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E-Banking and Role of E-Banking in customer

Satisfaction and How to Increase Public Awareness



By: Fahim Ullah Khan (Gomal university)
To: Mr. Maqbool Ahmed Khan (Chief Manager)



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Table of Contents




Abstract.....3
Acknowledgement .......4
Introduction..5
Definition of E-Banking..7
Background..7
Services Provided by Commercial Bank thorough
E-Banking....10
E-Banking Service in Pakistan...14
Awareness of E-Banking in Pakistan .25
Measure to enhance Public Awareness.. 33
Pros and Cons of E-Banking . 35
Various Risks associated with e-banking. .40
Conclusion .................................................................................52
Recommendation.53
References54

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Abstract


My this Project report is based on the E-banking technology and its use in which
customers can access more accurate, quicker and rapid banking services from the
computerized banking system. This system has also been adopted by the
international banks as well as by the local banks in Pakistan to give efficient
services to their elite customers.

The purpose of our research work is carried out to unlock the significance that
Pakistani banks are connected with this type of e-banking technology that is being
implemented by the banks for providing the electronic services to the customers
and in what extent this technology is relevant to customers. This research will also
help to determine whether the e-banking services are more efficient, accurate and
rapid banking services.
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ACKNOWLEDGEMENT





I want to present my acknowledgment to all the solicitous intellects that assisted
me, visualized my idea and carryout into corporeal certainty. First of all, I pray and
bow head in gratitude to Almighty Allah, the lord of Universe who is either of all
knowledge and wisdom to mankind, who blessed me the Power, Vision,
Proficiency and Strength Persistence with the capability to complete this endeavor
and realize our research objective.
Other than to my parents whose institution elevated me to the statures I attain
today. I deem it my most please duty to express my deep sense of gratitude to my
Coordinator, Mr.Shahab-ud-din (OG-2) and friends and I would like to
acknowledge this research report to my kind Supervisor Miss Tamkeen Ali who
alleviated me all over the report, because without her I would not be able to
complete this.







Fahim Ullah Khan

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INTRODUCTION


When Internet has entered into our daily life, the most dimensions of our lives
such as education, communication, business, etc, were overshadowed by this novel
phenomenon. One of these dimensions is to handle banking affairs through the
Internet (Shirley & Shahreza, 2007). According to (Richard Nyangosi & Arora,
Sumanjeet Singh, 2009) banking through electronic channels has gained much
popularity in recent years.

This system, popularly known as 'e-banking', provides faster delivery of banking
services to a wide range of customers. Information technology is becoming an
important factor in the future development of financial services industry, and
especially in banking industry (Nami. M. R, 2009). In current business
environments, customers using the services products of the banks want better
choice. (Avkiran, 1999) stressed the importance of the human touch in the
customer services. The capability of banking staff can be expected to directly
affect the customers satisfaction. However, e-banking technologies can help in
better understanding customers needs and customizing the services/ products
according to their needs.

In the new era there is a need of bank customers to get improved electronic
banking services and also better relations with the bankers. It is also the need of
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time to provide efficient services/products to the customers. In Pakistan however,
such kind of electronic banking has started recently.

Online banking system present to their consumers a set of information-related
benefits that favors to adopt e-banking, including the facility for the customers to
control their bank accounts at any time and any place, and to access information
content for making investment and financing decisions (Howcroft B, 2002).



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DEFINITION OF E-BANKING

Electronic banking, also known as Electronic Funds Transfer (EFT), online
banking or internet banking. It is basically the use of electronic methods or means
to transfer money electronically directly from one account to another account, from
one person to another, rather than cash or cheque.
We can use electronic funds transfer for:
Withdraw money by an ATM machine with a personal identification number
(PIN), for our convenience, day or night. We can guide our bank or credit union to
pay automatically monthly utility bills from our account, or our auto loan even our
mortgage payment.
Buy food, fuel for our personal transport, and other goods at the purchasing point,
using a credit card rather than cash.
Use a prepaid smart card embedded for our daily purchasing like pay phone, toll
expenses, daily college expense or any bookstores.

BACKGROUND

The increasingly change in worldwide competitiveness in commercial behaviors
has improved the volume of bank in the world. It has produced additional banking
knowledge and also improved customer demand of services given by banks.

This revolution has set a motion in the banking sector for the provision of a
payment system that is compatible with the demands of the electronic market
(Balachandher, 2001). On the behalf of increased competition, many banks and
organization did not only reduce their costs but they have also increased their
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products. Technology has changed the preconditions for service delivery,
dramatically in recent years (Frederickson, 2003).

The banks are the financial institutions to provide consumers savings services,
money transmission services and credit services (Sinkey, 1990). In other terms,
banks are concerned with safe transaction and collection of management functions.
In this regard the main object of the banks is to making profits and giving best
services to their customers. Customers are eager to a bank behavior because the
customers are the most significant cause of a banks deposit and revenue creation.
These customers may either be a single person or group of a person or
organization. According to (Chaudhury &Kuilboer, 2002) the potential of
providing innovative services over the Web is limited only by ones imagination.

Online services, especially banking services, are becoming more attractive and
alternative to visiting service outlets or phone call centers for increasing their
customers (HR- Focus, 2000). Therefore it become easy for the customers to prefer
online services (Szymanski &Hise, 2000), feel more in control of the service
process (Bateson, 2000) to avoid from human contact with time saving (Meuter
M.L. 2000).

In Pakistan however, banking organizations have been focused on censure for not
given to their customers with original and suitable banking services. Therefore, the
outcome that some customers, find it suitable to keep their money or reserves at
home than the banks. Studies will carry out by two famous banks working in
Pakistan, which have researched and applied computerized technology for the
delivery of banking services. Most of the bank branches have their own network
across the country (Safo, 1990).
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Although, banking administration has delayed to execute computer technology in
banking exercises. A number of studies have concluded that IT has positive effects
on bank services delivery to customers, bank productivity, cashiers work, banking
transaction and banking investment. So, these have positive effects on the growth
of banking system (Balachandher, 2001).

