Last Updated 05 Sep 2020

Awareness and Adoption of E-Banking in Pakistan

Category Adoption, Banking
Essay type Research
Words 2813 (11 pages)
Views 703
Table of contents

Abstract: This study aims to understand customers’ perceptions of adoption and awareness of electronic banking in Pakistan. The outcomes would help the policymakers to develop effective strategies for the future outlook of electronic banking in a country. The results suggest that banks’ customers in Pakistan perceive electronic banking as a tool for minimizing inconvenience, minimizing the risk of carrying cash, and time-saving. Customers further believe that electronic banking increases the chances of government access to public data increase chances of fraud and data losses.

It reduces cost and saves precious time. There are also some limitations of e-banking as it requires skills to operate it and passwords can be hacked. This research paper discussed that the people of Pakistan are well aware of electronic banking but they are not satisfied with the services provided by the bank and they also feel risk in that service that’s why they trust more on employees. It contains different demographics and their association with research questions. The results conclude that various customer segments do not differ in opinions towards the benefits and risks associated with e-banking.

This paper also includes recommendations in which it describes that what strategies the banks should choose to increase the satisfaction of customers Keywords: electronic banking; e-banking; customers’ perception; adoption; Pakistan, e-banking in Pakistan, e-banking, SMS banking, ATM

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The developments taking place in information and communication technology are increasing competition in financial institutions worldwide. The development of electronic distribution channels in the financial industry has completely transformed the traditional bank-customer relationship in recent years.

It has reduced personal contacts between the service providers and the customers (Barnes and Howlett, 1998). The scenario is further changed with increased competition among banks and non-bank financial institutions (Zineldin, 1996). Thus an enhanced understanding of why some people adopt one distributional channel and others do not, alongside the identification of the factors that may influence this decision is vital to investigate (Patricio, 2003). Thus, the deployment of advanced technologies is essential to achieve a competitive edge.

In the world of banking, the development of information technology has an enormous effect on the development of more flexible payment methods and more-user friendly banking services. Recently, the banking industry was highly affected by the technology evolution that transformed the way banks deliver their services, using technologies such as automated teller machines, phones, the Internet, credit cards, and electronic cash. In line with global trends, electronic banking in Pakistan has been undergoing many changes.

Electronic banking is a term for the process by which a customer may perform banking transactions electronically without visiting a brick-and-mortar institution. Electronic banking refers to systems that enable bank customers to access accounts and general information on bank products and services through a personal computer (PC) or another intelligent device. There are many benefits of e-banking as it provides an easy way to monitor an account, we can shop, pay bills, buy items at auction, and transfer money from anywhere at any time, it reduces costs, saves time, and vice versa.


This study focuses on the awareness and adoption of electronic banking in Pakistan. Our objectives of this research were to:

  1. Check awareness of electronic banking in Pakistan.
  2. Check why people are not aware of electronic banking.
  3. Know if the people are aware of electronic banking then to how much extent.
  4. Check whether banks of Pakistan are providing electronic banking or not.
  5. To find the critical attributes that customers expect important while using electronic banking.
  6. To find the key variables that affect customers’ evaluations towards risk associated with electronic banking.
  7. To understand the relationship between demographic characteristics of customers and their perceptions towards electronic banking.
  8. To present results and implications which are insightful to researchers and banks interested in electronic banking.

This research is important because it tells bankers that how much people in Pakistan are aware of and adopt electronic banking and to how much extend. It also tells them to improve their e-banking services in Pakistan.

Electronic banking in Pakistan State-owned banks dominated the Pakistani financial market before 1990. The government introduced economic liberalization policies in 1991 when two smaller banks, Muslim Commercial Bank and Allied Bank were privatized. Since then, the government has continuously advocated the privatization of existing state-owned enterprises and encouraged the private and foreign banks to set up their businesses in the country. The recent acquisition of locally owned Union Bank by Standard Chartered Bank indicates foreign interest in the domestic financial market.

