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.

1. Problem Statement
To identify critical factors that plays a role in the success of Electronic Banking in Pakistan

2. Introduction
These days, 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. To ensure that customer is being serviced by the technology, it is important for institutes to achieve a competitive advantage by providing better services in the market. Banks can provide added advantage to their customers by providing more flexible payment options, user friendly UI, Infrastructure and secure environment for performing banking transactions electronically. At present, the major focus of banks is to deliver services to customer not through conventional ways but by introducing technological changes such as ATM machines, Internet, Mobile banking and Electronic banking. Banks today have been working very aggressively to bring changes in technology at a very faster rate. By electronic banking, it refers to a process through which a customer will be able to perform financial and non-financial transactions using electronic device. Using electronic device, customer may not require visiting branch physically and performing transaction. This services has several advantages with it as it provides 24/7 services to the customers which enables them to shop, pay utility bills, purchase of grocery items, shopping at mart and transfer of funds from one place to another, in no time. It reduces costs, it saves time, and vice versa. Main focus of this study is to evaluate critical factors which are the main source of success or failure of electronic banking in Pakistan. 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. In the light of those factors, questionnaire has been designed in order to validate these factors with respect to existing infrastructure and facilities provided by banks in Pakistan. Other objectives of this research include: 1. 2. 3. 4. 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. 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.

3. Literature Review
An Overview The financial sector has now become a key component of the global economy 6. (Ahmad, 2006).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 .The most common technologies which are used today are ATMs, credit cards, phones etc. In Pakistan e banking is still undergoing with lots of changes 1. (Hassan, 2011). 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, saves costs and information can be accessed from any part of the world 1. (Hassan, 2011). As per Hagel & Hewlin, 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. 1. (Hassan, 2011) Bank customers require improve e banking services in the new and new type of products. Online banking provides customers to enjoy a number of benefits from any part of the world at any time. E-banking facilitates the customers to perform their transactions electronically from one to another account instead of using cheque or cash. It reduces costs. in operating & banking e-services, save time, provide quick information just on a click away, enhance the cash management of the bank, provide history of their bank accounts, provide facility of e bills, transfer of credit card amount.4. (Rahimuddin, 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. 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. (Ahmad, 2006). 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.109.92 billion as compare to Rs 89.42 in FY04. Also some banks were adding 401 brand new branches in their portfolio in FY05 which the makes the total to 2582 .This has enhanced the trust of customer on e-banking 2. (SBP, 2007). Pakistan has done many efforts in order to enhance its IT sector along with the other countries like Denmark, Sweden, India, Srilanka, and US but still it is way behind as compare to goals set today for digitized world. Today Pakistan is facing a lot of challenges which include organizational, technological and governmental as well. The main problems are due to lack of computer education, political instability. Not many regulatory authorities and also most the people are unable to understand English. With respect to infrastructure, there is requirement of a particular bandwidth which supports the whole traffic and also secure privacy. Availability of power also plays a very important role in developing the online banking in Pakistan 1. (Hassan, 2011). 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 .IT Integrated Policies also play a significant to warranty the success as in Pakistan there is mismatch between policies and ground realities. 1. (Hassan, 2011)

The IT-policy in Pakistan is also not according to the public interest public .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, i.e. organizations involved in e-Banking and e-shopping in the country. 1. (Hassan, 2011) Strong partnerships between Government and private sectors are two major pillars of countrys development. 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. 3. (Kundi, 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. Also SBP has taken various statistics of ATMs transactions, the record of online branches on quarterly basis and then uploaded on to the website.SBP has also passed an ordinance which provides legal authenticity to the online transactions. 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. 2. (SBP, 2007)

Critical Success Factors in e-Banking Critical success factors have been explained by many depending on the purpose for which they were used. Here we have used Rockarts definition. He says that the CSFs refers to those factors which plays a vital role in success of an organization. These factors are referred as important to understand and should be taken care by the organization to ensure its success. 5. (Shah, 2010) There are always some internal and external factors. Internal factors are those which are in our control; however external factors are not in our hands. Efficient and effective customer support is an important internal factor along with the quality of services. It is very important for an organization to keep their customers happy and satisfied by ensuring a strong control on the internal factors. Trust, information security, awareness, 24/7 service availability are some of the important factors which are internal and controllable. Improving these services will lead to better and great results in the favor of any financial institutions 5. (Shah, 2010) To ensure that all the internal factors are in control, financial institutions are focusing on the integration of systems to provide wide variety of services from one window. Another important thing to take care is an environment which is user friendly. This will lead to increase customer satisfaction and customers will be comfortable in using electronic services. Internet should be integrated with other systems in real-time to experience better services. 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, it should work 24 hours a day 365 days, now the banks are interconnected with all international banks through credit and debit cards.5. (Shah, 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; also it took some time to aware people understand the rules in online banking 4. (Rahimuddin, 2010)

The slow adoption of e banking is due to the slow adoption of the internet, trust which includes reliability, security, to attract customer to use e banking and also the delivery of financial services is a part of customer service 9. (Khan, 2007). Electronic banking also provided opportunity for criminal activities, hacking is also threat 10. (Schaechter, 2002) Some websites which have Problems like sluggishness, bad navigation, 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. Website represents the brand image .A good website is easy to use, it gains customer confidence, provide online resources and improve relationship between bank & customer. It is speedy, interactive, secured, user friendly etc. 7. (Shariq, 2006) One of the most important factors is less fees charged to the customer. Reputation of a service provider is another factor that effect trust, also customers usually complain about logon times. 8. (Kaleem, 2008)

4. Survey
A questionnaire survey has been conducted in order to validate the factors, which we have identified from the literature that are more critical to the success or failure of electronic banking in Pakistan.