In addition, delivery the high quality services is a way for the banking to improve
their relationships with their customers. By the Delivering high quality services,
banks can achieve customer satisfaction and through customer satisfaction banks
can gain loyal customers (Grnroos, 2000). Because of the highly undifferentiated
services and products, financial organizations specifically banks become main tool
for competing in this marketplace (Kim J.K, Han, Choi & Kim S.H. 1998).
Much research has been done about the quality of services and customer
requirements in the traditional banking environment, where personal interaction
between the customers and the bank employees takes place (Oppewal&Vriens,
2000). Therefore, this is very important for the online banking services providers
to become more capable about the customers perceptions of the online banking
services quality. On the other hand the customers also have more expectations and
demand when they are using e-banking services either the services are satisfactory
or not. Because it is quite easier for customers to evaluate and compare the benefits
of competing services (Santos, 2003).





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SERVICES PROVIDED BY COMMERCIAL BANK THROUGH E-
BANKING

The Basic Level Service is the banks web site which disseminates information on
different products and services offered to customers and members of public in
general. It may receive and reply to customers queries through email;
In the next level are Simple transactional Web sites which allow customers to
submit their instructions, applications for different services, queries in their
account balances, etc. but do not permit any fund-based transactions on their
accounts.
The third level of Internet banking services are offered by Fully Transactional Web
sites which allow the customers to operate their accounts for transfer of funds,
payment of different bills, subscribing to other products of the bank and to transact
purchase and sale of securities, etc.
The above forms of Internet banking service to the customer by new banks are
delivered through Internet or other electronic delivery channels as value added
services. Some of these banks are known as Virtual banks or Internet only
banks and may not have physical presence in a country despite offering different
banking services.
Internet Banking enables you to manage your accounts and investments more
easily. It also gives you greater control over balances, transfers and fixed deposits.




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The services are available for customers:
Account Info and Other Services

o Balance Inquiry
o Account Statement
o Cheques Book Request
o Fixed and Call Deposit
o Cheques in Clearing
o Change Password
o Address Change Request
o Funds Transfer
o Bill Payment (Electricity, telephone bills etc)
o Remittance Request
o Account Usage

Credit Card Services
The credit card enables the cardholders to purchase any item like clothes, jewelry,
railway/air tickets, etc., pay bills for dining in a restaurant or boarding and lodging
in hotel, avail of any service like car rental, etc. on credit and the customer has to
pay total expenses on purchasing to the bank after a particular period.

o Balance Inquiry
o Transaction details
o Credit Card Payment
o Change Password
o Account Usage

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Debit Card services
A debit card is issued on payment of a specified amount to the bank. The customer
will use it anywhere to carry out the purchasing, amount for which will be debited
from his account by a bank.
Thus it is like an electronic purse, which can be read and debited by the required
amount. It may be noted that while through a credit card the customer first makes a
purchase or avails service and pays later on, through the debit card a customer has
to first pay the due amount and then make a purchase or avail the service.

o Making purchases using your debit card
o Withdrawals at any time through ATM
o Secure mobilization of money

Cell phone Internet Services

This system allows you to access the banks cell phone banking service via the
Internet using your cell phone. The following transactions can be conducted:

o Get balance enquiries
o Make account payments
o Make inter-account transfers
o Get mini-statements of the last five transactions
o Recharge MTN and Vodacom prepaid airtime
o Increase or decrease your overdraft limit

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Telephone Banking Services
Your telephone gives you access to your bank accounts 24 hours a day,
seven days a week. You can do your banking from your home or office,
from your car, and even at the riverside
Smart Cards:
Smart Cards have a built-in microcomputer chip, which can be used for storing and
processing information. For example, a person can have a smart card from a bank
with the specified amount stored electronically on it. As he goes on making
transactions with the help of the card the balance keeps on reducing electronically.
When the specified amount is utilized by the customer, he can approach the bank
to get his card validated for a further specified amount. Such cards are used for
paying small amounts like telephone calls, petrol bills, etc.

ATM Cards:
The card contains a PIN (Personal Identification Number) which is selected by the
customer or conveyed to the customer and enables him to with draw cash up to the
transaction limit for the day. He can also deposit cash or cheque.



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E-BANKING GROWTH IN PAKISTAN

In a recent survey done in Pakistan on April 14, 2014, the number of transactions
through ATMs reached over 61.7 million in October to December 2013, it showed.
The number of ATMs in the country has reached 7,684 for the quarter ended
December 2013, showing an increase of 10.2 percent from the previous quarter.
As of December 31, 2013, for every 100,000 people, there are 4.2 ATMs in the
country and during the same period, Rs635 billion was transacted using this
channel, it said.
The fastest growing payment channel in the country is mobile banking in which the
number of transactions increased by 170.7 percent as compared to that in the same
period last fiscal year. Presently, there are around 1.5 million registered users of
mobile banking in the country, it showed.
Furthermore, as of end of December 2013, 24 banks are offering internet banking
services that constitute a volume share of four percent of total e-banking
transactions, it said, adding that during the quarter under review, 3.9 million
transactions amounting to over Rs161 billion were conducted by 1.37 million
registered users on internet banking. This showed a growth of 5.7 percent in
volume and 2.7 percent in value of transactions as compared to the previous
quarter.
The volume of e-banking transactions in Pakistan has grown considerably over the
years. During the quarter October-December, 2013, the volume and value of
overall e-banking transactions grew by 5.1 percent and 8.7 percent respectively to
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the last quarter and by 22.7 percent and 10 percent when compared with the same
period of the last year.

