Online Banking in general Askari Bank(in particular)

Project  Proposal

Online Banking in general Askari Bank(in particular)

Prepared By:                                                  Presented To:

Saad Majid Sheikh                                                         Dr. Ali Sajid

Nadia Babar                                                                 Productivity Management

Khalid Sajjad    Akbar                                                   NIMS

Sohail Ashraf

                                                November 25, 2001

Project Synopsis

            In this age of Information Technology all the fields of life are being affected by new inventions and innovations. Almost all kind of organizations are steeping into the field of IT, in an effort to increase their productivity and expand their customer bank. Same goes for the Banking Sector. Today all the banks of the world are adopting the tool of On-Line Banking. Since it is the easiest way of banking yet lesser time consuming, the world has gone for it.

The need of ON-LINE Banking was felt in south Asia during the last 5 to 7 years. This concept emerged as an essential for successful banking techniques. Although foreign banks were pioneers of bringing this concept to South-Asia but they have yet to commence On-Line banking in Pakistan. Seeing brighter future prospects, ASKARI Bank has taken the lead and stepped into this arena. Seeing their performance the group intends to look into this field to explore the pros and cons of this system of banking and how this setup can enhance overall nation’s productivity.

Project Statement:

The group intends to work for  Enhancement of productivity in particular and national service in general, with the focus on On-Line Banking. How do we foresee and look for the future prospects of On-Line banking to emerge or to play a front line role in enhancing the business activities and to facilitate faster yet easier banking transactions in Pakistan.

TABLE OF CONTENTS

Project proposal – On-line Banking and Askari Bank

Research Objectives:

1          The group has set forth the under mentioned objectives in conduct of the research:

• To familiarize public with the subject of ON-LINE BANKING, enhance their keenness to remain abreast to the techniques and the modern trends of efficient banking, with an ultimate objective of TIME SAVING of customers and banks, thereof the time saved may be utilized in enhancement of productivity.
• To induce healthy practices in banking business and profession and to advise suitable measures for their achievement.
• To encourage and provide On-Line banking information and to offer education through project report contents to MBA students and consequently to national financial institutions.
• To print and publish the report for provision to all whop are interested in the issue of On-Line banking.
• To learn and get proficient in project handling and preparation with an ultimate aim of improving the productivity.

Research Vision

2.         Our Vision is to transform the time wasted in orthodox banking queues into a modern and dynamic method of accomplishing banking transactions from home/work places, thereby formulating virtual banking system in PAKISTAN. It is visualized to make people highly professional and efficient, fully equipped to play a meaningful role on sustainable basis in the economic and social development of Pakistan.

Prelude to Research

3.         The need of ON-LINE Banking was felt in south Asia during the last 5 to 7 years. This concept emerged as an essential for successful banking techniques. Although foreign banks were pioneers of bringing this concept to South-Asia but they have yet to commence On-Line banking in Pakistan. Seeing brighter future prospects, ASKARI Bank has taken the lead and stepped into this arena. Seeing their performance the group intends to look into this field to explore the pros and cons of this system of banking and how this setup can enhance overall nation’s productivity.

Mission Statement of the Project

4.         Our mission is to promote higher productivity through efficient monetary and financial transactions that would foster a sound and dynamic financial system, so as to achieve sustained and equitable economic growth and prosperity in Pakistan.

5.         The group intends to work for Enhancement of productivity, in particular, and national service in general, with the help of On-Line Banking. How do we foresee and look for the future prospects of On-Line banking to emerge or to play a front line role in enhancing the business activities and to facilitate faster yet easier banking transactions in Pakistan.

METHODOLOGY OF THE RESEARCH

Questionnaire Prepared for both: Potential And Current Customers Of On-Line Banking and Various Financial Institutions / Banks

6.         In order to have the diversified opinions and to ascertain the efficacy of On-Line banking as a starter of the research, it is being planned to do a survey to customers and call on several financial institutions and ask about the services they offer. Here are some proposed questions to consider:

Ø  Are there special fees to bank On-Line, additional fees to pay bills On-Line and is there a way to get the bank to waive the fees?

Ø  How long does it take for an On-Line transaction to clear? How long does it take before a payment is delivered when you pay a bill On-Line?

Ø  Does the institution use the Internet for On-Line banking? How difficult is it to download the information into personal financial software, such as Intuit Quicken or Microsoft Money?

Ø  Does the institution use it's own or commercial software and a traditional phone line instead of the Internet? Does it charge for the software? How difficult is the software to install? If you're a Macintosh computer user, does the bank offer software for Macs?

Ø  Is the On-Line banking system simple to learn and use? Will the financial institution help if you have a technical problem?

Ø  What type of encryption is used to keep transactions secret and money safe? Has the institution ever had an On-Line security problem?