According to the State Bank of Pakistan (SBP) annual report (2005), there were 35 commercial banks, including 16 private banks (with 797 branches), 11 foreign banks (with 82 branches), 4 privatized banks (with 4,141 branches), and 4 public banks (with 1,543 branches), respectively. Electronic banking is an innovation in the series of technological wonders. Automated teller machine (ATM), telephone banking, internet banking, credit cards, and debit cards, etc. have emerged as effective delivery channels for traditional banking products.

In Pakistan, foreign banks took a lead by introducing ATM and credit cards in the mid-1990s followed by domestic banks in the late 1990s. Annual Report of SBP (2003, p. 110) explained this delay in electronic banking largely by regulatory hurdles, higher startup costs, ongoing banking sector reforms, and lack of technical skills. The government also introduced the Electronic Transaction Ordinance in 2002. This ordinance provides legal recognition to digital signatures and documentation. Thus reducing the risks associated with the use of an electronic medium of business.

At present, almost all commercial banks in Pakistan have set up their ATM networks, issuing debit and credit cards and have joined one of the two operating ATM Switch Networks. According to Kolachi (2006), Pakistani banks provide the following online banking services and products.

  1. Inquiry, account statement inquiry, account balance inquiry, check statement inquiry, fixed deposit inquiry
  2. Payment, funds transfer, credit card payments, direct payments, utility bills payments
  3. Request, checkbook request, stop payment request, demand draft request, a new fixed deposit request
  4. Download, customer profile, statement download, other information, and guidelines downloads.

Literature review Consumers’ perceptions towards the adoption of electronic banking have attracted many researchers in recent years. Thornton and White (2001) who compared seven distribution electronic channels available for banks in the US concluded that customers’ orientation such as convenience, service, technology change, knowledge about computing, and availability of internet affected the usage of different channels.

According to Hagel and Hewlin (1997), Internet banking became very attractive to customers and lots of banks because the technology is being accepted by them and they can now understand and have information about the complex products. Nowadays banks are also facing a lot of competition and need a high market share and provide better services to their customers so that they can attract new customers and old customers do not try to leave them. Howcroft et al. 2002) found that the most important factors that have encouraged consumers to use online banking are lower fees followed by reducing paperwork and human error which subsequently minimizes human disputes (Kiang et al. , 2000). Byers and Lederer, (2001 ) concluded that it was changing consumer attitudes rather than bank cost structures that determine the changes in distribution channels; they added that virtual banks can only be profitable when the segment that prefers electronic media is approximately twice the size of the segment preferring street banks.

A decrease in the percentage of customers visiting banks with an increase in alternative channels of distribution will also minimize the queues in branches (Thornton and White, 2001). Internet banking increases the power of the customers to make price comparison across suppliers quickly and easily, which subsequently pushes the price and margins downwards (Devlin, 1995). Although electronic banking provides many opportunities for the banks, it is also the case that the current banking services provided through Internet are limited due to security concerns, complexity, and technological problems (Sathye, 1999: Mols, 1999).

Risks associated with electronic banking Although the internet provides many opportunities for banks but it is the case that current banking services through the internet are limited due to security concerns, complexity, and technological problems (Mols, 1999; Sathye, 1999). Hewer and Howcroft (1999) referred to the term trust to measure risk. While Suganthi et al. (2001) viewed risk in the context of security concerns and risk in the context of trust in one’s bank. Finally, a number of studies also found trust and perceived risks have a significant positive influence on commitment (Bhattacherjee, 2002; Mukherjee and Nath, 2003) and ultimately leads towards overall satisfaction (Rexha et al. , 2003). The reputation of a service provider is another important factor affecting trust. Doney and Cannon (1997) defined reputation as the extent to which customers believe a supplier or service provider is honest and concern about its customers. Tyler and Stanley (1999) argued that banks can build a close and long-lasting relationships with customers only if trust, commitment, honesty, and cooperation are developed between them. Nancy et al. 2001) study found that customers complain about computer logon time which is usually longer than making a telephone call. Further, the respondents felt that they have to check and recheck the forms filled online, as they are worried about making mistakes. Frequent slow response time and delay of service delivery cause customers to be unsure about the completion of a transaction (Jun and Cai, 2001). Min and Galle (1999) found crashes in operating systems and disruption of information access as common factors related to an unwillingness to use internet channels for commerce.

