Principles of Money &

Banking

By. Prof Riaz Ahmed Mian

E-Banking

By. Prof Riaz Ahmed Mian

 E-Banking
 E-banking can be defined as the
automated delivery of banking
products and services to customers
through interactive electronic
communication channels.

Prof. Riaz Ahmed Mian, HCBF, University of the Punjab

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 Four Perspectives of E-
banking:
1. The Communication Perspectives:

 First comes the communication

motives i.e., to get familiar with the
client and help the client getting
familiar with you. Communication
leads to information which is the most
important commercial weapon.

Prof. Riaz Ahmed Mian, HCBF, University of the Punjab

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 Four Perspectives of E-banking – Cont’d

2. The Business Perspectives:

 The commercial purpose comes

next i.e., to use IT products to
ameliorate business dealings and
operations. It signifies the use of IT
equipment to record transactions and
to generate required reports.

Prof. Riaz Ahmed Mian, HCBF, University of the Punjab

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 Four Perspectives of E-banking – Cont’d

3. The Service Perspectives:

 Let your mind go to factors like

client support, customer satisfaction,
reputation, winning loyalty of
employees, better interaction,
promoting user friendliness,
eliminating bottlenecks etc.

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 Four Perspectives of E-banking – Cont’d

4. The Online Perspectives:

 This means doing online business

where there is no physical contact
between bank and the client. Online
business makes the banking virtually
cross all borders and boundaries. It
opens a door of borderless market
for a bank.

Prof. Riaz Ahmed Mian, HCBF, University of the Punjab 5

 E-banking Products
Following is the list of products that
are the special features of modern E-
banking.
1. Online Banking:
 The records of all branches are
integrated and it can be accessed
from any branch. Now a client is not
required to stick to a same branch
where he opened the account. Under
online system he can operate his
account from any branch.
Prof. Riaz Ahmed Mian, HCBF, University of the Punjab 6
 E-banking Products – cont’d

2. Electronic Funds Transfer:

 The payer just enters his pin code
and his computer access his bank
account and transfer the money in
any desired account. He does not have
to go to the bank, no need to write and
sign cheques and no more need to
count heavy bundles of rupees. This is
electronic fund transfer mechanism
where there is no physical contact
between bank, client and money.
Prof. Riaz Ahmed Mian, HCBF, University of the Punjab 7
 E-banking Products – cont’d

Electronic Funds Transfer – cont’d

 The title to promote EFT globally

goes to SWIFT (Society for Worldwide
Inter-bank Financial
Telecommunication) and nearly eight
hundred leading banks of the world
who are the members of this society.
Foreign banks working in Pakistan are
also the members of this society.

Prof. Riaz Ahmed Mian, HCBF, University of the Punjab

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 E-banking Products – cont’d

3. Credit Cards and Smart Cards:

 Credit cards help the holder to pay a
bill of his shopping without losing cash.
It earns its holder a credit for 40-45 days.
 Smart cards are further evolution of
credit cards. They are most secure due to
certain special magnetic characters.
Smart cards could have a silicon chip or
a micro processor in them. Such smart
cards are used to instantly transfer
money at retail counters or EFTPOS
(Electronic Funds Transfer at the Point
of Sale)
Prof. Riaz Ahmed Mian, HCBF, University of the Punjab 9
 E-banking Products – cont’d

4. Automated Teller Machine: (ATM)

 You can get money at ATM when all
the bank employees are enjoying sweet
dreams in their homes. Initially ATMs
were structured to perform single
function i.e., withdrawal of cash. However,
modern ATMs are many steps ahead.
Now many routine functions can be
performed at ATM like cash, cheque
deposit, taking account statements etc.

Prof. Riaz Ahmed Mian, HCBF, University of the Punjab 10

 E-banking Products – cont’d

5. Internet Banking:
 Internet banking means that now
account can be opened while sitting in
your bed room through a internet
equipped with PC or laptop. Or go one
step ahead, don’t you think a laptop is
too heavy to carry around. So why not
just a new edition of cellular mobile
phones. In the new era mobile phones
have become a competitors of computers.

Prof. Riaz Ahmed Mian, HCBF, University of the Punjab

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 E-banking Products – cont’d

6. Mobile Phone Banking:

 Banks can be in contact with their
customers through mobile phones.
Information can be delivered to any type
of mobile device. Customers can check
their account balances through their
mobile phone using SMS and the bank
can send SMS as an alert to customer’s
mobile phones.

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 E-banking inside a Bank
1. MIS (Management Information
System):
A good MIS is one that fulfils all
information needs of management
well in time. Not only the information
is important but the style and mode in
which information is presented is also
crucial in deciding the worth of
information. E-banking makes use of
the MIS to increase the managerial
capabilities and operative efficiency
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of bank managers and employees.
 E-banking inside a Bank – cont’d

2.DSS: (Decision Support System)

It is a system that helps the

management to find solution of
unstructured problems. Such
problems have long term effects and
they are poorly defined. They are
complex in nature and involve a
greater degree of uncertainty.
(cont’d..)

