Future success of banking industry lies in effective use of IT: State Bank

Karachi: Deputy Governor, State Bank of Pakistan Yaseen Anwar says 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 IT & Banking Conference, 2011 jointly organized by SBP & Pakistan Software Export Board at local hotel on Saturday, he said no bank today can survive without sound IT infrastructure. The reason is that banks do not sell tangible products rather they sell ‘customer experience’ and ‘customer possibilities’, he said, adding these experiences are driven by possibilities generated by use of technology.

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

He said use of IT is now defining customer service standards of banks due to increased usage of phone banking, IVR systems, Internet Banking, ATMs, POS, Credit Cards, other host of transactions of different modes under band of e-banking. “IT has transformed our local banking sector and redefined concept of banking and financial services.”

Numerous banking services through technology platform have not only enhanced business volumes of banks and increased access to unbanked geographical regions, it also brought about operational and cost efficiencies, he observed. More recently, IT brought about another revolutionary change in how banking will be conducted in future; by bringing about 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. 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 in Pakistan, banks have vast space to work in this area as 85% of 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. 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.

Anwar said such systems have enabled banks to perform efficient data analysis that help banks in developing their business strategies. Sophisticated IT systems are also helping banks in managing local human resource requirements of banks operating in multiple countries. He stressed that minimum security standards must be adopted to ensure safety, security, maintenance of e-banking transaction. Banks must design fool proof data security processes.

He said SBP issued various guidelines on critical subjects pertaining to operational continuity, data security and safety. These guidelines provide 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 stability of its operations.

He said IT advancement helped banks in managing complex Capital Adequacy Framework and banks in Pakistan are now better placed to measure, monitor, control credit, market, operational risks. More and more banks are moving towards an integrated platform for managing various transactions including Foreign Exchange, money market, fixed income, and derivates.

He felt though banks in Pakistan have come long way in implementing IT, banking system is still quite far from desired level both in terms of quality and quantity of IT based solutions provided to their customers. Although some foreign and large local banks have made significant progress in establishing superior e-banking platforms, yet on overall basis effect is largely limited due to limited outreach of these institutions.

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