During the quarter under review, Pakistan real-time interbank settlement
mechanism (PRISM), the large value payment system of the country processed
141,667 payments worth over Rs. 35 trillion. This showed an increase of 8.2
percent and 15 percent in volume and value respectively compared to the previous
quarter.
Real time online banking (RTOB) has the highest share of 89.9 percent in value
with 25.2 percent share in volume of transactions. The remaining portion of
transactions in terms of volume is captured by point of sale (5.9 percent), internet
(4 percent), call center (0.2 percent) and mobile banking (1.5 percent) respectively.
The number of online branches is 10,596 which accounts for around 95 percent of
the total bank branches in the country; around 24.5 million transactions amounting
to Rs. 7.48 trillion were performed via this channel during October-December of
FY13-14. As on 31st December 2013, there is around 18.3 Point of Sale (POS)
machines for every 100,000 people in the country.
The number of plastic cards (debit, credit and ATM only cards) reached 22.38
million showing a decline of 4.2 percent compared with that in the previous
quarter. The Credit cards showed a significant drop of 11.4 percent compared to
the last quarter. In contribution of plastic cards, debit cards have the highest share
of 89.6 percent.




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E-BANKING GROWTH IN PAKISTAN (STATE BANK 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
(2008-2009).
1. 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).

2. 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.

3. According to the report, during the fourth quarter, the volume and value of ATM
transactions in the country reached at 25.2 million and Rs 189.0 billion
respectively showing a growth of 12 percent in numbers and 12.2 percent increase
in value as compared to 5.2 percent increase in numbers and 10.2 percent increase
in value in the third quarter.
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4. During the period under review, the volume and value of internet transactions in
the country recorded at 0.6 million and Rs 22.2 billion respectively, showing an
increase of 15.4 percent in numbers and 35.7 percent increase in value as compared
to 2.8 percent decline in numbers and 2.1 percent increase in value in the previous
quarter. Whereas, the volume and value of mobile transactions in the country
recorded at 21,733 and Rs 4.9 million respectively showing an increase of 40.6
percent in numbers and 48.2 percent increase in value as compared to 12.1 percent
decline in numbers and 15.4 percent decline in value in the previous quarter.

5. According to the report, the total quantity of ATM machines during April-June,
2009 period reached at 3,999 registering a growth of 5.7 percent as compared to
7.4 percent increase in the previous quarter. The volume of Real Time Online
Branches (RTOB) during the quarter reached at 6,040 and recorded a growth of 1.3
percent as compared to 1.8 percent increase recorded in the previous quarter. The
total quantity of POS terminal reached at 49,715 showing an increase of 2.7
percent in number as compared to 1.1 percent decline in previous quarter.

6. It said that total quantity of cards (debit / credit /ATM only) in circulation during
fourth quarter of FY09 reached at 8.9 million which shows an increase of 6.6
percent as compared to 3.1 percent decline in the previous quarter. The quantity of
credit cards has decreased by 0.6 percent as compared to 6.2 percent decrease in
the previous quarter. The quantity of debit cards has increased by 9.6 percent as
compared to 2.5 percent decline in previous quarter and stood at 6.4 million, it
added.

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7. The report pointed out that paper-based instrument during the fourth quarter of
FY09 witnessed a growth of 4.8 percent to 85.6 million in numbers compared with
1.4 percent decline in the previous quarter (81.7million). The value of transactions
decreased by 6.1 percent to Rs 33.1 trillion as against 1.6 percent increase or Rs
35.3 trillion recorded during third quarter of FY09.

It said that during the last six quarters the transition from manual (paper-based)
banking to e-banking has been gradual, yet consistent, in terms of both volume and
value of transactions. The composition (in percentage) of electronic transactions
increased to 34.2 percent of the total number of transactions as compared to 32.9
percent recorded last quarter. In terms of value, the same increased by 10.5 percent
as compared to 9.3 percent rise recorded last quarter.

E-Payment Grow To Rs. 4.1trillion FY 2010

The electronic payments continued to show a rising trend as both the number and
value of such transactions increased in the second quarter (Oct-December) of the
current 2009-10 fiscal year (FY10).
As per State Banks Second Quarterly Report on Retail E-Payments and Paper
Based Instruments released on Friday, the volume and value of E-Payments
transactions in the country during the second quarter of FY10 reached 46.4 million
and Rs 4.1 trillion respectively showing an increase of 0.2 percent in number and
6.1 percent increase in value as compared to 4.0 percent increase in number and
0.3 percent increase in value in the previous quarter.

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According to the Report, total number of Automated Teller Machines during the
second quarter reached to 4,217 registering a growth of 4.0 percent as compared to
1.4 percent increase in the previous quarter. The volume of Real Time Online
Branches (RTOB) during second quarter reached at 6,587 and recorded a growth of
7.6 percent as compared to 1.3 percent increase recorded in the previous quarter.

The total quantity of POS terminal reached 50,920 showing a decrease of 1.5
percent in number as compared to 4.0 percent increase in previous quarter. The
volume and value of debit cards transactions were reported at 29.98 million and
Rs. 235.25 billion respectively showing an increase of 3.7 percent in numbers and
9.7 percent increase in value as compared to 3.0 percent increase in numbers and
2.2 percent increase in value in the previous quarter.

Similarly, during the second quarter of FY10 the volume and value of credit cards
transactions were reported to be 3.8 million and Rs. 17.0 billion respectively
showing a decrease of 10.0 percent in numbers and 8.7 percent decrease in value as
compared to 6.9pc decrease in numbers and 2.6pc decrease in value in the previous
quarter. In addition, the total number of cards (debit / credit /ATM only) in
circulation during the second quarter reached to 9.95 million which shows an
increase of 6.8 percent compared to 4.3 percent increase in the previous quarter.