Prof. Riaz Ahmed Mian, HCBF, University of the Punjab

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 E-banking inside a Bank – cont’d

DSS: (Decision Support System) – cont’d

In terms of banking we can take

examples of portfolio investments,
future gain on mutual funds, growth
of micro financing in the society,
chances of success of an energy
project etc. Such decisions require
bank management to apply
professional and sophisticated
techniques to analyse all components
of problem before finding a solution.
Prof. Riaz Ahmed Mian, HCBF, University of the Punjab
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 E-banking inside a Bank – cont’d

3.EIS: (Executive Information System)

 An EIS is the system that allows an
opportunity to an executive to peep
behind the final reports and figures. It
provides a higher level executive with
an insight in bank’s affairs and
conduct of employees. It allows a
bank manager to scan the branch
environment to locate any inefficiency
or rigidity.
Prof. Riaz Ahmed Mian, HCBF, University of the Punjab
16
 E-banking inside a Bank – cont’d

4. TPS and RGS: (Transaction Processing

System / Report Generating System)
 TPS means the system that automates
the process of recording transactions. If
you have been a regular visitor to a bank
you must have noticed that previously you
would have to wait in line when you go to
deposit amount in your account. The bank
employees would record amount, manually
on various big registers. The client wait as
the bank employees fumble with lots of
hefty ledgers to find the correct one.
Prof. Riaz Ahmed Mian, HCBF, University of the Punjab
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 Benefits of E-banking
Benefits to Consumers:
 Customer’s account is access able
with an online account.
 Customer can withdraw cash at any
time through ATMs that are now available
at almost all parts of the country.
 Beside withdrawing cash, customers
can also have mini banks statements,
balance inquiry at these ATM.
(cont’d..)

Prof. Riaz Ahmed Mian, HCBF, University of the Punjab

18
 Benefits of E-banking – cont’d

Benefits to Consumers – cont’d

 Through internet banking customer

can operate his account while sitting in
his office or home. There is no need to
go to the bank in person for such matter.
 E-banking has also greatly helped in
payment of utility bills. Now there is no
need to stand in long queues outside
banks for this purpose.
(cont’d..)

Prof. Riaz Ahmed Mian, HCBF, University of the Punjab

19
 Benefits of E-banking – cont’d

Benefits to Consumers – cont’d

 All services that are usually available

from the local bank can be found on a
single web site.
 The growth of credit card usage also
owes greatly to E-banking. Now a
customer can shop world wide without
any need of carrying paper money with
him.
 Banks are available 24 hours a day,
seven days a week, and they are only a
mouse
Prof. Riaz click
Ahmed Mian, HCBF, away.
University of the Punjab
20
 Benefits of E-banking – cont’d

Benefits to Banking Industry:

 The growth of E-banking has greatly

helped the banks in controlling their over
heads and operating cost.
 Many repetitive and tedious tasks
have now been fully automated resulting
into accuracy, greater efficiency, better
time usage and enhanced control.
(cont’d..)

Prof. Riaz Ahmed Mian, HCBF, University of the Punjab

21
 Benefits of E-banking – cont’d

Benefits to Banking Industry – cont’d

 The rise of E-banking has made

banks more competitive. It has also led
to expansion of the banking industry,
opening of new avenues for banking
operations.
 Electronic banking has greatly helped
the banking industry to reduce paper
work, thus helping them to move to
paper-less environment.
(cont’d..)

Prof. Riaz Ahmed Mian, HCBF, University of the Punjab

22
 Benefits of E-banking – cont’d

Benefits to Banking Industry – cont’d

 Electronic banking has also helped

the banks in proper documentation of
their records and transactions.
 The reach and delivery capabilities of
computer networks, such as the Internet,
are far better then any branch network.

Prof. Riaz Ahmed Mian, HCBF, University of the Punjab

23
 Benefits of E-banking – cont’d

Benefits to General Economy:

 E-banking has also helped banks in
better monitoring of their customer base.
It is a useful tool in the hands of banks
to devise suitable commercial package
that are in conformity with customer
needs.
(cont’d..)

Prof. Riaz Ahmed Mian, HCBF, University of the Punjab

24
 Benefits of E-banking – cont’d

Benefits to General Economy – cont’d

 As E-banking provides opportunity to

banking sector to enlarge their customer
base, as a consequence to increase the
volume of credit creation which results
in better economic condition. Besides all
this E-banking has also helped in
documentation of the economic activity
of the masses.

Prof. Riaz Ahmed Mian, HCBF, University of the Punjab

25
 Issues in E-banking
I. E-banking – The Producer Side:

 The producers are the bankers. These

are the people who lead the bank and
design the policies Following issues
need a particular attention as the
discussion comes to
E-banking.

Prof. Riaz Ahmed Mian, HCBF, University of the Punjab

26
 Issues in E-banking – cont’d

1. Locating Customers:

A banker is required to know the values

of its global customers. He is required
to broaden his view so as to develop the
art of seeing the invisible.

