Critical Success Factors for Electronic Banking in Pakistan

Fahad Rehman and Alishba Wazir Khatri rehman.fahad@hotmail.com, smartalish@yahoo.com Institute of Business Management (IoBM), Karachi, Pakistan
Abstract The expansion of electronic banking has started from the use of ATM (Automated Teller Machine), and from there it moved to phone banking, electronic funds transfer, online bill payments, mobile banking, branchless banking and the revolutionary of Internet Banking. The use of electronic banking has eliminated the requirement of banking personnel who helps the customer to perform their financial and non-financial transactions. Now, all the responsibilities have been shifted on the customers to perform transactions themselves. Electronic Banking has been generally used to provide assistance and help to the customers but these changes have increase work and involvement on the part of customers. There are several other assumptions and factors which might be ignorable in terms of customer service. But assumptions can be wrong if the customer is aware and have the basic understanding about the electronic services. Purpose of electronic banking is to enable all the business transactions to occur electronically. This has established a momentous strategic growth and operational benefits to the banks. At present, developing countries have started actively adopting Electronic Banking services and have made it an important part of their financial and non-financial activities. Instead of its capability to provide a bridge for economic and digital gap between different countries, developing countries are still slowly working in adopting Electronic Banking. At present, there is still a lack of E-Banking readiness research in developing countries to fully assess the application of Electronic Banking in different scenarios and environments. This objective of this study is to highlight the Electronic Banking availability and its readiness in Pakistan. The assessment can be done by evaluating some of the important factors which included legal, technological, political, social and environmental factors, which forces Pakistan to excel in this domain. Keywords: Electronic banking, Critical Success Factors, Case Study, Research Analysis, Information System Integration, Electronic Commerce, E-Commerce, Objective The main idea of this research is to present, highlight and discuss the results of a questionnaire survey, which was conducted to evaluate and validate the Critical Success Factors in the success of electronic banking in Pakistan. Issues that were identified in the literature review process have been taken into consideration during this research. The research is primarily concerned with the issues that were identified during the literature review.

Introduction These days. the major focus of banks is to deliver services to customer not through conventional ways but by introducing technological changes such as ATM machines. and vice versa. . shopping at mart and transfer of funds from one place to another. Other objectives of this research include: 1. it refers to a process through which a customer will be able to perform financial and non-financial transactions using electronic device. it saves time.1. customer may not require visiting branch physically and performing transaction. Banks today have been working very aggressively to bring changes in technology at a very faster rate. To ensure that customer is being serviced by the technology. purchase of grocery items. there is an exponential increase in the competition between financial institutions all over the worldwide in providing most convenience to their customers by providing information technology within their reach. These factors have been extracted and known from the available literature where based on several research some key factors have been categorized as being critical. By electronic banking. In the light of those factors. pay utility bills. At present. user friendly UI. questionnaire has been designed in order to validate these factors with respect to existing infrastructure and facilities provided by banks in Pakistan. This services has several advantages with it as it provides 24/7 services to the customers which enables them to shop. Using electronic device. Problem Statement To identify critical factors that plays a role in the success of Electronic Banking in Pakistan 2. Infrastructure and secure environment for performing banking transactions electronically. Banks can provide added advantage to their customers by providing more flexible payment options. 3. It reduces costs. 2. Check awareness of electronic banking in Pakistan Identification of critical success factors in the success of electronic banking Electronic banking services being provided by banks of Pakistan Electronic banking usage patterns This research is important because it tells banking industry the areas of improvement which would help them to take remedial measures to extend their electronic banking services to different its customers. in no time. Mobile banking and Electronic banking. 4. Main focus of this study is to evaluate critical factors which are the main source of success or failure of electronic banking in Pakistan. it is important for institutes to achieve a competitive advantage by providing better services in the market. It also helps the institutions to modify their policies in light of the challenges and issues faced by the banks in providing services to its customers. Internet.

