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Evolution of Banking | Definition | Automated Transaction Machines (ATM)


E-Banking means electronic banking. Electronic banking is through computer and associated systems. Electronic banking also refers to the banking done through the computer based devices. In electronic banking the bankers use information technology devices to provide better and efficient services to their clients.


E-Banking means electronic banking. Electronic banking is through computer and associated systems. Electronic banking also refers to the banking done through the computer based devices.

In electronic banking the bankers use information technology devices to provide better and efficient services to their clients. The traditional banking is paper based banking; whereas, the e-banking is paper free banking.

In Pakistan the state bank of Pakistan has promulgated electronic Transaction Ordinance in 2002 which provides legal recognition of electronic settlement of transactions in the banking sectors.

The commercial banks in Pakistan are providing E-banking facilities to their customers. It is due to E-banking that customers can avail the banking services 24/7 hours a day, anywhere at any time.

E-Banking Services or Products:

Following are the main products and services of banking system based on advance computer and telecommunication technology.


In traditional banking the record is kept only at the branch of bank where the customer maintains his account. So, the customer has to present a cheque and deposit money only to that branch. In Online system any branch of a bank has the access of the record of any other branch having online-banking system. Online banking enables a customer to withdraw cash from his account from any branch of his bank . He can also deposit cash in his account at any branch of his bank. It means that online banking system enables the customers to operate his account at any branch of his bank having online system.

Electronic Fund Transfer System (EFTS):

Electronic funds transfer system is a retail payment system. Under electronic fund transfer system the account of purchaser is automatically debited and the account of seller is automatically credited at the time of transaction. The bank issues a debit card or credit card to the customer for making payments of commodities purchased or for payment of utility bills through electronic fund transfer system.
Payment through electronic fund transfer system can also be made for the purchase of petrol or CNG from petrol pumps.
For electronic fund transfer credit card of debit card is put into a computer terminal placed at the point of sale (POS).

Credit Card:

Credit CardIn today’s modern economy, paper money is being replaced by plastic money all over the world. Public has started using credit cards or plastic money for purchasing goods. It is common in Pakistan that a person has three or more credit cards issued by different banks.

A credit card is an instrument which provides credit facilities it is holder. Credit cards are issued by the banks to individuals having income above certain minimum levels. The credit cards are accepted only by specified business concerns.

There are three parties to a credit card.

  1. Drawee: The issuing bank is the drawee.
  2. Drawer: The credit card holder is the drawer
  3. Payee: The payee concern is the payee.

Credit card helps the holder to pay for commodities purchased without losing cash. Credit limit is fixed by the issuing bank according to the worthiness of the customer.
After approval by the bank, a card holder is issued a plastic card on which is inscribed the name of the issuing bank, the holder’s name, his/her signature, his/her photo and the date of expiry. Credit cards is used both for general purchases and online purchases.

Debit Card:

Debit CardDebit card is a plastic card that is used to make purchases. When debit card is used, the amount is debited to the account of card holder. The purchases through debit card can be made what is in the bank account of the card holder.

The main difference between debit and credit card lies in the words debit and credit. In case of debit card, the card holder’s account is debited with the amount of purchases. On the other hand, in case of credit card, the card holder makes payment to the bank at the end of a month. Thus, the card holder enjoys credit in the market.

Smart Card:

Smart CardSmart card is the developed shape of credit card. It is a plastic card used for online shopping by means of EFTS. A smart card on which monetary value and other relevant information are stored electronically. A smart card contains magnetic memory chip for storing cash value and other information. Smart cards are more secure than to credit card and debit cards.

Automated Transaction Machines (ATM):

ATMATM is an electronic cash machine from where customers can withdraw cash and get other information about their accounts 24 Hours a day. All major commercial banks in Pakistan have installed ATM machines. The ATM installed in Pakistan performs single function i.e; Withdrawing of cash. The ATM's installed by banks in developed countries can perform many functions like deposits and withdrawal of cash, taking account statements etc.

When a customer wants to withdraw cash he inserts the ATM card into the automated teller machine and enter his personal identification number (PIN) into it. He then presses cash withdrawal button and enters the desired amount for withdrawal. The cash along with transaction receipt comes out and ATM card is returned.

Advantages of E-Banking:

Following are the main advantages of E-Banking.

24 Hours Services:

E-Banking provides services to customers 24 hours a day, seven days a week, anywhere and anytime. E-Banking has given new meaning to banking hours. The customer can make his own schedule for banking hours. The customers can withdraw cash at anytime through ATM's.

Easy Operation of Account:

Through E-Banking the customer can easily operate his bank account. He does not have to visit the bank for withdrawal and deposit of cash. He can operate his account while sitting in his office or home. He also does not have to stand in long lines to operate his bank account.

Efficient Services:

E-Banking provides efficient and modern banking services to clients.

Shopping Facility:

The credit or debit card holder can shop commodities of his own choice without carrying cash. There is no danger of losing cash.

Time Saving:

Through E-Banking the customer can:
A) Check and get balances of his account any time.
B) Make payment of utility bills.
C) Get credit card statement at any time.
D) Transfer money from one account to another account without going to the bank in person.
There is no need to stand in queues for these purposes thus, precious time and money of the customer is saved.

Reducing operating Expenses:

E-Banking is paper free banking. Most of banking transactions are completed automatically. Banking activities can be monitored from central location. Thus, E-Banking helps in reducing operating expenses of the bank.

Eliminating Paper Work:

With the introduction of E-Banking the manual work such as recording, posting and checking has been eliminated. The bankers are saved from the hectic manual and paper work.

Beneficial for Government:

E-Banking is also beneficial for government to check the banking account for retailers, wholesalers, exporters, importers and industrialists for the purpose of imposing taxes.

Growth in Economy:

Through E-Banking efficient and convenient services are provided to customers. The E-Banking brings growth in economy with increased employment opportunities.

Disadvantages Of E-Banking:

Following are the main disadvantages of E-Banking.

Danger of Stealing Funds:

There is always a danger of stealing funds by knowing the secret code number of bank customers.

No Provision Of Receipt:

In electronic fund transfer system there is no provision of receipt. Sometimes customers have to face difficulties due to non provision of receipts.

Computer Fraud:

There is always a possibility of computer fraud in E-Banking. Customers having access to such systems may manipulate or falsify the bank record to their own objectives. There is also possibility of embezzlement of cash by ATM's. Credit card frauds are also common. These frauds create financial as well as mental torture for the clients.

Computer Problem:

The E-Banking facilities are possible if the computer and internet is working properly. If there is problem in hardware or software E-Banking is not possible.

Computer Virus:

Computer virus is common now-a-days. When a computer is infected by a virus, it may corrupt the files or copy the log files.


The advantages of E-Banking are more compared to disadvantages. The bankers can minimize the disadvantages by taking proper measures. Keeping in view the benefits of electronic banking, a large part of banking system in Pakistan has been computerized. It is hoped that in the near future the whole banking system will be computerized.

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