The Impact of E-Banking on the Profitability of Banks: A Study of Pakistani Banks

Abstract

The proliferation and penetration of internet has opened new horizons and scenarios for the retail banking industry. The retail banks are now providing their products and services through the electronic medium; e-banking. E-banking is considered to have a substantial impact on banks’ performance. The aim of this paper is to examine the impact of e-banking on the profitability of Pakistani banks, in particular. This paper covers twelve banks across Pakistan. The study is qualitative in nature which examines different objectives which determine the performance of banks mainly in terms of profitability. It also discusses the effect of customers’ literacy on provision of services from banks’ perspective. It also discusses the basic motive of banks to adopt e-banking services. The study is done through taking interviews from the managers of these banks.The results show that e-banking has increased the profitability of banks, it has enabled the banks to meet their costs and earn profits even in the short span of time. The illiteracy of customers is not regarded as a major impediment in provision of their products and services. For banks, the main motive to adopt e-banking is to increase their clientage and to retain their customers. The profitability of banks has augmented in transitioning to e-banking medium.