E-Banking Transactions Rose To Rs. 12 Trillion I n Fiscal Year 2011 (J an-J uly
2011)

The value of e-banking transactions aggregated to Rs 12 trillion during the second
half of FY11, showing an increase of 19.0 percent as compared to the first half of
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the year, according to State Bank of Pakistan's Payment Systems Half Yearly
Review.
The volume of such transactions during the period under review reached 125.9
million, depicting an increase of 15.5 percent as compared to the first half of FY11,
the Review said, adding that payment system infrastructure in Pakistan had
maintained overall growth trend for the second half of FY11. The Automated
Teller Machines (ATMs), which are the largest channel of e-banking transactions,
showed 16.5 percent increase in number of transactions, and 19.0 percent increase
in value, raising the share of ATM transactions in total e-banking transactions to
58.8 percent and 5.4 percent respectively, the Review said, adding that the number
of Real-Time Online Branches (RTOB) transactions grew by 14.7 percent and the
value of transactions increased by 18.8 percent as compared to first half of FY11.
"These transactions contributed 31.6 percent in total volume of e-banking, and 93.2
percent in the value of such transactions respectively," the Review observed.
According to the Review, 466 more Automated Teller Machines were added in the
system, bringing total ATMs in the country to 5,200, while 380 more bank
branches were converted into Real Time Online Branches (RTOBs).
"A total of 7,416 bank branches (78 percent) are now offering real time online
banking out of total 9,541 branches in the country.
The number of plastic cards at 14 million also registered an increase of 6.2 percent
during the period under review as compared to the numbers during the preceding
half year," the Review added. It said that total number of POS terminals at 37,232
depicted a decline of 16 percent as compared to 44,383 terminals in the first half of
FY11."
This decline in the number of POS terminals is due to business considerations in
terms of which investment in ATMs was considered a more viable strategic option.
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The volume of POS transactions in the country during the second half of FY11,
however, reached 7.2 million showing an increase of 2.8 percent. The value of
POS transactions at Rs 33.9 billion registered a 4.4 percent decrease as compared
to the first half of FY11," the Review said.
The overall increasing trend in payment system infrastructure was also witnessed
in the large value payments settled through Pakistan Real-time Interbank
Settlement Mechanism (PRISM), which increased by 14.8 percent in volume and
21.9 percent in terms of value as compared to the first half of FY11, it said and
added that the major portion of PRISM transactions, in terms of value was of
settlements against securities which accounted for 46 percent of the total
transactions followed by Interbank Funds Transfers at 37 percent and settlement of
retail cheques through multilateral clearing at 15 percent.
The Review said that the volume and value of paper-based retail payments during
the second half of FY11 were recorded as 177.3 million and Rs 84.6 trillion
respectively indicating an increase of 3.5 percent in the volume of
transactions."The value of transactions has increased by 13.3 percent as compared
to the first half of Year 2011. The contribution of paper-based payments in total
retail payment transactions was 58.5 percent in terms of volume and 87.5 percent
in terms of value," it added.
July to September (2011)






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Banking institutions are showing tremendous growth day by day. Significant
positive changes shown in statistics table: 2 below during the 3rd quarter of year
2011.



















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24























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Awareness of E-banking in Pakistan:
In order to know whether the public is aware about E-banking and the various
services it is offering and also to check the level of acceptance or the utilization of
E-banking, a questionnaire was prepared to get the idea.
Following results were achieved:


Table 1 shows the different questions and their association with gender. First
question is about Awareness of electronic banking. Total respondents who
answered this question were 396 in which 196 were male respondents and 200
were female respondents. This result shows that awareness of electronic banking is
dependent on gender. Next question was answered by 385 total respondents from
which the amount of male and female were 190 and 195 respectively.
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Its results Show that providing e-banking services by banks were highly dependent
on gender. Third one is about awareness of SMS banking which was answered by
196 male and 195 female respondents. Its result shows that awareness of SMS
banking is also dependent on gender. Now the next question is about Internet
banking awareness which was answered by 189 male respondents and 198 female
respondents and its result shows that awareness of internet banking is dependent on
gender. Next question is about awareness of ATM card usage. Total 391
respondents answered that question from which the amount of male and female
were 193 and 198 respectively. It results shows that awareness of ATM card usage
is not dependent on gender.
Now there is a question about Phone banking awareness so total 392 respondents
answered that question from which 193 were male and 199 were female and its
result shows that phone banking awareness is not dependent on gender.
The seventh question was asked by respondents about their satisfaction about e-
banking services providing by their banks and total 390 answered that question and
its result shows that satisfaction about e-banking services providing by banks is
depends on gender. Now there is second last question which was answered by 191
male and 195 female respondents and its result shows that satisfaction about
security of e-banking providing by banks is not depends on gender. Last question
is about the using e-banking service in future and its results are highly dependent
on gender.





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Now there is a table no.2 which shows the description of the question, Aware of
electronic Banking. It shows the amount of respondents from strongly disagree
to strongly agree. The highest figures of people are agreed about awareness of e-
banking. In male respondents 64 were agree which is 33% of total male
respondents. Likewise, in female respondents 57 were agreeing about it which is
29% of total females.

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Now there is a simple bar chart of the Table no.2 which shows clearly that very
less amount of people are strongly disagree or disagree, mostly are agree and
strongly agree that they know well about e-banking. Now there is a table no. 3
which shows the association of education level with different research questions


In table no. 3 there is a demographic of education whose relationship with research
questions is given in above table. First there is a question about awareness of
electronic banking. Total respondents were 384 from which the education of 8
respondents were primary, 7 people had just completed high school, 10
respondents complete their secondary education,195 were graduate and 164 were
post graduate. Its result shows that awareness of electronic banking is highly
dependent on education. Secondly there is a question about use of debit or credit
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cards for online transactions. Total respondents were 376 from which respondents
were from different education level which are given on above table. Next question
is about awareness of ATM card usage, which is responded by 381 people and its
result shows that it depends on education. Next question is about Phone banking
awareness, which is answered by 380 people and it result shows that it is not
dependent on education. Fifth question is about feeling of risk for hacking of
passwords, 378 people responds that and its result tells that it is also not dependent
on education and next there question are also not dependent on education



In this table results shows that mostly people are graduate whose percentage is
51% percentage of total respondents in which highest percentage of people have
neutral point of view about that. Following is the table no. 5 which shows the
association of age with different research questions.


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Above table shows the relationship of research questions with age. In first question
it is asked about command on computer. This question was answered by total 391
respondents from which from which 91respondents had age less than 19. The
respondents from age group 20-29 were 241 which is highest amount, 30
respondents were from age group 30-39.