7.         Thereafter the  group intends to cover the assigned project under following aspects:

• Introduction of the concept of ON-LINE BANKING
• Highlight the potential value added prospects of the topic of On-Line banking.
• Perception and Communication
• Financial Structure of Pakistan.
• Study of Banks have no plans to enter into ON-LINE BANKING.
• Study of Banks Providing On-Line Banking services in Pakistan.
• Comparison of both kinds of banks
• Comparison of Pakistani banks with foreign banks
• View the impact of On-Line banking on the productivity enhancement of banks as well as its customers.
• Finally and most importantly view the impact of On-Line banking on the productivity of customers.
• Conclusion.

Introduction – ON-LINE BANKING A REVOLUTION

8.         The thought of today is the reality of tomorrow but the thoughts of Banking on Your OWN TERMS AT YOUR OWN DOORSTEPS, which seemed to be reality of tomorrow, is no a more mystique.

What we can do now:

• It allows customers to do most of their financial transactions at home               on a personal computer.
• Pay your bills On-Line while you're watching TV.
• Check your account balances from your digital cell phone as you stand in

line to board a flight.

• Consolidate all your financial accounts On-Line in one convenient, secure location.
• Have access to friendly, helpful customer service representatives.

9.         That's just a small part of banking on your own terms with concept of On-Line Banking. In addition to offering the bank customers tremendous banking convenience, on-line concept also provides customers huge banking value. For instance, take totally FREE Net Value checking account, no minimum balance to earn interest, and FREE, unlimited On-Line bill pay services and moreover this allows to do banking 24 hours a day, seven days a week. How is it done? As we live on the Internet and save the expenses associated with a large network of brick-and-mortar branches.

Banking Concept and its History

10.       Many banking functions such as safeguarding funds, lending, guaranteeing loans, and exchanging money can be traced to the early days of recorded history. In medieval times the Knights Templar, an international military and religious order, not only stored valuables and granted loans but also arranged for the transfer of funds from one country to another. The great banking families of the Renaissance, such as the Medici in Florence, were involved in lending money and financing international trade. The first modern banks were established in the 17th century, notably the Riksbank in Sweden (1656) and the Bank of England (1694).

11.       Banking, transactions carried on by any individual or firm engaged in providing financial services to consumers, businesses, or government enterprises. In the broadest sense, banking consists of safeguarding and transfer of funds, lending or facilitating loans, guaranteeing creditworthiness, and exchange of money. These services are provided by such institutions as commercial banks, savings banks, trust companies, finance companies, and merchant banks or other institutions engaged in investment banking. A narrower and more common definition of banking is the acceptance, transfer, and, most important, creation of deposits. This includes such depository institutions as commercial banks, savings and loan associations, building societies, and mutual savings banks. All countries subject banking to government regulation and supervision, normally implemented by central banking authorities. For further information on central banks and investment banking, see the relevant articles.

Aspects of Banking

12.       The most basic role of banking, safeguarding funds, is done through vaults, safes, and secure facilities that physically store money. These physical deposits are in most cases insured against theft, and in most cases against the bank being unable to repay the funds. In some banks the service is extended to safe deposit boxes for valuables. Interest given on savings accounts, a percentage return on the bank’s investments with the money, gives an additional incentive to save. Transfer of funds can be handled through negotiable instruments, cheques, or direct transfers performed electronically. Credit cards and account debit cards, electronic cash tills, computer On-Line banking, and other services provided by banks extend their usefulness by offering customers additional ways of gaining access to and using their funds. Automated clearing houses perform similar services for business customers by handling regular payments, such as wages, for a company banking with the bank. Longer-term schemes for providing regular income on savings are often offered through trust funds or other investment schemes.

13.       Loans to bank customers are drawn on the funds deposited with the bank and yield interest which provides the profits for the banking industry and the interest on savings accounts. Banks also provide foreign exchange facilities for individual customers, as well as handling large international money transfers. Investment banks engage chiefly in financing businesses and trading in securities.

14.       The growth in use of the Internet worldwide and the development of procedures enabling secure transactions On-Line have created the new field of On-Line banking, where customers deal with their banks chiefly or entirely through Internet connections. Such services are not restricted by opening hours or location of branches, unlike the traditional banks. Both existing banks and new groups are already moving into this potentially very important area. Since On-Line banking services can be accessed with equal ease almost anywhere in the developed world, this raises the possibility of banking networks operating without regard to national boundaries, with consequent regulatory problems.

Background - On-Line Banking

15.       The growth in use of the Internet worldwide and the development of procedures enabling secure transactions On-Line have created the new field of On-Line banking, where customers deal with their banks chiefly or entirely through Internet connections. Such services are not restricted by opening hours or location of branches, unlike the traditional banks. Both existing banks and new groups are already moving into this potentially very important area. Since On-Line banking services can be accessed with equal ease almost anywhere in the developed world, this raises the possibility of banking networks operating without regard to national boundaries, with consequent regulatory problems.

16.       Banking on line, commonly called PC banking, electronic banking or Internet banking, has been around in one form or another for a decade or more.