Liao and Cheung (2002) found that individual expectations regarding the accuracy, security, transaction speed, user-friendliness, user involvement, and convenience are the most important attributes in the perceived usefulness of internet-based e-retail banking. Confidentiality of consumer data is another important concern in the adoption of online banking (Gerrad and Cunningham, 2003). Customers fear someone’s unlimited access to personal financial information. White and Nteli (2004) focused on why internet usage has not been increased in the UK as compared to internet usage for banking purposes?

Results found that the customers still have concerns about the security and safety aspects of the internet. Lack of internet accessibility and a provision of documentary evidence for all transactions are found important hurdles in the development of electronic banking in Thailand (Jaruwachirathanakul and Fink, 2005). Laforet and Li (2005) found that the habit of carrying cash, less accessibility of the internet, and documentary proof of financial transactions as important hurdles in adoption, in the case of China.

Lack of specific laws to govern internet banking is another important concern for users. It covers issues such as unfair and deceptive trade practices by the supplier, unauthorized access by hackers. Larpsiri et al. (2002) argued that it is not clear whether electronic documents and records are acceptable as sufficient evidence of transactions. Another issue is the jurisdiction of the courts and dispute resolution procedures in case of using the internet for commercial purposes. A dispute can arise from many issues. For instance, websites are not a branch of the bank.

It is difficult for the court to define the location of the branch and decide whether they have jurisdiction (Rotchanakitumnuai and Speece, 2003). Other risks associated with electronic banking are job losses, lack of opportunities to socialize, and the development of a lazy society were mentioned by (Black et al. , 2001). Demographic factors Gender alone is not a significant factor, affecting the adoption of technology in general (Gefen and Straub, 1997). However, Kolodinsk et al. (2004) found that married couples are more likely to adopt new technology than either single males or females.

Research has also linked the age and adoption of technology, as young people are more likely to adopt technology (Lee et al. , 2002). Maturity in population in terms of knowledge, confidence, and comfort in computer usage also increases influence towards online banking (Karjaluoto et al. , 2002). An increase in income and education have found positive effects on adoption (Lockett and Littler, 1997; Sarel and Marmorstein, 2003). Mattilia et al. (2003) indicated that young, educated and wealthy consumers are most likely to adopt internet banking in Finland.

Mature customers prefer personal service and a printed receipt of their transactions. Mature customers also perceive internet banking to be more costly than paying bills over the counter. Methodology The study was conducted in Lahore city which is the second-largest city of Pakistan and represents almost 20% of all branch's networks. Branches for the survey were selected on a convenience basis but after the permission of respective branch managers. The survey covered both residential and commercial areas.

In this research data is conducted by using a questionnaire as a data collection instrument, in which questions were asked starting from their command on computer and internet usage, following with the awareness of electronic banking and its types, about the benefits of e-banking, and then some questions regarding their bank services and the security provided by these banks. The questionnaire includes close-ended questions and they were on a liker scale of utilizing a five-point categorical.

Empirical Results

There is a “table ” which shows gender-wise association with research questions

No. Question Gender




Total P-values
1 Aware of electronic banking 196 200 396 0. 011
2 Your bank provides an electronic banking facility 190 195 385 0. 000
3 Aware of SMS banking 196 195 391 0. 036
4 Aware of INTERNET banking 189 198 387 0. 010
5 Aware of ATM card usage 193 198 391 0. 054
6 Aware of PHONE banking 193 199 392 0. 272
7 Satisfied with the E-banking services provided by the bank 192 198 390 0. 08
8 Satisfied with the security of E-banking provide by bank 191 195 386 0. 068
9 Want to use e-banking facilities in future 194 197 391 0. 000

The table shows the different questions and their association with gender. The first question is about the awareness of electronic banking. Total respondents who answered this question were 396 in which 196 were male respondents and 200 were female respondents. Its result shows that awareness of electronic banking is dependent on gender.

