Future Success of Banking Lies in Effective Use of IT: SBP Notes

Mr. Yaseen Anwar, Deputy Governor, State Bank of PakistanMr. Yaseen Anwar, Deputy Governor, State Bank of Pakistan says that the future success of banking industry lies in the effective use of information technology and passing on its benefits to banks’ customers in terms of cost, speed and convenience.
 
Delivering his keynote address at the ‘IT & Banking Conference, 2011’ which was jointly organized by SBP and Pakistan Software Export Board at a local hotel in Karachi, he said that no bank today can survive without sound information technology infrastructure.

The reason is that banks do not sell tangible products rather they sell ‘customer experience’ and ‘customer possibilities’, he said, adding that these experiences are driven by possibilities generated by the use of technology.

Mr. Anwar said that in recent decades, technological innovation has continued its inroads into the banking sector. ‘Not only has IT become a key factor for managing all types of banking operations, but also has become the key driver for financial inclusion both in terms of products and services,’ he said and added that customers who were initially exposed to ATMs now find blurring of boundaries between the telephone and PC, and even television and the convergence of these media is making access to financial services far easier and better. 

He said that use of information technology is now defining customer service standards of banks due to increased usage of phone banking, IVR systems, Internet Banking, ATMs, POS, Credit Cards and other host of transactions of different modes under the band of e-banking.

‘Information technology has transformed our local banking sector and has redefined the concept of banking and financial services,’ he added.

Numerous banking services through the technology platform have not only enhanced business volumes of banks and increased access to unbanked geographical regions, it has also brought about operational and cost efficiencies, he observed and added that more recently, information technology has brought about another revolutionary change in how banking will be conducted in the future; by bringing about the possibility of branchless banking, the whole concept of brick and mortar branch is changing.

‘The need for a customer to visit a branch where his / her account is parked is no more an obligation,’ he said. Branchless banking has the potential of changing lives of those people who are still unbanked and without any financial services, he added.

SBP Deputy Governor said that in Pakistan, banks have vast space to work in this area as85% of the population still remains unbanked and untapped today. ‘Many Banks are moving towards more sophisticated IT based solutions to run their businesses efficiently and facilitate financial services for customers, he said and added that some banks have implemented Core Banking Solutions which marked a paradigm shift as bank customers can now access their accounts from any of their branches.

Mr. Anwar said that such systems have enabled the banks to perform efficient data analysis that help banks in developing their business strategies. ‘Sophisticated IT systems arealso helping banks in managing local human resource requirements of banks operating in multiple countries,’ he added.

However, he emphasized that the minimum security standards must be adopted to ensure the safety, security and maintenance of e-banking transaction. Banks must design fool proof data security processes.
 
He said that the State Bank has issued various guidelines on critical subjects pertaining to operational continuity and data security and safety. ‘These guidelines provide a minimum set of standards to be met by banks on relevant issues and banks should strive to exceed these minimum standards in order to maximize the stability of its operations’, he added.
 
He said that the information technology advancement has helped banks in managing the complex Capital Adequacy Framework and the banks in Pakistan are now better placed to measure, monitor, and control credit, market, and operational risks. ‘More and more banks are moving towards an integrated platform for managing various transactions including Foreign Exchange, money market, fixed income, and derivatives,’ he added. 
 
Mr. Anwar observed that though banks in Pakistan have come a long way in implementing the information technology, our banking system is still quite far from the desired level both in terms of quality and quantity of IT based solutions provided to their customers. He said that although some foreign and large local banks have made significant progress in establishing superior e-banking platforms, yet on overall basis the effect is largely limited due to the limited outreach of these institutions.