"This is one of the fastest-growing developments I've seen in banking in 35 years," said James M. Shelton, a former banker who now is executive director of the On-Line Banking Association. “Bank branches, automated teller machines, credit cards, checks and good old-fashioned cash aren't going away. At least not anytime soon”.

Forms of On-Line Banking

17.       On-Line Banking can take different forms. Some On-Line banking systems are software based - meaning you will need software such as Quicken or Microsoft Money in order to access your account (and you will only be able to handle your banking from your own computer). Other systems are Internet based - meaning you can access your bank account from any computer that is connected to the Web from your home, office or while travelling.

Internet Based Banking

18.       There are banks which are truly Internet based and 100% available On-Line, in other words, those banks without a "PHYSICAL PRESENCE" of offices and branches. These banks also offer Internet-based banking, which can be accessed by any Internet computer, without the need of special software. Since these On-Line banks have a lower business cost (they do not have to build, support and maintain expensive branches) their fees are generally lower and their interest rates  (on your deposits) are generally higher than "traditional" banks.

Why On-Line Banking?      

19.       Unfortunately, banking is a "necessary evil" that can take a large chunk out of already busy schedules. Visiting a branch or ATM, paying bills by paper check (and mailing them) and balancing a chequebook all can be time consuming. Banking On-Line, by its nature, can automate many of these processes, saving you time and, in many cases, money. You can access your account and do your banking when (and where) it is convenient for you.

Deciding to Bank On-Line

20.       If someone decides to do banking On-Line, the group can give lots of hints on getting the most out of the experience of the others who are practicing this concept of banking. If you are not sure about banking On-Line yet, we can point out some of the advantages and let you know of some potential disadvantages, so you can compare.

On-Line Banking Advantages

Ø  In general, you will find lower fees and higher interest rates for deposits due to the reduced cost of operating On-Line and not needing numerous physical bank branches.

Ø  You will have easy access to account information and transactions, because any Internet-enabled computer can become your "bank terminal."

Ø  You will generally have up-to-the-minute current bank account information due to the automation of most systems.

Ø  In many cases, On-Line banks offer free bill pay, which can be a big savings in both money and time.

Ø  You can transfer funds electronically between accounts.

Potential On-Line Banking Disadvantages

Ø  You will need to mail (or have direct-deposited) any deposits to your bank account.

Ø  On-Line banks generally do not have their own ATMs, although you will be able to access ATMs provided by many other banks. Most On-Line banks offer a rebate for ATM usage.

Ø  Most On-Line banks do not have any physical locations for you to visit if you prefer to transact your business in person and face-to-face.

On-Line Banking Hints

Make Comparisons. No On-Line banks are created equally. There can be variances in fees, interest rates and special offers that may be available.

ATMs. If you need frequent access to ATMs, check the bank policies. Depending on the account, some On-Line banks will rebate you for some of your ATM usage.

 Bill Pay. Does the bank offer free bill pay? This is one of the biggest advantages of an On-Line banking account and should be a prime consideration.

Telephone Support. If you need telephone support, when is it available and is there free unlimited phone access?

Get Automated. On-Line banking is most efficient with automation of as many processes as possible. For example, have pay-checks direct deposited (no trips to the bank) and take advantage of On-Line bill pay (no need to write checks for bills and then pay to mail them).

Access. Does the bank require you to download additional software (not a true Internet based bank) or can you access your account anywhere with simply an Internet connection?

Banking in Pakistan

21.       The State Bank of Pakistan, established in 1948, is the central bank. It issues banknotes; manages currency, credit, the public debt, and exchange controls; and supervises the commercial banks. Pakistani banks were nationalized in 1974. A number of major foreign banks (21) maintain offices in the country. The practices of banks and other financial institutions are regulated, in part, by Islamic law. They are not permitted, under 1985 legislation, to pay interest on domestic transactions, or—under a 1991 Federal Shari‘ah (Islamic) Court ruling—to charge interest. Instead banks operate a system of investment partnerships with customers.

On-Line Banking in Pakistan

22.       In Pakistan On-Line Banking is not yet being practised at its full capacity. The State Bank Of Pakistan (SBP) has not authorized On-Line payments and receipts due to absence of safe and secure Internet browsers and sites. As Internet Culture has not been established in Pakistan, the Internet in Pakistan is very insecure. The credit card numbers and banks pin codes can easily be hacked so do to this reason only limited On-Line banking is allowed by the SBP and it is being practised. Askari Commercial Bank has taken the lead in On-Line banking in Pakistan. Its service is available for customers all around the country. Bank Alfalah also provides On-Line banking facility but only for its Karachi branch and others like Sonairi Bank, ABN Amro are also venturing in the field.

ASKARI BANK

23.       Askari Commercial Bank provides following On-Line features.

• The facility to pay utility bills.
• Check the bank balance
• View the bank statement
• Pay school fees
• Transfer of funds among accounts.
• Change password and Pin Code
• There is a loan testing facility
• Updated currency exchange rates
• Product interest rates
• Product information
• Branch locations
• It is operational 24 hours a day

The other features are not operational yet due to the order of SBP.