5. Sample Size
To gain insight about consumer behavior and feedback, we conducted a survey on electronic banking and how different people perceive electronic banking. A sample size of 100 was set in which people from various professions were presented with questionnaire.

6. Data Collection procedure

7. Analysis Procedures
The results obtained from online questionnaire was in excel format which was then analyzed using Microsoft Excel 2007. Questions were treated both individually and collectively for better analysis and consumer insights.

8. 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, Security concerns and Risk, 24/7 Availability of services, Convenience and Cost Effectiveness, Services provided by Bank and Customer service. The analysis is done basis on the feedback received from respondents. Awareness

Starting with the most critical factor in the success of electronic banking that is Awareness of Electronic Banking. The result shows us that out of 102 respondents 98 uses electronic banking which 96% of the total result. In Pakistan, people from professional domain are very well aware of Electronic Banking and they have been using electronic banking instead of conventional 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.

Also to note that people who are aware of electronic banking are those who use ATM and Internet Banking more than any other option.
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 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. This has been the major area of concern for all the customers even if they use electronic banking or not. 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.
What is, in your opinion, the disadvantage of electronic banking?

From the results, 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. Reason being that due to security concerns, people are hesitates to use electronic banking and they rather prefer to use conventional banking for their financial transactions.

24/7 Availability of services Customers want their banks to be available 24/7 to provide services whenever they need it. However, in practical world this seems to be impossible or impractical to provide 24/7 services. But, 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. 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. Here another point to note is that 24/7 availability of services is directly related to the convenience people get because of it. Therefore If we combine the response received against 24/7 availability of services and Convenience, 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.
What could, in your opinion, make electronic banking more attractive?

Electronic services provided by Banks As we have seen that awareness of electronic banking in Pakistan is very high, which means that people are willing to use electronic banking channels. 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. This also reflects towards the efforts being placed by banks to improve electronic banking services in Pakistan.
Do you think Automation system used by the bank is improved, efficient and rapid than the normal or ledger banking system?

Improvement in automation system is also directly related to the satisfaction of the customers. It is quite evident from the results that people who believe are that bank has improved their automation system, are more satisfied with the electronic banking services provided by the bank. Result shows that 94% of the respondents are either Satisfied or extremely satisfied with the Electronic Banking system in Pakistan.

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. Reviewing the results of the survey, 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.

9. Conclusion
In conclusion it is stated that Electronic Banking is very useful and todays need as it provides easy way to monitor your account and to perform your financial transactions at anytime from anywhere in the world. However, 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. But the customers are very much concerned about the security threats and risk that is associated with the extensive usage of Electronic banking. They want aggressive measures to be taken by banks of Pakistan to ensure and address customers concerns. 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. Awareness Security and Risk concerns 24/7 Availability of services Electronic services provided by Banks Customer Service

10.Recommendations
Following are some recommendations which we have received from our respondents; 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. 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, add all internet connections like wi-tribe , qubee, 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. Banks should target students of graduate level age 18+ to use card payment systems, or launch Pocket money cards etc. Much work has to be done, 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. Hidden costs charged by Banks for using the card at POS terminals should be minimized. Availability, fraud detection and Settlement should be real time Develop applications for smart phone / iPad for customers

11.References
1. Hassan, Yasir, et al, Awareness of Electronic Banking In Pakistan, Global Journal of Computer Science and Technology Volume 11 Issue 17 Version 1.0 October 2011 2. Chp 4, State bank of Pakistan, Payment and settlement system, www.sbp.org.pk 3. Muhammad Kundi, Ghulam, et al, Threats and Opportunities for E-Business, EJISDC (2009) 36, 8, 1-31, Department of Public Administration 4. Rahimuddin, Muhammad, et al, E- Banking System in Pakistan, School of Management, Blekinge Institute of Technology 5. Shah, Mahmood, et al, A Survey of Critical Success Factors in e-Banking, University of Portsmouth, UK 6. Ahmed, Ali, Policies & Regulations for Expanding e-banking to the Poor, The First MicroFinanceBank Ltd, Pakistan, May 2006 7. Shariq Shahzad, Internet Banking in Pakistan, Lule University of Technology 8. Kaleem, Ahmad, Bankers Perceptions of Electronic Banking in Pakistan, Lahore School of Economics, Journal of Internet Banking and Commerce 9. Khan, Saadullah, Adoption Issues of Internet Banking in Pakistani' Firms, Lule University of Technology 10. Schaechter, Andrea, Issues in Electronic Banking, Policy discussion papaer