2011) . Also some banks were adding 401 brand new branches in their portfolio in FY05 which the makes the total to 2582 . Pakistan has done many efforts in order to enhance its IT sector along with the other countries like Denmark.3. India.This has enhanced the trust of customer on e-banking 2.4. save time. Today Pakistan is facing a lot of challenges which include organizational. With respect to infrastructure. 2006). Literature Review An Overview The financial sector has now become a key component of the global economy 6.109. Not many regulatory authorities and also most the people are unable to understand English. In Pakistan e-baking has started its growth from FY05 where the data shows that most of the commercial banks have total 842 ATMs and the record number of transactions was Rs. Online banking provides customers to enjoy a number of benefits from any part of the world at any time. (Rahimuddin. provide history of their bank accounts. 2011) Bank customers require improve e banking services in the new and new type of products. (Ahmad. By e -banking the customer can easily perform their transactions without visiting a branch of a bank and they can access the information via their PC which ultimately reduces time. 2007). enhance the cash management of the bank. 2011). phones etc. transfer of credit card amount. 2010) The future banks will be having paperless working environment without any geographic boundaries and will facilitate larger number of the population including the poor segment as well. political instability. 1. one reason that people are adopting e banking is that because they can easily understand and are aware about various products offered by the products offered through internet banking. Availability of power also plays a very important role in developing the online banking in Pakistan 1. there is requirement of a particular bandwidth which supports the whole traffic and also secure privacy.92 billion as compare to Rs 89. 1. in operating & banking e-services. provide quick information just on a click away. (Hassan. The main problems are due to lack of computer education. credit cards. (Ahmad. So e-banking has the potential to expand its services into microfinance banks as well which will bring substantial improvement to the e banking 6.IT Integrated Policies also play a significant to warranty the success as in Pakistan there is ‘mismatch between policies and ground realities’. 2011). Srilanka. Sweden. technological and governmental as well. As per Hagel & Hewlin.Nowadays in financial institutions there are a numerous increasing trends of information and technology which has increased the competition between companies and giving them competitive advantage. It basically provides user friendly & flexible banking system . Government played a very important role in the implementation of policies and to create a healthy environment which has close coordination and cooperation with business community .42 in FY04. In Pakistan e banking is still undergoing with lots of changes 1. (Hassan. 2011). (Hassan. (SBP. saves costs and information can be accessed from any part of the world 1. It reduces costs. and US but still it is way behind as compare to goals set today for digitized world. (Hassan. (Hassan. E-banking facilitates the customers to perform their transactions electronically from one to another account instead of using cheque or cash. 2006). provide facility of e bills.The most common technologies which are used today are ATMs.

SBP has also passed an ordinance which provides legal authenticity to the online transactions. These factors are referred as important to understand and should be taken care by the organization to ensure its success. (Rahimuddin. (Hassan.e. 2010) Challenges: In spite of the benefits online banking has a problem that people have not still developed trust on transaction being performed by them. 1. financial institutions are focusing on the integration of systems to provide wide variety of services from one window. 5. 2011) Strong partnerships between Government and private sectors are two major pillars of country’s development. (Kundi. also it took some time to aware people understand the rules in online banking 4. It is very important for an organization to keep their customers happy and satisfied by ensuring a strong control on the internal factors. the record of online branches on quarterly basis and then uploaded on to the website. Trust. 2010) To ensure that all the internal factors are in control. 24/7 service availability are some of the important factors which are internal and controllable. Internal factors are those which are in our control. 2. 3. (Shah. This will lead to increase customer satisfaction and customers will be comfortable in using electronic services. awareness. (Shah.The IT-policy in Pakistan is also not according to the public interest public . Efficient and effective customer support is an important internal factor along with the quality of services. i. Public key software checks the security of the transactions carried on the internet. Automation taken place in clearance of cheque through a model which will reduce the chances of fraud in online banking. Only then we can eliminate socio-cultural and legal barriers to IT development Continuous Updating of IT and e-Business Systems: There should be approach of continuous updating of e-business systems which is a significant factor in the success of e-Business in Pakistan. (Shah. 2010) . Also SBP has taken various statistics of ATMs transactions. (SBP. 2010) There are always some internal and external factors. organizations involved in e-Banking and e-shopping in the country. now the banks are interconnected with all international banks through credit and debit cards. information security. Improving these services will lead to better and great results in the favor of any financial institutions 5. it should work 24 hours a day 365 days. Here we have used Rockart’s definition. Internet should be integrated with other systems in real-time to experience better services. 2009) The state bank of Pakistan has also played a very important role in to facilitate the online banking system in Pakistan and for which they have designed a payment and settlement system whose main objective to formulate a strategies with the interaction & cooperation of banking sector in order to further enhance the banking system in Pakistan. Another important thing to take care is an environment which is user friendly.5.The policy should be formulated keeping in view the concerns and interests of business community and users who transact online for exchange of goods and services. 2007) Critical Success Factors in e-Banking Critical success factors have been explained by many depending on the purpose for which they were used. Banks have used the Internet as a distribution channel and they should try to keep other traditional channels intact and it should cover different markets as well. however external factors are not in our hands. He says that the CSFs refers to those factors which plays a vital role in success of an organization.