The next question was answered by 385 total respondents from which the amount of male and female were 190 and 195 respectively. Its results show that providing e-banking services by banks was highly dependent on gender. The 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.

The next question is about awareness of ATM card usage. A total of 391 respondents answered that question from which the amount of male and female were 193 and 198 respectively. It results show that awareness of ATM card usage is not dependent on gender. Now there is a question about Phone banking awareness so a total of 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.

Now the seventh question was asked by respondents about their satisfaction with e-banking services providing by their banks and a total of 390 answered that question and its result shows that satisfaction about e-banking services providing by banks depends on gender. Now there is the second the last question which was answered by 191 male and 195 female respondents and its result shows that satisfaction about the security of e-banking providing by banks is not depends on gender. The last question is about using e-banking service in the future and its results are highly dependent on gender.

Aware of electronic banking
Gender strongly disagree disagree neutral agree strongly agree Total
Male 13 28 46 64 45 196
Female 31 32 53 57 27 200
Total 44 60 99 121 72 396

Now there is a table which shows the description of the question, “Aware of electronic banking”. It shows the number of respondents from strongly disagree to strongly agree. The highest figures of people are agreed about the awareness of e-banking.

In male respondents, 64 agreed which is 33% of total male respondents. Likewise, in female respondents, 57 were agreeing about it which is 29% of total females.

No. Question Primary High


Secondary Graduate Post


Frequency P-values
1 Aware of electronic banking 8 7 10 195 164 384 0. 000
2 Use debit or credit cards for online transactions 8 6 8 191 163 376 0. 008
3 Aware of ATM card usage 8 7 10 193 163 381 0. 030
4 Aware of PHONE banking 8 7 10 194 161 380 0. 155
5 Feel risk about the hacking of passwords 8 7 10 192 161 378 0. 555
6 Satisfied with the E-banking services provide by bank 8 7 9 191 163 378 0. 269
7 More trust on the bank employees with communication than E-banking 8 7 10 191 163 379 0. 680
8 Want to use e-banking facilities in future 8 7 9 192 163 379 0. 69

In this table there is a demographic of education whose relationship with research questions is given in the above table.

No. Question Age Below 19 20 - 29 30 - 39 - 40 - 49 50 - 59 Above 60 Frequency P-values
1 Have full command on the computer - 91 241 30 - 16 10 3 391 0. 034
2 Involved in banking transactions - 91 239 30 - 14 14 3 391 0
3 Awareness of the usefulness of electronic banking - 91 238 30 - 16 14 3 392 0. 004
4 Your Banks provides online technical assistance or 24 helpline - 88 240 30 - 16 14 3 391 0. 002
5 Use debit or credit cards for online transactions - 90 237 30 - 16 14 3 390 0
6 Aware of INTERNET banking - 91 238 29 - 14 14 3 389 0. 443
7 Aware of PHONE banking - 91 240 30 - 16 14 3 394 0. 105
8 It provides an easy way to monitor an account - 91 242 30 - 16 14 3 396 0. 019
9 Feel risk about the hacking of passwords - 91 239 30 - 16 13 3 392 0. 089
10 Have easy access to ATM - 88 240 30 - 16 13 3 390 0
11 Satisfied with the E-banking services provide by bank - 90 240 30 - 16 13 3 392 0. 47
12 Satisfied with the security of E-banking provide by bank - 89 239 28 - 16 13 3 388 0. 004
13 More trust on the bank employees with communication than E-banking - 90 241 30 - 16 13 3 393 0. 036

The above table shows the relationship between research questions with age. In the first question, it is asked about command on the computer. This question was answered by a total of 391 respondents from which 91 respondents had age less than 19.

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