Respondents who had age 40-49 were 16, 10respondents age was lied in 50-59
and only respondents were above 60. Its result shows that having full command on
computer is dependent on age. Next question is about involvement in banking
transaction which was answered by total 391 respondents and the amount of
responses by different age groups are shown in table. Its result shows that
involvement in banking transaction is highly dependent answered by on age. Third
question is about awareness of usefulness of e-banking which is total 392
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respondents and its results show that it depends on age. Next question is about
providing of online technical assistance or 24 hours helpline which responds by
391 respondents and its results tells that it is also dependent on age. Moreover,
there is question about using of debit or credit cards for online transactions which
responds by 390 people, which shows the result that it depends on age.

Next questions are about awareness of internet banking and Phone banking whose
result shows they are not dependent on age. Further there is a question about its
easy way of monitoring an account which responds by396 people and its result
shows that it depends on age. Further there is a question about feeling of risk about
hacking of passwords, 392 people respond it and result shows that it is independent
to age.

Now there is a question about easy access to ATM machine whose result shows
that it is highly dependent on age. Satisfaction of e-banking services provided by
banks is independent on age. However, Satisfaction of security providing for e-
banking by banks is dependent on age. Last question is about trust on bank
employees more than e-banking whose result shows that it is also dependent on
age.




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The table above describes about awareness of Phone banking with respect to age.
In this table greatest amount of respondents are agree that they are familiar with
phone banking. From age group ranges from 20 to 29 has greatest figure of 72
about knowing of phone banking which is 30% of the age group who had age 20-
29.










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Awareness Measures to Enhance Public

Internet banking is gaining ground. Banks increasingly operate websites through
which customers are able not only to inquire about account balances and interest
and exchange rates but also to conduct a range of transactions.
Unfortunately, data on Internet banking are scarce, and differences in definitions
make cross country comparisons difficult. Even so, one finds that Internet banking
is particularly widespread in Austria, Korea, the Scandinavian countries,
Singapore, Spain, and Switzerland, where more than 75 percent of all banks offer
such services.
The Scandinavian countries have the largest number of Internet users, with up to
one-third of bank customers in Finland and Sweden taking advantage of e-banking.
As we know that the world is developing and attaining new technologies day by
day in order to facilitate maximum people with maximum services within no time.
Therefore there is a need of, to increase the public awareness about E-banking.
The most commonly practiced tools for public awareness are the:
ELECTONIC MEDIA:
It means to keep the public aware about E-banking through Electronic media i.e.
Television, radio, internet and any other source of electronic media with a proper
advertisement.
PRINT MEDIA:
In includes the Newspapers, pamphlets any other paper media through which
people gain information about various things.
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So these two are the basic tools in order to promote E-banking. Besides this, the
various account holders in each banks, can also be told about E-banking, their
services and Benefits which the customers will get.

Promotional Measures Used by Banks to Promote e-Banking

The banks can promote e-banking viz. print, internet, SMS, outdoor advertisement,
television and radio.

a. Choice of Promotional Media:
There are different sources used by banks to
promote e-banking like print media, internet, SMS on mobile, outdoor
advertisements and television and radio. Majority of the bankers are in a view that
print media is used by the banks to a large extent for the purpose. Regarding
internet, highest percentage of the bankers said that internet is used very little.
Regarding the use of SMS about most of the bankers in a survey reported that it is
not at all used. Outdoor advertisements are also used to some extent. In the
opinion of 37.50 percent bankers, television and radio are also used by the banks to
some extent. It signifies that banks mostly rely on print media to promote e-
banking services.

b. Banks Providing Knowledge to Customers for Using E-banking Services

The extent to which banks are providing knowledge to customers for using e-
banking, many of respondents said that banks do provide knowledge but only to
some extent, followed by an average, who believed that sufficient guidance is
35

supplied by the banks in this field, that the banks extend a little or very little
knowledge is expressed by a small percentage of the respondents. So it is
concluded the banking personals should focus on introducing the E-banking and
their services and benefits to the customers so that they should be aware of that.
Only in such case there will be improvement in use of E-banking if public has
awareness.

Pros & Cons of E-banking

Advantages:

1) Convenience:
This is the single most important benefits that outweigh any shortcoming of
internet banking. Making transactions and payments right from the comfort of
home or office at the click of a button without even having to step out is a facility
none would like to forego. Keeping a track of accounts through the internet is
much faster and convenient as compared to going to the bank for the same. Even
non transactional facilities like ordering check books online, updating accounts,
enquiring about interest rates of various financial products etc become much
simpler on the internet.

2) Secure:
It is generally secure. But make sure that the website you're using has a valid
security certificate. This let's you know that the site is protected from cyber-thieves
looking to steal your personal and financial information.


36

3) Access:
You have twenty-four-hour access. When your neighborhood bank closes, you can
still access your account and make transactions online. It's a very convenient
alternative for those that can't get to the bank during normal hours because of their
work schedule, health or any other reason.

4) Mobilization:
You can access your account from virtually anywhere. If you're on a business trip
or vacationing away from home, you can still keep a watchful on your money and
financial transactions - regardless of your location.

5) Rapid transactions:
Conducting business online is generally faster than going to the bank. Long teller
lines can be time-consuming, especially on a Pay Day. But online, there are no
lines to contend with. You can access your account instantly and at your leisure.

6) Home Online facilities:
Many features and services are typically available online. For example, with just a
few clicks you can apply for loans, check the progress of your investments, review
interest rates and gather other important information that may be spread out over
several different brochures in the local bank.

7) Shop and payment:
Through E-banking, one can shop and make the payment safely by sitting at home,
office or anywhere.


37

8) E-mails and statements:
Most banks also send statements and Notices via E-mails which save paper and
notify you immediately if there is any funny business with your account.

9) Cheaper services:
Online banking is often cheaper as compared to manual/traditional banking. In
addition to being able to offer competitive rates, many online banks dont charge
hefty fee and you dont have to pay for the gas to get there and you save money on
postage if you are paying bills electronically.

Safe Money:
It is due to |E-banking that nowadays one can take money as much he wants
without keeping it in shape of cash i.e. ATM cards etc.