7. 2008) 4. A sample size of 100 was set in which people from various professions were presented with questionnaire. (Shariq. bad navigation. Analysis Procedures The results obtained from online questionnaire was in excel format which was then analyzed using Microsoft Excel 2007. user friendly etc. trust which includes reliability. Reputation of a service provider is another factor that effect trust. interactive. 2007). 24/7 Availability of services.A good website is easy to use. (Kaleem. which we have identified from the literature that are more critical to the success or failure of electronic banking in Pakistan. absence of interactivity in the service setting undermine the customer satisfaction so the website features should be such that it show its unique and advertise product and services to its customers and there should be a system to provide feedback as well which will provide benefit to both bank & customer. 7. also customers’ usually complain about logon times. Website represents the brand image . Survey A questionnaire survey has been conducted in order to validate the factors. Convenience and Cost Effectiveness. (Schaechter. secured. hacking is also threat 10. Awareness . Security concerns and Risk. Electronic banking also provided opportunity for criminal activities. Research Analysis The questionnaire was designed in a way to perform analysis on the critical factors as it was extracted from our literature review which includes Awareness. The analysis is done basis on the feedback received from respondents. Services provided by Bank and Customer service. Questions were treated both individually and collectively for better analysis and consumer insights. provide online resources and improve relationship between bank & customer. 8. 6. it gains customer confidence. security. 5. 2006) One of the most important factors is less fees charged to the customer. 2002) Some websites which have Problems like sluggishness. we conducted a survey on electronic banking and how different people perceive electronic banking. Sample Size To gain insight about consumer behavior and feedback. 8. It is speedy. Data Collection procedure A questionnaire was created on the internet using Google Docs and all data was collected online. (Khan. to attract customer to use e banking and also the delivery of financial services is a part of customer service 9.The slow adoption of e banking is due to the slow adoption of the internet.

Which of the following you use more frequently? Security Concerns and Risk This has been the challenge for all the countries and banks that have been into electronic banking and providing services to their customers. The result shows us that out of 102 respondents 98 uses electronic banking which 96% of the total result. In Pakistan. Also to note that people who are aware of electronic banking are those who use ATM and Internet Banking more than any other option. the disadvantage of electronic banking? . This result will also help us to identify the significance of this survey because people who are aware of electronic banking are the best source to tell us the other factors which are necessary for the success of electronic banking in Pakistan. There is always a room for fraudulent activities to take place and as the technology advances more and more door opens for intruders to breach security barriers. people from professional domain are very well aware of Electronic Banking and they have been using electronic banking instead of conventional banking. in your opinion. What is.Starting with the most critical factor in the success of electronic banking that is Awareness of Electronic Banking. This has been the major area of concern for all the customers even if they use electronic banking or not. The same response we have received from our respondents as they believe that the basic threat and disadvantage of using electronic banking is the security and risk concerns.

make electronic banking more attractive? . But. people are hesitates to use electronic banking and they rather prefer to use conventional banking for their financial transactions.From the results. Therefore If we combine the response received against 24/7 availability of services and Convenience. it is evident that around 60% of the respondents believe that Security Concerns and risks are the 2 major factors that are crucial in the success of electronic banking. Result shows that 32% of the respondents believe that 24/7 Availability of services is the main reason which attract customers to use Electronic banking. What could. Reason being that due to security concerns. in practical world this seems to be impossible or impractical to provide 24/7 services. in your opinion. Here another point to note is that 24/7 availability of services is directly related to the convenience people get because of it. we can see that 54% of the respondents think that important factors involved in the success of electronic banking are 24/7 Availability of services or Convenience. However. 24/7 Availability of services Customers want their banks to be available 24/7 to provide services whenever they need it. with the introduction of electronic banking this has become possible for banks to provide 24/7 services which has become the major reason that attracted people towards using of Electronic Banking.

