Future of Smart banking in Pakistan

Futur of Smart banking in Pakistan | PakistanTribeIn the 1995 when IBM launched Simon the first Smartphone with collaboration with Bellsouth, It would hard to imagine for an ordinary person how this little magic device will revolutionize entire way of human life, The Simon was absolutely ahead of its time, in fact it was a transforming device that IBM introduced and this was the time when industry accepted definition for a smartphone.

Although. Simon had short span of life but it illustrated how truly innovative product can feed many other creative efforts and this was learned by technology experts all over the world which later gave birth to Modern Smartphone, tablet, smart watch, google glass etc. today we are living in the world where everything is going smart, Smart education system, Smart communication system, smart medical system, smart transportation system, smart business solution, e-books, e-market, e-bank and  Smart Banking.

Smart Banking can be defined as using an internet-connected device to access your bank account, credit card account, or other financial account to facilitate a transaction that might otherwise have taken place using a physical credit card, debit card, check or cash at a physical store, by this definition Mobile banking is a major component of smart banking.

The US Federal Reserve survey defines mobile banking as “using a mobile phone to access your bank account, credit card account, or other financial account. Mobile banking can be done either by accessing your bank’s web page through the web browser on your mobile phone, via text messaging, or by using an application downloaded to your mobile phone

Today technology is revolutionizing the global banking and payment industry, banking is going through transformation process, it is going from a physical branch type of banking to a new banking based on internet, it is going from what we call a brick-and-mortar retail banking to either a click-and-bricks banking or a clicks-and-clicks banking.

The click and bricks’ banking is a sort of banking where both branches and the retails branch network with powerful internet banking service and clicks-and-clicks banks are only operate through internet, banks also provide what we called Wireless Application Protocol (WAP) services, which is using cellphone to do all banking transactions, this is what the world is experience today but lately we will be using as well the digital TV banking where we will be using our TV set to do our banking needs, when we are sitting on our couch instead of watching TV, or during the advertisement time we can do all our banking with the TV remote control.

Today financial service provider with help of very powerful technology has started offering  new product and service and the classical examples are electronic letter of credit, electronic direct debits or even international cheque truncation where paper doesn’t travel any more.

Smart banks making banking experience more pleasant day by day for their customers, it has brought down several conventional banks barriers such as wait in queue, banking hours, and waiting for bank statement or ATM visit to access your balance and this fulfill the most pressing need of today to do safe and secure banking without leaving the comfort of home, for Bankers It also offers new opportunities to provide added convenience and control to their existing customers, and reach a large population of unbanked customers, click bank is an emerging market this is an aspect of banking that no one can resist.

Changing Dynamics in Developed Market

In Asia Smart Banking is flourishing over the last past decade, notably in technologically advanced nation like Japan and South Korea, in Pakistan since 2003 rapid technological advancement taken place. Accordingly to Pakistan Telecommunication Authority annual cellular subscribers in Pakistan was 5.023 million in 20003-04 that became 29.58 million upto 2013, similarly in 2005 total broadband subscribers was just 26 thousand in and this raised to 2.89 million in 2013, in short total teledensity in 2003 was 4.31% which raised to 75.57% in 2013 these factual data illustrates the fact that people are shifting more and more their day to day activities to the internet and eventually change will bring a rapid expansion in demand of smart bank in Pakistan.

According to State Bank of Pakistan Mobile phone and smart card banking accounts have surged to nearly 1.45 million and this indicates that Pakistan’s financial sector is now going through a dynamic transition led by latest technology solutions. The Tamer Easypaisa and Omni have registered more than 1.44 million mobile wallet accounts, around 16 million branchless banking transaction worth of Rs. 59 Billon have been conducted only during July-September 2013 in Pakistan and it is expected that the percentage of user using mobile financial services in Pakistan could go up from the current 2% to 35% by 2020, retail banks and technology vendors must be prepared to play the long game in future.

Another study conducted by Telenor and Boston consulting group revealed that the wider access to mobile financial service in Pakistan could be lead to the creation of 1 million new job and reduction of financial exclusion by 2020, an estimated $2 billion could be added annually to government revenues, helping raise Pakistan’s GDP growth by 3%. 

Driving Forces Of Smart Banking

Smart Banking is convenient, it is noted in developed market that consumers who have adopted smart banking are very satisfied and recommend this way of banking to others or will do in future; the most common ways of smart banking is mobile banking. In Pakistan almost 72% population has mobile and some consumers have even multiple mobile subscriptions and the rate of smart phone penetration is increasing significantly which will trigger the extensive use of smart banking in near future, below are most common driving forces of smart banking in any market which are grouped in terms of safety, control and convenient.

Smart-Banking-in-PakistanDemography of Smart Banking Users

It is observed in developed market that the use of smart banking is highly correlated with age and education.it split evenly between males and females and the use of smart banking is generally unrelated to household income. In Pakistan penetration rate of digital activities is increasing rapidly in age of 18 to 29 years adults, they are mainly graduate, post graduate or in college. Similarly the same age group constitutes approximately 44% of internet banking users and this growth in adoption and innovation is one of several strategic factors that will result in Pakistan the majority of young account holder using smart banking within the next few years.

A Winning Strategy for Banks

Banks must realize and evaluate carefully the changing trend in Pakistan for young account holders and plan their strategy accordingly to avoid any strategic drift, this includes identifying the relative areas of opportunity and thread of smart banking emerging market. More specifically Banks must leverage the increased penetration of mobile phones to offer their product and services to poorer household in remote places that were expensive for them to operate or inaccessible due to lack of infrastructure and information.

Whether for convenience, control or safety, click banking is a next generation banking; this will make us more of a banker running our own account, checking our account as often as our e-mail, smart banking will shut down local branches in the same way as mobile did the public call office and probably our children will laugh when they will be told that people actually used to go to a bank branch and queue up there to pay utility bills.

About Arshad Imran

Arshad Imran is Karachi based Pakistani blogger interested in Pakistan's business sector. He is Associate Member of ICMAP and Senior Finance SME at Primatics Financial.

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