Disadvantages of E-Banking:

The world has come from far and we are every day digging into the unknown,
what was unthinkable then, is now a practice. Today, you can bank right from the
comfort of your home and multitudes of benefits come with it. However, though
internet banking is such a good and desirable innocent, it has some disadvantages
as listed:

1) Setting up an account may take time:
In order to register for your bank's online program, you will probably have to
provide ID and sign a form at a bank branch. Some banks even ask for photos

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2) Legal issues:
If you and your spouse wish to view and manage your assets together online, one
of you may have to sign a durable power of attorney before the bank will display
all of your holdings together.

3) Learning difficulties:
Banking sites can be difficult to navigate at first. Getting acquitted with the
banking sites software may require some time to read the tutorials in order to
become comfortable in your virtual lobby.

4) Site changes and upgrades:
Even the largest banks periodically upgrade their online programs, adding new
features in unfamiliar places. In some cases, you may have to re-enter account
information.

5) Customer service:
There is no personal contact with any of the staff, and if talk to any staff through
the telephone, you have guarantee you are talking to the best person available

6) Internet account:
You need to get an account with an Internet Service Provider (ISP) which may be
another hectic experience

7) Security concern:
Even though online banking sites are heavily encrypted, with the developing
technology, its hard to rule out the "hackers" who may access your bank accounts

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8) Switching banks:
This can be more cumbersome online than in person

9) Money usage:
You cant spend your money from the online bank account as you wish, in the
end; you will need to go to an ATM to withdraw money for usage.

10) Technical breakdowns:
As with all technologies, online banking websites sometimes go down. If this
happen when you closed your local bank or credit card accounts, you will
definitely go penniless.

However, even though online banking has some disadvantages, the advantages
with no doubt outweigh. It is there for important for everyone to prepare for the
unknown with an online bank account.

11) Identity Confirmation:
Federal regulations require that financial institutions confirm each customer's
identity. This may present a logistical issue, as copying and faxing documents is
sometimes necessary.

12) Skills required:
As we know that the literacy rate in Pakistan is low so there are many peoples who
find it impossible to utilize the E-banking services as it is skill and education
required work. Many people thus prefer more the Manual banking system.


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Various Risks Associated with E-banking

A major driving force behind the rapid spread of I-banking all over the world is its
acceptance as an extremely cost effective delivery channel of banking services as
compared to other existing channels.
However, Internet is not an unmixed blessing to the banking sector. Along with
reduction in cost of transactions, it has also brought about a new orientation to
risks and even new forms of risks to which banks conducting I-banking expose
themselves. Regulators and supervisors all over the world are concerned that while
banks should remain efficient and cost effective, they must be conscious of
different types of risks this form of banking entails and have systems in
Place to manage the same. An important and distinctive feature is that technology
plays significant part both as source and tool for control of risks. Because of rapid
changes in information technology, there is no finality either in the types of risks or
their control measures. Both evolve continuously. The thrust of regulatory action in
risk control has been to identify risks in broad terms and to ensure that banks have
minimum systems in place to address the same and that such systems are reviewed
on a continuous basis in keeping with changes in technology. In the following
paragraphs a generic set of risks are discussed as the basis for formulating general
risk control guidelines, which this Group will address:

1. Operational risk:

Operational risk, also referred to as transactional risk is the most common form of
risk associated with I-banking. It takes the form of inaccurate processing of
transactions, non enforceability of contracts, compromises in data integrity, data
privacy and confidentiality, unauthorized access / intrusion to banks systems and
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transactions etc. Such risks can arise out of weaknesses in design, implementation
and monitoring of banks information system. Besides inadequacies in technology,
human factors like negligence by customers and employees, fraudulent activity of
employees and crackers hackers etc. can become potential source of operational
risk. Often there is thin line of difference between operational risk and security risk
and both terminologies are used interchangeably.

2. Security risk:

a. Internet is a public network of computers which facilitates flow of data /
information and to which there is unrestricted access. Banks using this
medium for financial transactions must, therefore, have proper technology
and systems in place to build a secured environment for such transactions.

b. Security risk arises on account of unauthorized access to a banks critical
information stores like accounting system, risk management system,
portfolio management system, etc. A breach of security could result in direct
financial loss to the bank. For example, hackers operating via the Internet
could access, retrieve and use confidential customer information and also
can implant virus. This may result in loss of data, theft of or tampering with
customer information, disabling of a significant portion of banks internal
computer system thus denying service, cost of repairing these etc. Other
related risks are loss of reputation, infringing customers privacy and its
legal implications etc.

Thus, access control is of paramount importance. Controlling access to
banks system has become more complex in the Internet environment which
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is a public domain and attempts at unauthorized access could emanate from
any source and from anywhere in the world with or without criminal intent.
Attackers could be hackers, unscrupulous vendors, disgruntled employees or
even pure thrill seekers. Also, in a network environment the security is
limited to its weakest link. It is therefore, necessary that banks critically
assess all interrelated systems and have access control measures in place in
each of them.

c. In addition to external attacks banks are exposed to security risk from
internal sources e.g. employee fraud. Employees being familiar with
different systems and their weaknesses become potential security threats in a
loosely controlled environment. They can manage to acquire the
authentication data in order to access the customer accounts causing losses
to the bank.

d. Unless specifically protected, all data / information transfer over the Internet
can be monitored or read by unauthorized persons. There are programs such
as sniffers which can be set up at web servers or other critical locations to
collect data like account numbers, passwords, account and credit card
numbers. Data privacy and confidentiality issues are relevant even when
data is not being transferred over the net. Data residing in web servers or
even banks internal systems are susceptible to corruption if not properly
isolated through firewalls from Internet.

e. The risk of data alteration, intentionally or unintentionally, but unauthorized
is real in a networked environment, both when data is being transmitted or
stored. Proper access control and technological tools to ensure data integrity
43

is of utmost importance to banks. Another important aspect is whether the
systems are in place to quickly detect any such alteration and set the alert.

f. Identity of the person making a request for a service or a transaction as a
customer is crucial to legal validity of a transaction and is a source of risk to
a bank. A computer connected to Internet is identified by its IP (Internet
Protocol) address. There are methods available to masquerade one computer
as another, commonly known as IP Spoofing. Likewise user identity can be
misrepresented. Hence, authentication control is an essential security step in
any e-banking system.


g. Non-repudiation involves creating a proof of communication between two
parties; say the bank and its customer, which neither can deny later. Banks
system must be technologically equipped to handle these aspects which are
potential sources of risk.