which means that people are willing to use electronic banking channels. Do you think Automation system used by the bank is improved.Electronic services provided by Banks As we have seen that awareness of electronic banking in Pakistan is very high. efficient and rapid than the normal or ledger banking system? Improvement in automation system is also directly related to the satisfaction of the customers. Result shows that 94% of the respondents are either Satisfied or extremely satisfied with the Electronic Banking system in Pakistan. It is quite evident from the results that people who believe are that bank has improved their automation system. data shows that 11% says that customer services offered for electronic banking are Excellent and 67% says that they are good. Overall result to gauge customer service is good and respondents believe that banks have also worked on to improve the customer services. . Reviewing the results of the survey. This also reflects towards the efforts being placed by banks to improve electronic banking services in Pakistan. The question comes in mind that whether banks are also aligned with the needs of their customers? Are they working on different solutions and products to provide better and more secure electronic banking features to provide convenience and security to their customers? The same question was asked in the survey and we are surprised to see that 93% of the respondents believe that there is an improvement in the automation system which is more efficient and rapid than the conventional banking. How much you satisfied from the e-banking system? Customer Service People are reluctant to use services if the Customer services provided are not sufficient. Good customer services attract customers as this gives them a confidence that if they face any difficulty in using the services provided by bank then they will be helped by the customer support representatives. are more satisfied with the electronic banking services provided by the bank.

Availability. Awareness Security and Risk concerns 24/7 Availability of services Electronic services provided by Banks Customer Service 10. or launch Pocket money cards etc. Make it secure & more attractive through its familiarity to common consumer & improving its efficiency Customer support should be more effective and efficient Make e-banking services available every time customers use it by improving the infrastructure and security of these services Add every utility company. They want aggressive measures to be taken by banks of Pakistan to ensure and address customers concerns. there recommendations are given in the light to improve Electronic Banking services in Pakistan and also to help banks understand the significance of electronic banking and its requirement. Respondents believe that security concerns if the most critical factor and it consideration is not being given for its improvements then it would lead to a problem for the success of Electronic Banking in Pakistan. We have concluded that following are the major things that are crucial and important in the success or failure of Electronic Banking in Pakistan. Much work has to be done. fraud detection and Settlement should be real time Develop applications for smart phone / iPad for customers . add all the kind of top up in the options of all telecoms monthly automatic billing Banks should Make ATM facility working round the clock Promote paper free environment Acceptability of Cards on more places as well as number of ATMs should be increased in the country E-Banking should be made more secure Improve electronic banking facilities. bring people closer to automated transaction processing by spreading awareness. But the customers are very much concerned about the security threats and risk that is associated with the extensive usage of Electronic banking. the biggest risk with these ATM machines is that they are not properly monitored and there have been numerous cases of cards being confiscated or stuck in the machine with the machine being non responsive. However. add all internet connections like wi-tribe . Hidden costs charged by Banks for using the card at POS terminals should be minimized. results of this research show that most of the people of Pakistan are well aware of electronic banking and also are very much satisfied with the services provided by banks in Electronic banking domain. qubee.9.Recommendations Following are some recommendations which we have received from our respondents. Banks should target students of graduate level age 18+ to use card payment systems. Conclusion In conclusion it is stated that Electronic Banking is very useful and today’s need as it provides easy way to monitor your account and to perform your financial transactions at anytime from anywhere in the world.

Muhammad. Threats and Opportunities for E-Business. Hassan. Chp 4. et al. A Survey of Critical Success Factors in e-Banking. EJISDC (2009) 36. et al. Global Journal of Computer Science and Technology Volume 11 Issue 17 Version 1.References 1. Mahmood. Luleå University of Technology 8. Ali. 1-31. The First MicroFinanceBank Ltd. May 2006 7. Khan. Rahimuddin. et al. University of Portsmouth. State bank of Pakistan. E. Policies & Regulations for Expanding e-banking to the Poor.pk 3. Department of Public Administration 4. Journal of Internet Banking and Commerce 9.sbp. Payment and settlement system. Bankers’ Perceptions of Electronic Banking in Pakistan. Blekinge Institute of Technology 5. www. Kaleem. Internet Banking in Pakistan. Shariq Shahzad. Andrea. et al.org. Ahmed. Saadullah.Banking System in Pakistan. Adoption Issues of Internet Banking in Pakistani' Firms. 8.11. Schaechter. Pakistan. Issues in Electronic Banking.0 October 2011 2. Yasir. Luleå University of Technology 10. UK 6. Muhammad Kundi. Ghulam. Ahmad. Shah. School of Management. Awareness of Electronic Banking In Pakistan. Lahore School of Economics. Policy discussion papaer .

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