Retail cheque clearing under the Pakistan real time interbank settlement mechanism, or PRISM for short, grew 48.4pc in a year from March 2015 to March 2016, according to the State Bank of Pakistan.
Real time cheque clearing is still a small percentage of paper-based cheque clearing despite the fact that banks were required by the SBP to ensure implementation of PRISM at branch levels from January last year.
A shift can, however, be seen from paper-based to PRISM-facilitated cheque clearing. The total number of paper-based cheque clearing declined from 14.631m in Jan-March 2015 to 13.995m in Jan-March 2016 but the number of cheques cleared under PRISM rose from 11,038 to 16,387 during this period, latest stats reveal.
Key challenges to the growth of e-banking include lower investment by banks in fin-tech, low level of financial literacy and a lack of trained staff at banks to fix issues in the functioning of software and electronic machines that make e-transactions possible.
In a broader context, concentration of the internet and smart-phone applications in a few big cities and in upper income groups also hampers the growth of e-banking. “More importantly, a lack of documentation culture itself makes it difficult to push people to use banking channels for transacting business or for saving money and that, in turn, also reflects in less-accelerated movement of e-banking transactions,” says a banker.

“There is a misconception in many minds that paper-based transactions can somehow save them [customers] from being exposed to tax authorities while e-banking transactions cannot”


“There is a misconception in many minds that paper-based transactions can somehow save them from being exposed to tax authorities while e-banking transactions cannot.”
Despite all this, two key factors have been instrumental in promoting e-banking: the spread of information technology and the SBP’s constant persuasion of banks to deepen and widen the online banking culture. Amazing growth in branchless banking is a result of both.
Business-to-business (BB) online transactions in branchless banking now remain well over 100m in each quarter, whereas till the end of 2011, the number of such transactions was below 21m, SBP stats show.
Expansion in the internet banking footprint, after the last year’s launch of 4G cellular phone connectivity, is an example of how growth in banking e-transactions responds to improvement in technology.
Internet banking transactions grew more than 19pc in a year, thanks largely to 4G-supported smart-phone applications, from 4.085m in Jan-March 2015 to 4.864m in Jan-March 2016. Cash and utility bills payments through the internet, account-to-account fund transfers and third-party account-to-account transfers all showed a rising trend, the latest SBP report reveals.
Bankers say BB online transactions in branchless banking are expected to get a boost after the launch, this month, of the electronic import form (EIF). They say that it is not the mere implementation of EIF, but its spillover effect on the domestic economy, widening of the culture of issuing electronic sale/purchase receipts and electronic money transfers, that would make a real impact on the growth of online transactions.
The future growth of e-banking in Pakistan, as elsewhere in the world, also depends largely on the growth of the domestic e-commerce sector.
Currently, the country’s e-commerce is valued at $100m and is growing at an annual rate of 100pc, which means that as we enter the next decade the e-commerce value will easily hit the $1bn mark.
People associated with online shopping portals say that e-banking transactions would rise very fast if the prevailing culture of cash-on-delivery weakens over time and other modes of payments become popular.
The use of mobile wallets or M-wallets, for example, has the potential of boosting both e-commerce volumes as well as e-banking transactions once this concept of payment takes root.
Under the payment through M-wallet, once the customer selects this mode of payment, they are required to enter their personal identification number, and if their M-wallet has enough deposits to cover purchases, the amount is deducted from their account and their buying transaction is completed. But the M-wallet concept has just started and the number of active users is yet to grow to a certain level to make an impact.
On the other hand, credit cards are doing well and contributing sufficiently to the growth of both e-banking transactions and e-commerce.
The issuance of guidelines for third-party service providers (TPSP) by the SBP, in May this year, is designed to take branchless banking and e-banking transactions to a new level, central bankers say.
Under these guidelines, third-party service providers can help banks and other financial institutions, which now have the liberty to enter into a one-on-one arrangement with mobile phone companies to run their mobile banking operations, or hire a third-party’s services for this purpose.
Companies desiring to offer third party services are required to meet a set of financial and operational criteria laid down by the central bank.
Published in Dawn, Business & Finance weekly, September 26th, 2016