3) System architecture and design

a) Appropriate system architecture and control is an important factor in
managing various kinds of operational and security risks. Banks face
the risk of wrong choice of technology, improper system design and
inadequate control processes. For example, if access to a system is
based on only an IP address, any user can gain access by
masquerading as a legitimate user by spoofing IP address of a genuine
user. Numerous protocols are used for communication across Internet.
Each protocol is designed for specific types of data transfer. A system
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allowing communication with all protocols, says HTTP (Hyper Text
Transfer Protocol), FTP (File Transfer Protocol), telnet etc. is more
prone to attack than one designed to permit say, only HTTP.

b) Choice of appropriate technology is a potential risk banks face.
Technology which is outdated, not scalable or not proven could land
the bank in investment loss, a vulnerable system and inefficient
service with attendant operational and security risks and also risk of
loss of business.
c) Many banks rely on outside service providers to implement, operate
and maintain their banking systems. Although this may be necessary
when banks do not have the requisite expertise, it adds to the
operational risk. The service provider gains access to all critical
business information and technical systems of the bank. Thus making
the system vulnerable. In such a scenario, the choice of vendor, the
contractual arrangement for providing the service etc., become critical
components of banks security. Bank should educate its own staff and
over dependencies on these vendors should be avoided as far as
possible.

d) Not updating banks system in keeping with the rapidly changing
technology, increases operational risk because it leaves holes in the
security system of the bank. Also, staff may fail to understand fully
the nature of new technology employed. Further, if updating is left
entirely at customers end, it may not be updated as required by the
bank. Thus education of the staff as well as users plays an important
role to avoid operational risk.
45


4) Reputational risk


a) Reputational risk is the risk of getting significant negative public opinion,
which may result in a critical loss of funding or customers. Such risks arise
from actions which cause major loss of the public confidence in the banks'
ability to perform critical functions or impair bank-customer relationship. It
may be due to banks own action or due to third party action.

b) The main reasons for this risk may be system or product not working to the
expectations of the customers, significant system deficiencies, significant
security breach (both due to internal and external attack), inadequate
information to customers about product use and problem resolution
procedures, significant problems with communication networks that impair
customers access to their funds or account information especially if there
are no alternative means of account access. Such situation may cause
customer-discontinuing use of product or the service. Directly affected
customers may leave the bank and others may follow if the problem is
publicized.

c) Other reasons include losses to similar institution offering same type of
services causing customer to view other banks also with suspicion, targeted
attacks on a bank like hacker spreading inaccurate information about bank
products, a virus disturbing banks system causing system and data integrity
problems etc.

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d) Possible measures to avoid this risk are to test the system before
implementation, backup facilities, contingency plans including plans to
address customer problems during system disruptions, deploying virus
checking, deployment of ethical hackers for plugging the loopholes and
other security measures.

e) It is significant not only for a single bank but also for the system as a whole.
Under extreme circumstances, such a situation might lead to systemic
disruptions in the banking system as a whole. Thus the role of the regulator
becomes even more important as not even a single bank can be allowed to
fail.

5) Legal risk

a) Legal risk arises from violation of, or non-conformance with laws, rules,
regulations, or prescribed practices, or when the legal rights and obligations
of parties to a transaction are not well established.

b) Given the relatively new nature of Internet banking, rights and obligations
in some cases are uncertain and applicability of laws and rules is uncertain
or ambiguous, thus causing legal risk.

c) Other reasons for legal risks are uncertainty about the validity of some
agreements formed via electronic media and law regarding customer
disclosures and privacy protection. A customer inadequately informed about
his rights and obligations, may not take proper precautions in using Internet
47

banking products or services, leading to disputed transactions, unwanted
suits against the bank or other regulatory sanctions.

d) In the enthusiasm of enhancing customer service, bank may link their
Internet site to other sites also. This may cause legal risk. Further, a hacker
may use the linked site to defraud a bank customer.

e) If banks are allowed to play a role in authentication of systems such as
acting as a Certification Authority, it will bring additional risks. A digital
certificate is intended to ensure that a given signature is, in fact, generated
by a given signer. Because of this, the certifying bank may become liable
for the financial losses incurred by the party relying on the digital
certificate.

6) Money laundering risk

a) As Internet banking transactions are conducted remotely banks may find it
difficult to apply traditional method for detecting and preventing undesirable
criminal activities. Application of money laundering rules may also be
inappropriate for some forms of electronic payments. Thus banks expose
themselves to the money laundering risk. This may result in legal sanctions
for non-compliance with know your customer laws.

b) To avoid this, banks need to design proper customer identification and
screening techniques, develop audit trails, and conduct periodic compliance
reviews, frame policies and procedures to spot and report suspicious
activities in Internet transactions.


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7) Cross border risks

a) Internet banking is based on technology that, by its very nature, is designed
to extend the geographic reach of banks and customers. Such market
expansion can extend beyond national borders. This causes various risks.

b) It includes legal and regulatory risks, as there may be uncertainty about legal
requirements in some countries and jurisdiction ambiguities with respect to the
responsibilities of different national authorities. Such considerations may expose
banks to legal risks associated with non-compliance of different national laws and
regulations, including consumer protection laws, record-keeping and reporting
requirements, privacy rules and money laundering laws.

c) If a bank uses a service provider located in another country, it will be more
difficult to monitor it thus, causing operational risk. Also, the foreign-based
service provider or foreign participants in Internet banking are sources of
country risk to the extent that foreign parties become unable to fulfill their
obligations due to economic, social or political factors.

d) Cross border transaction accentuates credit risk, since it is difficult to
appraise an application for a loan from a customer in another country
compared to a customer from a familiar customer base. Banks accepting
foreign currencies in payment for electronic money may be subjected to
market risk because of movements in foreign exchange rates.



