank but also show the way to higher levels of customer satisfaction and retention which results internet banking is very helpful for banks and consumers. It has been observed that change in life style have also changed the features of the banks, now banks are providing different ways to provide good services to their consumers because competition is getting tough and tough in banking industry that is why now a day’s banks are providing different facilities to their customers like ATM, Phone banking, internet banking etc by providing these services bank can easily attract and retain their present and new clients.

This paper also explained the advantages and the security concerns about internet banking. According to author, improved customer access, offering value added services, increased customer loyalty; attracting new customers are the primary drivers of internet banking. An investigation conducted by the online banking association, the member institutions rated security reason as the most important concern of online banking. It is also discussed in this research paper that education is one of the crucial factors for expanding E-banking. New generation consumers and males are more comfortable in using E-banking as compare to females. Most of the studies are taken in foreign countries; this study was conducted to get the bankers prospective about E- banking.

N.D.Oye, M.A.Shakil, N.A.Iahad 4: According to the description provided in this research paper, any use of information and communication technology and electronic means by a bank to conduct transactions and have interaction with the stakeholders. It has been observed and analyzed that the current banking practices in Pakistan. The paper shows why the majority of the population is reluctant to use E-banking in Pakistan. Electronic banking provides relieve and facilities to their customer to use bank website for all kind of transactions in secure environment. Customers can interact through bank’s website anytime to the bank. It is also discussed that all those activities that does help the customer to not to present physically in the bank and fulfill the transaction requirements online through codes, personal information etc are included in E-banking.

Through E-banking it is now possible for the customer to perform all kind of banking transactions from their accounts anytime and in every part of the world. E-banking has made all kind of online shopping easier and more secure. E-banking facilitate customers by making them able to pay off their utility bills, get and loans by installments and making customers able to see their past transaction records and history. 24 hours banking service helps them to keep intact with the banking staff but unfortunately in Pakistan the E-banking process is immature as required for E-banking i.e. Personal Digital Assistance (PDA). Another benefit which is highlighted in this research paper is providing convenience by saving the time and cost of both individuals and companies.

E-Readiness has also been described in this research paper as according to the definition and description of electronic readiness by Economist Intelligence Unit in 2008, the ability to pursue value creation opportunities facilitated by the use of internet.

Further, this concept is explained as the capacity of the country to promote available information and communication technologies and other digital support for successful implementation of E-banking in the country. It is the measure to find out the number of consumer, government and business units’ use of information technology for their benefits.

It is important that bank should have IT infrastructure and internet facility available to facilitate their customers with all kind of online banking services to have an access in online banking. The bank must have an official website which facilitates customers to perform all kind of transactions so that to reduce work load over the banking staff and adopting online banking services which will increase customers’ satisfaction and customer retention. Plastic money like debit/credit cards has also its significant importance in E-banking. It plays a vital role and helps the customer in handling their money in safe and secure mode. E-banking extends the prospect of business. Nowadays business organization and individual can easily access global opportunities. Many companies use ICT application for their distribution activities resulting secure transaction with more profit.

E-banking has to face many difficulties due to which problem arises to recognize E- banking. Many private banks are still using old banking system and they are not availing the benefits from E-banking facilities. Other constraints in the way of E- banking in Pakistan are lack of internet facility with customer, learning how to interact with bank websites, internet cost and technical issues related to PC and technology awareness. One of the major issues that some banks are still avoiding to implement E- banking system is the security issue.

Talha Suhail, S. Taha Hameeduddin5: Defines Electronic banking is the sign of the future. It provides massive benefits to consumers in terms of the easiness and cost of transactions. E-banking creates new challenges for country authorities in regulating and supervising the financial system. Due to the Electronic banking customers can easily compare banks' services and products, which have increased competition among banks, and allow banks to go through new markets and make bigger their geographical reach. E- Banking is providing a lot of facilities like getting loans and mortgages facility by just one click. Transactions can be verified and many banks provide information of transactions for the last few months. Paying of bills is also very simple these days with online banking. Through internet banking one can get the facilities of insurance, loans, investment and all of these can be done through simple online Application. Internet banking has gained its popularity over the years and has enhanced internet based capabilities. It saves a lot of time and you can get full information of every transaction you have made. Internet banking has quite a good impact on the people and consumers of E-banking. They really like this service given by the banks but there are some users who do not trust financial institutions for banking online for the sake of protecting their account balances. They only focus on the negativity rather the benefits. Despite of the fact that online banking has reduced road robberies but personality stealing, different scams and other online robberies has led many people not to trust these institution. Recently several governmental forces and a number of industries have joined hands to fight against the online frauds to provide the users a decent understanding and faith on this service. Due to the negatives involved, and security concern it has not succeed totally but due to its more benefits peoples are linked with it and are more worthy.


1 Nouman Anwar Dar, Awareness of Electronic banking in Pakistan, 2011

2 Ahmad Kaleem and Saima Ahmad, Bankers Perception of Electronic Banking in Pakistan, April 2008

3 Dr. Himani Sharma, NJRIM VOL.1, NO.1, JUNE 2011

4 N.D.Oye, M.A.Shakil, N.A.Iahad, International Journal of Engineering Research and Application (IJERA), E-banking: A Case Study of Askari Commercial Bank, Pakistan.

5 Talha Suhail, S. Taha Hameeduddin, Internet Banking & EPS, August 9, 2009.

Excerpt out of 63 pages


E-banking: An Essential Sector in Banking Industry
E-banking in Pakistan
Banking & Finance
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ISBN (eBook)
ISBN (Book)
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This piece of work is a group effort of two students. Teachers comment our work as Good work done by the students.
Ebanking, Banking, Banking industry in Pakistan, Ebanking an emerging field in Banking sector
Quote paper
Salman Ahmed (Author), 2012, E-banking: An Essential Sector in Banking Industry, Munich, GRIN Verlag, https://www.grin.com/document/206653


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