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 Issues in E-banking – cont’d

2. User Friendliness:

The effectiveness can be judged from

the degree of the user friendliness.
Every client of the bank need not be a
computer expert as well. So he might
get irritated if the online service requires
him to perform many tasks that
demand technical knowledge of the
computer programs.
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 Issues in E-banking – cont’d

3.Cyber Crime:
Cyber terrorism is increasing with the
passage of time. Banks are one of the
greatest victim of it. Money manipulation
and embezzlement by ATMs and online
technology is a threat to the success of
the E-banking

Prof. Riaz Ahmed Mian, HCBF, University of the Punjab

29
 Issues in E-banking – cont’d

4. Human Element:
Well, would any one of us like to live a life at
a place where there would be all amenities of
life but no other human being. Absolutely NO.
There is an extent to which we make our life
mechanical. Beyond that we need a human
element to heal the ailments of mechanical life.
Similar is the case of E-banking, there is a need
to identify places where a client needs a
representation from a good looking neatly
dressed bank employee in an amicable way. A
computer assisted voice message or an E-mail
message is likely to irritate the client at such
places. So E-banking is good but not every time. 30
 Issues in E-banking – cont’d

4. Human Element:
There is an extent to which we make our
life mechanical. Beyond that we need a
human element to heal the ailments of
mechanical life. Similar is the case of E-
banking, there is a need to identify places
where a client needs a representation
from a good looking neatly dressed bank
employee in an amicable way. A computer
assisted voice message or an E-mail
message is likely to irritate the client at
such places. So E-banking is good but not31
Prof. Riaz Ahmed Mian, HCBF, University of the Punjab
every time.
 Issues in E-banking – cont’d

5. Regulating Authority:
The legal framework, rules and
regulations hold an important position in
the promotion of E-banking. Where a bank
goes multinational or multi-local it has to
observe rules that change with new area.
There might be different policies, tax rates,
tariffs, criteria of service or hindrance to
access particular market.

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 Issues in E-banking – cont’d

6.Cut-throat Global Competition:

The biggest weapon in E-banking battle
field is innovation and information about
innovation. Mistakes could be fatal and
speed and accuracy are the most reliable
tools. Rather than trying to do better than
a competitor, try to innovate a new
product. Because by the time you get
expertise in some other’s product and
become better at it, your competitor would
have moved to second or third generation
of that product. So don’t waste time in 33
copying, rather make others copy.
 Issues in E-banking – cont’d

7. The Human Resource:

The human resource is always superior
to a mechanical resource. Remember that
the human capital is the sustainable
competitive advantage. Their motivation is
at times far more important than the
operative efficiency of the machine. So a
bank must pay considerable attention
towards the motivation, commitment and
above all loyalty of its employees.

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 Issues in E-banking
II. E-banking – The Consumer Side:

1. Finding the Fit Product:

The variety of option poses a problem
of choice. A client has to go through a
list of so many options before taking a
decision.

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 E-banking – The Consumer Side – cont’d

2. Simplicity and Ease of Use:

Simplicity and ease of use is the
major element that attract the client.
People cherish for such banking
services that allow them more
convenience and room for making
decisions.

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 E-banking – The Consumer Side – cont’d

3. Uncertainty and Legal Matters:

Rules and regulations effect client
also. A particular banking product may
be very suitable for a client of a
particular area but it may not be
feasible for client of other area on
account of state rules, tax policies etc.
Further uncertainties are always
associated with purely defined
products. These also discourage the 37
client.
 E-banking – The Consumer Side – cont’d

4. Cyber Terrorism:
Credit cards frauds are common now
a days. They create financial as well as
mental pain for the client. However, as
we progress forward there is a hope to
have such systems which have strong,
unbreakable, inbuilt check on such
practices.

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 E-banking – The Future
 What is the future of E-banking? This
question has no exhaustive reply. As the
internet grows up and people's life
become eventful, the need for proficient
and speedy modes to handle their daily
requirements will become more vital.  E-
banking has accelerated the process of
globalization and regionalization.

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 E-banking – The Future – cont’d

 “Few managers have a clear vision of

tomorrow's banking environment. Few
institutions have strategic plans in place
today that anticipate the future of
online banking. The challenge for the
banking industry lies in creating the
right incentives for customers to use
PCs regularly for banking”
 Overall, electronic banking is one of
the most essential aspects of the
approaching electronic era.  40
 E-banking – The Future – cont’d

But along-with all such optimistic

factors there are some realities that bite
critically. In words of a great Muslim
leader of present era and former
Malaysian Prime Minister Mr. Mahatir
Bin Muhammad:
“We are told we must open up, that
trade and commerce must be totally
free. But free for whom? For rogue
speculators, for anarchists wanting to
destroy weak countries, in their crusade
for open societies to force us to submit 41
to the dictatorship of international
 E-banking – In Pakistan
 Numbers of Automated Teller
Machines (ATMs) in Pakistan has
tripled in the last 5 years to around
1000 ATMs across 50 major cities using
the 1LINK or MNet networks. 1Link is the
largest network of ATMs across
Pakistan with a total of 508 ATMs.

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thank U

Best of Luck