49


8) Strategic Risk

a) This risk is associated with the introduction of a new product or service.
Degree of this risk depends upon how well the institution has addressed the
various issues related to development of a business plan, availability of
sufficient resources to support this plan, credibility of the vendor (if
outsourced) and level of the technology used in comparison to the available
technology etc.

b) For reducing such risk, banks need to conduct proper survey, consult
experts from various fields, establish achievable goals and monitor
performance. Also they need to analyze the availability and cost of
additional resources, provision of adequate supporting staff, proper training
of staff and adequate insurance coverage. Due diligence needs to be
observed in selection of vendors, audit of their performance and establishing
alternative arrangements for possible inability of a vendor to fulfill its
obligation . Besides this, periodic evaluations of new technologies and
appropriate consideration for the costs of technological up gradation are
required.

9) Other risks

a) Traditional banking risks such as credit risk, liquidity risk, interest rate risk
and market risk are also present in Internet banking. These risks get
intensified due to the very nature of Internet banking on account of use of
electronic channels as well as absence of geographical limits. However, their
50

practical consequences may be of a different magnitude for banks and
supervisors than operational, reputational and legal risks. This may be
particularly true for banks that engage in a variety of banking activities, as
compared to banks or bank subsidiaries that specialize in Internet banking.

b) Credit risk is the risk that a counter party will not settle an obligation for
full value, either when due or at any time thereafter. Banks may not be able
to properly evaluate the credit worthiness of the customer while extending
credit through remote banking procedures, which could enhance the credit
risk. Presently, banks generally deal with more familiar customer base.
Facility of electronic bill payment in Internet banking may cause credit risk
if a third party intermediary fails to carry out its obligations with respect to
payment. Proper evaluation of the creditworthiness of a customer and audit
of lending process are a must to avoid such risk.


c) Another facility of Internet banking is electronic money. It brings various
types of risks associated with it. If a bank purchases e-money from an issuer
in order to resell it to a customer, it exposes itself to credit risk in the event
of the issuer defaulting on its obligation to redeem electronic money,

d) Liquidity Risk Such type of risk arises out of a banks inability to meet its
obligations when they become due without incurring unacceptable losses,
even though the bank may ultimately be able to meet its obligations. It is
important for a bank engaged in electronic money transfer activities that it
ensures that funds are adequate to cover redemption and settlement demands
51

at any particular time. Failure to do so, besides exposing the bank to
liquidity risk, may even give rise to legal action and reputational risk.

e) Interest risk, Similarly banks dealing in electronic money face interest rate
risk because of adverse movements in interest rates causing decrease in the
value of assets relative to outstanding electronic money liabilities. Banks
also face market risk because of losses in on-and-off balance sheet positions
arising out of movements in market prices including foreign exchange rates.
Banks accepting foreign currency in payment for electronic money are
subject to this type of risk.
.
a) Risk of unfair competition, Internet banking is going to intensify the
competition among various banks. The open nature of Internet may induce a
few banks to use unfair practices to take advantage over rivals. Any leaks at
network connection or operating system etc., may allow them to interfere in
a rival banks system Thus one can find that along with the benefits, Internet
banking carries various risks for bank itself as well as banking system as a
whole. The rapid pace of technological innovation is likely to keep changing
the nature and scope of risks banks face.

These risks must be balanced against the benefits. Supervisory and regulatory
authorities are required to develop methods for identifying new risks, assessing
risks, managing risks and controlling risk exposure. But authorities need to keep in
consideration that the development and use of Internet banking are still in their
early stages, and policies that hamper useful innovation and experimentation
should be avoided. Thus authorities need to encourage banks to develop a risk
52

management process rigorous and comprehensive enough to deal with known risks
and flexible enough to accommodate changes in the type and intensity of the risks.

CONCLUSION:
With the interpretation of study and data gathered from the customers,
we can conclude that the commercial banks such as MCB although has been
providing even e-services, also with using manual banking system. They have not
been fulfilling the requirements well in terms of how rapidly these services are
been providing to their customers. Almost certainly, it is because of the fact that
the bank has offered a primary computerization network plan initially from the
head office to its different branches to boost the standard level of the bank and
consequently meet competition and customers desires.
Those banks such as working on automation banking system either computerized
banking or electronic banking (ATM), provided enhanced, efficient and rapid
services to their customers. Perhaps due to this advantage, banks expand over its
branches in the banking line for service providing facilities and also try to get more
and more accounts, businesses and customers in the market.
The accuracy of working transaction by an automated system is more accurate than
a manual banking system. Bank performance does not depend on whether the bank
uses a manual system or automated banking system. The problem is that the
manual banking system takes more time than an automated banking system with
accuracy. Therefore customers like and choose to stay at home than to go at bank
and avoid consuming their time and waiting for their credits or money
requirements.


53

RECOMMENDATION:

According to the executions of literature study and analysis, there are
some dilemmas were noticed and we can expect that the subsequent
recommendations may reduce or solve these problems concerned with banks and
customers. In our research study, it has been exposed how electronic-banking
system can appeal customers to save time or make transaction with their banks.
Automated banking systems, functions through computerized networks or
electronic systems which require massive investment of money.
I recommend that to support the banks and to give them confidence to execute
these systems, the government should endow with important tax assistance for
importers of computerized, automatic or electronic banking apparatus and
equipments which will make them available without problems in future.
Government should be in association with the State Bank of Pakistan that could
endorse a law which would make sure that banks can earn good net profits at the
end of their financial year and can also save some money from their profits for the
persistence of automating operations.
In addition, for the banks to apply or purchase victorious and efficient automation
banking system and there should be well developed countrys telecommunication
network system and unbreakable electricity supply for the automated system of
banks. I should therefore, recommend that the government remain to supply and
execute a much rapid and enhanced telecommunication and electricity plans with a
good deal of apparent and advanced association with the classified sector.

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REFERENCES:

En.wikipedia.org
www.investopedia.com
www.fininace.gov.pk
www.growpk.com
www.tribune.com.pk
www.pakistanbanks.org
& various other Indian and Pakistani authors articles etc











. The End